Constant Contact, Inc. (CTCT)

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Constant Contact Inc. (CTCT)

Q3 2008 Earnings Call

November 6, 2008 5:00 pm ET


Jerry Sisinski - Director of Investor Relations

Gail Goodman - Chairman, President and Chief Executive Officer

Steve Wasserman - Chief Financial Officer


Richard Davis - Needham & Co.

Peter Goldmacher - Cowen & Co.

Brad Reback - Oppenheimer

Tom Roderick - Thomas Weisel Partners

Laura Letterman - William Blair

Michael Wong - ThinkEquity

Richard Baldry - Canaccord Adams



Good day everyone and welcome to the Constant Contact third quarter 2008 earnings conference call. Please be aware that today’s program is being recorded. At this time, I’d like to turn the conference over to Mr. Jerry Sisinski, Director of Investor Relations; please go ahead sir.

Jerry Sisinski

Good afternoon and welcome to Constant Contact’s Investor Conference Call for the third quarter ended September 30, 2008. I am Jerry Sisinski, Director of Investor Relations at Constant Contact. With me on the call today is Gail Goodman, Chairman, President and CEO of Constant Contact; and Steve Wasserman, our Chief Financial Officer, is dialing into the call remotely.

Before we begin today’s call, we must provide some cautionary remarks regarding forward-looking statements. During the course of this conference call we will make various remarks about the company’s future expectations, plans and prospects that constitute forward-looking statements for purposes of the Safe Harbor Provisions under the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the risk factor section of our most recent Form 10-Q on file with the SEC.

In addition, any forward-looking statements represent our views only as of today, November 6, 2008 and should not be relied upon as representing our views of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our views change. Therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to today.

During this call, we will be referring to the company’s adjusted EBITDA, adjust EBITDA margin and non-GAAP net income loss per share. These financial measures are non-GAAP financial measures that are not prepared in accordance with Generally Accepted Accounting Principles.

A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is available in the press release announcing our third quarter 2008 financial results. This press release is available in the Investor Relations section of our website at www.constantcontact.com.

In terms of the format of today’s call, Gail will begin by providing business highlights and accomplishments for the third quarter and Steve will then discuss the financial results and forward guidance; after which we will open the call for your questions.

Now let me turn the call over to Gail.

Gail Goodman

Thanks Jerry and thanks to everyone for joining us on the call. Today I’m going to review our third quarter results which were highlighted by another quarter of better than expected revenue growth, with solid financial performance. We also delivered another strong quarter for customer additions and as I’ll discuss in a moment, our key customer metrics remain very consistent with historical ranges.

We are benefiting from continued strong demand for our email marketing solution, growing market awareness in a vastly under penetrated market, the launch of our national radio advertising campaign and continued solid execution from all our sales and marketing teams. As a result, we are again raising our revenue guidance for 2008 and we are confident about our growth outlook heading into 2009, in spite of challenging economic environment that we continue to monitor closely.

Summarizing our results for the third quarter; revenue was $22.9 million, up 69% year-over-year and adjusted EBITDA was $1.4 million, up from adjusted EBITDA of $104,000 in the third quarter of 2007. Both revenue and adjusted EBITDA came in above the high end of our range of guidance. We are particularly pleased with the company’s strong financial performance and continued business momentum in light of the current challenging macroeconomic environment.

As evidence of our business momentum, we added over 21,400 net new email marketing customers during the third quarter, bringing our total email marketing customer count to over 228,500, which represented growth of 58% on a year-over-year basis. Net adds were inline with the expectations we shared last quarter and within the third quarter, we saw typical seasonal patterns, including slower summer months at the beginning of the quarter, followed by a very strong September, when small and mid-sized businesses and organizations reengaged following their summer vacations.

We believe there are a number of factors driving our continued success. First and foremost is the fact that we’re addressing a very large market opportunity and we’ve penetrated less than a few percent of what we believe is our addressable market.

In tough economic times, it is all the more important for small businesses and organizations to communicate with their members, customers and prospects. Email marketing has proved to be a very effective means of communication and Constant Contact provides an extremely affordable and easy-to-use solution.

We talk to thousands of customers every week and we consistently hear that Constant Contact is considered to be one of the most important tools that they are using to survive and even thrive in the current economic environment. As a result, we are often told that we would be among the last services they would ever consider turning off because the ROI is so compelling and we are so fundamental to their success.

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