ExactTarget Announces Third Quarter 2012 Results

  ExactTarget Announces Third Quarter 2012 Results

Third Quarter Revenue Increased 35% Year-Over-Year to $74.7 million, Company
Raises Full-Year Outlook

Business Wire

INDIANAPOLIS -- November 08, 2012

ExactTarget (NYSE:ET), a global provider of cross-channel interactive
marketing software-as-a-service solutions, announced results today for the
third quarter ended September30, 2012.

“ExactTarget's record third quarter revenue of $74.7 million represents 35
percent year-over-year growth and reflects our expanding market leadership and
success in helping organizations transform their businesses through digital
marketing," said Scott Dorsey, ExactTarget co-founder and chief executive
officer. "With our strong revenue growth, two strategic acquisitions in
October and record-setting Connections conference, our momentum continues to
build, and we are pleased to raise our outlook for full-year 2012."

Third Quarter 2012 Financial Highlights:

Three Months Ended September 30, 2012:

  *Revenue: $74.7 million, a 35 percent increase compared to the third
    quarter of 2011. Non-U.S. revenue was $14.1 million, an 80 percent
    increase compared to the third quarter of 2011.
  *Recurring Subscription Revenue: $57.9 million (excludes $1.3 million of
    revenue related to utilization above the contracted level), a 36 percent
    increase compared to the third quarter of 2011.
  *Net (Loss) / Income: $(0.7) million compared to $(22.3) million in the
    third quarter of 2011. The third quarter of 2011 included tax expense of
    $14.7 million related to a full valuation allowance on deferred tax
    assets. Net (Loss) / Income attributable to common stockholders for the
    third quarter of 2012 was $(0.01) per share on a basic and diluted basis,
    compared to $(2.55) per share on a basic and diluted basis for the third
    quarter of 2011.
  *Adjusted Net (Loss) / Income: $2.3 million, or $0.03 per share on a basic
    basis and diluted basis, after adjusting for stock-based compensation and
    amortization of intangibles, compared to $(20.1) million, or $(2.30) per
    share on a basic and diluted basis, in the third quarter of 2011. The
    third quarter of 2011 included tax expense of $14.7 million related to a
    full valuation allowance on deferred tax assets.
  *Operating Cash Flow: $6.8 million compared to $2.4 million in the third
    quarter of 2011.
  *Adjusted EBITDA: $7.7 million compared to $(0.9) million in the third
    quarter of 2011.

Recent Business Highlights:

  *Completed the acquisition of privately-held business-to-business marketing
    automation provider Pardot, LLC, expanding ExactTarget's product suite
    with Pardot's solution to create, deploy and manage online lead nurturing
    campaigns through integrations with salesforce.com, Microsoft Dynamics
    CRM, NetSuite and SugarCRM.
  *Completed the acquisition of privately-held Web personalization provider
    iGoDigital, expanding ExactTarget's product suite with iGoDigital's
    advanced product recommendations solutions and predictive analytics to
    power cross-channel personalization and optimization.
  *Unveiled MobilePush, the first enterprise application to integrate push
    notifications into cross-channel digital marketing with advanced
    reporting, analytics and cross-channel integration.
  *Announced the expansion of ExactTarget's Fuel platform, enabling
    developers and technology providers to build upon and integrate with
    ExactTarget's suite of cross-channel marketing and automation
    applications.
  *Announced the addition of a French language user interface for
    ExactTarget's suite of digital marketing products, enabling marketers to
    access ExactTarget applications in their native language or toggle between
    English, Brazilian Portuguese, German and French with a simple click.
  *Expanded the company's global footprint with a new office in Paris in
    October and the announcement of a new office in Stockholm that is expected
    to open in the fourth quarter 2012.
  *Hosted more than 4,000 of the world's top marketers at Connections 2012.
    The three-day event featured addresses from Michael J. Fox, illusionist
    David Blaine and executives from Twitter, LinkedIn, Foursquare Forrester
    and others.

Business Outlook:

As of November 8, 2012, ExactTarget is issuing guidance for the fourth quarter
2012 and increasing its outlook for full-year 2012 as follows:

  *Fourth Quarter 2012:

       *Adjusted Revenue: expected to be $79.0 million to $80.0 million.
         Adjusted Revenue excludes the impact of adjusting deferred revenue to
         fair value under purchase accounting.
       *Adjusted Net (Loss) / Income: expected to be $(12.5) million to
         $(13.5) million. Adjusted Net (Loss) / Income excludes the effects of
         stock-based compensation expense, amortization of intangibles, and
         the impact of adjusting deferred revenue to fair value under purchase
         accounting.
       *Adjusted Net (Loss) / Income per Share: expected to be $(0.18) per
         share to $(0.20) per share on a basic and diluted basis (non-GAAP)
         assuming weighted average shares outstanding of approximately 68
         million shares.

  *Full Year 2012:

       *Adjusted Revenue: expected to be $287.0 million to $288.0 million, an
         increase over prior guidance of $277.0 million to $280.0 million.
         Adjusted Revenue excludes the impact of adjusting deferred revenue to
         fair value under purchase accounting.
       *Adjusted Net (Loss) / Income: expected to be $(12.0) million to
         $(13.0) million, an improvement over previous guidance when
         incorporating the effect of the previously announced acquisitions.
         Adjusted Net (Loss) / Income excludes the effects of stock-based
         compensation expense, amortization of intangibles, and the impact of
         adjusting deferred revenue to fair value under purchase accounting.
       *Adjusted Net (Loss) / Income per Share: expected to be $(0.22) per
         share to $(0.24) per share on a basic and diluted basis (non-GAAP),
         an improvement over previous guidance when incorporating the effect
         of the previously announced acquisitions. This assumes weighted
         average shares outstanding of approximately 53 million to 54 million
         shares.


Conference Call Information
What:      ExactTarget Third Quarter 2012 Financial Results Conference Call
When:        Thursday, November 8, 2012
Time:        5 p.m. Eastern
             866.713.8565 (Domestic)
             617.597.5324 (International)
Webcast:     www.ExactTarget.com/Investor (Live and Replay)
Replay:      888.286.8010, Conference ID 50057326 (Domestic)
             617.801.6888, Conference ID 50057326 (International)
             NOTE: Audio replay will be available until November 15, 2012
             

About ExactTarget

ExactTarget is a leading global provider of cross-channel interactive
marketing software-as-a-service solutions that empower organizations of all
sizes to communicate with their customers through email, mobile, social media
and websites. ExactTarget’s powerful suite of integrated applications enable
marketers to plan, automate, deliver and optimize data-driven interactive
marketing and real-time communications to drive customer engagement, increase
sales and improve return on marketing investment. Headquartered in
Indianapolis, Indiana with offices across North America and in Europe, South
America and Australia, ExactTarget trades on the New York Stock Exchange under
the ticker symbol “ET.” For more information, visit www.ExactTarget.com.

Website Information

We routinely post important information for investors on our website
www.ExactTarget.com in the "Investor Relations" section. We intend to use this
website as a means of disclosing material, non-public information and for
complying with our disclosure obligations under Regulation Fair Disclosure.
Accordingly, investors should monitor the Investor Relations section of our
website, in addition to following our press releases, SEC filings, public
conference calls, presentations and webcasts. The information contained on, or
that may be accessed through, our website is not incorporated by reference
into, and is not a part of, this document.

Non-GAAP Financial Measures

This press release includes information about non-GAAP, Adjusted Revenue,
Adjusted EBITDA, Adjusted Net (Loss) / Income and Adjusted Net (Loss) / Income
per Share. We believe these measures provide important supplemental
information regarding our operating performance and are often used by
investors and analysts in their evaluation of companies such as ours. In
addition, we use Adjusted EBITDA as a key measurement of our operating
performance because it assists us in comparing our operating performance on a
consistent basis by removing the impact of certain non-cash and non-operating
items. Adjusted Revenue is calculated as GAAP revenue plus the impact of
adjusting deferred revenue to fair value under purchase accounting. Adjusted
EBITDA is calculated as Net (Loss) / Income before (1)other (income) expense,
which includes interest income, interest expense and other income and expense,
(2)income tax expense (benefit), (3)depreciation and amortization of
property and equipment, (4)amortization of intangible assets, (5)stock-based
compensation, and (6) the impact of adjusting deferred revenue to fair value
under purchase accounting. Adjusted Net (Loss) / Income is calculated as Net
(Loss) / Income before (1) amortization of intangible assets, (2) stock-based
compensation, and (3) the impact of adjusting deferred revenue to fair value
under purchase accounting. Adjusted Net (Loss) / Income per Share is
calculated as Adjusted Net (Loss) / Income divided by weighted average shares
outstanding on a GAAP basis. These non-GAAP financial measures are used in
addition to and in conjunction with results presented in accordance with GAAP
and should not be relied upon to the exclusion of GAAP financial measures.
Adjusted Revenue, Adjusted Net (Loss) / Income and Adjusted EBITDA reflect an
additional way of viewing aspects of our operations that we believe, when
viewed with our GAAP results and the accompanying reconciliations to
corresponding GAAP financial measures, provide a more complete understanding
of factors and trends affecting our business.

Safe Harbor Statement

This press release contains forward-looking statements about expected
financial metrics such as Adjusted Revenue, Adjusted Net (Loss) / Income and
Adjusted Net (Loss) / Income per Share. The achievement or success of the
matters covered by such forward-looking statements involve risks,
uncertainties and assumptions. If any such risks or uncertainties materialize
or if any of the assumptions prove incorrect, the company’s results could
differ materially from the results expressed or implied by the forward-looking
statements we make. The risks and uncertainties referred to above include -
but are not limited to - risks associated with possible fluctuations in the
company’s financial and operating performance; attracting and retaining
clients; defects or errors in the company’s solutions; unexpected decrease in
clients’ use of email; ability to gain customer acceptance of cross-channel
marketing; changes in domestic and international data privacy regulations;
compromises of the company’s security measures; infrastructure scalability;
third-party hardware and software; competition; the company’s ability to hire,
retain and motivate employees and manage the company’s domestic and
international growth; successful client deployment and utilization of the
company’s existing and future solutions; changes in the company’s sales cycle;
various financial aspects of the company’s subscription model; unexpected
increases in attrition or decreases in new business; the emerging markets in
which the company operates; unique aspects of entering or expanding in
international markets; litigation related to intellectual property and other
matters, and any related claims, negotiations and settlements; unanticipated
changes in the company’s effective tax rate; fluctuations in the number of
shares we have outstanding and the price of such shares; foreign currency
exchange rates; interest rates; and general developments in the economy,
financial markets, and credit markets. Further information on these and other
factors that could affect the company’s financial results is included in the
Registration Statements on Form S-1 we filed earlier in 2012 in connection
with our initial public and follow on offerings as filed with the Securities
and Exchange Commission. Additional information will also be set forth in our
quarterly reports on Form 10-Q, annual reports on Form 10-K and other filings
that we make with the Securities and Exchange Commission. These documents are
available on the SEC Filings section of the Investor Information section of
the company’s website at www.ExactTarget.com/investor.

Although we believe the expectations reflected in such forward-looking
statements are based upon reasonable assumptions, we can give no assurance
that the expectations will be attained or that any deviation will not be
material. ExactTarget, Inc. assumes no obligation and does not intend to
update these forward-looking statements.

                                                               
EXACTTARGET, INC.
Condensed Consolidated Balance Sheets
(Unaudited; in thousands, except share data)
                                                                  
                                                  As of           As of
                                                  September 30,   December 31,
                                                  2012            2011
Assets
Current Assets:
Cash and cash equivalents                         $  212,019      $  60,705
Accounts receivable, net                          51,597          43,380
Prepaid expenses and other current assets         17,303         11,186     
Total current assets                              280,919         115,271
Property and equipment, net                       60,422          54,616
Goodwill                                          18,279          18,447
Other non-current assets                          4,917          4,950      
Total assets                                      $  364,537     $  193,284 
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable                                  $  7,607        $  8,124
Accrued liabilities                               15,856          10,725
Accrued compensation and related expenses         13,282          14,167
Current portion of long-term obligations and      1,446           4,787
other
Deferred revenue                                  48,829         39,273     
Total current liabilities                         87,020          77,076
Long-term portion of debt                         —               13,333
Other non-current liabilities                     5,554          5,134      
Total liabilities                                 $  92,574      $  95,543  
Redeemable convertible preferred stock:
Series E, Series F, and Series G redeemable
convertible preferred stock at respective
redemption value. Authorized 4,912,646 shares;    $  —            $  63,000
issued and outstanding no shares and 4,912,646
at September 30, 2012, and December 31, 2011,
respectively;
Stockholders’ equity:
Common stock, $0.0005 par value. Authorized
300,000,000 shares; Issued and outstanding        34              5
67,128,612 and 9,042,346 shares at September
30, 2012 and December 31, 2011, respectively;
Additional paid in capital                        427,128         17,031
Series A, Series B, and Series D preferred
stock, at respective issuance date fair value.
Authorized 10,000,000 and 18,554,573 shares at
September 30, 2012 and December 31, 2011,         —               164,894
respectively; issued and outstanding no shares
and 18,554,573 at September 30, 2012 and
December 31, 2011, respectively;
Accumulated other comprehensive loss              (1,055      )   (1,051     )
Accumulated deficit                               (154,144    )   (146,138   )
Total stockholders' equity                        271,963        34,741     
Total liabilities and stockholders' equity        $  364,537     $  193,284 

                                                 
EXACTTARGET, INC.
Condensed Consolidated Statements of Operations
(Unaudited; in thousands, except share and per
share data)
                                                    
                       Three Months Ended           Nine Months Ended
                       September 30,                September 30,
                       2012          2011          2012          2011
Revenue:                                                        
Subscription           $  59,188      $ 45,187      $  165,438     $ 122,988
Professional           15,467       9,936        42,592       24,997    
services
Total revenue          74,655         55,123        208,030        147,985
Cost of revenue:
Subscription (1,2)     13,492         10,487        38,922         28,489
Professional           11,235       7,824        33,454       21,106    
services (1)
Total cost of          24,727       18,311       72,376       49,595    
revenues
Gross profit           49,928       36,812       135,654      98,390    
Operating expenses:
Sales and marketing    26,647         25,637        79,227         68,224
(1,2)
Research and           13,813         11,760        36,646         30,151
development (1)
General and            10,189       6,901        27,435       18,082    
administrative (1,2)
Total operating        50,649       44,298       143,308      116,457   
expenses
Operating loss         (721       )   (7,486    )   (7,654     )   (18,067   )
Other expense, net     —            (94       )   (352       )  (683      )
Loss before taxes      (721       )   (7,580    )   (8,006     )   (18,750   )
Income tax expense     —            14,742       —            10,540    
Net loss               $  (721    )  $ (22,322 )   $  (8,006  )  $ (29,290 )
                                                                   
Net loss per common
share - basic and      $  (0.01   )   $ (2.55   )   $  (0.16   )   $ (3.38   )
diluted
Weighted average
number of common
shares outstanding
- basic and diluted    66,337,436     8,766,854     49,072,974     8,664,639
                                                                             

(1) Includes stock-based                                
compensation expense as follows:
                                                           
                                   Three Months Ended      Nine Months Ended
                                   September 30,           September 30,
                                   2012       2011        2012       2011
Cost of revenue - subscription     $ 59       $ 104       $ 264      $ 271
Cost of revenue - professional     260         201         727         527
services
Sales and marketing                754         644         2,302       1,644
Research and development           486         337         1,266       1,010
General and administrative         1,212     644        3,165     1,490
Total stock-based compensation     $ 2,771   $ 1,930    $ 7,724   $ 4,942
                                                                         

(2) Includes intangible asset                             
amortization expense as follows:
                                                             
                                        Three Months Ended   Nine Months Ended
                                        September 30,        September 30,
                                        2012      2011      2012       2011
Cost of revenue - subscription          $  75     $ 75      $  225     $ 225
Sales and marketing                     118        95        382         239
General and administrative              76       102      288       368
Total intangible amortization expense   $  269   $ 272    $  895    $ 832

                                                  
EXACTTARGET, INC.
Condensed Consolidated
Statements of Cash
Flows
(Unaudited; in
thousands)
                                                     
                         Three Months Ended          Nine Months Ended
                         September 30,               September 30,
                         2012         2011          2012         2011
Cash flows from                                                 
operating activities:
Net loss                 $ (721    )   $ (22,322 )   $ (8,006  )   $ (29,290 )
Adjustments to
reconcile net loss to
net cash provided by
operating activities:
Depreciation and         5,616         4,632         16,115        12,233
amortization
Lease incentives         —             —             134           273
received from lessor
Provision for doubtful   344           (88       )   1,577         650
accounts
Stock-based              2,771         1,930         7,724         4,942
compensation
Change in deferred       —             14,743        —             10,540
taxes
Other                    —             4             38            76
Changes in operating
assets and
liabilities:
Accounts receivable,     (9,589    )   (7,855    )   (9,443    )   (8,739    )
net
Prepaid expenses and     (3,704    )   (2,427    )   (6,254    )   (4,601    )
other assets
Accounts payable and     6,172         7,466         4,419         9,621
accrued liabilities
Accrued compensation     1,018         2,760         (912      )   3,160
and related expenses
Deferred revenue         4,888       3,575        9,358       2,975     
Net cash provided by     6,795       2,418        14,750      1,840     
operating activities
                                                                   
Cash flows from
investing activities:
Business combination     —             (2,710    )   (806      )   (2,710    )
Purchases of property    (10,425   )  (14,289   )   (19,544   )  (28,033   )
and equipment
Net cash used in         (10,425   )  (16,999   )   (20,350   )  (30,743   )
investing activities
                                                                   
Cash flows from
financing activities:
Repayments on capital    (199      )   (302      )   (587      )   (627      )
leases
Net proceeds
(payments) on term       —             9,189         (16,667   )   7,523
loan and revolving
line of credit
Proceeds from issuance
of common stock from     3,981         115           4,801         186
option exercises
Payments of contingent   —             —             (456      )   (1,394    )
consideration
Proceeds from issuance
of preferred stock,      —             —             —             29,962
net of issuance costs
Proceeds from issuance
of common stock, net     —           —            169,709     —         
of issuance costs
Net cash provided by     3,782         9,002         156,800       35,650
financing activities
Effect of exchange
rate changes on cash     312         (202      )   114         (1        )
and cash equivalents
Increase (decrease) in
cash and cash            464           (5,781    )   151,314       6,746
equivalents
Cash and cash
equivalents, beginning   211,555     35,331       60,705      22,804    
of the period
Cash and cash
equivalents, end of      $ 212,019   $ 29,550     $ 212,019   $ 29,550  
the period

                                                  
EXACTTARGET, INC.
Reconciliation of GAAP to Non-GAAP Financial
Measures
(Unaudited; in thousands, except share and per
share data)
                     
                       Three Months Ended           Nine Months Ended
                       September 30,                September 30,
                       2012          2011          2012          2011
Net loss               $   (721   )  $ (22,322 )   $  (8,006  )  $ (29,290 )
Stock-based            2,771          1,930         7,724          4,942
compensation
Amortization of        269          272          895          832       
intangible assets
Adjusted net (loss)    2,319          (20,120   )   613            (23,516   )
/ income
                                                                   
Income tax expense     —              14,742        —              10,540
Depreciation and
amortization of        5,347          4,360         15,220         11,401
property and
equipment
Other expense, net     —            (94       )   (352       )  (683      )
Adjusted EBITDA        $   7,666    $ (924    )   $  16,185    $ (892    )
                                                                   
Adjusted net (loss)
/ income per share -   $   0.03       $ (2.30   )   $  0.01        $ (2.71   )
basic
Adjusted net (loss)
/ income per share -   $   0.03       $ (2.30   )   $  0.01        $ (2.71   )
diluted
Weighted average
shares outstanding
used in computing      66,337,436     8,766,854     49,072,974     8,664,639
per share amounts -
basic
Weighted average
shares outstanding
used in computing      71,462,770     8,766,854     68,440,521     8,664,639
per share amounts -
diluted

Contact:

Media Contact:
Finn Partners
Kari Brownsberger, 312.329.3980
MediaRelations@ExactTarget.com
or
Investor Contact:
ExactTarget
Mitch Frazier, 317.275.5034
Investor@ExactTarget.com
 
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