Enom 2013 Annual Report Download - page 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, 2013, our principal sources of liquidity were our cash and cash equivalents in the amount of $153.5 million, and our
$125.0 million revolving loan facility.
Historically, we have principally financed our operations from the issuance of stock, net cash provided by our operating activities and
borrowings under our 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 oper ations 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 service offerings and, more recently, our investments in New gTLD Program
formation expenses. Since our inception through December 31, 2013, we have also used significant cash to make strategic acquisitions to further
grow our business, including the recent acquisitions of Name.com in December 2012, Creativebug in March 2013, Society6 in June 2013 and
earlier acquisitions detailed in our 2012 Annual Report on Form 10-K. We may make further acquisitions in the future.
In connection with our gTLD Initiative under the New gTLD Program, we incurred formation expenses of $8.4 million through
December 31, 2013. We also made capital investments in gTLD applications of $3.9 million and $18.2 million in the years ended December 31,
2013 and 2012, respectively. The net amount of investment incurred in our pursuit of gTLD operator rights in 2014 is expected to be
substantially higher as the New gTLD Program progre sses. In addition, for the year ended December 31, 2013, we recorded a $4.2 million net
gain related to the withdrawals of our interest in certain gTLD applications.
We announced a $25.0 million stock repurchase plan on August 19, 2011, which was increased on February 8, 2012 to $50.0 million.
Under the plan, we were authorized to repurchase up to $50.0 million of our common stock from time to time in open market purchases or in
negotiated transactions. During the year ended December 31, 2013, we repurchase d 0.6 million shares at an average price of $8.65 per share for
an aggregate amount of $4.8 million. Approximately $19.2 million remains available under the repurchase plan at December 31, 2013. 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, dated August 29, 2013, with Silicon Valley Bank, as administrative agent, and the lenders and other
agents party thereto (the “Credit Agreement”). The Credit Agreement provides for a $100.0 million senior secured term loan facility (the “Term
Loan Facility”) and a $125.0 million senior secured revolving loan facility (the “Revolving Loan Facility”), each maturing on August 29, 2018.
The Credit Agreement replaced our existing revolving credit facility that we entered into in August 2011, and a portion of the proceeds from the
Term Loan Facility were used to repay the $20.0 million outstanding principal balance of, and all accrued but unpaid interest and other amounts
due under, the 2011 revolving credit facility.
The Term Loan Facility provides for an up to $100.0 million term loan that was fully drawn at December 31, 2013 (“Term Loans”). The
Revolving Loan Facility provides for borrowings up to $125.0 million, with the right (subject to certain conditions and at the discretion of the
lenders) to increase the Revolving Loan Facility by up to $25.0 million i n the aggregate. The Revolving Loan Facility also includes sublimits of
up to (i) $25.0 million to be available for the issuance of letters of credit and (ii) $10.0 million to be available for swingline loans. Beginning on
December 31, 2013, the Term Loans shall be repaid in quarterly installments of $3.75 million and repaid Term Loans cannot be re-borrowed. At
December 31, 2013, $96.3 million was outstanding under the Term Loan Facility, no principal balance was outstanding under the Revolving
Loan Facility and approximately $113.8 million was available for borrowing under the Revolving Loan Facility, after deducting the face amount
of outstanding standby letters of credit of approximately $11.2 million.
Under the Credit Agreement, loans bear interest, at our option, at an annual rate based on LIBOR or a base rate. Loans based on LIBOR
bear interest at a rate between LIBOR plus 2.00% and LIBOR plus 3.00%, depending on our consolidated leverage ratio. Loans based on the
base rate bear interest at the base rate plus an applicable margin of 1.00% or 2.00%, depending on our consolidated leverage ratio. We are
required to pay a commitment fee between 0.20% and 0.40% per annum, depending on our consolidated lever age ratio, on the undrawn portion
available under the Revolving Loan Facility. The weighted average variable interest rate of the outstanding loans at December 31, 2013 was
2.42%.
63