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Constant Contact Announces Second Quarter 2012 Financial Results

Stocks in this article: CTCT

Constant Contact®, Inc. (Nasdaq: CTCT), which helps more than half a million small organizations connect with their customers through a suite of online engagement marketing tools, today announced its financial results for the second quarter ended June 30, 2012.

“The second quarter marked another important step forward in our transformation from a single product company to an engagement marketing suite provider helping small businesses succeed. The addition of SinglePlatform and the continued expansion of our social, local and mobile capabilities are positioning Constant Contact to deliver a unique and powerful value proposition that enables small businesses to transform the way they create and nurture customer relationships,” said Gail Goodman, chief executive officer of Constant Contact.

“The combination of new customer additions, increased revenue per customer and improvements in customer retention contributed to revenue and adjusted EBITDA consistent with our expectations. With our core email marketing product delivering solid results and multiple new product initiatives in the early stages of ramping, we believe we are setting the stage for meaningful long-term growth,” continued Goodman.

Second Quarter 2012 Financial Metrics (Includes Impact of SinglePlatform Acquisition)

  • Revenue was $62.1 million, an increase of 18.2% compared to revenue of $52.5 million for the comparable period in 2011.
  • Gross margin in the second quarter was 70.3%, compared to 71.0% for the comparable period in 2011.
  • GAAP net loss was $500 thousand, compared to GAAP net income of $1.3 million for the second quarter of 2011.
  • GAAP net loss per share was $0.02, based on diluted weighted average shares outstanding of 30.4 million, compared to GAAP net income of $0.04 per share for the comparable period in 2011, based on diluted weighted average shares outstanding of 30.8 million.
  • Adjusted EBITDA was $8.1 million, consistent with the comparable period in 2011. Adjusted EBITDA for the second quarter of 2012 includes approximately $900 thousand in transaction and payroll expenses associated with SinglePlatform.
  • Adjusted EBITDA margin was 13.0%, compared to 15.3% for the comparable period in 2011.
  • Non-GAAP net income per diluted share was $0.11, based on diluted weighted average shares outstanding of 31.1 million, as compared to $0.15 per share for the comparable period in 2011, based on 30.8 million diluted weighted average shares outstanding.
  • Cash flow from operations was $5.2 million, compared to $8.4 million for the second quarter of 2011.
  • Capital expenditures were $5.2 million, compared to $4.5 million for the second quarter of 2011.
  • Free cash flow was $56 thousand, compared to $3.9 million for the second quarter of 2011.
  • The company had $81.1 million in cash, cash equivalents and short-term marketable securities at June 30, 2012, compared to $143 million at March 31, 2012. Constant Contact acquired SinglePlatform for approximately $63 million in cash consideration in June 2012.

Operating Metrics

  • Added 45,000 gross new unique paying customers in the second quarter consistent with the first quarter of 2012. This excludes SinglePlatform customers. (*)
  • Ended the second quarter with 525,000 unique paying customers, an increase from 510,000 unique paying customers at the end of the first quarter of 2012 and 470,000 unique paying customers at the end of the second quarter of 2011. This excludes SinglePlatform customers. (*)
  • Including SinglePlatform customers, Constant Contact ended the second quarter of 2012 with 535,000 unique customers. (*)
  • Average monthly revenue per unique customer, ARPU, for the second quarter was $39.98, up from $39.56 in the first quarter of 2012 and $37.86 in the comparable period in 2011. This excludes SinglePlatform customers.
  • 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 second quarter. This excludes SinglePlatform customers. (*) Figures are rounded to nearest 5,000.

Other Recent Highlights

  • Announced the acquisition of SinglePlatform, a company that helps small businesses get discovered through web and mobile searches, for approximately $63 million in cash consideration. By providing a single place to update relevant business information, SinglePlatform enables businesses to reach more than 200 million consumers across its extensive publishing network, which includes network sites such as Foursquare, New York Times, YP and Urban Spoon. This generated approximately seven million digital storefront views for SinglePlatform listings in June alone.
  • Announced the general availability of SaveLocal TM, which allows small businesses to run deals on their terms. SaveLocal is focused on disrupting the daily deals market by allowing merchants to run deals that make sense financially, attract new customers and drive repeat business.
  • Expanded Constant Contact’s thought leadership with the launch of Gail Goodman’s book on Engagement Marketing, titled, Engagement Marketing: How Small Business Wins in a Socially Connected World. More information is available via http://engagementmarketing.com/.
  • Appointed Ken Surdan to the newly created role of senior vice president, product. Ken oversees product strategy, engineering and operations in this new role and reports directly to CEO Gail Goodman.
  • Announced the election of Jay Herratti to the company’s board of directors. Mr. Herratti was most recently the CEO of OpenGrid Media, which owns and operates leading local consumer brands such as UrbanSpoon, Citysearch and InsiderPages. He previously served as CEO of Evite, as well as SVP Strategic Planning at IAC and Interim CEO of IAC Advertising Solutions.

“This remains an exciting period for Constant Contact. Email marketing posted strong results. Event Marketing, meanwhile, more than doubled revenue year-over-year and SinglePlatform is rapidly scaling their sales team to capture market demand. We are seeing significant interest in Social Campaigns TM and SaveLocal. We continue to fine-tune our go-to-market strategies to translate strong early adoption into paid users. We continue to believe that Constant Contact’s multi-product strategy will deliver acceleration in customer and revenue growth,” said Harpreet Grewal, chief financial officer of Constant Contact.

“We are in the middle of the summer months, which tend to be a seasonally slow period for small businesses. However, as we look ahead, we are raising our previously increased revenue guidance and are increasing adjusted EBITDA guidance for the full year 2012,” Grewal added.

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