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Constant Contact Announces Fourth Quarter And Full Year 2012 Financial Results

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 fourth quarter and full year ended December 31, 2012.

“We had a good finish to the year and are pleased with our fourth quarter results. We delivered better than expected revenue and profitability in-line with expectations. We also finished the year with positive momentum across our core metrics, including new customer additions,” said Gail Goodman, chief executive officer of Constant Contact. “2012 was an important year as we expanded our product suite and began the transformation of Constant Contact into a true multi-product company. We now have a robust suite of six online marketing tools for our small business customers, and 2013 is the year that we bring them all together for small businesses.”

“Looking forward, social media marketing and mobile marketing will require small businesses to dramatically adapt their marketing efforts,” continued Goodman. “More than ever they need a partner to help them navigate this changing marketing landscape and to provide a single, integrated engagement marketing platform to create, manage and measure all of their marketing campaigns. Constant Contact will be that resource for small businesses and build upon our role as the trusted marketing provider to more than half a million small businesses. The opportunity is expansive, and we believe that we have the right strategy, products and team to execute on our vision.”

Fourth Quarter 2012 Financial Metrics

  • Revenue was $66.3 million, an increase of 15.2% compared to revenue of $57.5 million for the comparable period in 2011.
  • Gross margin in the fourth quarter was 71.7%, compared to 72.4% for the comparable period in 2011.
  • GAAP net income was $6.4 million, compared to GAAP net income of $18.9 million for the fourth quarter of 2011. GAAP net income per diluted share was $0.21, based on diluted weighted average shares outstanding of 30.9 million, compared to GAAP net income of $0.62 per diluted share, based on diluted weighted average shares outstanding of 30.6 million, for the comparable period in 2011. GAAP net income and GAAP net income per share for the fourth quarter of 2012 included a $6.1 million non-cash benefit, or $0.20 per diluted share, from a change to the fair value of a contingent consideration liability associated with the acquisition of SinglePlatform. GAAP net income and GAAP net income per share for the fourth quarter of 2011 included a $13.8 million, or $0.45 per diluted share, tax benefit primarily associated with the release of the deferred tax asset valuation allowance.
  • Adjusted EBITDA was $10.2 million compared to adjusted EBITDA of $12.0 million for the comparable period in 2011. Adjusted EBITDA margin was 15.3%, compared to 20.9% for the comparable period in 2011. Adjusted EBITDA and adjusted EBITDA margin for the fourth quarter of 2012 excluded 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.
  • Non-GAAP net income was $5.1 million, compared to non-GAAP net income of $8.1 million for the fourth quarter of 2011. Non-GAAP net income per diluted share was $0.17, based on diluted weighted average shares outstanding of 30.9 million, compared to non-GAAP net income per diluted share of $0.27, based on diluted weighted average shares outstanding of 30.6 million, for the comparable period in 2011. Non-GAAP net income and non-GAAP net income per share for the fourth quarter of 2012 excluded a $6.1 million non-cash benefit, or $0.20 per diluted share, from a change to the fair value of a contingent consideration liability associated with the acquisition of SinglePlatform. Non-GAAP net income and non-GAAP net income per share for the fourth quarter of 2011 excluded a $13.8 million, or $0.45 per diluted share, tax benefit primarily associated with the release of the deferred tax asset valuation allowance.
  • Cash flow from operations was $11.7 million, compared to $13.4 million for the fourth quarter of 2011.
  • Capital expenditures were $6.8 million, compared to $5.2 million for the fourth quarter of 2011.
  • Free cash flow was $4.8 million, compared to $8.2 million for the fourth quarter of 2011.
  • The company had $93.5 million in cash, cash equivalents and short-term marketable securities at December 31, 2012, compared to $88.2 million at September 30, 2012.

Full Year 2012 Financial Metrics

  • Revenue was $252.2 million, an increase of 17.6% compared to $214.4 million for 2011.
  • Gross margin was 70.8%, compared to 71.3% for 2011.
  • GAAP net income was $12.8 million for 2012, compared to GAAP net income of $23.7 million. GAAP net income per diluted share was $0.41, based on diluted weighted average shares outstanding of 31.0 million, compared to GAAP net income of $0.77 per diluted share for 2011, based on diluted weighted average shares outstanding of 30.7 million. GAAP net income and net income per share for 2012 included a $12.2 million, or $0.39 per diluted share, non-cash benefit from a change to the fair value of a contingent consideration liability associated with the acquisition of SinglePlatform. GAAP net income and GAAP net income per share for 2011 included a $13.4 million, or $0.44 per diluted share, tax benefit primarily associated with the release of the deferred tax asset valuation allowance.
  • Adjusted EBITDA for 2012 was $36.6 million compared to adjusted EBITDA of $36.1 million for 2011. Adjusted EBITDA margin for 2012 was 14.5% compared to 16.8% for 2011. Adjusted EBITDA and adjusted EBITDA margin excluded a $12.2 million non-cash benefit from a change to the fair value of a contingent consideration liability associated with the acquisition of SinglePlatform.
  • Non-GAAP net income was $17.5 million for 2012, compared to $21.8 million for 2011. Non-GAAP net income per diluted share was $0.56, based on diluted weighted average shares outstanding of 31.0 million, compared to non-GAAP income of $0.71 per diluted share for 2011, based on diluted weighted average shares outstanding of 30.7 million. Non-GAAP net income and non-GAAP net income per share for 2012 excluded a $12.2 million, or $0.39 per diluted share, non-cash benefit from a change to the fair value of a contingent consideration liability associated with the acquisition of SinglePlatform. Non-GAAP net income and non-GAAP net income per share for 2011 excluded a $13.6 million, or $0.44 per diluted share, tax benefit primarily associated with the release of the deferred tax asset valuation allowance.
  • Cash flow from operations was $38.7 million for the full year of 2012 compared to $41.7 million in 2011.
  • Capital expenditures were $21.9 million for the full year of 2012 compared to $18.1 million in 2011.
  • Free cash flow was $16.8 million for the full year of 2012, compared to $23.5 million in 2011.

Operating Metrics

  • Added 45,000 gross new unique customers in the fourth quarter compared to 35,000 in the third quarter of 2012. (*)
  • Ended the fourth quarter with 555,000 unique customers, an increase from 540,000 unique customers at the end of the third quarter of 2012 and 500,000 unique customers at the end of the fourth quarter of 2011. This includes the approximately 10,000 existing SinglePlatform customers at the time of the acquisition in June 2012. (*)
  • Average monthly revenue per unique customer (ARPU) for the fourth quarter was $41.12, up from $40.35 in the third quarter of 2012, and up from $38.94 in the comparable period in 2011. (**)
  • 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 fourth quarter. (*) Figures are rounded to nearest 5,000. (**) The ARPU calculation includes SinglePlatform revenue for the fourth quarter of 2012 and excludes the approximately 10,000 existing SinglePlatform customers at the time of the acquisition in June 2012.

Other Recent Highlights

  • Announced the addition of four major new publishers, including The Washington Post, WhitePages™, Infogroup ®, and Acxiom Corporation to the SinglePlatform publishing partner network. The publisher network continues to expand, extending the reach of SinglePlatform's small business customers, giving them an even greater opportunity to be found at the critical moment a consumer is making a purchase decision.
  • Launched the new Constant Contact Solution Provider Program with an accredited curriculum that delivers education and training on engagement marketing tools, marketing best practices and business development to help Constant Contact Solution Providers market and grow their own business. The program is focused on driving business results for solution provider partners by supplying them with the sales tools, marketing resources and KnowHow ® to accelerate demand generation.
  • Achieved growth across the portfolio of engagement marketing products, including reaching the following milestones during 2012:
    • Sent out more than 45 billion emails on behalf of more than 500,000 email marketing customers
    • Managed more than 315,000 events via EventSpot for more than 5 million event registrants
    • SinglePlatform’s digital storefronts had more than 100 million consumer views, with monthly views surpassing 20 million in December
    • Social Campaigns generated more than 120,000 users since its launch in February
    • SaveLocal launched more than 9,500 deals in 2012, with more than 20% of the deals purchased by new consumers

“We took steps to refocus the organization on operating discipline and reverse the trends that contributed to our weak performance in the third quarter,” said Harpreet Grewal, chief financial officer of Constant Contact. “We have made good progress and are pleased with the fourth quarter results. For 2013, our guidance remains largely unchanged. We expect to deliver approximately 13% – 15% annual revenue growth and approximately 100 basis points of annual adjusted EBITDA margin improvement,” continued Grewal. “Our 2013 priorities focus on accelerating customer growth and transforming Constant Contact into a true multi-product company. We expect to continue making investments in product integration, branding and positioning, pricing and packaging, and will maintain our renewed focus on operational discipline and analytical rigor to drive the desired results.”

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