arvand

Endurance International Group Acquires Arvixe: A Look at the Numbers

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Endurance International Group recently announced three acquisitions including Arvixe, LLC a web hosting company, sort of located in San Louis Obispo, California. I say sort of because according to the owner, Arvand Sabetian, the firm has no offices. Totally decentralized, people work out of boats, motor homes and ashrams. Here are some numbers.

Arvixe services 150,000 domains and 70,000 hosting accounts. There are 80 full-time contractors and employees worldwide.

We do have one hard number. Endurance paid $17.6 million cash at closing for the interests of the company. A second payment is due in 12 months; this $4.4 million payment brings the deal up to $22 million.

Holdbacks are always connected to some type of representation, warranty or performance hurtle. My guess is that this is tied somewhere back to renewals and retention. The homepage of Arvixe’s website only shows one rate: as low as $4 a month. After I drilled down a bit I found out that is for 24 months and is due in advance. There has to be a lot of deferred revenues in Arvixe, and from the public information, it is unclear how it was treated in this transaction.

For many reasons I believe Arvixe has around $11.7 million in revenues. This is from the owners public statement projecting 2014 revenues of $12 million and doing a bit of extrapolation from Inc.5000 lists, and finally what makes sense in the cash paid at closing.

Where does this put us? In terms of cash at closing 1.5 X revenues and a total cost 1.88 X revenues if the full post closing payment is paid out in twelve months.

The transaction appears to fall in line with mid-size EIG acquisitions. And of course not as high as EIG paid for much larger companies like Hostgator where the value came in at 2 X revenues.

If you are a smaller shared hosting company I would not use this deal to peg your valuation. This goes to the stock value of EIG, it currently trades at 3.7 X market cap to revenue. It’s in the spread.

Financially without all that brick and mortar Arvixe EBITDA percent could be through the roof, possibly 40-50 percent. This is just a guess, but at $22 million this could be a 4 X EBITDA transaction, more than reasonable. So reasonable if the transaction were larger I think I would almost hear accretive to value.

I think the numbers work for EIG. I just wonder if the deal works. Maybe Arvand Sabetian has really long handcuffs, if not I would be suspect as to how long a decentralized office will be effective. It needs someone to pull it together and from what I understand Sabetian picked up this talent keeping the company alive through college. It is a unique skill.

Later, Tom

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6 Comments

  1. All major web hosting sites are under EIG. bluehost, arvixe, hostgator, fatcow, ipage etc.

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  2. Brad

    This is absolutely linked to the decline in service for Arvixe customers. Endurance International Group are almost synonymous with bad hosting. The epitome of large hosting companies that seem distant and uninterested in customer experience. It's very sad.

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  3. Herm

    I wonder if this is why Arvixe support has been non-existent lately. My site was down for a week before they bothered to get it up. And they still haven't responded to the support ticket I opened over it. Trouble is, now the site is up they inexplicably replaced my SSL certificate with one that expired three years ago, and for the last week have done nothing to fix the issue despite repeated attempts to alert them of the problem. Sounds like the new owners don't actually want any revenue coming in because after this nonsense it is time to find a new host.

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  4. T.C. Parker

    I now understand what the HELL went wrong over at Arvixe. 2015 has been a NIGHTMARE!!! The server is always down or being "Migrated" or "Updated to prevent downtown time", YEAH RIGHT! Currently I have been unable to login to my cPanel to work on my websites for 6 days. I have 4 open support tickets that have been open for well over a week now! I am on an unlimited plan, and when I was able to get to my cPanel, I was trying to backup my sites so that I could move them to a new host and I am getting the error no disk space on device. This filesystem is out of disk space on this server. How is that possible when I have an unlimited plan. Now I can't even get into the cPanel at all, and they are doing absolutely NOTHING about it! One of my websites has an expired SSL Certificate since October 11th, so when customers go to my website all they see is the Red screen of death saying site unsafe, even though I requested to purchase a new SSL on October 4th. It still has not been done a month later, and numerous emails to that department have gone unanswered over a month! I was on live chat and 53 minutes of waiting, the only thing that the person said was Hello, I will be right with you. 53 minutes of waiting and that is the only thing that was said on the chat. RIDICULOUS!!! I am so frustrated that i have sent messages to the CEO through LinkedIn, Google+, Twitter, and every other way that I cold think of because I need access to my cPanel so that I can get the Hell away from Arvixe!!!!

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  5. I just left Arvixe Hosting. It's the worst experience I've had with any business ever. This article clears up the motive behind the problem. You buy a hosting package, put your domain on their servers and your site disappears. It always off line with "a server issue." When you try to migrate to another host, your site is inaccessible. Pleas for mercy get you nowhere. I had to tweet the CEO Arvand Sabetien to get my website on a working server so it could be moved to another web host. Now, they have blocked the transfer of my domain name. Your article makes clear that if Arvixe starts bleeding customers before the second payment from EIG, there will be no second payment, or it would be reduced. But wouldn't it be easier to just be a decent web host? By the way, tech people and publications don't get treated like this by the company.

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    • LongTimeCustomer

      OMG this answers a lot of the issues with Arvixe now. I have been with Arvixe since the SLO days and the great US staff. I'm glad to see Arvand move ahead, but its a shame we all have to be in the wake of the death cycle EIG is putting us though. NO CUSTOMER SERVICE! NO HELP! Its likely time to start packing and leaving Arvixe. Im sure we will start to see more posts on the ripoffreport.com too. Sadly, the complaints will be true.

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