Enom 2011 Annual Report Download - page 67

Seasonality of Quarterly Results
In general, Internet usage and online commerce and advertising are seasonally strongest in the fourth quarter and generally slower during the summer
months. While we believe that these seasonal trends have affected and will continue to affect our quarterly results, our rapid growth in operations may have
overshadowed these effects to date. We believe that our business may become more seasonal in the future.
Liquidity and Capital Resources
As of December 31, 2011 , our principal sources of liquidity were our cash and cash equivalents in the amount of $86.0 million , which primarily are
invested in money market funds, and our $105 million revolving credit facility with a syndicate of commercial banks. We completed our initial public offering
on January 31, 2011 and received proceeds, net of underwriting discounts but before deducting offering expenses, of $81.8 million from the issuance of
5.2 million shares of common stock.
Historically, we have principally financed our operations from the issuance of stock, net cash provided by our operating activities and borrowings under
our revolving credit facility. Our cash flows from operating activities are significantly affected by our cash-based investments in operations, including
working capital, and corporate infrastructure to support our ability to generate revenue and conduct operations through cost of services, product development,
sales and marketing and general and administrative activities. Cash used in investing activities has historically been, and is expected to be, significantly
impacted by our upfront investments in content and also reflects our ongoing investments in our platform, company infrastructure and equipment for both
service offerings and the net sales and purchases of our marketable securities. During the fourth quarter of 2011, we commenced an evaluation of changes to
improve our content creation and distribution platform, through a number of initiatives including creating new content formats to meet rapidly changing
consumer demand. Such changes may include increasing our investment in premium video and long-form content, increasing and expanding distribution of
our content to our network of customer websites, and an overall reduction in the volume of shorter-form text articles published on eHow.com. In the near
term, we also anticipate increased expenditures in non-algorithmic content such as premium video and longer-form or photo-centric content designed to
further enhance user engagement. Actions to implement such changes are undertaken only to the extent that we believe that their collective impact would
improve the consumer experience on our owned and operated websites and/or increase the future overall revenue generated from our existing portfolio of
media content. While we assess such improvements to our content creation and distribution platform, we have begun and expect to maintain a reduced level of
overall investment in media content when compared to historical levels. We currently anticipate making investments, including in long-lived media content
and the New gTLD Program, of $25 million or more during the year ending December 31, 2012, which amount could fluctuate based on a variety of factors,
including our ongoing evaluation of our content and distribution platform, the gTLD auction process, and other investment opportunities.
Since our inception through December 31, 2011 we also used significant cash to make strategic acquisitions to further grow our business, including those
detailed in Note 13 (Business Acquisitions) to our consolidated financial statements. We may make further acquisitions in the future.
We announced a $25 million stock repurchase plan on August 19, 2011 which was further increased on February 8, 2012 to $50 million. Under the plan,
the Company is authorized to repurchase up to $50 million of its common stock from time to time in open market purchases or in negotiated transactions.
During the year ended December 31, 2011, we repurchased 2.3 million shares at an average price of $7.29 per share for an aggregate amount of $17.1 million.
The timing and actual number of shares repurchased will depend on various factors including price, corporate and regulatory requirements, debt covenant
requirements, alternative investment opportunities and other market conditions.
On August 4, 2011, we replaced our previous revolving credit facility by entering into a new credit agreement (the “Credit Agreement”) with a syndicate
of commercial banks. The Credit Agreement provides for a $105 million, five year revolving credit facility, with the right (subject to certain conditions) to
increase such facility by up to $75 million in the aggregate. The syndicate of commercial banks under the Credit Agreement have no obligation to fund any
increase in the size of the facility. The Credit Agreement contains customary events of default and affirmative and negative covenants and restrictions,
including certain financial maintenance covenants such as a maximum total net leverage ratio and a minimum fixed charge ratio. As of December 31, 2011,
no principal balance was outstanding and approximately $98.0 million was available for borrowing under the Credit Agreement, after deducting the face
amount of outstanding standby letters of credit, and we were in compliance with all covenants.
In the future, we may utilize commercial financings, bonds, debentures, lines of credit and term loans with a syndicate of commercial banks or other
bank syndicates for general corporate purposes, including acquisitions and investing in our intangible assets, platform and technologies.
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