© Gotham City Research LLC

August 3, 2015

Did EIGI deliberately target customers who engage in malicious activities? Does EIGI aggressively attract customers from the internet underground?

Gotham City Research expects:

  • EIGI will ‘beat’ its Adjusted EBITDA estimates today (just as we expect university students to ‘ace’ self-graded exams). EIGI has generated negative free cash flow each quarter it has “beat” Adj. EBITDA estimates.

  • 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 is new 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 company’s health and prospects, by asking the following questions (for more information, read the report):

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

2. Churn Rate: What is EIGI’s month...

April 28, 2015

GOTHAM CITY RESEARCH’S OPINIONS:

  • 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:

  • 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 disclosure...

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