Enom 2012 Annual Report Download - page 70

65
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, 2012, our principal sources of liquidity were our cash and cash equivalents in the amount of $102.9
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, impacted significantly by
our upfront investments in content and also reflects our ongoing investments in our platform, company infrastructure and
equipment for both our service offerings, the net sales and purchases of our marketable securities and more recently our
investments in gTLD applications.
We intend to evolve and continuously improve our content creation and distribution platform and to create new content
formats to enhance our content product offerings. In 2012 such changes included increasing our investment in video, long-
form content and images, publishing content directed at international markets and in languages other than English, as well as
increasing and expanding distribution of our content to our network of customer websites. As we made improvements and
assessed the impact of such improvements to our content creation and distribution platform we reduced the level of our overall
investment in media content in 2012 when compared to 2010 and 2011. However, based on our assessment of the results to
date, we expect to increase our investment in media content during 2013 compared to 2012.
In connection with our gTLD initiative under the New gTLD Program, we incurred formation cash costs of $2.2 million
and expect to incur further formation costs of between $5 million and $10 million in 2013. We also made $18.2 million of
capital investment in gTLD applications in the year ended December 31, 2012 and the net amount of capital investment
incurred in our pursuit of gTLD operator rights in 2013 could be substantially higher or lower as the New gTLD Program
progresses.
Since our inception through December 31, 2012 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, 2012, we repurchased 1.1 million
shares at an average price of $8.02 per share for an aggregate amount of $8.9 million and approximately $24 million remains
available under the repurchase plan at December 31, 2012. 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.
We entered into a credit agreement (the “Credit Agreement”) with a syndicate of commercial banks in August 2011. 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 has
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, 2012, no principal balance was outstanding and
approximately $95 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.