Constant Contact Announces Third Quarter 2009 Financial Results

http://www.businesswire.com/news/home/20091105006441/en

Quarterly revenue increases 47 percent year-over-year

Email marketing customer base exceeds 324,200
WALTHAM, Mass.--(Business Wire)--
Constant Contact®, Inc. (NasdaqGM: CTCT), a leading provider of email marketing,
online surveys and event marketing for small businesses and organizations, today
announced its financial results for the third quarter ended September 30, 2009.

Constant Contact reported total revenue of $33.5 million for the quarter ended
September 30, 2009, an increase of 47% compared to revenue of $22.9 million for
the comparable period in 2008. Constant Contact ended the third quarter of 2009
with over 324,200 email marketing customers, an increase of 42% compared to the
end of the third quarter of 2008.

"Constant Contact delivered significant revenue growth and profitability that
was well above our expectations for the third quarter," said Gail Goodman, CEO
of Constant Contact. "September net customer additions rose sharply following a
slow July and August, and that momentum continued throughout October. We
continue to expect to generate greater than 45 percent annual revenue growth for
2009, and our positive view of the market is reflected by our initial target of
2010 revenue growth in the low 30 percent range."

Constant Contact reported operating income of $1.3 million for the quarter ended
September 30, 2009, compared to an operating loss of $1.0 million for the
comparable period in 2008. Constant Contact reported adjusted EBITDA of $4.9
million in the third quarter of 2009, an increase of 259% compared to adjusted
EBITDA of $1.4 million in the comparable period in 2008.

Adjusted EBITDA is a non-GAAP financial measure that is calculated by taking
GAAP net income (loss), adding depreciation and amortization and stock-based
compensation, then subtracting interest and other income. Adjusted EBITDA margin
is equal to adjusted EBITDA divided by revenue. A reconciliation of the most
comparable GAAP financial measure to the non-GAAP measure used above is included
with the financial tables at the end of this release.

Constant Contact reported GAAP net income of $1.5 million for the third quarter
of 2009, compared to a GAAP net loss of $399,000 for the comparable period in
2008. Constant Contact reported GAAP net income per diluted share of $0.05 for
the third quarter of 2009, compared to a GAAP net loss per share of $0.01 for
the comparable period in 2008.

Third quarter 2009 non-GAAP net income per diluted share was $0.09, compared to
$0.01 for the same period in 2008. Non-GAAP net income per diluted share is a
non-GAAP financial measure that is calculated by adding back stock-based
compensation expense to GAAP net income (loss) and dividing this total by the
diluted weighted average shares outstanding. A reconciliation of the most
comparable GAAP financial measure to the non-GAAP measure used above is included
with the financial tables at the end of this release.

"The combination of solid revenue growth and expense management led to a record
adjusted EBITDA margin of approximately 15% during the third quarter and we are
raising our adjusted EBITDA target margin for the full year 2009 to nine
percent," said Steven R. Wasserman, vice president and chief financial officer
of Constant Contact. "As we plan for 2010, we will continue to balance revenue
growth and margin expansion objectives. On a preliminary basis, we are targeting
full year adjusted EBITDA margin expansion in the range of 350 to 400 basis
points."

Other Third Quarter Highlights

* Added approximately 19,400 net new email marketing customers, bringing total
email marketing customers to over 324,200.
* Maintained consistency in its key customer metrics. The average email
marketing invoice remained in the $33 range, plus or minus two dollars. The
number of customers in the $15 and $30 revenue bands remained at 80%, plus or
minus one percent, and the monthly retention rate remained in its historical
range of 97.8%, plus or minus 0.5%.
* Had great early success relative to its recently released Event Marketing
product, with thousands of organizations already trialing the product and
hundreds signed up as paying customers. Constant Contact Event Marketing was
available on a limited basis during the third quarter and became generally
available during the fourth quarter. More information about Constant Contact
event marketing and what it can do for your small business is available at:
http://www.constantcontact.com/event-marketing/
* Expanded its team of small business marketing experts known as regional
development directors, or RDDs. The company currently has 17 RDDs located across
the United States helping to coach and mentor small businesses and organizations
on topics such as best practices in email marketing, integrating social media
with email marketing, surveying and getting feedback from customers and how
small businesses can host, manage and promote great events.
* Eric Groves authored our latest book, The Constant Contact Guide to Email
Marketing, which was published by Wiley Publishing. Groves is the Senior Vice
President, Global Market Development at Constant Contact and his book jumped to
the Amazon 100 list within the first two weeks of its availability. More
information on the book is available at:
http://www.constantcontact.com/learning-center/email-marketing-guide/index.jsp
* The Company released its social networking share bar that allows customers to
share their email marketing campaigns through popular social media sites. This
release was accompanied by small business social media best practices, hints and
tips, tutorials, webinars, and educational content delivered through RDDs.
Follow us on TwitterTM @ConstantContact and join the Constant Contact fan page
on Facebook.
* Continued to get traction on its web services integration; presently over five
percent of email marketing customers are using at least one Constant Contact
AppConnectTM web services integration. Constant Contact`s long-time partner
Softerware is using AppConnect to enhance integration between DonorPerfectTM,
their non-profit fundraising software, and Constant Contact.
* Announced InfoTransfer Version 1.0 for Salesforce, an integration with
Salesforce.com that allows users to easily and accurately share their
Salesforce.com contacts with their Constant Contact Email Marketing account.

Business Outlook

Based on information available as of November 5, 2009, Constant Contact is
issuing guidance for the fourth quarter and full year 2009 and for 2010 as
follows:

Fourth Quarter 2009: The Company expects fourth quarter revenue to be in the
range of $36 million to $36.3 million, adjusted EBITDA to be in the range of
$1.8 million to $2.1 million, and non-GAAP net loss per share to be in the range
of $0.01 to $0.02 based on weighted average shares outstanding of 28.4 million
shares.

GAAP net loss is expected to be in the range of $1.9 million to $2.2 million and
GAAP net loss per share to be in the range of $0.07 to $0.08. GAAP net loss per
share includes an estimated stock-based compensation expense of $1.6 million.

Full Year 2009: The Company expects full year 2009 revenue to be in the range of
$128.6 million to $128.9 million. The Company expects adjusted EBITDA to be in
the range of $11.5 million to $11.8 million. The Company expects full year 2009
non-GAAP net income per share to be in the range of $0.12 to $0.13 based on
weighted average shares outstanding (diluted) of 29.5 million shares.

The Company expects GAAP net loss to be in the range of $1.5 million to $1.8
million, and GAAP net loss per share to be in the range of $0.05 to $0.06. GAAP
net loss per share is based on weighted average shares outstanding (basic) of
28.3 million shares and includes an estimated stock-based compensation expense
of $5.2 million.

Full Year 2010: The Company expects its 2010 annual revenue growth rate to be in
the low 30 percent range and its adjusted EBITDA margin to be in the range of
12.5 percent to 13 percent.

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.
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 incentive compensation, and for
budgeting and planning purposes. These measures are used in monthly financial
reports prepared for management and in 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 of
the Company 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 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 2009 financial results conference call

When: Thursday, November 5, 2009

Time: 5:00 p.m. ET

Live Call: (888) 401-4685, domestic
(719) 325-2352, international

Replay: (888) 203-1112, passcode 3514304, domestic
(719) 457-0820, passcode 3514304, international

Webcast: http://investor.constantcontact.com/(live and replay)

About Constant Contact, Inc.

With more than 300,000 customers, Constant Contact, Inc. is a leading provider
of email marketing and online survey tools for small businesses, non-profits,
and member associations. Founded in 1995, Constant Contact helps small
organizations grow stronger customer relationships by delivering professional,
low cost, easy-to-use online tools backed with award-winning support, education
and personal coaching. Constant Contact is a publicly traded company (NasdaqGM:
CTCT) with offices located in Waltham, Mass., Loveland, Colo., and Delray, Fla.
To learn more, please visit www.ConstantContact.com or call 781-472-8100.

Constant Contact and the Constant Contact logo are registered trademarks of
Constant Contact, Inc. All other company 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 Constant Contact`s
projected 2009 and 2010 revenue growth and adjusted EBITDA, momentum regarding
the Company`s net customer additions, the Company`s recently launched event
marketing product, growth prospects for 2009, 2010 and beyond, and the Company`s
financial guidance for the fourth quarter of 2009, full year 2009 and 2010.
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 our 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 businesses, non-profits, and associations, adverse economic
conditions in general and adverse economic conditions specifically affecting the
markets in which the Company operates, adverse regulatory or legal developments,
the Company`s ability to continue to promote and maintain its brand in a
cost-effective manner, the Company`s ability to compete effectively, the
continued growth and acceptance of email as a communications tool, the Company`s
ability to successfully develop and introduce new products and add-ons or
enhancements to existing products, the Company`s ability to manage growth, 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,
2009 2008 2009 2008

Revenue $ 33,533 $ 22,859 $ 92,606 $ 61,797
Cost of revenue 9,927 6,554 26,953 16,986
Gross profit 23,606 16,305 65,653 44,811

Operating expenses:
Research & development 4,663 3,935 13,334 10,965
Sales & marketing 14,169 10,819 42,281 29,707
General & administrative 3,432 2,564 9,950 6,888
Total operating expenses 22,264 17,318 65,565 47,560

Income (loss) from operations 1,342 (1,013 ) 88 (2,749 )

Interest and other income 128 614 414 2,299
Net income (loss) 1,470 (399 ) 502 (450 )

Net income (loss) per share:
Basic $ 0.05 $ (0.01 ) $ 0.02 $ (0.02 )
Diluted $ 0.05 $ (0.01 ) $ 0.02 $ (0.02 )

Weighted average shares outstanding used in computing per share amounts:

Basic 28,304 28,036 28,219 27,814
Diluted 29,569 28,036 29,447 27,814

Constant Contact, Inc.
Calculation of Adjusted EBITDA and Adjusted EBITDA Margin (unaudited)
(In thousands)

Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008

Net income (loss) $ 1,470 $ (399 ) $ 502 $ (450 )

Subtract:
Interest and other income (128 ) (614 ) (414 ) (2,299 )

Income (loss) from operations 1,342 (1,013 ) 88 (2,749 )

Add back:
Depreciation and amortization 2,284 1,629 6,045 3,859
Stock-based compensation expense 1,301 757 3,613 1,961

Adjusted EBITDA $ 4,927 $ 1,373 $ 9,746 $ 3,071

Divide by:
Revenue $ 33,533 $ 22,859 $ 92,606 $ 61,797

Adjusted EBITDA margin 14.7 % 6.0 % 10.5 % 5.0 %

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,
2009 2008 2009 2008

Net income (loss) $ 1,470 $ (399 ) $ 502 $ (450 )

Add back:
Stock-based compensation expense 1,301 757 3,613 1,961

Non-GAAP net income $ 2,771 $ 358 $ 4,115 $ 1,511

Non-GAAP net income per share:
Basic $ 0.10 $ 0.01 $ 0.15 $ 0.05
Diluted $ 0.09 $ 0.01 $ 0.14 $ 0.05

Weighted average shares outstanding used in computing per share amounts:

Basic 28,304 28,036 28,219 27,814
Diluted 29,569 29,388 29,447 29,237

Constant Contact, Inc.
Calculation of Free Cash Flow (unaudited)
(In thousands)

Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008

Net cash provided by operating activities $ 6,645 $ 1,698 $ 16,241 $ 10,783

Subtract:
Acquisition of property and equipment (3,213 ) (2,895 ) (13,210 ) (11,028 )

Free cash flow $ 3,432 $ (1,197 ) $ 3,031 $ (245 )

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

September 30, December 31,
2009 2008
Assets
Current assets
Cash & cash equivalents $ 53,347 $ 73,243
Short-term marketable securities 57,089 33,932
Accounts receivable, net 83 40
Prepaid expenses and other current assets 3,302 3,670
Total current assets 113,821 110,885

Property and equipment, net 23,026 15,799
Restricted cash 750 308
Other assets 251 150
Total assets $ 137,848 $ 127,142

Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 3,065 $ 4,786
Accrued expenses 7,379 5,461
Deferred revenue 19,393 15,052
Total current liabilities 29,837 25,299

Long-term accrued rent 3,161 1,853

Total liabilities 32,998 27,152

Stockholders' equity
Common stock 284 282
Additional paid in capital 148,803 144,414
Accumulated other comprehensive income 73 106
Accumulated deficit (44,310 ) (44,812 )
Total stockholders' equity 104,850 99,990
Total liabilities and stockholders' equity $ 137,848 $ 127,142

Constant Contact, Inc.
Consolidated Condensed Statements of Cash Flows (unaudited)
(In thousands)

Nine Months Ended September 30,
2009 2008
Cash flows from operating activities
Net income (loss) $ 502 $ (450 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 6,045 3,859
Amortization (Accretion) of premium (discount) on investments 16 (18 )
Stock-based compensation expense 3,613 1,961
Recovery of bad debts (7 ) (1 )
Gain on sales of marketable securities (5 ) -
Change in operating assets & liabilities:
Accounts receivable (36 ) (10 )
Prepaid expenses and other current assets 368 (1,200 )
Other assets (101 ) 34
Accounts payable (1,721 ) 451
Accrued expenses 1,918 2,376
Deferred revenue 4,341 3,747
Long-term accrued rent 1,308 34
Net cash provided by operating activities 16,241 10,783

Cash flows from investing activities
Purchases of short-term marketable securities (54,600 ) -
Proceeds from maturities of short-term marketable securities 19,400 4,500
Proceeds from sales of short-term marketable securities 11,999 -
Increase in restricted cash (442 ) -
Acquisition of property and equipment (13,210 ) (11,028 )
Net cash used in investing activities (36,853 ) (6,528 )

Cash flows from financing activities
Proceeds from issuance of common stock pursuant to exercise of stock options 433 211
Proceeds from issuance of common stock pursuant to employee stock purchase plan 283 229
Proceeds from issuance of common stock in connection with secondary - 4,009
public offering, net of issuance costs
Net cash provided by financing activities 716 4,449

Net (decrease) increase in cash and cash equivalents (19,896 ) 8,704
Cash and cash equivalents, beginning of period 73,243 97,051
Cash and cash equivalents, end of period $ 53,347 $ 105,755

Media Contact:
Constant Contact
Christopher Nahil, 781-472-8134
cnahil@constantcontact.com
or
Investor Contact:
Constant Contact
Jeremiah Sisitsky, 339-222-5740
jsisitsky@constantcontact.com

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