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Endurance International Group:EIGIs Adjusted EBITDA is a Meaningless Metric, as It

Does Not Correlate with Free Cash Flow 4 Questions AllAnalysts Should Ask EIGI

Every $1.00 in reported "Adjusted EBITDA" equals -$0.50 in Free Cash Flow$ in millions Q3-2013 Q4-2013 Q1-2014 Q2-2014 Q3-2014 Q4-2014 TARGET

Adj. EBITDA (Estimate) $41.2 $38.5 $56.7 $55.3 $56.3 $60.0 $500.0 ?Adj. EBITDA (Reported) $49.9 $46.2 $59.1 $56.5 $58.0 $62.0 $500.0 ?

Free Cash Flow ($45.7) ($47.8) ($12.7) ($42.4) ($17.9) ($1.9) ($253.9) ?GAAP Net Loss ($27.7) ($72.6) ($21.7) ($43.0) ($9.4) ($2.8)

EIGI buries earnouts (i.e., deferred consideration), a critical component of its acquisitionspending within the "Cash flows from financing activities" section in the stmt of cash flows.

EIGIs Adjusted EBITDA is apoor proxy for cash flow, given

that Adj. EBITDA hascorresponded with negativefree cash flow, as shown

below.EIGIs long-term $500M Adj.EBITDA target (disclosed 3

months ago) will coincide with-$254M cash losses, if history

serves as a guide.

$500M Long Term Adj EBITDA Goal Mentioned 3 Months Ago

Source: EIGI February 2015 Presentation, pg. 12; Q4 2014 Earnings Presentation, pg. 6

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Disclaimer:By reading this report, you agree that use of GOTHAM CITY RESEARCH LLCs research is at your own risk.In no event will you hold GOTHAM CITY RESEARCH LLC or any affiliated party liable for any direct orindirect trading losses caused by any information in this report. This report is not investment advice or arecommendation or solicitation to buy any securities. GOTHAM CITY RESEARCH LLC is not registered asan investment advisor in any jurisdiction. Gotham City Research LLC is not affiliated or associated withGotham Asset Management, LLC or any of its affiliates.You agree to do your own research and due diligence before making any investment decision withrespect to securities covered herein. You represent to GOTHAM CITY RESEARCH LLC that you havesufficient investment sophistication to critically assess the information, analysis and opinions in thisreport. You further agree that you will not communicate the contents of this report to any other personunless that person has agreed to be bound by these same terms of service.You should assume that as of the publication date of this report, GOTHAM CITY RESEARCH LLC stands toprofit in the event the issuers stock declines. We may buy, sell, cover or otherwise change the form orsubstance of its position in the issuer. GOTHAM CITY RESEARCH LLC disclaims any obligation to notifythe market of any such changes.Our research and report includes forward-looking statements, estimates, projections, and opinionsprepared with respect to, among other things, certain accounting, legal, and regulatory issues the issuerfaces and the potential impact of those issues on its future business, financial condition and results ofoperations, as well as more generally, the issuers anticipated operating performance, access to capitalmarkets, market conditions, assets and liabilities. Such statements, estimates, projections and opinionsmay prove to be substantially inaccurate and are inherently subject to significant risks and uncertaintiesbeyond GOTHAM CITY RESEARCH LLCs control.Our research and report expresses our opinions, which we have based upon generally availableinformation, field research, inferences and deductions through our due diligence and analyticalprocess. GOTHAM CITY RESEARCH LLC believes all information contained herein is accurate andreliable, and has been obtained from public sources we believe to be accurate and reliable.However, such information is presented as is, without warranty of any kind, whether express orimplied. GOTHAM CITY RESEARCH LLC, makes no representation, express or implied, as to the accuracy,timeliness, or completeness of any such information or with regard to the results to be obtained from itsuse. All expressions of opinion are subject to change without notice, and GOTHAM CITY RESEARCH LLCis not obligated to update or supplement any reports or any of the information, analysis and opinioncontained in them.You should assume that GOTHAM CITY RESEARCH LLC has and/or will submit the contents of this reportwith the Securities Exchange Commission, and other entities.

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Table of ContentsI. DisclaimerII. 4 Questions for EIGIIII. Why These Questions Matter

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4 Questions for EIGIGotham City Research expects:

EIGI will beat its Adjusted EBITDA estimates today (just as we expect university students to aceself-graded exams).

Endurance will aggressively dangle its vague $500 million Adjusted EBITDA long-term goal,hoping to fool some investors into thinking that the previously disclosed $500 million figure isnew information, when in fact, the $500 million target is old news from several months ago.

Gotham City Research believes investors will gain a more accurate understanding of the companyshealth and prospects, by asking the following questions (see the next few pages to understand why):

1. Average Revenue per Subscriber (ARPS): What are the total number of end subscribers andresellers you had for each year between 2012 and 2014? How many currently? What % of yourtotal revenues are sourced from resellers for those years?

2. Churn Rate: What is EIGIs monthly churn rate, from 2012-Present? You claim, Our MRRretention rate was 99% for all periods presented. How is this possible, given Endurances datacenter outages, under-investment in core infrastructure, negative customer/employee reviews,and industry peers skepticism regarding your implied churn?

3. International Revenue, Directi, and your undisclosed subsidiarya. What was your 2014 International revenue?b. Explain the Directi revenue inconsistencies found within your 2014 10K (that is, why do

they not add up?) See our report for context.c. Who is the Domain Name Business (i.e. the undisclosed subsidiary) that you

purchased from a company associated with the founders of Directi Holdings?

4. Does your long-term target $500 million adjusted EBITDA suggest positive Free Cash Flow aswell? Your historical Adjusted EBITDA has not corresponded with positive Free Cash Flow.

Endurance does not Disclose End Subscriber Numbers2012 2013 2014 Current

End Subscribers Undisclosed Undisclosed Undisclosed UndisclosedResellers Undisclosed Undisclosed Undisclosed Undisclosed

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Why These Questions MatterSummary: Gotham City Research believes Endurance International Group utilizes unconventionalaccounting practices, hoping investors will not diligence EIGIs suspect business practices or accountingany further. EIGI hopes investors will rely on spoon-fed propaganda from EIGI management and WallStreet analysts, rather than talk to former employees, customers, etc. EIGI and its management correctlybelieve (so far) they can fool some of the people, all of the time.Astute investors, on the other hand, will look past EIGIs obfuscation, focusing on EIGIs true ARPS/ARPU,churn, EIGIs international business, free cash flow, etc.Astute investors will disregard EIGIs previously disclosed $500 million Adj. EBITDA long-term target,noting Adj. EBITDA has not historically corresponded with positive free cash flow. Moreover, the stockprices of tech companies with deteriorating ARPU & churn crash years before fat profits are generated.For example, Blackberrys share price, ARPU, and churn deteriorated years before revenue & profits did:

As shown above, Blackberrys stock price peaked in 2008 (just as ARPU and churn began trendingnegatively). By 2011, Blackberry and EPS grew multi-fold, yet the stock had already crashed 80%+ bythen. We believe Endurances stock price today is where Blackberrys stock price was ~2008.

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EIGI Conceals its True ARPS/ARPU and Churn Trends In Order to Buy Time (so mgmt can unload stock?)Gotham City Research believes:

EIGI is playing tricks with its ARPS/ARPU definitions to conceal a material decline in itsARPS/ARPU (we calculate ARPS/ARPU actually declined ~-13% in 2014 vs EIGIs claimed ~+11%growth). The companys ARPS/ARPU has recently mix shifted into lower ARPS/ARPU businesswith the Directi acquisition. Historically such a mix-shift merits a lower valuation.

Actual churn is very high, and the company knows it. The company hides its true churndeterioration hoping that investors, EIGIs peers, and the public at large wont learn about thesuspect business means by which it has masked its churn and propped EIGIs revenues (for now).

Godaddy, the industry leader, has a rather simple, easy to understand definition of subscribers:Godaddys ARPU/ARPS is simple and easy to understand. GDDY uses 63 words, 4 lines to define totalcustomers whereas EIGI uses 233 words and 12 lines to define it.Godaddys definition is simple:

We define total customers as those that, as of the end of a period, have an active subscription. Asingle user may be counted as a customer more than once if the user maintains activesubscriptions in multiple accounts. Total customers is an indicator of the scale of our businessand is a critical factor in our ability to increase our revenue base.

Endurances definition is needlessly complicated (why else would it be complicated, but to deceive?):We define total subscribers as those that, as of the end of a period, are identified as subscribingdirectly to our products on a paid basis. Historically, in calculating total subscribers, we includedthe number of end-of-period subscribers we added through business acquisitions as if thosesubscribers had subscribed with us since the beginning of the period presented. Since the firstquarter of 2014, we have included subscribers we added through business acquisitions from theclosing date of the relevant acquisition.Additionally, in the fourth quarter of 2014, we modified our definition of total subscribers tobetter reflect our expanding product mix by including paid subscribers to all of our subscription-based products, rather than limiting the definition to paid subscribers to our web presencesolutions. We do not include in total subscribers accounts that access our solutions via resellersor that purchase only domain names from us. Subscribers of more than one brand are counted asseparate subscribers. We believe total subscribers is an indicator of the scale of our platform andour ability to expand our subscriber base, and is a critical factor in our ability to monetize theopportunity we have identified in serving the small- and medium-sized business (SMB) market.Total subscribers for a period may reflect adjustments to add or subtract subscribers as weintegrate and/or are otherwise able to identify subscribers that meet this definition of totalsubscribers.

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A High Churn Business Utilizing Suspect Practices to Conceal Deterioration, Bolster Results (for now)EIGI has experienced some terrible (and worsening) service outages recently:

EIGIs service outages are unsurprising, given how little the company spends on core infrastructure:

Former employees comment about customers leaving:Everything takes a backseat to customer acquisition in order to replace the hoards of existing

customers fleeing Former Employee AThey are incredibly cheap and would rather lose a customer than provide a decent level of service. Theybuy new companies to make up for customer loss rather than listening to issues Former Employee BCompany went downhill in all departments starting in 2013. They simply do not care for their employees.You Do not want to work here. Trust me. They recently fired lots of people to include upper management.

That should speak volumes. Former Employee COne of Endurances industry peers doubts Endurances disclosed churn figures:

EIGI uses a churn model/definition that is not industry common practice, while using industryterminology.

Service Outages are Worsening

Date DurationAug-13 24 hours of downtimeDec-13 3 days of downtimeApr-14 24 hours of downtimeMay-14 9 hours of downtimeOct-14 5 days of downtime

RESEARCH & DEVELOPMENT SPENDING2012 2013 2014

GDDY 19.3% 18.4% 18.3%WWWW 8.4% 6.6% 5.5%WIX 38.4% 36.9% 40.8%EIGI 4.7% 4.5% 3.1%EIGI as % of GDDY 24.5% 24.3% 16.9%

R&D Spending per Subscriber Comparison2012 2013 2014

Godaddy $17.14 $17.95 $20.02EIGI $4.28 $6.63 $3.89

variance (75.0%) (63.1%) (80.6%)

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International Revenue, Directi, and your undisclosed subsidiaryEIGI did not disclose its 2014 International revenue, despite reporting international profits/losses andtangible long-lived assets. This is highly unusual behavior. We think we know why. We believeEndurances shift into international via Directi signals (I) slow-down in its core domestic business and (II)greater reliance on suspect business in order to compensate for churn. The following support our beliefs:

Directis revenue figures within EIGIs 2014 10K do not add up. EIGI is depending on the controversial Turakhia brothers, Directis management, whose

company Radix shamelessly lied to the US government (and got caught doing so). Directi and other Turakhia-related businesses are flagged for engaging in an unusually high

percentage of suspect activities (e.g. malware, and similar). If the Domain Name Business (i.e. the undisclosed subsidiary) is NOT Radix, it is still a Turakhia

brothers company: purchased from a company associated with the founders of Directi HoldingsWhy do business with suspect characters, if your core business is chugging along smoothly?

Adjusted EBITDA does not Correlate with Free Cash FlowEIGI may have beat Adj. EBITDA estimates (akin to a child acing self-graded exams), but it alsoconcurrently burned significant amounts of cash:

One reader asked us how we calculated EIGIs Free Cash Flow. He pointed out that Cash flow fromoperating activities less Cash flow from investing activities led to higher figures. This is correct. EIGI,unsurprisingly, hides earnouts (acquisition-related payments) in its Cash flow from financing activitiessection (EIGI refers to earnouts as Payment of deferred consideration):

Every $1.00 in reported "Adjusted EBITDA" equals -$0.50 in Free Cash Flow$ in millions Q3-2013 Q4-2013 Q1-2014 Q2-2014 Q3-2014 Q4-2014 TARGET

Adj. EBITDA (Estimate) $41.2 $38.5 $56.7 $55.3 $56.3 $60.0 $500.0 ?Adj. EBITDA (Reported) $49.9 $46.2 $59.1 $56.5 $58.0 $62.0 $500.0 ?

Free Cash Flow ($45.7) ($47.8) ($12.7) ($42.4) ($17.9) ($1.9) ($253.9) ?GAAP Net Loss ($27.7) ($72.6) ($21.7) ($43.0) ($9.4) ($2.8)

EIGI buries earnouts (i.e., deferred consideration), a critical component of its acquisitionspending within the "Cash flows from financing activities" section in the stmt of cash flows.