GOTHAM CITY RESEARCH LLC Endurance

Transcription

GOTHAM CITY RESEARCH LLC
www.gothamcityresearch.com
[email protected]
Endurance International Group:
A Web of Deceit
Price Target: $0.00 per share
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Endurance View
ARPU increased +11%
“High Quality Subscribers”
“High Quality Products”
“We are transparent and honest”
“Customers First”
“We leave it better than we found it”
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Reality
ARPU decreased -13%
History of terrorist & spam/malware subs
R&D as % revenue is 1/6th of Godaddy’s
A U.A.E. subsidiary tried to deceive the US
Service outages, poor customer service
Customers say otherwise; High churn
“The United States filed an early warning against all 31 proposals submitted by Radix Registry because
the application "inappropriately" included a supposed emailed recommendation from the Federal
Bureau of Investigation. Those proposals - which were for options like.shop,.web,.bank and.law - did not
have FBI backing, the federal government wrote.”
Radix Registry is an Undisclosed Subsidiary of Endurance International Group
Disclaimer:
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indirect trading losses caused by any information in this report. This report is not investment advice or a
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information, field research, inferences and deductions through our due diligence and analytical
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Page 2 of 61
Table of Contents
I.
II.
III.
IV.
V.
VI.
VII.
VIII.
IX.
X.
XI.
XII.
XIII.
XIV.
XV.
Disclaimer
Summary
Introduction
EIGI Uses Related Parties (Itself?) to Inflate Earnings
30%-67% of Directi’s Revenues are Suspect
EIGI’s Undisclosed U.A.E. subsidiary and its False Credentials
Average Revenue per Subscriber is Down -13%, Not Up +11%
Suspect Customers: Terrorism & Malware-related
Underinvestment leads to Service Outages and High Churn
40%-100%+ of Profits are Suspect: Putting it all Together
Valuation: Interest Expense Exceeds Normalized Adj. EBITDA
Appendix A: The Ravichandran Ties that Blind
Appendix B: Directi Revenue Does Not Reconcile
Appendix C: Organic Growth Calculations
End Notes
Page 3 of 61
a GOTHAM CITY RESEARCH’S OPINIONS
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EIGI shares will go to $0.00 per share, as the company will
struggle to service its debt. Normalized EBITDA margins do
not cover interest expense.
Recent years’ reported EBITDA benefited from attracting
Blinkx-like revenue (spam/malware, terrorism, etc.).
EIG profits at the expense of its customers (service
outages, poor customer service, etc.).
SUMMARY OF FINDINGS
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40%-100%+ of EIGI’s reported profits are suspect.
2014 Average Revenue per Subscriber (ARPS) actually
declined -13%. EIGI’s 10K claims ARPS grew +11%.
Organic growth overstated ~3x. We calculate organic
growth to be ~5.6%, not 13.0%-15.0% as EIG claims.
Directi’s revenues per the Indian filings are 30%-67% lower
than reported in EIGI’s 10K.
Directi revenue figures within the EIGI 10K do not add up.
EIGI paid 17% of its ’12-’14 EBITDA to a related party tied
to the CEO. The related party seems to be Endurance.
No international revenue disclosures, despite promoting
itself as an ‘international growth’ concern.
An undisclosed subsidiary falsely claimed to the US
Government that the FBI “recommended” them.
EIGI's BlueHost, JustHost, HostGator and HostMonster
hosted terrorist websites as recently as few weeks ago.
EIGI domains hosted 1,000s of spam/malware-related sites
per spam/malware watchdogs (the hosting world’s Blinkx).
EIGI spends ~1/6th on core infrastructure vs Godaddy.
Customer reviews are consistently poor.
A 15+ year industry executive states EIGI uses a churn
model/definition that is “not industry common practice,
while using industry terminology.”
EIGI is free cash flow negative. Godaddy is FCF positive.
The management team (including the CEO) recently sold
~30% of their stake in EIGI.
Company: Endurance
International Group
CEO: Hari Ravichandran
Ticker: EIGI
Exchanges: NASDAQ
Price Target: $0.00/share
Share price: $21.94/share
Market cap: $3.03B
52-week high: $23.49
52-week low: $11.88
Shares outstanding:
132.36M
2014 FCF: -226M
EBITDA 3-year avg: $70M
Interest expense 3-year
avg: $94M
2014 Cash: $33M
2014 Debt: $1,020M
Fiscal Year: Dec. 31
Auditor: BDO
IPO Date: November 2013
(JOBs ACT IPO)
Page 4 of 61
INTRODUCTION
Endurance International Group is an extraordinary company. EIGI’s stock has risen 2x since going public
in late 2013, handily outperforming its peers. The company has also generated industry-leading margins1:
ADJUSTED EBITDA MARGIN - EIGI vs PEERS
2012
2013
2014
GDDY
19.1%
17.4%
19.6%
WWWW
35.5%
31.1%
29.8%
EIGI
45.8%
40.0%
37.4%
Yet Endurance also appears to be an extraordinarily poor company, bleeding cash:
EIGI Free Cash Flow vs Peers
2012
2013
2014
$ in 000s
$46,745 ($55,153)
$73,249
GDDY
$62,788 $88,082
$82,794
WWWW
($306,652) ($94,294) ($226,156)
EIGI
We tend to get excited when we see such diverging qualities in a company, so we decided to examine
further. These initial red flags troubled us, as they tend to be indicative of extraordinarily bad companies:
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High debt level for a traditionally low ARPU and high churn business.
Related party transactions between EIGI and entities tied to EIGI CEO.
No International revenue disclosure, despite promoting itself as an international growth story.
Suspect accounting, some of which widely deviates from its peers.
We dug deeper. Our due diligence spanned across several continents and included industry experts’
input. We have come to believe that Endurance is, indeed, an extraordinary company – just for all the
wrong reasons. Once we learned that CEO Hari Ravichandran has been spending an unusual amount of
time promoting the stock rather than running the business in recent months – 15+ investor meetings in
recent months2 – we decided to share our findings with the public.
Gotham City Research believes 40%-100%+ of reported profits are suspect, and that normalized profits
do not cover interest expense for the following reasons:
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Related party transactions account for 17% of EBITDA, and resemble transactions with it-self.
ARPU declined -13% yet EIGI’s 10K claims ARPU grew +11%.
Accounting irregularities found with its International business.
A significant undisclosed subsidiary lied to the US government about its credentials.
The company hosts terrorist-related websites, and a high % of malware/spam-related accounts.
Churn is high as a result of service outages, poor customer support, and slow loading speeds.
EIGI claims otherwise, yet EIGI has under-invested in its business, spending 80% less on
infrastructure vs. Godaddy.
Page 5 of 61
Endurance’s EBITDA Margins are Exceptionally High Relative to its Peers
EIGI’s adjusted EBITDA margins handily outperform its web hosting peers’. Godaddy, the industry leader,
is twice as large as Endurance yet its reported Adjusted EBITDA margins are half that of EIGI’s 1:
2012
2013
2014
GDDY
19.1%
17.4%
19.6%
WWWW
35.5%
31.1%
29.8%
EIGI
45.8%
40.0%
37.4%
Although improbable, it’s possible that EIGI is actually a great business, leadings its peers, in an
otherwise commoditized industry. Endurance attributes its ‘superior performance’ to ‘best in class cloud
enablement technology platform’, ‘high quality products’, and ‘high quality subscribers’: 2
Gotham City Research believes that the company’s above representations are not in agreement with
reality. In fact, it seems that the Company is characterized by low quality products, low quality
subscribers, mediocre/poor technology platforms. The remainder of the report details how exactly. We
first begin by explaining how we believe EIGI uses related parties to overstate earnings.
Page 6 of 61
EIGI Uses Related Parties, Improper Accounting, & Other Dubious Practices to Overstate Earnings
We believe the keys to EIGI’s success have been its Ravichandran related parties, suspect accounting, &
other dubious business practices (these have helped the CEO unload ~30% of his shares recently). With
respect to the related parties, we believe the company has engaged in two parallel schemes:
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EIGI uses the Ravichandran entities and its other captive vendors to overstate profits:
EIGI Secretly
Controls
Ravichandran
Entities
Realized Capital
Gains in EIGI Stock
Compensate the
Ravichandrans
EIGI Uses them to
Manufacture its
Reported Profits &
Accounting
EIGI Stock Price
Appreciates in
Value
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Ravichandran entities sell its services to EIGI at below-market prices (while harming customers
via poor user experiences), allowing EIGI to achieve an artificial cost advantage:
Ravichandran
Entities provide
EIGI services
below-market
Realized Capital
Gains in EIGI Stock
Compensate the
Ravichandrans
EIGI benefits by
Achieving
Artificially Higher
Profit Margins
EIGI's Positive
Earnings Boost
EIGI Stock Price
Page 7 of 61
The Largest Related Parties are Secretly Controlled by the Company Itself
Endurance the “Customer”
Glowtouch the “Vendor”
CEO Ravichandran
Director Ravichandran
Gowex, Quindell, Tile Shop, Crazy Eddie’s, Sino-Forest, and many other frauds shared (at least) one
common characteristic: material related party transactions with captive or quasi-captive entities. In
many cases, these captive or quasi-captive entities were substantially the companies themselves.
Gotham City Research believes that EIGI’s largest “related parties” are substantially EIGI itself for the
following reasons:
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Endurance CEO Hari Ravichandran and/or immediate family were and/or is a director and/or
owner of related parties, Glowtouch Technologies and Innovative Business Services (“IBS”).
The transactions are material to EIGI, as the transactions have accounted for at least 16.5% of
2012-2014 EBITDA.
EIGI’s payments to Glowtouch account for the majority of Glowtouch’s revenues.
Glowtouch currently staffs and operates the HostGator India (an Endurance subsidiary) business.
Glowtouch/Endurance employees name Glowtouch/Endurance as if they’re the same entities
on linkedin or other on-line profiles.
http://www.glowtouch.co.in/ website doesn’t work as of April 17, 2015.
We have documentation that shows Glowtouch pays &/or receives payment-in-kind from EIGI.
Pattern of related party transactions beyond those involving Ravichandran, including loans at
favorable rates between Endurance and its management & “consulting” contracts.
EIGI was exempted from the auditor attestation requirements in the assessment of internal
control over financial reporting, because it technically qualifies as an “emerging growth
company” per the JOBS Act (despite being in business since the late 1990s).
Endurance International appears to be web hosting’s Crazy Eddie’s, but with an Indian twist:
Crazy Eddie’s
Antar Family
Suspect Accounting
Seemingly high growth
Captive Vendor (Wren Distributors)
Related Party Loans & Other Payments
Endurance International Group
Ravichandran Family
Suspect Accounting
Seemingly high growth
Entities tied to the CEO
Related Party Loans & Other Payments
Page 8 of 61
The Ravichandran Related Party Transactions – at least 16.5% of EBITDA
Endurance has paid $34.5 million – roughly equal to 16.5% of EBITDA – to Ravichandran companies (i.e.,
substantially to itself) over the last 3 years3:
ENDURANCE's PAYMENTS TO RELATED PARTIES
$ in 1,000s
2012
2013
2014
EBITDA
$4,651
$59,537
$146,427
$8,598
$10,300
Payments to Related Parties
$15,800
184.9%
17.3%
10.8%
Payments as % of EBITDA
TOTAL
$210,615
$34,698
16.5%
The above payments include those made out to Glowtouch Technologies, Diya Systems, Tregaron India
Holdings (‘Glowtouch’ refers to all Ravichandran entities), and IBS.
Endurance CEO Hari Ravichandran as Director of Glowtouch
Hari’s employment contract with Endurance4:
So Hari Ravichandran, according to the employment agreement, is concurrently the CEO of Endurance
and Director of Glowtouch Technologies.
Glowtouch Technologies = Tregaron India Holdings LLC = Diya Systems
See the appendix for further details regarding the Ravichandran’s web, but here are the highlights:
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Glowtouch Technologies = Tregaron India Holdings LLC.
Diya Systems is a subsidiary of Glowtouch, run by Endurance CEO’s father.
Tregaron India Holdings owned by Hari’s father and mother
Hari’s sister is President of Glowtouch. Hari seems to owe here a few favors.
Page 9 of 61
Endurance Accounts for Most of Glowtouch’s Revenue
Crazy Eddie’s, the leading electronics retailer of the 1980s, used a distributor to facilitate its accounting
fraud. Crazy Eddie’s distributor was not a related party, but most of its revenue came from Crazy Eddie’s.
As a result, Crazy Eddie’s exerted significant control over the distributor, helping it inflate profits.
Sam Antar, former CFO of Crazy Eddie’s (“CRZY”), describes in detail how CRZY’s cozy relationship with
its distributor/supplier helped it commit accounting fraud5:
“Crazy Eddie’s had a very cozy relationship with a vendor known as Wren Distributors (Wren).
We were Wren's largest customer, accounting for 35% of its revenues. We purchased over 10%
of our merchandise from Wren. In order to inflate our inventory without adding to our accounts
payable, I asked Wren to ship us $3 -$4 million in merchandise before 1986 year-end, but to
hold off billing until after the auditors completed the year-end audit. Because the merchandise
was included in the year-end inventory count without recording the corresponding accounts
payable to Wren, we were able to inflate income by $3-$4 million.
In 1987, we continued to take advantage of our relationship with Wren. I pressured Wren to ship
us about $5-$7 million in merchandise before year-end. The merchandise was included in the
year-end inventory count without being included in the amount owed to the vendor.”
The Endurance/Glowtouch setup seems worse as we believe Ravichandran’s grip over the related
parties is far tighter. Endurance accounts for most of the company’s revenue, just as Crazy Eddie’s did
with its distributor, corroborating our belief6:
Most of Glowtouch's Revenue is from EIGI
$ in millions
2010
2011
2012
Glowtouch Total Revenue
$7.5
$8.1
$10.4
from EIGI
$5.1
$5.5
$6.4
From EIGI as % of Total
68.4%
67.8%
61.5%
2013
$13.2
$7.3
55.3%
Glowtouch Does Not Even Mention Endurance as a Case Study
Seems strange given Endurance accounts for most of its revenue7:
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Glowtouch India’s website does not function
Glowtouch India’s operations seem largely non-functional, casting further doubt that Glowtouch is an
independent entity: http://www.glowtouch.co.in/
Endurance India and Glowtouch India Share the Same Address
Endurance’s address in India (Hostgator is an Endurance subsidiary)8:
Glowtouch, via its Diya subsidiary shares the same address as Endurance i.e. Hostgator India9:
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Glowtouch Pays Endurance or Receives Payments in Kind
Glowtouch/Diya seems to pay or receive payment in kind from Endurance10:
Endurance/Glowtouch Employees Refer to Endurance/Glowtech Interchangeably
A man by the name of Vivek Ahuja refers to Endurance International Group / Glowtouch Technologies as
if they were the same entity in his linked profile: (incidentally, CEO Hari Ravichandran writes a
recommendation):11
Page 12 of 61
Glowtouch Helps Endurance Manufacturer Margin
Glowtouch seems like the perfect vehicle whereby Endurance can manufacture reported profits as they
wish in order to meet Wall Street’s quarterly expectations (especially when combined with a slew of
accounting shenanigans we detail in following sections)12:
EIGI Consistently Beats Sell-side/Guidance Adj. EBITDA
2013
2014
Q3
Q4
Q1
Q2
Q3
Q4
Adj. EBITDA (Estimate)
Adj. EBITDA (Reported)
$41.2
$38.5
$56.7
$55.3
$56.3
$60.0
$49.9
$46.2
$59.1
$56.5
$58.0
$62.0
$ in millions
Glowtouch Helps Endurance Make Margin at the Expense of Endurance Customers
GlowTouch provides outsourcing services such as: customer and technical support, billing support, web
development and maintenance, data entry and quality assurance (QA) testing.13
Endurance’s tech infrastructure spending is less than 1/5th of Godaddy’s (as a % of revenue):14
RESEARCH & DEVELOPMENT SPENDING
GDDY
WWWW
WIX
EIGI
EIGI as % of GDDY
2012
2013
2014
19.3%
8.4%
38.4%
4.7%
24.5%
18.4%
6.6%
36.9%
4.5%
24.3%
18.3%
5.5%
40.8%
3.1%
16.9%
Unsurprisingly, Endurance customers have experienced frequent service
customer/technical support, slow speeds, etc. (as detailed later in this report)15:
outages,
poor
Service Outages are Worsening
Date
Aug-13
Dec-13
Apr-14
May-14
Oct-14
Duration
24 hours of downtime
3 days of downtime
24 hours of downtime
9 hours of downtime
5 days of downtime
Gotham City Research believes these are no coincidences. We also believe that EIGI’s practice of
profiting at the expense of its customers is coming to an end. EIGI is no longer a private company
operating in the shadows. Furthermore, Godaddy recently went public. Sunshine will prove to be the
best disinfectant.
Page 13 of 61
Endurance International Group claims that Directi and International are priorities for organic growth 1:
Given that Directi is an International company, the #2 and #4 priorities listed above suggest that EIGI’s
international business is a very big priority. Yet EIGI reveals very little information about its international
operations. We think we know why.
Gotham City Research believes that Endurance’s international revenues are neither accurate nor reliable.
We specifically believe 30%-67% of Direct’s revenues are of dubious quality for the following reasons:
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EIGI does not disclose International revenues (yet pitches itself to Wall Street as an International
Cloud play). Godaddy discloses international revenue.
EIGI’s International tangible long-lived assets are only 2.9% of total tangible long-lived assets.
30%-67% of Directi’s reported revenue do not reconcile with Directi’s Indian filings.
EIGI has a few different figures for Directi revenue in its 2014 10K. None of them reconcile with
one another. It’s as if Directi has several sets of books, just as the characters in The Producer did.
EIGI management did not assess the effectiveness of internal control over financial reporting of
Directi.
The Directi website does not appear to be maintained or updated.
Directi’s owners have publicly claimed that its business is worth $300 million + for many years,
yet EIGI acquired it for 67% lower, roughly ~$100 million.
EIGI has an undisclosed international subsidiary that EIGI secretly acquired for ~$60 million. We
believe this is the “Domain Name Business” EIGI cryptically refers to in the 10K. We think we
know why EIGI does not disclose this subsidiary. See the next section for more information
about this subsidiary.
Page 14 of 61
EIGI Sells Itself as an International Growth Play but it Does Not Disclose International Revenues
Endurance’s explanation, as to why it does not disclose international revenue is one of the funniest (and
absurd) we’ve ever read. It claims it is impracticable to do so, and that there are limitations in certain
accounting systems2:
"It is impracticable for the Company to provide revenue information by geography for December
31, 2012, 2013 and 2014 due to unavailability of geographic information for some subscribers
acquired as part of previous acquisitions as well as limitations in certain accounting systems that
are currently in use."
Gotham City Research believes EIGI’s explanation above is a serious misrepresentation (we’re reporting
EIGI to the SEC and other regulatory bodies), for the following reasons:
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EIGI discloses tangible long-lived assets and total loss before income taxes of international origin
(so much for ‘impracticable’ and ‘limitations in certain accounting systems’)
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EIGI discloses Directi revenue (though there are serious issues with the Directi numbers) and
Directi is an international company. So how is it ‘impracticable’ for EIGI to report total
international revenue, when it already discloses its largest contributor to international revenue?
CEO Ravichandran states: “But primarily all the growth on the international side at this point for
this year we anticipate coming through organic means.”3 How can he make this claim about
international organic growth without knowing the 2014 international revenue?
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Page 15 of 61
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“So it’s not enough data to actually have a sort of a real comparison there. But international -talk about the Directi business to be the large portion of our localized international business, it
was about 11%ish of our revenue, between 10% to 11%.” – Did CEO Ravichandran say 11% of
revenue was from ‘localized international business’ ?
Godaddy discloses international revenue4
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Endurance has paid its auditor considerable sums of money in the past5
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EIGI has Paid its Auditor More than the US Government
$ in 1,000s
2012
2013
2014
TOTAL
$796
$1,502
$2,615
Income taxes paid
$4,913
Tax fees paid to BDO
$538
$1,080
$1,343
$2,960
Audit + related fees
$695
$1,253
$1,344
$3,292
TOTAL paid to BDO
$1,234
$2,332
$2,687
$6,253
Paid to BDO vs USA
1.5x
1.6x
1.0x
1.3x
it seems EIGI has the resources to render itself able to report international revenue (Endurance
has paid BDO more in fees than it has paid the US Federal or Local governments in taxes). One
would think that the least EIGI can do to thank Uncle Sam for the low tax bill (assuming they are
filing taxes truthfully), would be to file accurate, reliable, and truthful financial statements.
Perhaps it’s too much to ask.
EIGI’s Reported Directi Revenue Figures are Unreliable
After reviewing EIGI’s Directi figures in EIGI’s 10K, one would get the impression EIGI manages several
sets of books just as the characters in The Producers did. $29 million does not equal $31.3 million and
EIGI provides no explanations as to why they differ (the highlighted amounts differ)6:
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“For the year ended December 31, 2014, $29.0 million of revenue from the Company’s 2014
acquisition of Directi was included in the Company’s consolidated statement of operations and
comprehensive loss.”
Page 16 of 61
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“Revenue increased by $109.5 million, or 21%, from $520.3 million for the year ended
December 31, 2013 to $629.8 million for the year ended December 31, 2014. Of this increase,
$31.3 million was related to revenues from our acquisition of Directi.”
The company makes the following claim:
Management did not assess the effectiveness of internal control over financial reporting of Directi,
Webzai, BuyDomains and Arvixe because of the timing of the acquisitions which were completed
during 2014. Our audit of internal control over financial reporting of Endurance International Group
Holdings, Inc. also did not include an evaluation of the internal control over financial reporting of
Directi, Webzai, BuyDomains and Arvixe.
The above explanation is notably strange, because Endurance completed the Directi acquisition by
January 2014, unlike Webzai, BuyDomains, and Arvixe, which were acquired in Q4 2014. Is the company
hedging itself, fully aware that their reported Directi figures are inaccurate and unreliable?
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This explanation does not reconcile – “Directi, Webzai, BuyDomains and Arvixe represented
approximately 3% and (2)% of our total assets and net assets, respectively as of December 31,
2014 and 6% of our total revenues for the year ended December 31, 2014.” –
a. 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.
30%-67% of Directi’s Revenues According to EIGI 10K Don’t Reconcile with Indian Filings
We reviewed Directi’s Indian filings and estimated total Directi’s revenue according to them 7:
2014 Directi Revenue - EIGI 10K vs Directi Indian Filings
Low
High
Average
Indian Filings $12,053,864
$19,523,551 $15,788,707
10K Adj. Revenue $48,500,000
$48,500,000 $48,500,000
% variance
(75.1%)
(59.7%)
(67.4%)
10K GAAP Revenue $29,000,000
$31,300,000 $30,150,000
% variance
(34.9%)
(24.3%)
(29.6%)
We calculated a ‘Low’ and ‘High’ in order to factor in:
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Directi shifted revenue around between subsidiaries in 2013 and 2014
EIGI’s representation of Directi GAAP revenue are inconsistent as we discussed in prior page.
On average, the variance between the Indian filings seems to fall between 30%-67%
See the appendix for a more detailed breakout of the above calculations.
Page 17 of 61
We believe the following likely explain the above variances:
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
Directi revenues are materially overstated (EIGI’s refusal to disclose international revenue and
existence of several varying figures for Directi revenue support this theory).
The unexplained differences are fully explained by the Radix FZC and/or P.D.R. Solutions FZC
subsidiaries.
Endurance does not want to draw attention to its international operations (we explore why, in
the next section), specifically because it has problem undisclosed subsidiaries.
Endurance does not want to draw attention to its international operations (we explore why, in
the next section), specifically because they play critical roles in driving suspect
malware/clickfraud related revenue.
Directi.com about section on website hasn’t been updated since 2007 8
Page 18 of 61
EIGI’s undisclosed U.A.E. subsidiary & its False Credentials
Endurance mentions buying a “Domain Name Business” (without naming it) in its most recent 10K 1:
In addition, in connection with the acquisition of Directi, the Company was initially obligated to
make additional aggregate payments of up to approximately $62.0 million subject to specified
terms, conditions and operational contingencies. Of this $62.0 million, the Company has
committed a total of $36.2 million consisting of cash payments of $27.2 million and future earnout payments of $9.0 million to purchase a domain name business from a company associated
with the founders of Directi Holdings
Radix Registry is the undisclosed subsidiary and has misrepresented its credentials to the USA
We believe Radix is the “Domain Name Business” for the following reasons:




Radix is related to the founders of Directi Holdings, the Turakhia brothers & Brijesh Joshi.
Radix is a “domain name business” (specifically participates in gTLD auctions)
Those familiar with Directi and Endurance (at the time acquisition discussions) wrote, “In buying
Directi, Endurance would also get Radix Registry which has 29 active new gTLD applications of
which 26 are in contention.” It seems they were off on the deal terms, but right on the target.
Who.is shows Radix Registry’s name as ‘PDR LTD. D/B/A PUBLICDOMAINREGISTRY.COM’
“PDR LTD. D/B/A PUBLICDOMAINREGISTRY.COM” is a wholly-owned subsidiary of Endurance:

Radix FZC and P.D.R. Solutions FZC (a EIGI subsidiary) are in the same building in the UAE.

Page 19 of 61
Radix Registry Lied to the US Government and its Radix/Directi Founders Are Highly Suspect
The US Federal Government filed an early warning against all 31 proposals submitted by Radix Registry,
in Radix’s attempt to register the .army, .navy and .airforce and other addresses on the Internet. Radix’s
application "inappropriately" included a supposed emailed recommendation from the Federal Bureau of
Investigation (seems the equivalent of a CEO lying about graduating from Harvard)2:
Radix Registry is suspect for reasons beyond attempting to deceive the US Government:




Radix FZC (its legal name) is a ‘Free Zone Company’ in Hamriyah Free Zone, a tax haven in the
United Arab Emirates (think of it as the Singapore for Indians and others).
Radix FZC does not appear in the Hamriyah Free Zone company directory, despite Hamriyah
listing over 5,890 entities (it is our understanding that there are only 5,000ish total entities).3
PrivacyProtect.org, controlled by Radix Registry’s founders (i.e. the Turakhia brothers), have
been the losing respondent in more than 60 Uniform Domain Name Dispute Resolution Policy
(“UDRP”) proceedings.4
The ICANN “gTLD Applicant Guidebook” forbids applicants with a history of adverse UDRP
decisions from applying for new gTLDs.
Endurance Hosts an Entity U.A.E. has Designated as a Terrorist Organization
United Arab Emirates Designated the Muslim American Society (apparently MAS was created in secret
by U.S. Muslim Brotherhood leader) as a terrorist organization.5 Endurance hosts the Muslim American
Society via its Fastdomain and Hostmonster subsidiaries6:
Page 20 of 61
Average Revenue per Subscriber is Down -13%, Not Up +11%
“The least initial deviation from the truth is multiplied later a thousandfold.” ― Aristotle
Reported Average Revenue per Subscriber (“ARPS”) is Growing but Actual ARPS is Declining
Despite the related party transactions, suspect international revenue, undisclosed subsidiary, and the
undisclosed subsidiary’s lies, perhaps Endurance possesses a strong core business. After all, EIGI reports
very strong ARPU (they call it “ARPS” or Average Revenue per Subscriber”, which in tech-land is similar
to “Comp Store Sales”) of over ~10%1:
EIGI's Reported ARPS
2011
2012
2013
$ 474,115 $ 528,119 $
Adjusted revenue
2,845
3,223
3,502
Total subscribers
$12.84
$12.92
$13.09
Reported ARPS
0.62%
1.32%
% change
Revenue in 1,000s of $s, and total subscribers in 1,000s
2014
651,945
4,087
$14.48
10.62%
Page 21 of 61
Not only is EIGI’s reported ARPS growing, Endurance appears to be outperforming its peers2:
EIGI ARPU & ARPU Growth vs Peers
2012
GDDY
WWWW
EIGI
$7.75
$13.44
$12.92
GDDY
WWWW
EIGI
2013
2014
$8.67
$9.50
$14.24
$14.62
$13.09
$14.48
% change in ARPU
11.8%
9.6%
6.0%
2.7%
1.3%
10.6%
Icing on the cake: Directi’s ARPS looks breathtakingly amazing and “accretive” to overall ARPS. The
implied Directi ARPS is $72 per month or 5x-6x EIGI’s historical ARPS:
DIRECTI ARPS ACCORDING TO EIG
2013
n.a.
Directi subscribers
n.a.
Directi ARPS
n.a.
EIGI Reported ARPS
$13.09
$ & subscribers in 1,000s except ARPS
Directi revenue
2014
$48,499
56
$72.17
$14.48
We estimate that EIGI’s true ARPS actually declined in 2014 by around ~13%3:
EIGI Actual 2014 ARPS Declined
2011
2012
2013
$ 474,115 $ 528,119 $
Adjusted revenue
3,223
3,502
total subscribers - reported 2,845
1,000
Directi end subscribers
total subscribers - actual
4,502
$12.92
$13.09
Reported ARPS ######
Actual ARPS 12.84
$12.92
$13.09
% growth in ARPS
$
0.01
1.3%
All figures except ARPS are in 1,000s
total subscribers subtracts the 56 implied directi resellers.
2014
651,945
4,031
1,000
5,031
$14.48
$11.40
(12.9%)
How Endurance’s ‘Subscriber’ is not necessarily a subscriber
Gotham City Research believes that a subscriber is a subscriber. The definition is and should be quite
simple. In fact, Godaddy seems to agree (their definition of a subscriber is simple and clean relative to
EIGI’s). Endurance, on the other hand, defines a subscriber as either a customer or a reseller (a reseller
may account for 10s if not 100s of customers).
Page 22 of 61
According to Endurance International Group4:
Total Subscribers = Subscribers (excluding Directi) + Directi’s Resellers
According to Gotham City Research:
Total Subscribers = Subscribers (excluding Directi) + Directi’s Subscribers
When it comes to Endurance’s recent acquisition, Directi, EIGI adds Directi’s resellers as subscribers to
EIGI’s total subscriber count, rather than Direct’s end subscribers. We can’t think of any good reasons
for doing this, given that Endurance includes its end subscribers in its subscriber count.
The customers added as a result of Directi includes a significant number of resellers, which
reduces the total amount of Directi's contribution to total subscribers because we count only the
resellers, and not their end customers, as subscribers.
EIGI includes the above clarification, that it counts Directi’s resellers (as customers), and not its end
customers, only in the 10Q not the 10K.
Reseller
subscriber
subscriber
subscriber
subscriber
subscriber
subscriber
subscriber
subscriber
subscriber
subscriber
Additional Ways Endurance’s ARPS is Misrepresented
Endurance obfuscates the definition of a subscriber further than illustrated above:



In Q4 2014 the company changed the definition of a subscriber (which added increases
subscribers), and did not discuss this change on the quarterly call.
EIGI does not count as subscribers those who purchase only domain names as subscribers (but
they count the revenue!).
EIGI does not count subscribers those who access solutions via resellers as subscribers. The
directi adjustment we make does not account for domestic resellers that EIGI counts as
subscribers.
Investors rely on accurate figures from companies so that they can then make their investment
decisions accordingly. Clearly CEO Ravichandran and the Company’s misrepresentations regarding ARPS
betray that trust.
Page 23 of 61
WWWW, EIGI’s most comparable peer (and whose shares have declined -36% over the last 12 months),
has recently warned about ARPS declining:5
“ARPU is expected to decline sequentially in the first quarter of 2015, primarily due to the issues
that impacted our DIY and DIFM businesses in the fourth quarter of 2014. “
Endurance’s ARPS Don’t Add Up – A common symptom in cases where numbers are fabricated
Unsurprisingly, EIGI’s reported ARPS does not add up to the calculated amounts derived from using the
figures they disclose:
ARPS Numbers Don't Reconcile
2011
Adjusted revenue
total subscribers
Reported ARPS
Calculated ARPS
Irregularity
$
2012
2013
474,115 $
528,119 $
2014
651,945
2,845
3,223
3,502
4,087
$12.84
$12.92
$13.09
$14.48
$
$
13.02 $
0.10 $
13.09 $
(0.00) $
14.32
(0.16)
Their reported ARPS excluding Directi do not add up either.
Godaddy’s ARPU is Lower than Endurance’s ARPU – Possible Explanations
Even with the correct Directi adjustments, EIGI’s ARPU exceeds Godaddy’s. Possible explanations:


Endurance’s slippery total subscriber definition may account for the entire variation. For
example, Endurance may count certain domestic resellers as subscribers, rather than counting
the end customers. This may sufficiently lower EIGI’s ARPU.
Endurance may attractive far more suspect accounts, e.g. malware/spam accounts. These
accounts are probably very profitable on a per subscriber basis (we explore this further in the
following sections).
EIGI’s Organic growth far lower than EIGI Claims
CEO Ravichandran claims that organic growth in 2013 adjusted revenue grew 17%, and 2014’s adjusted
revenue organically grew between 13%-15%6:
“For the GAAP revenue – for the year, GAAP revenue grew to $520.3 million and adjusted
revenue to $528.1 million ahead of our adjusted revenue expectation of $525 million. Apart from
2012 acquisitions, adjusted revenue organically grew 17%” – CEO Hari Ravichandran
“I would say that organically, when we think about the business, it’s a somewhere between 13%,
14%, 15% organic growth depending on what marketing programs are available each year.” –
Hari Ravichandran CEO of EIGI
Page 24 of 61
Gotham City Research believes organic growth is much lower – in the 0%-7% range for 2013, and ~5%
for 2014:
EIGI's Revenue Organic Growth
2013
EIGI
Gotham
17.0%
5.9%
2014
13.0%-15.0%
5.6%
2013 Organic growth:
EIGI 2013 Organic Growth Calculation
2012
$ in 1,000s
2013
GAAP Revenue $292,156 $520,296
Purchase accounting adjustment
Homestead/Homegator/Other
$64,123
$7,311
$90,150 $245,800
Organic Revenue $266,129 $281,807
Organic Growth
5.9%
2014 Organic growth
2013
$ in 1,000s
$520,296
GAAP revenue
$528,119
adjusted revenue
Directi
Arvixe, BuyDomains, & Webzai
Other acquisitions
Organic Revenue
Organic Growth
2014
$629,845
$651,945
($48,500)
($14,600)
($31,000)
$557,845
5.6%
2014’s organic growth seems heavily dependent on domain-related businesses. This is strange, given the
company tends to downplay the importance of this business.
The presentation accompanying the Q4 2013 earnings call uses the word ‘organic’ quite a bit, but does
not disclose organic revenue growth.
See the appendix for further details.
Page 25 of 61
Purchase Accounting Adjustments Irregularities
Just as Endurance disclosed 2 irreconcilable DIrecti revenue figures (i.e. the numbers don’t add), there
appears to be a ‘purchase accounting adjustment’ irregularity as well7:
On one hand the S-1 states “Purchase accounting adjustments reduced 2012 revenue by $47.2 million.”
Yet the ARPS derivation shows a $64.12 million adjustment:
It’s theoretically possibly, but highly slippery, that the $17 million variance – between the $47.2 million
and $64.12 million – is a result of a “GAAP” purchase accounting adjustment vs a “Non-GAAP”
purchasing accounting adjustment. The problem is if this is the case, the Company did not disclose it.
Page 26 of 61
Some companies aim to improve long-term profitability by putting the customer’s needs first. Other
companies improve short-term profitability by profiting at their customers’ and/or others’ expense.
Blinkx, a click fraud/malware concern whose shares have declined over -80% since Ben Edelman
exposed their nefarious practices, is an example of the latter case. Blink engaged in suspect activities,
and the company eventually reaped what it sowed. Gotham City Research believes that Endurance
International Group resembles Blink, and EIGI’s stock will share a similar fate. We specifically believe
that Endurance has been boosting profitability by turning a blind eye to the suspect but profitable
business of providing Internet hosting to harmful activities such as malware/spam and terrorism.
Endurance aggressively attracts customers, spending $23 on sales & marketing for every $100 it earns in
revenue. That’s twice as much as Godaddy spends1:
EIGI SALES & MARKETING SPENDING 2x GDDY
GDDY
EIGI
EIGI vs GDDY
2012
2013
2014
14.3%
28.4%
1.99x
12.9%
22.6%
1.76x
11.9%
23.3%
1.96x
Yet Endurance, at minimum lacks the infrastructure necessary to minimize suspect customers. It spends
only $3 on its tech infrastructure for every $100 it earns in revenue, less 1/5th Godaddy spending:
EIGI INFRASTRUCTURE SPENDING 1/6th GDDY
GDDY
EIGI
EIGI vs GDDY
2012
2013
2014
19.3%
4.7%
0.25x
18.4%
4.5%
0.24x
18.3%
3.1%
0.17x
Page 27 of 61
The following further support our belief that (I) Endurance generates revenue from harmful activities (or
is willfully ignorant of the fact that their aggressive sales and marketing approach leads to “ends justify
the means” results) and (II) revenues-derived from these activities mask a high churn business:
Terrorist related






Endurance International Group was recently hacked for hosting terrorist website.
The list of hacked Endurance companies include: BlueHost, FastDomain, Hostgator,
HostMonster and JustHost.
Endurance was exposed by the Boston Globe for hosting Taliban-related website several years
ago. A senior executive at Endurance (still with the company) claimed its ‘terms of service’
explicitly prohibits terrorist-related activities.
The ‘Terms of service’ for BlueHost, FastDomain, Hostgator, HostMonster and JustHost do not
explicitly forbid terrorism related activities. It seems Endurance only paid lip service back in
2008.
Endurance transacted with several "Specially Designated Nationals" ("SDNs”) for years, even
though SDNs’ assets are blocked & U.S. persons are generally prohibited from dealing with them.
Endurance hosts a group designated by the UAE as a terrorist group. Recall that Endurance owns
a few UAE subsidiaries.
Malware/Spam related



Endurance has a far higher concentration of black-listed domains versus Godaddy, at 41% v. %11.
Endurance’s domains are consistently in the top 5-10 of Top 100 Registrars with Blacklisted
Domains.
EIGI owns many registrars with 80% or higher spam vs ham registrations.
Other




Endurance is a reseller of Tucows a.k.a. OPENSRS
Tucows prefers to simply pass on the information about illegal websites to its resellers without
requiring them to take any action.
Tucows is the largest registrar that fails to suspend rogue Internet pharmacy domain names,
which contrasts with GoDaddy and eNom who taken decisive action to prevent criminal activity
on their registration platforms.
Endurance is a Reseller of Tucows, Designated as “Notorious” by the US Government
Page 28 of 61
Endurance International Group Hacked ~1 Month Ago for Hosting Terrorist Websites
A hacking group that had hacked websites and social media accounts affiliated with the ISIS group,
recently hacked some of Endurance group’s “crown jewels” (i.e., largest acquisitions), include BlueHost,
FastDomain, Hostgator, HostMonster and JustHost for hosting terrorist websites2:
Page 29 of 61
The hacker group warned Endurance International Group to stop hosting terrorist websites or next time
their DNS settings will be changed. Attracting terrorists as customers and underinvesting in core
infrastructure seems like a perfect recipe for disaster.
islam-army.com is one specific terrorist website that Endurance Hosts/Hosted 3
The twitter account of Bluehost was also hacked for hosting terrorists4:
Page 30 of 61
Endurance Does Not Deny Hosting Terrorist Websites
Endurance did not deny hosting terrorist websites. The company did not apologize, nor did it
speak out against terrorism nor take any responsibility for its role in hosting terrorist websites.
We also were unable to find any official press releases from the endurance, hostgator, or
bluehost websites (in fact, http://www.hostgator.com/press has not been updated since 2011).
However, Endurance did respond to media5:
Last night, Bluehost’s Twitter account was compromised for a short period of time. Bluehost was
able to regain control of their Twitter account within a couple hours. We are continuing to
investigate this matter, but are viewing this as an unfortunate case of cybervandalismto to one of
our partners. HostGator.com was not affected by this issue.
HostGator:
We have taken all appropriate security measures to ensure that our platform is secure. Per our
security protocol, we will continue to conduct a thorough review of this incident.
Hostmonster:
We have regained control late last night and are investigating this matter extensively.
Endurance’s History with Terrorists and “Specially Designated Nationals”
An SDR is a designation the US Government makes to individuals Americans are (generally) prohibited
from dealing with (very special “bad guys”, according to the US Government):6
As part of its enforcement efforts, OFAC publishes a list of individuals and companies owned or
controlled by, or acting for or on behalf of, targeted countries. It also lists individuals, groups,
and entities, such as terrorists and narcotics traffickers designated under programs that are not
country-specific. Collectively, such individuals and companies are called "Specially Designated
Nationals" or "SDNs." Their assets are blocked and U.S. persons are generally prohibited from
dealing with them
Page 31 of 61
An Endurance subsidiary was doing business with an SDR named Kahane Chai for many years after Chai
was designated an SDN (in 2001)7:
It seems Endurance’s subsidiary did business with Kahane Chai for at least 6 years 8:
Endurance detected a few additional SDRs as well (these are just the publicly disclosed ones): 9
Page 32 of 61
Endurance and the Taliban – Nearly All Endurance Companies Don’t Expressly Prohibit Terrorism
Endurance has had terrorism-related problem going back to 2008. It hosted a website that taught its
members how to outfit a suicide bomber, included al-Qaeda propaganda videos, and offered a Taliban
video showing the beheadings of three spies:10
Endurance International previously hosted another website that supported holy war in Iraq.11
Most Endurance Company Terms of Service Does Not Expressly Prohibit Terrorism
Jean McCarthy, marketing director for Endurance International, told the Boston Globe:
"Our terms of service expressly prohibit the use of our services for terrorist or unlawful
purposes,"
We checked several of Endurance companies’ terms of service, and we found the above claim is
substantially false12:





Bluehost’s terms of service does not expressly prohibit the use of its services for terrorist
purposes
Hostgator’s terms of service does not expressly prohibit the use of its services for terrorist
purposes
Hostmonster’s terms of service does not expressly prohibit the use of its services for terrorist
purposes
Bluehost’s terms of service does not expressly prohibit the use of its services for terrorist
purposes
Bizland’s expressly prohibits the use of its services for terrorist purposes.
Page 33 of 61
Endurance and Its High Concentration of Black-listed websites
Endurance International Group seems to host a disproportionately high percentage of malware/spam13:
Endurance High % of Black-listed websites
Godaddy Endurance
1,052
Black-listed websites
969
9,473
Active websites
2,374
Black-listed as % of Active
11.1%
40.8%
Uribl gathered the Top 100 Registrars with Blacklisted Domains, and Endurance is consistently one of
the top 4 (if you add all its subsidiary domains). The list is updated on a rolling 5 day period, but we’ve
found that Endurance has consistently ranked highly in total number, as well as yielding a high % of
spam sites versus non spam sites.
Note that one of the largest contributors to the Endurance related black-listed websites are from Directi
related companies. publicdomainregistry.com, the undisclosed subsidiary, is one of the largest blacklisted website registrars:
Specific example of the kinds of malware the above monitors14:
Page 34 of 61
Bizland (a.k.a. Endurance) history of malicious activities
66.96.147.66 (Endurance/Bizland IP address) has been listed on Cyberwarzone because it has a history
of malicious activities. The IP has been reported on various domains which keep track of malicious IP’s.15
Reasons why 66.96.147.66 is listed on Cyberwarzone:





History of being on a blacklist
History of being used in an aggressive marketing campaign
History of malicious traffic or use
Triggered as a spam-bot or aggressive crawler
We were lazy and we did not see that it is a false-positive
Over 1,000+ domains on Bizland have been Malware-related
Over 1,000 Endurance-related domains have been flagged with the following warning16:
All domains/IPs listed on this website should be treated with extreme caution. Some of them
will automatically infect your computer.
Bulk Injection Hack infects ~20,000 Endurance-related Websites
Endurance’s websites, in yet another example of how they seem more vulnerable than websites hosted
elsewhere, accounted for 57% of compromised websites17:
“During the first week of September 2010, the number of affected websites ranged from 22,000
to about 39,000 depending on the day. According to the data collected by Websense, BlueHost
was the most affected hosting company and accounted for 38% of compromised websites. It
was followed by DreamHost with 28%. BizLand and Go Daddy acquired the third and fourth
spot with 19% and 12% respectively.”
Page 35 of 61
Endurance is a Reseller of Tucows, Designated as “Notorious” by the US
Endurance is a reseller of Tucows according to one of Endurance VP’s comments 18:
Mitch Haber, VP of Product Management at The Endurance International Group, an OpenSRS
reseller, offered his congratulations. “OpenSRS is a true partner. Their platform is solid and their
support team is among the best in the industry. They have played a key role in our success and
we look forward to working with them toward the next 10 million domains under management.”
The US trade office designated Tucows in its annual “notorious markets” list as an example of concern
about some registrars not taking action to block or suspend sites selling illegal goods.19
And it’s not just the US government, The Japanese government requested suspension of a company
selling illegal unapproved drugs, yet the company continued operating under a Tucows domain
illegally.20
Page 36 of 61
Endurance makes the following claims about its business 1:
CEO Hari Ravichandran says2:
“Our most powerful channel is customer advocacy and word of mouth. About 45% of new
subscribers added to the Endurance platform find us through word of mouth, which does not
offers any marketing dollars. We accomplish this by focusing on delivering a superior solution,
fueled by our cloud enablement platform, and great customer service.”
Gotham City Research has found that customers disagree with the above representations. In fact, we
believe Endurance International’s business is actually characterized by the following qualities:





Low quality products & services, exacerbated by underinvesting in its business.
Low quality customer & technical support.
High churn business, and attempts to conceal its true churn by re-defining churn.
High customer cannibalization.
Endurance’s acquired companies deteriorate, post-acquisition.
Page 37 of 61
Our opinions are supported by the following findings:






Very low R&D spending – underinvests in its core infrastructure (e.g. servers)
Service outages, frequent service disruptions
Poor customer reviews – with specific and detailed grievances.
EIGI twists the definition of churn/retention to the point that the disclosures resemble lies.
An industry expert explicitly states EIGI’s churn/retention definition/framework “is not the
industry common practice, while using industry terminology. Their businesses suffers from the
same issues other ‘hosters’ suffer.”3
Documented examples of cannibalism
Endurance Underinvests in Infrastructure so It Can Squeeze Out as Much as Possible from Customers
In the prior section, we indicated how Endurance’s suspect practices have attracted terrorist-related and
spam/malware-related subscribers. We find that EIGI’s practices not only contribute to harming the
general public, it also profits at its customers’ expense.
Endurance spends 60-80% less per customer on infrastructure, than Godaddy does4:
R&D Spending per Subscriber Comparison
2012
Godaddy
EIGI
variance
2013
2014
$17.14 $17.95 $20.02
$4.28
$6.63
$3.89
(75.0%) (63.1%) (80.6%)
Endurance’s R&D spending per revenue dollar is even low compared to the much larger Salsesforce.com,
which is seen as a sales heavy organization in the tech world.5
We use the words R&D and infrastructure synonymously, as both Godaddy and Endurance have
comparable definitions. Here is EIGI’s R&D definition i.e. ‘Engineering and Development Costs’:
Engineering and development costs incurred in the development and maintenance of the
Company’s technology infrastructure.
Our engineering and development activity is focused on enhancing our systems, developing and
expanding product and service offerings, and integrating technology capabilities from our
acquisitions.
Page 38 of 61
Godaddy’s stock-based compensation to R&D employees exceeds EIGI’s by 10x:
EIGI
Godaddy
Some might assume that EIGI’s R&D efficiency is greater than Godaddy’s. However, that fails to explain a
clear pattern of service disruptions and consistent post-acquisition customer complaints
How valuable is a web hosting company with frequent (and worsening) service outages?
Endurance companies experienced at least 4 large-scale service outages last year, and they seem to be
worsening with timing6:
Date
Duration
Aug-13 24 hours of downtime
Dec-13 3 days of downtime
Apr-14 24 hours of downtime
May-14 9 hours of downtime
Oct-14 5 days of downtime
EIGI seems to have trouble monitoring outages (it seems the company is not even aware until customers
complain)7:
The official Twitter accounts for BlueHost and HostGator at first sent out messages suggesting
that the hosts were not aware of any outages, but shortly before 3 p.m. Tuesday, BlueHost's
official Twitter account tweeted the following announcement: "FYI we're experiencing a
Page 39 of 61
temporary network issue with our data center that's affecting some customers. If that's you stay
tuned for updates!" HostGator's official Twitter account tweeted a similar message out around
the same time, alerting users to the fact that the site was aware of the service outage and was
working to address it.
The outage led a number of BlueHost and HostGator customers to send tweets of frustration to
the accounts for the hosting services.
"Really @bluehostsupport @bluehost? You have my website down (& phone support broken) on
the BIGGEST fundraing day of the year? Unacceptable," @tweeted @AimeeCustis.
"been an hour+ and we're still down. you gonna explain yourselves, gator?? we want 2014 for
FREE.@HGSupport @hostgator #hategator," tweeted @Lazytravelers.
Some Twitter users even threatened to cancel their accounts, including @JohnTVokc: "New Years
Resolution for 2014 - Find a much more reliable host for my dedicated server account.
@hostgatorcontinues to disappoint."
The tagline on EIG's Google search listing states that "Endurance International empowers the
spirit of the entrepreneur with better web solutions for better success," but Tuesday's was at
least the second major outage its customers endured in 2013, as thewhir.com reports that
HostGator, BlueHost and other EIG services went down for an extended period of time in August.
The following twitter exchange (on the next page) reveals a few qualities we believe are companywide8



Service outages and product quality have worsened with time.
Endurance International has destroyed formerly average and quality hosting companies. Once
acquired, a formerly good company becomes a bad company, and an average one becomes a
terrible one.
Endurance engages in deceptive (and at times) false advertising.
Page 40 of 61
Page 41 of 61
Deceptive Marketing and False Advertising
The above exchange reveals what appears to be false advertising on the part of a small orange:
Customer Reviews are Poor
Customer reviews are so poor, detailed, and descriptive, we’ve decided to summarize the main
grievances, highlight a few complaints, and leave the rest for later. We’ve tended to find complaints
even when we were not looking for them. A recent former Hostgator customer assessment summarizes
some of the common complaints (wrote the following in January 2015):9
I thought I'd share my recent experience after moving from Hostgator to Stablehost two weeks
ago. I own a (locally) popular Wordpress blog and faced some serious issues with the Hostgator
baby croc package, which was my host of choice for the past two years.
These included, but were not limited to:
Security issues - most notably a rogue Hostgator user on my server using mod_userdir to
install a phishing script on mydomain.com/~hackername. Hostgator later apologized
and blocked mod_userdir after I had to specifically request it (I was amazed that they
don't do it by default!?)
Performance issues - as my traffic grew, I began receiving constant CPU resource email
nagging, resulting in frequent temporary account restrictions.
Generally unprofessional and SLOW support
Page 42 of 61
Statistically significant sample of Complaints
We encourage you to evaluate these and other customer reviews:









49 comments, nearly all complaining about outage More Downtime for HostGator and BlueHost
Customers as Router Issues Plague Utah Data Center http://www.thewhir.com/web-hostingnews/downtime-hostgator-bluehost-customers-router-issues-plague-utah-data-center
23 very negative reviews about Homestead (Google ‘homestead hosting’ and you get to
http://www.cnet.com/products/homestead-web-host/user-reviews/
Bluehost – 6 pages of reviews. Reviews since 2014 are terrible, reviews in 2013 were mixed,
and
reviews
up
to
2012
were
excellent.
https://www.webhostinghero.com/reviews/bluehost/2/#listing
Hostmonster 62 reviews most are terrible – http://www.whoishostingthis.com/hostingreviews/hostmonster/ Dotser all 19 reviews are poor http://www.whoishostingthis.com/hosting-reviews/dotster/
Bluehost
user
ratings
far
worse
than
the
‘experts’
rating
–
http://www.whoishostingthis.com/hosting-reviews/bluehost/
Hostgator – On yelp 1.5 stars out of 5 – 25 reviews: http://yelp.com/biz/hostgator-houston-3
15 negative comments about Hostgator and other Endurance companies
http://www.linux-depot.com/non-endurance-international-group-eig-hosting/
“hostgator
sucks…any
alternative”
–
one
of
many
similar
threads
http://www.webhostingtalk.com/showthread.php?page=2&t=1326038#postcount9389876&ut
m_source=twitterfeed&utm_medium=twitter
The “before and after” Endurance acquires summary10:
And both Bluehost and Hostgator are owned by Endurance International Group. Both hosts used
to have a reputation of being excellent before EIG bought them out. Both hosts are now the
subject of regular complaints (mainly overcrowded and slow servers, and unresponsive support
that doesn't support) on a number of forums specialising in web hosting and web mastering.
Customer Confusion and Customer Cannibalism
EIGI’s seemingly deliberate strategy of not building a brand leads to both intended and unintended
consequences. One of the intended consequences is best described as follows11:
The separate branding on the part of Endurance means that customers aren’t aware that many
of these properties operate on the same platform. The outage resulted in several major brands
and several million websites knocked out, many of whom probably didn’t realize that they were
Endurance customers.
Page 43 of 61
Endurance probably hopes that customer confusion leads customers to simply leave one Endurance
company for another one. The problem with this strategy, and the unintended consequences:


Long-term brand erosion, leading to higher churn (or worst case, discontinuing a brand).
Dilutive cannibalism – the example in the next page shows how an affiliate marketer of A Small
Orange (“ASO” an EIGI company), bad-mouths Hostgator (an EIGI company). Hostgator is a
much bigger company versus ASO, so cannibalism seems counterproductive:
The above Tweet concurrently badmouths Hostgator whilst complimenting ASO. IT was RT-ed 20x
EIGI’s True Churn is Very High – Revenue not as stable as Portrayed
EIGI discloses a “Monthly Recurring Revenue Retention Rate” of 99%.12
Page 44 of 61
The implied churn rate of 1% (since EIGI does not disclose churn), implies the company has industry leading churn:
Monthly Churn
GDDY
1.3%
WWWW
1.0%
WIX
2.0%
EIGI Undisclosed
What is Endurance’s secret sauce? An industry veteran does not understand how Endurance reports such low churn,
given that some of its more high profile subsidiaries suffered from higher churn, EIGI acquired them13:
I closely watched Endurance presentations, and their claim of “1% Churn” got my attention. They
have repeated that claim on their Q4-2013 earnings call while defining the MRR retention at 99%.
They have kept that statement in their Q1-2014 results.
Out of the over 50+ companies that were bought over the past years, there are a few which were
players in the Hosting market for many years and were struggling with churn throughout those
years. Included among them are: HostCentric, Hostmonster, Bizland, homestead, domain.com,
Ehost, ApolloHosting [these are all Endurance subsidiaries].
I wondered what the Endurance team did in order to reduce the industry-inherited churn in these
companies.
After analyzing EIGI’s numbers more carefully, he concluded that EIGI’s figures are not consistent with industry
norms:
The Endurance guys used in their analysis a model which is not the industry common practice,
while using industry terminology.
Their businesses suffers from the same issues other ‘hosters’ suffer, and most probably at the
same level.
In summary, Churn has always been a key performance indicator of a Hosting company. No
hosting company can avoid it, and they all continue to struggle to minimize it.
CEO Ravichandran’s explanation of churn does not make sense
EIGI’s CEO has claimed that:14
“85% to sometimes it's higher than 90% of the subscriber churn that happens is businesses just
going out of business. So this is off the churn number, 85% to 90% would be people going out
of business.”
So if we are to trust Ravichandran and EIGI, churn is %1 per month, and 85%-90% of that is from “people
going out of business.” Yet US statistics regarding business survival consistently shows that businesses
Page 45 of 61
closure (due to failure or voluntary closure) within the first year has been a remarkably steady 20-25%
the 1994-2010 period15:
Ravichandran’s explanation would imply that new customers hosting on EIGI brands only close shop at a rate of
10%-11%, significantly less than the 20-26% historical rate. We don’t think that’s the case, especially coupled with
the significant service outages, customer complaints, integration issues, and other problems we’ve discussed in prior
sections.
EIGI’s Distorted ARPS Figures Contributes to a Distorted Churn
Recall how Endurance was magically able to transform a -13% decline in ARPU to a +11% improvement in 2014.
Since churn requires accurate, relevant, and consistent disclosures of customer counts, a distorted ARPU implies a
distorted churn.
Page 46 of 61
Web hosting is a Competitive Business
Web hosting is a commoditized industry with low barriers to entry, low ARPU, high customer churn, and
formidable competition. Additionally, Endurance’s core markets are saturated, as the 4 largest players
account for over 85% of the core markets1:
Recent Subscriber #s
GDDY
12.7
EIGI
4.1
WWWW
3.3
WIX
1.2
TOTAL
21.3
Core Markets
25.0
as % of Core
85%
On a reported Adjusted EBITDA basis (which we believe is really ‘EBITDA before costs’) EIGI looks
profitable & far more profitable than its peers:
2012
2013
2014
GDDY
19.1%
17.4%
19.6%
WWWW
35.5%
31.1%
29.8%
EIGI
45.8%
40.0%
37.4%
Blink had “Industry-leading” profitability as well (driven by suspect business practices):
Blinkx's Revenue per Employee Surpassed Peers
revenue per
Employees Revenue
employee
RocketFuel
552
$240
$434,783
YuMe
357
$157
$439,776
Tremor
287
$148
$515,679
Criteo
452
$240
$530,973
Blinkx
265
$247
$932,830
Page 47 of 61
Competition and commoditization leads some companies to innovate – and others to cut corners.
Gotham City Research believes Endurance’s behaviors are more consistent with the latter (following in
the footsteps of Blinkx). The below-mentioned explains some of EIGI’s higher Adj. EBITDA vs peers:


Boost revenue by either willfully ignoring or outright attracting suspect (but highly profitable)
accounts, e.g. malware/spam-related. Hosting terrorist-websites and other black-listed sites are
symptomatic of aggressive “profits at any cost” practices.
Cut costs by squeezing as much out of customers as possible – Slash infrastructure spending and
customer support-related spending, leading to service outages, slow speeds, and poor customer
service.
Yet EIGI looks far worse than its peers on a cash flow, gross margin, and revenue per employee bases:
EIGI Free Cash Flow vs Peers
2012
2013
2014
$ in 000s
$46,745 ($55,153)
$73,249
GDDY
$62,788 $88,082
$82,794
WWWW
($306,652) ($94,294) ($226,156)
EIGI
2014 REVENUE PER EMPLOYEE
Revenue Employees Revenue per employee
GDDY $1,387,262
4,908
$282,653
WWWW $543,937
2,100
$259,018
EIG $629,845
2,503
$251,636
GROSS MARGIN - EIGI vs PEERS
2012
2013
GDDY
52.8%
58.1%
WWWW
60.7%
65.1%
WIX
78.9%
81.0%
EIGI - reported
18.8%
32.7%
EIGI - comparable
49.0%
53.1%
2014
62.6%
64.7%
81.6%
39.4%
55.7%
The following qualities would explain the above:





Endurance’s ARPU is declining and organic growth is low/mid single-digits.
Churn is very high, and the company tinkers with its subscriber definition to mask this.
Directi/international revenue are suspect. The company is desperate for any top-line growth.
Sales and marketing spend per revenue is relatively high, to compensate for high churn.
The company acquires competitors aggressively, slash and burn, and report suspect profits In
order to mask the variance between cash flow and Adjusted EBITDA.
Something else must contribute to the wide variance between EIGI’s Adjusted EBITDA & FCF
Page 48 of 61
Cash collected & cash spent provides insight to an investor to gauge the overall health of EIGI
EIGI includes the following definition/description of Adjusted EBITDA, and states the importance of
emphasizing cash-in and cash-out to properly gauge its health2:
Endurance’s rhetoric seems sound – except EIGI’s calculation of Adjusted EBITDA adds back highly
relevant ‘cash spent’, pretending as if ‘cash spent’ does not matter (EIGI’s words & actions contradict):
EIGI Adjusted EBITDA Overstated 40%-100%+ Once Adjusted EBITDA is Standardized
We believe EIGI’s Adjusted EBITDA does not help investors gauge the health of its business. We also
believe EIGI’s true adjusted EBITDA looks more like the following, after one actually factors in both cash
collected and cash spent, not just cash collected:
Adjusted EBITDA - EIGI's Perspective vs Standardized
$ in 1,000s
2012
2013
2014
Adjusted EBITDA - EIGI Perspective $ 133,664 $ 207,931 $ 235,618
(32,767) (45,036)
(4,787)
(294) (45,594) (19,927)
Changes in ST + LT Deferred Revenue (124,257) (62,125)
(75,923)
Adjusted EBITDA - Standardized $ (23,654) $ 55,176 $ 134,981
Overstatement (117.7%)
(73.5%)
(42.7%)
Transaction expenses and charges
Integration and restructuring expenses
Page 49 of 61
‘Transaction expenses and charges’ and ‘Integration and restructuring expenses’ are cash costs
Endurance is a roll-up, and has a long and consistent history of M&A since 2002 (13 years ago) as the
article titled “Bizland [Endurance’s former name] Growing Through Acquisitions” clearly demonstrates3.
Because on-going acquisitions has been core to Endurance’s DNA, these cash expenses have been
normal and recurring, and should be added back.
Endurance’s peer companies – WWWW and GDDY – are far more conservative in adding back these
other adjustments to Adj. EBITDA (in fact, Godaddy’s ‘other adjustments’ actually reduces Adj. EBITDA) 4:
Adjusted EBITDA Adjustments vs Peers
$ in mms
2012
2013
2014
GDDY
($28.7)
$0.4
($16.5)
WWWW
$3.5
$1.7
$2.7
EIGI
$12.4
$90.6
$24.7
Deferred revenue adjustments incorrect given accounting irregularities, no refund reserve disclosures
Although adding back deferred revenue to Adjusted EBITDA is standard for publicly-traded web hosting
companies, we believe the deferred revenue add-backs are improper for Endurance specifically because:




EIGI’s ‘Total customer’, ‘ARPU’, and ‘Churn’ definitions are not consistent with peers (as
discussed).
True churn is higher than EIGI reports. Higher churn leads to higher refunds which reduces
deferred revenue (and therefore, future revenues).
EIGI does not disclose its refund reserves, despite discussing its importance. The concern is that
deferred revenue balances are inaccurate.
We’ve identified accounting irregularities in EIGI’s deferred revenue balances.
Refunds are Important yet EIGI Does not disclose refunds
Refunds are clearly important to EIGI5:
“We may not have adequate reserves in the event that our historical levels of refunds increase,
which could adversely affect our liquidity and profitability.”
Yet the company does not disclose refunds, or refund reserves. Given the service outages experienced
by Endurance’s customers in 2013, 2014, 2015, this seems highly suspect.
Date
Duration
Aug-13 24 hours of downtime
Dec-13 3 days of downtime
Apr-14 24 hours of downtime
May-14 9 hours of downtime
Oct-14 5 days of downtime
Page 50 of 61
Deferred Revenue Irregularities
Like many other Endurance-related figures, there are accounting irregularities in deferred revenue:
Unexplained Deferred Revenue Irregularities
$ in 1,000s
2012
2013
Changes in ST deferred revenue
$102,121
$43,118
Changes in LT deferred revenue
$22,136
$19,007
Changes in deferred revenue - Calculated
$124,257
$62,125
$104,069
$51,047
Changes in deferred revenue - reported
Unexplained difference
$20,188
$11,078
2014
$65,371
$10,552
$75,923
$67,654
$8,269
Correspondence with the SEC: Feeling the Pressure
The Securities and Exchange and Commission recently questioned EIGI’s pro forma Free Cash Flow and
Unlevered Free Cash disclosures. Rather than defending its practices (though it does offer a token
rebuttal), the Company folded6:
“The Company will remove FCF and UFCF from its future reports on Forms 10-Q and 10-K filed
with the Commission.”
The Company no longer discloses those pro forma figures in its 10K. However, it continued disclosing
them in its earnings releases.
Page 51 of 61
Normalized EBITDA – Unable to cover Interest Expense, Shares Approach $0.00 per share
Endurance has relied on related parties (which are substantially itself) and under-invested in its core
infrastructure for years. EIGI’s acquisition spree and accounting shenanigans have concealed customer
churn and inflated revenue and ARPU growth. If Endurance’s R&D spending were to simply converge to
Godaddy’s level of R&D (as a percentage of revenue), in order to play “catch-up” and remove the effects
of, the Company will have trouble servicing its debt1:
Normalized EBITDA - Unable to Cover Interest Expense
$ in 1,000s
2012
2013
Adjusted EBITDA - Standardized
($23,654)
$55,176
Normalized Infrastructure spend
($42,455)
($72,468)
Normalized Adjusted EBITDA
$18,801
$127,644
Interest Expense
($126,165)
($98,449)
2014
$134,981
($95,972)
$39,009
($57,414)
We believe the company will be forced to either:


Play “catch-up” on infrastructure spend (to reduce further service outages)
Pay the price of high churn, suffering significant declines in organic revenue.
In either scenario, the Company’s ability to service debt is a near-term risk factor. As a result, we believe
the shares will approach $0.00 per share.
Absent Debt, the Shares See 80+% Downside
If we were to assume Endurance had zero debt on its balance sheet, EIGI stock faces 80%+ downside:




EIGI’s ARPU is declining – Declining ARPU tends to mean ‘game over’ for a company’s stock. See
Blackberry as an example.
EIGI trades at higher multiples compared against the true industry leader, GDDY
WWWW seems like the most appropriate comparable company:
 WWWW trades at ~10x adj EBITDA, and 10x Free cash flow – WWWW’s adj EBITDA and
free cash flow figures are cleaner than EIGI’s (WWWW also actually generates FCF).
 EIGI’s suspect accounting and business practices resemble WWWW. We think EIGI’s
practices are worse, as detailed in this report.
EIGI is worth $2.98 per share, once it trades in-line with WWWW, at 10x Adj. EBITDA
EIGI's Value per Share Calculation
EBITDA Multiple
10.0x
Normalized Adjusted EBITDA
$39,009
Fully Diluted Shares
131,000
Equity value per share
$2.98
Market value per share
$21.94
Upside/(Downside)
(86.4%)
Page 52 of 61
The Ravichandran Ties that Blind
Dr. V. Ravichandran



CEO of Diya Systems
Majority owner of Tregaron
FATHER of EIGI CEO
Indira Ravichandran



Wife of Dr. V. Ravichandran
Majority owner of Tregaron
Mother of EIGI CEO
Tregaron India Holdings


Tregaron india holdings address https://www.google.com/maps/@38.301045,85.57095,3a,75y,167.7h,90t/data=!3m4!1e1!3m2!1sBaUQuRSCN8NWike2AO7q0g!2e0
Glowtouch is Tregaron
https://app.sos.ky.gov/ftshow/(S(ymujrwwoiood4clctf4qez4h))/default.aspx?path=ftsearch&id=
0715135&ct=06&cs=99999
Page 53 of 61

VIDYA RAVICHANDRAN – sister of EIGI CEO
4011 WHITEBLOSSOM ESTATES COURT
LOUISVILLE, KY 40241
Tregaron India Holdings and Glowtouch share a common address






GlowTouch Technologies
The Summit II
4360 Brownsboro Rd.
Suite 200
Louisville, KY 40207
Same address (same suite) as glowtech http://www.manta.com/c/mb5826b/tregaron-indiaholdings-llc
http://www.glowtouch.com/contact/
Glowtouch is diya http://company.monsterindia.com/diyasmin/
Glowtouch and and eig both invested in by a tregaron capital
http://www.tregaroncapital.com/recent_news.htm
Diya Systems
o Seems to use EIGI services, per https://who.is/whois/diya.net
o Diya Systems is a fully owned subsidiary of GlowTouch Technologies
 http://www.diya.net/aboutus/companies
 Same phone number as glowtech contact
 The Summit II
Employee reviews are terrible:
http://www.glassdoor.com/Reviews/Diya-Systems-Reviews-E641824.htm
Page 54 of 61
Source: http://www.consumercomplaints.in/complaints/glowtouch-technologies-pvt-ltd-c50718.html
Another employee, Shruthi Shetty uses Endurance/Glowtouch interchangeably:
http://people.bayt.com/shruthi-shetty-14189325/
Page 55 of 61
Directi Revenue Does Not Reconcile
We gathered all Indian filings for all the Directi and related entities, and attempted to reconcile EIGI’s
disclosed revenue with the sum of all the Indian entities. They did not reconcile as already discussed.
Directi Revenue Reconcilation
Low
directi internet solutions pvt ltd 1,039,666,986
91,272,462
directi web services pvt ltd
757,256
directi services pvt ltd
0
Directi Web Technology Pvt Ltd
484,358
PDR DOMAINS SOLUTIONS PVT LTD
16,263,120
Big Rock Solutions
TOTAL REVENUE ( in INR) 1,148,444,182
USD INR exchange rate
0.017
in USD
$19,523,551
ADJUSTED REVENUE
$48,500,000
ADJUSTED REVENUE
$31,300,000
High
277,126,173
50,774,780
1,726,063
411,314,905
502,555
2,621,188
744,065,664
0.0162
$12,053,864
$48,500,000
$29,000,000
Notes:


We used 2013 and 2014 year figures
Because EIGI’s reported Directi revenue do not reconcile, we used both numbers as part of the
‘low’ and ‘high’ analysis
Page 56 of 61
Organic Growth Calculations
2013 Organic Growth
2012
$ in 1,000s
2013
GAAP Revenue $292,156 $520,296
Purchase accounting adjustment
Homestead/Homegator/Other
$64,123
$7,311
$90,150 $245,800
Organic Revenue $266,129 $281,807
Organic Growth
5.9%
Notes:


We add back the ‘purchase accounting adjustment’ to GAAP revenue
We exclude the Homestead/Homegator/Other revenue (combination of disclosed and
estimated values) from EIGI’s GAAP revenue
2014 Organic growth
2013
$ in 1,000s
$520,296
GAAP revenue
$528,119
adjusted revenue
Directi
Arvixe, BuyDomains, & Webzai
Other acquisitions
Organic Revenue
Organic Growth


2014
$629,845
$651,945
($48,500)
($14,600)
($31,000)
$557,845
5.6%
We use 2014 adjusted Directi revenue as provided by the 10K 2014
Other acquisitions – includes the following (adjusted for date of acquisition completion):
 Radix estimate of $28.4 million (the average gLTD brings in 28.4 million per launch,
Radix launched three gLTDs in June 2014).
 Buydomains owns 950,000 domain names. Domain name resellers typically sell 2% of
inventory per year. We assume an avg selling price of $1,200-$1,500 per domain.
 Arvix disclosed revenue for 2013 = $ 12 million, we conservatively assume revenues
grew to $14 million in 2014.
 Webzai , we estimate $4.75 million in revenue
Page 57 of 61
End Notes
Introduction
1. GDDY, WWWW, and EIGI SEC filings
2. GCR Investigation
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
GDDY, WWWW, and EIGI SEC filings
EIGI Investor Presentation
EIGI proxy filings, 10Ks, and IPO filings
EIGI IPO filing exhibit
http://www.sec.gov/Archives/edgar/data/1237746/000119312513361255/d555515dex1020.ht
m
Sam Antar, Former CFO of Crazy Eddie’s
Glowtouch Revenue information: http://www.inc.com/profile/glowtouch-technologies
Glowtouch website
http://www.hostgator.in/contact
Diya website
http://who.is/domain-history/glowtouch.com
https://who.is/whois/diya.net
http://www.linkedin.com/in/ahujavivek
EIGI quarterly releases, and sell side estimates
EIGI filings
GDDY, WWWW, and EIGI SEC filings
GCR due diligence
1.
2.
3.
4.
5.
6.
EIGI Investor presentation
EIGI 10K 2014
EIGI Q4 2014 earnings call
GDDY IPO filing
EIGI proxy filings
EIGI 10K 2014
Page 58 of 61
7. directi internet solutions pvt ltd, directi web services pvt ltd, directi services pvt ltd, Directi Web
Technology Pvt Ltd, PDR DOMAINS SOLUTIONS PVT LTD, Big Rock Solutions Indian filings with
the Ministry of Corporate of Affairs
8. directi.com , ‘recent media coverage’
EIGI’s undisclosed U.A.E. subsidiary and its false credentials
1. EIGI 10K 2014
2. https://gacweb.icann.org/download/attachments/27131927/RadixReg-US31.pdf?version=1&modificationDate=1353452704000&api=v2
http://www.politico.com/news/stories/1112/84149.html
3. http://www.hfza.ae/en-us/directory.aspx
4. http://www.thedomains.com/2012/09/27/lawyers-attack-directi-radix-new-gtld-applicationsthey-should-be-disqualified/
5. http://english.alarabiya.net/en/News/middle-east/2014/11/15/UAE-formally-blacklists-82groups-as-terrorist-.html
6. http://who.is/whois/https://www.muslimamericansociety.org
Average Revenue per Subscriber is down -13%, Not Up +11%
1. EIGI 10Ks
2. EIGI, GDDY, WWWW SEC filings
3. Directi customer count Source:
http://www.lifesize.com/~/media/Documents/Case%20Studies/Companies%20A%20Through%
20L/Directi%20Case%20Study%20EN.ashx
EIGI 10Ks
4. EIGI 10Ks, 10`Qs, and earnings releases.
5. WWWW 10K 2014
6. EIGI earnings calls
7. EIGI IPO filings
1. GDDY and EIGI SEC filings
2. Syrian Electronic Army website
https://twitter.com/Official_SEA16/status/582381417323048960
https://twitter.com/Official_SEA16/with_replies
http://www.zone-h.org/mirror/id/23960546?zh=1
3. https://who.is/whois/https://islam-army.com
4. Syrian Electronic Army website
Page 59 of 61
5. https://www.hackread.com/syrian-electronic-army-hacks-bluehost-hostgator-for-hostingterrorist-websites/
6. Specially
Designated
Nationals
List
(SDN)
http://www.treasury.gov/resourcecenter/sanctions/SDN-List/Pages/default.aspx
7. EIGI 10K 2014
8. http://who.is/domain-history/kahanetzadak.com
9. EIGI 10K 2014
10. Terrorism in Cyberspace: The Next Generation
11. http://www.boston.com/news/nation/articles/2008/03/27/unwittingly_hosting_terror/?page=f
ull
12. The respect websites’ ‘terms of service’
13. http://rss.uribl.com/nic/
14. https://www.scamwarners.com/forum/viewtopic.php?f=4&t=11184
15. Source: http://cyberwarzone.com/malicious-history-of-66-96-147-66/
16. http://www.malwareurl.com/ns_listing.php?as=AS29873
17. https://wpsecuritylock.com/godaddy-other-network-providers-bulk-injection-hack/
18. http://www.tucows.com/domain-registrar-tucows-inc-reaches-milestone-10000000-domainsunder-management/
19. http://www.reuters.com/article/2015/03/05/us-usa-trade-piracy-idUSKBN0M121F20150305
20. http://blog.legitscript.com/2015/01/twitter-spat-russian-rogue-internet-pharmacy-operator/
1.
2.
3.
4.
5.
6.
7.
EIGI Investor Presentation
EIGI earnings call
http://cloudtweaks.com/2014/07/endurance-new-way-measure-churn/
GDDY and EIGI filings
CRM SEC filings
GCR due diligence
HostGator & BlueHost Are Down Due To EIG Outage
Source: http://www.ibtimes.com/hostgator-bluehost-are-down-due-eig-outage-1523952
8.
9.
10.
11.
https://twitter.com/BrittMalka/with_replies
Source: http://www.webhostingtalk.com/showthread.php?t=1451220
Source: https://www.drupal.org/node/2407073
http://www.datacenterknowledge.com/archives/2013/08/05/how-did-the-failure-of-networkswitches-at-a-little-known-data-center-in-provo-utah-knock-four-major-services-and-millionsof-web-pages-offline/
12. EIGI Investor Presentation, EIGI, GDDY, WIX, WWWW filings
13. http://cloudtweaks.com/2014/07/endurance-new-way-measure-churn/
14. Q1 2014 earnings call
Page 60 of 61
15. Business failure Source: https://www.linkedin.com/pulse/20140915223641-170128193-whatare-the-real-small-business-survival-rates
1. EIGI Investor Presentation, and WWWW, GDDY, EIGI SEC filings.
2. EIGI 10K
3. Bizland rollup strategy:
http://www.indianewengland.com/ME2/Audiences/dirmod.asp?sid=&nm=&type=Publishing&m
od=Publications%3A%3AArticle&mid=8F3A7027421841978F18BE895F87F791&tier=4&id=EE1BC
DFDFC484619A8FF862ED5FA696A&AudID=FB6219837BDE4E39877F2E53436E947B
4. GDDY, WWWW, and GDDY SEC filings
5. EIGI 10K
6. SEC Correspondence letter
1. EIGI, GDDY SEC filings
Page 61 of 61

GOTHAM CITY RESEARCH LLC Endurance

Transcription

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