Rightside Group, Ltd.
11/08/2016

Rightside® Announces Third Quarter 2016 Financial Results

Registry Revenue Grows 26% Over the Prior Year Period

KIRKLAND, Wash., Nov. 08, 2016 (GLOBE NEWSWIRE) -- Rightside Group, Ltd. (Nasdaq:NAME), a leading provider of domain name services that advance the way businesses and consumers define and present themselves online, today announced financial results for the third quarter ended September 30, 2016.

"In the third quarter, we executed on our strategy to deliver revenue growth in our higher margin businesses while optimizing for margin expansion across all areas of our business," said Chief Executive Officer Taryn Naidu.  "Our registry services business continues to be core to the Company's strategy and its revenue grew 26% year over year driven by strong premium name sales.  Name.com, our flagship retail registrar grew 14% year over year.  This quarter, we also reported Adjusted EBITDA of $2.3 million, over two times higher than the prior year period as we've continued to drive cost efficiencies throughout the business and capitalize on the opportunity provided by new gTLDs."

Financial Summary         
(in thousands)         
          
  Three Months Ended  Nine Months Ended 
  September 30, September 30, 
   2016   2015   2016   2015  
Registrar services $  44,800  $  43,953  $  132,975  $  129,233  
Registry services    3,012      2,382     8,583     5,912  
Aftermarket and other     6,327     8,547     23,435     23,423  
Eliminations (1)    (872)    (763)    (2,565)    (1,747) 
Total revenue  $  53,267  $  54,119  $  162,428  $  156,821  
          
Gain on other assets, net $  (29) $  (1,721) $  (2,247) $  (8,682) 
          
Loss before income tax $  (4,820) $  (4,350) $  (12,841) $  (9,818) 
Income tax benefit    (391)    (946)    (834)    (2,617) 
Net loss $  (4,429) $  (3,404) $  (12,007) $  (7,201) 
          
Adjusted EBITDA (2) $  2,272  $  897  $  6,395  $  2,244  
          
(1)  Amounts in the eliminations line reflect the elimination of intercompany charges between our Registrar and Registry services businesses. 
           
(2)  This Non-GAAP financial measure is described below and reconciled to GAAP net loss in the accompanying table. 
          

Third Quarter 2016 Financial Highlights  
(Unless otherwise noted, all comparisons are relative to the fiscal third quarter 2015.)

Business Highlights

  
Registrar Services Operating Metrics 
                
  Three Months Ended    Nine Months Ended    
  September 30,    September 30,      
   2016   2015  Change
  2016   2015  Change  
End of period domains (in millions) (1)  16.2    16.3  -0.6%    16.2   16.3  -0.6% 
Average revenue per domain (2) $  11.04  $  10.81  2.1% $  10.94  $  10.69  2.3% 
Renewal rate (3)  73.0  74.7     74.6  75.4    
                
(1) A domain is defined as an individual domain name registered by a third-party customer on Rightside's registrar platforms for which Rightside has begun to recognize revenue.  
                
(2) Average revenue per domain is calculated by dividing registrar services revenue for a period by the average number of domains registered on Rightside's registrar platforms in that period.  Average revenue per domain for partial year periods is annualized.  
                
(3) The renewal rate is defined as the percentage of domain names on Rightside's registrar platforms that are renewed after their original term expires.  

Liquidity and Capital Resources

Business Outlook

For the full year ending December 31, 2016, Rightside expects the following:

Conference Call and Webcast

Rightside will host a conference call and audio webcast with investors and analysts today, November 8, at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time):

About Non-GAAP Financial Measures

We define Adjusted EBITDA as net income (loss) adjusted for interest, income taxes, depreciation and amortization, stock-based compensation, and certain gains, losses, and expenses that we do not believe are indicative of ongoing core business operating results. Adjusted EBITDA is a non-GAAP financial measure and its most directly comparable GAAP financial measure is GAAP net income (loss).  A reconciliation of GAAP net income (loss) to Adjusted EBITDA can be found in the accompanying table. Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.  Rightside compensates for these limitations by relying primarily on its GAAP results and using Adjusted EBITDA only as a supplement.

We have not provided a complete reconciliation of its Adjusted EBITDA guidance to the comparable forward-looking GAAP financial measure, net income (loss), because we are unable to provide a forward-looking estimate of certain reconciling items between net income (loss) and Adjusted EBITDA guidance including: acquisition and realignment costs; advisory and consulting fees; provision for income taxes; and gain (loss) on other assets, net.

About Rightside

Rightside® inspires and delivers new possibilities for consumers and businesses to define and present themselves online. The company, with its affiliates, is a leading provider of domain name services, offering one of the industry's most comprehensive platforms for the discovery, registration, usage, and monetization of domain names. In addition to being a new gTLD registry operator, Rightside is home to some of the most admired brands in the industry, including Enom and Name.com. Headquartered in Kirkland, WA, Rightside has offices in North America and Europe. For more information please visit www.rightside.co.

Cautionary Information Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended, including, among others, Rightside's expected total revenue, Adjusted EBITDA, and registry services revenue.  Statements containing words such as may, believe, anticipate, expect, intend, plan, project, and estimate or similar expressions constitute forward-looking statements. Statements regarding Rightside's future performance are based on current expectations, estimates and projections about our industry, financial condition, operating performance and results of operations, including certain assumptions related thereto. Actual results may differ materially from the results predicted, and reported results should not be considered an indication of future performance. Forward-looking statements involve risks and uncertainties including, among others:  Rightside's ability to successfully operate new gTLD registries and provide back-end infrastructure services to new and existing registries; Rightside's ability to successfully market and sell its gTLDs; and the difficulty in predicting and developing consumer demand for new gTLDs. More information about potential risk factors that could affect Rightside's operating and financial results are contained in Rightside's Quarterly Report on Form 10-Q for the quarter ended June 30, 2016 filed with the Securities and Exchange Commission on August 9, 2016.  All forward-looking statements are expressly qualified in their entirety by this cautionary statement.  Rightside does not intend to revise or update the information set forth in this press release, except as required by law, and may not provide this type of information in the future.

Rightside Group, Ltd. 
Condensed Consolidated Statements of Operations 
(in thousands, except per share data) 
(unaudited) 
          
  Three Months Ended Nine Months Ended 
  September 30, September 30, 
   2016   2015   2016   2015  
Revenue $  53,267  $  54,119  $  162,428  $  156,821  
Cost of revenue (excluding depreciation and amortization)    40,356     41,583     122,971     120,870  
Sales and marketing    2,702     2,591     8,046     7,618  
Technology and development     4,571     5,355     15,196     15,737  
General and administrative    5,413     5,195     15,617     15,082  
Depreciation and amortization    3,871     4,237     12,120     12,317  
Gain on other assets, net    (29)    (1,721)    (2,247)    (8,682) 
Interest expense    1,211     1,225     3,664     3,695  
Other (income) expense, net    (8)    4     (98)    2  
Loss before income tax    (4,820)    (4,350)    (12,841)    (9,818) 
Income tax benefit    (391)    (946)    (834)    (2,617) 
Net loss $  (4,429) $  (3,404) $  (12,007) $  (7,201) 
          
Net loss per share attributable to common stockholders:         
Basic $  (0.23) $  (0.18) $  (0.62) $  (0.38) 
Diluted    (0.23)    (0.18)    (0.62)    (0.38) 
           
Weighted average number of shares outstanding:         
Basic    19,358     18,916     19,251     18,809  
Diluted    19,358     18,916     19,251     18,809  
          

 

Rightside Group, Ltd.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
     
     
  September 30, December 31,
   2016   2015 
     
Assets    
Current assets    
Cash and cash equivalents $  47,285  $  45,095 
Accounts receivable, net    11,248     11,306 
Prepaid expenses and other current assets    5,764     7,256 
Deferred registration costs    76,082     75,435 
Total current assets    140,379     139,092 
Deferred registration costs, less current portion          16,063     15,700 
Property and equipment, net     11,392     13,298 
Intangible assets, net     50,575     54,328 
Goodwill     103,042     103,042 
gTLD deposits     2,323     8,139 
Other assets     939     1,428 
Total assets $  324,713  $  335,027 
     
Liabilities and Stockholders' Equity     
Current liabilities    
Accounts payable $  7,886  $  7,162 
Accrued expenses and other current liabilities    20,525     24,691 
Debt    1,500     1,500 
Capital lease obligation    1,101     1,193 
Deferred revenue    98,823     96,278 
Total current liabilities    129,835     130,824 
Deferred revenue, less current portion    22,811     21,802 
Debt, less current portion    21,772     21,701 
Capital lease obligation, less current portion    142     811 
Deferred tax liabilities, net    14,589     15,477 
Other liabilities     786     1,125 
Total liabilities    189,935     191,740 
Total stockholders' equity    134,778     143,287 
Total liabilities and stockholders' equity $  324,713  $  335,027 
     


Rightside Group, Ltd.
Reconciliation of Net Loss to Adjusted EBITDA
(in thousands)
(unaudited)
         
         
  Three Months Ended Nine Months Ended
  September 30, September 30,
   2016   2015   2016   2015 
Net loss $  (4,429) $  (3,404) $  (12,007) $  (7,201)
Add (deduct):        
Income tax benefit    (391)    (946)    (834)    (2,617)
Gain on other assets, net (1)    (29)    (1,721)      (2,247)    (8,682)
Interest expense    1,211     1,225     3,664     3,695 
Depreciation and amortization    3,871     4,237     12,120     12,317 
Stock-based compensation expense    1,768     1,506     4,864     4,643 
Acquisition and realignment costs          564     89 
Advisory and consulting fees    271        271    
Adjusted EBITDA $  2,272  $  897  $  6,395  $  2,244 
         
 (1)  Net loss (gain) on withdrawals of interest in gTLD applications, included in gain on other assets, net.
Investor Contacts

The Blueshirt Group

Allise Furlani, 212-331-8433

Brinlea Johnson, 212-331-8424

IR@rightside.rocks

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Source: Rightside Group, Ltd.

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