CTCT

Constant Contact, Inc. (CTCT)

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Constant Contact, Inc. (CTCT)

Q4 2008 Earnings Call

February 12, 2009 5:00 pm ET

Executives

Jerry Sisinski – Director Investor Relations

Gail Goodman – Chairman, President, CEO

Steven Wasserman – Chief Executive Officer

Analysts

Tom Roderick – Thomas Weisel Partners

Brad Reback – Oppenheimer

Richard Davis – Needham & Company

Laura Lederman – William Blair

Michael Huang – Thinkequity

Richard Baldry – Canaccord Adams

Presentation

Operator

Welcome to the Constant Contact fourth quarter 2008 earnings conference call. Today's call is being recorded. At this time for opening remarks I would like to turn the conference over to Mr. Jerry Sisinski.

Jerry Sisinski

Good afternoon and welcome to Constant Contact's investor conference call for the fourth quarter and full year ended December 31, 2008. I'm Jerry Sisinski, Director of Investor Relations at Constant Contact. With me on the call today is Gail Goodman, Chairman, President and CEO and Steve Wasserman, our Chief Financial Officer.

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 of 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 February 12, 2009 and should not be relied upon as representing our views as 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 refer to the company's adjusted EBITDA, adjusted EBITDA margin, non-GAAP net income loss attributable to common stock holders, non-GAAP income loss attributable to common stock holders per share and free cash flow. 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 fourth quarter and full year 2008 financial results.

The press release is available in the investor relations section of our web site at www.constantcontact.com. In terms of the format of today's call, Gail will begin by providing business highlights and accomplishments for the fourth quarter and full year 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 to everyone for joining us on the call. Today I am very pleased to be reviewing our fourth quarter and full year 2008 results. In 2008, Constant Contact delivered rapid, predictable revenue growth and expanding margins. We exceeded our revenue and adjusted EBITDA targets for each quarter of the year. We grew revenue year over year by 73% and expanded our adjusted EBITDA margins by over nine percentage points.

I view 2008 as an extraordinary year for the company, especially when one factors in the difficult economic conditions. We are clearly monitoring the macro economic environment closely, but we can again share with you that the demand and need for our solutions remains high and we have not seen any decrease in interest levels.

In addition to strong financial results, each of our key customer metrics remains consistent with historical ranges. We exited 2008 with momentum and believe we're well positioned for 2009.

Let me summarize our results for the fourth quarter and full year. Revenue was $25.5 million in the fourth quarter, an increase of 61% year over year, surpassing the $100 million annualized revenue run rate. Fourth quarter revenue was above the high end of our guidance as was our adjusted EBITDA of $878,000 for the quarter.

Looking at the full year, revenue was $87.3 million, up 73% as compared to 2007 while our adjusted EBITDA went from a loss of $2.4 million in 2007 to a positive $3.9 million in 2008. In addition, we were able to deliver an adjusted EBITDA margin of 4.5% for the year which was above our original target of 4%.

We were able to exceed our adjusted EBITDA target while investing heavily in marketing programs to drive further market awareness and growth. At the same time, we demonstrated the operating leverage inherent in our business model.

The most important growth factor for Constant Contact is continuing to add new customers to our on-demand back offerings. During the fourth quarter we added a record of over 24,800 net new e-mail marketing customers which was a 15% increase from the number of net customer's additions during the third quarter.

As a result of this strong performance, Constant Contact crossed the 250,000 customer milestone, ending the year with over 253,400 customers, representing a 54% year over year growth.

During the fourth quarter, net customer additions were better than we expected. We believe the over performance was driven primarily by the national radio advertising campaign we launched in September.

In addition to strong net additions in the fourth quarter, our key customer metrics were consistent with historical ranges. Our average e-mail marketing invoice remained in the $33.00 range, plus or minus $2.00.

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