UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR ~~15(D)~~15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~September 30, 2019



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR ~~15(D)~~15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-36131

Endurance International Group Holdings, Inc.

(Exact ~~Name~~name of ~~Registrant~~registrant as ~~Specified~~specified in ~~Its Charter)~~its charter)



Delaware		46-3044956
(State or ~~Other Jurisdiction~~other jurisdiction of ~~Incorporation~~incorporation or ~~Organization)~~organization)		(I.R.S. Employer Identification No.)



10 Corporate Drive,	Suite 300	01803
Burlington,	Massachusetts	01803
(Address of ~~Principal Executive Offices)~~principal executive offices)		(Zip Code)

(781) 852-3200

(Registrant’s ~~Telephone Number, Including Area Code)~~telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value	EIGI	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	ý	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

As of ~~August 1,~~October 31, 2019, there were ~~146,055,237~~146,405,002 shares of the issuer’s common stock, $0.0001 par value per share, outstanding.

TABLE OF CONTENTS




	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets as of December 31, 2018 and ~~June~~September 30, 2019	4
Consolidated Statements of Operations and Comprehensive ~~Loss~~Income (Loss) for the three and ~~six~~nine months ended ~~June~~September 30, 2018 and 2019	5
Consolidated Statements of Changes in Stockholders' Equity ~~as of June~~for the three and nine months ended September 30, 2018 and ~~June~~September 30, 2019	5
Consolidated Statements of Cash Flows for the ~~six~~nine months ended ~~June~~September 30, 2018 and 2019	78
Notes to Consolidated Financial Statements	89
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	4849
Item 3. Quantitative and Qualitative Disclosures About Market Risk	7372
Item 4. Controls and Procedures	7372
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	7473
Item 1A. Risk Factors	7473
Item 5. Other Information	73
Item 6. Exhibits	74
Signatures	76

Endurance International Group Holdings, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share amounts)


	December 31, 2018			June 30, 2019			December 31, 2018			September 30, 2019
Assets				(unaudited)						(unaudited)
Current assets:
Cash and cash equivalents	$	88,644		$	90,818		$	88,644		$	84,465
Restricted cash	1,932			1,832			1,932			1,832
Accounts receivable	12,205			12,989			12,205			12,139
Prepaid domain name registry fees	56,779			57,326			56,779			56,555
Prepaid commissions	41,458			41,704			41,458			40,528
Prepaid and refundable taxes	7,235			6,517			7,235			13,070
Prepaid expenses and other current assets	27,855			26,411			27,855			23,137
Total current assets	236,108			237,597			236,108			231,726
Property and equipment—net	92,275			88,700			92,275			86,318
Operating lease right-of-use assets	—			104,210			—			98,064
Goodwill	1,849,065			1,848,949			1,849,065			1,854,829
Other intangible assets—net	352,516			292,191			352,516			273,329
Deferred financing costs—net	2,656			2,221			2,656			2,000
Investments	15,000			15,000			15,000			15,000
Prepaid domain name registry fees, net of current portion	11,207			11,281			11,207			11,139
Prepaid commissions, net of current portion	42,472			45,160			42,472			47,776
Other assets	5,208			2,778			5,208			2,292
Total assets	$	2,606,507		$	2,648,087		$	2,606,507		$	2,622,473
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	12,449		$	14,933		$	12,449		$	10,171
Accrued expenses	79,279			64,774			79,279			67,267
Accrued taxes	2,498			2,418			2,498			1,783
Accrued interest	25,259			24,483			25,259			14,526
Deferred revenue	371,758			376,046			371,758			375,729
Operating lease liabilities—short term	—			22,483			—			22,474
Current portion of notes payable	31,606			31,606			31,606			31,606
Current portion of financed equipment	8,379			4,583			8,379			2,637
Deferred consideration—short term	2,425			1,408			2,425			2,181
Other current liabilities	3,147			2,319			3,147			2,216
Total current liabilities	536,800			545,053			536,800			530,590
Long-term deferred revenue	96,140			99,249			96,140			99,257
Operating lease liabilities—long term	—			90,989			—			84,594
Notes payable—long term, net of original issue discounts of $21,349 and $19,151 and deferred financing costs of $31,992 and $28,919, respectively	1,770,055			1,725,326
Notes payable—long term, net of original issue discounts of $21,349 and $18,013 and deferred financing costs of $31,992 and $27,318, respectively							1,770,055			1,703,065
Deferred tax liability	16,457			18,785			16,457			20,231
Deferred consideration—long term	1,364			—			1,364			—
Other liabilities	11,237			6,460			11,237			6,308
Total liabilities	2,432,053			2,485,862			2,432,053			2,444,045
Stockholders’ equity:
Preferred Stock—par value $0.0001; 5,000,000 shares authorized; no shares issued or outstanding	—			—			—			—
Common Stock—par value $0.0001; 500,000,000 shares authorized; 143,444,515 and 145,741,251 shares issued at December 31, 2018 and June 30, 2019, respectively; 143,444,178 and 145,741,251 outstanding at December 31, 2018 and June 30, 2019, respectively	14			14
Common Stock—par value $0.0001; 500,000,000 shares authorized; 143,444,515 and 146,140,876 shares issued at December 31, 2018 and September 30, 2019, respectively; 143,444,178 and 146,140,876 outstanding at December 31, 2018 and September 30, 2019, respectively							14			15
Additional paid-in capital	961,235			979,626			961,235			988,773
Accumulated other comprehensive loss	(3,211		)	(4,115		)	(3,211		)	(4,876		)
Accumulated deficit	(783,584		)	(813,300		)	(783,584		)	(805,484		)
Total stockholders’ equity	174,454			162,225			174,454			178,428
Total liabilities and stockholders’ equity	$	2,606,507		$	2,648,087		$	2,606,507		$	2,622,473

See accompanying notes to consolidated financial statements.

Endurance International Group Holdings, Inc.

Consolidated Statements of Operations and Comprehensive ~~Loss~~Income (Loss)

(unaudited)

(in thousands, except share and per share amounts)


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2019			2018			2019			2018			2019			2018			2019
Revenue	$	287,770		$	278,204		$	579,126		$	558,887		$	283,770		$	277,193		$	862,896		$	836,080
Cost of revenue (including impairment of $17,892 for the three and six months ended June 30, 2019)	130,746			139,587			264,652			263,441
Cost of revenue (including impairment of $0 and $17,892, respectively, for the three and nine months ended September 30, 2019)													128,945			120,755			393,597			384,196
Gross profit	157,024			138,617			314,474			295,446			154,825			156,438			469,299			451,884
Operating expense:
Sales and marketing	66,546			65,490			133,902			132,078			63,831			59,143			197,733			191,221
Engineering and development	21,959			25,348			41,876			49,042			22,683			28,257			64,559			77,299
General and administrative	30,744			31,124			69,519			62,517			25,693			30,309			95,212			92,826
Total operating expense	119,249			121,962			245,297			243,637			112,207			117,709			357,504			361,346
Income from operations	37,775			16,655			69,177			51,809			42,618			38,729			111,795			90,538
Other income (expense):
Interest income	227			314			431			605			289			305			720			910
Interest expense	(38,346		)	(37,037		)	(74,396		)	(74,251		)	(37,527		)	(36,057		)	(111,923		)	(110,308		)
Total other expense—net	(38,119		)	(36,723		)	(73,965		)	(73,646		)	(37,238		)	(35,752		)	(111,203		)	(109,398		)
Loss before income taxes and equity earnings of unconsolidated entities	(344		)	(20,068		)	(4,788		)	(21,837		)
Income tax (benefit) expense	(946		)	6,160			(2,889		)	7,879
Income (loss) before equity earnings of unconsolidated entities	602			(26,228		)	(1,899		)	(29,716		)
Equity (income) loss of unconsolidated entities, net of tax	(25		)	—			2			—
Net income (loss)	$	627		$	(26,228	)	$	(1,901	)	$	(29,716	)
Comprehensive income (loss):
Income (loss) before income taxes and equity earnings of unconsolidated entities													5,380			2,977			592			(18,860		)
Income tax expense (benefit)													11,715			(4,839		)	8,826			3,040
(Loss) income before equity earnings of unconsolidated entities													(6,335		)	7,816			(8,234		)	(21,900		)
Equity loss of unconsolidated entities, net of tax													—			—			2			—
Net (loss) income													$	(6,335	)	$	7,816		$	(8,236	)	$	(21,900	)
Comprehensive (loss) income:
Foreign currency translation adjustments	(2,425		)	348			(1,845		)	(53		)	(644		)	(1,001		)	(2,489		)	(1,054		)
Unrealized gain (loss) on cash flow hedge, net of tax (expense) benefit of ($45) and ($370) for the three and six months ended June 30, 2018, respectively, and ($35) and $269 for the three and six months ended June 30, 2019, respectively	144			110			1,184			(851		)
Total comprehensive loss	$	(1,654	)	$	(25,770	)	$	(2,562	)	$	(30,620	)
Basic net income (loss) per share attributable to Endurance International Group Holdings, Inc.	$	0.00		$	(0.18	)	$	(0.01	)	$	(0.21	)
Diluted net income (loss) per share attributable to Endurance International Group Holdings, Inc.	$	0.00		$	(0.18	)	$	(0.01	)	$	(0.21	)
Weighted-average common shares used in computing net income (loss) per share:
Unrealized gain (loss) on cash flow hedge, net of tax (expense) benefit of ($182) and $626 for the three and nine months ended September 30, 2018, respectively, and ($70) and $200 for the three and nine months ended September 30, 2019, respectively													812			240			1,996			(611		)
Total comprehensive (loss) income													$	(6,167	)	$	7,055		$	(8,729	)	$	(23,565	)
Basic net (loss) income per share													$	(0.04	)	$	0.05		$	(0.06	)	$	(0.15	)
Diluted net (loss) income per share													$	(0.04	)	$	0.05		$	(0.06	)	$	(0.15	)
Weighted-average common shares used in computing net (loss) income per share:
Basic	142,340,561			145,308,823			141,356,567			144,414,929			143,107,122			145,951,755			141,946,574			144,932,834
Diluted	144,702,002			145,308,823			141,356,567			144,414,929			143,107,122			146,301,595			141,946,574			144,932,834

See accompanying notes to consolidated financial statements.

Endurance International Group Holdings, Inc.

Consolidated Statements of Changes in Stockholders’ Equity

(in thousands, except share amounts)

(unaudited)


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive (Loss) Gain			Accumulated Deficit			Total Stockholders’ Equity			Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive (Loss) Gain			Accumulated Deficit			Total Stockholders’ Equity
	Number	Amount		Additional Paid-in Capital		Accumulated Other Comprehensive (Loss) Gain			Accumulated Deficit			Total Stockholders’ Equity			Number	Amount		Additional Paid-in Capital		Accumulated Other Comprehensive (Loss) Gain			Accumulated Deficit			Total Stockholders’ Equity
Balance—December 31, 2017	140,190,695	$	14	$	931,033	$	(541	)	$	(847,501	)	$	83,005		140,190,695	$	14	$	931,033	$	(541	)	$	(847,501	)	$	83,005
Vesting of restricted shares	262,454	—		—		—			—			—			262,454	—		—		—			—			—
Exercise of stock options	4,338	—		25		—			—			25			4,338	—		25		—			—			25
Other comprehensive gain (loss)	—	—		—		1,621			—			1,621			—	—		—		1,621			—			1,621
Adjustment to beginning retained earnings resulting from adoption of ASC 606, net of tax impact of $7.0 million	—	—		—		—			59,383			59,383			—	—		—		—			59,383			59,383
Net loss	—	—		—		—			(2,528		)	(2,528		)	—	—		—		—			(2,528		)	(2,528		)
Reclassification of stock-compensation liability award	—	—		250		—			—			250			—	—		250		—			—			250
Stock-based compensation	—	—		6,992		—			—			6,992			—	—		6,992		—			—			6,992
Balance—March 31, 2018	140,457,487	14		938,300		1,080			(790,646		)	148,748			140,457,487	14		938,300		1,080			(790,646		)	148,748
Vesting of restricted shares	2,342,606	—		—		—			—			—			2,342,606	—		—		—			—			—
Exercise of stock options	67,899	—		431		—			—			431			67,899	—		431		—			—			431
Other comprehensive gain (loss)	—	—		—		(2,281		)	—			(2,281		)	—	—		—		(2,281		)	—			(2,281		)
Net income	—	—		—		—			627			627			—	—		—		—			627			627
Stock-based compensation	—	—		7,390		—			—			7,390			—	—		7,390		—			—			7,390
Balance—June 30, 2018	142,867,992	$	14	$	946,121	$	(1,201	)	$	(790,019	)	$	154,915		142,867,992	14		946,121		(1,201		)	(790,019		)	154,915
Vesting of restricted shares															399,378	—		—		—			—			—
Exercise of stock options															39,041	—		300		—			—			300
Other comprehensive gain (loss)															—	—		—		168			—			168
Net loss															—	—		—		—			(6,335		)	(6,335		)
Stock-based compensation															—	—		7,550		—			—			7,550
Balance—September 30, 2018															143,306,411	$	14	$	953,971	$	(1,033	)	$	(796,354	)	$	156,598
Vesting of restricted shares															117,641	—		—		—			—			—
Exercise of stock options															20,126	—		131		—			—			131
Other comprehensive gain (loss)															—	—		—		(2,178		)	—			(2,178		)
Net income															—	—		—		—			12,770			12,770
Stock-based compensation															—	—		7,133		—			—			7,133
Balance—December 31, 2018															143,444,178	14		961,235		(3,211		)	(783,584		)	174,454


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive (Loss) Gain			Accumulated Deficit			Total Stockholders’ Equity			Common Stock			Additional Paid-in Capital			Accumulated Other Comprehensive (Loss) Gain			Accumulated Deficit			Total Stockholders’ Equity
	Number	Amount		Additional Paid-in Capital		Accumulated Other Comprehensive (Loss) Gain			Accumulated Deficit			Total Stockholders’ Equity			Number	Amount		Additional Paid-in Capital			Accumulated Other Comprehensive (Loss) Gain			Accumulated Deficit			Total Stockholders’ Equity
Balance—December 31, 2018	143,444,178	$	14	$	961,235	$	(3,211	)	$	(783,584	)	$	174,454		143,444,178	$	14	$	961,235		$	(3,211	)	$	(783,584	)	$	174,454
Vesting of restricted shares	116,526	—		—		—			—			—			116,526	—		—			—			—			—
Exercise of stock options	892	—		5		—			—			5			892	—		5			—			—			5
Other comprehensive gain (loss)	—	—		—		(1,362		)	—			(1,362		)	—	—		—			(1,362		)	—			(1,362		)
Net loss	—	—		—		—			(3,488		)	(3,488		)	—	—		—			—			(3,488		)	(3,488		)
Stock-based compensation	—	—		9,016		—			—			9,016			—	—		9,016			—			—			9,016
Balance—March 31, 2019	143,561,596	14		970,256		(4,573		)	(787,072		)	178,625			143,561,596	14		970,256			(4,573		)	(787,072		)	178,625
Vesting of restricted shares	2,176,738	—		—		—			—			—			2,176,738	—		—			—			—			—
Exercise of stock options	2,918	—		16		—			—			16			2,918	—		16			—			—			16
Other comprehensive gain (loss)	—	—		—		458			—			458			—	—		—			458			—			458
Net loss	—	—		—		—			(26,228		)	(26,228		)	—	—		—			—			(26,228		)	(26,228		)
Stock-based compensation	—	—		9,354		—			—			9,354			—	—		9,354			—			—			9,354
Balance—June 30, 2019	145,741,252	$	14	$	979,626	$	(4,115	)	$	(813,300	)	$	162,225		145,741,252	14		979,626			(4,115		)	(813,300		)	162,225
Vesting of restricted shares															398,293	1		(1		)	—			—			—
Exercise of stock options															1,331	—		5			—			—			5
Other comprehensive gain (loss)															—	—		—			(761		)	—			(761		)
Net income															—	—		—			—			7,816			7,816
Stock-based compensation															—	—		9,143			—			—			9,143
Balance—September 30, 2019															146,140,876	$	15	$	988,773		$	(4,876	)	$	(805,484	)	$	178,428

See accompanying notes to consolidated financial statements.

Endurance International Group Holdings, Inc.

Consolidated Statements of Cash Flows

(unaudited)

(in thousands)


	Six Months Ended June 30,						Nine Months Ended September 30,
	2018			2019			2018			2019
Cash flows from operating activities:
Net loss	$	(1,901	)	$	(29,716	)	$	(8,236	)	$	(21,900	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation of property and equipment	24,864			22,105			36,753			33,385
Amortization of other intangible assets	51,713			42,469			77,890			64,137
Impairment of long lived assets	—			17,892
Impairment of long-lived assets							—			17,892
Amortization of deferred financing costs	2,986			3,509			4,708			5,331
Amortization of net present value of deferred consideration	251			120			311			143
Amortization of original issue discounts	2,126			2,198			3,209			3,336
Stock-based compensation	14,382			18,370			21,932			27,513
Deferred tax expense (benefit)	(4,484		)	2,627
Deferred tax expense							8,839			1,942
Loss on sale of assets	261			136			191			128
Loss from unconsolidated entities	2			—			2			—
Financing costs expensed	1,228			—			1,228			—
Loss on early extinguishment of debt	331			—			331			—
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	3,740			(793		)	1,687			34
Prepaid and refundable taxes	(1,102		)	725			(3,446		)	(5,908		)
Prepaid expenses and other current assets	(8,668		)	2,328			2,703			5,108
Leases right-of-use asset, net	—			653			—			395
Accounts payable and accrued expenses	(11,670		)	(15,135		)	(18,011		)	(23,492		)
Deferred revenue	8,193			7,241			3,502			7,636
Net cash provided by operating activities	82,252			74,729			133,593			115,680
Cash flows from investing activities:
Businesses acquired in purchase transactions, net of cash acquired							—			(8,875		)
Purchases of property and equipment	(13,381		)	(16,164		)	(22,343		)	(26,796		)
Proceeds from sale of assets							6			1
Net cash used in investing activities	(13,381		)	(16,164		)	(22,337		)	(35,670		)
Cash flows from financing activities:
Proceeds from issuance of term loan and notes, net of original issue discounts	1,580,305			—			1,580,305			—
Repayments of term loans	(1,630,693		)	(50,000		)	(1,656,094		)	(75,000		)
Payment of financing costs	(1,295		)	—			(1,580		)	—
Payment of deferred consideration	(4,196		)	(2,500		)	(4,500		)	(2,500		)
Principal payments on financed equipment	(3,909		)	(3,861		)	(5,609		)	(6,332		)
Proceeds from exercise of stock options	456			22			756			26
Net cash used in financing activities	(59,332		)	(56,339		)	(86,722		)	(83,806		)
Net effect of exchange rate on cash and cash equivalents and restricted cash	(1,488		)	(152		)	(2,146		)	(483		)
Net increase (decrease) in cash and cash equivalents and restricted cash	8,051			2,074			22,388			(4,279		)
Cash and cash equivalents and restricted cash:
Beginning of period	69,118			90,576			69,118			90,576
End of period	$	77,169		$	92,650		$	91,506		$	86,297
Supplemental cash flow information:
Interest paid	$	72,461		$	68,353		$	110,139		$	110,886
Income taxes paid (received)	$	2,122		$	724
Income taxes paid							$	3,725		$	1,715

See accompanying notes to consolidated financial statements.

Endurance International Group Holdings, Inc.

Notes to Consolidated Financial Statements

(unaudited)

1. Nature of Business

Formation and Nature of Business

Endurance International Group Holdings, Inc. (“Holdings”) is a Delaware corporation, which, together with its wholly owned subsidiary, EIG Investors Corp. (“EIG Investors”), its primary operating subsidiary, The Endurance International Group, Inc. (“EIG”), and other subsidiaries of EIG, collectively form the “Company.” The Company is a leading provider of cloud-based platform solutions designed to help small- and medium-sized businesses succeed online.

EIG and EIG Investors were incorporated in April 1997 and May 2007, respectively, and Holdings was originally formed as a limited liability company in October 2011 in connection with the acquisition of a controlling interest in EIG Investors, EIG and EIG's subsidiaries by investment funds and entities affiliated with Warburg Pincus and Goldman, Sachs & Co. ("Goldman") on December 22, 2011. On November 7, 2012, Holdings reorganized as a Delaware limited partnership and on June 25, 2013, Holdings converted into a Delaware C-corporation and changed its name to Endurance International Group Holdings, Inc.

2. Summary of Significant Accounting Policies

Basis of Preparation

The accompanying consolidated financial statements, which include the accounts of Holdings and its subsidiaries, have been prepared using accounting principles generally accepted in the United States of America (“U.S. GAAP”). All intercompany transactions were eliminated on consolidation.

Although the Company believes the disclosures included herein are adequate to ensure that the consolidated financial statements are fairly presented, certain information and footnote disclosures to the financial statements have been condensed or omitted in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, the consolidated financial statements and the footnotes included herein should be read in conjunction with the audited financial statements and the footnotes included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

Segment Information

Operating segments are defined as components of an enterprise that engage in business activities for which discrete financial information is available and regularly reviewed by the chief operating decision maker ("CODM"). The Company has determined that its chief executive officer is the Company's CODM.

The Company has identified ~~three~~3 reportable ~~segments,~~segments: web presence, domains and email marketing. The Company has determined that it does not satisfy aggregation criteria for these operating segments, and that each segment meets the quantitative threshold of Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 280, Segment Reporting. Therefore, all ~~three~~3 operating segments are reportable segments.

The Company's segments share certain resources, primarily related to sales and marketing, engineering and development, and general and administrative functions. Management allocates these costs to each respective segment based on a consistently applied methodology, primarily based on a percentage of revenue.

Use of Estimates

U.S. GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. These estimates, judgments and assumptions used in preparing the accompanying consolidated financial statements are based on the relevant facts and circumstances as of the date of the consolidated financial statements. Although the Company regularly assesses these estimates, judgments and assumptions used in preparing the consolidated financial statements, actual results could differ from those estimates. Changes in estimates are recorded in the period in which they become known. The more significant estimates reflected in these consolidated financial statements include estimates of fair value of assets acquired and liabilities assumed under purchase accounting related to the Company’s acquisitions and when evaluating goodwill and long-lived assets for potential impairment, the estimated useful lives of intangible and depreciable assets, revenue recognition for multiple-element arrangements, stock-based compensation, contingent consideration, derivative instruments, certain accruals, reserves and deferred taxes.

Unaudited Interim Financial Information

The accompanying interim consolidated balance sheet as of ~~June~~September 30, 2019, and the related consolidated statements of operations and comprehensive ~~loss~~income (loss) for the three and ~~six~~nine months ended ~~June~~September 30, 2018 and 2019, the consolidated statements of cash flows for the ~~six~~nine months ended ~~June~~September 30, 2018 and 2019, the consolidated statements of changes in stockholders' equity for the three and ~~six~~nine months ended ~~June~~September 30, 2018 and 2019, and the notes to consolidated financial statements are unaudited. These unaudited consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements. The unaudited consolidated financial statements include, in the opinion of management, all adjustments, consisting only of normal recurring adjustments that are necessary for a fair presentation of the Company’s financial position as of ~~June~~September 30, 2019, results of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2018 and 2019, cash flows for the ~~six~~nine months ended ~~June~~September 30, 2018 and 2019, and changes in stockholders' equity for the three and ~~six~~nine months ended ~~June~~September 30, 2018 and 2019. The results in the consolidated statements of operations and comprehensive ~~loss~~income (loss) are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2019.

Cash Equivalents

Cash and cash equivalents include all highly liquid investments with remaining maturities of three months or less at the date of purchase.

Restricted Cash

Restricted cash is composed of certificates of deposit and cash held by merchant banks and payment processors, which provide collateral against any chargebacks, fees, or other items that may be charged back to the Company by credit card companies and other merchants, and collateral for certain facility leases.

Accounts Receivable

Accounts receivable is primarily composed of cash due from credit card companies for unsettled transactions charged to ~~subscribers’~~customers’ credit cards. As these amounts reflect authenticated transactions that are fully collectible, the Company does not maintain an allowance for doubtful accounts. The Company also accrues for earned referral fees and commissions, which are governed by reseller or affiliate agreements, when the amount is reasonably estimable.

Prepaid Domain Name Registry Fees

Prepaid domain name registry fees represent amounts that are paid in full at the time a domain is registered by one of the Company’s registrars on behalf of a customer. The registry fees are recognized on a straight-line basis over the term of the domain registration period.

Fair Value of Financial Instruments

The carrying amounts of the Company's financial instruments, which include cash equivalents, accounts receivable, accounts payable and certain accrued expenses, approximate their fair values due to their short maturities. The fair value of the Company's notes payable is based on the borrowing rates currently available to the Company for debt with similar terms and average maturities and approximates their carrying value.

Derivative Instruments and Hedging Activities

FASB ASC 815, Derivatives and Hedging, provides the disclosure requirements for derivatives and hedging activities with the intent to provide users of financial statements with an enhanced understanding of: (a) how and why an entity uses derivative instruments, (b) how the entity accounts for derivative instruments and related hedged items, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. Further, qualitative disclosures are required that explain the Company’s objectives and strategies for using derivatives, as well as quantitative disclosures about the fair value of and gains and losses on derivative instruments, and disclosures about credit risk-related contingent features in derivative instruments.

As required by ASC 815, the Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the

hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to

economically hedge certain of its risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting.

In accordance with the FASB’s fair value measurement guidance in FASB Accounting Standards Update ("ASU") No. 2011-4, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements, the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.

Property and Equipment

Property and equipment is recorded at cost, or at fair value if the property and equipment is acquired in an acquisition. The Company also capitalizes the direct costs of constructing additional computer equipment for internal use, as well as upgrades to existing computer equipment which extend the useful life, capacity or operating efficiency of the equipment. Capitalized costs include the cost of materials, shipping and taxes. Materials used for repairs and maintenance of computer equipment are expensed and recorded as a cost of revenue. Materials on hand and construction-in-process are recorded as property and equipment. Assets recorded under equipment financing are depreciated over the lease term. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets as follows:



Building		Thirty-five years
Software		Two to three years
Computers and office equipment		Three years
Furniture and fixtures		Five years
Leasehold improvements		Shorter of useful life or remaining term of the lease

Software Development Costs

The Company accounts for software development costs for internal-use software under the provisions of FASB ASC 350-40, Internal-Use Software. Accordingly, certain costs to develop internal-use computer software are capitalized, provided these costs are expected to be recoverable. During the three and ~~six~~nine months ended ~~June~~September 30, 2018, the Company capitalized internal-use software development costs of ~~$2.7~~$2.8 million and ~~$4.3~~$7.1 million, respectively. During the three and ~~six~~nine months ended ~~June~~September 30, 2019, the Company capitalized internal-use software development costs of ~~$4.1~~$3.8 million and ~~$7.3~~$11.1 million, respectively.

Goodwill

Goodwill relates to amounts that arose in connection with the Company’s various business combinations and represents the difference between the purchase price and the fair value of the identifiable intangible and tangible net assets when accounted for using the purchase method of accounting. Goodwill is not amortized, but is subject to periodic review for impairment. Events that would indicate impairment and trigger an interim impairment assessment include, but are not limited to, current economic and market conditions, including a decline in the equity value of the Company's business, a significant adverse change in agreements that would materially affect reported operating results, business climate or operational performance of the business and an adverse action or assessment by a regulator. Additionally, a reorganization or change in the number of reporting units could result in the reassignment of goodwill between reporting units and may trigger an impairment assessment.

In accordance with ASU No. 2011-08, Intangibles—Goodwill and Other (Topic 350), the Company is required to review goodwill by reporting unit for impairment at least annually or more often if there are indicators of impairment present. Under U.S. GAAP, a reporting unit is either the equivalent of, or one level below, an operating segment. The Company performs its annual goodwill test as of October 31 of each fiscal year. The Company has identified a total of ~~ten~~10 reporting units, and goodwill has been allocated to ~~six~~6 of these reporting units. The Company also early adopted the provisions of ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350), which eliminates the second step of the goodwill impairment test. As a result, the Company's goodwill impairment test includes only one step, which is a comparison of the carrying value of each reporting unit to its fair value, and any excess carrying value, up to the amount of goodwill allocated, is impaired. Goodwill has been allocated to each reporting unit in accordance with ASC 350-20-40, which requires that goodwill be allocated based on the relative fair values of each reporting unit.

The carrying value of each reporting unit is based on the assignment of the appropriate assets and liabilities to each reporting unit. Assets and liabilities are assigned to each reporting unit if the assets or liabilities are employed in the operations of the reporting unit and the asset and liability is considered in the determination of the reporting unit's fair value. Certain assets and liabilities are shared by multiple reporting units, and are allocated to each reporting unit based on its relative size, primarily based on revenue.

The fair value of each reporting unit is determined by the income approach and the market approach. For the income approach, fair value is determined based on the present value of estimated future after-tax cash flows, discounted at an appropriate risk adjusted rate. The Company derives its discount rates using a capital asset pricing model and by analyzing published rates for industries relevant to the reporting units to estimate the weighted-average cost of capital. The Company uses discount rates that are commensurate with the risks and uncertainty inherent in the business and in internally developed forecasts. For fiscal year 2018, the Company used a discount rate of 10.0% for all but one of its reporting units. The Company also performed sensitivity analysis on its discount rates. The Company uses internal forecasts to estimate future after-tax cash flows, which include an estimate of long-term future growth rates based on the Company's view of the long-term outlook for each reporting unit. Actual results may differ from those assumed in the Company's forecasts.

For the market approach, the Company utilizes two different approaches: market multiples for publicly traded companies, and market multiples based on the acquisition value of comparable companies that were sold.

For the fiscal year 2018 goodwill impairment analysis, the Company compared the fair value from the income approach to the two market approaches. For ~~three~~3 of the Company's reporting units, which represent approximately 95% of the Company's goodwill, the fair value derived from the income approach was consistent with the fair value derived from the two market approaches. The Company established the fair value for these reporting units based on the average fair value from all three valuation approaches. For ~~two~~2 of the Company's reporting units, which represent approximately 3% of the Company's goodwill, the Company based their fair value entirely upon the income approach, as these ~~two~~2 reporting units are experiencing declining cash flows and are expected to continue to experience declines over time. The fair values from the income approach for these two reporting units were materially below the fair values derived from both market approaches. The goodwill allocated to these ~~two~~2 reporting units is approximately $64.2 million as of December 31, 2018. Although the Company does not expect an impairment of goodwill for these ~~two~~2 reporting units in the near term, the Company expects that cash flows will continue to decline, which could result in goodwill impairment charges for these ~~two~~2 reporting units at some point in the future. For ~~one~~1 of the reporting units, which represents approximately 2% of the Company's goodwill, the fair values derived from the market approaches were much lower than the income approach using a discount rate of 10%. The Company determined that more risk was present in the projected future cash flows of this reporting unit as compared to the Company's other reporting units and determined that a discount rate of 17% was appropriate. The fair value of this reporting unit under the income approach at a discount rate of 17% was consistent with the fair values determined under the two market approaches. The Company established fair value for this reporting unit based on the average fair value from all three valuation approaches.

As of the test date of October 31, 2018, the fair value for all reporting units was higher than their respective carrying values, and no impairment has been recorded. No triggering events were identified between the October 31, 2018 test and December 31, 2018.

Goodwill as of December 31, 2018 was $1,849.1 million. The carrying value of goodwill that was allocated to the domain, email marketing and web presence reporting segments was approximately $29.9 million, $604.3 million and $1,214.9 million, respectively. The fair value of all reporting units with goodwill at December 31, 2018 ~~exceeds~~exceeded each reporting unit's carrying value by at least 20%.

Goodwill as of ~~June~~September 30, 2019 was ~~$1,848.9~~$1,854.8 million. The carrying value of goodwill that was allocated to the domain, email marketing and web presence reporting segments was approximately $29.9 million, ~~$604.3~~$611.3 million and ~~approximately $1,214.8~~$1,213.7 million, respectively. For the three and ~~six~~nine months ended ~~June~~September 30, 2019, no impairment triggering events were identified and no0 impairment has been recorded.

Long-Lived Assets

The Company’s long-lived assets consist primarily of intangible assets, including acquired subscriber relationships, trade names, intellectual property, developed technology and domain names available for sale. The Company also has long-lived tangible assets, primarily consisting of property and equipment. The majority of the Company’s intangible assets are recorded in connection with its various acquisitions. The Company’s intangible assets are recorded at fair value at the time of their acquisition. The Company amortizes intangible assets over their estimated useful lives.

Determination of the estimated useful lives of the individual categories of intangible assets is based on the nature of the applicable intangible asset and the expected future cash flows to be derived from the intangible asset. Amortization of intangible assets with finite lives other than developed technology is recognized in accordance with their estimated projected cash flows.

The Company evaluates long-lived intangible and tangible assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If indicators of impairment are present and undiscounted future cash flows are less than the carrying amount, the fair value of the assets is determined and compared to the carrying value. If the fair value is less than the carrying value, then the carrying value of the asset is reduced to the estimated fair value and an impairment loss is charged to expense in the period the impairment is identified.

Indefinite life intangible assets include domain names that are available for sale which are recorded at the cost to acquire. These assets are not being amortized and are being tested for impairment annually and whenever events or changes in circumstance indicate that their carrying value may not be recoverable. When a domain name is sold, the Company records the cost of the domain in cost of revenue.

During the three and ~~six~~nine months ended ~~June~~September 30, 2019, the Company recognized an impairment charge of $0.0 million and $17.9 million, respectively, relating primarily to premium domain name intangible assets acquired in 2014, which was recorded in cost of revenue in the consolidated ~~statement~~statements of operations and comprehensive ~~loss.~~income (loss). The impairment resulted from recent market conditions that have adversely impacted cash flows from these assets, and these market conditions are expected to continue. The Company valued its premium domain name assets based on discounted projected cash flows from these assets using a discount rate of 11.6%, which resulted in an impairment of $16.2 ~~million.~~million during the three months ended June 30, 2019. The balance of the impairment charge was primarily related to developed technology intangible assets associated with the premium domain business, which were valued using a relief from royalty approach. During the three and ~~six~~nine months ended ~~June~~September 30, 2018, the Company recorded no0 impairment charge associated with these intangible assets.

Revenue Recognition

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), or ASC 606, which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. Since then, the FASB has also issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606), ~~Principals~~Principal versus Agent Considerations, ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606), Identifying Performance Obligations and Licensing, and ASU No. 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments, which further elaborate on the original ASU No. 2014-09. The Company adopted the guidance in ASC 606 on January 1, 2018. Revenue is recognized when control of the promised products or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to for those products and services. In general, the Company determines revenue recognition through the following steps:

Identification of the contract, or contracts, with the customer

Identification of the performance obligations in the contract

Determination of the transaction price

Allocation of the transaction price to the performance obligations in the contract

Recognition of revenue when, or as, the Company satisfies a performance obligation

The Company provides cloud-based subscription services, which include web hosting and related add-ons, search engine optimization ("SEO") services, domain registration services and email marketing.

Web hosting gives ~~subscribers~~customers access to an environment where the Company hosts a customer’s website. The related contract terms are generally for one year, but can range from 30 days to 3three years. Web hosting services are typically sold in bundled offerings that include web hosting, domain registration services and various add-ons. The Company recognizes revenue for web hosting and domain registration services over the term of the contract.

The main add-on services related to web hosting are domain privacy, website security, secure sockets layer ~~("SSL")~~ security, site backup and restoration, and web builder tools. These services may be included in web hosting bundles, or they may be purchased on a standalone basis. Certain add-on services are provided by third parties. In cases where the Company is acting as an agent for the sale of third-party add-on services, the Company recognizes revenue on a net basis at the time of sale. In cases where the Company is acting as a principal for the sale of third-party add-on services (i.e., the Company has the primary responsibility to provide specific goods or services, it has discretion to establish prices and it may assume inventory risk), the Company recognizes revenue on a gross basis over the term of the contract. The revenue for Company-provided add-on services is primarily recognized over the term of the contract.

SEO services are monthly subscriptions that provide a customer with increased traffic to their website over the term of the subscription. Revenue from SEO services is recognized over the monthly term of the contract.

In the case of domain registration services, the Company is an accredited registrar and can provide registration services to the customer, or it can select an accredited third-party registrar to perform these duties. Domain registration services are generally annual subscriptions, but can cover multiple years. Revenue for these services is recognized over ~~time.~~the life of the subscription.

Email marketing services provide ~~subscribers~~customers with a cloud-based platform that can send broadcast emails to a ~~customer~~contact list managed by the ~~subscriber.~~customer. Pricing is based on contact list volume from the prior monthly period, which determines the contractual billing price for the upcoming month. Revenue for this service is recognized over the monthly term of the contract.

~~Non-subscription~~

Inventory management and marketplace listing services provide customers with a cloud-based platform that integrates standard inventory management features with order management and shipping management capabilities across multiple channels. Pricing is primarily based on order volume from the prior monthly period. For inventory management customers who subscribe to an annual plan, revenue is recognized ratably over the term of the contract. Inventory management professional services are also provided to customers on demand, and are recognized into revenue upon completion.

Non-subscription-based services include certain professional services, primarily website design or re-design services, marketing development fund ("MDF") revenue, premium domain names and domain parking services.

Website design and re-design services are recognized when the service is complete.

Marketing development funds consist of commissions earned by the Company when a third party sells its products or services directly to the Company’s ~~subscribers,~~customers, and advertising revenue for third-party ads placed on Company websites. The Company records revenue when the service is provided and calculates it based on the contractual revenue share arrangement or over the term of the advertisement.

Domain parking allows the Company to monetize certain of its premium domain names by loaning them to specialized third parties that generate advertising revenue from these parked domains on a ~~pay per click ("PPC")~~pay-per-click basis. Revenue is recognized when earned and calculated based on the revenue share arrangement with the third party.

Revenue from the sale of premium domains is recognized when persuasive evidence of an arrangement to sell such domains exists and delivery of an authorization key to access the domain name has occurred. Premium domain names are paid for in advance prior to the delivery of the domain name.

The contracts that the Company enters into typically do not contain any variable or non-cash considerations.

The Company maintains a reserve for refunds and chargebacks related to revenue that has been recognized and is expected to be refunded, as calculated based on observed historical trends. The Company had a refund and chargeback reserve of $0.4 million and $0.3 million as of December 31, 2018 and ~~June~~September 30, 2019, respectively. The portion of deferred revenue that was expected to be refunded at December 31, 2018 and ~~June~~September 30, 2019 was $2.2 million and ~~$1.8~~$1.7 million, respectively. Based on refund history, approximately 83% of all refunds happen in the same fiscal month that the contract starts or renews, and approximately 95% of all refunds happen within 45 days of the contract start or renewal date.

The Company did not apply any practical expedients during its adoption of ASC 606. The Company elected to use the portfolio method in the calculation of the deferred contract assets.

Contracts with Multiple Performance Obligations

A considerable amount of the Company’s revenue is generated from transactions that are contracts with customers that may include web hosting plans, domain name registrations, and other cloud-based products and services. In these cases, the Company determines whether the products and services are distinct performance obligations that should be accounted for separately versus together. The Company allocates revenue to each performance obligation based on its relative standalone selling price ("SSP"), generally based on the price charged to customers. Web hosting services, domain name registrations, and other cloud-based products and services have distinct performance obligations and are often sold separately. If the promise is not distinct and therefore not a performance obligation, then the total transaction amount is allocated to the identified performance obligation based on a relative selling price hierarchy. When multiple performance obligations are included in a contract, the total transaction amount for the contract is allocated to the performance obligations based on a relative selling price hierarchy. The Company determines the relative selling price for a performance obligation based on ~~standalone selling price (“SSP”).~~SSP. The Company determines SSP by considering its observed ~~standalone selling prices,~~SSPs, competitive prices in the marketplace and management judgment; these ~~standalone selling prices~~SSPs may vary depending upon the particular facts and circumstances related to each deliverable. The Company analyzes the ~~standalone selling prices~~SSPs used in its allocation of transaction amount, at a minimum, on a quarterly basis.

Deferred Revenue

The Company records deferred revenue when cash payments are received or are due in advance of the Company’s performance, including amounts that are refundable.

The following table provides a reconciliation of the Company's deferred revenue as of ~~June~~September 30, 2019:

Short-term Long-term
(in thousands)
Balance at December 31, 2018 $ 371,758
$ 96,140
Recognition of the beginning deferred revenue into revenue, as a result of performance obligations satisfied (257,178 ) —
Cash received in advance during the period 461,848
104,281
Recognition of cash received in the period into revenue, as a result of performance obligations satisfied (301,708 ) —
Impact of foreign exchange rates 154
—
Reclassification between short-term and long-term 101,172
(101,172 )
Balance at June 30, 2019 $ 376,046
$ 99,249



	Short-term			Long-term
	(in thousands)
Balance at December 31, 2018	$	371,758		$	96,140
Recognition of beginning deferred revenue into revenue, as a result of performance obligations satisfied	(323,934		)	—
Cash received in advance during the period	652,151			191,750
Recognition of cash received in the period into revenue, as a result of performance obligations satisfied	(512,146		)	—
Impact of foreign exchange rates	(733		)	—
Reclassification between short-term and long-term	188,633			(188,633		)
Balance at September 30, 2019	$	375,729		$	99,257

The difference between the opening and closing balances of the Company’s deferred revenue liabilities primarily results from the timing difference between the Company’s performance and the customer’s payment. During the ~~six~~nine months ended ~~June~~September 30, 2019, the Company recognized ~~$257.2~~$323.9 million and $0.0 million, respectively, from beginning deferred revenue current and long-term balances existing at December 31, 2018. The Company did not recognize any revenue from performance obligations satisfied in prior periods.

The following table provides the remaining performance obligation amounts as of ~~June~~September 30, 2019. These amounts are equivalent to the ending deferred revenue balance of ~~$475.3~~$475.0 million, which includes both short and long-term amounts:


	Web presence		Email marketing		Domain		Total		Web presence		Email marketing		Domain		Total
	(in thousands)								(in thousands)
Remaining performance obligation, short-term	$	260,898	$	55,317	$	59,831	$	376,046	$	260,679	$	55,983	$	59,067	$	375,729
Remaining performance obligation, long-term	84,119		3		15,127		99,249		84,161		4		15,092		99,257
Total	$	345,017	$	55,320	$	74,958	$	475,295	$	344,840	$	55,987	$	74,159	$	474,986

This backlog of revenue related to future performance obligations is prepaid by customers and supported by executed contracts with customers. The Company has established a reserve of $0.3 million for refunds and chargebacks, 95% of which is expected to materialize in the first 45 days after the contract start date or renewal date. The remainder of the deferred revenue is expected to be recognized in future periods.

Deferred Customer Acquisition Costs

As a result of the implementation of ASC 606, the Company now capitalizes the incremental costs directly related to obtaining and fulfilling a contract (such as sales commissions and certain direct sales and marketing success-based costs), if these costs are expected to be recovered. These costs are amortized over the period the services are transferred to the customer, which is estimated based on customer churn rates for various segments of the business. The Company includes only those incremental costs that would not have been incurred if the contracts had not been entered into:


	Short-term			Long-term			Short-term			Long-term
	(in thousands)						(in thousands)
Balance at December 31, 2018	$	41,458		$	42,472		$	41,458		$	42,472
Deferred customer acquisition costs incurred in the period	12,092			18,780			17,969			28,231
Amounts recognized as expense in the period	(27,945		)	—			(41,784		)	—
Impact of foreign exchange rates	(63		)	70			(122		)	80
Reclassification between short-term and long-term	16,162			(16,162		)	23,007			(23,007		)
Balance at June 30, 2019	$	41,704		$	45,160
Balance at September 30, 2019							$	40,528		$	47,776

As of ~~June~~September 30, 2019, the Company had a total of ~~$73.0~~approximately $73.9 million, ~~$12.3~~$12.6 million and ~~$1.6~~$1.7 million in deferred assets relating to costs incurred to obtain or fulfill contracts in its web presence, email marketing and domain segments, respectively. These deferred assets consist entirely of recoverable, specific, success-based sales commissions. During the ~~six~~nine months ended ~~June~~September 30, 2019, the Company recognized total amortization costs related to the above items of approximately ~~$23.6~~$34.9 million, ~~$3.1~~$4.7 million, and ~~$1.3~~$2.1 million in its web presence, email marketing and domain segments, ~~respectively.~~respectively, which were included in sales and marketing in the consolidated statements of operations and comprehensive income (loss).

Significant Judgments

The Company sells a number of third-party cloud-based services to enhance a ~~subscriber’s~~customer’s overall web hosting experience. The Company exercises considerable judgment to determine if it is the principal or agent in each of these arrangements, and in some instances, has concluded that it is an agent of the third party and recognizes revenue at the time of the ~~subscriber~~customer purchase in an amount that is net of the revenue share payable to the third party.

The Company exercises judgment to determine the ~~standalone selling price~~SSP for each distinct performance obligation. In instances where the ~~standalone selling price~~SSP is not directly observable, such as when the Company does not sell the product or service separately, the Company determines the ~~standalone selling price~~SSP using information that may include a competitive market assessment approach and other observable inputs. The Company typically has more than one ~~standalone selling price~~SSP for individual products and services.

Judgment is required to determine whether particular types of sales and marketing costs incurred, including commissions, are incremental and recoverable costs incurred to obtain and fulfill the customer contract. In addition, judgment is required to determine the life of the customer over which deferred customer acquisition costs are amortized.

Income Taxes

Income taxes are accounted for in accordance with FASB ASC 740, Accounting for Income Taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using the enacted tax rates ~~expected~~and laws that will be in effect when the Company expects the differences to ~~apply to taxable income in~~reverse. The Company reduces the ~~years in which those temporary differences are expected to be recovered or settled. The effect on~~ deferred tax assets by a valuation allowance if, based upon the weight of available evidence, it is more likely than not that the Company will not realize some portion or all of the deferred tax assets. The Company considers relevant evidence, both positive and negative, to determine the need for a valuation allowance.

As part of the Tax Cut and Jobs Act of 2017 (the “TCJA”), the Company is subject to a territorial tax system in which it is required to make an accounting policy in providing for tax on Global Intangible Low Taxed Income (“GILTI”) earned by certain foreign subsidiaries. The Company has elected to treat the impact of GILTI as a period cost, to be reported as a part of continuing operations, as a component of income tax expense.

The Company establishes reserves when it believes that certain positions are likely to be challenged despite the Company’s assertion that its tax return positions are fully supportable. The calculation of the Company’s tax liabilities involves significant judgment based on individual facts, circumstances, and information available in addition to applying complex tax regulations in various jurisdictions.

Under U.S. GAAP, in order to recognize an uncertain tax benefit, the taxpayer must determine it is more likely than not the position will be sustained, and the measurement of the benefit is calculated as the largest amount that is more than 50 percent likely to be realized upon resolution of the benefit. Although the Company believes that it has adequately provided for liabilities resulting from tax assessment by taxing authorities, positions taken by these tax authorities could have an impact on the Company’s results of operations, financial position and/or cash flows. The Company recognizes the interest and penalties related to income taxes as a ~~change~~part of interest expense and operating expenses, respectively, in ~~tax rates is recognized~~continuing operations in its consolidated statements of operations and comprehensive income ~~in the period that includes the enactment date.~~(loss).

ASC 740 clarifies the accounting for income taxes by prescribing a minimum recognition threshold that a tax position is required to meet before being recognized in the financial statements. The Company recognizes the effect of income tax positions only if those positions are more likely than not to be sustained. Recognized income tax positions are measured at the largest amount that is more likely than not to be realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. ~~The Company had unrecognized tax benefits at December 31, 2018 and June 30, 2019 of $4.4 million and $5.3 million, respectively.~~

The Company records interest related to unrecognized tax benefits in interest expense and penalties in operating expenses. During the three and six months ended June 30, 2018 and 2019, the Company recognized an immaterial amount of interest and penalties related to unrecognized tax benefits.

Stock-Based Compensation

The Company may issue restricted stock units, restricted stock awards and stock options which vest upon the satisfaction of a performance condition and/or a service condition. The Company follows the provisions of FASB ASC 718, Compensation—Stock Compensation, which requires employee stock-based payments to be accounted for under the fair value method. Under this method, the Company is required to record compensation cost based on the estimated fair value for stock-based awards granted over the requisite service periods for the individual awards, which generally equals the vesting periods, net of estimated forfeitures. The Company uses the straight-line amortization method for recognizing stock-based compensation expense. In addition, for stock-based awards where vesting is dependent upon achieving certain performance goals, the Company estimates the likelihood of achieving the performance goals against established performance targets.

The Company estimates the fair value of employee stock options on the date of grant using the Black-Scholes option-pricing model, which requires the use of highly subjective estimates and assumptions. For restricted stock awards and restricted

stock units granted, the Company estimates the fair value of each restricted stock award or restricted stock unit based on the closing trading price of its common stock on the date of grant.

Net (Loss) Income ~~(Loss)~~ per Share

The Company considered FASB ASC 260-10, Earnings per Share, which requires the presentation of both basic and diluted earnings per share in the consolidated statements of operations and comprehensive ~~loss.~~income (loss). The Company’s basic net (loss) income ~~(loss)~~ per share is computed by dividing net (loss) income ~~(loss)~~ by the weighted-average number of shares of common stock outstanding for the period, and, if there are dilutive securities, diluted income per share is computed by including common stock equivalents which includes shares issuable upon the exercise of stock options, net of shares assumed to have been purchased with the proceeds, using the treasury stock method.


	Three Months Ended June 30,					Six Months Ended June 30,						Three Months Ended September 30,					Nine Months Ended September 30,
	2018		2019			2018			2019			2018			2019		2018			2019
	(unaudited) (in thousands, except share amounts and per share data)											(unaudited) (in thousands, except share amounts and per share data)
Net income (loss)	$	627	$	(26,228	)	$	(1,901	)	$	(29,716	)
Net income (loss) per share attributable to Endurance International Group Holdings, Inc.:
Net (loss) income												$	(6,335	)	$	7,816	$	(8,236	)	$	(21,900	)
Net (loss) income per share:
Basic	$	—	$	(0.18	)	$	(0.01	)	$	(0.21	)	$	(0.04	)	$	0.05	$	(0.06	)	$	(0.15	)
Diluted	$	—	$	(0.18	)	$	(0.01	)	$	(0.21	)	$	(0.04	)	$	0.05	$	(0.06	)	$	(0.15	)
Weighted-average common shares used in computing net income (loss) per share:
Weighted-average common shares used in computing net (loss) income per share:
Basic	142,340,561		145,308,823			141,356,567			144,414,929			143,107,122			145,951,755		141,946,574			144,932,834
Diluted	144,702,002		145,308,823			141,356,567			144,414,929			143,107,122			146,301,595		141,946,574			144,932,834

The following number of weighted-average potentially dilutive shares were excluded from the calculation of diluted loss per share because the effect of including such potentially dilutive shares would have been anti-dilutive:


	Three Months Ended June 30,		Six Months Ended June 30,		Three Months Ended September 30,		Nine Months Ended September 30,
	2018	2019	2018	2019	2018	2019	2018	2019
	(unaudited)				(unaudited)
Restricted stock awards and units	6,604,998	9,240,137	6,243,878	8,864,517	6,915,158	9,310,082	6,470,097	3,977,996
Options	8,606,916	9,167,540	8,787,671	8,944,596	8,362,719	9,001,646	8,644,464	8,931,747
Total	15,211,914	18,407,677	15,031,549	17,809,113	15,277,877	18,311,728	15,114,561	12,909,743

Recent Accounting Pronouncements - Recently Adopted

In February 2016, the FASB issued ASU No. 2016-02, Leases, or ASC 842. Since then, the FASB has also issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases, which further clarifies ASU No. 2016-02 and corrects unintended application of guidance. The new standard establishes a right-of-use ("ROU") model that requires a lessee to record an ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company adopted the new standard on January 1, 2019. The Company elected to utilize the available practical expedients and implemented internal controls and reporting systems to enable the preparation of the financial information on adoption and on an ongoing basis subsequent to adoption. Upon adoption, the Company recorded an ROU asset of $114.9 million, and a lease liability of $124.5 million, and reduced accrued facility exit costs by $1.7 million and deferred rent liabilities by $7.9 million. There was no impact to opening retained earnings as a result of the adoption of the new guidance. The impact of applying ASC 842 on the results for reporting periods and balance sheet beginning after January 1, 2019 is presented under ASC 842, while prior amounts are not adjusted and continue to be reported in accordance with the Company’s historic accounting under ASC 840, Leases. The Company's accounting for finance leases remained substantially unchanged. See Note 5, Leases, for further details.

Recent Accounting Pronouncements - Recently Issued

In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. The new guidance provides for the deferral of implementation costs for cloud computing arrangements and expensing those costs over the term of the cloud services arrangement. The Company is currently evaluating the timing of adoption and the expected impact of the new guidance.

3. ~~Correction of Income Tax Expense - Fiscal Year 2018~~Acquisitions

~~During the three months ended September 30, 2018, the~~The Company ~~revised its deferred income tax provision~~accounts for the ~~first~~acquisitions of businesses using the purchase method of accounting. The Company allocates the purchase price to the tangible and ~~second quarters of 2018~~identifiable intangible assets and liabilities assumed based on their estimated fair values. Purchased identifiable intangible assets typically include subscriber relationships, trade names, domain names held for sale, developed technology and in-process research and development. The methodologies used to ~~reflect a revision that favorably impacted net income (loss)~~determine the fair value assigned to subscriber relationships and domain names held for ~~these periods.~~

During fiscal year 2017, the Company began a process to reorganize, and in some instances, eliminate legal entities associated with certain products introduced in 2015 and 2016. This reorganization is expected to provide tax benefits, as the Company can deduct lossessale are typically based on the ~~investments in these entities in its U.S. income tax filings. After further review of these losses,~~excess earnings method that considers the Company determined that a significant portion of these losses should have been reflected in its 2017 income tax provision calculations. The Company increased its net operating loss ("NOL") carry-forwards available to offset future U.S. federal taxable incomereturn received from $157.6 million as of December 31, 2017, to $236.3 million. Additionally, NOL carry-forwards available to offset future state taxable income were increased from $128.6 million as of December 31, 2017, to $168.3 million. These changes in NOL carry-forwards did not impact the ~~actual income tax provision recorded in 2017; however, due to the changes enacted in the 2017 Tax Cuts~~intangible asset and ~~Jobs Act, the manner in which net operating loss carry-forwards are handled did impact the Company's 2018 provision for non-cash deferred income taxes. The impact of this revision~~includes certain expenses and also considers an attrition rate based on the Company’s ~~financial statements as originally filed~~internal subscriber analysis and an estimate of the average life of the subscribers. The fair value assigned to trade names is typically based on the income approach using a relief from royalty methodology that assumes that the fair value of a trade name can be measured by estimating the cost of licensing and paying a royalty fee for the ~~three~~trade name that the owner of the trade name avoids. The fair value assigned to developed technology typically uses the cost approach. If applicable, the Company estimates the fair value of contingent consideration payments in determining the purchase price. The contingent consideration is then adjusted to fair value in subsequent periods as an increase or decrease in current earnings in general and ~~six months ended June 30, 2018 is detailed~~administrative expense in the consolidated statements of operations and comprehensive income (loss).

Ecomdash

On September 13, 2019, the Company acquired substantially all of the assets of LTD Software LLC, doing business as Ecomdash (“Ecomdash”), which is a software provider that offers inventory management and marketplace listing solutions for small and mid-sized businesses selling online. The aggregate purchase price was $9.6 million, of which approximately $8.9 million was paid in cash at the closing. The Company retained the remainder of the purchase price as a holdback to fund any working capital adjustment, if applicable, and to serve as security for the indemnification obligations of the seller under the asset purchase agreement. Subject to any working capital adjustment and indemnification claims, the Company will release the holdback funds to the seller 12 months from the closing date.

Transaction costs were expensed as incurred. The Company has accounted for this transaction as a business combination in accordance with the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized at their estimated fair values as of the acquisition date.

The following table ~~below:~~

summarizes the preliminary allocation of the purchase consideration to the assets acquired and liabilities assumed at the date of acquisition:



	September 13, 2019
	(in thousands)
Working capital	$	(163	)
Goodwill	6,953
Developed technology	2,445
Subscriber relationships	390
Total	$	9,625

Three Months Ended June 30, 2018 Six Months Ended June 30, 2018
Originally Filed Adjustment Revised Originally Filed Adjustment Revised
(in thousands, except share and per share data)
Loss before income taxes and equity earnings of unconsolidated subsidiaries $ (344 ) $ —
$ (344 ) $ (4,788 ) $ —
$ (4,788 )
Income tax expense (benefit) 1,650
(2,596 ) (946 ) 4,267
(7,156 ) (2,889 )
(Loss) income before equity earnings of unconsolidated subsidiaries (1,994 ) $ 2,596
$ 602
(9,055 ) 7,156
(1,899 )
Equity (income) loss of unconsolidated subsidiaries (25 ) —
(25 ) 2
—
2
Net income (loss) $ (1,969 ) $ 2,596
$ 627
$ (9,057 ) $ 7,156
$ (1,901 )
Comprehensive income (loss)
Foreign currency translation (2,425 ) —
(2,425 ) (1,845 ) —
(1,845 )
Unrealized gain on cash flow hedge, net of tax 144
—
144
1,184
—
1,184
Total comprehensive income (loss) $ (4,250 ) $ 2,596
$ (1,654 ) $ (9,718 ) $ 7,156
$ (2,562 )
Basic net income (loss) per share $ (0.01 ) $ 0.01
$ —
$ (0.06 ) $ 0.05
$ (0.01 )
Diluted net income (loss) per share $ (0.01 ) $ 0.01
$ —
$ (0.06 ) $ 0.05
$ (0.01 )
Weighted-average common shares used in computing net income (loss) per share
Basic 142,340,561
—
142,340,561
141,356,567
—
141,356,567
Diluted 142,340,561
2,361,441
144,702,002
141,356,567
—
141,356,567
Goodwill related to the acquisition is deductible for tax purposes.

Pro Forma Disclosure

The following ~~table represents~~unaudited information is presented as if the ~~impact~~Ecomdash acquisition was completed as of January 1, 2018. The unaudited pro forma results are not necessarily indicative of the ~~revised deferred income tax provision on~~actual results that would have occurred had the ~~impacted balance sheet accounts as~~transaction

actually taken place at the beginning of the ~~date shown:~~period indicated.

June 30, 2018
Originally Filed Adjustment Revised
(in thousands)
Deferred tax liability $ 29,897
$ (7,156 ) $ 22,741
Total liabilities 2,490,106
(7,156 ) 2,482,950
Accumulated deficit (797,175 ) 7,156
(790,019 )
Total stockholders' equity 147,759
7,156
154,915
Total liabilities and stockholders' equity 2,637,865
—
2,637,865

~~The following table represents the impact of the revised deferred income tax provision on the impacted lines of the statement of cash flows for the period shown:~~

Six Months Ended June 30, 2018
Originally Filed Adjustment Revised
(in thousands)
Net income (loss) $ (9,057 ) $ 7,156
$ (1,901 )
Deferred tax expense 2,672
(7,156 ) (4,484 )
Net cash provided by operating activities 82,252
—
82,252



	Three Months Ended September 30,					Nine Months Ended September 30,
	2018			2019		2018			2019
	(unaudited, in thousands)
Pro forma revenue	$	284,169		$	277,629	$	864,093		$	837,388

Proforma net (loss) income	$	(6,546	)	$	7,612	$	(8,869	)	$	(22,532	)

Unaudited pro forma net (loss) income includes adjustments for amortization expense related to the intangible assets acquired and the tax impact of these amortization expense adjustments.

4. Property and Equipment and Property, Plant and Equipment Financing Obligations

Components of property and equipment consisted of the following:


	December 31, 2018			June 30, 2019			December 31, 2018			September 30, 2019
	(in thousands)						(in thousands)
Land	$	790		$	790		$	790		$	790
Building	7,819			8,125			7,819			8,285
Software	102,259			100,124			102,259			104,629
Computers and office equipment	157,396			174,908			157,396			184,457
Furniture and fixtures	19,258			19,619			19,258			19,311
Leasehold improvements	20,215			21,228			20,215			21,684
Construction in process	12,314			13,394			12,314			4,012
Property and equipment—at cost	320,051			338,188			320,051			343,168
Less: accumulated depreciation	(227,776		)	(249,488		)	(227,776		)	(256,850		)
Property and equipment—net	$	92,275		$	88,700		$	92,275		$	86,318

Depreciation expense related to property and equipment for the three months ended ~~June~~September 30, 2018 and 2019 was ~~$12.8~~$11.9 million and ~~$10.9~~$11.3 million, respectively. Depreciation expense related to property and equipment for the ~~six~~nine months ended ~~June~~September 30, 2018 and 2019 was ~~$24.9~~$36.8 million and ~~$22.1~~$33.4 million, respectively.

Financed equipment with a cost basis of $16.7 million was included in software as of ~~June~~September 30, 2019. The net carrying value of financed equipment as of ~~June~~September 30, 2019 was ~~$7.6~~$6.1 million.

5. Leases

The Company has operating leases for data centers, corporate offices, data center equipment, and office equipment. The Company's leases have remaining lease terms of 1 year to 8 years, some of which include options to extend.

The Company's lease expense for the three and ~~six~~nine months ended ~~June~~September 30, 2019 ~~was~~consisted entirely ~~comprised~~ of operating leases and amounted to ~~$7.3~~$6.9 million and ~~$14.5~~$21.5 million, respectively. Operating lease payments, which reduced operating cash flows for the three and ~~six~~nine months ended ~~June~~September 30, 2019, amounted to ~~$7.2~~$6.7 million and ~~$13.9~~$20.6 million, respectively.

Supplemental balance sheet information related to leases was as follows:


	June 30, 2019		September 30, 2019
	(in thousands)		(in thousands)
Operating lease right-of-use assets	$	104,210	$	98,064

Operating lease liabilities—short-term	22,483		22,474
Operating lease liabilities—long-term	90,989		84,594
Total operating lease liabilities	$	113,472	$	107,068

As of ~~June~~September 30, 2019, the weighted-average remaining lease term was ~~5.55~~5.40 years and the discount rate for the Company's leases was ~~6.76%~~6.77%.

Maturities for leases were as follows:


	Operating Leases		Operating Leases
	(in thousands)		(in thousands)
Remainder of 2019	$	14,519	$	7,202
2020	28,735		28,353
2021	22,244		21,893
2022	19,143		18,871
2023	17,677		17,645
Thereafter	34,523		34,522
Total lease payments	$	136,841	$	128,486
Less: imputed interest	23,369		21,418
Total	$	113,472	$	107,068

6. Fair Value Measurements

The following valuation hierarchy is used for disclosure of the valuation inputs used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or ~~liabilities.~~liabilities

Level 2 inputs are quoted prices for similar assets or liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial ~~instrument.~~instrument

Level 3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair ~~value.~~value

A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

As of December 31, 2018, the Company’s financial assets required to be measured on a recurring basis consisted of the 2015 interest rate cap, the 2018 interest rate cap, and certain cash equivalents, which included money market instruments and bank time deposits. As of ~~June~~September 30, 2019, the Company’s financial assets required to be measured on a recurring basis consist of the 2018 interest rate cap and certain cash equivalents, which include money market instruments and bank time deposits. The Company has classified the interest rate caps, which are discussed in Note 7, Derivatives and Hedging Activities below, within Level 2 of the fair value hierarchy. The Company has also classified these cash equivalents within Level 2 of the fair value hierarchy. The 2015 interest rate cap matured during the three months ended March 31, 2019.

Basis of Fair Value Measurements


	Balance		Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance		Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)								(in thousands)
Balance at December 31, 2018
Financial assets:
Cash equivalents (included in cash and cash equivalents)	$	7,874	$	—	$	7,874	$	—	$	7,874	$	—	$	7,874	$	—
Interest rate cap (included in other assets)	2,583		—		2,583		—		2,583		—		2,583		—
Total financial assets	$	10,457	$	—	$	10,457	$	—	$	10,457	$	—	$	10,457	$	—
Balance at June 30, 2019
Balance at September 30, 2019
Financial assets:
Cash equivalents (included in cash and cash equivalents)	$	8,122	$	—	$	8,122	$	—	$	9,089	$	—	$	9,089	$	—
Interest rate cap (included in other assets)	158		—		158		—		22		—		22		—
Total financial assets	$	8,280	$	—	$	8,280	$	—	$	9,111	$	—	$	9,111	$	—

The carrying amounts of the Company's other financial assets and liabilities including cash, accounts receivable, accounts payable and accrued liabilities approximate their respective fair values because of the relatively short period of time between their origination and their expected realization or settlement.

7. Derivatives and Hedging Activities

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its debt funding and the use of derivative financial instruments. Specifically, the Company may enter into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s investments and borrowings.

Cash Flow Hedges of Interest Rate Risk

The Company has entered into ~~two~~2 three-year interest rate caps as part of its risk management strategy, of which the first one matured in the three months ended March 31, 2019. The interest rate caps, designated as cash flow hedges of interest rate risk, provide for the payment to the Company of variable amounts if interest rates rise above the strike rate on the contract in exchange for an upfront premium. Therefore, these derivatives limit the Company’s exposure if the interest rate rises, but also allow the Company to benefit when the interest rate falls.

In December 2015, the Company entered into a three-year interest rate cap with $500.0 million notional value outstanding. This interest rate cap was effective beginning on February 29, 2016 and matured on February 27, 2019. The fair value of this interest rate contract included in other assets on the consolidated balance sheet as of ~~June~~September 30, 2019 was $0.0 million, and the Company recognized $0.0 million and $0.4 million, respectively, of interest expense in the Company’s consolidated ~~statement~~statements of operations and comprehensive ~~loss~~income (loss) for the three and ~~six~~nine months ended ~~June~~September 30, 2019. The Company recognized a $0.1 million loss in Accumulated Other Comprehensive Income ("AOCI") for the ~~six~~nine months ended ~~June~~September 30, 2019.

In June 2018, the Company entered into a three-year interest rate cap with $800.0 million notional value outstanding. This interest rate cap was effective beginning on August 28, 2018. The fair value of this interest rate contract included in other assets on the consolidated balance sheet as of ~~June~~September 30, 2019 was ~~$0.2~~$0.0 million, and the Company recognized $0.4 million and ~~$0.9~~$1.3 million, respectively, of interest expense in the Company’s consolidated ~~statement~~statements of operations and comprehensive ~~loss~~income (loss) for the three and ~~six~~nine months ended ~~June~~September 30, 2019. The Company recognized a ~~$1.0~~$0.7 million loss, net of a tax benefit of ~~$0.3~~$0.2 million, in AOCI for the ~~six~~nine months ended ~~June~~September 30, 2019. The Company estimates that $1.8 million will be reclassified from AOCI to interest expense (as an increase to interest expense) in the next twelve months.

The changes in the fair value of derivatives that qualify as cash flow hedges is recorded in AOCI, and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt.

8. Goodwill and Other Intangible Assets

The following table summarizes the changes in the Company’s goodwill balances from December 31, 2018 to ~~June~~September 30, 2019:


	Web Presence			Email Marketing		Domain		Total			Web Presence			Email Marketing		Domain		Total
	(in thousands)										(in thousands)
Goodwill balance at December 31, 2018	$	1,214,902		$	604,305	$	29,858	$	1,849,065		$	1,214,902		$	604,305	$	29,858	$	1,849,065
Goodwill related to 2019 acquisition											—			6,953		—		6,953
Foreign translation impact	(116		)	—		—		(116		)	(1,189		)	—		—		(1,189		)
Goodwill balance at June 30, 2019	$	1,214,786		$	604,305	$	29,858	$	1,848,949
Goodwill balance at September 30, 2019											$	1,213,713		$	611,258	$	29,858	$	1,854,829

In accordance with ASC 350, the Company reviews goodwill and other indefinite-lived intangible assets for indicators of impairment on an annual basis and between tests if an event occurs or circumstances change that would more likely than not reduce the fair value of goodwill below its carrying amount.

AtAs of December 31, 2018, other intangible assets consisted of the following:



	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted- Average Useful Life
	(dollars in thousands)
Developed technology	$	284,266	$	180,914	$	103,352	7 years
Subscriber relationships	659,515		486,518		172,997		7 years
Trade names	134,048		84,617		49,431		8 years
Intellectual property	34,263		28,954		5,309		5 years
Domain names available for sale	30,981		9,554		21,427		Indefinite
Total December 31, 2018	$	1,143,073	$	790,557	$	352,516

~~At June~~As of September 30, 2019, other intangible assets consisted of the following:


	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted- Average Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted- Average Useful Life
	(dollars in thousands)							(dollars in thousands)
Developed technology	$	284,246	$	197,267	$	86,979	7 years	$	286,562	$	204,555	$	82,007	7 years
Subscriber relationships	659,529		507,763		151,766		7 years	659,817		518,461		141,356		7 years
Trade names	134,048		89,425		44,623		8 years	134,045		91,937		42,108		8 years
Intellectual property	34,263		29,709		4,554		5 years	34,263		30,086		4,177		5 years
Domain names available for sale	18,047		13,778		4,269		Indefinite	18,090		14,409		3,681		Indefinite
Total June 30, 2019	$	1,130,133	$	837,942	$	292,191
Total September 30, 2019								$	1,132,777	$	859,448	$	273,329

During the ~~six~~nine months ended ~~June~~September 30, 2018, there were no0 impairment charges of intangible assets. During the ~~six~~nine months ended ~~June~~September 30, 2019, the Company recorded an impairment charge of $17.9 million relating to premium domain name intangible assets acquired in 2014, which was recorded in cost of revenue in the consolidated ~~statement~~statements of operations and comprehensive ~~loss.~~income (loss). The impairment resulted from recent market conditions that have adversely impacted cash flows from these assets, and these market conditions are expected to continue.

The estimated useful lives of the individual categories of other intangible assets are based on the nature of the applicable intangible asset and the expected future cash flows to be derived from the intangible asset. Amortization of intangible assets with finite lives is recognized over the period of time the assets are expected to contribute to future cash flows. The Company amortizes finite-lived intangible assets over the period in which the economic benefits are expected to be realized based upon their estimated projected cash flows.

The Company’s amortization expense is included in cost of revenue in the consolidated ~~statement~~statements of operations and comprehensive ~~loss~~income (loss) in the aggregate amounts of ~~$26.0~~$26.2 million and ~~$21.3~~$21.7 million for the three months ended ~~June~~September 30, 2018 and 2019, respectively. The Company’s amortization expense is included in cost of revenue in the consolidated ~~statement~~statements of operations and comprehensive ~~loss~~income (loss) in the aggregate amounts of ~~$51.7~~$77.9 million and ~~$42.5~~$64.1 million for the ~~six~~nine months ended ~~June~~September 30, 2018 and 2019, respectively.

9. Notes Payable

At December 31, 2018 and ~~June~~September 30, 2019, notes payable, net of original issue discounts and deferred financing costs, consisted of the following:


	At December 31, 2018		At June 30, 2019		At December 31, 2018		At September 30, 2019
	(in thousands)				(in thousands)
Term Loan	$	1,470,085	$	1,423,989	$	1,470,085	$	1,401,002
Notes	331,576		332,943		331,576		333,669
Revolving credit facilities	—		—		—		—
Total notes payable	1,801,661		1,756,932		1,801,661		1,734,671
Current portion of notes payable	31,606		31,606		31,606		31,606
Notes payable - long term	$	1,770,055	$	1,725,326	$	1,770,055	$	1,703,065

First Lien Term Loan Facility

The First Lien Term Loan (the "Term Loan") was issued at par and automatically bears interest at an alternate base rate unless the Company gives notice to opt for the LIBOR-based interest rate. The LIBOR-based interest rate for the Term Loan is 3.75% per annum plus the greater of an adjusted LIBOR and 1.00%. The alternate base rate for the Term Loan is 2.75% per annum plus the greatest of the prime rate, the federal funds effective rate plus 0.50%, an adjusted LIBOR for a one-month interest period plus 1.00%, and 2.00%.

The Term Loan has a maturity date of February 9, 2023 and requires quarterly mandatory repayments of principal. During the ~~six~~nine months ended ~~June~~September 30, 2019, the Company made ~~two~~3 mandatory repayments of $7.9 million each and ~~two~~3 voluntary repayments of $17.1 million each, for a total repayment of ~~$50.0~~$75.0 million.

Interest is payable on maturity of the elected interest period for a term loan with a LIBOR-based interest rate, which interest period can be one, two, three or six months. Interest is payable at the end of each fiscal quarter for a term loan with an alternate base rate.

As of December 31, 2018 and ~~June~~September 30, 2019, the Term Loan had an outstanding balance of:


	At December 31, 2018			At June 30, 2019			At December 31, 2018			At September 30, 2019
	(in thousands)						(in thousands)
Term Loan	$	1,505,002		$	1,455,002		$	1,505,002		$	1,430,002
Unamortized deferred financing costs	(18,556		)	(16,482		)	(18,556		)	(15,412		)
Unamortized original issue discount	(16,361		)	(14,531		)	(16,361		)	(13,588		)
Net Term Loan	1,470,085			1,423,989			1,470,085			1,401,002
Current portion of Term Loan	31,606			31,606			31,606			31,606
Term Loan - long term	$	1,438,479		$	1,392,383		$	1,438,479		$	1,369,396

Revolving Credit Facility

The Company has a revolving credit facility (the “Revolver”), which has an aggregate available amount of $165.0 million. As of December 31, 2018 and ~~June~~September 30, 2019, the Company did not have any balances outstanding under the Revolver and the full amount of the facility was unused and available.

The Revolver consists of a non-extended tranche of approximately $58.8 million and an extended tranche of approximately $106.2 million. The non-extended tranche has a maturity date of February 9, 2021. The extended tranche has a maturity date of June 20, 2023, with a "springing" maturity date of November 10, 2022 if the Term Loan has not been repaid in full or otherwise extended to September 19, 2023 or later prior to November 10, 2022.

The Company has the ability to draw down against the Revolver using a LIBOR-based interest rate or an alternate base rate. The LIBOR-based interest rate for a non-extended revolving loan is 4.00% per annum (subject to a leverage-based step-down) and for an extended revolving loan is 3.25% per annum (subject to a leverage-based step-down), in each case plus an adjusted LIBOR for a selected interest period. The alternate base rate for a non-extended revolving loan is 3.00% per annum (subject to a leverage-based step-down) and for an extended revolving loan is 2.25% per annum (subject to a leverage-based step-down), in each case plus the greatest of the prime rate, the federal funds rate plus 0.50% and an adjusted LIBOR orfor a one-month interest period plus 1.00%. There is also a non-refundable commitment fee, equal to 0.50% per annum (subject to a leverage-based step-down) of the average daily unused principal amount of the Revolver, which is payable in arrears on the last day of each fiscal quarter. Interest is payable on maturity of the elected interest period for a revolver loan with a LIBOR-based interest rate, which interest period can be one, two, three or six months. Interest is payable at the end of each fiscal quarter for a revolver loan with an alternate base rate.

Senior Notes

In connection with the acquisition of Constant Contact, Inc. ("Constant Contact") in February 2016, EIG Investors issued $350.0 million aggregate principal amount of senior notes (the "Senior Notes") with a maturity date of February 1, 2024. The Senior Notes were issued at a price of 98.065% of par and bear interest at the rate of 10.875% per annum. The Senior Notes have been fully and unconditionally guaranteed, on a senior unsecured basis, by Holdings and its subsidiaries that guarantee the Term Loan and the Revolver (including Constant Contact and certain of its subsidiaries). The Company has the right to redeem all or a part of the Senior Notes at any time for a premium which is based on the applicable redemption date. As of

December 31, 2018 and ~~June~~September 30, 2019, the Senior Notes had an outstanding balance of:


	At December 31, 2018			At June 30, 2019			At December 31, 2018			At September 30, 2019
	(in thousands)						(in thousands)
Senior Notes	$	350,000		$	350,000		$	350,000		$	350,000
Unamortized deferred financing costs	(13,436		)	(12,437		)	(13,436		)	(11,906		)
Unamortized original issue discount	(4,988		)	(4,620		)	(4,988		)	(4,425		)
Net Senior Notes	331,576			332,943			331,576			333,669
Current portion of Senior Notes	—			—			—			—
Senior Notes - long term	$	331,576		$	332,943		$	331,576		$	333,669

Interest on the Senior Notes is payable twice a year, on August 1^st and February 1.1^st.

Maturity of Notes Payable

The maturity of the notes payable at ~~June~~September 30, 2019 is as follows:


Amounts maturing in:	(in thousands)		Amounts
			(in thousands)
Remainder of 2019	$	15,803	$	7,902
2020	31,606		31,606
2021	31,606		31,606
2022	31,606		31,606
2023	1,344,381		1,327,282
Thereafter	350,000		350,000
Total	$	1,805,002	$	1,780,002

Interest

The Company recorded ~~$38.3~~$37.5 million and ~~$37.0~~$36.1 million in interest expense for the three months ended ~~June~~September 30, 2018 and 2019, respectively, and ~~$74.4~~$111.9 million and ~~$74.3~~$110.3 million for the ~~six~~nine months ended ~~June~~September 30, 2018 and 2019, respectively.

The following table provides a summary of interest rates and interest expense for the three and ~~six~~nine months ended ~~June~~September 30, 2018 and 2019:


	Three Months Ended June 30, 2018			Three Months Ended June 30, 2019			Six Months Ended June 30, 2018			Six Months Ended June 30, 2019			Three Months Ended September 30, 2018			Three Months Ended September 30, 2019			Nine Months Ended September 30, 2018			Nine Months Ended September 30, 2019
	(percentage per annum)												(percentage per annum)
Interest rate—LIBOR	5.96%-6.32%			6.18%-6.39%			5.46%-6.32%			6.18%-6.44%			5.81%-6.07%			5.88%-6.27%			5.46%-6.32%			5.88%-6.44%
Interest rate—reference	*			*			*			*
Interest rate—alternate base rate													*			*			*			*
Interest rate—Senior Notes	10.875		%	10.875		%	10.875		%	10.875		%	10.875		%	10.875		%	10.875		%	10.875		%
Non-refundable fee—unused facility	0.50		%	0.50		%	0.50		%	0.50		%	0.50		%	0.50		%	0.50		%	0.50		%
	(dollars in thousands)												(in thousands)
Interest expense and service fees	$	34,318		$	33,883		$	67,075		$	68,107		$	34,469		$	32,965		$	101,575		$	101,072
Loss on extinguishment of debt	331			—			331			—			—			—			331			—
Deferred financing fees immediately expensed	1,228			—			1,228			—			—			—			1,228			—
Amortization of deferred financing fees	1,092			1,776			2,986			3,509			1,722			1,822			4,708			5,331
Amortization of original issue discounts	1,068			1,111			2,126			2,198			1,083			1,138			3,209			3,336
Amortization of net present value of deferred consideration	123			59			251			120			60			23			311			143
Other interest expense	186			208			399			317			193			109			561			426
Total interest expense	$	38,346		$	37,037		$	74,396		$	74,251		$	37,527		$	36,057		$	111,923		$	110,308

* The Company did not have debt bearing interest based on the alternate base rate for the three and ~~six~~nine months ended ~~June~~September 30, 2018 and 2019.

Debt Covenants

The Term Loan and Revolver (together, the "Senior Credit Facilities") require that the Company complies with a financial covenant to maintain a maximum ratio of consolidated senior secured net indebtedness to an adjusted consolidated EBITDA measure.

The Senior Credit Facilities also contain covenants that limit the Company's ability to, among other things, incur additional debt or issue certain preferred shares; pay dividends on or make other distributions in respect of capital stock; make other restricted payments; make certain investments; sell or transfer certain assets; create liens on certain assets to secure debt; consolidate, merge, sell or otherwise dispose of all or substantially all of its assets; and enter into certain transactions with affiliates. These covenants are subject to a number of important limitations and exceptions.

Additionally, the Senior Credit Facilities require the Company to comply with certain negative covenants and specify certain events of default that could result in amounts becoming payable, in whole or in part, prior to their maturity dates.

With the exception of certain equity interests and other excluded assets under the terms of the Senior Credit Facilities, substantially all of the Company's assets are pledged as collateral for the obligations under the Senior Credit Facilities.

The indenture with respect to the Senior Notes contains covenants that limit the Company's ability to, among other things, incur additional debt or issue certain preferred shares; pay dividends on or make other distributions in respect of capital stock; make other restricted payments; make certain investments; sell or transfer certain assets; create liens on certain assets to secure debt; consolidate, merge, sell or otherwise dispose of all or substantially all of its assets; and enter into certain transactions with affiliates. Upon a change of control as defined in the indenture, the Company must offer to repurchase the Senior Notes at 101% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, up to, but not including, the repurchase date. These covenants are subject to a number of important limitations and exceptions.

The indenture also provides for events of default, which, if any of them occurs, may permit or, in certain circumstances, require the principal, premium, if any, interest and any other monetary obligations on all the then outstanding Senior Notes to be due and payable immediately.

The Company was in compliance with all covenants at ~~June~~September 30, 2019.

10. Stock-Based Compensation

The Company has 2 stock incentive plans, as described below.

2013 Stock Incentive Plan

The Amended and Restated 2013 Stock Incentive Plan (the “2013 Plan”) of the Company became effective upon the closing of its initial public offering. The 2013 Plan provides for the grant of options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards to employees, officers, directors, consultants and advisers of the Company. Under the 2013 Plan, the Company may issue up to 38,000,000 shares of the Company’s common stock. At ~~June~~September 30, 2019, there were ~~11,594,475~~9,389,295 shares available for grant under the 2013 Plan.

2011 Stock Incentive Plan

As of February 9, 2016, the effective date of the acquisition of Constant Contact, the Company assumed and converted certain outstanding equity awards granted by Constant Contact under the Constant Contact 2011 Stock Incentive Plan (the “2011 Plan”) prior to the effective date of the acquisition (the “Assumed Awards”) into corresponding equity awards with respect to shares of the Company’s common stock. In addition, the Company assumed certain shares of Constant Contact common stock, par value $0.01 per share, available for issuance under the 2011 Plan (the “Available Shares”), which will be available for future issuance under the 2011 Plan in satisfaction of the vesting, exercise or other settlement of options and other equity awards that may be granted by the Company following the effective date of the acquisition of Constant Contact in reliance on the prior approval of the 2011 Plan by the stockholders of Constant Contact. The Assumed Awards were converted into 2,143,987 stock options and 2,202,846 restricted stock units with respect to the Company’s common stock and the Available Shares were converted into 10,000,000 shares of the Company’s common stock reserved for future awards under the 2011 Plan. At ~~June~~September 30, 2019, there were ~~8,630,774~~8,747,324 shares available for grant under the 2011 Plan.

All Plans

The following table presents total stock-based compensation expense recorded in the consolidated statements of operations and comprehensive ~~loss~~income (loss) for all awards granted under the Company’s 2013 Plan and 2011 Plan:


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2019		2018		2019		2018		2019		2018		2019
	(in thousands)								(in thousands)
Cost of revenue	$	852	$	967	$	2,395	$	1,882	$	828	$	738	$	3,223	$	2,620
Sales and marketing	1,434		1,827		2,531		3,581		1,478		1,807		4,009		5,388
Engineering and development	1,137		1,432		2,282		2,765		1,237		1,435		3,519		4,200
General and administrative	3,967		5,128		7,174		10,142		4,007		5,163		11,181		15,305
Total stock-based compensation expense	$	7,390	$	9,354	$	14,382	$	18,370	$	7,550	$	9,143	$	21,932	$	27,513

Under both the 2011 and 2013 Plans combined, as of September 30, 2019, the Company had approximately $7.4 million of unrecognized stock-based compensation expense related to option awards that will be recognized over 1.4 years and approximately $56.3 million of unrecognized stock-based compensation expense related to restricted stock awards and restricted stock units that will be recognized over 2.1 years.

2013 Stock Incentive Plan

The following table provides a summary of the Company’s stock options as of ~~June~~September 30, 2019 and the stock option activity for all stock options granted under the 2013 Plan during the ~~six~~nine months ended ~~June~~September 30, 2019:


	Stock Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value(3) (in thousands)		Stock Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value(3) (in thousands)
Outstanding at December 31, 2018	7,322,293		$	11.62				7,322,293		$	11.62
Granted	1,215,789		$	7.99				1,215,789		$	7.99
Exercised	—		$	—				—		$	—
Forfeited	(25,441	)	$	7.94				(62,191	)	$	8.17
Expired	(31,507	)	$	13.30				(133,755	)	$	12.23
Outstanding at June 30, 2019	8,481,134		$	11.11	5.0	$	—
Exercisable at June 30, 2019	6,296,891		$	12.06	3.7	$	—
Expected to vest after June 30, 2019⁽¹⁾	2,184,243		$	8.35	8.8	$	—
Exercisable as of June 30, 2019 and expected to vest⁽²⁾	8,481,134		$	11.11	5.0	$	—
Outstanding at September 30, 2019								8,342,136		$	11.11	4.6	$	—
Exercisable at September 30, 2019								6,417,025		$	11.98	3.4	$	—
Expected to vest after September 30, 2019⁽¹⁾								1,925,111		$	8.22	8.7	$	—
Exercisable as of September 30, 2019 and expected to vest⁽²⁾								8,342,136		$	11.11	4.6	$	—


⁽¹⁾	This represents the number of unvested options outstanding as of ~~June~~September 30, 2019 that are expected to vest in the future.


⁽²⁾	This represents the number of vested options as of ~~June~~September 30, 2019 plus the number of unvested options outstanding as of ~~June~~September 30, 2019 that are expected to vest in the future.


⁽³⁾	The aggregate intrinsic value was calculated based on the positive difference, if any, between the estimated fair value of the Company’s common stock on ~~June~~September 30, 2019 of ~~$4.80~~$3.75 per share, or the date of exercise, as appropriate, and the exercise price of the underlying options.

Restricted stock units granted under the 2013 Plan generally vest annually over a three-year period, unless otherwise determined by the Company’s board of directors. The following table provides a summary of the Company’s restricted stock unit activity for the 2013 Plan during the ~~six~~nine months ended ~~June~~September 30, 2019:


	Restricted Stock Units		Weighted- Average Grant Date Fair Value		Restricted Stock Units		Weighted- Average Grant Date Fair Value
Non-vested at December 31, 2018	5,203,259		$	7.69	5,203,259		$	7.69
Granted	4,452,603		$	7.90	7,186,974		$	6.71
Vested	(1,715,860	)	$	7.58	(2,059,340	)	$	7.68
Canceled	(388,750	)	$	7.80	(774,088	)	$	7.74
Non-vested at June 30, 2019	7,551,252		$	7.83
Non-vested at September 30, 2019					9,556,805		$	6.95

Restricted stock awards granted under the 2013 Plan generally vest annually over a four-year period, unless otherwise determined by the Company’s board of directors. The following table provides a summary of the Company’s restricted stock

award activity for the 2013 Plan during the ~~six~~nine months ended ~~June~~September 30, 2019:


	Restricted Stock Awards		Weighted- Average Grant Date Fair Value		Restricted Stock Awards		Weighted- Average Grant Date Fair Value
Non-vested at December 31, 2018	443,247		$	11.67	443,247		$	11.67
Granted	—		$	—	—		$	—
Vested	(214,058	)	$	12.58	(235,145	)	$	12.78
Canceled	(11,995	)	$	11.32	(16,850	)	$	11.09
Non-vested at June 30, 2019	217,194		$	10.79
Non-vested at September 30, 2019					191,252		$	10.35

2011 Stock Incentive Plan

The following table provides a summary of the Company’s stock options as of ~~June~~September 30, 2019 and the stock option activity for all stock options granted under the 2011 Plan during the ~~six~~nine months ended ~~June~~September 30, 2019:


	Stock Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (In Years)	Aggregate Intrinsic Value(3) (in thousands)		Stock Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (In Years)	Aggregate Intrinsic Value(3) (in thousands)
Outstanding at December 31, 2018	715,104		$	9.00				715,104		$	9.00
Granted	—		$	—				—		$	—
Exercised	(3,810	)	$	5.68				(5,141	)	$	5.15
Forfeited	(10,137	)	$	10.30				(18,574	)	$	9.98
Expired	(60,519	)	$	10.27				(105,269	)	$	9.90
Outstanding at June 30, 2019	640,638		$	8.88	2.9	$	27
Exercisable at June 30, 2019	563,403		$	8.80	2.7	$	27
Expected to vest after June 30, 2019⁽¹⁾	77,235		$	9.51	3.9	$	—
Exercisable as of June 30, 2019 and expected to vest⁽²⁾	640,638		$	8.88	2.9	$	27
Outstanding at September 30, 2019								586,120		$	8.85	2.6	$	1
Exercisable at September 30, 2019								538,356		$	8.79	2.5	$	1
Expected to vest after September 30, 2019⁽¹⁾								47,764		$	9.49	3.7	$	—
Exercisable as of September 30, 2019 and expected to vest⁽²⁾								586,120		$	8.85	2.6	$	1


⁽¹⁾	This represents the number of unvested options outstanding as of ~~June~~September 30, 2019 that are expected to vest in the future.


⁽²⁾	This represents the number of vested options as of ~~June~~September 30, 2019 plus the number of unvested options outstanding as of ~~June~~September 30, 2019 that are expected to vest in the future.


⁽³⁾	The aggregate intrinsic value was calculated based on the positive difference, if any, between the estimated fair value of the Company’s common stock on ~~June~~September 30, 2019 of ~~$4.80~~$3.75 per share, or the date of exercise, as appropriate, and the exercise price of the underlying options.

Unless otherwise determined by the Company’s board of directors, restricted stock units granted under the 2011 Plan generally vest annually over a three- or a four-year period. The following table provides a summary of the Company’s restricted stock unit activity for the 2011 Plan during the ~~six~~nine months ended ~~June~~September 30, 2019:


	Restricted Stock Units		Weighted- Average Grant Date Fair Value		Restricted Stock Units		Weighted- Average Grant Date Fair Value
Non-vested at December 31, 2018	868,026		$	8.26	868,026		$	8.26
Granted	—		$	—	—		$	—
Vested	(363,346	)	$	8.12	(397,072	)	$	8.20
Canceled	(56,230	)	$	8.04	(91,432	)	$	8.26
Non-vested at June 30, 2019	448,450		$	8.41
Non-vested at September 30, 2019					379,522		$	8.33

Under both the 2011 and 2013 Plans combined, as of June 30, 2019 the Company had approximately $9.2 million of unrecognized stock-based compensation expense related to option awards that will be recognized over 1.6 years and approximately $54.1 million of unrecognized stock-based compensation expense related to restricted stock awards and restricted stock units that will be recognized over 2.1 years.

11. Accumulated Other Comprehensive Loss

The following table presents the components of accumulated other comprehensive loss:


	Foreign Currency Translation Adjustments			Unrealized Losses on Cash Flow Hedges			Total			Foreign Currency Translation Adjustments			Unrealized Losses on Cash Flow Hedges			Total
	(in thousands)									(in thousands)
Balance at December 31, 2018	$	(1,537	)	$	(1,674	)	$	(3,211	)	$	(1,537	)	$	(1,674	)	$	(3,211	)
Other comprehensive loss	(53		)	(851		)	(904		)	(1,054		)	(611		)	(1,665		)
Balance at June 30, 2019	$	(1,590	)	$	(2,525	)	$	(4,115	)
Balance at September 30, 2019										$	(2,591	)	$	(2,285	)	$	(4,876	)

12. Revenue

Adoption of ~~FASB~~ ASC 606, Revenue from Contracts with Customers

The Company recorded a net increase to opening retained earnings of $59.4 million as of January 1, 2018 due to the cumulative impact of adopting ASC 606, with the impact primarily related to customer acquisition costs.

During the three months ended ~~June~~September 30, 2018 and 2019, the Company recognized ~~$287.8~~$283.8 million and ~~$278.2~~$277.2 million of revenue, respectively, the majority of which was derived from contracts with customers. During the ~~six~~nine months ended ~~June~~September 30, 2018 and 2019, the Company recognized ~~$579.1~~$862.9 million and ~~$558.9~~$836.1 million of revenue, respectively, the majority of which was derived from contracts with customers.

During the three and ~~six~~nine months ended ~~June~~September 30, 2018 and 2019, the Company did not incur any impairment or credit losses on any receivables or contract assets arising from the Company’s contracts with customers.

In accordance with ASC 606, the Company disaggregates revenue from contracts with customers based on the timing of revenue recognition. The Company determined that disaggregating revenue into these categories depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. As discussed in Note 17, Segment Information, the Company's business consists of the web presence, domain and email marketing segments. The following table presents disaggregated revenues by category for the three and ~~six~~nine months ended ~~June~~September 30, 2018 and 2019:


	Three Months Ended June 30, 2018								Three Months Ended September 30, 2018
	Web presence		Email marketing		Domain		Total		Web presence		Email marketing		Domain		Total
	(in thousands)								(in thousands)
Subscription-based revenue
Direct revenue from subscriptions	$	141,640	$	100,732	$	12,638	$	255,010	$	138,869	$	100,816	$	12,911	$	252,596
Professional services	3,321		356		98		3,775		3,387		299		103		3,789
Reseller revenue	5,491		906		13,171		19,568		5,241		855		12,585		18,681
Total subscription-based revenue	$	150,452	$	101,994	$	25,907	$	278,353	$	147,497	$	101,970	$	25,599	$	275,066

Non-subscription-based revenue
MDF	$	1,975	$	160	$	192	$	2,327	$	2,199	$	141	$	252	$	2,592
Premium domains	36		—		5,566		5,602		3		—		5,067		5,070
Domain parking	252		—		1,236		1,488
Domain parking and monetization									172		—		870		1,042
Total non-subscription-based revenue	$	2,263	$	160	$	6,994	$	9,417	$	2,374	$	141	$	6,189	$	8,704

Total revenue	$	152,715	$	102,154	$	32,901	$	287,770	$	149,871	$	102,111	$	31,788	$	283,770

	Six Months Ended June 30, 2018								Three Months Ended September 30, 2019
	Web presence		Email marketing		Domain		Total		Web presence		Email marketing		Domain		Total
	(in thousands)								(in thousands)
Subscription-based revenue
Direct revenue from subscriptions	$	285,452	$	201,767	$	26,274	$	513,493	$	133,650	$	101,302	$	12,563	$	247,515
Professional services	6,704		746		197		7,647		2,912		344		110		3,366
Reseller revenue	11,246		1,765		26,551		39,562		4,689		939		12,764		18,392
Total subscription-based revenue	$	303,402	$	204,278	$	53,022	$	560,702	$	141,251	$	102,585	$	25,437	$	269,273

Non-subscription-based revenue
MDF	$	3,813	$	323	$	221	$	4,357	$	1,712	$	180	$	274	$	2,166
Premium domains	67		—		10,756		10,823		54		—		4,412		4,466
Domain parking	450		—		2,794		3,244
Domain parking and monetization									179		—		1,109		1,288
Total non-subscription-based revenue	$	4,330	$	323	$	13,771	$	18,424	$	1,945	$	180	$	5,795	$	7,920

Total revenue	$	307,732	$	204,601	$	66,793	$	579,126	$	143,196	$	102,765	$	31,232	$	277,193


	Three Months Ended June 30, 2019								Nine Months Ended September 30, 2018
	Web presence		Email marketing		Domain		Total		Web presence		Email marketing		Domain		Total
	(in thousands)								(in thousands)
Subscription-based revenue
Direct revenue from subscriptions	$	134,379	$	100,984	$	12,736	$	248,099	$	424,321	$	302,583	$	39,185	$	766,089
Professional services	3,068		396		112		3,576		10,091		1,045		300		11,436
Reseller revenue	4,785		915		12,920		18,620		16,487		2,620		39,136		58,243
Total subscription-based revenue	$	142,232	$	102,295	$	25,768	$	270,295	$	450,899	$	306,248	$	78,621	$	835,768

Non-subscription-based revenue
MDF	$	1,792	$	184	$	259	$	2,235	$	6,012	$	464	$	473	$	6,949
Premium domains	5		—		4,182		4,187		70		—		15,823		15,893
Domain parking	168		—		1,319		1,487
Domain parking and monetization									622		—		3,664		4,286
Total non-subscription-based revenue	$	1,965	$	184	$	5,760	$	7,909	$	6,704	$	464	$	19,960	$	27,128

Total revenue	$	144,197	$	102,479	$	31,528	$	278,204	$	457,603	$	306,712	$	98,581	$	862,896

	Six Months Ended June 30, 2019								Nine Months Ended September 30, 2019
	Web presence		Email marketing		Domain		Total		Web presence		Email marketing		Domain		Total
	(in thousands)								(in thousands)
Subscription-based revenue
Direct revenue from subscriptions	$	270,421	$	202,294	$	25,609	$	498,324	$	404,071	$	303,596	$	38,172	$	745,839
Professional services	6,290		786		218		7,294		9,202		1,130		328		10,660
Reseller revenue	9,707		1,793		25,664		37,164		14,396		2,732		38,428		55,556
Total subscription-based revenue	$	286,418	$	204,873	$	51,491	$	542,782	$	427,669	$	307,458	$	76,928	$	812,055

Non-subscription-based revenue
MDF	3,411		346		526		$	4,283	5,123		526		800		$	6,449
Premium domains	27		—		9,027		9,054		81		—		13,439		13,520
Domain parking	301		—		2,467		2,768
Domain parking and monetization									480		—		3,576		4,056
Total non-subscription-based revenue	$	3,739	$	346	$	12,020	$	16,105	$	5,684	$	526	$	17,815	$	24,025

Total revenue	$	290,157	$	205,219	$	63,511	$	558,887	$	433,353	$	307,984	$	94,743	$	836,080

Subscription-based revenue is primarily recognized over time, when the services are performed, except for third-party products for which the Company acts as an agent. Revenue from third-party products for which the Company acts as an agent is recognized at a point in time, when the revenue is earned.

Revenue, classified by the major geographic areas in which the Company’s customers are located, was as follows for the three and ~~six~~nine months ended ~~June~~September 30, 2018 and 2019:


	Three Months Ended June 30, 2018								Three Months Ended September 30, 2018
	Web presence		Email marketing		Domain		Total		Web presence		Email marketing		Domain		Total
	(in thousands)								(in thousands)
Domestic	$	102,643	$	93,744	$	13,082	$	209,469	$	100,065	$	93,992	$	12,509	$	206,566
International	50,072		8,410		19,819		78,301		49,806		8,119		19,279		77,204
Total	$	152,715	$	102,154	$	32,901	$	287,770	$	149,871	$	102,111	$	31,788	$	283,770

	Six Months Ended June 30, 2018								Three Months Ended September 30, 2019
	Web presence		Email marketing		Domain		Total		Web presence		Email marketing		Domain		Total
	(in thousands)								(in thousands)
Domestic	$	206,658	$	187,725	$	26,016	$	420,399	$	96,524	$	95,068	$	11,576	$	203,168
International	101,074		16,876		40,777		158,727		46,672		7,697		19,656		$	74,025
Total	$	307,732	$	204,601	$	66,793	$	579,126	$	143,196	$	102,765	$	31,232	$	277,193

	Three Months Ended June 30, 2019								Nine Months Ended September 30, 2018
	Web presence		Email marketing		Domain		Total		Web presence		Email marketing		Domain		Total
	(in thousands)								(in thousands)
Domestic	$	96,480	$	94,659	$	11,404	$	202,543	$	306,724	$	281,717	$	38,525	$	626,966
International	47,717		7,820		20,124		75,661		150,879		24,995		60,056		235,930
Total	$	144,197	$	102,479	$	31,528	$	278,204	$	457,603	$	306,712	$	98,581	$	862,896

	Six Months Ended June 30, 2019								Nine Months Ended September 30, 2019
	Web presence		Email marketing		Domain		Total		Web presence		Email marketing		Domain		Total
	(in thousands)								(in thousands)
Domestic	$	194,327	$	189,472	$	24,686	$	408,485	$	290,851	$	284,540	$	36,262	$	611,653
International	95,830		15,747		38,825		150,402		142,502		23,444		58,481		224,427
Total	$	290,157	$	205,219	$	63,511	$	558,887	$	433,353	$	307,984	$	94,743	$	836,080

13. Income Taxes

For the three months ended ~~June~~September 30, 2018 and 2019, the Company recognized a tax ~~benefit~~expense of ~~$0.9~~$11.7 million and a tax ~~expense~~benefit of ~~$6.2~~$4.8 million, respectively, in the consolidated statements of operations and comprehensive ~~loss. The~~ income ~~tax expense for~~(loss). For the ~~three~~nine months ended June 30, 2019 was primarily attributable to a federal and state current income tax expense of $1.5 million, a foreign current tax expense $1.2 million, and a federal and state deferred tax expense of $3.6 million, partially offset by a foreign deferred tax benefit of $0.1 million. The income tax benefit for the three months ended June 30, 2018 was primarily attributable to a federal and state deferred tax benefit of $0.4 million, a federal and state current income tax benefit of $0.3 million and a foreign current tax benefit of $0.3 million, partially offset by a foreign deferred tax expense of $0.1 million.

~~For the six months ended June~~September 30, 2018 and 2019, the Company recognized a tax ~~benefit~~expense of ~~$2.9~~$8.8 million and ~~a tax expense of $7.9~~$3.0 million, respectively, in the consolidated statements of operations and comprehensive ~~loss. The~~ income tax expense for the six months ended June 30, 2019 was primarily attributable to a federal and state deferred tax expense of $2.8 million, a federal and state current income tax expense of $3.6 million and a foreign current tax expense of $1.6 million, partially offset by a foreign deferred tax benefit of $0.1 million. The income tax benefit for the six months ended June 30, 2018 was primarily attributable to a federal and state deferred tax benefit of $4.1 million and a foreign deferred tax benefit of $0.1 million, partially offset by federal and state current income tax expense of $0.4 million and a foreign current tax expense of $0.9 million.

~~As described in Note 3,Correction of Income Tax Expense - Fiscal Year 2018~~, the Company has revised its deferred income tax provision for the first and second quarters of 2018 to reflect an increase in NOL carry-forwards resulting from the reorganization and liquidation of certain affiliated entities which resulted in the recognition of a worthless stock loss of approximately $78.0 million during fiscal year 2017. This revision did not impact the previously reported income tax provision(loss).

~~for fiscal year 2017; however, due to~~The components of the changes enacted in the 2017 Tax Cuts and Jobs Act, the manner in which net operating loss carry-forwards are handled did impact the Company's 2018 provision for deferred income taxes previously recorded for the three months ended March 31, 2018 and for the three and six months ended June 30, 2018. The Company revised its provisionexpense (benefit) for income taxes ~~for~~consisted of the ~~three months ended March 31, 2018 from an~~following:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2019			2018			2019
	(in thousands)
Current:
U.S. Federal and State	$	118		$	(3,254	)	$	536		$	599
Foreign	(1,620		)	(1,091		)	(756		)	499
Total current (benefit) expense	(1,502		)	(4,345		)	(220		)	1,098
Deferred:
U.S. Federal and State	12,940			(580		)	8,883			1,986
Foreign	277			86			163			(44		)
Total deferred expense (benefit)	13,217			(494		)	9,046			1,942
Total expense (benefit)	$	11,715		$	(4,839	)	$	8,826		$	3,040

The expense ~~of $2.6 million to a benefit of $1.9 million. The Company revised its provision~~ (benefit) for income taxes ~~for~~shown on the ~~three~~consolidated statements of operations and ~~six months ended June 30, 2018~~comprehensive income (loss) differs considerably from ~~an expense~~amounts that would result from applying the statutory tax rates to income before taxes primarily due to tax rules and attributes that are available to each of ~~$1.7 million~~the jurisdictions in which the Company operates. In addition, due to ~~a benefit of $0.9 million, and an expense of $4.3 million to a benefit of $2.9 million, respectively. All of these changes are attributable to~~the recent changes in U.S. tax law based on the TCJA, there are a number of provisions that impact the Company’s overall tax result, a significant item being the limitation on the deductibility of interest expenses. These new laws may create variability from period to period, especially when the Company is assessing whether its deferred tax ~~expense (benefit).~~assets and liabilities are more likely than not to be realized.

The Company ~~regularly assesses~~is required to assess its ability to realize its deferred tax assets. Assessing the realization of deferred tax assets requires significant management judgment. In determining whether its deferred tax assets are more likely than not realizable, the Company evaluated all available positive and negative evidence, and weighted the evidence based on its objectivity. Evidence the Company considered included:


•	~~NOLs incurred from the Company’s inception to~~ ~~June 30, 2019~~; NOLs incurred from the Company’s inception to date

Expiration of various federal, state and foreign tax ~~attributes;~~attributes

Reversals of existing temporary ~~differences;~~differences

Composition and cumulative amounts of existing temporary ~~differences;~~differences and

~~Forecasted~~Current year forecasted profit before ~~tax.~~tax

After consideration of all positive and negative evidence, the Company believes that it is more likely than not that a portion of its deferred tax assets will not be realized. The Company has recorded a valuation allowance at December 31, 2018 and September 30, 2019 of $47.1 million and $64.0 million, respectively. The increase in valuation allowance is primarily due to the change in the timing of when the existing temporary differences are expected to reverse in the future.

The Company ~~updates~~establishes reserves when the ~~scheduling~~Company believes that certain positions are likely to be challenged despite the Company’s assertion that its tax return positions are fully supportable. The calculation of the ~~reversal of the consolidated U.S. deferred tax assets and liabilities each quarter, as the deferred~~Company’s tax liabilities ~~have continued~~involves significant judgment based on individual facts, circumstances and information available in addition to decrease and the Company generated pre-tax losses. Based on the analysis of the above evidence, the Company recorded an increase of $10.7 million to its valuation allowance during the three months ended June 30, 2019.

applying complex tax regulations in various jurisdictions. The Company recognizes, in its consolidated financial statements, the effect of a tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. During the quarter ended September 30, 2017, management concluded that the Company’s material tax positions required the recording of an ASC 740-10 reserve, with interest and penalties, for uncertain income tax positions as of September 30, 2017. The Company has recorded unrecognized tax ~~positions~~benefits at December 31, 2018 and ~~June~~September 30, 2019 of $4.4 million and ~~$5.3~~$3.7 million, respectively, that would affect its effective tax rate. The Company does not expect a significant change in the liability for unrecognized tax benefits in the next 12 months.

As of December 31, 2018, the Company had NOL carry-forwards available to offset future U.S. federal taxable income of approximately $127.0 million and future state taxable income of approximately $125.3 million. These NOL carry-forwards expire on various dates through 2038.

As of December 31, 2018, the Company had ~~NOL carry-forwards in foreign jurisdictions~~recorded the following tax attributes available to ~~offset future foreign taxable income by approximately $13.8 million, consisting of the following:~~be carried forward:


Jurisdiction	Available Loss Carry-forwards		Year Loss Carry-forwards Begin to Expire	Amount		Year Loss Carry-forwards Expire
	(in millions)			(in millions)
Domestic
Federal				$	108.9	2037
State				115.5		various dates through 2038
Foreign
China	$	0.9	2020	0.9		2021
Netherlands				12.1		2020
India	0.6		2020	0.6		2020
Netherlands	12.1		2020
Singapore	0.3		n/a (indefinite carry-over period)	0.3		indefinite
Total NOL carry-forwards				$	238.3

Domestic
Federal				$	29.2	2023
State				12.9		various dates through 2023
Total capital loss carry-forwards				$	42.1

Domestic
Federal				$	23.7	2038
State				12.4		various dates through 2038
Total R&D credit carry-forwards				$	36.1

Total tax attributes available				$	316.5

~~In addition, the Company has $29.2 million of U.S. federal capital loss carry-forwards and $12.9 million in state capital loss carry-forwards, generally expiring through 2023.~~ As of December 31, 2018 and September 30, 2019, the Company had U.S. tax credit carry-forwards available to offset future U.S. federal and state taxes of approximately $23.7 million and $12.4 million, respectively. These credit carry-forwards expire on various dates through 2038. Duehas recorded interest expense that can be carried forward indefinitely due to provisions of the ~~2017 Tax Cuts~~TCJA, of $61.2 million and ~~Jobs Act, the Company has a carry-forward of disallowed interest expense of $67.0~~$139.8 million, ~~which has an indefinite carry-forward period.~~

Utilization of the NOL carry-forwards may be subject to an annual limitation due to the ownership change rules under Section 382 of the Internal Revenue Code (“Section 382 Limitation”). Ownership changes can limit the amount of net operating loss and other tax attributes that a company can use each year to offset future taxable income and taxes payable. Although the Company has experienced a number of ownership changes over time, it currently does not have any Section 382 Limitation on its ability to utilize NOL carry-forwards.respectively.

The Company files income tax returns in the United States for federal income taxes and in various state jurisdictions. The Company also files in several foreign jurisdictions. In the normal course of business, the Company is subject to examination by

tax authorities throughout the world. Since the Company is in a loss carry-forward position, it is generally subject to U.S. federal and state income tax examinations by tax authorities for all years for which a loss carry-forward is utilized. One of the Company’s subsidiaries, Constant Contact, is under audit by the U.S. Internal Revenue Service and the New York City Department of Finance for periods ended December 31, 2015 and February 9, 2016. The Company is also currently under audit in India for fiscal years ended March 31, 2014, 2015 and 2016 and Israel for the fiscal years ended December 31, 2012, 2013, 2014 and 2015.

14. Severance and Other Exit Costs

The Company evaluates its data center, sales and marketing, support and engineering operations and the general and administrative function on an ongoing basis in an effort to optimize its cost structure. As a result, the Company may incur charges for employee severance, exiting facilities and restructuring data center commitments and other related costs.

2019 Restructuring Plan

In January 2019, the Company announced plans to eliminate approximately 40 positions located primarily in the southwest United States, and further consolidate a Massachusetts facility, in order to streamline operations and create operational efficiencies (the "2019 Restructuring Plan"). During the three and ~~six~~nine months ended ~~June~~September 30, 2019, the Company incurred severance costs of ~~$0.2~~$0.0 million and $0.8 million, respectively, and paid $0.3 million and ~~$0.4~~$0.6 million, respectively, and had a remaining accrued severance liability of ~~$0.5~~$0.2 million as of September 30, 2019 in connection with the 2019 Restructuring Plan. The Company expects to complete severance payments related to the 2019 Restructuring Plan during the year ending December 31, 2019.

In connection with the 2019 Restructuring Plan, the Company reduced the amount of space leased for an office in Massachusetts. During the three and ~~six~~nine months ended ~~June~~September 30, 2019, the Company incurred facility exit costs of $0.0 million and $1.4 million, respectively, and had a remaining facility exit cost accrual of ~~$1.4~~$1.3 million as of ~~June~~September 30, 2019 in connection with the 2019 Restructuring Plan.

2018 Restructuring Plan

In January 2018, the Company announced plans to eliminate approximately 71 positions, later increased to approximately 95 positions, primarily in the Asia Pacific region and to a lesser extent in the U.S., in order to streamline operations and create operational efficiencies (the "2018 Restructuring Plan"). During the three and ~~six~~nine months ended ~~June~~September 30, 2019, the Company incurred severance costs of $0.0 million and $0.0 million, respectively, and paid $0.0 million and $0.2 million, respectively. The Company had a remaining accrued severance liability of $0.0 million as of ~~June~~September 30, 2019 in connection with the 2018 Restructuring Plan.

In connection with the 2018 Restructuring Plan, the Company closed offices in Ohio. During the three and ~~six~~nine months ended ~~June~~September 30, 2019, the Company incurred facility charges of $0.0 million and a reduction of $0.2 million related to the adoption of ASC 842, respectively, and made payments of $0.0 million and $0.1 million related to facilities charges, respectively. The Company had a remaining accrued facility liability of ~~$0.2~~$0.1 million as of ~~June~~September 30, 2019 in connection with the 2018 Restructuring Plan.

2017 Restructuring Plan

In January 2017, the Company announced plans to close certain offices as part of a plan to consolidate certain web presence customer support operations, resulting in severance costs. These severance charges were associated with the elimination of approximately 660 positions, primarily in customer support. Additionally, the Company implemented additional restructuring plans to create operational efficiencies and synergies related to the Constant Contact acquisition, which resulted in additional severance charges for the elimination of approximately 50 positions. During the three and ~~six~~nine months ended ~~June~~September 30, 2019, in connection with these plans (together, the “2017 Restructuring Plan”), the Company recorded severance charges of $0.0 million and $0.0 million and paid $0.1 million and ~~$0.1~~$0.2 million, respectively. The Company had a remaining accrued severance liability of ~~$0.1~~$0.0 million as of ~~June~~September 30, 2019.

In connection with the 2017 Restructuring Plan, the Company closed offices in Orem, Utah and relocated certain employees to its Tempe, Arizona office. The Company completed facility charges related to the 2017 Restructuring Plan during the year ended December 31, 2018. There is no remaining facility liability as of ~~June~~September 30, 2019 in connection with the 2017 Restructuring Plan.

Activity of Combined Restructuring Plans

The following table provides a summary of the aggregate activity for the ~~six~~nine months ended ~~June~~September 30, 2019 related to the severance accrual for the Company’s combined restructuring plans:


	Employee Severance			Employee Severance
	(in thousands)			(in thousands)
Balance at December 31, 2018	$	393		$	393
Severance charges	821			785
Cash paid	(672		)	(983		)
Balance at June 30, 2019	$	542
Balance at September 30, 2019				$	195

The following table provides a summary of the aggregate activity for the ~~six~~nine months ended ~~June~~September 30, 2019 related to the facilities exit accrual for the Company’s combined restructuring plans:


	Facilities			Facilities
	(in thousands)			(in thousands)
Balance at December 31, 2018	$	4,100		$	4,100
Facility charges	1,377			1,220
Adjustment for adoption of ASC 842	(1,671		)	(1,417		)
Sublease income received	222			268
Cash paid	(938		)	(1,291		)
Balance at June 30, 2019	$	3,090
Balance at September 30, 2019				$	2,880

The following table presents restructuring charges recorded in the consolidated statements of operations and comprehensive ~~loss~~income (loss) for the periods presented:


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended September 30,					��	Nine Months Ended September 30,
	2018		2019		2018		2019		2018		2019				2018		2019
	(in thousands)								(in thousands)
Cost of revenue	$	859	$	156	$	1,406	$	1,423	$	37	$	7			$	1,443	$	1,430
Sales and marketing	104		4		116		224		17		17				133		241
Engineering and development	48		7		356		421		33		28				389		449
General and administrative	284		16		946		130		110		(245		)		1,056		(115		)
Total restructuring charges	$	1,295	$	183	$	2,824	$	2,198	$	197	$	(193	)		$	3,021	$	2,005

15. Commitments and Contingencies

From time to time, the Company is involved in legal proceedings or subject to claims arising in the ordinary course of its business. The Company is not presently involved in any such legal proceeding or subject to any such claim that, in the opinion of its management, would have a material adverse effect on its business, operating results or financial condition. However, the results of such legal proceedings or claims cannot be predicted with certainty, and regardless of the outcome, can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors.

As previously disclosed, the Company ~~has been~~was named as a defendant in ~~two~~2 shareholder litigation matters, which are discussed below. ~~Neither the ultimate outcome of the~~ ~~Machado~~ ~~and~~ ~~McGee~~ shareholder litigation matters listed below nor an estimate of any probable losses or any reasonably possible losses (other than the reserves specifically discussed below) can be assessed at this time.

Endurance

On May 4, 2015, Christopher Machado, a purported holder of the Company’s common stock, filed a civil action in the United States District Court for the District of Massachusetts against the Company and its former chief executive officer and former chief financial officer, captioned Machado v. Endurance International Group Holdings, Inc., et al., Civil Action No. 1:15-cv-11775-GAO. The plaintiff filed an amended complaint on December 8, 2015, a second amended complaint on March 18, 2016, and a third amended complaint on June 30, 2017. In the third amended complaint, plaintiffs Christopher Machado and Michael Rubin ~~allege~~alleged claims for violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, as amended, on behalf of a purported class of purchasers of the Company’s securities between October 25, 2013 and December 16, 2015, including persons or entities who purchased or acquired the Company's shares pursuant or traceable to the registration statement and prospectus issued in connection with the Company's October 25, 2013 initial public offering. The plaintiffs ~~challenge~~challenged as false or misleading certain of the Company’s disclosures about the total number of subscribers, average revenue per subscriber, the

number of customers paying over $500 per year for the Company’s products and services, and the average number of products sold per subscriber. The ~~plaintiffs seek, on behalf of themselves~~proceedings were stayed and the purported class, compensatory damages, rescissory damages as to class members who purchased shares pursuant to the offering and the plaintiffs' costs and expenses of litigation. On January 12, 2018, the parties filed a joint motion to stay all proceedings pending the outcome of a mediation between the parties. The court granted the stay on February 21, 2018 and later extended the stay to allow the parties to discuss a potential resolution of this matter. The parties then negotiated the terms and conditions of a stipulation and agreement of settlement and related papers, which, among other things, ~~provide~~provided for the release of all claims asserted against the Company and its former chief executive officer and former chief financial officer. On July 6, 2018, the plaintiffs filed an unopposed motion seeking preliminary approval of the proposed settlement, certification of a proposed settlement class, and approval of notice to the settlement class. On January 2,September 13, 2019, the court entered an order ~~preliminarily approving~~granting final approval of the settlement and ~~scheduling a hearing for September 13, 2019 to determine whether~~dismissed the ~~proposed settlement is fair, reasonable and adequate and whether the~~ case ~~should therefore be dismissed~~ with prejudice. The Company's ~~combined~~ contribution to the settlement pool ~~under this proposed settlement and the potential settlement of the~~ ~~McGee~~ ~~litigation discussed below would be approximately~~was equal to the ~~$7.3~~$5.8 million it reserved for ~~these matters~~this matter during the year ended December 31, 2018. ~~The Company cannot make any assurances as to whether or when the~~ ~~Machado~~ ~~settlement will be approved by the court.~~

Constant Contact

On February 9, 2016, the Company acquired all of the outstanding shares of common stock of Constant Contact.

On August 7, 2015, a purported class action lawsuit, William McGee v. Constant Contact, Inc., et ~~al,~~al., was filed in the United States District Court for the District of Massachusetts against Constant Contact and ~~two~~2 of its former officers. An amended complaint, which named an additional former officer as a defendant, was filed December 19, 2016. The lawsuit asserts claims under Sections 10(b) and 20(a) of the Exchange Act, and is premised on allegedly false and/or misleading statements, and non-disclosure of material facts, regarding Constant Contact’s business, operations, prospects and performance during the proposed class period of October 23, 2014 to July 23, 2015. The parties mediated the claims on March 27, 2018, and as a result of that mediation reached an agreement in principle with the lead plaintiff to settle the action. The parties then negotiated the terms and conditions of a stipulation and agreement of settlement and related papers, which, among other things, provide for the release of all claims asserted against Constant Contact and its former officers. On May 18, 2018, the plaintiffs filed an unopposed motion seeking preliminary approval of the proposed settlement, certification of the proposed settlement class for settlement purposes only, and approval of notice to the settlement class. The court has not yet ruled on this ~~motion.~~motion but a hearing is scheduled for November 8, 2019. The Company's ~~combined~~ contribution to the settlement pool under this proposed settlement ~~and the potential settlement of the~~ ~~Machado~~ ~~litigation discussed above~~ would be ~~approximately~~ equal to the ~~$7.3~~$1.5 million it reserved for ~~these matters~~this matter during the year ended December 31, 2018. The Company cannot make any assurances as to whether or when the McGee settlement will be approved by the ~~court.~~court and the Company cannot assess the ultimate outcome of this matter or an estimate of any probable losses or any reasonably possible losses (other than the reserve specifically discussed above) at this time.

16. Related Party Transactions

The Company has various agreements in place with related parties. Below are details of significant related party transactions that occurred during the ~~six~~nine months ended ~~June~~September 30, 2018 and 2019.

Tregaron:

The Company has contracts with Tregaron India Holdings, LLC and its affiliates, including Diya Systems (Mangalore) Private Limited, Glowtouch Technologies Pvt. Ltd. and Touchweb Designs, LLC (collectively, “Tregaron”), for outsourced services, including email- and chat-based customer and technical support, network monitoring, engineering and development support and web design and web building services, and an office space lease. As of December 31, 2018, these entities were owned directly or indirectly by family members of the Company’s former chief executive officer, who was also a holder of more than 5% of the Company's capital stock during the majority of the year ended December 31, 2018. During the last quarter of fiscal year 2018, the former chief executive officer divested shares of the Company's capital stock, reducing his ownership to under 5%. As a result, Tregaron is not a related party as of January 1, 2019 and, therefore, no related party transactions are reported with Tregaron for the three and ~~six~~nine months ended ~~June~~September 30, 2019.

The following table presents the amounts of related party transactions recorded in the consolidated statements of operations and comprehensive ~~loss~~income (loss) for the periods presented relating to services provided by Tregaron and its affiliates under

these ~~agreements:~~agreements for the periods in 2018 during which Tregaron was a related party:


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2019		2018		2019		2018		2019		2018		2019
	(in thousands)								(in thousands)
Cost of revenue	$	3,525	$	—	$	7,225	$	—	$	3,330	$	—	$	10,555	$	—
Sales and marketing	270		—		445		—		160		—		605		—
Engineering and development	270		—		670		—		290		—		960		—
General and administrative	20		—		45		—		20		—		65		—
Total related party transaction expense, net	$	4,085	$	—	$	8,385	$	—	$	3,800	$	—	$	12,185	$	—

As of December 31, 2018, approximately $2.4 million was included in accounts payable and accrued expense relating to services provided by Tregaron.

Innovative Business Services, LLC and SiteLock, LLC:

The Company also has ~~agreements~~an agreement with SiteLock, LLC ("SiteLock"), a subsidiary of Innovative Business Services, LLC, ~~(“IBS”),~~ which provides multi-layered third-party security and website performance applications that are sold by the Company. During the ~~six~~nine months ended ~~June~~September 30, 2019, a director of the Company and the Company’s former chief executive officer, who was also a holder of more than 5% of the Company's capital stock during the majority of the year ended December 31, 2018, continued to hold a material financial interest in ~~IBS.~~SiteLock.

The Company records revenue on the sale of ~~IBS~~SiteLock products on a net basis, since the Company views ~~IBS~~SiteLock as the primary obligor to deliver these services. As a result, the revenue share paid by the Company to ~~IBS~~SiteLock is recorded as contra-revenue. Further, ~~IBS~~SiteLock pays the Company a fee on sales made by ~~IBS~~SiteLock directly to customers of the Company. The Company records these fees as revenue.

The following table presents the amounts of related party transactions recorded in the consolidated statements of operations and comprehensive ~~loss~~income (loss) for the periods presented relating to ~~services provided by IBS and its affiliates under these agreements:~~the Company's agreement with SiteLock:


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2019			2018			2019			2018			2019			2018			2019
	(in thousands)												(in thousands)
Revenue	$	(1,445	)	$	(1,440	)	$	(2,645	)	$	(2,740	)	$	(1,430	)	$	(1,400	)	$	(4,075	)	$	(4,140	)
Revenue (contra)	2,090			1,890			4,340			3,990			1,800			1,190			6,140			5,180
Total related party transaction impact to revenue	$	645		$	450		$	1,695		$	1,250		$	370		$	(210	)	$	2,065		$	1,040
Cost of revenue	170			170			320			320			170			180			490			500
Total related party transaction expense, net	$	815		$	620		$	2,015		$	1,570		$	540		$	(30	)	$	2,555		$	1,540

As of December 31, 2018 and ~~June~~September 30, 2019, approximately $0.2 million and $0.0 million, respectively, was included in prepaid expenses and other current assets relating to the Company’s ~~agreements~~agreement with ~~IBS.~~SiteLock.

As of December 31, 2018 and ~~June~~September 30, 2019, approximately $0.6 million and ~~$0.7~~$0.4 million, respectively, was included in accounts payable and accrued expense relating to the Company’s ~~agreements~~agreement with ~~IBS.~~SiteLock.

As of December 31, 2018 and ~~June~~September 30, 2019, approximately $0.9 million and $0.5 million, respectively, was included in accounts receivable relating to the Company’s ~~agreements~~agreement with ~~IBS.~~SiteLock.

Goldman, Sachs & Co.:

Goldman Sachs Lending Partners LLC, a subsidiary of Goldman, was one of the joint bookrunners and joint lead arrangers for the refinancing of the Company's Term Loan in June 2018. In that capacity, Goldman Sachs Lending Partners LLC received an arrangement fee of $0.3 million and was reimbursed for an immaterial amount of expenses.

17. Segment Information

The Company has three reportable segments: web presence, domain and email marketing. The products and services included in each of the ~~three~~3 reportable segments are as follows:

Web Presence. The web presence segment consists primarily of the Company's web hosting brands, including Bluehost and HostGator. This segment also includes related products such as domain names, website security, website design tools and services, and e-commerce products.

~~Domain~~Domain. . The domain segment consists of domain-focused brands such as Domain.com, ResellerClub and LogicBoxes as well as certain web hosting brands that are under common management with domain-focused brands. This segment sells domain names and domain management services to resellers and end users, as well as premium domain names, and also generates advertising revenue from domain name parking. It also resells domain names and domain management services to the web presence segment.

Email Marketing. The email marketing segment consists of Constant Contact email marketing tools and related products and the Company's SinglePlatform digital storefront solution. This segment also generates revenue from sales of the Company's Constant Contact-branded website builder ~~tool.~~tool and the Company's Ecomdash inventory management and marketplace listing solution.

The Company measures profitability of these segments based on revenue, gross profit, and adjusted EBITDA. The Company's segments share certain resources, primarily related to sales and marketing, engineering and development, and general and administrative functions. Management allocates these costs to each respective segment based on a consistently applied methodology.

The CODM does not use asset information to allocate resources or make operating decisions.

The accounting policies of each segment are the same as those described in the summary of significant accounting policies; please refer to Note 2, Summary of Significant Accounting Policies, for further details. The following tables contain financial information for each reportable segment for the three and ~~six~~nine months ended ~~June~~September 30, 2018 and 2019:


	Three Months Ended June 30, 2018												Three Months Ended September 30, 2018
	Web presence			Email marketing			Domain			Total			Web presence			Email marketing			Domain			Total
	(in thousands, as revised)												(in thousands)
Revenue⁽¹⁾	$	152,715		$	102,154		$	32,901		$	287,770		$	149,871		$	102,111		$	31,788		$	283,770
Gross profit	$	75,702		$	71,376		$	9,946		$	157,024		$	75,074		$	71,356		$	8,395		$	154,825

Net (loss) income	$	(6,876	)	$	10,395		$	(2,892	)	$	627		$	(7,565	)	$	6,596		$	(5,366	)	$	(6,335	)
Interest expense, net⁽²⁾	18,385			17,329			2,405			38,119			18,132			17,128			1,978			37,238
Income tax (benefit) expense	(497		)	(333		)	(116		)	(946		)
Income tax expense (benefit)													6,136			4,179			1,400			11,715
Depreciation	8,391			3,406			999			12,796			8,401			2,538			950			11,889
Amortization of other intangible assets	11,863			13,239			876			25,978			11,941			13,384			852			26,177
Stock-based compensation	5,424			1,288			678			7,390			1,569			4,472			1,509			7,550
Restructuring expenses	788			420			87			1,295			54			141			2			197
(Gain) loss from unconsolidated entities	(25		)	—			—			(25		)
Loss from unconsolidated entities													—			—			—			—
Impairment of other long-lived assets	—			—			—			—			—			—			—			—
Shareholder litigation reserve	(197		)	—			(43		)	(240		)	(768		)	—			(167		)	(935		)
Adjusted EBITDA	$	37,256		$	45,744		$	1,994		$	84,994		$	37,900		$	48,438		$	1,158		$	87,496

	Three Months Ended June 30, 2019												Three Months Ended September 30, 2019
	Web presence			Email marketing			Domain			Total			Web presence			Email marketing			Domain			Total
	(in thousands)												(in thousands)
Revenue⁽¹⁾	$	144,197		$	102,479		$	31,528		$	278,204		$	143,196		$	102,765		$	31,232		$	277,193
Gross profit	$	73,217		$	73,589		$	(8,189	)	$	138,617		$	73,592		$	73,763		$	9,083		$	156,438

Net (loss) income	$	(10,262	)	$	4,164		$	(20,130	)	$	(26,228	)	$	(3,477	)	$	12,546		$	(1,253	)	$	7,816
Interest expense, net⁽²⁾	17,093			19,110			520			36,723			16,665			18,599			488			35,752
Income tax (benefit) expense	3,193			2,269			698			6,160
Income tax expense (benefit)													(2,499		)	(1,795		)	(545		)	(4,839		)
Depreciation	7,767			2,229			903			10,899			8,302			2,114			864			11,280
Amortization of other intangible assets	9,210			11,408			731			21,349			9,311			11,553			804			21,668
Stock-based compensation	5,042			3,222			1,090			9,354			4,751			3,301			1,091			9,143
Restructuring expenses	155			23			5			183			(37		)	(157		)	1			(193		)
(Gain) loss from unconsolidated entities	—			—			—			—
Loss from unconsolidated entities													—			—			—			—
Impairment of other long-lived assets	—			—			17,892			17,892			—			—			—			—
Shareholder litigation reserve	—			—			—			—			—			—			—			—
Adjusted EBITDA	$	32,198		$	42,425		$	1,709		$	76,332		$	33,016		$	46,161		$	1,450		$	80,627


	Six Months Ended June 30, 2018											Nine Months Ended September 30, 2018
	Web presence			Email marketing		Domain			Total			Web presence			Email marketing		Domain			Total
	(in thousands, as revised)											(in thousands)
Revenue⁽¹⁾	$	307,732		$	204,601	$	66,793		$	579,126		$	457,603		$	306,712	$	98,581		$	862,896
Gross profit	$	150,075		$	143,553	$	20,846		$	314,474		$	225,149		$	214,909	$	29,241		$	469,299

Net (loss) income	$	(12,984	)	$	15,754	$	(4,671	)	$	(1,901	)	$	(20,549	)	$	22,350	$	(10,037	)	$	(8,236	)
Interest expense, net⁽²⁾	35,371			33,738		4,856			73,965			53,503			50,866		6,834			111,203
Income tax (benefit) expense	(5,176		)	3,830		(1,543		)	(2,889		)
Income tax expense (benefit)												960			8,009		(143		)	8,826
Depreciation	16,368			6,552		1,944			24,864			24,769			9,090		2,894			36,753
Amortization of other intangible assets	23,871			26,332		1,510			51,713			35,812			39,716		2,362			77,890
Stock-based compensation	10,497			2,696		1,189			14,382			12,066			7,168		2,698			21,932
Restructuring expenses	1,600			582		642			2,824			1,654			723		644			3,021
(Gain) loss from unconsolidated entities	2			—		—			2
Loss from unconsolidated entities												2			—		—			2
Impairment of other long-lived assets	—			—		—			—			—			—		—			—
Shareholder litigation reserve	5,548			1,500		1,212			8,260			4,780			1,500		1,045			7,325
Adjusted EBITDA	$	75,097		$	90,984	$	5,139		$	171,220		$	112,997		$	139,422	$	6,297		$	258,716

	Six Months Ended June 30, 2019											Nine Months Ended September 30, 2019
	Web presence			Email marketing		Domain			Total			Web presence			Email marketing		Domain			Total
	(in thousands)											(in thousands)
Revenue⁽¹⁾	$	290,157		$	205,219	$	63,511		$	558,887		$	433,353		$	307,984	$	94,743		$	836,080
Gross profit	$	145,458		$	147,636	$	2,352		$	295,446		$	219,050		$	221,399	$	11,435		$	451,884

Net (loss) income	$	(16,804	)	$	10,102	$	(23,014	)	$	(29,716	)	$	(20,281	)	$	22,648	$	(24,267	)	$	(21,900	)
Interest expense, net⁽²⁾	34,188			36,504		2,954			73,646			50,853			55,103		3,442			109,398
Income tax (benefit) expense	4,088			2,897		894			7,879
Income tax expense (benefit)												1,589			1,102		349			3,040
Depreciation	15,716			4,553		1,836			22,105			24,018			6,667		2,700			33,385
Amortization of other intangible assets	18,289			22,691		1,489			42,469			27,600			34,244		2,293			64,137
Stock-based compensation	9,935			6,305		2,130			18,370			14,686			9,606		3,221			27,513
Restructuring expenses	789			1,377		32			2,198			752			1,220		33			2,005
(Gain) loss from unconsolidated entities	—			—		—			—
Loss from unconsolidated entities												—			—		—			—
Impairment of other long-lived assets	—			—		17,892			17,892			—			—		17,892			17,892
Shareholder litigation reserve	—			—		—			—			—			—		—			—
Adjusted EBITDA	$	66,201		$	84,429	$	4,213		$	154,843		$	99,217		$	130,590	$	5,663		$	235,470

⁽¹⁾

Revenue excludes intercompany transactions relating to domain sales and domain services from the domain segment to the web presence segment of ~~$2.4~~$2.5 million and ~~$5.1~~$7.6 million, respectively, for the three and ~~six~~nine months ended ~~June~~September 30, 2018, and ~~$2.3~~$2.4 million and ~~$5.1~~$7.5 million, respectively, for the three and ~~six~~nine months ended ~~June~~September 30, 2019.


⁽²⁾	Interest expense includes impact of amortization of deferred financing costs, original issue discounts and interest income.

18. Subsequent Events

The Company evaluated all subsequent events occurring through ~~August 5,~~November 4, 2019 to determine if any such events should be reflected in these consolidated financial statements. There were no material recognized subsequent events recorded in the ~~June~~September 30, 2019 consolidated financial statements.

19. Supplemental Guarantor Financial Information

In February 2016, EIG Investors (the “Issuer”) issued $350.0 million aggregate principal amount of its 10.875% Senior Notes due 2024 (refer to Note 9, Notes Payable), which it exchanged for new 10.875% Senior Notes due 2024 pursuant to a registration statement on Form S-4. The registered exchange offer for the Senior Notes was completed on January 30, 2017. The Senior Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by Holdings, the

Issuer, and the following wholly-owned subsidiaries: EIG, Bluehost Inc., FastDomain Inc., Domain Name Holding Company, Inc., Endurance International Group – West, Inc., HostGator.com LLC, A Small Orange, LLC, Constant Contact, SinglePlatform, LLC and P.D.R Solutions (U.S.) LLC (collectively, the “Subsidiary Guarantors”), subject to certain customary guarantor release conditions. Holdings’ other domestic subsidiaries and its foreign subsidiaries (collectively, the “Non-Guarantor Subsidiaries”) have not guaranteed the Senior Notes.

P.D.R Solutions (U.S.) LLC became a Subsidiary Guarantor on April 25, 2019. The condensed consolidated financial statements have been revised for all periods presented to reflect this new guarantor entity.

The following tables present supplemental condensed consolidating balance sheet information of Holdings (“Parent”), the Issuer, the Subsidiary Guarantors and the Non-Guarantor Subsidiaries as of December 31, 2018 and ~~June~~September 30, 2019, supplemental condensed consolidating results of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2018 and 2019, and condensed cash flow information for the ~~six~~nine months ended ~~June~~September 30, 2018 and 2019:

Condensed Consolidating Balance Sheets

December 31, 2018

(in thousands)



	Parent		Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	21	$	2		$	62,495		$	26,126		$	—		$	88,644
Restricted cash	—		—			1,932			—			—			1,932
Accounts receivable	—		—			11,219			986			—			12,205
Prepaid domain name registry fees	—		—			50,325			6,454			—			56,779
Prepaid commissions	—		—			40,804			654			—			41,458
Prepaid expenses and other current assets	—		422			31,425			3,243			—			35,090
Total current assets	21		424			198,200			37,463			—			236,108
Intercompany receivables—net	34,595		401,342			(323,200		)	(112,737		)	—			—
Property and equipment—net	—		—			79,091			13,184			—			92,275
Goodwill	—		—			1,695,451			153,614			—			1,849,065
Other intangible assets—net	—		—			351,920			596			—			352,516
Investment in subsidiaries	139,838		1,559,256			57,749			—			(1,756,843		)	—
Prepaid commissions, net of current portion	—		—			41,746			726			—			42,472
Other assets	—		5,239			27,463			1,369			—			34,071
Total assets	$	174,454	$	1,966,261		$	2,128,420		$	94,215		$	(1,756,843	)	$	2,606,507
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	—	$	—		$	12,015		$	434		$	—		$	12,449
Accrued expenses and other current liabilities	—		25,373			77,316			7,494			—			110,183
Deferred revenue	—		—			347,703			24,055			—			371,758
Current portion of notes payable	—		31,606			—			—			—			31,606
Current portion of financed equipment	—		—			8,379			—			—			8,379
Deferred consideration—short term	—		—			2,425			—			—			2,425
Total current liabilities	—		56,979			447,838			31,983			—			536,800
Deferred revenue—long term	—		—			91,615			4,525			—			96,140
Notes payable	—		1,770,055			—			—			—			1,770,055
Deferred consideration	—		—			1,364			—			—			1,364
Other long-term liabilities	—		(612		)	28,349			(43		)	—			27,694
Total liabilities	—		1,826,422			569,166			36,465			—			2,432,053
Equity	174,454		139,839			1,559,254			57,750			(1,756,843		)	174,454
Total liabilities and stockholders' equity	$	174,454	$	1,966,261		$	2,128,420		$	94,215		$	(1,756,843	)	$	2,606,507

Condensed Consolidating Balance Sheets

~~June~~September 30, 2019

(in thousands)


	Parent		Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated		Parent		Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	44	$	4		$	60,251		$	30,519		$	—		$	90,818	$	284	$	3		$	62,433		$	21,745		$	—		$	84,465
Restricted cash	—		—			1,832			—			—			1,832		—		—			1,832			—			—			1,832
Accounts receivable	—		—			11,583			1,406			—			12,989		—		—			10,753			1,386			—			12,139
Prepaid domain name registry fees	—		—			50,867			6,459			—			57,326		—		—			50,197			6,358			—			56,555
Prepaid commissions	—		—			41,177			527			—			41,704		—		—			40,008			520			—			40,528
Prepaid expenses and other current assets	—		60			28,264			4,604			—			32,928		—		29			31,732			4,446			—			36,207
Total current assets	44		64			193,974			43,515			—			237,597		284		32			196,955			34,455			—			231,726
Intercompany receivables—net	33,790		301,522			(216,721		)	(118,591		)	—			—		33,264		242,612			(165,492		)	(110,384		)	—			—
Property and equipment—net	—		—			75,359			13,341			—			88,700		—		—			72,862			13,456			—			86,318
Operating lease right-of-use assets	—		—			98,179			6,031			—			104,210		—		—			92,946			5,118			—			98,064
Goodwill	—		—			1,695,451			153,498			—			1,848,949		—		—			1,695,451			159,378			—			1,854,829
Other intangible assets, net	—		—			292,017			174			—			292,191		—		—			270,584			2,745			—			273,329
Investment in subsidiaries	128,412		1,605,044			54,500			—			(1,787,956		)	—		145,011		1,648,822			63,390			—			(1,857,223		)	—
Prepaid commissions, net of current portion	—		—			44,688			472			—			45,160		—		—			47,300			476			—			47,776
Other assets	—		2,380			27,036			1,864			—			31,280		—		2,022			26,567			1,842			—			30,431
Total assets	$	162,246	$	1,909,010		$	2,264,483		$	100,304		$	(1,787,956	)	$	2,648,087	$	178,559	$	1,893,488		$	2,300,563		$	107,086		$	(1,857,223	)	$	2,622,473
Liabilities and stockholders' equity	Liabilities and stockholders' equity																Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	—	$	—		$	13,672		$	1,261		$	—		$	14,933	$	—	$	—		$	9,614		$	557		$	—		$	10,171
Accrued expenses and other current liabilities	20		24,547			60,754			8,673			—			93,994		131		14,618			62,349			8,694			—			85,792
Deferred revenue	—		—			351,292			24,754			—			376,046		—		—			351,364			24,365			—			375,729
Operating lease liabilities—short term	—		—			19,330			3,153			—			22,483		—		—			19,466			3,008			—			22,474
Current portion of notes payable	—		31,606			—			—			—			31,606		—		31,606			—			—			—			31,606
Current portion of financed equipment	—		—			4,583			—			—			4,583		—		—			2,637			—			—			2,637
Deferred consideration—short term	—		—			1,408			—			—			1,408		—		—			2,181			—			—			2,181
Total current liabilities	20		56,153			451,039			37,841			—			545,053		131		46,224			447,611			36,624			—			530,590
Deferred revenue—long term	—		—			94,248			5,001			—			99,249		—		—			94,333			4,924			—			99,257
Operating lease liabilities—long term	—		—			87,778			3,211			—			90,989		—		—			82,192			2,402			—			84,594
Notes payable	—		1,725,326			—			—			—			1,725,326		—		1,703,065			—			—			—			1,703,065
Other long-term liabilities	—		(881		)	26,375			(249		)	—			25,245		—		(812		)	27,605			(254		)	—			26,539
Total liabilities	20		1,780,598			659,440			45,804			—			2,485,862		131		1,748,477			651,741			43,696			—			2,444,045
Equity	162,226		128,412			1,605,043			54,500			(1,787,956		)	162,225		178,428		145,011			1,648,822			63,390			(1,857,223		)	178,428
Total liabilities and stockholders' equity	$	162,246	$	1,909,010		$	2,264,483		$	100,304		$	(1,787,956	)	$	2,648,087	$	178,559	$	1,893,488		$	2,300,563		$	107,086		$	(1,857,223	)	$	2,622,473

Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)

Three Months Ended ~~June~~September 30, 2018

(in thousands)


	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated			Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue	$	—		$	—		$	274,924		$	16,146		$	(3,300	)	$	287,770		$	—		$	—		$	271,559		$	15,793		$	(3,582	)	$	283,770
Cost of revenue	—			—			124,129			9,917			(3,300		)	130,746			—			—			121,476			11,051			(3,582		)	128,945
Gross profit	—			—			150,795			6,229			—			157,024			—			—			150,083			4,742			—			154,825
Operating expense:
Sales and marketing	—			—			64,212			2,334			—			66,546			—			—			61,386			2,445			—			63,831
Engineering and development	—			—			19,917			2,042			—			21,959			—			—			20,527			2,156			—			22,683
General and administrative	—			58			64,652			(33,966		)	—			30,744			(11		)	52			25,055			597			—			25,693
Total operating expense	—			58			148,781			(29,590		)	—			119,249			(11		)	52			106,968			5,198			—			112,207
(Loss) income from operations	—			(58		)	2,014			35,819			—			37,775
Income (loss) from operations																			11			(52		)	43,115			(456		)	—			42,618
Interest expense and other income—net	—			38,037			202			(120		)	—			38,119			—			37,305			74			(141		)	—			37,238
(Loss) income before income taxes and equity earnings of unconsolidated entities	—			(38,095		)	1,812			35,939			—			(344		)
Income (loss) before income taxes and equity earnings of unconsolidated entities																			11			(37,357		)	43,041			(315		)	—			5,380
Income tax (benefit) expense	—			(9,067		)	8,337			(216		)	—			(946		)	—			(8,891		)	22,020			(1,414		)	—			11,715
(Loss) income before equity earnings of unconsolidated entities	—			(29,028		)	(6,525		)	36,155			—			602
Equity (income) loss of unconsolidated entities, net of tax	(627		)	(29,655		)	(36,181		)	—			66,438			(25		)
Income (loss) before equity earnings of unconsolidated entities																			11			(28,466		)	21,021			1,099			—			(6,335		)
Equity loss (income) of unconsolidated entities, net of tax																			6,346			(22,120		)	(1,099		)	—			16,873			—
Net (loss) income	$	627		$	627		$	29,656		$	36,155		$	(66,438	)	$	627		$	(6,335	)	$	(6,346	)	$	22,120		$	1,099		$	(16,873	)	$	(6,335	)
Comprehensive income (loss):
Foreign currency translation adjustments	—			—			—			(2,425		)	—			(2,425		)	—			—			—			(644		)	—			(644		)
Unrealized gain (loss) on cash flow hedge, net of taxes	—			144			—			—			—			144			—			812			—			—			—			812
Total comprehensive income (loss)	$	627		$	771		$	29,656		$	33,730		$	(66,438	)	$	(1,654	)
Total comprehensive (loss) income																			$	(6,335	)	$	(5,534	)	$	22,120		$	455		$	(16,873	)	$	(6,167	)

Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)

~~Six~~Nine Months Ended ~~June~~September 30, 2018

(in thousands)


	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated			Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue	$	—		$	—		$	552,325		$	33,890		$	(7,089	)	$	579,126		$	—		$	—		$	823,884		$	49,683		$	(10,671	)	$	862,896
Cost of revenue	—			—			249,638			22,103			(7,089		)	264,652			—			—			371,114			33,154			(10,671		)	393,597
Gross profit	—			—			302,687			11,787			—			314,474			—			—			452,770			16,529			—			469,299
Operating expense:
Sales and marketing	—			—			128,768			5,134			—			133,902			—			—			190,154			7,579			—			197,733
Engineering and development	—			—			38,366			3,510			—			41,876			—			—			58,893			5,666			—			64,559
General and administrative	—			116			102,474			(33,071		)	—			69,519			(11		)	169			127,529			(32,475		)	—			95,212
Total operating expense	—			116			269,608			(24,427		)	—			245,297			(11		)	169			376,576			(19,230		)	—			357,504
(Loss) income from operations	—			(116		)	33,079			36,214			—			69,177
Income (loss) from operations																			11			(169		)	76,194			35,759			—			111,795
Interest expense and other income—net	—			73,746			465			(246		)	—			73,965			—			111,051			539			(387		)	—			111,203
(Loss) income before income taxes and equity earnings of unconsolidated entities	—			(73,862		)	32,614			36,460			—			(4,788		)
Income (loss) before income taxes and equity earnings of unconsolidated entities																			11			(111,220		)	75,655			36,146			—			592
Income tax (benefit) expense	—			(17,579		)	13,877			813			—			(2,889		)	—			(26,470		)	35,897			(601		)	—			8,826
(Loss) income before equity earnings of unconsolidated entities	—			(56,283		)	18,737			35,647			—			(1,899		)
Income (loss) before equity earnings of unconsolidated entities																			11			(84,750		)	39,758			36,747			—			(8,234		)
Equity loss (income) of unconsolidated entities, net of tax	1,901			(54,382		)	(35,644		)	16			88,111			2			8,247			(76,503		)	(36,744		)	19			104,983			2
Net (loss) income	$	(1,901	)	$	(1,901	)	$	54,381		$	35,631		$	(88,111	)	$	(1,901	)	$	(8,236	)	$	(8,247	)	$	76,502		$	36,728		$	(104,983	)	$	(8,236	)
Comprehensive income (loss):
Foreign currency translation adjustments	—			—			—			(1,845		)	—			(1,845		)	—			—			—			(2,489		)	—			(2,489		)
Unrealized gain (loss) on cash flow hedge, net of taxes	—			1,184			—			—			—			1,184			—			1,996			—			—			—			1,996
Total comprehensive (loss) income	$	(1,901	)	$	(717	)	$	54,381		$	33,786		$	(88,111	)	$	(2,562	)	$	(8,236	)	$	(6,251	)	$	76,502		$	34,239		$	(104,983	)	$	(8,729	)

Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)

Three Months Ended ~~June~~September 30, 2019

(in thousands)


	Parent			Issuer			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated			Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue	$	—		$	—		$	266,013	$	15,270		$	(3,079	)	$	278,204		$	—		$	—		$	265,165		$	15,196		$	(3,168	)	$	277,193
Cost of revenue (including impairment of $17,892)	—			—			132,230		10,436			(3,079		)	139,587
Cost of revenue																		—			—			113,787			10,136			(3,168		)	120,755
Gross profit	—			—			133,783		4,834			—			138,617			—			—			151,378			5,060			—			156,438
Operating expense:
Sales and marketing	—			—			61,568		3,922			—			65,490			—			—			56,595			2,548			—			59,143
Engineering and development	—			—			22,915		2,433			—			25,348			—			—			25,954			2,303			—			28,257
General and administrative	824			58			29,563		679			—			31,124			401			58			29,880			(30		)	—			30,309
Total operating expense	824			58			114,046		7,034			—			121,962			401			58			112,429			4,821			—			117,709
(Loss) income from operations	(824		)	(58		)	19,737		(2,200		)	—			16,655			(401		)	(58		)	38,949			239			—			38,729
Interest expense and other income—net	—			36,807			58		(142		)	—			36,723			—			35,925			(38		)	(135		)	—			35,752
(Loss) income before income taxes and equity earnings of unconsolidated entities	(824		)	(36,865		)	19,679		(2,058		)	—			(20,068		)	(401		)	(35,983		)	38,987			374			—			2,977
Income tax (benefit) expense	—			(8,774		)	13,884		1,050			—			6,160			—			(8,563		)	3,616			108			—			(4,839		)
(Loss) income before equity earnings of unconsolidated entities	(824		)	(28,091		)	5,795		(3,108		)	—			(26,228		)	(401		)	(27,420		)	35,371			266			—			7,816
Equity loss (income) of unconsolidated entities, net of tax	25,404			(2,689		)	3,108		—			(25,823		)	—
Net (loss) income	$	(26,228	)	$	(25,402	)	$	2,687	$	(3,108	)	$	25,823		$	(26,228	)
Equity (income) loss of unconsolidated entities, net of tax																		(8,217		)	(35,635		)	(267		)	—			44,119			—
Net income (loss)																		$	7,816		$	8,215		$	35,638		$	266		$	(44,119	)	$	7,816
Comprehensive income (loss):
Foreign currency translation adjustments	—			—			—		348			—			348			—			—			—			(1,001		)	—			(1,001		)
Unrealized gain (loss) on cash flow hedge, net of taxes	—			110			—		—			—			110			—			240			—			—			—			240
Total comprehensive (loss) income	$	(26,228	)	$	(25,292	)	$	2,687	$	(2,760	)	$	25,823		$	(25,770	)
Total comprehensive income (loss)																		$	7,816		$	8,455		$	35,638		$	(735	)	$	(44,119	)	$	7,055

Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)

~~Six~~Nine Months Ended ~~June~~September 30, 2019

(in thousands)


	Parent			Issuer			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated			Parent			Issuer			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue	$	—		$	—		$	534,472	$	30,863		$	(6,448	)	$	558,887		$	—		$	—		$	799,637	$	46,059		$	(9,616	)	$	836,080
Cost of revenue (including impairment of $17,892)	—			—			249,262		20,627			(6,448		)	263,441			—			—			363,049		30,763			(9,616		)	384,196
Gross profit	—			—			285,210		10,236			—			295,446			—			—			436,588		15,296			—			451,884
Operating expense:
Sales and marketing	—			—			125,306		6,772			—			132,078			—			—			181,901		9,320			—			191,221
Engineering and development	—			—			44,517		4,525			—			49,042			—			—			70,471		6,828			—			77,299
General and administrative	824			116			60,614		963			—			62,517			1,226			175			90,494		932			(1		)	92,826
Total operating expense	824			116			230,437		12,260			—			243,637			1,226			175			342,866		17,080			(1		)	361,346
(Loss) income from operations	(824		)	(116		)	54,773		(2,024		)	—			51,809			(1,226		)	(175		)	93,722		(1,784		)	1			90,538
Interest expense and other income—net	—			73,851			72		(277		)	—			73,646			—			109,776			34		(412		)	—			109,398
(Loss) income before income taxes and equity earnings of unconsolidated entities	(824		)	(73,967		)	54,701		(1,747		)	—			(21,837		)	(1,226		)	(109,951		)	93,688		(1,372		)	1			(18,860		)
Income tax (benefit) expense	—			(17,604		)	24,033		1,450			—			7,879			—			(26,167		)	27,649		1,558			—			3,040
(Loss) income before equity earnings of unconsolidated entities	(824		)	(56,363		)	30,668		(3,197		)	—			(29,716		)	(1,226		)	(83,784		)	66,039		(2,930		)	1			(21,900		)
Equity loss (income) of unconsolidated entities, net of tax	28,892			(27,473		)	3,197		—			(4,616		)	—			20,674			(63,106		)	2,930		—			39,502			—
Net (loss) income	$	(29,716	)	$	(28,890	)	$	27,471	$	(3,197	)	$	4,616		$	(29,716	)	$	(21,900	)	$	(20,678	)	$	63,109	$	(2,930	)	$	(39,501	)	$	(21,900	)
Comprehensive income (loss):
Foreign currency translation adjustments	—			—			—		(53		)	—			(53		)	—			—			—		(1,054		)	—			(1,054		)
Unrealized gain (loss) on cash flow hedge, net of taxes	—			(851		)	—		—			—			(851		)	—			(611		)	—		—			—			(611		)
Total comprehensive (loss) income	$	(29,716	)	$	(29,741	)	$	27,471	$	(3,250	)	$	4,616		$	(30,620	)	$	(21,900	)	$	(21,289	)	$	63,109	$	(3,984	)	$	(39,501	)	$	(23,565	)

Condensed Consolidating Statement of Cash Flows

~~Six~~Nine Months Ended ~~June~~September 30, 2018

(in thousands)


	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated			Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Net cash (used in) provided by operating activities	$	(22	)	$	(60,405	)	$	105,770		$	36,909		$	—	$	82,252		$	—		$	(88,464	)	$	184,252		$	37,805		$	—	$	133,593
Cash flows from investing activities:
Purchases of property and equipment	—			—			(13,197		)	(184		)	—		(13,381		)	—			—			(22,159		)	(184		)	—		(22,343		)
Proceeds from sale of property and equipment																		—			—			6			—			—		6
Net cash used in investing activities	—			—			(13,197		)	(184		)	—		(13,381		)	—			—			(22,153		)	(184		)	—		(22,337		)
Cash flows from financing activities:
Proceeds from issuance of term loan and notes, net of original issue discounts	—			1,580,305			—			—			—		1,580,305			—			1,580,305			—			—			—		1,580,305
Repayments of term loans	—			(1,630,693		)	—			—			—		(1,630,693		)	—			(1,656,094		)	—			—			—		(1,656,094		)
Payment of financing costs	—			(1,295		)	—			—			—		(1,295		)	—			(1,580		)	—			—			—		(1,580		)
Payment of deferred consideration	—			—			(4,196		)	—			—		(4,196		)	—			—			(4,500		)	—			—		(4,500		)
Principal payments on financed equipment	—			—			(3,909		)	—			—		(3,909		)	—			—			(5,609		)	—			—		(5,609		)
Proceeds from exercise of stock options	456			—			—			—			—		456			756			—			—			—			—		756
Intercompany loans and investments	(376		)	112,087			(90,165		)	(21,546		)	—		—			(641		)	165,833			(147,328		)	(17,864		)	—		—
Net cash (used in) provided by financing activities	80			60,404			(98,270		)	(21,546		)	—		(59,332		)
Net cash provided by (used in) financing activities																		115			88,464			(157,437		)	(17,864		)	—		(86,722		)
Net effect of exchange rate on cash and cash equivalents and restricted cash	—			—			—			(1,488		)	—		(1,488		)	—			—			—			(2,146		)	—		(2,146		)
Net increase (decrease) in cash and cash equivalents and restricted cash	58			(1		)	(5,697		)	13,691			—		8,051
Net increase in cash and cash equivalents and restricted cash																		115			—			4,662			17,611			—		22,388
Cash and cash equivalents and restricted cash:
Beginning of period	92			2			57,629			11,395			—		69,118			92			2			57,629			11,395			—		69,118
End of period	$	150		$	1		$	51,932		$	25,086		$	—	$	77,169		$	207		$	2		$	62,291		$	29,006		$	—	$	91,506

Condensed Consolidating Statement of Cash Flows

~~Six~~Nine Months Ended ~~June~~September 30, 2019

(in thousands)


	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated			Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Net cash (used in) provided by operating activities	$	(804	)	$	(49,818	)	$	126,660		$	(1,309	)	$	—	$	74,729		$	(1,094	)	$	(83,729	)	$	202,049		$	(1,546	)	$	—	$	115,680
Cash flows from investing activities:
Businesses acquired in purchase transaction, net of cash acquired																		—			—			(8,875		)	—			—		(8,875		)
Purchases of property and equipment	—			—			(16,164		)	—			—		(16,164		)	—			—			(26,796		)	—			—		(26,796		)
Net cash used in investing activities	—			—			(16,164		)	—			—		(16,164		)
Proceeds from sale of property and equipment																		—			—			—			1			—		1
Net cash (used in) provided by investing activities																		—			—			(35,671		)	1			—		(35,670		)
Cash flows from financing activities:
Repayments of term loans	—			(50,000		)	—			—			—		(50,000		)	—			(75,000		)	—			—			—		(75,000		)
Payment of deferred consideration	—			—			(2,500		)	—			—		(2,500		)	—			—			(2,500		)	—			—		(2,500		)
Principal payments on financed equipment	—			—			(3,861		)	—			—		(3,861		)	—			—			(6,332		)	—			—		(6,332		)
Proceeds from exercise of stock options	22			—			—			—			—		22			26			—			—			—			—		26
Intercompany loans and investments	805			99,820			(106,479		)	5,854			—		—			1,331			158,730			(157,708		)	(2,353		)	—		—
Net cash provided by (used in) financing activities	827			49,820			(112,840		)	5,854			—		(56,339		)	1,357			83,730			(166,540		)	(2,353		)	—		(83,806		)
Net effect of exchange rate on cash and cash equivalents and restricted cash	—			—			—			(152		)	—		(152		)	—			—			—			(483		)	—		(483		)
Net increase (decrease) in cash and cash equivalents and restricted cash	23			2			(2,344		)	4,393			—		2,074			263			1			(162		)	(4,381		)	—		(4,279		)
Cash and cash equivalents and restricted cash:
Beginning of period	21			2			64,427			26,126			—		90,576			21			2			64,427			26,126			—		90,576
End of period	$	44		$	4		$	62,083		$	30,519		$	—	$	92,650		$	284		$	3		$	64,265		$	21,745		$	—	$	86,297

~~Item~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and related notes and other financial information included in our Annual Report on Form 10-K for the year ended December 31, 2018.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. The statements contained in this report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “likely,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “strategy,” “target,” “would,” and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

Overview

We are a leading provider of cloud-based platform solutions designed to help small- and medium-sized businesses, or SMBs, succeed online. We serve approximately 4.8 million subscribers globally with a range of products and services that help SMBs get online, get found and grow their businesses. In addition to for-profit businesses, our subscribers include non-profit organizations, community groups, bloggers, and hobbyists. Although we provide our solutions through a number of brands, we are focusing our marketing, engineering and product development efforts on a small number of strategic assets, including our Constant Contact, Bluehost, HostGator, and Domain.com brands.

We currently report our financial results in three reportable segments, as follows:

Web Presence. Our web presence segment consists primarily of our web hosting brands, including Bluehost and HostGator. This segment also includes related products such as domain names, website security, website design tools and services, and e-commerce products.

Domain. Our domain segment consists of domain-focused brands such as Domain.com, ResellerClub and LogicBoxes as well as certain web hosting brands that are under common management with our domain-focused brands. This segment sells domain names and domain management services to resellers and end users, as well as premium domain names, and also generates advertising revenue from domain name parking. It also resells domain names and domain management services to our web presence segment.

Email Marketing. Our email marketing segment consists of Constant Contact email marketing tools and related products and our SinglePlatform digital storefront solution. This segment also generates revenue from sales of our Constant Contact-branded website builder ~~tool.~~tool and our Ecomdash inventory management and marketplace listing solution ("Ecomdash"), which was acquired in the third quarter of 2019.

Our financial results for the ~~second~~third quarter of 2019 reflected an increase in net ~~loss~~income, and a decrease in both revenue and net cash provided by operating activities ~~and a decrease in revenue~~ compared to the ~~second~~third quarter of 2018. Year over year changes in revenue, net (loss) income ~~(loss)~~ and net cash provided by operating activities are summarized below:


	Three Months Ended June 30,					Six Months Ended June 30,						Three Months Ended September 30,					Nine Months Ended September 30,
	2018		2019			2018			2019			2018			2019		2018			2019
	(in thousands)											(in thousands)
Revenue	$	287,770	$	278,204		$	579,126		$	558,887		$	283,770		$	277,193	$	862,896		$	836,080
Net income (loss)	$	627	$	(26,228	)	$	(1,901	)	$	(29,716	)
Net (loss) income												$	(6,335	)	$	7,816	$	(8,236	)	$	(21,900	)
Net cash provided by operating activities	$	29,892	$	59,680		$	82,252		$	74,729		$	51,341		$	40,951	$	133,593		$	115,680

Revenue for the three months ended ~~June~~September 30, 2019 decreased by ~~3.3%~~2.3% as compared to the three months ended ~~June~~September 30, 2018, primarily due to revenue declines in the web presence and domain segments. These declines were partially offset by a slight increase in email marketing segment revenue.

Net income (loss) improved from a loss of ~~$0.6~~$6.3 million for the three months ended ~~June~~September 30, 2018 ~~declined~~ to ~~a net loss~~income of ~~$26.2~~$7.8 million for the three months ended ~~June~~September 30, 2019, due primarily to the decrease in revenue, an impairment charge of $17.9 million in the 2019 period due mostly to certain premium domain name intangible assets which have been adversely affected by ongoing market conditions, and higher engineering and development,lower income tax expense, lower cost of revenue (including amortization expense), and ~~stock-based compensation~~lower interest expense. These factors were partially offset by lower ~~charges for litigation related matters, lower cost of~~ revenue, ~~(including lower amortization expense),~~higher stock-based compensation expense, and ~~lower sales~~higher engineering and ~~marketing, depreciation, interest, and restructuring~~development expense.

Net cash provided by operating activities during the three months ended ~~June~~September 30, 2019 ~~increased~~decreased from ~~$29.9~~$51.3 million for the three months ended ~~June~~September 30, 2018 to ~~$59.7~~$41.0 million for the three months ended ~~June~~September 30,

2019. This ~~increase~~decrease was the result of higher ~~litigation,~~ interest ~~and interest rate cap, tax, and restructuring related~~ payments, ~~in the 2018 period,~~ as well as ~~the~~ timing of certain vendor payments, partially offset by lower restructuring related payments and lower tax related payments.

Revenue for the ~~six~~nine months ended ~~June~~September 30, 2019 decreased by ~~3.5%~~3.1% as compared to the ~~six~~nine months ended ~~June~~September 30, 2018, primarily due to revenue declines in the web presence and domain segments. These declines were partially offset by a slight increase in email marketing segment revenue.

Net loss increased from ~~$1.9~~$8.2 million for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$29.7~~$21.9 million for the ~~six~~nine months ended ~~June~~September 30, 2019. This was due primarily to an impairment charge of $17.9 million in the second quarter of 2019, ~~due~~which was attributable to ~~substantially~~certain premium domain name intangible assets which have been adversely affected by ongoing market conditions, partially offset by the same factors ~~discussed in the comparison shown above of~~that positively impacted net income during the three months ended ~~June~~September 30, ~~2018 and~~ 2019.

Net cash provided by operating activities decreased from ~~$82.3~~$133.6 million for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$74.7~~$115.7 million for the ~~six~~nine months ended ~~June~~September 30, 2019. This decrease was primarily due to the overall decline in revenue and higher levels of investment in engineering and development, which were partially offset by lower payments for interest, interest rate caps, and ~~restructuring.~~restructuring expense.

Our total subscriber base ~~decreased~~increased during the three months ended ~~June~~September 30, 2019. ~~Attrition~~Our non-strategic brands continue to lose subscribers, but during this period net subscriber additions from our strategic brands, in the aggregate, outpaced losses in our non-strategic ~~brands accounted for a majority of subscriber losses during the quarter. These~~brands. Our non-strategic brands are principally web hosting brands, but also include our cloud backup brands and certain other products that we launched in late 2015 and early 2016, but have either discontinued or no longer actively market. Subscriber counts are decreasing in these brands, and we are managing them to optimize cash flow rather than to acquire new subscribers. ~~These non-strategic brands have had a negative impact on our revenue, net subscriber additions and subscriber billings.~~

Our 2019 operating plan ~~is focused~~continues to focus on delivering increased value to customers of our key strategic brands, including Constant Contact, Bluehost, HostGator and Domain.com, and on simplifying our operations. We increased our investments in engineering and development in 2018 in order to improve the customer experience and expand product offerings in our strategic brands, and ~~are continuing~~have continued these investments across our ~~three segments~~business in 2019. We believe this will position us for growth in the future. These additional investments have adversely impacted our net income (loss), adjusted EBITDA, cash flows from operations and free cash flow during the first ~~half~~nine months of 2019, and we expect this impact to continue during the remainder of the year. We intend to increase sales and marketing spend in the fourth quarter of 2019 as compared with the third quarter of 2019, which we expect will result in lower adjusted EBITDA in the fourth quarter relative to the third.

Key Metrics

We use a number of metrics, including the following key metrics, to evaluate the operating and financial performance of our business, identify trends affecting our business, develop projections and make strategic business decisions:

total ~~subscribers;~~subscribers

average revenue per subscriber, or ~~ARPS;~~ARPS

adjusted ~~EBITDA; and~~EBITDA

free cash ~~flow.~~flow

Adjusted EBITDA and free cash flow are non-GAAP financial measures. A non-GAAP financial measure is a numerical measure of a company’s operating performance, financial position or cash flow that includes or excludes amounts that are included or excluded from the most directly comparable measure calculated and presented in accordance with accounting principles generally accepted in the United States of America, which we refer to as "GAAP" or "U.S. ~~GAAP".~~GAAP." Our non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in our industry, as other companies in our industry may calculate non-GAAP financial results differently. In addition, there are limitations in using non-GAAP financial measures because they are not prepared in accordance with GAAP and exclude expenses that may have a material impact on our reported financial results. For example, adjusted EBITDA excludes interest expense, which has been and will continue to be for the foreseeable future a significant recurring expense in our business. The presentation of non-GAAP financial information is not meant to be considered in isolation from, or as a substitute for, the directly comparable financial measures prepared in accordance with GAAP. We urge you to review the additional information about adjusted EBITDA and free cash flow shown below, including the reconciliations of these non-GAAP financial measures to their comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.

The following table summarizes our key metrics (except for free cash flow, which is discussed in Liquidity and Capital Resources below) by segment for the periods presented:


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2019		2018		2019		2018		2019		2018		2019
	(in thousands, except ARPS)								(in thousands, except ARPS)
Consolidated metrics:
Total subscribers	4,918		4,769		4,918		4,769		4,852		4,780		4,852		4,780
Average subscribers for the period	4,965		4,776		4,985		4,786		4,885		4,774		4,951		4,791
ARPS	$	19.32	$	19.42	$	19.36	$	19.46	$	19.36	$	19.35	$	19.36	$	19.39
Adjusted EBITDA	$	84,994	$	76,332	$	171,220	$	154,843	$	87,496	$	80,627	$	258,716	$	235,470

Web presence segment metrics:
Total subscribers	3,737		3,588		3,737		3,588		3,682		3,579		3,682		3,579
Average subscribers for the period	3,774		3,600		3,793		3,614		3,709		3,584		3,765		3,610
ARPS	$	13.49	$	13.35	$	13.52	$	13.38	$	13.47	$	13.32	$	13.50	$	13.34
Adjusted EBITDA	$	37,256	$	32,198	$	75,097	$	66,201	$	37,900	$	33,016	$	112,997	$	99,217

Email marketing segment metrics:
Total subscribers	504		492		504		492		499		491		499		491
Average subscribers for the period	511		493		512		494		502		491		509		493
ARPS	$	66.60	$	69.28	$	66.64	$	69.21	$	67.88	$	69.79	$	66.97	$	69.40
Adjusted EBITDA	$	45,744	$	42,425	$	90,984	$	84,429	$	48,438	$	46,161	$	139,422	$	130,590

Domain segment metrics:
Total subscribers	677		689		677		689		671		710		671		710
Average subscribers for the period	680		683		680		678		674		699		677		688
ARPS	$	16.13	$	15.39	$	16.36	$	15.62	$	15.71	$	14.88	$	16.18	$	15.30
Adjusted EBITDA	$	1,994	$	1,709	$	5,139	$	4,213	$	1,158	$	1,450	$	6,297	$	5,663

Total Subscribers

We define total subscribers as the approximate number of subscribers that, as of the end of a period, are identified as subscribing directly to our products on a paid basis, excluding accounts that access our solutions via resellers or that purchase only domain names from us. Subscribers of more than one brand, and subscribers with more than one distinct billing relationship or subscription with us, are counted as separate subscribers. Total subscribers for a period reflects adjustments to add or subtract subscribers as we integrate acquisitions and/or are otherwise able to identify subscribers that meet, or do not meet, this definition of total subscribers.

Most of our web presence segment subscribers have hosting subscriptions, but web presence subscribers also include customers who do not have a web hosting subscription but subscribe to other non-hosting services, such as email. These subscribers generally have lower-priced subscriptions than hosting subscribers.

Domain segment subscribers mostly consist of customers who have a domain name subscription as well as a subscription to another product, such as domain privacy, or a basic hosting, email or domain privacy service that is bundled with their domain subscription. Also included as domain segment subscribers are hosting customers of our BigRock and HostGator India brands and certain other small web hosting brands that are under common management with our domain-focused brands.

Email marketing segment subscribers mostly consist of subscribers to Constant Contact's email marketing service, but also include SinglePlatform subscribers and paying subscribers to our Constant Contact-branded website builder tool and our Ecomdash inventory management and marketplace listing solution, which ~~we launched~~was acquired in the quarter ended ~~June~~September 30, 2019. Our email marketing and total subscriber counts as of September 30, 2019 include approximately 1,300 subscribers from the Ecomdash acquisition.

The table below provides additional detail on changes in our total subscriber count by segment for the twelve-month period ending on ~~June~~September 30, 2019:

Web presence Email marketing Domain Total
# Subscribers # Subscribers # Subscribers # Subscribers
(in thousands)
Total Subscribers - June 30, 2018 3,737
504
677
4,918
Adjustments (2 ) —
—
(2 )
Net subscriber decrease (147 ) (12 ) 12
(147 )
Total Subscribers - June 30, 2019 3,588
492
689
4,769



	Web presence		Email marketing		Domain	Total
	# Subscribers		# Subscribers		# Subscribers	# Subscribers
	(in thousands)
Total Subscribers - September 30, 2018	3,682		499		671	4,852
Adjustments	(2	)	1		—	(1	)
Acquisitions	—		1		—	1
Net subscriber (decrease) increase	(101	)	(10	)	39	(72	)
Total Subscribers - September 30, 2019	3,579		491		710	4,780

The decrease in total subscribers from ~~4.918~~4.852 million at ~~June~~September 30, 2018 to ~~4.769~~4.780 million at ~~June~~September 30, 2019 was driven primarily by subscriber losses in our web presence segment, a majority of which were due to subscriber attrition in our non-strategic brands, and to a lesser extent, subscriber losses in our email marketing segment, partially offset by subscriber additions in our domain segment.

~~We expect~~As noted in the Overview section above, during the three months ended September 30, 2019, our total subscriber base increased as compared to total subscribers ~~to continue to decrease for~~at June 30, 2019 as subscriber additions from our strategic brands, in the ~~near term, due primarily to the impact of subscriber churn~~aggregate, outpaced losses in non-strategic ~~web presence~~ brands.

Average Revenue per Subscriber (ARPS)

We calculate ARPS as the amount of revenue we recognize in a period, including marketing development funds and other revenue not received from subscribers, divided by the average of the number of total subscribers at the beginning of the period and at the end of the period, which we refer to as average subscribers for the period, divided by the number of months in the period. For our web presence and email marketing segments, we believe ARPS is an indicator of our ability to optimize our mix of products, services and pricing and sell products and services to both new and existing subscribers. For our domain segment, ARPS may fluctuate from period to period due to changes in the amount of non-subscription-based revenue, reseller activity and other factors impacting this segment as discussed in more detail below.

The following table reflects the calculation of ARPS by segment:


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2019		2018		2019		2018		2019		2018		2019
	(in thousands)								(in thousands, except ARPS)
Consolidated revenue	$	287,770	$	278,204	$579,126		$558,887		$	283,770	$	277,193	$	862,896	$	836,080
Consolidated total subscribers	4,918		4,769		4,918		4,769		4,852		4,780		4,852		4,780
Consolidated average subscribers for the period	4,965		4,776		4,985		4,786		4,885		4,774		4,951		4,791
Consolidated ARPS	$	19.32	$	19.42	$	19.36	$	19.46	$	19.36	$	19.35	$	19.36	$	19.39

Web presence revenue	$	152,715	$	144,197	$	307,732	$	290,157	$	149,871	$	143,196	$	457,603	$	433,353
Web presence subscribers	3,737		3,588		3,737		3,588		3,682		3,579		3,682		3,579
Web presence average subscribers for the period	3,774		3,600		3,793		3,614		3,709		3,584		3,765		3,610
Web presence ARPS	$	13.49	$	13.35	$	13.52	$	13.38	$	13.47	$	13.32	$	13.50	$	13.34

Email marketing revenue	$	102,154	$	102,479	$	204,601	$	205,219	$	102,111	$	102,765	$	306,712	$	307,984
Email marketing subscribers⁽¹⁾	504		492		504		492		499		491		499		491
Email marketing average subscribers for the period	511		493		512		494		502		491		509		493
Email marketing ARPS	$	66.60	$	69.28	$	66.64	$	69.21	$	67.88	$	69.79	$	66.97	$	69.40

Domain revenue	$	32,901	$	31,528	$	66,793	$	63,511	$	31,788	$	31,232	$	98,581	$	94,743
Domain subscribers	677		689		677		689		671		710		671		710
Domain average subscribers for the period	680		683		680		678		674		699		677		688
Domain ARPS	$	16.13	$	15.39	$	16.36	$	15.62	$	15.71	$	14.88	$	16.18	$	15.30


⁽¹⁾	Total email marketing subscriber count as of ~~June~~September 30, 2018 was impacted by a loss of approximately 10,500 subscribers, which resulted from changes made to Constant Contact's account cancellation policy to make it more consistent with the rest of our business. ~~Excluding this impact, total email marketing subscribers at June 30, 2018 would have been approximately 514,000.~~

These changes took place in the three months ended June 30, 2018, as previously disclosed. In addition, the total email marketing subscriber count as of September 30, 2019 includes approximately 1,300 subscribers added as part of our September 2019 acquisition of Ecomdash.

ARPS does not represent an exact measure of the average amount a subscriber spends with us each month, because our calculation of ARPS includes all of our revenue, including revenue generated by non-subscribers, in the numerator. We have three principal sources of non-subscription-based revenue:

•

Revenue from domain-only customers. Our web presence and domain segments each earn revenue from domain-only customers. For our web presence segment, approximately 1% of our revenue for the ~~six~~nine months ended ~~June~~September 30, 2019 was earned from domain-only customers. For our domain segment, approximately 6%5% of our revenue for the ~~six~~nine months ended ~~June~~September 30, 2019 was earned from domain-only customers.


•	Domain monetization revenue. This consists principally of revenue from our BuyDomains brand, which provides premium domain name products and services, and, to a lesser extent, revenue from advertisements placed on unused domains (often referred to as “parked” pages) owned by us or our customers. A significant portion of this revenue is associated with our domain segment.


•	Revenue from marketing development funds. Marketing development funds are the amounts that certain of our partners pay us to assist in and incentivize our marketing of their products.

A portion of our revenue is generated from customers that resell our services. We refer to these customers as “resellers.” We consider these resellers (rather than the end user customers of these resellers) to be subscribers under our total subscribers definition, because we do not have a billing relationship with the end users and cannot determine the number of end users acquiring our services through a reseller. A majority of our reseller revenue is for the purchase of domains and is primarily related to our domain segment. As of both ~~June~~September 30, 2018 and 2019, approximately 40% of our domain segment revenue is earned from resellers. Reseller revenue earned by our web presence segment and email marketing segment was less than 4% and less than 1%, respectively, for all periods presented, and fluctuations in reseller revenue have not materially impacted ARPS for those segments.

Comparison of Three Months Ended ~~June~~September 30, 2018 and 2019: ARPS

For the three months ended ~~June~~September 30, 2018 and 2019, consolidated ARPS ~~increased~~decreased from ~~$19.32~~$19.36 to ~~$19.42,~~$19.35, respectively. This ~~increase~~decrease in ARPS was driven primarily ~~by an increase in ARPS from our email marketing segment, partially offset~~ by decreases in ARPS from our web presence and domain ~~segments.~~segments, partially offset by an increase in ARPS from our email marketing segment.

Web presence ARPS decreased from ~~$13.49~~$13.47 for the three months ended ~~June~~September 30, 2018 to ~~$13.35~~$13.32 for the three months ended ~~June~~September 30, 2019. This decrease was primarily the result of ~~lower~~more subscribers joining our platform at introductory pricing, ~~for our strategic brands.~~which is typically lower than renewal pricing. In addition, non-subscription-based revenue decreased slightly from ~~$2.3~~$2.4 million for the three months ended ~~June~~September 30, 2018 to ~~$2.0~~$1.9 million for the three months ended ~~June~~September 30, 2019, causing ARPS to decrease by ~~$0.02.~~$0.04.

Email marketing ARPS increased from ~~$66.60~~$67.88 for the three months ended ~~June~~September 30, 2018 to ~~$69.28~~$69.79 for the three months ended ~~June~~September 30, 2019. This increase was primarily due to ~~price increases and~~ increased purchases from existing subscribers.

Domain ARPS decreased from ~~$16.13~~$15.71 for the three months ended ~~June~~September 30, 2018 to ~~$15.39~~$14.88 for the three months ended ~~June~~September 30, 2019. This decrease was primarily the result of a decrease in non-subscription-based revenue from ~~$7.0~~$6.2 million for the three months ended ~~June~~September 30, 2018 to $5.8 million for the three months ended ~~June~~September 30, 2019, which caused ARPS to decrease by ~~$0.60, and increased sales of lower priced products.~~$0.29, as well as more subscribers joining our platform at introductory pricing.

Comparison of ~~Six~~Nine Months Ended ~~June~~September 30, 2018 and 2019: ARPS

For the ~~six~~nine months ended ~~June~~September 30, 2018 and 2019, consolidated ARPS increased from $19.36 to ~~$19.46,~~$19.39, respectively. This increase in ARPS was driven primarily by increases in ARPS from our email marketing segment, partially offset by a decrease in ARPS from our web presence and domain segments.

Web presence ARPS decreased from ~~$13.52~~$13.50 for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$13.38~~$13.34 for the ~~six~~nine months ended ~~June~~September 30, 2019. This decrease was primarily the result of ~~lower~~more subscribers joining our platform at introductory ~~pricing for our strategic brands.~~pricing. In addition, non-subscription-based revenue decreased from ~~$4.3~~$6.7 million for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$3.7~~$5.7 million for the ~~six~~nine months ended ~~June~~September 30, 2019, which caused ARPS to decrease by $0.02.

Email marketing ARPS increased from ~~$66.64~~$66.97 for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$69.21~~$69.40 for the ~~six~~nine months ended ~~June~~September 30, 2019. This increase was due to price increases and increased purchases from existing subscribers.

Domain ARPS decreased from ~~$16.36~~$16.18 for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$15.62~~$15.30 for the ~~six~~nine months ended ~~June~~September 30, 2019. This decrease was primarily the result of a decrease in ~~non-subscription based~~non-subscription-based revenue from ~~$13.8~~$20.0 million for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$12.0~~$17.8 million for the ~~six~~nine months ended ~~June~~September 30, 2019, which caused ARPS to decrease by ~~$0.41, and increased sales of lower priced products.~~$0.40, as well as more subscribers joining our platform at introductory pricing.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure that we calculate as net income (loss), excluding the impact of interest expense (net), income tax expense (benefit), depreciation, amortization of other intangible assets, stock-based compensation, restructuring expenses, transaction expenses and charges, (gain) loss of unconsolidated entities, impairment of other long-lived assets, SEC investigations reserve, and shareholder litigation reserve. We view adjusted EBITDA as a performance measure and believe it helps investors evaluate and compare our core operating performance from period to period.

The following table reflects the reconciliation of net (loss) income calculated in accordance with GAAP to adjusted EBITDA for the periods presented:


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2019			2018			2019			2018			2019			2018			2019
	(in thousands)												(in thousands)
Consolidated
Net income (loss)	$	627		$	(26,228	)	$	(1,901	)	$	(29,716	)
Net (loss) income													$	(6,335	)	$	7,816		$	(8,236	)	$	(21,900	)
Interest expense, net⁽¹⁾	38,119			36,723			73,965			73,646			37,238			35,752			111,203			109,398
Income tax (benefit) expense	(946		)	6,160			(2,889		)	7,879
Income tax expense (benefit)													11,715			(4,839		)	8,826			3,040
Depreciation	12,796			10,899			24,864			22,105			11,889			11,280			36,753			33,385
Amortization of other intangible assets	25,978			21,349			51,713			42,469			26,177			21,668			77,890			64,137
Stock-based compensation	7,390			9,354			14,382			18,370			7,550			9,143			21,932			27,513
Restructuring expenses	1,295			183			2,824			2,198			197			(193		)	3,021			2,005
(Gain) loss from unconsolidated entities	(25		)	—			2			—
Loss from unconsolidated entities													—			—			2			—
Impairment of other long-lived assets	—			17,892			—			17,892			—			—			—			17,892
Shareholder litigation reserve	(240		)	—			8,260			$	—		(935		)	—			7,325			$	—
Adjusted EBITDA	$	84,994		$	76,332		$	171,220		$	154,843		$	87,496		$	80,627		$	258,716		$	235,470

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2019			2018			2019			2018			2019			2018			2019
Web presence													(in thousands)
Net (loss) income	$	(6,876	)	$	(10,262	)	$	(12,984	)	$	(16,804	)
Net loss													$	(7,565	)	$	(3,477	)	$	(20,549	)	$	(20,281	)
Interest expense, net⁽¹⁾	18,385			17,093			35,371			34,188			18,132			16,665			53,503			50,853
Income tax (benefit) expense	(497		)	3,193			(5,176		)	4,088
Income tax expense (benefit)													6,136			(2,499		)	960			1,589
Depreciation	8,391			7,767			16,368			15,716			8,401			8,302			24,769			24,018
Amortization of other intangible assets	11,863			9,210			23,871			18,289			11,941			9,311			35,812			27,600
Stock-based compensation	5,424			5,042			10,497			9,935			1,569			4,751			12,066			14,686
Restructuring expenses	788			155			1,600			789			54			(37		)	1,654			752
(Gain) loss from unconsolidated entities	(25		)	—			2			—
Loss from unconsolidated entities													—			—			2			—
Impairment of other long-lived assets	—			—			—			—			—			—			—			—
Shareholder litigation reserve	(197		)	—			5,548			—			(768		)	—			4,780			—
Adjusted EBITDA	$	37,256		$	32,198		$	75,097		$	66,201		$	37,900		$	33,016		$	112,997		$	99,217

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2019			2018			2019			2018			2019			2018			2019
Email marketing													(in thousands)
Net (loss) income	$	10,395		$	4,164		$	15,754		$	10,102
Net income													$	6,596		$	12,546		$	22,350		$	22,648
Interest expense, net⁽¹⁾	17,329			19,110			33,738			36,504			17,128			18,599			50,866			55,103
Income tax (benefit) expense	(333		)	2,269			3,830			2,897
Depreciation	3,406			2,229			6,552			4,553
Amortization of other intangible assets	13,239			11,408			26,332			22,691
Stock-based compensation	1,288			3,222			2,696			6,305
Restructuring expenses	420			23			582			1,377
Income tax expense (benefit)													4,179			(1,795		)	8,009			1,102


(Gain) loss from unconsolidated entities	—			—			—			—
Depreciation													2,538			2,114			9,090			6,667
Amortization of other intangible assets													13,384			11,553			39,716			34,244
Stock-based compensation													4,472			3,301			7,168			9,606
Restructuring expenses													141			(157		)	723			1,220
Loss from unconsolidated entities													—			—			—			—
Impairment of other long-lived assets	—			—			—			—			—			—			—			—
Shareholder litigation reserve	—			—			1,500			—			—			—			1,500			—
Adjusted EBITDA	$	45,744		$	42,425		$	90,984		$	84,429		$	48,438		$	46,161		$	139,422		$	130,590

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2019			2018			2019			2018			2019			2018			2019
Domain													(in thousands)
Net (loss) income	$	(2,892	)	$	(20,130	)	$	(4,671	)	$	(23,014	)
Net loss													$	(5,366	)	$	(1,253	)	$	(10,037	)	$	(24,267	)
Interest expense, net⁽¹⁾	2,405			520			4,856			2,954			1,978			488			6,834			3,442
Income tax (benefit) expense	(116		)	698			(1,543		)	894
Income tax expense (benefit)													1,400			(545		)	(143		)	349
Depreciation	999			903			1,944			1,836			950			864			2,894			2,700
Amortization of other intangible assets	876			731			1,510			1,489			852			804			2,362			2,293
Stock-based compensation	678			1,090			1,189			2,130			1,509			1,091			2,698			3,221
Restructuring expenses	87			5			642			32			2			1			644			33
(Gain) loss from unconsolidated entities	—			—			—			—
Loss from unconsolidated entities													—			—			—			—
Impairment of other long-lived assets	—			17,892			—			17,892			—			—			—			17,892
Shareholder litigation reserve	(43		)	—			1,212			—			(167		)	—			1,045			—
Adjusted EBITDA	$	1,994		$	1,709		$	5,139		$	4,213		$	1,158		$	1,450		$	6,297		$	5,663


⁽¹⁾	Interest expense includes impact of amortization of deferred financing costs, original issue discounts and interest income.

Comparison of the Three Months Ended ~~June~~September 30, 2018 and 2019: Net Income (Loss) and Adjusted EBITDA

Net ~~loss~~income (loss) on a consolidated basis ~~increased~~improved from ~~net income~~a loss of ~~$0.6~~$6.3 million for the three months ended ~~June~~September 30, 2018 to ~~a net loss~~income of ~~$26.2~~$7.8 million for the three months ended ~~June~~September 30, 2019. The primary factors driving this improvement were a $16.6 million decrease in income tax expense, a $4.5 million decrease in amortization expense, and a $1.5 million decrease in interest expense, partially offset by a $5.6 million increase in costs relating to engineering and development and a $1.6 million increase in stock-based compensation expense.

Net loss for our web presence segment decreased from $7.6 million for the three months ended September 30, 2018 to $3.5 million for the three months ended September 30, 2019. This ~~increase~~decrease in net loss was primarily ~~due~~related to ~~impairment charges of $17.9 million, reduced revenue of $9.6 million, a $7.1~~an $8.6 million decrease in income tax ~~benefit,~~expense, a ~~$3.5~~$2.6 million ~~increase~~decrease in ~~engineering~~amortization, a $5.0 million decrease in costs impacting sales and ~~development~~marketing, a $3.2 million decrease in costs impacting cost of revenue, and a ~~$2.0~~$1.5 million ~~increase~~decrease in ~~stock-based compensation~~interest expense. These factors were partially offset by a ~~$4.6~~$6.7 million decrease in ~~amortization expense, $2.8 million of net cost reductions impacting cost of~~ revenue, a ~~$1.9~~$3.5 million decrease in depreciation expense, a $1.4 million decrease in interest expense, a $1.1 million decrease in restructuring costs, $1.1 million of net cost reductions relating to sales and marketing and other net cost reductions of $0.4 million.

~~Net loss for our web presence segment increased from $6.9 million for the three months ended June 30, 2018 to $10.3 million for the three months ended June 30, 2019. This~~ increase in ~~net loss was primarily related to reduced revenue of $8.5~~engineering costs, a $3.2 million higher income tax expense of $3.7 million, and $2.1 million of cost increases impacting engineering and development expense. These factors were partially offset by $4.2 million of cost reductions impacting sales and marketing expense, a $2.7 million decreaseincrease in ~~amortization expense, $2.2 million of net cost reductions impacting cost of revenue, a $1.3 million decrease in interest~~stock-based compensation expense, and ~~other net cost reductions of $0.5 million.~~a $3.0 million increase in general and administrative costs.

Net income for our email marketing segment ~~decreased~~increased from ~~$10.4~~$6.6 million for the three months ended ~~June~~September 30, 2018 to ~~$4.2~~$12.5 million for the three months ended ~~June~~September 30, 2019. This ~~decrease~~increase in net income was primarily due to ~~$2.7~~a $6.0 million ~~of cost increases impacting sales and marketing expense, a $2.6 million increase~~decrease in income tax expense, a ~~$1.9 million increase in stock-based compensation expense, a~~ $1.8 million ~~increase in interest expense, and $1.2 million of cost increases impacting engineering and development expense. These decreases in net income were partially offset by a $1.8 million reduction~~decrease in amortization expense, a $1.2 million ~~reduction~~decrease in ~~depreciation~~stock-based compensation expense, and a $0.7 million ~~reduction~~increase in revenue. These factors were partially offset by an increase of $1.9 million in costs impacting ~~general~~engineering and ~~administrative expense,~~development, and a ~~$0.3~~$1.5 million increase in ~~revenue.~~interest expense.

Net loss for our domain segment ~~increased~~decreased from ~~$2.9~~$5.4 million for the three months ended ~~June~~September 30, 2018 to ~~$20.1~~$1.3 million for the three months ended ~~June~~September 30, 2019. This ~~increase~~decrease in net loss was primarily due to a ~~$17.9 million impairment charge relating primarily to premium domain name intangible assets and a $1.4~~$1.9 million reduction in ~~revenue, partially offset by~~tax expense, a ~~$1.8~~$1.5 million reduction in interest expense, a $0.4 million reduction in stock-based compensation, and other ~~net~~ cost ~~decreases~~reductions of ~~$0.3~~$0.8 million. These factors were partially offset by a $0.6 million reduction in revenue.

Adjusted EBITDA on a consolidated basis decreased from ~~$85.0~~$87.5 million for the three months ended ~~June~~September 30, 2018 to ~~$76.3~~$80.6 million for the three months ended ~~June~~September 30, 2019. This decrease in adjusted EBITDA was primarily a result of the adjusted EBITDA decrease in our web presence and email marketing segments, as discussed below.

Adjusted EBITDA for our web presence segment decreased from ~~$37.3~~$37.9 million for the three months ended ~~June~~September 30, 2018 to ~~$32.2~~$33.0 million for the three months ended ~~June~~September 30, 2019. This decrease was primarily due to ~~an $8.5~~a $6.7 million decrease in revenue, ~~and higher~~a $3.5 million increase in engineering and development expense, ~~of $2.1 million.~~and a $3.0 million increase in general and administrative expense. These ~~decreases~~factors were partially offset by ~~$4.2~~$5.0 million of ~~net~~ cost reductions impacting sales and marketing expense, with the balance of the offset primarily related to lower cost of ~~revenue.~~revenue of $3.2 million.

Adjusted EBITDA for our email marketing segment decreased from ~~$45.7~~$48.4 million for the three months ended ~~June~~September 30, 2018 to ~~$42.4~~$46.2 million for the three months ended ~~June~~September 30, 2019. This decrease was due primarily to an increase in ~~sales~~costs impacting engineering and ~~marketing~~development expense of ~~$2.7~~$1.9 million, an increase in costs impacting general and administrative expense of $0.6 million, and an increase in ~~engineering and development expense~~costs impacting cost of ~~$1.2~~revenue of $0.5 million. These factors were partially offset by ~~increases~~an increase in revenue of ~~$0.3~~$0.7 million, and other ~~net~~ cost reductions of ~~$0.3~~$0.2 million.

Adjusted EBITDA for our domain segment ~~decreased~~increased from ~~$2.0~~$1.2 million for the three months ended ~~June~~September 30, 2018 to ~~$1.7~~$1.5 million for the three months ended ~~June~~September 30, 2019. This ~~decrease~~increase in adjusted EBITDA was due primarily to a combined decrease of approximately $1.4 million in costs impacting cost of revenue and general and administrative expense, partially offset by a decrease in revenue of ~~$1.4~~$0.6 million, ~~partially offset by a reduction in~~and other cost increases of ~~revenue of $1.1~~$0.6 million.

Comparison of the ~~Six~~Nine Months Ended ~~June~~September 30, 2018 and 2019: Net Income (Loss) and Adjusted EBITDA

Net loss on a consolidated basis increased from ~~$1.9~~$8.2 million for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$29.7~~$21.9 million for the ~~six~~nine months ended ~~June~~September 30, 2019. This increase in net loss was due to a reduction in revenue of ~~$20.3~~$26.8 million, increased impairment charges of $17.9 million, ~~increased tax expense of $10.8 million,~~ a ~~$6.4~~$12.0 million increase in ~~net~~ costs impacting engineering and development expense, ~~and~~ increased stock-based compensation expense of ~~$4.0 million. These factors were partially offset by decreased amortization expense of $9.2~~$5.6 million, ~~decreased litigation reserves of $8.3 million,~~and a $7.2 million reduction in costs impacting cost of revenue, decreased depreciation expense of $2.8 million, a $2.6 million reduction in costs impacting sales and marketing expense, and other net cost decreases of $1.5 million.

Net loss for our web presence segment increased from $13.0 million for the six months ended June 30, 2018 to $16.8 million for the six months ended June 30, 2019. This increase in net loss is primarily related to a reduction in revenue of $17.6 million, increased income tax expense of $9.3 million, a $3.7$2.4 million increase in ~~net costs impacting engineering and development expense, and a $1.8 million increase in net~~ costs impacting general and administrative expense. These factors were partially offset by ~~$9.3~~decreased amortization expense of $13.7 million, a $10.6 million reduction in costs impacting cost of ~~reductions~~revenue, a $7.4 million reduction in ~~net~~ costs impacting sales and marketing expense, a ~~$5.6~~$7.3 million reduction due to the impact of the shareholder litigation reserve recorded during the nine months ended September 30, 2018, a $5.8 million reduction in income tax expense, a decrease in depreciation expense of $3.4 million, a $1.8 million reduction in interest expense, and a $1.0 million reduction in restructuring costs.

Net loss for our web presence segment decreased from $20.5 million for the nine months ended September 30, 2018 to $20.3 million for the nine months ended September 30, 2019. This decrease in net loss is primarily related to $14.4 million of reductions in costs impacting sales and marketing expense, an $8.2 million decrease in amortization expense, ~~a $5.6 million decrease in litigation reserves, $4.9~~$8.1 million of reductions in ~~net~~ costs impacting cost of revenue, a ~~$1.2~~$4.8 million reduction due to the impact of the shareholder litigation reserve recorded during the nine months ended September 30, 2018, a $2.6 million decrease in interest expense, and other ~~net~~ cost decreases of ~~$2.0~~$1.3 million. These factors were partially offset by a reduction in revenue of $24.2 million, a $7.2 million increase in costs impacting engineering and development expense, a $4.8 million increase in costs impacting general and administrative expense, a $2.6 million increase in stock-based compensation expense, and a $0.6 million increase in income tax expense.

Net income for our email marketing segment ~~decreased~~increased from ~~$15.8~~$22.4 million for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$10.1~~$22.6 million for the ~~six~~nine months ended ~~June~~September 30, 2019. This ~~decrease~~increase in net income was primarily due to ~~$5.2~~a $6.9 million ~~higher net costs impacting sales and marketing~~decrease in income tax expense, a ~~$3.6~~$5.5 million decrease in amortization expense, a $2.4 million decrease in depreciation expense, a $1.5 million reduction due to the impact of the shareholder litigation reserve recorded during the nine months ended September 30, 2018, and an increase in ~~stock-based compensation expense, a $2.8 million increase in interest expense, and $2.1 million~~revenue of ~~higher net costs impacting engineering and development expense.~~$1.3 million. These factors were partially offset by a ~~$3.6~~$5.0 million ~~reduction~~increase in ~~amortization~~costs impacting sales and marketing, a $4.2 million increase in interest expense, a ~~$2.0~~$4.1 million ~~reduction~~increase in ~~depreciation~~costs impacting engineering and development, a $2.4 million increase in stock-based compensation expense, ~~a $1.5 million reduction in litigation reserves,~~ and other ~~net~~ cost ~~reductions~~increases of ~~$0.9~~$1.7 million.

Net loss for our domain segment increased from ~~$4.7~~$10.0 million for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$23.0~~$24.3 million for the ~~six~~nine months ended ~~June~~September 30, 2019. This increase in net loss was primarily due to a $17.9 million increase in impairment charges, a ~~$3.3~~$3.8 million reduction in revenue, a ~~$2.4~~$1.9 million increase in costs impacting sales and marketing expense, a $0.8 million increase in costs impacting engineering and development, and a $0.5 million increase in income tax ~~expense, and a $1.5 million increase in net costs impacting sales and marketing~~ expense. These factors were partially offset by a ~~$2.8~~$3.5 million reduction in ~~net~~ costs impacting cost of revenue, a ~~$1.9~~$2.3 million decrease in costs impacting general and administrative expense, a $3.4 million decrease in interest expense, and other ~~net~~ cost reductions of ~~$2.1~~$1.4 million.

Adjusted EBITDA on a consolidated basis decreased from ~~$171.2~~$258.7 million for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$154.8~~$235.5 million for the ~~six~~nine months ended ~~June~~September 30, 2019. This decrease in adjusted EBITDA was a result of the adjusted EBITDA decrease in our web presence, email marketing and domain segments, as discussed below.

Adjusted EBITDA for our web presence segment decreased from ~~$75.1~~$113.0 million for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$66.2~~$99.2 million for the ~~six~~nine months ended ~~June~~September 30, 2019. This decrease was primarily due to a decline in revenue of ~~$17.6~~$24.2 million, an increase in ~~net~~ costs impacting engineering and development expense of ~~$3.7~~$7.2 million, and an increase in ~~net~~ costs

impacting general and administrative expense of ~~$1.8~~$4.8 million. These factors were partially offset by a decrease in ~~net~~ costs impacting sales and marketing expense of ~~$9.3~~$14.4 million, and a decrease in ~~net~~ costs impacting cost of revenue of ~~$4.9~~$8.1 million.

Adjusted EBITDA for our email marketing segment decreased from ~~$91.0~~$139.4 million for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$84.4~~$130.6 million for the ~~six~~nine months ended ~~June~~September 30, 2019. This decrease was due primarily to an increase in ~~net~~ costs impacting sales and marketing expense of ~~$5.2~~$5.0 million, ~~and~~ an increase in ~~net~~ costs impacting engineering and development expense of ~~$2.1~~$4.1 million, and an increase in costs impacting cost of revenue of $1.0 million. These factors were partially offset by ~~increased~~an increase in revenue of ~~$0.6 million and other net cost reductions of $0.1~~$1.3 million.

Adjusted EBITDA for our domain segment decreased from ~~$5.1~~$6.3 million for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$4.2~~$5.7 million for the ~~six~~nine months ended ~~June~~September 30, 2019. This decrease was due primarily to ~~lower~~a decrease in revenue of ~~$3.3~~$3.8 million, an increase in costs impacting sales and marketing of $1.9 million, and an increase in costs impacting engineering and development of $0.8 million. These factors were partially offset by a reduction in costs impacting cost of revenue of $3.5 million, primarily due to lower domain registration costs, and a reduction in costs impacting general and administrative expense of ~~approximately $2.0~~$2.3 million, ~~and other net cost reductions of $0.4 million.~~primarily due to lower labor costs.

Free Cash Flow

For a discussion of free cash flow, see Liquidity and Capital Resources.

Components of Operating Results

Revenue

We generate revenue primarily from selling subscriptions for our cloud-based products and services. The subscriptions we offer are similar across all of our brands and are provided under contracts pursuant to which we have ongoing obligations to support the subscriber. These contracts are generally for service periods of up to 36 months and typically require payment in advance at the time of initiating the subscription for the entire subscription period. Typically, we also have arrangements in place to automatically renew a subscription at the end of the subscription period. Due to factors such as discounted introductory pricing, our renewal fees may be higher than our initial subscription. A majority of our web presence segment and domain segment subscriptions have terms of 24 months or less, while our email marketing segment sells subscriptions that are mostly one-month terms. We also earn revenue from the sale of domain name registrations, premium domains and non-term based products and services, such as certain online security products and professional technical services as well as through referral fees and commissions.

Cost of Revenue

Cost of revenue includes costs of operating our ~~subscriber~~customer support organization, fees we pay to register domain names for our ~~subscribers,~~customers, costs of operating our data center infrastructure, such as technical personnel costs associated with monitoring and maintaining our network operations, fees we pay to third-party product and service providers, and merchant fees we pay as part of our billing processes. We also allocate to cost of revenue the depreciation and amortization related to these activities and the intangible assets we have acquired, as well as a portion of our overhead costs attributable to our employees engaged in ~~subscriber~~customer support activities. In addition, cost of revenue includes stock-based compensation expense for employees engaged in support and network operations. We generally expect cost of revenue to decrease as a percentage of revenue due to decreasing amortization expense on our intangible assets.

Gross Profit

Gross profit is the difference between revenue and cost of revenue. Gross profit has fluctuated from period to period in large part as a result of revenue and cost of revenue adjustments from purchase accounting impacts related to acquisitions, as well as revenue and cost of revenue impacts related to developments in our business. With respect to revenue, the application of purchase accounting requires us to record purchase accounting adjustments for acquired deferred revenue, which reduces the revenue recorded from acquisitions for a period of time after the acquisition. The impact generally normalizes within a year following the acquisition. With respect to cost of revenue, the application of purchase accounting requires us to defer domain registration costs, which reduces cost of revenue, and record long-lived assets at fair value, which increases cost of revenue through an increase in amortization expense over the estimated useful life of the long-lived assets. For a new ~~subscriber~~customer that we bring on to our platform, we typically recognize revenue over the term of the subscription, even though we collect the subscription fee at the initial billing. As a result, our gross profit may be affected by the prices we charge for our subscriptions, as well as by the number of new subscribers and the terms of their subscriptions. We expect our gross profit to increase in absolute dollars in future periods, and that our gross profit margin will also increase as amortization expense related to our intangible assets declines.

Operating Expense

We classify our operating expense into three main categories: sales and marketing, engineering and development, and general and administrative.

Sales and Marketing

Sales and marketing expense primarily consists of costs associated with bounty payments to our network of online partners, search engine marketing, or SEM, and search engine optimization, or SEO, general awareness and brand building activities, as well as the cost of employees engaged in sales and marketing activities. Sales and marketing expense also includes costs associated with sales of products as well as stock-based compensation expense for employees engaged in sales and marketing activities. Sales and marketing expense as a percentage of revenue may increase or decrease in a given period, depending on the cost of attracting new ~~subscribers~~customers to our solutions, changes in how we invest in different ~~subscriber~~customer acquisition channels, changes in how we approach SEM and SEO and the extent of general awareness and brand building

activities we may undertake, as well as the efficiency of our sales and support personnel and our ability to sell more products and services to our subscribers and drive favorable returns on invested marketing dollars.

Engineering and Development

Engineering and development expense includes the cost of employees engaged in enhancing our technology platform and our systems, developing and expanding product and service offerings, and integrating technology capabilities from our acquisitions. Engineering and development expense includes stock-based compensation expense for employees engaged in engineering and development activities. Our engineering and development expense does not include costs of leasing and operating our data center infrastructure, such as technical personnel costs associated with monitoring and maintaining our network operations and fees we pay to third-party product and service providers, which are included in cost of revenue.

General and Administrative

General and administrative expense includes the cost of employees engaged in corporate functions, such as finance and accounting, information technology, human resources, legal and executive management. General and administrative expense also includes insurance premiums, professional service fees, and cost incurred related to regulatory and litigation matters. General and administrative expense includes stock-based compensation expense for employees engaged in general and administrative activities.

Other Income (Expense)

Other income (expense) consists primarily of costs related to, and interest paid on, our indebtedness. We include in our calculation of interest expense the cash cost of interest payments and loan financing fees, the amortization of deferred financing costs and original issue discounts and the amortization of the net present value adjustment which we may apply to some deferred consideration payments related to our acquisitions in our calculation of interest expense. Interest income consists primarily of interest income earned on our cash and cash equivalents balances.

Income Tax Expense (Benefit)

We estimate our income taxes in accordance with the asset and liability method, under which deferred tax assets and liabilities are recognized based on temporary differences between the assets and liabilities in our consolidated financial statements and the financial statements that are prepared in accordance with tax regulations for the purpose of filing our income tax returns, using statutory tax rates. This methodology requires us to record a valuation allowance against net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

Critical Accounting Policies and Estimates

We prepare our consolidated financial statements in accordance with U.S. GAAP. The preparation of our consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expense during the reported periods. We base our estimates, judgments and assumptions on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from the estimates, judgments and assumptions made by our management. To the extent that there are differences between our estimates, judgments and assumptions and our actual results, our future financial statement presentation, financial condition, results of operations and cash flows may be affected.

We believe that our critical accounting policies and estimates are the assumptions and estimates associated with the following:

revenue recognition

goodwill

long-lived assets

business combinations

derivative instruments

depreciation and amortization

income taxes

stock-based compensation arrangements ~~and~~

segment ~~information.~~information

Except for the adoption of Accounting Standards Codification 842, or ASC 842, there have been no material changes to our critical accounting policies since December 31, 2018. For further information on our critical accounting policies and estimates, including information on our adoption of ASC 842, see Note 2 to the consolidated financial statements appearing in

Part I, Item 1 in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or the SEC, on February 21, 2019.

Results of Operations

The following tables set forth our results of operations for the periods presented. The period-to-period comparison of financial results is not necessarily indicative of future results.


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2019			2018			2019			2018			2019			2018			2019
	(in thousands)												(in thousands)
Revenue	$	287,770		$	278,204		$	579,126		$	558,887		$	283,770		$	277,193		$	862,896		$	836,080
Cost of revenue (including impairment of $17,892 for the three and six months ended June 30, 2019)	130,746			139,587			264,652			263,441
Cost of revenue (including impairment of $0 and $17,892, respectively, for the three and nine months ended September 30, 2019)													128,945			120,755			393,597			384,196
Gross profit	157,024			138,617			314,474			295,446			154,825			156,438			469,299			451,884
Operating expense:
Sales and marketing	66,546			65,490			133,902			132,078			63,831			59,143			197,733			191,221
Engineering and development	21,959			25,348			41,876			49,042			22,683			28,257			64,559			77,299
General and administrative	30,744			31,124			69,519			62,517			25,693			30,309			95,212			92,826
Total operating expense	119,249			121,962			245,297			243,637			112,207			117,709			357,504			361,346
Income from operations	37,775			16,655			69,177			51,809			42,618			38,729			111,795			90,538
Other income (expense):
Interest income	227			314			431			605			289			305			720			910
Interest expense	(38,346		)	(37,037		)	(74,396		)	(74,251		)	(37,527		)	(36,057		)	(111,923		)	(110,308		)
Total other expense—net	(38,119		)	(36,723		)	(73,965		)	(73,646		)	(37,238		)	(35,752		)	(111,203		)	(109,398		)
Loss before income taxes and equity earnings of unconsolidated entities	(344		)	(20,068		)	(4,788		)	(21,837		)
Income tax (benefit) expense	(946		)	6,160			(2,889		)	7,879
Income (loss) before equity earnings of unconsolidated entities	602			(26,228		)	(1,899		)	(29,716		)
Equity (income) loss of unconsolidated entities, net of tax	(25		)	—			2			—
Net income (loss)	$	627		$	(26,228	)	$	(1,901	)	$	(29,716	)
Income (loss) before income taxes and equity earnings of unconsolidated entities													5,380			2,977			592			(18,860		)
Income tax expense (benefit)													11,715			(4,839		)	8,826			3,040
(Loss) income before equity earnings of unconsolidated entities													(6,335		)	7,816			(8,234		)	(21,900		)
Equity loss of unconsolidated entities, net of tax													—			—			2			—
Net (loss) income													$	(6,335	)	$	7,816		$	(8,236	)	$	(21,900	)

Comparison of Three Months Ended ~~June~~September 30, 2018 and 2019

Revenue

Three Months Ended June 30, Change
2018 2019 Amount %
(dollars in thousands)
Revenue $ 287,770
$ 278,204
$ (9,566 ) (3 )%



	Three Months Ended September 30,				Change
	2018		2019		Amount			%
	(dollars in thousands)
Revenue	$	283,770	$	277,193	$	(6,577	)	(2	)%

Revenue decreased by ~~$9.6~~$6.6 million, or 3%2%, from ~~$287.8~~$283.8 million for the three months ended ~~June~~September 30, 2018 to ~~$278.2~~$277.2 million for the three months ended ~~June~~September 30, 2019. This decrease was attributable to ~~$8.5~~$6.7 million in reduced

revenue from our web presence segment and ~~$1.4~~$0.6 million in reduced revenue from our domain segment, offset by a ~~$0.3~~$0.7 million increase in revenue from our email marketing segment, each of which are further discussed below.

Web presence segment revenue decreased by ~~$8.5~~$6.7 million, or 6%4%, from ~~$152.7~~$149.9 million for the three months ended ~~June~~September 30, 2018 to ~~$144.2~~$143.2 million for the three months ended ~~June~~September 30, 2019. This decrease was primarily the result of lower revenue from ~~the~~our non-strategic brands discussed in the ~~"Overview"~~Overview section above.

Email marketing segment revenue increased by ~~$0.3~~$0.7 million, or 0%1%, from ~~$102.2~~$102.1 million for the three months ended ~~June~~September 30, 2018 to ~~$102.5~~$102.8 million for the three months ended ~~June~~September 30, 2019. This increase was due to increased purchases from existing ~~subscribers and price increases.~~subscribers.

Domain segment revenue decreased by ~~$1.4~~$0.6 million, or 4%2%, from ~~$32.9~~$31.8 million for the three months ended ~~June~~September 30, 2018 to ~~$31.5~~$31.2 million for the three months ended ~~June~~September 30, 2019. This decrease was primarily due to a ~~$1.2~~$0.4 million reduction in non-subscription-based revenue, primarily premium domain name ~~sales, and a $0.2 million reduction in revenue from our domain-focused brands.~~

sales.

Our revenue is generated primarily from our products and services delivered on a subscription basis, which include web hosting, domains, website builders, email marketing, ~~search engine marketing~~SEM and other similar services. We also generate ~~non-subscription~~non-subscription-based revenue through domain monetization and marketing development funds. ~~Non-subscription~~Non-subscription-based revenue decreased from ~~$9.4~~$8.7 million, or 3% of total revenue, for the three months ended ~~June~~September 30, 2018 to $7.9 million, or 3% of total revenue, for the three months ended ~~June~~September 30, 2019, primarily due to ~~lower domain monetization~~decreases in premium domains and marketing development funds revenue. Our ~~domain monetization~~ revenue from sales of premium domains from our BuyDomains brand has been, and ~~may~~is likely to continue to be, negatively affected by lower demand in the secondary market for domain names.

~~Cost of Revenue~~Gross Profit

Three Months Ended June 30,
2018 2019 Change
Amount
% of
Revenue
Amount
% of
Revenue
Amount %
(dollars in thousands)
Cost of revenue (including impairment of $17,892 for the three months ended June 30, 2019) $ 130,746
45 % $ 139,587
50 % $ 8,841
7 %



	Three Months Ended September 30,
	2018				2019				Change
	Amount		% of Revenue		Amount		% of Revenue		Amount		%
	(dollars in thousands)
Gross profit	$	154,825	55	%	$	156,438	56	%	$	1,613	1	%

~~Cost of revenue~~Gross profit increased by ~~$8.8~~$1.6 million, or 7%1%, from ~~$130.7~~$154.8 million for the three months ended ~~June~~September 30, 2018 to ~~$139.6~~$156.4 million for the three months ended ~~June~~September 30, 2019. This increase was primarily due to ~~an impairment charge of $17.9 million relating primarily to premium domain name intangible assets arising from~~ a 2014 acquisition. This increase was partially offset by lower amortization expense of $4.6 million relating to intangible assets arising from our acquisitions, and other decreases in cost of revenue across our segments as discussed below.

Our cost of revenue contains a significant portion of non-cash expenses, in particular amortization expense for the intangible assets we have acquired through our acquisitions and any related impairments to those assets. The following table sets forth the significant non-cash components of cost of revenue:

Three Months Ended June 30,
2018 2019
(in thousands)
Amortization expense $ 25,978
$ 21,349
Depreciation expense $ 10,889
$ 9,795
Stock-based compensation expense $ 852
$ 967
Impairment charges $ —
17,892

Cost of revenue for our web presence segment decreased by $6.0 million, or 8%, from $77.0 million for the three months ended June 30, 2018 to $71.0 million for the three months ended June 30, 2019. This decrease was primarily due to the following factors: lower amortization expense of $2.7 million; lower data center costs of $2.2 million, primarily due to vendor pricing concessions; and lower domain registration costs of $0.7 million.

Cost of revenue for our email marketing segment decreased by $1.9 million, or 6%, from $30.8 million for the three months ended June 30, 2018 to $28.9 million for the three months ended June 30, 2019. This decrease was primarily due to lower amortization expense of $1.8 million.

Cost of revenue for our domain segment increased by $16.8 million, or 73%, from $23.0 million for the three months ended June 30, 2018 to $39.7 million for the three months ended June 30, 2019. This increase was primarily due to an impairment charge of $17.9 million relating to certain premium domain name intangible assets. This increase was partially offset by lower domain registration costs of $0.7 million.

~~Gross Profit~~

Three Months Ended June 30,
2018 2019 Change
Amount
% of
Revenue
Amount
% of
Revenue
Amount %
(dollars in thousands)
Gross profit $ 157,024
55 % $ 138,617
50 % $ (18,407 ) (12 )%

Gross profit decreased by $18.4 million, or 12%, from $157.0 million for the three months ended June 30, 2018 to $138.6 million for the three months ended June 30, 2019. This decrease was primarily due to a decline of $2.5 million in web presence

~~segment gross profit and an $18.1 million decline in domain segment gross profit, offset by a $2.2~~$2.4 million increase in gross profit from our email marketing ~~segment.~~segment and a $0.7 million increase in domain segment gross profit, partially offset by a $1.5 million decline in web presence segment gross profit. Our gross profit as a percentage of revenue ~~decreased~~increased by ~~five~~one percentage ~~points~~point year over year, from 55% for the three months ended ~~June~~September 30, 2018 to ~~50%~~56% for the three months ended ~~June~~September 30, 2019.

~~The following table sets forth gross profit and the significant non-cash components of cost of revenue as a percentage of revenue:~~

Three Months Ended June 30,
2018 2019
(dollars in thousands)
Revenue $ 287,770
$ 278,204
Gross profit $ 157,024
$ 138,617
Gross profit as % of revenue 55 % 50 %
Amortization expense as % of revenue 9 % 8 %
Depreciation expense as % of revenue 4 % 4 %
Impairment charges — % 6 %
Stock-based compensation expense as % of revenue *
*


*	~~Less than 1%.~~

Web presence segment gross profit decreased by ~~$2.5~~$1.5 million, or 3%2%, from ~~$75.7~~$75.1 million for the three months ended ~~June~~September 30, 2018 to ~~$73.2~~$73.6 million for the three months ended ~~June~~September 30, 2019. This decrease was primarily due to the decline in web presence segment revenue, as described above, partially offset by a decrease in cost of revenue, ~~as described above.~~primarily due to lower data center and domain registration costs. Our web presence gross profit as a percentage of revenue increased by one percentage point year over year, from 50% for the three months ended ~~June~~September 30, 2018 to 51% for the three months ended ~~June~~September 30, 2019.

Email marketing segment gross profit increased by ~~$2.2~~$2.4 million, or 3%, from $71.4 million for the three months ended ~~June~~September 30, 2018 to ~~$73.6~~$73.8 million for the three months ended ~~June~~September 30, 2019. This increase was primarily due to decreased cost of revenue, mostly due to lower amortization expense. Our email marketing gross profit as a percentage of revenue increased by two percentage points year over year, from 70% for the three months ended ~~June~~September 30, 2018 to 72% for the three months ended ~~June~~September 30, 2019.

Domain segment gross profit ~~decreased~~increased by ~~$18.1~~$0.7 million, or ~~182%~~8%, from ~~$9.9~~$8.4 million for the three months ended ~~June~~September 30, 2018 to ~~$(8.2)~~$9.1 million for the three months ended ~~June~~September 30, 2019. ~~This decrease~~The main contributor to this increase was decreased cost of revenue, primarily due to ~~increased cost of revenue as a result of an impairment charge in connection with premium~~lower domain ~~name intangible assets,~~registration costs and ~~to a lesser extent,~~stock-based compensation expense, partially offset by reduced revenue as described above. Our domain gross profit as a percentage of revenue ~~decreased~~increased by ~~fifty-six~~three percentage points year over year, from ~~30%~~26% for the three months ended ~~June~~September 30, 2018 to ~~(26)%~~29% for the three months ended ~~June~~September 30, 2019.

Operating Expense


	Three Months Ended June 30,													Three Months Ended September 30,
	2018				2019				Change					2018				2019				Change
	Amount		% of Revenue		Amount		% of Revenue		Amount			%		Amount		% of Revenue		Amount		% of Revenue		Amount			%
	(dollars in thousands)													(dollars in thousands)
Sales and marketing	$	66,546	23	%	$	65,490	24	%	$	(1,056	)	(2	)%	$	63,831	22	%	$	59,143	21	%	$	(4,688	)	(7	)%
Engineering and development	21,959		8	%	25,348		9	%	3,389			15	%	22,683		8	%	28,257		10	%	5,574			25	%
General and administrative	30,744		11	%	31,124		11	%	380			1	%	25,693		9	%	30,309		11	%	4,616			18	%
Total	$	119,249	41	%	$	121,962	44	%	$	2,713		2	%	$	112,207	40	%	$	117,709	42	%	$	5,502		5	%

Sales and Marketing. Sales and marketing expense decreased by ~~$1.1~~$4.7 million, or 2%7%, from ~~$66.5~~$63.8 million for the three months ended ~~June~~September 30, 2018 to ~~$65.5~~$59.1 million for the three months ended ~~June~~September 30, 2019. Web presence segment sales and marketing expense declined by ~~$4.1~~$5.0 million, which was partially offset by ~~increased~~an increase in email marketing segment sales and marketing expense of ~~$2.5~~$0.1 million and ~~increased~~an increase in domain segment sales and marketing expense of ~~$0.6~~$0.2 million.

Sales and marketing expense for our web presence segment decreased by ~~$4.1~~$5.0 million, or ~~11%~~14%, from ~~$38.3~~$36.5 million for the three months ended ~~June~~September 30, 2018 to ~~$34.1~~$31.5 million for the three months ended ~~June~~September 30, 2019. This decrease was primarily due to lower marketing program ~~spend.~~spend on our non-strategic brands.

Sales and marketing expense for our email marketing segment increased by ~~$2.5~~$0.1 million, or ~~11%~~0%, from ~~$23.4~~$21.9 million for the three months ended ~~June~~September 30, 2018 to ~~$25.9~~$22.0 million for the three months ended ~~June~~September 30, 2019. ~~The~~This slight increase was due primarily to higher marketing program ~~spend of $1.8 million and higher labor costs of $0.7 million.~~

spend.

Sales and marketing expense for our domain segment increased by ~~$0.6~~$0.2 million, or ~~13%~~4%, from ~~$4.9~~$5.3 million for the three months ended ~~June~~September 30, 2018 to ~~$5.5~~$5.6 million for the three months ended ~~June~~September 30, 2019. The increase was due primarily to ~~increases in marketing program spend.~~higher labor costs.

Engineering and Development. Engineering and development expense increased by ~~$3.4~~$5.6 million, or ~~15%~~25%, from ~~$22.0~~$22.7 million for the three months ended ~~June~~September 30, 2018 to ~~$25.3~~$28.3 million for the three months ended ~~June~~September 30, 2019. Web presence segment engineering and development expense increased by ~~$1.9~~$3.8 million, email marketing segment engineering and development expense increased by ~~$1.2~~$1.8 million, and domain segment engineering and development expense ~~increased by $0.3 million. All~~remained relatively flat. Both of these cost increases were primarily related to higher labor costs as we continue to invest in our engineering and development resources.

General and Administrative. General and administrative expense increased by ~~$0.4~~$4.6 million, or 1%18%, from ~~$30.7~~$25.7 million for the three months ended ~~June~~September 30, 2018 to ~~$31.1~~$30.3 million for the three months ended ~~June~~September 30, 2019. ~~Stock-based compensation costs increased by~~This increase was primarily due to a $1.2 million ~~which was partially offset by~~increase in stock-based compensation expense and other cost ~~decreases, mainly legal fees.~~increases, primarily labor related, of $2.5 million. Our general and administrative expense primarily consists of consolidated corporate-wide ~~support~~shared functions, and the costs of these functions are allocated between our three segments primarily based on relative revenues.

General and administrative expense for our web presence segment increased by ~~$0.7~~$5.8 million, or 4%47%, from ~~$16.6~~$12.2 million for the three months ended ~~June~~September 30, 2018 to ~~$17.3~~$17.9 million for the three months ended ~~June~~September 30, ~~2019.~~2019, primarily due to labor-related costs. General and administrative expense for our email marketing segment ~~increased~~decreased by ~~$0.4~~$0.9 million, or 4%9%, from ~~$10.4~~$10.7 million for the three months ended ~~June~~September 30, 2018 to ~~$10.8~~$9.8 million for the three months ended ~~June~~September 30, 2019. General and administrative expense for our domain segment decreased by ~~$0.7~~$0.2 million, or ~~20%~~7%, from ~~$3.8~~$2.8 million for the three months ended ~~June~~September 30, 2018 to ~~$3.0~~$2.6 million for the three months ended ~~June~~September 30, 2019.

Other Expense, Net

Three Months Ended June 30, Change
2018 2019 Amount %
(dollars in thousands)
Other expense, net $ (38,119 ) $ (36,723 ) $ (1,396 ) (4 )%



	Three Months Ended September 30,				Change
	2018		2019		Amount			%
	(dollars in thousands)
Other expense, net	$	37,238	$	35,752	$	(1,486	)	(4	)%

Other expense, net decreased by ~~$1.4~~$1.5 million, or 4%, from ~~$38.1~~$37.2 million for the three months ended ~~June~~September 30, 2018 to ~~$36.7~~$35.8 million for the three months ended ~~June~~September 30, 2019. The decrease was attributable to ~~$1.4~~$1.5 million of decreased net interest expense, primarily due to lower average term loan balances.

Income Tax Expense (Benefit) ~~Expense~~

Three Months Ended June 30, Change
2018 2019 Amount %
(dollars in thousands)
Income tax (benefit) expense $ (946 ) $ 6,160
$ 7,106
(751 )%



	Three Months Ended September 30,					Change
	2018		2019			Amount			%
	(dollars in thousands)
Income tax expense (benefit)	$	11,715	$	(4,839	)	$	(16,554	)	(141	)%

For the three months ended ~~June~~September 30, 2018 and 2019, we recognized an income tax ~~benefit~~expense of ~~$0.9~~$11.7 million and an income tax ~~expense~~benefit of ~~$6.2~~$4.8 million, respectively, in the consolidated statements of operations and comprehensive ~~loss.~~income (loss). The income tax ~~expense~~benefit for the three months ended ~~June~~September 30, 2019 was primarily attributable to a federal and state current income tax ~~expense~~benefit of ~~$1.5~~$3.3 million, a foreign current tax ~~expense~~benefit of ~~$1.2~~$1.1 million, and a federal and state deferred tax ~~expense~~benefit of ~~$3.6~~$0.5 million, partially offset by a foreign deferred tax ~~benefit~~expense of $0.1 million. The income tax ~~benefit~~expense for the three months ended ~~June~~September 30, 2018 was primarily attributable to a federal and state deferred tax ~~benefit~~expense of ~~$0.4~~$12.9 million, a federal and state current income tax ~~benefit~~expense of ~~$0.3~~$0.1 million and a foreign ~~current~~deferred tax ~~benefit~~expense of $0.3 million, partially offset by a foreign ~~deferred~~current tax ~~expense~~benefit of ~~$0.1~~$1.6 million.

The ~~increase~~decrease in our income tax expense in the 2019 period is primarily due to higher valuation allowances on deferred tax assets related to interest expense deduction limitations, a greater portion of the full year expected income tax expense recognized in the 2019 period under the inter-period income tax guidance of ASC 740 as we incurred a greater portion of the expected full year net loss for the three months ended ~~June~~September 30, 2019 as compared to ~~the 2018 period, and increased expenses for uncertain tax positions.~~

As discussed in Note 3 of the consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, we revised our deferred income tax provision for the first and second quarters of 2018 to reflect an increase in net operating loss, or NOL, carry-forwards resulting from the reorganization and liquidation of certain affiliated entities which resulted in the recognition of a worthless stock loss of approximately $78.0 million during fiscal year 2017. As a result, we revised our provision (benefit) for income taxes for the three months ended ~~June~~September 30, 2018 ~~from an expense of $1.7 million~~is primarily due to a ~~benefit~~decrease in our forecasted income for the year and a lower valuation allowance on deferred tax assets, as well as the impact of ~~$0.9 million.~~the interim tax accounting requirement under ASC 740.

Comparison of ~~Six~~Nine Months Ended ~~June~~September 30, 2018 and 2019

Revenue

Six Months Ended June 30, Change
2018 2019 Amount %
(dollars in thousands)
Revenue $ 579,126
$ 558,887
$ (20,239 ) (3 )%



	Nine Months Ended September 30,				Change
	2018		2019		Amount			%
	(dollars in thousands)
Revenue	$	862,896	$	836,080	$	(26,816	)	(3	)%

Revenue decreased by ~~$20.2~~$26.8 million, or 3%, from ~~$579.1~~$862.9 million for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$558.9~~$836.1 million for the ~~six~~nine months ended ~~June~~September 30, 2019. This decrease was attributable to a decrease in revenue from our web presence segment and to a lesser extent from our domain segment, partially offset by ~~growth~~an increase in revenue from our email marketing segment as discussed below.

Web presence segment revenue decreased by ~~$17.6~~$24.3 million, or 6%5%, from ~~$307.7~~$457.6 million for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$290.2~~$433.4 million for the ~~six~~nine months ended ~~June~~September 30, 2019. This decrease was primarily the result of subscriber attrition in our non-strategic brands.

Email marketing segment revenue increased by ~~$0.6~~$1.3 million, or 0%, from ~~$204.6~~$306.7 million for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$205.2~~$308.0 million for the ~~six~~nine months ended ~~June~~September 30, 2019. This slight increase was due to increased purchases from existing subscribers and price increases.

Domain segment revenue decreased by ~~$3.3~~$3.8 million, or 5%4%, from ~~$66.8~~$98.6 million for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$63.5~~$94.7 million for the ~~six~~nine months ended ~~June~~September 30, 2019. This decrease was primarily due to a ~~$1.8~~$2.1 million reduction in non-subscription-based revenue, primarily premium domain ~~monetization revenue,~~sales, with the balance of the decrease relating to reduced revenue from our domain-focused brands.

Our revenue is generated primarily from our products and services delivered on a subscription basis, which include web hosting, domains, website builders, ~~search engine marketing~~SEM and other similar services. We also generate ~~non-subscription~~non-subscription-based revenue through domain monetization and marketing development funds. ~~Non-subscription~~Non-subscription-based revenue decreased from ~~$18.4~~$27.1 million, or 3% of total revenue, for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$16.1~~$24.0 million, or 3% of total revenue, for the ~~six~~nine months ended ~~June~~September 30, 2019, due primarily to a ~~decrease~~decreases in premium domains and marketing development ~~funds.~~

~~Cost of Revenue~~

Six Months Ended June 30,
2018 2019 Change
Amount
%
of
Revenue
Amount
%
of
Revenue
Amount %
(dollars in thousands)
Cost of revenue (including impairment of $17,892 for the six months ended June 30, 2019) $ 264,652
46 % $ 263,441
47 % $ (1,211 ) — %

Cost of revenue decreased by $1.2 million, or 0%, from $264.7 million for the six months ended June 30, 2018 to $263.4 million for the six months ended June 30, 2019. Web presence segment cost of revenue decreased by $13.0 million and email marketing segment cost of revenue decreased by $3.5 million, while domain segment cost of revenue increased by $15.2 million.

Six Months Ended June 30,
2018 2019
(dollars in thousands)
Amortization expense $ 51,713
$ 42,469
Depreciation expense 22,015
19,844
Impairment charges $ —
$ 17,892
Stock-based compensation expense $ 2,395
$ 1,882

Cost of revenue for our web presence segment decreased by $13.0 million, or 8%, from $157.7 million for the six months ended June 30, 2018 to $144.7 million for the six months ended June 30, 2019. This decrease was primarily due to lower amortization expense of $5.6 million; lower data center costs of $2.9 million; lower stock-based compensation of $1.1 million; lower depreciation of $1.1 million; and lower third-party application costs of $1.2 million. The balance of the decrease related primarily to domain registration costs.

Cost of revenue for our email marketing segment decreased by $3.5 million, or 6%, from $61.0 million for the six months ended June 30, 2018 to $57.6 million for the six months ended June 30, 2019. This decrease was primarily due to a reduction in amortization expense of $3.6 million.

Cost of revenue for our domain segment increased by $15.2 million, or 33%, from $45.9 million for the six months ended June 30, 2018 to $61.2 million for the six months ended June 30, 2019. This increase was primarily due to an increase in impairment charges of $17.9 million in connection with certain premium domain name intangible assets, which was partially offset by lower domain registration costs.funds revenue.

Gross Profit

Six Months Ended June 30,
2018 2019 Change
Amount
%
of Revenue
Amount
%
of Revenue
Amount %
(dollars in thousands)
Gross profit $ 314,474
54 % $ 295,446
53 % $ (19,028 ) (6 )%



	Nine Months Ended September 30,
	2018				2019				Change
	Amount		% of Revenue		Amount		% of Revenue		Amount			%
	(dollars in thousands)
Gross profit	$	469,299	54	%	$	451,884	54	%	$	(17,415	)	(4	)%

Gross profit decreased by ~~$19.0~~$17.4 million, or 6%4%, from ~~$314.5~~$469.3 million for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$295.4~~$451.9 million for the ~~six~~nine months ended ~~June~~September 30, 2019. ~~Email~~Web presence gross profit decreased by $6.1 million, email marketing gross profit increased by ~~$4.1~~$6.5 million, and domain gross profit decreased by ~~$18.5 million, and web presence gross profit decreased by $4.6~~$17.8 million. Our gross profit as a percentage of revenue ~~decreased by one percentage point from~~remained flat at 54% for the ~~six~~nine months ended ~~June~~September 30, 2018 ~~to 53% for the six months ended June 30,~~and 2019 ~~mainly due to~~despite reduced revenue and the impairment charge impacting the domain ~~segment. The following table sets forth gross profit and the significant non-cash components of~~segment, since these factors were partially offset by cost ~~of revenue as a percentage of revenue:~~

Six Months Ended June 30,
2018 2019
(dollars in thousands)
Revenue $ 579,126
$ 558,887
Gross profit $ 314,474
$ 295,446
Gross profit % of revenue 54 % 53 %
Amortization expense % of revenue 9 % 8 %
Depreciation expense % of revenue 4 % 4 %
Impairment charges % of revenue — % 3 %
Stock-based compensation expense % of revenue *
*


*	~~Less than 1%.~~

reductions.

Web presence segment gross profit decreased by ~~$4.6~~$6.1 million, or 3%, from ~~$150.1~~$225.1 million for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$145.5~~$219.1 million for the ~~six~~nine months ended ~~June~~September 30, 2019. This decrease was primarily due to the ~~$17.6~~$24.3 million decrease in revenue as described above, partially offset by ~~a $12.9~~an $18.2 million decline in cost of ~~revenue.~~revenue, which was mostly due to lower data center costs and domain registration costs. Our web presence gross profit as a percentage of revenue increased by ~~one~~two percentage ~~point~~points year over year, from 49% for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~50%~~51% for the ~~six~~nine months ended ~~June~~September 30, 2019. This increase in gross profit percentage is primarily attributable to the reduction in cost of revenue, which decreased by a bigger percentage than the decrease in revenue.

Email marketing segment gross profit increased by ~~$4.1~~$6.5 million, or 3%, from ~~$143.6~~$214.9 million for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$147.6~~$221.4 million for the ~~six~~nine months ended ~~June~~September 30, 2019. This increase was primarily due to the increase in email marketing revenue discussed above, combined with ~~the~~a decrease in cost of ~~revenue.~~revenue, which was mostly due to lower amortization expense. Our email marketing segment gross profit as a percentage of revenue increased by two percentage points year over year, from 70% for the ~~six~~nine months ended ~~June~~September 30, 2018 to 72% for the ~~six~~nine months ended ~~June~~September 30, 2019. This increase was primarily the result of the reduction in cost of revenue.

Domain segment gross profit decreased by ~~$18.5~~$17.8 million, or ~~89%~~61%, from ~~$20.8~~$29.2 million for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$2.4~~$11.4 million for the ~~six~~nine months ended ~~June~~September 30, 2019, primarily due to an impairment charge of $17.9 million relating to certain premium domain name intangible ~~assets.~~assets, partially offset by lower domain registration costs. Our domain segment gross profit as a percentage of revenue decreased by ~~twenty-seven~~eighteen percentage points year over year, from ~~31%~~30% for the ~~six~~nine months ended ~~June~~September 30, 2018 to 4%12% for the ~~six~~nine months ended ~~June~~September 30, 2019.

Operating Expense


	Six Months Ended June 30,													Nine Months Ended September 30,
	2018				2019				Change					2018				2019				Change
	Amount		% of Revenue		Amount		% of Revenue		Amount			%		Amount		% of Revenue		Amount		% of Revenue		Amount			%
	(dollars in thousands)													(dollars in thousands)
Sales and marketing	$	133,902	23	%	$	132,078	24	%	$	(1,824	)	(1	)%	$	197,733	23	%	$	191,221	23	%	$	(6,512	)	(3	)%
Engineering and development	41,876		7	%	49,042		9	%	7,166			17	%	64,559		7	%	77,299		9	%	12,740			20	%
General and administrative	69,519		12	%	62,517		11	%	(7,002		)	(10	)%	95,212		11	%	92,826		11	%	(2,386		)	(3	)%
Total	$	245,297	42	%	$	243,637	44	%	$	(1,660	)	(1	)%	$	357,504	41	%	$	361,346	43	%	$	3,842		1	%

Sales and Marketing. Sales and marketing expense decreased by ~~$1.8~~$6.5 million, or 1%3%, from ~~$133.9~~$197.7 million for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$132.1~~$191.2 million for the ~~six~~nine months ended ~~June~~September 30, 2019. This decrease was due to lower sales and marketing expense in our web presence segment, partially offset by higher sales and marketing expense in our email marketing and domain segments, as further discussed below. Sales and marketing ~~expenses~~expense for the ~~six~~nine months ended ~~June~~September 30, 2019 ~~were~~was impacted by ~~$2.9~~$4.4 million of increased deferrals of customer acquisition costs as we shifted more of our marketing program spend to success-based referral programs. A significant portion of these increased customer acquisition cost deferrals occurred during the first quarter of fiscal year 2019.

Sales and marketing expense for our web presence segment decreased by ~~$8.7~~$13.7 million, or ~~11%~~12%, from ~~$75.6~~$112.1 million for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$66.9~~$98.5 million for the ~~six~~nine months ended ~~June~~September 30, 2019. This decrease was primarily due to a ~~$9.9~~$13.9 million decrease in marketing program spend on our non-strategic brands and labor related cost decreases, which ~~was~~were partially offset by a ~~$0.7~~$0.8 million increase in stock-based compensation ~~expense and other labor related cost decreases.~~expense.

Sales and marketing expense for our email marketing segment increased by ~~$5.1~~$5.2 million, or ~~11%~~7%, from ~~$48.6~~$70.6 million for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$53.8~~$75.8 million for the ~~six~~nine months ended ~~June~~September 30, 2019. This increase was primarily due to an increase in labor costs of ~~$3.0~~$2.9 million, ~~and the balance related primarily to higher~~a $2.0 million increase in marketing program ~~spend.~~spend, and a $0.5 million increase in stock-based compensation expense, partially offset by other cost decreases.

Sales and marketing expense for our domain segment increased by ~~$1.7~~$2.0 million, or ~~18%~~13%, from ~~$9.6~~$15.0 million for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$11.4~~$17.0 million for the ~~six~~nine months ended ~~June~~September 30, 2019. The increase was due primarily to an increase in marketing program spend of ~~$1.3~~$1.4 million, with the balance related to an increase in labor costs.

Engineering and Development. Engineering and development expense increased by ~~$7.2~~$12.7 million, or ~~17%~~20%, from ~~$41.9~~$64.6 million for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$49.0~~$77.3 million for the ~~six~~nine months ended ~~June~~September 30, 2019. Web presence segment engineering and development expense increased by ~~$3.8~~$7.6 million, email marketing segment engineering and development expense increased by ~~$2.7~~$4.5 million, and domain segment engineering and development expense increased by $0.7 million. All of these cost increases were primarily related to higher labor costs as we continue to invest in our engineering and development resources.

General and Administrative. General and administrative expense decreased by ~~$7.0~~$2.4 million, or ~~10%~~3%, from ~~$69.5~~$95.2 million for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$62.5~~$92.8 million for the ~~six~~nine months ended ~~June~~September 30, 2019. This decrease was primarily related to ~~decreased~~the impact of the shareholder litigation ~~related reserves~~reserve of ~~$8.3~~$7.3 million recorded during the nine months ended September 30, 2018, partially offset by ~~higher~~a $4.1 million increase in stock-based compensation expense. Our general and administrative expense consists primarily ~~consists~~ of consolidated corporate-wide ~~support~~shared functions, and the costs of these functions are allocated between our three segments primarily based on relative revenues.

General and administrative expense for our web presence segment ~~decreased~~increased by ~~$4.0~~$1.8 million, or ~~10%~~3%, from ~~$38.7~~$50.9 million for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$34.7~~$52.7 million for the ~~six~~nine months ended ~~June~~September 30, 2019. General and administrative expense for our email marketing segment ~~increased~~decreased by ~~$0.1~~approximately $0.8 million, or 1%3%, from ~~$21.6~~$32.4 million for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$21.7~~$31.5 million for the ~~six~~nine months ended ~~June~~September 30, 2019. General and administrative expense for our domain segment decreased by ~~approximately $3.1~~$3.4 million, or ~~34%~~28%, from ~~$9.2~~$12.0 million for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$6.0~~$8.6 million for the ~~six~~nine months ended ~~June~~September 30, 2019.

Other Expense, Net

Six Months Ended June 30, Change
2018 2019 Amount %
(dollars in thousands)
Other expense, net $ (73,965 ) $ (73,646 ) $ (319 ) — %



	Nine Months Ended September 30,				Change
	2018		2019		Amount			%
	(dollars in thousands)
Other expense, net	$	111,203	$	109,398	$	(1,805	)	(2	)%

Other expense, net decreased by ~~$0.3~~$1.8 million, or 0%2%, from ~~$74.0~~$111.2 million for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$73.6~~$109.4 million for the ~~six~~nine months ended ~~June~~September 30, 2019. The decrease was primarily due to the impact of $1.6 million of interest costs incurred in connection with our 2018 refinancing and lower term loan balances, partially offset by higher LIBOR interest rates.

Income Tax ~~(Benefit)~~ Expense

Six Months Ended June 30, Change
2018 2019 Amount %
(dollars in thousands)
Income tax (benefit) expense $ (2,889 ) $ 7,879
$ 10,768
(373 )%



	Nine Months Ended September 30,				Change
	2018		2019		Amount			%
	(dollars in thousands)
Income tax expense	$	8,826	$	3,040	$	(5,786	)	(66	)%

For the ~~six~~nine months ended ~~June~~September 30, 2018 and 2019, we recognized a tax ~~benefit~~expense of ~~$2.9~~$8.8 million and ~~an expense of $7.9~~$3.0 million, respectively, in the consolidated statements of operations and comprehensive ~~loss.~~income (loss). The income tax expense for the ~~six~~nine months ended ~~June~~September 30, 2019 was attributable to a federal and state deferred tax expense of ~~$2.8~~$2.0 million, a federal and state current tax expense of ~~$3.6~~$0.6 million, and a foreign current tax expense of ~~$1.6~~$0.5 million, partially offset by a foreign deferred tax benefit of $0.1 million. The income tax ~~benefit~~expense for the ~~six~~nine months ended ~~June~~September 30, 2018 was primarily attributable to a federal and state deferred tax ~~benefit~~expense of ~~$4.1~~$8.9 million, ~~and~~ a foreign deferred tax ~~benefit~~expense of ~~$0.1~~$0.2 million, and a federal and state current income tax expense of $0.5 million, partially offset by a ~~federal and state current tax expense of $0.4 million and a~~ foreign current tax ~~expense~~benefit of ~~$0.9~~$0.8 million.

The ~~increase~~decrease in our income tax expense in the 2019 period is primarily due to ~~higher~~the following factors: lower valuation allowances on deferred tax assets related to interest expense deduction ~~limitations,~~limitations; our recognition in the 2019 period of a ~~greater~~smaller portion of the full year expected income tax expense ~~recognized in the 2019 period~~ under the inter-period income tax guidance of ASC 740, assince we incurred a ~~greater~~smaller portion of the expected full year net loss for the ~~six~~nine months ended ~~June~~September 30, 2019 as compared to the 2018 ~~period,~~period; and increased expenses for uncertain tax positions.

As discussed in Note 3 of the consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, we revised our deferred income tax provision for the first and second quarters of 2018 to reflect an increase in NOL carry-forwards resulting from the reorganization and liquidation of certain affiliated entities which resulted in the recognition of a worthless stock loss of approximately $78.0 million during fiscal year 2017. As a result, we revised our provision (benefit) for income taxes for the six months ended June 30, 2018 from an expense of $4.3 million to a benefit of $2.9 million.

Liquidity and Capital Resources

Sources of Liquidity

We have funded our operations since inception primarily with cash flows generated by operations, borrowings under our credit facilities and public offerings of our securities.

First Lien Term Loan Facility. We entered into our current first lien term loan facility, which we refer to as the "Term ~~Loan",~~Loan," on June 20, 2018. The Term Loan was issued at par with an original balance of $1,580.3 million and has a maturity date

of February 9, 2023. The Term Loan automatically bears interest at an alternate base rate unless we give notice to opt for the LIBOR-based interest rate. The LIBOR-based interest rate for the Term Loan is 3.75% per annum plus the greater of an adjusted LIBOR and 1.00%. The alternate base rate for the Term Loan is 2.75% per annum plus the greatest of the prime rate, the federal funds effective rate plus 0.50%, an adjusted LIBOR for a one-month interest period plus 1.00%, and 2.00%. The Term Loan requires quarterly mandatory repayments of principal. During the ~~six~~nine months ended ~~June~~September 30, 2019, we made ~~two~~three mandatory repayments of $7.9 million each and ~~two~~three voluntary prepayments of $17.1 million each, for a total repayment of ~~$50.0~~$75.0 million.

Revolving Credit Facility. We entered into our current revolving credit facility, which we refer to as the ~~"Revolver",~~"Revolver," on February 9, 2016. The Revolver has an aggregate available amount of $165.0 million and consists of a non-extended tranche of approximately $58.8 million and an extended tranche of approximately $106.2 million. The non-extended tranche has a maturity date of February 9, 2021. The extended tranche has a maturity date of June 20, 2023, with a "springing" maturity date of November 10, 2022 if the Term Loan has not been repaid in full or otherwise extended to September 19, 2023 or later prior to November 10, 2022. We have the ability to draw down against the Revolver using a LIBOR-based interest rate or an

alternate base rate. The LIBOR-based interest rate for a non-extended revolving loan is 4.00% per annum (subject to a leverage-based step-down) and for an extended revolving loan is 3.25% per annum (subject to a leverage-based step-down), in each case plus an adjusted LIBOR for a selected interest period. The alternate base rate for a non-extended revolving loan is 3.00% per annum (subject to a leverage-based step-down) and for an extended revolving loan is 2.25% per annum (subject to a leverage-based step-down), in each case plus the greatest of the prime rate, the federal funds rate plus 0.50% and an adjusted LIBOR or a one-month interest period plus 1.00%. We are also required to pay a commitment fee of 0.50% per annum (subject to a leverage-based step-down) to the lenders based on the average daily unused principal amount of the Revolver.

We refer to the Term Loan and the Revolver together as the "Senior Credit Facilities."

Senior Notes. Our wholly owned subsidiary, EIG Investors Corp., issued $350.0 million aggregate principal amount of senior notes, which we refer to as the "Senior ~~Notes",~~Notes," on February 9, 2016. The Senior Notes were issued at a price of 98.065% of par and have a maturity date of February 1, 2024. The Senior Notes bear interest at the rate of 10.875% per annum. We have the right to redeem all or part of the Senior Notes at any time for a premium which is based on the applicable redemption date. On January 30, 2017, we completed a registered exchange offer for the Senior Notes, as required under the registration rights agreement we entered into with the initial purchasers of the Senior Notes. All of the $350.0 million aggregate principal amount of the Senior Notes was validly tendered for exchange as part of this exchange offer. The registration rights agreement also obligated us to use reasonable efforts to cause to become effective a registration statement providing for the registration of certain secondary transactions in the Senior Notes by Goldman, Sachs & Co. and its affiliates. The Senior Notes have been fully and unconditionally guaranteed, on a senior unsecured basis, by us and our subsidiaries that guarantee the Senior Credit Facilities.

As of ~~June~~September 30, 2019, we had cash and cash equivalents totaling ~~$90.8~~$84.5 million and negative working capital of ~~$307.5~~$298.9 million, which included the $31.6 million current portion of the Term Loan. There was no balance outstanding on the Revolver as of ~~June~~September 30, 2019. In addition, we had approximately ~~$1,754.2~~$1,730.4 million of long-term indebtedness, including deferred financing costs, outstanding under the Term Loan and the Senior Notes. We also had ~~$475.3~~$475.0 million of short-term and long-term deferred revenue, which is not expected to be payable in cash.

LIBOR Phase-Out

The U.K. Financial Conduct Authority announced in 2017 that it intends to phase out LIBOR by the end of 2021. We are evaluating the impact of the expected discontinuation of LIBOR on our Term Loan, Revolver, outstanding interest rate cap, and other contracts. Please refer to the risk factors disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 21, 2019, for a discussion of potential risks regarding the LIBOR phase-out.

Debt Covenants

Senior Credit Facilities

The Senior Credit Facilities require that we comply with a financial covenant to maintain a maximum ratio of consolidated senior secured indebtedness to Bank Adjusted EBITDA (as defined below).

The Senior Credit Facilities contain covenants that limit our ability to, among other things, incur additional debt or issue certain preferred shares; pay dividends on or make other distributions in respect of capital stock; make other restricted payments; make certain investments; sell or transfer certain assets; create liens on certain assets to secure debt; consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and enter into certain transactions with affiliates. These covenants are subject to a number of important limitations and exceptions. Additionally, the Senior Credit Facilities require us

to comply with certain negative covenants and specify certain events of default that could result in amounts becoming payable, in whole or in part, prior to their maturity dates.

With the exception of certain equity interests and other excluded assets under the terms of the Senior Credit Facilities, substantially all of our assets are pledged as collateral for the obligations under the Senior Credit Facilities.

Senior Notes

The indenture governing the Senior Notes contains covenants that limit our ability to, among other things, incur additional debt or issue certain preferred shares; pay dividends on or make other distributions in respect of capital stock; make other restricted payments; make certain investments; sell or transfer certain assets; create liens on certain assets to secure debt; consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and enter into certain transactions with affiliates. Upon a change of control as defined in the indenture, we or EIG Investors Corp. must offer to repurchase the Senior Notes at 101% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, up to, but not including, the repurchase date. These covenants are subject to a number of important limitations and exceptions.

We were in compliance with all covenants under the Senior Credit Facilities and the Senior Notes at ~~June~~September 30, 2019.

Secured Net Leverage Ratio

The Senior Credit Facilities require that we comply with a financial covenant to maintain a maximum ratio of consolidated senior secured net indebtedness on the date of determination to an adjusted consolidated EBITDA measure, which we refer to as "Bank Adjusted ~~EBITDA",~~EBITDA," for the most recently completed four quarters (which we refer to as trailing twelve months, or "TTM"). This net leverage ratio is tested as of the last day of each fiscal quarter and may not exceed 6.00 to 1.00. As of ~~June~~September 30, 2019, we were in compliance with this covenant. Bank Adjusted EBITDA is defined in the credit agreement that governs our Senior Credit Facilities, and is different from the Adjusted EBITDA metric discussed above in the Key Metrics section.

The credit agreement ~~governing the Senior Credit Facilities~~ defines consolidated senior secured net indebtedness as our and our restricted subsidiaries' aggregate amount of indebtedness that is secured by a lien not expressly subordinated to the liens securing the Senior Credit Facilities. Consolidated senior secured net indebtedness is determined on a consolidated basis in accordance with GAAP and consists only of indebtedness for borrowed money, unreimbursed obligations under letters of credit, obligations with respect to financed equipment and debt obligations evidenced by promissory notes and similar instruments, minus the aggregate amount of cash and permitted investments, excluding cash and permitted investments that are restricted.

The credit agreement defines Bank Adjusted EBITDA as net income (loss) adjusted to exclude, among other things, interest expense, income tax expense (benefit), depreciation and amortization. Bank Adjusted EBITDA also adjusts net income (loss) by excluding certain non-cash foreign exchange gains (losses), certain gains (losses) from sale of assets, stock-based compensation, unusual and non-recurring expenses (including acquisition related costs, gains or losses on early extinguishment of debt, and loss on impairment of tangible or intangible assets). It also adjusts net income (loss) for revenue on a billed basis, changes in deferred domain costs, share of loss (profit) of unconsolidated entities, and certain integration related costs. Finally, it adjusts net income (loss) to give pro forma effect to acquisitions, debt incurrences, repayments of debt, other specified transactions and certain cost savings on a TTM basis.

We use Bank Adjusted EBITDA to monitor our secured net leverage ratio and our ability to undertake key investing and financing functions such as making investments and incurring additional indebtedness, which may be prohibited by the covenants under our credit agreement unless we comply with certain financial ratios and tests.

Bank Adjusted EBITDA is a supplemental measure of our liquidity and is not presented in accordance with GAAP. Bank Adjusted EBITDA is not a measurement of our financial performance under GAAP and should not be considered an alternative to revenue, net income (loss), cash flow, or any other performance measure derived in accordance with GAAP. Our presentation of Bank Adjusted EBITDA may not be comparable with similarly titled measures of other companies.

As of ~~June~~September 30, 2019, our secured net leverage ratio on a TTM basis was ~~4.28~~4.24 to 1.00 and was calculated as follows:


	For the three months ended,															For the three months ended,
	September 30, 2018			December 31, 2018			March 31, 2019			June 30, 2019			TTM			December 31, 2018			March 31, 2019			June 30, 2019			September 30, 2019			TTM
	(in thousands, except ratios)															(in thousands, except ratios)
Net income (loss)	$	(6,335	)	$	12,770		$	(3,488	)	$	(26,228	)	$	(23,281	)	$	12,770		$	(3,488	)	$	(26,228	)	$	7,816		$	(9,130	)
Interest expense	37,527			37,557			37,214			37,037			149,335			37,557			37,214			37,037			36,057			147,865
Income tax expense (benefit)	11,715			(15,072		)	1,719			6,160			4,522
Income tax (benefit) expense																(15,072		)	1,719			6,160			(4,839		)	(12,032		)
Depreciation	11,889			11,454			11,206			10,899			45,448			11,454			11,206			10,899			11,280			44,839
Amortization of other intangible assets	26,177			25,258			21,120			21,349			93,904			25,258			21,120			21,349			21,668			89,395
Stock-based compensation	7,550			7,132			9,016			9,354			33,052			7,132			9,016			9,354			9,143			34,645
Integration and restructuring costs	197			347			2,015			183			2,742			347			2,015			183			(193		)	2,352
Transaction expenses and charges	—			—			—			—			—			—			—			—			—			—
Loss of unconsolidated entities	—			265			—			—			265			265			—			—			—			265
Impairment of long-lived assets	—			—			—			17,892			17,892			—			—			17,892			—			17,892
Gain on assets, not ordinary course	—			—			—			—			—			—			—			—			—			—
Legal advisory and related expenses	(832		)	159			400			465			192			159			400			465			849			1,873
Billed revenue to GAAP revenue adjustment	(4,834		)	(8,035		)	10,385			(3,143		)	(5,627		)	(8,035		)	10,385			(3,143		)	578			(215		)
Adjustment for domain registration cost on a cash basis	1,299			1,255			(2,441		)	1,421			1,534			1,255			(2,441		)	1,421			465			700
Currency translation	(17		)	(506		)	29			63			(431		)	(506		)	29			63			75			(339		)
Adjustment for acquisitions on a proforma basis																(96		)	(54		)	(54		)	(43		)	(247		)
Bank Adjusted EBITDA	$	84,336		$	72,584		$	87,175		$	75,452		$	319,547		$	72,488		$	87,121		$	75,398		$	82,856		$	317,863
Current portion of notes payable													31,606															31,606
Current portion of financed equipment													4,583															2,637
Notes payable - long term													1,725,326															1,703,065
Financed equipment - long term													—															—
Original issue discounts and deferred financing costs													48,070															45,331
Less:
Unsecured notes													(350,000		)													(350,000		)
Cash													(90,818		)													(84,465		)
Certain permitted restricted cash													(100		)													(100		)
Net senior secured indebtedness													$	1,368,667														$	1,348,074
Net leverage ratio													4.28															4.24
Maximum net leverage ratio													6.00															6.00

Cash and Cash Equivalents

As of ~~June~~September 30, 2019, our cash and cash equivalents were primarily held for working capital purposes and for required principal and interest payments under our indebtedness. A majority of our cash and cash equivalents was held in operating accounts. Our cash and cash equivalents ~~increased~~decreased by ~~$2.2~~$4.2 million, from $88.6 million at December 31, 2018 to ~~$90.8~~$84.5 million at ~~June~~September 30, 2019. Of the ~~$90.8~~$84.5 million cash and cash equivalents we had at ~~June~~September 30, 2019, ~~$28.7~~$21.0 million was held in foreign countries, and due to tax and accounting reasons, we do not plan to repatriate this cash in the near future. We used cash on hand at December 31, 2018 and cash flows from operations to purchase property and equipment and to make our debt payments on our Term Loan, as described under "Financing Activities" below. Our future capital requirements will depend on many factors including, but not limited to our growth rate, our level of sales and marketing activities, the development and introduction of new and enhanced products and services, market acceptance of our solutions, potential settlements of legal proceedings, acquisitions, and our gross profits and operating expenses. We believe that our current cash and cash equivalents and operating cash flows will be sufficient to meet our anticipated working capital and capital expenditure requirements, as well as our required principal and interest payments under our indebtedness, for at least the next 12 months.

The following table shows our purchases of property and equipment, principal payments on property, plant and equipment financing obligations, depreciation, amortization and cash flows from operating activities, investing activities and financing activities for the stated periods:


	Six Months Ended June 30,						Nine Months Ended September 30,
	2018			2019			2018			2019
	(dollars in thousands)						(in thousands)
Purchases of property and equipment	$	(13,381	)	$	(16,164	)	$	(22,343	)	$	(26,796	)
Principal payments on financed equipment	(3,909		)	(3,861		)	$	(5,609	)	$	(6,332	)
Depreciation	24,864			22,105			$	36,753		$	33,385
Amortization	57,076			48,296			$	86,118		$	72,947
Impairment of long lived assets	—			17,892
Impairment of long-lived assets							$	—		$	17,892
Cash flows provided by operating activities	82,252			74,729			$	133,593		$	115,680
Cash flows used in investing activities	(13,381		)	(16,164		)	$	(22,337	)	$	(35,670	)
Cash flows used in financing activities	(59,332		)	(56,339		)	$	(86,722	)	$	(83,806	)

Capital Expenditures

Our capital expenditures on the purchase of property and equipment for the ~~six~~nine months ended ~~June~~September 30, 2018 and 2019 were ~~$13.4~~$22.3 million and ~~$16.2~~$26.8 million, respectively. The remaining balance payable on the property, plant and equipment financings was ~~$4.6~~$2.6 million as of ~~June~~September 30, 2019. We expect our capital expenditures to remain roughly consistent with fiscal year 2018 levels in the near term as we continue to enhance our internal software tools, upgrade and replace data center assets as these assets reach the end of their useful life, and to a lesser extent, continue to enhance our disaster recovery program.term.

Operating Activities

Cash provided by operating activities consists primarily of net income (loss) adjusted for certain non-cash items including depreciation, amortization, stock-based compensation expense, impairment charges, if any, and changes in deferred taxes, and the effect of changes in working capital, in particular in deferred revenue. As we add subscribers to our platform, we typically collect subscription fees at the time of initial billing and recognize revenue over the terms of the subscriptions. Accordingly, we generate operating cash flows as we collect cash from our subscribers in advance of delivering the related products and services, and we maintain a significant deferred revenue balance.

Net cash provided by operating activities decreased from ~~$82.3~~$133.6 million for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$74.7~~$115.7 million for the ~~six~~nine months ended ~~June~~September 30, 2019. This decrease was primarily the result of lower revenue and billings and a higher level of investment in engineering and development resources, which were partially offset by ~~lower~~a $5.7 million decrease related to the interest rate cap ~~payments of $5.7 million, lower~~payment made during the nine months ended September 30, 2018, and a decrease in payments for restructuring expenses of ~~$4.4 million, and lower interest payments of $4.1~~$5.4 million.

Investing Activities

Cash flows used in investing activities consist primarily of the purchase of property and equipment, acquisition consideration payments, and changes in restricted cash balances.

During the ~~six~~nine months ended ~~June~~September 30, 2019, net cash used in investing activities was ~~$16.2~~$35.7 million, of which $26.8 million was used to purchase property and ~~equipment.~~equipment and $8.9 million was used to acquire Ecomdash.

During the ~~six~~nine months ended ~~June~~September 30, 2018, net cash used in investing activities was ~~$13.4~~$22.3 million, which was used to purchase property and equipment.

Financing Activities

Cash flows used in financing activities consist primarily of the net change in our overall indebtedness, payment of associated financing costs, payment of deferred consideration for our acquisitions and the issuance or repurchase of equity.

During the ~~six~~nine months ended ~~June~~September 30, 2019, cash flows used in financing activities was ~~$56.3~~$83.8 million. We paid ~~$50.0~~$75.0 million of principal payments related to our Term Loan. Included in the ~~$50.0~~$75.0 million were mandatory repayments of ~~$15.8~~$23.7 million and voluntary prepayments of ~~$34.2~~$51.3 million. We also made ~~$3.9~~$6.3 million of principal payments related to property, plant and equipment financing obligations, and $2.5 million of deferred financing consideration payments relating to our 2016 acquisition of AppMachine.

During the ~~six~~nine months ended ~~June~~September 30, 2018, cash flows used in financing activities was ~~$59.3~~$86.7 million. We paid ~~$1,630.7~~$1,656.1 million of term loan principal payments, mostly in connection with the June 2018 repricing of our previously outstanding term loan, from which we received net proceeds of $1,580.3 million. Included in the ~~$1,630.7~~$1,656.1 million were mandatory repayments of ~~$16.4~~$24.3 million and voluntary prepayments of ~~$34.0~~$51.5 million. We also made ~~$3.9~~$5.6 million of principal payments related to property, plant and equipment financing obligations and ~~$4.2~~$4.5 million of deferred financing consideration payments relating to AppMachine. In addition, we paid ~~$1.3~~$1.6 million for deferred financing costs relating to the 2018 repricing. These payments were partially offset by ~~$0.5~~$0.8 million that we received from the exercise of stock options.

Free Cash Flow

Free cash flow, or FCF, is a non-GAAP financial measure that we calculate as GAAP cash flows from operations less capital expenditures and financed ~~equipment.~~equipment obligations. We believe that FCF provides investors with an indicator of our ability to generate positive cash flows after meeting our obligations with regard to capital expenditures (including property, plant and financed equipment).

The following table reflects the reconciliation of cash flows from operations to free cash flow:


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2019			2018			2019			2018			2019			2018			2019
	(in thousands)												(in thousands)
Cash flows from operations	$	29,892		$	59,680		$	82,252		$	74,729		$	51,341		$	40,951		$	133,593		$	115,680
Less:
Capital expenditures and financed equipment⁽¹⁾	(9,806		)	(12,032		)	(17,290		)	(20,025		)	(10,662		)	(13,103		)	(27,952		)	(33,128		)
Free cash flow	$	20,086		$	47,648		$	64,962		$	54,704		$	40,679		$	27,848		$	105,641		$	82,552

(1) Capital expenditures during three and ~~six~~nine months ended ~~June~~September 30, 2018 includes $1.7 million and ~~$3.9~~$5.6 million, respectively, of principal payments under a three-year agreement for equipment financing. Capital expenditures during the three and ~~six~~nine months ended ~~June~~September 30, 2019 includes ~~$1.3~~$2.5 million and ~~$3.9~~$6.3 million, respectively, of principal payments under a ~~two-year~~three-year agreement for equipment financing. The remaining balance on the equipment financing is ~~$4.6~~$2.6 million as of ~~June~~September 30, 2019.

FCF ~~increased~~decreased by ~~$27.6~~$12.8 million, from ~~$20.1~~$40.7 million for the three months ended ~~June~~September 30, 2018 to ~~$47.6~~$27.8 million for the three months ended ~~June~~September 30, 2019. FCF was ~~favorably~~unfavorably impacted mainly due to the following factors: ~~lower litigation related payments of $8.0 million; lower~~an increase in interest payments of ~~$6.3~~$4.9 million, primarily due to the impact of our 2018 term loan refinancing, which resulted in lower interest payments in the prior period and higher interest rates, partially offset by lower average term loan balances; lower interest rate cap payments of $5.7 million; lower payments for taxes of $2.7 million; and lower payments for restructuring expenses of $1.8 million. The balance of the increase was primarily related to timing of vendor payments. These increases were partially offset by lower revenue and billings, and increases in capital expenditures and payments for financed equipment of ~~$2.2~~$2.4 million; and timing of vendor payments and lower revenue and cash billings. These decreases in FCF were partially offset by decreases in payments for restructuring expenses of $1.0 million and decreases in payments for taxes of $0.6 million.

FCF decreased by ~~$10.3~~$23.1 million, from ~~$65.0~~$105.6 million for the ~~six~~nine months ended ~~June~~September 30, 2018 to ~~$54.7~~$82.6 million for the ~~six~~nine months ended ~~June~~September 30, 2019. FCF was unfavorably impacted by lower revenue and billings and a higher level of investment in engineering and development resources. In addition, capital spending increased by ~~$2.7~~$5.2 million. These decreases in FCF were partially offset by ~~lower payments for~~a $5.7 million decrease related to the interest rate cap ~~of $5.7~~payment made during the nine months ended September 30, 2018, and a $5.4 million ~~lower~~decrease in payments for restructuring ~~expenses of $4.4 million, and lower interest payments of $4.1 million.~~expenses.

Net Operating Loss (NOL) Carry-forwards

As of December 31, 2018, we had NOL carry-forwards available to offset future U.S. federal taxable income of approximately ~~$127.0~~$108.9 million and future state taxable income of approximately ~~$125.3~~$115.5 million. These NOL carry-forwards

expire on various dates through 2038. We are currently expecting to utilize the majority of these NOL carry-forwards byin the ~~end of fiscal year 2019.~~near term.

As of December 31, 2018, we had ~~NOL carry-forwards in foreign jurisdictions~~recorded the following tax attributes available to ~~offset future foreign taxable income by approximately $13.8 million, consisting of the following:~~be carried forward:


Jurisdiction	Available Loss Carry-forwards		Year Loss Carry-forwards Begin to Expire	Amount		Year Loss Carry-forwards Expire
	(in millions)			(in millions)
Domestic
Federal				$	108.9	2037
State				115.5		various dates through 2038
Foreign
China	$	0.9	2020	0.9		2021
Netherlands				12.1		2020
India	0.6		2020	0.6		2020
Netherlands	12.1		2020
Singapore	0.3		n/a (indefinite carry-over period)	0.3		indefinite
Total NOL carry-forwards				$	238.3

Utilization of the U.S. NOL carry-forwards may be subject to an annual limitation due to the ownership percentage change limitations under Section 382 of the Internal Revenue Code, which we refer to as Section 382 Limitations. Ownership changes can limit the amount of net operating loss and other tax attributes that a company can use each year to offset future taxable income and taxes payable. Although we have experienced a number of ownership changes over time, we do not currently have any Section 382 Limitations on our ability to utilize NOL carry-forwards.

Contractual Obligations and Commitments

There have been no significant changes in our contractual obligations from those disclosed in our Annual Report on Form 10-K filed with the SEC on February 21, 2019, except as it relates to our long-term debt obligations and lease obligations (as a result of adoption of ASC 842 during the three months ended March 31, 2019). The following table summarizes these debt and lease-related contractual obligations as of ~~June~~September 30, 2019:


	Payments due by period										Payments due by period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years		Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(in thousands)										(in thousands)
Long-term debt and lease obligations:
Principal payments on term loan facility and notes	$	1,805,002	$	31,606	$	63,212	$	1,360,184	$	350,000	$	1,780,002	$	31,606	$	63,212	$	1,335,184	$	350,000
Principal payments on lease obligations	$	136,841	$	28,887	$	46,183	$	38,756	$	23,015	128,486		28,467		43,135		35,309		21,575
Total principal payments relating to our long-term debt and lease obligations	$	1,941,843	$	60,493	$	109,395	$	1,398,940	$	373,015	$	1,908,488	$	60,073	$	106,347	$	1,370,493	$	371,575

Recently Issued Accounting Pronouncements

For information on recent accounting pronouncements, see Recent Accounting Pronouncements in Note 2 to the consolidated financial statements appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

~~Item~~ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~Quantitative and Qualitative Disclosure About Market Risk~~

We have operations both within the United States and internationally, and we are exposed to market risk in the ordinary course of our business. These risks include primarily foreign exchange risk, interest rate and inflation.

Foreign Currency Exchange Risk

A significant majority of our subscription agreements and our expenses are denominated in U.S. dollars. We do, however, have sales in a number of foreign currencies as well as business operations in Brazil and India and are subject to the impacts of currency fluctuations in those markets. The impact of these currency fluctuations is insignificant relative to the overall financial results of our company.

Interest Rate Sensitivity

We had cash and cash equivalents of ~~$90.8~~$84.5 million at ~~June~~September 30, 2019, the majority of which was held in operating accounts for working capital purposes and other general corporate purposes, which includes payment of principal and interest under our indebtedness. As of ~~June~~September 30, 2019, we had approximately ~~$1,455.0~~$1,430.0 million outstanding under our Term Loan, $350.0 million outstanding under the Senior Notes and $0.0 million outstanding under the Revolver.

The Term Loan automatically bears interest at an alternate base rate unless we give notice to opt for the LIBOR-based interest rate. The LIBOR-based interest rate for the Term Loan is 3.75% per annum plus the greater of an adjusted LIBOR and 1.00%. The alternate base rate for the Term Loan is 2.75% per annum plus the greatest of the prime rate, the federal funds effective rate plus 0.50%, an adjusted LIBOR for a one-month interest period plus 1.00%, and 2.00%.

We have the ability to draw down against the Revolver using a LIBOR-based interest rate or an alternate base rate. The LIBOR-based interest rate for a non-extended revolving loan is 4.00% per annum (subject to a leverage-based step-down) and for an extended revolving loan is 3.25% per annum (subject to a leverage-based step-down), in each case plus an adjusted LIBOR for a selected interest period. The alternate base rate for a non-extended revolving loan is 3.00% per annum (subject to a leverage-based step-down) and for an extended revolving loan is 2.25% per annum (subject to a leverage-based step-down), in each case plus the greatest of the prime rate, the federal funds rate plus 0.50% and an adjusted LIBOR orfor a one-month interest period plus 1.00%. We are also required to pay a commitment fee of 0.50% per annum (subject to a leverage-based step-down) to the lenders based on the average daily unused principal amount of the Revolver.

Based on our aggregate indebtedness outstanding under our Term Loan of ~~$1,455.0~~$1,430.0 million as of ~~June~~September 30, 2019, a 100 basis point increase in the current LIBOR rate would result in a ~~$14.7~~$14.4 million increase in our aggregate interest payments over a 12-month period, and a 100 basis point decrease in the current LIBOR rate would result in a ~~$14.7~~$14.4 million decrease in our interest payments.

We have entered into two interest rate caps as part of our risk management strategy. The three-year interest rate cap we entered into in December 2015 limited our exposure beginning on February 29, 2016 to interest rate increases over 2.00% on $500.0 million of our Term Loan. The December 2015 interest rate cap matured in February 2019. The three-year interest rate cap we entered into in June 2018 limits our exposure beginning on August 28, 2018 to interest rate increases over 3.00% on $800.0 million of our Term Loan. The LIBOR interest rate applicable to our Term Loan as of ~~June~~September 30, 2019 was approximately ~~2.52%~~2.13%.

Inflation Risk

We do not believe that inflation has a material effect on our business, financial condition or results of operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability to do so could harm our business, financial condition and results of operations.

~~Item~~ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of ~~June~~September 30, 2019, our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are

designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based upon that evaluation of our disclosure controls and procedures as of ~~June~~September 30, 2019, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

During the three months ended ~~June~~September 30, 2019, there has not been any change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time we are involved in legal proceedings or subject to claims arising in the ordinary course of our business. We are not presently involved in any such legal proceeding or subject to any such claim that, in the opinion of our management, would have a material adverse effect on our business, operating results or financial condition. However, the results of such legal proceedings or claims cannot be predicted with certainty, and regardless of the outcome, can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

As previously disclosed, we ~~have been~~were named as a defendant in two shareholder litigation matters. There have been no material developments in these legal proceedings since the disclosure provided in Part II, Item 1 of the Quarterly Report on Form 10-Q for the period ended March 31, 2019, filed with the SEC on May 3, 2019. For more information on these legal proceedings, see Note 15, ~~to the consolidated financial statements~~Commitments and Contingencies, included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Neither the ultimate outcome of these shareholder litigation matters, nor an estimate of any probable losses or any reasonably possible losses (other than the shareholder litigation reserves recorded specifically for these matters), can be assessed at this time.

ITEM 1A. Risk Factors

There were no material changes to the risk factors disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 21, 2019.

ITEM 5. OTHER INFORMATION

Disclosures of Iranian Activities under Section 13(r) of the Exchange Act

Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, or ITRA, which added Section 13(r) to the Exchange Act, we are required to disclose in our annual or quarterly reports, as applicable, whether we or any of our affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with certain individuals or entities that are subject to sanctions under U.S. law. Disclosure is generally required even where the activities, transactions or dealings were conducted in compliance with applicable law.

On September 11, 2019, our subsidiary P.D.R Solutions (U.S.) LLC, or PDR, suspended the domain name arabisc-haram.com, or the Domain Name, which was identified on September 10, 2019 by the Office of Foreign Assets Control, or OFAC, as associated with Al Haram Commercial Company, or Al Haram, a Specially Designated National, or SDN, pursuant to 31 C.F.R. Part 594. The Domain Name was registered on November 13, 2017 through a third party domain registrar that uses PDR’s platform to sell, register and manage domain names for customers of such third party domain registrar; there was no direct financial transaction between PDR and the registrant of the Domain Name. PDR debited the account of the third party domain registrar a total of USD sixty cents ($0.60) as a fee for such third party domain registrar’s use of PDR’s platform in connection with the Domain Name, all of which was debited prior to OFAC’s designation of Al Haram. PDR reported the Domain Name to OFAC as potentially the property of an SDN subject to blocking pursuant to Executive Order 13224. To date, PDR has not received any correspondence from OFAC regarding this matter.

ITEM 6. EXHIBITS

Exhibit

Number

Description of Exhibit

Incorporated by Reference

Filed

Herewith

Description of Exhibit

Incorporated by Reference

Filed

Herewith

Form

File Number

Date of Filing

Exhibit

Number

Form

File Number

Date of Filing

Exhibit

Number

2.1*

Agreement and Plan of Merger, dated October 30, 2015, by and among Constant Contact, Inc., the Registrant, and Paintbrush Acquisition Corporation

8-K

001-36131

November 2, 2015

2.1

Agreement and Plan of Merger, dated October 30, 2015, by and among Constant Contact, Inc., the Registrant, and Paintbrush Acquisition Corporation

8-K

001-36131

November 2, 2015

2.1

2.2*

Asset Purchase Agreement dated September 6, 2019 by and among LTD Software LLC, Endurance Commerce, LLC, Endurance International Group Holdings, LLC, and the Signing Members, as defined therein

8-K

001-36131

September 16, 2019

2.1

3.1

Restated Certificate of Incorporation of the Registrant

S-1/A

333-191061

October 23, 2013

3.3

Restated Certificate of Incorporation of the Registrant

S-1/A

333-191061

October 23, 2013

3.3

3.2

Amended and Restated By-Laws of the Registrant

8-K

001-36131

January 30, 2017

3.1

Amended and Restated By-Laws of the Registrant

8-K

001-36131

January 30, 2017

3.1

4.1

Specimen certificate evidencing shares of common stock of the Registrant

S-1/A

333-191061

October 8, 2013

4.1

Specimen certificate evidencing shares of common stock of the Registrant

S-1/A

333-191061

October 8, 2013

4.1

4.2

Second Amended and Restated Registration Rights Agreement, dated as of October 24, 2013, by and among the Registrant and the other parties thereto

10-Q

001-36131

November 7, 2014

4.2

4.3

Stockholders Agreement, dated as of October 24, 2013, by and among the Registrant and certain holders of the Registrant’s common stock

10-Q

001-36131

November 7, 2014

4.3

4.4

Indenture (including form of Note), dated as of February 9, 2016, among EIG Investors Corp., the Registrant, the Endurance Guarantors party thereto and Wilmington Trust, National Association, as trustee

8-K

001-36131

February 10, 2016

4.1

4.5

Exchange and Registration Rights Agreement, dated as of February 9, 2016, among EIG Investors Corp., the Registrant, the Endurance Guarantors party thereto, Goldman, Sachs & Co., Credit Suisse Securities (USA) LLC and Jefferies LLC

10-Q

001-36131

May 9, 2016

4.6

31.1

Certification of Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended

31.2

Certification of Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended

32.1

Certification of Principal Executive Officer Pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification of Principal Financial Officer Pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

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Inline XBRL Taxonomy Extension Calculation Linkbase Document

4.2
Second Amended and Restated Registration Rights Agreement, dated as of October 24, 2013, by and among the Registrant and the other parties thereto
10-Q 001-36131 November 7, 2014 4.2

4.3
Stockholders Agreement, dated as of October 24, 2013, by and among the Registrant and certain holders of the Registrant’s common stock
10-Q 001-36131 November 7, 2014 4.3

4.4
Indenture (including form of Note), dated as of February 9, 2016, among EIG Investors Corp., the Registrant, the Endurance Guarantors party thereto and Wilmington Trust, National Association, as trustee
8-K 001-36131 February 10, 2016 4.1

4.5
Exchange and Registration Rights Agreement, dated as of February 9, 2016, among EIG Investors Corp., the Registrant, the Endurance Guarantors party thereto, Goldman, Sachs & Co., Credit Suisse Securities (USA) LLC and Jefferies LLC
10-Q 001-36131 May 9, 2016 4.6

31.1
Certification of Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended
X
31.2
Certification of Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended
               X
32.1
Certification of Principal Executive Officer Pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
               X
32.2
Certification of Principal Financial Officer Pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
               X
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*	Schedules have been omitted pursuant to Item ~~601(b)(2)~~601(a)(5) of Regulation S-K. Endurance agrees to furnish supplementally to the Securities and Exchange Commission a copy of any omitted schedule or exhibit upon request.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	ENDURANCE INTERNATIONAL GROUP HOLDINGS, INC.

Date: ~~August 5,~~November 4, 2019	By:	/s/ Marc Montagner
		Marc Montagner
		Chief Financial Officer (Principal Financial Officer)



	Three Months Ended June 30, 2018									Six Months Ended June 30, 2018
	Originally Filed			Adjustment			Revised			Originally Filed			Adjustment			Revised
	(in thousands, except share and per share data)
Loss before income taxes and equity earnings of unconsolidated subsidiaries	$	(344	)	$	—		$	(344	)	$	(4,788	)	$	—		$	(4,788	)
Income tax expense (benefit)	1,650			(2,596		)	(946		)	4,267			(7,156		)	(2,889		)
(Loss) income before equity earnings of unconsolidated subsidiaries	(1,994		)	$	2,596		$	602		(9,055		)	7,156			(1,899		)
Equity (income) loss of unconsolidated subsidiaries	(25		)	—			(25		)	2			—			2
Net income (loss)	$	(1,969	)	$	2,596		$	627		$	(9,057	)	$	7,156		$	(1,901	)
Comprehensive income (loss)
Foreign currency translation	(2,425		)	—			(2,425		)	(1,845		)	—			(1,845		)
Unrealized gain on cash flow hedge, net of tax	144			—			144			1,184			—			1,184
Total comprehensive income (loss)	$	(4,250	)	$	2,596		$	(1,654	)	$	(9,718	)	$	7,156		$	(2,562	)
Basic net income (loss) per share	$	(0.01	)	$	0.01		$	—		$	(0.06	)	$	0.05		$	(0.01	)
Diluted net income (loss) per share	$	(0.01	)	$	0.01		$	—		$	(0.06	)	$	0.05		$	(0.01	)
Weighted-average common shares used in computing net income (loss) per share
Basic	142,340,561			—			142,340,561			141,356,567			—			141,356,567
Diluted	142,340,561			2,361,441			144,702,002			141,356,567			—			141,356,567



	June 30, 2018
	Originally Filed			Adjustment			Revised
	(in thousands)
Deferred tax liability	$	29,897		$	(7,156	)	$	22,741
Total liabilities	2,490,106			(7,156		)	2,482,950
Accumulated deficit	(797,175		)	7,156			(790,019		)
Total stockholders' equity	147,759			7,156			154,915
Total liabilities and stockholders' equity	2,637,865			—			2,637,865