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GOTHAM CITY RESEARCH LLC

www.gothamcityresearch.com

info@gothamcityresearch.com

GOTHAM CITY RESEARCH LLC

Initial Follow-up to
Endurance International Group:
A Web of Deceit
Endurance International Group
Initial Response to the Gotham Report

Gowex (a near-complete fraud)


Initial Response to the Gotham Report

The claims in this 'report' are baseless


and not rooted in reality

Gothams report
mixed lies with facts.

"It is better to be
approximately right
than precisely wrong."

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 or
indirect trading losses caused by any information in this report. This report is not investment advice or a
recommendation or solicitation to buy any securities. GOTHAM CITY RESEARCH LLC is not registered as
an investment advisor in any jurisdiction. Gotham City Research LLC is not affiliated or associated with
Gotham Asset Management, LLC or any of its affiliates.
You agree to do your own research and due diligence before making any investment decision with
respect to securities covered herein. You represent to GOTHAM CITY RESEARCH LLC that you have
sufficient investment sophistication to critically assess the information, analysis and opinions in this
report. You further agree that you will not communicate the contents of this report to any other person
unless 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 to
profit in the event the issuers stock declines. We may buy, sell, cover or otherwise change the form or
substance of its position in the issuer. GOTHAM CITY RESEARCH LLC disclaims any obligation to notify
the market of any such changes.
Our research and report includes forward-looking statements, estimates, projections, and opinions
prepared with respect to, among other things, certain accounting, legal, and regulatory issues the issuer
faces and the potential impact of those issues on its future business, financial condition and results of
operations, as well as more generally, the issuers anticipated operating performance, access to capital
markets, market conditions, assets and liabilities. Such statements, estimates, projections and opinions
may prove to be substantially inaccurate and are inherently subject to significant risks and uncertainties
beyond GOTHAM CITY RESEARCH LLCs control.
Our research and report expresses our opinions, which we have based upon generally available
information, field research, inferences and deductions through our due diligence and analytical
process. GOTHAM CITY RESEARCH LLC believes all information contained herein is accurate and
reliable, 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 or
implied. 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 its
use. All expressions of opinion are subject to change without notice, and GOTHAM CITY RESEARCH LLC
is not obligated to update or supplement any reports or any of the information, analysis and opinion
contained in them.
You should assume that GOTHAM CITY RESEARCH LLC has and/or will submit the contents of this report
with the Securities Exchange Commission, and other entities.

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Table of Contents
I.
II.
III.
IV.

Disclaimer
Follow-up to Endurance International Group: a Web of Deceit
Forensic Evaluation of Endurances Response
End Notes

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Follow-up to Endurance International Group: a Web of Deceit


Gotham City Research gets some things wrong, and some things right. We try our best. Thats all we can
do, particularly when companies like Endurance International Group provide either:

Limited disclosures or
Disclosures that seem transparent and reliable yet are precisely irrelevant.

We may get some things wrong about Endurance, but we remain confident that shares will approach
$0.00 per share, given the totality of our findings, both in the report and to be released in the future.
Here are Gotham City Researchs responses to specific statements made yesterday by EIGI:

Endurance
"The claims in this 'report' are baseless
and not rooted in reality.
The reality is, since going public,
Endurance has beat expectations every
quarter, showing consistent growth
throughout the company.
Endurance senior executives still own a
significant stake in the company and are
deeply invested in its future success. To
suggest otherwise, is ridiculous.
Endurance is transparent in how it
calculates all of its metrics including its
average revenue per subscriber, subscriber
counts, organic growth and monthly
revenue retention. The company has
always been clear in its financial
disclosures and reports on its financial
health and growth.
KPMG serves as Endurance's internal
auditor including auditing Sarbanes-Oxley
controls. BDO serves as the company's
external auditor.
As previously disclosed, the company's
free cash flow for operations in 2014 was
$143 million.

Endurance has never interacted with


Gotham City Research or the unnamed
analyst who authored this report.

Gotham
Endurance did not specify what exactly is
baseless & not rooted in reality.
Our report said exactly the same (see page
13). This statement fails to support EIGIs
assertion that our report was baseless
and not rooted in reality.
Gowex AND Quindells executives owned
significant stakes in their companies as
well. This fact did not prevent fraud.

Endurances
reported
metrics
are
transparently irrelevant, confusing, and
not
consistent
with industry-wide
definitions. See our report yesterday for
further details.

Gowex, Quindell, and many other frauds


have said the same (nearly verbatim).

This pro forma figure is one that EIGI no


longer reports in its audited financial
filings as a result of recent pressure from
the SEC. Ironically, EIGI continues using
this pro forma metric in its unaudited
press releases as it did here.
Actually, Gotham contacted Endurance,
and the company failed to answer its
questions.

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Forensic Evaluation of Endurances Response


Muddy Waters Research recently retained Qverity to analyze Noble Group managements statements to
investors. Qverity provides evaluation of behavioral analysis, & is founded and staffed by former United
States Central Intelligence Agency experts in detecting deception. Its principals authored the books Spy
the Lie and Get the Truth. We provide a similar evaluation of Endurances statements made yesterday:
italicized indicates EIGI statements whereas bolded indicates a forensic dissection:
"The claims in this 'report' are baseless and not rooted in reality.
Comment: EIGI starts with a bold, vague statement intended to inspire confidence. However,
EIGI never specifies which exact claims it is referring to, nor does EIGI explain what is
baseless or not rooted in reality. Therefore, the statement seems intended to deceive, and
to falsely inspire confidence.
The reality is, since going public, Endurance has beat expectations every quarter, showing
consistent growth throughout the company.
Comment: The above statement is manipulative, and a form of reality distortion. EIGI is
contesting a claim that Gotham never made (i.e. Gotham never contested that Endurance beat
adj. EBITDA expectations. In fact, it included a table showing the same).
Endurance senior executives still own a significant stake in the company and are deeply invested
in its future success. To suggest otherwise, is ridiculous.
Comment: EIGI includes a credibility-enhancing, but irrelevant (to its prior assertions)
statement. EIGIs statement is similar to a CEO claiming I donate to charity as a response to
allegations of fraud.
"Endurance is transparent in how it calculates all of its metrics including its average revenue per
subscriber, subscriber counts, organic growth and monthly revenue retention. The company has
always been clear in its financial disclosures and reports on its financial health and growth.
Comment: The use of the word transparent is intended to inspire trust via positive word
association. Additionally, EIGI implicitly contests a claim that Gotham never made (i.e.
Gotham never asserted that Endurance was not transparent in how it calculates all of its
metrics). This is the equivalent of a thief who states I am innocent of murder when he/she
was never accused about murder.

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KPMG serves as Endurance's internal auditor including auditing Sarbanes-Oxley controls. BDO
serves as the company's external auditor.
Comment: EIGI builds a wall of false integrity, suggesting it could not commit wrong-doing
because of its affiliations with other parties. EIGI is hoping the audience will conclude
therefore Gotham must be wrong.
"As previously disclosed, the company's free cash flow for operations in 2014 was $143 million.
Comment: The first clause as previously disclosed is intended as a dismissive statement, to
discourage further inquiry.
EIGI is guilty of a few errors of omission here: first, it fails to mention that free cash flow for
operations is a pro forma figure. Second, EIGI fails to mention that it no longer includes these
pro forma free cash flow measures in its audited annual financial filings, because the SEC
criticized EIGIs definition of EIGIs free cash flow in correspondence letters between the SEC
and Endurance. The errors of omission suggest EIGI has something material to hide.
Additionally, Warburg Pincus and Goldman Sachs own more than 40 percent of the company.
Comment: Endurance convincingly attempts to manipulate the reader into drawing one of the
following false inferences:

Warburg Pincus and Goldman Sachs own more than 40 percent of the company,
therefore Endurance can do no wrong.
Warburg Pincus and Goldman Sachs own more than 40 percent of the company,
therefore the claims in Gothams report are baseless and not rooted in reality.

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