Rightside® Announces First Quarter 2017 Financial Results
09 Mayo 2017 - 3:05PM
First Quarter Registry Revenue Grows 20%
Over the Prior Year PeriodCompany Repurchases
Approximately $3.0 Million in Common Stock
Year-to-Date
Rightside Group, Ltd. (Nasdaq:NAME), a leading provider of domain
name services that advance the way businesses and consumers define
and present themselves online, today announced financial results
for the first quarter ended March 31, 2017.
"In the first quarter of 2017, we continued to execute on our
strategy to deliver revenue growth in our higher margin businesses
and drive operating efficiencies throughout our business model,”
said Chief Executive Officer Taryn Naidu. “Registry revenue grew
20% and total company gross margin of 41% improved 470 basis points
over the prior year period. During the quarter, we successfully
completed the divesture of eNom as we continue to focus on growing
and driving margin expansion in our new gTLD registry business and
our retail registrar, Name.com. We remain committed to delivering
shareholder value and during the quarter we initiated our share
buyback program, repurchasing approximately $3.0 million in common
stock year-to-date.”
Financial Summary |
(in thousands) |
|
|
|
|
|
|
|
Three Months
Ended |
|
|
March 31, |
|
|
2017 |
|
2016 |
Registrar services |
|
$ |
7,259 |
|
|
$ |
7,038 |
|
Registry
services |
|
|
3,176 |
|
|
|
2,639 |
|
Aftermarket and other |
|
|
4,348 |
|
|
|
7,275 |
|
Eliminations (1) |
|
|
(357 |
) |
|
|
(346 |
) |
Total
revenue |
|
$ |
14,426 |
|
|
$ |
16,606 |
|
|
|
|
|
|
(Gain)
loss on other assets, net |
|
$ |
(120 |
) |
|
$ |
1 |
|
|
|
|
|
|
Loss
from continuing operations before income tax |
|
|
(5,385 |
) |
|
|
(8,197 |
) |
Income
tax expense (benefit) |
|
|
247 |
|
|
|
(1,945 |
) |
Loss
from continuing operations |
|
|
(5,632 |
) |
|
|
(6,252 |
) |
Income
from discontinued operations, net of income tax |
|
|
75,383 |
|
|
|
1,145 |
|
Net
income (loss) |
|
$ |
69,751 |
|
|
$ |
(5,107 |
) |
|
|
|
|
|
Adjusted
EBITDA from continuing operations (2) |
|
$ |
(945 |
) |
|
$ |
(2,235 |
) |
|
|
|
|
|
(1) Amounts in the eliminations line reflect the elimination of
intercompany charges between our Registrar and Registry services
businesses.
(2) This Non-GAAP financial measure is described below and
reconciled to GAAP loss from continuing operations in the
accompanying table, which excludes the gain on the divestiture of
eNom of $75.6 million.
First Quarter 2017 Financial Highlights (Unless
otherwise noted, all comparisons are relative to the fiscal first
quarter 2016. All financials will be reported on a continuing
operations basis to reflect the sale of eNom in January 2017.)
- Registrar services revenue increased to $7.3 million compared
to $7.0 million.
- Registry services revenue increased 20% to $3.2 million
compared to $2.6 million.
- Aftermarket and other revenue was $4.3 million compared to $7.3
million as a result of challenges in the lower margin third party
syndication business.
- Total revenue decreased to $14.4 million compared to $16.6
million.
- Net income was $69.8 million inclusive of a $75.6 million gain
from the sale of eNom.
- Adjusted EBITDA was ($0.9 million), compared to ($2.2
million).
Business Highlights
- Year-to-date, Rightside repurchased approximately 320,000
shares of its common stock for approximately $3.0 million.
Rightside currently has approximately $47 million available and
authorized under the current share repurchase program.
- The Company ended the first quarter with approximately 590,000
registered domains, up 26% year-over-year.
- The final registry renewal rate for the fourth quarter of 2016
was 59% compared to 53% for the same quarter in 2015.
Registry renewal rates are not fully measurable until 45 days after
the end of the quarter.
- Reported gross margin of 41% in the first quarter of 2017, was
up 470 basis points year-over-year, as we continued to grow our mix
of higher margin registry services revenue and realize the
benefit of our profitability initiatives.
Liquidity and Capital Resources
- As of March 31, 2017, cash, cash equivalents and available for
sale securities was $83 million, compared to $32 million as of
December 31, 2016.
Business Outlook
For the full year ending December 31, 2017, Rightside reiterates
guidance of the following:
- Total revenue of $58 to $62 million.
- Adjusted EBITDA of around break-even for the full year
with a return to positive adjusted EBITDA in the fourth
quarter.
Conference Call and Webcast
Rightside will host a conference call and audio webcast with
investors and analysts today, May 9, at 4:30 p.m. Eastern Time
(1:30 p.m. Pacific Time):
- Live conference call: (844) 413-1777 (domestic) or (716)
247-5761 (international)
- Conference call replay available through May 14,
2017: (855) 859-2056 (domestic) or (404) 537-3406
(international)
- Conference ID: 13639154
- Live and archived webcast: http://www.rightside.market
About Non-GAAP Financial Measures
We define Adjusted EBITDA from continuing operations as income
(loss) from continuing operations adjusted for interest, income
taxes, depreciation and amortization, stock-based compensation, and
certain gains, losses, and expenses that we do not believe are
indicative of ongoing core business operating results. Adjusted
EBITDA from continuing operations is a non-GAAP financial measure
and its most directly comparable GAAP financial measure is GAAP
income (loss) from continuing operations. A reconciliation of
GAAP income (loss) from continuing operations to Adjusted EBITDA
from continuing operations can be found in the accompanying table.
Adjusted EBITDA from continuing operations should not be considered
in isolation or as a substitute for performance measures calculated
in accordance with GAAP. Rightside compensates for these
limitations by relying primarily on its GAAP results and using
Adjusted EBITDA from continuing operations only as a
supplement.
We have not provided a complete reconciliation of our Adjusted
EBITDA from continuing operations guidance to the comparable
forward-looking GAAP financial measure, net income (loss) from
continuing operations, because we are unable to provide a
forward-looking estimate of certain reconciling items between net
income (loss) from continuing operations and Adjusted EBITDA from
continuing operations guidance including: acquisition and
realignment costs; provision for income taxes; and gain (loss) on
other assets, net.
About Rightside
Rightside inspires and delivers new possibilities for
consumers and businesses to define and present themselves online.
The company, with its affiliates, is a leading provider of domain
name services, offering one of the industry's most comprehensive
platforms for the discovery, registration, usage and monetization
of domain names. In addition to being a new gTLD registry
operator, Rightside is home to one of the most admired
registrar brands in the industry, Name.com. Headquartered
in Kirkland, WA, Rightside has offices in North
America and Europe. For more information please
visit www.rightside.co.
Cautionary Information Regarding Forward-Looking
Statements
This press release contains forward-looking statements within
the meaning of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, as amended, including, among others,
Rightside’s expected total revenue, Adjusted EBITDA, and registry
services revenue. Statements containing words such as may,
believe, anticipate, expect, intend, plan, project, and estimate or
similar expressions constitute forward-looking statements.
Statements regarding Rightside’s future performance are based on
current expectations, estimates and projections about our industry,
financial condition, operating performance and results of
operations, including certain assumptions related thereto. Actual
results may differ materially from the results predicted, and
reported results should not be considered an indication of future
performance. Forward-looking statements involve risks and
uncertainties including, among others: Rightside’s ability to
successfully operate new gTLD registries and provide back-end
infrastructure services to registries; Rightside’s ability to
successfully market and sell its gTLDs; the difficulty in
predicting and developing consumer demand for new gTLDs;
Rightside’s anticipated use of cash proceeds from the divestiture
of eNom; expected benefits from the divestiture; expectations about
plans and objectives for future operations after the eNom
divestiture; and expected benefits from a share repurchase program.
More information about potential risk factors that could affect
Rightside’s operating and financial results are contained in
Rightside’s Annual Report on Form 10-K for the year ended December
31, 2016 filed with the Securities and Exchange Commission on March
15, 2017. All forward-looking statements are expressly
qualified in their entirety by this cautionary statement.
Rightside does not intend to revise or update the information set
forth in this press release, except as required by law, and may not
provide this type of information in the future.
Rightside Group, Ltd. |
Statements of Operations |
(in thousands, except per share data) |
(unaudited) |
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 31, |
|
|
2017 |
|
2016 |
Revenue |
|
$ |
14,426 |
|
|
$ |
16,606 |
|
Cost of
revenue (excluding depreciation and amortization) |
|
|
8,480 |
|
|
|
10,539 |
|
Sales
and marketing |
|
|
1,897 |
|
|
|
2,111 |
|
Technology and development |
|
|
2,372 |
|
|
|
3,137 |
|
General
and administrative |
|
|
4,572 |
|
|
|
4,652 |
|
Depreciation and amortization |
|
|
2,537 |
|
|
|
3,178 |
|
(Gain)
loss on other assets, net |
|
|
(120 |
) |
|
|
1 |
|
Interest
expense |
|
|
124 |
|
|
|
1,235 |
|
Other
income, net |
|
|
(51 |
) |
|
|
(50 |
) |
Loss from
continuing operations before income tax |
|
|
(5,385 |
) |
|
|
(8,197 |
) |
Income tax
expense (benefit) |
|
|
247 |
|
|
|
(1,945 |
) |
Loss from
continuing operations |
|
|
(5,632 |
) |
|
|
(6,252 |
) |
Income
from discontinued operations, net of income tax |
|
|
75,383 |
|
|
|
1,145 |
|
Net
income (loss) |
|
$ |
69,751 |
|
|
$ |
(5,107 |
) |
|
|
|
|
|
Basic income
(loss) per share attributable to common |
|
|
|
|
stockholders: |
|
|
|
|
Continuing operations |
|
$ |
(0.29 |
) |
|
$ |
(0.33 |
) |
Discontinued operations |
|
|
3.85 |
|
|
|
0.06 |
|
Basic
income (loss) per share |
|
$ |
3.56 |
|
|
$ |
(0.27 |
) |
Diluted
income (loss) per share attributable to common |
|
|
|
|
stockholders: |
|
|
|
|
Continuing operations |
|
$ |
(0.29 |
) |
|
$ |
(0.33 |
) |
Discontinued operations |
|
|
3.85 |
|
|
|
0.06 |
|
Diluted
income (loss) per share |
|
$ |
3.56 |
|
|
$ |
(0.27 |
) |
Weighted
average number of shares outstanding: |
|
|
|
|
Basic |
|
|
19,583 |
|
|
|
19,146 |
|
Diluted |
|
|
19,583 |
|
|
|
19,146 |
|
|
|
|
|
|
|
Rightside Group, Ltd. |
Balance Sheets |
(in thousands) |
(unaudited) |
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
|
2017 |
|
2016 |
Assets |
|
|
|
|
Current
assets |
|
|
|
|
Cash and
cash equivalents |
|
$ |
69,949 |
|
$ |
31,922 |
Accounts
receivable, net |
|
|
6,094 |
|
|
3,498 |
Available-for-sale investments, at fair value |
|
|
13,024 |
|
|
— |
Prepaid
expenses and other current assets |
|
|
2,967 |
|
|
2,590 |
Deferred
registration costs |
|
|
8,504 |
|
|
9,063 |
Assets of
discontinued operations |
|
|
— |
|
|
129,053 |
Total
current assets |
|
|
100,538 |
|
|
176,126 |
Deferred
registration costs, less current portion |
|
|
1,640 |
|
|
1,594 |
Property and
equipment, net |
|
|
5,392 |
|
|
5,746 |
Intangible
assets, net |
|
|
45,129 |
|
|
46,961 |
Goodwill |
|
|
70,921 |
|
|
70,921 |
gTLD
deposits |
|
|
1,517 |
|
|
2,169 |
Other
assets |
|
|
510 |
|
|
671 |
Total
assets |
|
$ |
225,647 |
|
$ |
304,188 |
|
|
|
|
|
Liabilities and Stockholders' Equity |
|
|
|
|
Current
liabilities |
|
|
|
|
Accounts
payable |
|
$ |
771 |
|
$ |
1,080 |
Accrued
expenses and other current liabilities |
|
|
7,417 |
|
|
8,887 |
Debt |
|
|
— |
|
|
12,800 |
Capital
lease obligation |
|
|
— |
|
|
983 |
Deferred
revenue |
|
|
20,111 |
|
|
19,475 |
Liabilities of discontinued operations |
|
|
— |
|
|
133,588 |
Total
current liabilities |
|
|
28,299 |
|
|
176,813 |
Deferred
revenue, less current portion |
|
|
4,917 |
|
|
4,429 |
Deferred tax
liabilities, net |
|
|
8,179 |
|
|
8,102 |
Other
liabilities |
|
|
372 |
|
|
261 |
Total
liabilities |
|
|
41,767 |
|
|
189,605 |
Total
stockholders' equity |
|
|
183,880 |
|
|
114,583 |
Total
liabilities and stockholders' equity |
|
$ |
225,647 |
|
$ |
304,188 |
|
|
|
|
|
Rightside Group, Ltd. |
Reconciliation of Loss from Continuing
Operations to Adjusted EBITDA from Continuing
Operations |
(in thousands) |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 31, |
|
|
2017 |
|
2016 |
Loss
from continuing operations |
|
$ |
(5,632 |
) |
|
$ |
(6,252 |
) |
Add
(deduct): |
|
|
|
|
Income
tax expense (benefit) |
|
|
247 |
|
|
|
(1,945 |
) |
(Gain)
loss on other assets, net (1) |
|
|
(120 |
) |
|
|
1 |
|
Interest
expense |
|
|
124 |
|
|
|
1,235 |
|
Depreciation and amortization |
|
|
2,537 |
|
|
|
3,178 |
|
Stock-based compensation expense |
|
|
1,462 |
|
|
|
1,234 |
|
Acquisition and realignment costs |
|
|
437 |
|
|
|
314 |
|
Adjusted
EBITDA from continuing operations |
|
$ |
(945 |
) |
|
$ |
(2,235 |
) |
|
|
|
|
|
(1) Net loss (gain) on withdrawals of interest in gTLD
applications is included in (gain) loss on other assets, net.
Investor Contacts
The Blueshirt Group
Allise Furlani, 212-331-8433
Brinlea Johnson, 212-331-8424
IR@rightside.rocks
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