CTCT

Constant Contact, Inc. (CTCT)

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Constant Contact, Inc. (CTCT)

Q1 2009 Earnings Call

May 7, 2009 5:00 pm ET

Executives

Jeremiah Sisitsky – Director of Investor Relations

Gail F. Goodman – Chairman, President & Chief Executive Officer

Steven R. Wasserman – Vice President and Chief Financial Officer

Analysts

Brad Reback – Oppenheimer & Co.

Tom Roderick – Thomas Weisel Partners

Richard Davis – Needham & Company

Joe Delcaar – Cowen & Company

Laura Lederman – William Blair & Company, L.L.C.

Michael Huang – ThinkEquity Partners

Richard Baldry – Canaccord Adams

Raghavan Sarathy – Dougherty & Company

Presentation

Operator

Good day everyone and welcome to the Constant Contact first quarter 2009 earnings conference call. Today's conference is being recorded. At this time, I’d like to turn the conference over to Jerry Sisinski, Director of Investor Relations. Please go ahead sir.

Jeremiah Sisitsky

Thank you, Janey. Good afternoon everyone and welcome to Constant Contact’s Investor Conference Call for the first quarter ended March 31, 2009. I am Jerry Sisinski, Director of Investor Relations at Constant Contact and 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 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-K on file with the SEC. In addition, any forward-looking statements represent our views only as of today, May 7, 2009, while we may elect to update these forward-looking statements at some point in the future, we 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, non-GAAP net income 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 first quarter 2009 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 this call, Gail will begin by providing business highlights and accomplishments for the first quarter and Steve will then discuss our financial results and forward guidance in detail, after which we will open the call for your questions. With that let me now turn the call over to Gail.

Gail F. Goodman

Thanks Jerry and thanks everyone for joining us on the call. We are very pleased with the company's performance in the first quarter of 2009, which was highlighted by better than expected net customer additions, revenue, and adjusted EBITDA. We continue to monitor the small business market very carefully, as the difficult economic environment is clearly impacting companies of all sizes including small businesses. However, Constant Contact's business momentum exiting 2008 has continued into 2009. And as a result we remain optimistic about our financial outlook for the rest of the year. Steve will discuss this more in a few moments.

Summarizing our results for the first quarter. Revenue was $28.1 million, an increase of 55% year-over-year and adjusted EBITDA came in at $1.7 million, which was up a 112% on a year-over-year basis. Both revenue and adjusted EBITDA came in above the high end of our guidance range. One of the drivers of our revenue over performance and a positive sign for the remainder of the year was very strong net customer additions in the first quarter, while we had previously indicated we expected modest sequential growth from the fourth quarter, we had 11% sequential increase in net ads adding over 27,500 net new email marketing customers during the quarter.

The better than expected net customer ad performance in the quarter led to a quarter ending email marketing customer of just under 281,000, a 55% year-over-year increase. In addition to strong net additions in the first quarter, our key customer metrics were consistent with historical ranges. Our average email-marketing invoice remained in the $33 range, plus or minus $2. The number of customers in our $15 and $30 revenue bands remained at 80% plus or minus 1%, and our monthly retention rate remained within its long-standing range of 97.8%, plus or minus a 0.5%. As expected during the first quarter our average revenue per email-marketing customer did not increase sequentially.

We have expected our ARPU to be roughly flat and during the first quarter, our ARPU was $35.15, down $0.07 from the fourth quarter level. For those of you who are at our Analyst Day, you'll recall our illustration that strength in email marketing customers can result in, in a reduction in ARPU during the given quarter and that was the case in the first quarter. With the survey pricing change now in place for quarter and plans to continue expanding our product suite, we are confident in the long-term trend of steadily increasing our average revenue per email marketing customer.

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