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 ( EIGI ) 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, among others.
Endurance holds a best-possible IBD Composite Rating of 99.
The company has been revving up its business through a number of initiatives, including acquisitions and new product offerings.
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 subscriber."
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 earlier.
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 exclusions.
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 at.
"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 ( GDDY ), 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 customers."
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 greater."
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 2016.
"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 grow."
Endurance is a part of IBD's Computer-Tech Services industry group. It shares the No. 1 spot withePlus ( PLUS ), which also has a Composite Rating of 99. Other highly-rated members of the group includeTyler Technologies ( TYL ) andCognizant Technology Solutions ( CTSH ).