news

Rightside Reports Third Quarter 2016 Results

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

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

Third Quarter 2016 Financial Highlights

(Unless otherwise noted, all comparisons are relative to the fiscal third quarter 2015.)

  • Registrar services revenue increased to $44.8 million compared to $44.0 million.
  • Registry services revenue increased 26% to $3.0 million compared to $2.4 million.
  • Aftermarket and other revenue was $6.3 million compared to $8.5 million and was impacted by a decline in traffic from lower margin third party syndication partners.
  • Total revenue was $53.3 million compared to $54.1 million.
  • Net loss was $4.4 million, compared to $3.4 million which included a $1.7 million gain on other assets.
  • Adjusted EBITDA increased to $2.3 million, compared to $897,000.

Business Highlights

  • Rightside has 40 gTLDs in its portfolio and ended the quarter with approximately 546,000 registered domains.
  • Rightside's retail registrar, Name.com, grew revenue approximately 14% year-over-year.
  • With approximately 16.4 million total domains under management as of September 30, 2016, including over 2.9 million domain names registered through its retail outlets, Rightside remains one of the world's largest registrars.
  • In Q3, the Company successfully launched its new gTLD .GAMES, which has already generated more than 7,000 registrations and over $300,000 in cash revenue for premium domain related sales, including high-value names like free.games, math.games and racing.games.

Liquidity and Capital Resources

  • As of September 30, 2016, cash and cash equivalents was $47.3 million, compared to $47.8 million as of June 30, 2016.
  • At the end of the third quarter, the Company had letters of credit totaling $11 million outstanding and approximately $19 million of available borrowing capacity under its revolving credit facility with Silicon Valley Bank. Subsequent to quarter end, the Company has drawn $12.8 million on its revolving credit facility.
  • On November 7, 2016, the Company fully repaid the aggregate outstanding principal of $27.4 million of its term loan credit facility with Tennenbaum Capital Partners LLC.

Business Outlook

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

  • Total revenue around the lower end of the previous range of $218 million to $228 million, inclusive of approximately $12 million of GAAP revenue from our Registry Services Business.
  • Total Adjusted EBITDA of $8 million to $11 million, as a result of margin optimization and effective cost management.

About Non-GAAP Financial Measures

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

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

About Rightside

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

Cautionary Information Regarding Forward-Looking Statements

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

The specific companies identified above do not represent all of Spectrum’s investments, and no assumptions should be made that any investments identified were or will be profitable. View the complete list of our portfolio companies. Spectrum is not responsible for the contents of any third party website linked above, and has not confirmed the accuracy of any information provided therein.