Constant Contact Announces Third Quarter 2013 Financial Results

  Constant Contact Announces Third Quarter 2013 Financial Results

         Quarterly revenue increasesapproximately 13% year-over-year

          Adjusted EBITDA increases approximately 32% year-over-year

Business Wire

WALTHAM, Mass. -- October 24, 2013

Constant Contact®, Inc. (Nasdaq: CTCT), which helps more than half a million
small organizations create and grow relationships with their customers through
a suite of online marketing tools, today announced its financial results for
the third quarter ended September 30, 2013.

“We are pleased with our results for the third quarter. All three of our
growth drivers– new customer additions, average revenue per user, and customer
retention – performed well,” said Gail Goodman, chief executive officer of
Constant Contact. “Our core email marketing business remains strong, and we
are seeing gains in many of our newer initiatives. We believe our efforts are
setting the stage for accelerated revenue growth and margin expansion.”

Third Quarter 2013 Financial Metrics

  *Revenue was $72.0 million, an increase of 12.9% compared to revenue of
    $63.8 million for the comparable period in 2012.
  *Gross margin in the third quarter was 71.6%, compared to 70.7% for the
    comparable period in 2012.
  *GAAP net income was $3.6 million, or $0.11 per share, compared to GAAP net
    income of $6.6 million, or $0.21 per share, for the third quarter of 2012.
    GAAP net income and GAAP net income per share for 2012 included a $6.1
    million non-cash benefit from a change to the fair value of a contingent
    consideration liability associated with the acquisition of SinglePlatform
    in 2012.
  *Adjusted EBITDA was $14.8 million, compared to adjusted EBITDA of $11.3
    million for the comparable period in 2012. Adjusted EBITDA margin was
    20.6%, compared to 17.6% for the comparable period in 2012.
  *Non-GAAP net income was $9.0 million, compared to non-GAAP net income of
    $6.2 million for the third quarter of 2012. Non-GAAP net income per
    diluted share was $0.29 per share, compared to $0.20 per share for the
    third quarter of 2012.
  *Cash flow from operations was $13.7 million, compared to $10.9 million for
    the third quarter of 2012.
  *Capital expenditures were $4.4 million for both the third quarter of 2013
    and the third quarter of 2012.
  *Free cash flow was $9.2 million, compared to $6.5 million for the third
    quarter of 2012.
  *The company had $107.2 million in cash, cash equivalents and marketable
    securities at September 30, 2013, compared to $99.3 million at June 30,
    2013.

Operating Metrics

  *Added 45,000 gross new unique customers in the third quarter compared to
    35,000 in the third quarter of 2012 and 50,000 in the second quarter of
    2013. (*)
  *Ended the third quarter with 585,000 unique customers, an increase from
    540,000 unique customers at the end of the third quarter of 2012 and
    575,000 unique customers at the end of the second quarter of 2013. (*)
  *Consistent with prior calculations (excluding the 10,000 SinglePlatform
    customers at the time of the acquisition), average monthly revenue per
    unique customer (ARPU) in the third quarter was $42.13.This is up from
    $40.35 in the comparable period in 2012, and $41.79 in the second quarter
    of 2013.
  *ARPU including the 10,000 SinglePlatform customers (as we anniversary the
    acquisition) was $41.40 in the third quarter.For comparison, including
    these customers in the calculation, ARPU would have been $39.59 in the
    third quarter of 2012 and $41.06 in the second quarter of 2013.
  *Monthly retention rate of unique paying customers remained in its
    historical range of 97.8%, plus or minus 0.5%, for each month during the
    third quarter.

(*) Figures are rounded to nearest 5,000.

Other Recent Highlights

  *Successfully launched new contact management functionality to more than
    275,000 customers, a key milestone of the company’s expanded platform
    vision.
  *Launched new programs with Staples and Microsoft aimed at helping small
    businesses grow with online tools. In partnership with Staples, Constant
    Contact will work to educate small businesses and nonprofits across the
    country with free in-store marketing workshops as a means to extend the
    company’s reach to new potential customers. Jointly, Microsoft and
    Constant Contact are launching an educational program to provide best
    online marketing practices seminars in Microsoft retail stores across
    North America.
  *To further strengthen Constant Contact’s partner network, the company held
    its first-ever OneCon Conference for partners in Boston and San Francisco.
    This multi-day interactive conference hosted forums to help the company’s
    partners grow their business and increase their clients' success.
  *Strengthened the management team and organization with new leadership,
    including: Jim Cuff as Vice President of Technical Operations to help
    build and scale technical and operating product platforms; John Orlando as
    Vice President of Product Marketing to lead product positioning and
    messaging efforts; and Will Yapp as Vice President of Business Development
    to develop strategic partnerships.
  *Under the company’s previously announced $20 million share repurchase
    program, the company repurchased 150,000 shares of common stock in the
    third quarter for approximately $2.9 million at an average purchase price
    of approximately $19 per share. To date, the company has repurchased
    250,000 shares of common stock at an average price of approximately $18
    per share, for a total cost of approximately $4.5 million.

“This time last year we refocused the company to deliver consistently good
results, and the third quarter reflects continued progress towards that goal.
Revenue in the quarter was in line with expectations and profitability
exceeded guidance. Our focus on results is driving gains in customer
additions, retention, and what our customers pay us (ARPU),” said Harpreet
Grewal, chief financial officer of Constant Contact. “In the third quarter, we
delivered higher year-on-year customer life-time value driven by lower cost of
customer acquisition, improved gross margins, and gains in retention and ARPU.

“Our initial 2014 guidance reflects that prior year investments are beginning
to drive top line growth and improved efficiencies,” added Grewal. “We look
for revenue growth to accelerate while delivering significant margin
expansion.”

Business Outlook

Constant Contact is issuing guidance for the fourth quarter, full year 2013
and full year 2014 as follows:

Fourth Quarter 2013:

                                            Current Guidance (10/24/2013)
Total revenue                                $74.5 m - $75.2 m
Adjusted EBITDA margin                       19.2% - 19.9%
Adjusted EBITDA                              $14.3 m - $15.0 m
Stock-based compensation expense             $3.5 m
GAAP net income                              $2.9 m - $3.3 m
GAAP net income per share                    $0.09 - $0.11
Non-GAAP net income per share*               $0.26 - $0.28
Diluted weighted average shares outstanding  31.3 m

Full Year 2013:

                               Prior Guidance         Current Guidance
                                 (7/25/2013)             (10/24/2013)
Total revenue                   $285.0 m - $288.0 m    $285.0 m - $285.7 m
Adjusted EBITDA margin          15.6% - 16.0%          16.0% - 16.2%
Adjusted EBITDA                 $44.5 m - $46.0 m      $45.5 m - $46.2 m
Stock-based compensation        $14.6 m                $14.7 m
expense
GAAP net income                 $4.3 m - $5.5 m        $6.0 m - $6.5 m
GAAP net income per share       $0.14 - $0.18          $0.19 - $0.21
Non-GAAP net income per         $0.68 - $0.73          $0.72 - $0.74
share*
Diluted weighted average        31.3 m                 31.2 m
shares outstanding
Estimated effective tax rate    ~40%                   ~40%
Estimated cash tax rate         ~10%                   ~10%
* Non-GAAP net income per share calculated using an estimated cash tax rate.

Full Year 2014:

                       Current Guidance (10/24/2013)
Total revenue           More than 13% revenue growth
Adjusted EBITDA margin  More than 200 basis points of annual Adjusted EBITDA
                         margin expansion

Non-GAAP Financial Measures

This press release contains the following non-GAAP financial measures:
Adjusted EBITDA, adjusted EBITDA margin, non-GAAP net income, non-GAAP net
income per share, estimated cash tax rate and free cash flow.

Adjusted EBITDA is a non-GAAP financial measure that is defined as GAAP net
income (loss) before income taxes, interest and other income (expense), net,
depreciation and amortization, stock-based compensation, litigation
contingency accruals and contingent consideration adjustments. Adjusted EBITDA
margin is a non-GAAP financial measure that is calculated by dividing adjusted
EBITDA by revenue.

Non-GAAP net income is a non-GAAP financial measure that is defined as GAAP
net income (loss) before the non-cash portion of income taxes, stock-based
compensation expense, litigation contingency accruals and contingent
consideration adjustments. Non-GAAP net income per share is a non-GAAP
financial measure that is calculated by dividing non-GAAP net income (loss) by
the weighted average shares outstanding.

Estimated cash tax rate is calculated by dividing estimated taxes to be paid
by estimated full year income before taxes.

Free cash flow is calculated by subtracting cash paid for the acquisition of
property and equipment from net cash provided by operating activities.

Constant Contact believes that these non-GAAP measures of financial results
provide useful information to management and investors regarding certain
financial and business trends relating to Constant Contact’s financial
condition and results of operations. The company’s management uses these
non-GAAP measures to compare the company’s performance to that of prior
periods for trend analyses, for purposes of determining executive and senior
management incentive compensation, and for budgeting and planning purposes.
These measures are used in monthly financial reports prepared for management
and in monthly and quarterly financial reports presented to the company’s
board of directors. The company believes that the use of these non-GAAP
financial measures provides an additional tool for investors to use in
evaluating ongoing operating results and trends and in comparing the company’s
financial measures with other software-as-a-service companies, many of which
present similar non-GAAP financial measures to investors.

Management of the company does not consider these non-GAAP measures in
isolation or as an alternative to financial measures determined in accordance
with GAAP. The principal limitation of these non-GAAP financial measures is
that they exclude significant expenses and income that are required by GAAP to
be recorded in the company’s financial statements. In addition, they are
subject to inherent limitations as they reflect the exercise of judgments by
management about which expenses and income are excluded or included in
determining these non-GAAP financial measures. In order to compensate for
these limitations, management presents non-GAAP financial measures in
connection with GAAP results. Constant Contact urges investors to review the
reconciliation of its non-GAAP financial measures to the comparable GAAP
financial measures, which it includes in press releases announcing quarterly
financial results, including this press release, and not to rely on any single
financial measure to evaluate the company’s business.

Reconciliation tables of the most comparable GAAP financial measures to the
non-GAAP financial measures used in this press release are included with the
financial tables at the end of this release.

Conference Call Information

What:       Constant Contact third quarter 2013 financial results conference
             call
When:        Thursday, October 24, 2013
Time:        5:00 p.m. ET
Live Call:   (877) 334-1974, domestic
             (760) 666-3590, international
Replay:      (855) 859-2056, domestic
             (404) 537-3406, international
Webcast:     http://investor.constantcontact.com/ (live and replay)

Live and replay conference ID code: 68764349

The webcast will be archived on Constant Contact’s website for a period of
three months.

About Constant Contact, Inc.

Constant Contact wrote the book on Engagement Marketing^® – the new marketing
success formula that helps small organizations create and grow customer
relationships in today’s socially connected world. More than half a million
small businesses, nonprofits and associations worldwide use the company’s
online marketing tools to generate new customers, repeat business, and
referrals through email marketing, social media marketing, event marketing,
local deals, digital storefronts, and online surveys. Only Constant Contact
offers the proven combination of affordable tools and free KnowHow^®,
including local seminars, personal coaching and award-winning product support.
The company further supports small organizations through its extensive network
of consultants/resellers, technology providers, franchises and national
associations.

Constant Contact and the Constant Contact Logo are registered trademarks of
Constant Contact, Inc. All Constant Contact product names and other brand
names mentioned herein are trademarks or registered trademarks of Constant
Contact, Inc. All other company and product names may be trademarks or service
marks of their respective owners.

Cautionary Language Concerning Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of
the “safe harbor” provisions of the Private Securities Litigation Reform Act
of 1995, including but not limited to, statements regarding accelerating
revenue growth and margin expansion and the company’s financial guidance for
the fourth quarter of 2013, full year 2013 and full year 2014. These
forward-looking statements are made as of the date they were first issued and
were based on current expectations, estimates, forecasts and projections as
well as the beliefs and assumptions of management. Words such as "expect,"
"anticipate," "should," "believe," "hope," "target," "project," "goals,"
"estimate," "potential," "predict," "may," "will," "might," "could," "intend,"
variations of these terms or the negative of these terms and similar
expressions are intended to identify these forward-looking statements.
Forward-looking statements are subject to a number of risks and uncertainties,
many of which involve factors or circumstances that are beyond Constant
Contact’s control. Constant Contact’s actual results could differ materially
from those stated or implied in forward-looking statements due to a number of
factors, including but not limited to, the company’s ability to attract new
customers and retain existing customers, the company’s dependence on the
market for email marketing services for small organizations, adverse economic
conditions in general and adverse economic conditions specifically affecting
the markets in which the company operates, the company’s ability to
successfully develop and introduce new products and add-ons or enhancements to
existing products and integrate its products in an effective manner, the
successful integration of SinglePlatform, adverse regulatory or legal
developments, litigation risk and expense, the company’s ability to continue
to promote and maintain its brand in a cost-effective manner, changes in the
competitive environment, the company’s ability to compete effectively, the
company’s ability to attract and retain key personnel, the company’s ability
to protect its intellectual property and other proprietary rights, and other
risks detailed in Constant Contact’s most recent Quarterly Report on Form 10-Q
filed with the Securities and Exchange Commission as well as other documents
that may be filed by the company from time to time with the Securities and
Exchange Commission. Past performance is not necessarily indicative of future
results. The forward-looking statements included in this press release
represent Constant Contact’s views as of the date of this press release. The
company anticipates that subsequent events and developments will cause its
views to change. Constant Contact undertakes no intention or obligation to
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. These forward-looking statements
should not be relied upon as representing Constant Contact’s views as of any
date subsequent to the date of this press release.

(CTCT-F)

Constant Contact, Inc.
Consolidated Condensed Statements of Operations (unaudited)
(In thousands, except per share data)



                                                          
                                                                   
                                                                   
                     Three Months Ended              Nine Months Ended
                     September 30,                   September 30,
                     2013           2012             2013          2012
                                                                   
Revenue              $ 72,039       $ 63,846         $ 210,452     $ 185,856
Cost of revenue       20,478       18,722         60,964      $ 54,755  
Gross profit          51,561       45,124         149,488      131,101 
                                                                   
Operating
expenses:
Research and           12,133         9,776            34,400        29,051
development
Sales and              24,608         24,881           83,214        76,435
marketing
General and            9,136          7,956            29,078        23,201
administrative
Acquisition costs
and other related     -            (6,020 )        -            (5,297  )
charges
Total operating       45,877       36,593         146,692      123,390 
expenses
                                                                   
Income from            5,684          8,531            2,796         7,711
operations
                                                                   
Interest income
and other income      133          68             116          201     
(expense), net
                                                                   
Income before          5,817          8,599            2,912         7,912
income taxes
                                                                   
Income tax            (2,215 )      (1,978 )        266          (1,535  )
(expense) benefit
                                                                   
Net income           $ 3,602       $ 6,621         $ 3,178       $ 6,377   
                                                                   
Net income per
share:
Basic                $ 0.12         $ 0.22           $ 0.10        $ 0.21
Diluted              $ 0.11         $ 0.21           $ 0.10        $ 0.21
                                                                   
Weighted average
shares outstanding
used in computing
per share amounts:
Basic                  30,696         30,466           30,672        30,339
Diluted                31,324         30,957           31,140        31,043

Constant Contact, Inc.
Calculation of Adjusted EBITDA and Adjusted EBITDA Margin (unaudited)
(In thousands)
                                                            
                                                                   
                       Three Months Ended            Nine Months Ended
                       September 30,                 September 30,
                       2013         2012             2013          2012
                                                                   
Net income             $ 3,602      $ 6,621          $ 3,178       $ 6,377
                                                                   
Income tax expense       2,215        1,978            (266    )     1,535
(benefit)
Interest income and
other income             (133   )     (68    )         (116    )     (201    )
(expense), net
Depreciation and         5,687        5,044            16,438        14,013
amortization
Stock-based              3,473        3,772            11,144        10,847
compensation expense
Litigation               -            -                820           -
contingency accrual
Contingent
consideration           -          (6,094 )        -           (6,094  )
adjustment
                                                                   
Adjusted EBITDA        $ 14,844    $ 11,253        $ 31,198     $ 26,477  
                                                                   
Divide by:
Revenue                $ 72,039     $ 63,846         $ 210,452     $ 185,856
                                                                   
Adjusted EBITDA          20.6   %     17.6   %         14.8    %     14.2    %
margin

Constant Contact, Inc.
Calculation of Non-GAAP Net Income and Non-GAAP Net Income per Share
(unaudited)
(In thousands, except per share data)


                                                           
                                                                    
                       Three Months Ended            Nine Months Ended
                       September 30,                 September 30,
                       2013         2012             2013           2012
                                                                    
Net income             $ 3,602      $ 6,621          $ 3,178        $ 6,377
                                                                    
Non-cash portion of
income tax expense       1,965        1,870            (1,016 )       1,212
(benefit)
Stock-based              3,473        3,772            11,144         10,847
compensation expense
Litigation               -            -                820            -
contingency accrual
Contingent
consideration           -           (6,094 )        -            (6,094 )
adjustment
                                                                    
Non-GAAP net income    $ 9,040      $ 6,169         $ 14,126      $ 12,342 
                                                                    
Non-GAAP net income    $ 0.29       $ 0.20           $ 0.45         $ 0.40
per share: diluted
                                                                    
Weighted average
shares outstanding       31,324       30,957           31,140         31,043
used in computing
per share amounts

Constant Contact, Inc.
Calculation of Free Cash Flow (unaudited)
(In thousands)
                                                             
                             Three Months Ended          Nine Months Ended
                             September 30,               September 30,
                             2013         2012           2013         2012
                                                                      
Net cash provided by         $ 13,659     $ 10,917       $ 30,095     $ 27,024
operating activities
                                                                      
Subtract:
Acquisition of property       4,445       4,432         14,134      15,076
and equipment
                                                                      
Free cash flow               $ 9,214      $ 6,485        $ 15,961     $ 11,948

Constant Contact, Inc.
Consolidated Condensed Statements of Cash Flows (unaudited)
(In thousands)
                                                                
                                                                   
                                                     Nine Months Ended
                                                     September 30,
                                                    2013          2012
                                                                   
Cash flows from operating activities
Net income                                           $ 3,178       $ 6,377
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization                          16,438        14,013
Amortization of premiums on investments                146           430
Stock-based compensation expense                       11,144        10,847
Provision for bad debts                                13            9
Deferred income taxes                                  (292    )     1,285
Contingent consideration adjustment                    -             (6,094  )
Taxes paid related to net share settlement of          (1,128  )     (376    )
restricted stock units
Change in operating assets & liabilities, net of
effects from acquisitions:
Accounts receivable                                    (71     )     (129    )
Prepaid expenses and other current assets              (1,695  )     1,624
Other assets                                           269           (492    )
Accounts payable                                       (4,607  )     (3,985  )
Accrued expenses                                       4,689         1,078
Deferred revenue                                       2,025         2,450
Other long-term liabilities                           (14     )    (13     )
Net cash provided by operating activities             30,095      27,024  
                                                                   
Cash flows from investing activities
Purchases of marketable securities                     (15,834 )     (36,357 )
Proceeds from maturities of marketable securities      11,534        40,167
Proceeds from sales of marketable securities           4,000         40,600
Increase in restricted cash                            (550    )     -
Acquisition of businesses, net of cash acquired        -             (68,296 )
Acquisition of property and equipment                 (14,134 )    (15,076 )
Net cash used in investing activities                 (14,984 )    (38,962 )
                                                                   
Cash flows from financing activities
Proceeds from issuance of common stock pursuant to     2,461         4,227
exercise of stock options
Income tax benefit from the exercise of stock          28            84
options
Proceeds from issuance of common stock pursuant to     484           536
employee stock purchase plan
Repurchases of common stock                           (4,529  )    -       
Net cash provided by (used in) financing              (1,556  )    4,847   
activities
Effects of exchange rates on cash                     1           2       
Net increase (decrease) in cash and cash               13,556        (7,089  )
equivalents
Cash and cash equivalents, beginning of period        67,775      49,589  
Cash and cash equivalents, end of period             $ 81,331     $ 42,500  
                                                                   
Supplemental disclosure of non-cash investing and
financing activities
Capitalization of stock-based compensation             351           730
Fair value of contingent consideration in
connection with acquisition included in accrued        -             12,152
expenses and other long-term liabilities

Constant Contact, Inc.
Consolidated Condensed Balance Sheets (unaudited)
(In thousands)


                                                            
                                                                 
                                               September 30,     December 31,
                                               2013             2012
                                                                 
Assets
Current assets
Cash and cash equivalents                      $  81,331         $  67,775
Marketable securities                             25,888            25,732
Accounts receivable, net                          150               92
Prepaid expenses and other current assets        8,209           6,513   
Total current assets                              115,578           100,112
                                                                 
Property and equipment, net                       39,522            39,653
Restricted cash                                   1,300             750
Goodwill                                          95,505            95,505
Acquired intangible assets, net                   4,936             6,758
Deferred tax assets                               11,672            11,377
Other assets                                     2,838           3,107   
Total assets                                   $  271,351       $  257,262 
                                                                 
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable                               $  3,561          $  8,167
Accrued expenses                                  15,492            10,803
Deferred revenue                                 34,725          32,700  
Total current liabilities                         53,778            51,670
                                                                 
Other long-term liabilities                      1,996           2,010   
                                                                 
Total liabilities                                55,774          53,680  
                                                                 
Stockholders' Equity
Common stock                                      307               307
Additional paid-in capital                        218,798           209,987
Accumulated other comprehensive income            17                11
Accumulated deficit                              (3,545   )       (6,723  )
Total stockholders' equity                       215,577         203,582 
Total liabilities and stockholders' equity     $  271,351       $  257,262 

Contact:

Media Contact:
Constant Contact
Erika Tower, 781-482-7039
pr@constantcontact.com
or
Investor Contact:
Constant Contact
Jeremiah Sisitsky, 339-222-5740
ir@constantcontact.com
 
Press spacebar to pause and continue. Press esc to stop.