B uoyed by recent buys and a steady stream of new offerings,
Endurance International Group is building muscle in the
cloud-based services arena as it continues to strike a chord with
the growing number of small and midsize businesses looking to rev
up their online presence.
Endurance International (
) provides cloud-based solutions to help small and midsize
companies market and grow their businesses on the Web. The
company, which went public in October 2013, boasts a suite of
over 150 products and services.
The far-flung offerings available on its platform include
domains, website builders, Web hosting, email, security, storage,
social media services, mobile device tools and productivity, and
e-commerce solutions. Its family of brands include Bluehost,
HostGator, iPage, Domain.com, A Small Orange, and ResellerClub,
Endurance holds a best-possible IBD Composite Rating of
The company has been revving up its business through a number
of initiatives, including acquisitions and new product
It made four buys in 2014. The biggest came last January when
it paid $109.8 million in a cash and stock deal for the Web
presence business of Directi from Directi Web Technologies.
Directi provides Web presence solutions to small and medium-size
businesses in various countries, including India, the U.S.,
Turkey, China, Russia and Indonesia.
And look for more buys: "Investing in mergers and acquisitions
is a very accretive use of free cash flow and going forward we'll
continue to do so," Blake Cunneen, Endurance's senior vice
president of corporate development, told IBD. "We don't have any
deals we're announcing. But we told the Street to expect M&A
growth to continue."
Endurance capped 2014 with healthy results. Cunneen says "we
saw continued growth and strength in two core metrics: net
subscriber growth and growth in average revenue per
Total subscribers increased by 91,000 in the fourth quarter.
Average monthly revenue per subscriber rose 12% year over year to
$14.78. For all of 2014, the number of subscribers rose 17% to
4.087 million and the average monthly revenue per subscriber
increased 11% to $14.48.
F ourth quarter adjusted net income, which excludes certain
items, soared 88% to 30 cents a share from 16 cents a year
Adjusted revenue rose 28% to $175.2 million.
Adjusted EBITDA surged 34% to $62 million. Adjusted EBITDA is
calculated as adjusted net income plus interest expense,
depreciation, and income tax expense (benefit) and certain other
Including items, the company reported a $2.2 million net loss
for the fourth quarter, compared with a net loss of $67.5 million
a year earlier.
Endurance guided to growth between 14% and 16% in adjusted
revenue for 2015 and between 17% and 21% in adjusted EBITDA.
"We like the company and think it is a very well run business
without much in the way of direct competition," Cowen analyst
Gregg Moskowitz told IBD. "There are a lot of vendors in the
space and the barriers to entry are not high. But the ability to
run a business of this nature at scale and do it very profitably
is another matter entirely, and that's one thing they've excelled
"The company has been able to continue to leverage very large
data sets of user behavior to improve cross-selling and
conversion rates. That's resulted in them amassing a stronger
competitive position over the past five to 10 years."
Among Endurance's competitors is Web-hosting provider and
recent hot IPOGoDaddy (
), which went public on April 1.
A key driver of Endurance's growth is the growing demand for
its services, says Cunneen.
"When you think about business today, having a strong Web
presence is pretty fundamental to having a successful business,"
he said. "Our core offering is so inherent to small business
needs. Where we differentiate ourselves is in providing great
customer support. One thing that helps drive word-of-mouth
referrals is providing a great user experience to our
Endurance services its customers with access to 24/7 support.
It tries to be "responsive" in how it talks to customers, he
adds, by trying to understand their businesses and identifying
ways to help them grow.
Endurance customers sign up for a standard Web-presence
package, which includes all the basic tools they need to manage
and build a Web presence, such as hosting, site-builder tools,
and domain name registration.
From there, Endurance is able to boost revenue per subscriber
by enhancing that presence with more products, such as site
backup, and scanning and marketing tools to help a site get
found, Cunneen says.
"Throughout 2014 the amount of subscriber acquisitions was
very strong and the company was able in a pretty steady fashion
to see (increases in) average monthly revenue per subscriber,"
said Moskowitz, who has an outperform rating on the company.
In the fourth quarter, it got "an additional benefit" from
three recent acquisitions, Moskowitz adds.
Last August it acquired Webzai, which provides a simple-to-use
website builder and mobile-website-builder product.
The next month it closed on the acquisition of substantially
all of the assets of NameMedia's BuyDomains business. BuyDomains
provides premium domain products.
Last October, it closed on the purchase of substantially all
of the assets of Arvixe, which is a Web-presence provider.
But Directi was very important, says Cunneen.
"It was a great acquisition for us," he said. "It brought a
truly international presence for us. And it brought a truly
international experience where we have multiple language sites in
local currency and providing local language support.
"While we're still very confident in our growth prospects
domestically, internationally our prospects are even
Among recent new products is the Instant AppMachine, unveiled
in March. It's the company's first product collaboration with
Netherlands-based technology developer AppMachine. Endurance has
a 40% ownership stake in AppMachine.
AppMachine enables users to create a professional mobile
application in minutes from a smartphone, tablet or desktop, with
no coding required, according to the company, which notes that
AppMachine is available in a beta version and will be widely
available to consumers in the summer.
"It's a great opportunity, and we're very excited about it,"
said Cunneen. "It allows our users to very quickly and
efficiently create a mobile application that captures all the
elements they need with easy to use functionality."
Analysts polled by Thomson Reuters expect Endurance's 2015
adjusted earnings to rise 27% to $1.37 a share and lift 24% in
"We feel very good about their competitive positioning," said
Moskowitz. "We're not seeing any material change in the
competitive landscape that would constrain their ability to
Endurance is a part of IBD's Computer-Tech Services industry
group. It shares the No. 1 spot withePlus (
), which also has a Composite Rating of 99. Other highly-rated
members of the group includeTyler Technologies (
) andCognizant Technology Solutions (