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8-K - FORM 8-K - Constant Contact, Inc. | b88711e8vk.htm |
Exhibit 99.1
Constant Contact Announces Third Quarter 2011 Financial Results
Quarterly revenue increases 21% year-over-year
Adjusted EBITDA increases 47% year-over-year
Adjusted EBITDA increases 47% year-over-year
WALTHAM, MA October 27, 2011 Constant
Contact®, Inc. (Nasdaq: CTCT), the trusted
marketing advisor to more than 450,000 small organizations worldwide, today announced its financial
results for the third quarter ended September 30, 2011.
The company delivered a solid performance during the third quarter. We combined 20 percent plus
revenue growth with 20 percent plus Adjusted EBITDA margins; impressive considering the seasonal
and macroeconomic headwinds facing the small business community, said Gail Goodman, chief
executive officer of Constant Contact.
Goodman added, We are at the forefront of a fundamental shift in how small businesses market,
interact and engage with their customers and prospects. Constant Contact is uniquely positioned to
capitalize on this opportunity with our soon-to-be launched Social Campaigns product, which turns
social media into a measurable, goal-oriented marketing medium for small businesses. This is a very
exciting new product launch. We will further build on our product momentum with the introduction of
our social CRM capabilities and delivery of our engagement marketing vision in 2012. We believe we
are dramatically changing the game for small businesses.
Third Quarter 2011 Financial Metrics
| Revenue for the third quarter was $54.3 million, an increase of 21% compared to revenue of $44.8 million for the comparable period in 2010. | ||
| Gross margin in the third quarter was 71.1%, compared to 71.7% for the comparable period in 2010. | ||
| GAAP net income was $5.4 million for the third quarter of 2011, compared to $2.9 million for the third quarter of 2010. | ||
| GAAP net income per share was $0.18 for the third quarter of 2011, based on diluted weighted average shares outstanding of 30.4 million, compared to $0.10 for the comparable period in 2010, based on diluted weighted average shares outstanding of 29.9 million. | ||
| Adjusted EBITDA for the third quarter of 2011 was $12.0 million, an increase of 47% compared to Adjusted EBITDA of $8.1 million for the comparable period in 2010. | ||
| Adjusted EBITDA margin for the third quarter of 2011 was 22.1%, compared to 18.2% for the comparable period in 2010. | ||
| Non-GAAP net income per diluted share was $0.27 for the third quarter of 2011, based on diluted weighted average shares outstanding of 30.4 million, compared to $0.17 for the comparable period in 2010. | ||
| Cash flow from operations was $11.6 million for the three months ended September 30, 2011, compared to $9.2 million for the third quarter of 2010 | ||
| Capital expenditures for the quarter were $4.1 million compared to $3.6 million for the third quarter of 2010 | ||
| Free cash flow for the three months ended September 30, 2011 was $7.5 million, compared to $5.7 million for the third quarter of 2010. |
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| The company had $128 million in cash, cash equivalents and short-term marketable securities at September 30, 2011, compared to $120 million at June 30, 2011. |
Operating Metrics
| Added 40,000 gross new unique paying customers in the third quarter, consistent with the third quarter of 2010. (*) | ||
| Ended the third quarter with 485,000 unique paying customers, an increase from 470,000 unique paying customers at the end of the second quarter of 2011 and 415,000 unique paying customers at the end of the third quarter of 2010. (*) | ||
| Average monthly revenue per unique customer, ARPU, for the third quarter was $37.94, up from $37.86 in the second quarter of 2011, and up from $36.90 in the comparable period in 2010.(**) | ||
| 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. | |
(**) | ARPU reflects the impact from the deferral of revenue associated with the money-back guarantee program launched in the third quarter. |
Other Recent Highlights
| Announced a money-back guarantee, which provides a full refund after 30 days if a customer is not 100 percent satisfied with results. The guarantee reflects the combined power of email and social media marketing and Constant Contacts commitment to delivering success to small businesses. | ||
| Announced that more than 100,000 small organizations have utilized mobile applications and social integrations through the Constant Contact MarketPlace. The Constant Contact MarketPlace represents one of the largest collections of apps, integrations and marketing experts specifically designed to help small businesses and nonprofits maximize their marketing efforts. | ||
| Opened and staffed its United Kingdom office during the third quarter, marking the companys first direct expansion outside of North America. The company plans to continue to increase its presence internationally. |
The strength of Constant Contacts business model is evidenced by the fact that we grew Adjusted
EBITDA by almost 50 percent, delivered an Adjusted EBITDA margin of 22 percent and grew revenue in
excess of 20 percent. At the same time we continue to invest heavily behind the evolution of the
company, said Harpreet Grewal, chief financial officer of Constant Contact.
As we look forward to 2012, Constant Contact is well positioned to deliver an attractive
combination of solid revenue growth and continued margin expansion. We expect revenue in 2012 to
be approximately $250 million and Adjusted EBITDA margins to increase 200 to 250 basis points
resulting in Adjusted EBITDA growth in the mid 30 percent range. We continue to invest to
re-accelerate revenue growth beyond 2012, Grewal concluded.
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Business Outlook
Based on information available as of October 27, 2011, Constant Contact is issuing guidance for the
fourth quarter, full year 2011 and full year 2012 as follows:
Fourth Quarter 2011:
Current Guidance (10/27/2011) | ||
Total revenue
|
$56.8 m to $57.2 m | |
Adjusted EBITDA
|
$11.1 m to $11.5 m | |
Stock-based compensation expense
|
$2.8 m | |
GAAP net income
|
$4.1 m to $4.5 m | |
GAAP net income per share
|
$0.13 to $0.15 | |
Non-GAAP net income per share
|
$0.23 to $0.24 | |
Diluted weighted average shares outstanding
|
30.4 m shares |
Full Year 2011:
Prior Guidance | Current Guidance | |||
(7/28/2011) | (10/27/2011)* | |||
Total revenue
|
$214 m to $216 m | $213.7 m to $214.1 m | ||
Adjusted EBITDA
|
$35.0 m to $35.7 m | $35.2 m to $35.6 m | ||
Stock-based compensation expense
|
$11.9 m | $11.4 m | ||
GAAP net income
|
$7.7 m to $8.4 m | $8.9 m to $9.3 m | ||
GAAP net income per share
|
$0.25 to $0.27 | $0.29 to $0.30 | ||
Non-GAAP net income per share
|
$0.63 to $0.65 | $0.66 to $0.68 | ||
Diluted weighted average shares outstanding
|
31.0 m shares | 30.6 m shares |
* | Current Full Year 2011 guidance reflects approximately $300,000 impact related to the deferral of revenue resulting from the recently launched Money Back Guarantee. |
Full Year 2012:
Current Guidance (10/27/2011) | ||
Total revenue
|
Approximately $250 million | |
Adjusted EBITDA
|
200 250 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, non-GAAP net loss, non-GAAP net
loss per share and free cash flow.
Adjusted EBITDA is calculated by taking GAAP net income, adding depreciation and amortization,
stock-based compensation, adjusting for taxes, then subtracting interest and other income.
Adjusted EBITDA margin is equal to adjusted EBITDA divided by revenue.
Page 3
Non-GAAP net income is calculated by adding back stock-based compensation expense to GAAP net
income, Non-GAAP net income per share is calculated by dividing Non-GAAP net income by the diluted
weighted average shares outstanding.
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 Contacts financial condition and results of operations. The companys management uses
these non-GAAP measures to compare the companys 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 companys 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 companys 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 companys 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 companys 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 2011 financial results conference call | |
When:
|
Thursday, October 27, 2011 | |
Time:
|
5:00 p.m. ET | |
Live Call:
|
(877) 334-1974, domestic | |
(760) 666-3590, international | ||
Replay:
|
(855) 859-2056, passcode 15329334, domestic | |
(404) 537-3406, passcode 15329334, international | ||
Webcast:
|
http://investor.constantcontact.com/(live and replay) |
The webcast will be archived on Constant Contacts website for a period of three months.
Page 4
About Constant Contact, Inc.
Constant Contact is revolutionizing the success formula for small organizations through affordable,
easy-to-use Engagement Marketing (TM) tools that help create and grow customer relationships. More
than 450,000 small businesses, nonprofits, and associations worldwide rely on Constant Contact to
drive ongoing customer dialogs through email marketing, social media marketing, event marketing,
and online surveys. All Constant Contact products come with unrivaled KnowHow, education, and free
coaching with a personal touch, including award-winning customer support.
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 the companys plans to launch a Social Campaigns product and other new product
features and the acceptance by the market of the Social Campaigns product, the overall market
demand for email marketing and social media marketing solutions and Constant Contacts long-term
market potential, scalable business model, international expansion, re-accelerating revenue growth
and the financial guidance for the fourth quarter of 2011, full year 2011 and full year 2012. 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 Contacts
control. Constant Contacts 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 companys
ability to attract new customers and retain existing customers, the companys 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 companys ability to successfully develop and introduce new products and add-ons or
enhancements to existing products, adverse regulatory or legal developments, the companys ability
to continue to promote and maintain its brand in a cost-effective manner, changes in the
competitive environment, the companys ability to compete effectively, the companys ability to
attract and retain key personnel, the companys ability to protect its intellectual property and
other proprietary rights, and other risks detailed in Constant Contacts 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 Contacts 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
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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 Contacts views
as of any date subsequent to the date of this press release.
###
(CTCT-F)
Media Contact:
Erika Dornaus
Constant Contact
(781) 482-7039
pr@constantcontact.com
Erika Dornaus
Constant Contact
(781) 482-7039
pr@constantcontact.com
Investor Contact:
Jeremiah Sisitsky
Constant Contact
(339) 222-5740
jsisitsky@constantcontact.com
Constant Contact
(339) 222-5740
jsisitsky@constantcontact.com
Page 6
Constant Contact, Inc.
Consolidated Condensed Statements of Operations (unaudited)
(In thousands, except per share data)
Consolidated Condensed Statements of Operations (unaudited)
(In thousands, except per share data)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenue |
$ | 54,346 | $ | 44,828 | $ | 156,888 | $ | 126,764 | ||||||||
Cost of revenue |
15,679 | 12,694 | 45,595 | 37,096 | ||||||||||||
Gross profit |
38,667 | 32,134 | 111,293 | 89,668 | ||||||||||||
Operating expenses: |
||||||||||||||||
Research and development |
7,338 | 5,890 | 22,325 | 17,454 | ||||||||||||
Sales and marketing |
19,455 | 18,773 | 66,204 | 57,694 | ||||||||||||
General and administrative |
6,191 | 4,551 | 17,887 | 13,454 | ||||||||||||
Total operating expenses |
32,984 | 29,214 | 106,416 | 88,602 | ||||||||||||
Income from operations |
5,683 | 2,920 | 4,877 | 1,066 | ||||||||||||
Interest and other income |
80 | 81 | 264 | 249 | ||||||||||||
Income before income taxes |
5,763 | 3,001 | 5,141 | 1,315 | ||||||||||||
Expense for income taxes |
(410 | ) | (59 | ) | (357 | ) | (59 | ) | ||||||||
Net income |
$ | 5,353 | $ | 2,942 | $ | 4,784 | $ | 1,256 | ||||||||
Net income per share: |
||||||||||||||||
Basic |
$ | 0.18 | $ | 0.10 | $ | 0.16 | $ | 0.04 | ||||||||
Diluted |
$ | 0.18 | $ | 0.10 | $ | 0.16 | $ | 0.04 | ||||||||
Weighted average shares outstanding used in
computing per share amounts: |
||||||||||||||||
Basic |
29,631 | 28,887 | 29,481 | 28,666 | ||||||||||||
Diluted |
30,399 | 29,937 | 30,679 | 29,820 |
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Constant Contact, Inc.
Calculation of Adjusted EBITDA and Adjusted EBITDA Margin (unaudited)
(In thousands)
Calculation of Adjusted EBITDA and Adjusted EBITDA Margin (unaudited)
(In thousands)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net income |
$ | 5,353 | $ | 2,942 | $ | 4,784 | $ | 1,256 | ||||||||
Subtract: |
||||||||||||||||
Interest and other income |
80 | 81 | 264 | 249 | ||||||||||||
Add back: |
||||||||||||||||
Depreciation and amortization |
3,535 | 3,131 | 10,567 | 8,595 | ||||||||||||
Stock-based compensation expense |
2,792 | 2,094 | 8,643 | 5,810 | ||||||||||||
Provision for income taxes |
410 | 59 | 357 | 59 | ||||||||||||
Adjusted EBITDA |
$ | 12,010 | $ | 8,145 | $ | 24,087 | $ | 15,471 | ||||||||
Divide by: |
||||||||||||||||
Revenue |
$ | 54,346 | $ | 44,828 | $ | 156,888 | $ | 126,764 | ||||||||
Adjusted EBITDA margin |
22.1 | % | 18.2 | % | 15.4 | % | 12.2 | % |
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Constant Contact, Inc.
Calculation of Non-GAAP Net Income and Non-GAAP Net Income per Share (unaudited)
(In thousands, except per share data)
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, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net income |
$ | 5,353 | $ | 2,942 | $ | 4,784 | $ | 1,256 | ||||||||
Add back: |
||||||||||||||||
Stock-based compensation expense |
2,792 | 2,094 | 8,643 | 5,810 | ||||||||||||
Non-GAAP net income |
$ | 8,145 | $ | 5,036 | $ | 13,427 | $ | 7,066 | ||||||||
Non-GAAP net income per share: diluted |
$ | 0.27 | $ | 0.17 | $ | 0.44 | $ | 0.24 | ||||||||
Weighted average shares outstanding used in computing per share amounts |
30,399 | 29,937 | 30,679 | 29,820 |
Constant Contact, Inc.
Calculation of Free Cash Flow (unaudited)
(In thousands)
Calculation of Free Cash Flow (unaudited)
(In thousands)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net cash provided by operating activities |
$ | 11,600 | $ | 9,217 | $ | 28,246 | $ | 20,450 | ||||||||
Subtract: |
||||||||||||||||
Acquisition of property and equipment |
4,092 | 3,567 | 12,921 | 11,917 | ||||||||||||
Free cash flow |
$ | 7,508 | $ | 5,650 | $ | 15,325 | $ | 8,533 | ||||||||
Page 9
Constant Contact, Inc.
Consolidated Condensed Balance Sheets
(unaudited)
(In thousands)
September 30, | December 31, | |||||||
2011 | 2010 | |||||||
Assets |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 35,931 | $ | 32,892 | ||||
Marketable securities |
91,771 | 91,461 | ||||||
Accounts receivable, net |
52 | 44 | ||||||
Prepaid expenses and other current assets |
5,670 | 5,562 | ||||||
Total current assets |
133,424 | 129,959 | ||||||
Property and equipment, net |
32,796 | 29,723 | ||||||
Restricted cash |
750 | 750 | ||||||
Goodwill |
18,448 | 5,248 | ||||||
Acquired intangible assets, net |
2,339 | 781 | ||||||
Other assets |
2,162 | 1,214 | ||||||
Total assets |
$ | 189,919 | $ | 167,675 | ||||
Liabilities and Stockholders Equity |
||||||||
Current liabilities |
||||||||
Accounts payable |
$ | 4,386 | $ | 7,444 | ||||
Accrued expenses |
11,465 | 6,724 | ||||||
Deferred revenue |
28,375 | 25,103 | ||||||
Total current liabilities |
44,226 | 39,271 | ||||||
Other long-term liabilities |
2,317 | 2,282 | ||||||
Total liabilities |
46,543 | 41,553 | ||||||
Common stock |
297 | 293 | ||||||
Additional paid-in capital |
181,395 | 168,974 | ||||||
Accumulated other comprehensive income |
58 | 13 | ||||||
Accumulated deficit |
(38,374 | ) | (43,158 | ) | ||||
Total stockholders equity |
143,376 | 126,122 | ||||||
Total liabilities and stockholders equity |
$ | 189,919 | $ | 167,675 | ||||
Page 10
Constant Contact, Inc.
Consolidated Condensed Statements of Cash Flows
(unaudited)
(In thousands)
Nine Months Ended | ||||||||||||||||
September 30, | ||||||||||||||||
2011 | 2010 | |||||||||||||||
Cash flows from operating activities |
||||||||||||||||
Net Income |
$ | 4,784 | $ | 1,256 | ||||||||||||
Adjustments to reconcile net income to net cash provided by operating
activities: |
||||||||||||||||
Depreciation and amortization |
10,567 | 8,595 | ||||||||||||||
Amortization of premiums on investments |
493 | 36 | ||||||||||||||
Stock-based compensation expense |
8,643 | 5,810 | ||||||||||||||
Recovery of bad debts |
(1 | ) | (1 | ) | ||||||||||||
Gain on sales of marketable securities |
(13 | ) | | |||||||||||||
Deferred income taxes |
221 | | ||||||||||||||
Taxes paid related to net share settlement of equity awards |
(154 | ) | | |||||||||||||
Change in operating assets & liabilities, net of effects from acquisition: |
||||||||||||||||
Accounts receivable |
(7 | ) | 6 | |||||||||||||
Prepaid expenses and other current assets |
(108 | ) | (1,148 | ) | ||||||||||||
Other assets |
(948 | ) | (54 | ) | ||||||||||||
Accounts payable |
(3,058 | ) | (113 | ) | ||||||||||||
Accrued expenses |
4,741 | 2,781 | ||||||||||||||
Deferred revenue |
3,272 | 4,109 | ||||||||||||||
Other long-term liabilities |
(186 | ) | (827 | ) | ||||||||||||
Net cash provided by operating activities |
28,246 | 20,450 | ||||||||||||||
Cash flows from investing activities |
||||||||||||||||
Purchases of marketable securities |
(111,035 | ) | (84,261 | ) | ||||||||||||
Proceeds from maturities of marketable securities |
28,563 | 72,695 | ||||||||||||||
Proceeds from sales of marketable securities |
81,727 | | ||||||||||||||
Payment for acquisition, net of cash acquired |
(15,000 | ) | (2,225 | ) | ||||||||||||
Acquisition of property and equipment |
(12,921 | ) | (11,917 | ) | ||||||||||||
Net cash used in investing activities |
(28,666 | ) | (25,708 | ) | ||||||||||||
Cash flows from financing activities |
||||||||||||||||
Proceeds from issuance of common stock pursuant to exercise of stock
options |
3,024 | 2,306 | ||||||||||||||
Proceeds from issuance of common stock pursuant to employee stock
purchase plan |
435 | 390 | ||||||||||||||
Net cash provided by financing activities |
3,459 | 2,696 | ||||||||||||||
Net increase (decrease) in cash and cash equivalents |
3,039 | (2,562 | ) | |||||||||||||
Cash and cash equivalents, beginning of period |
32,892 | 59,822 | ||||||||||||||
Cash and cash equivalents, end of period |
$ | 35,931 | $ | 57,260 | ||||||||||||
Supplemental disclosure of non-cash investing and financing activities |
||||||||||||||||
Issuance of common stock in connection with the acquisition of
NutshellMail, Inc. |
$ | | $ | 3,603 | ||||||||||||
Capitalization of stock-based compensation |
477 | 204 |
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