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Constant Contact, Inc. (CTCT)

Q2 2008 Earnings Call Transcript

August 12, 2008 8:30 am ET


Mary Norton – Director, IR

Doug Shaw – President and CEO

Scott Landers – SVP and CFO


Richard Davis – Needham & Company

Ralph Schackart – William Blair Fiscal House

Zach [ph] – JP Morgan

Ross Macmillan – Jefferies & Company

Kirk Materne – Banc of America



Good morning, ladies and gentlemen, and welcome to the Monotype Imaging second quarter conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. I would now like to turn the call over to Ms. Mary Norton, Director of Investor Relations. Ms. Norton, you may begin.

Mary Norton

Thank you, and good morning, everyone. Thank you for joining us for our second quarter conference call. With me this morning, our President and Chief Executive Officer, Doug Shaw, and Senior Vice President and Chief Financial Officer, Scott Landers.

Today’s discussion will reference certain non-GAAP measures such as adjusted EBITDA, and non – I’m sorry, net adjusted EBITDA, which are intended to serve as complements to results provided in accordance with generally accepted accounting principles. Reconciliations with these non-GAAP measures can be found on our Web site, along with a link to today’s call under Events and Presentations in the Investor Relations of our Web site at Both the call and the supplemental financial information will be archived on our Web site for one year.

Before we begin I’d like to remind everyone that matters we are discussing this morning and the information contained in the press release issued by the company earlier today announcing our second quarter and year-to-date financial results that are not historical facts are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements including predictions, estimates, expectations, and other forward-looking statements generally identifiable by the use of the words believe, will, expect, anticipate, or similar expressions are subject to risks and uncertainties that could cause actual results to differ materially.

Accordingly, participants in today’s call are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinions only as of today’s date, August 12, 2008. Information on the potential factors and detailed risks that could affect the company’s actual results of operations is included in the company’s filings with the SEC. The company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in our second quarter press release or on this morning’s conference call other than through the filings that will be made with the SEC concerning this reporting period.

And now, I’d like to turn the call over to Doug Shaw for a quarterly review, Doug.

Doug Shaw

Hello, everyone, and thank you for joining us today. In a few moments, Scott Landers will take you to our numbers in greater detail. But first, I’d like to give you my perspective on how we’re doing, where we’re going, and how we intend to get there. We’re coming up a great second quarter. Our traditional businesses are strong. Our newer businesses are enjoying double-digit growth. We continue to execute against our growth strategy, and we are on course to achieve our financial objectives.

This solid momentum is demonstrated in our second quarter results. Total revenues increased 12% quarter-over-quarter to a record $28.8 million driven by strong performance across all areas of business.

And the printer market that is expected to grow at an overall annual rate of 6%, our printer revenue growth quarter-over-quarter significantly outpaced the overall market as our technologies, particularly our driver and color products, were incorporated into more units. The balance of our OEM revenue grew at a double-digit rate as we continue to increase our penetration in the mobile phone, digital camera, set-top box, and navigational device markets.

Our revenue from the creative professional business was also up 12% thanks to continued growth in e-commerce sales. It’s worth noting that we are able to achieve this revenue growth while expanding our margins. Our gross profit margins hit 90%, including amortization of acquired technology, that’s up from 87% in the first quarter of this year, and 88% in the second quarter of 2007.

Net adjusted EBITDA, which excludes expenses related to the recent secondary offering and the non-cash foreign exchange loss on our inter-company loan totaled $13.5 million. That’s an increasing of $1.6 million or 14% over the second quarter of last year. It’s also a new quarterly record for us. As Mary said, our calculation of net adjusted EBITDA is provided in the Investor Relations section of our Web site.

From a cash perspective, we remain well-positioned upon our continued growth through generated cash from operations of $17.4 million.

In other news, we recently strengthened our Board of Directors with the appointment of Bob Lentz. Currently the President and CEO of Permission TV, Bob brings a wealth of experience to the Monotype Imaging Board, including more than 25 years of financial and operational experience in the technology industry. With his broad industry knowledge and strong leadership skills, he will be a valued asset to us as we continue to grow the company.

Another major highlight of the quarter was the appointment of our new CFO, Scott Landers. Scott joined us in early July, replacing Jackie Arthur who left to pursue a new opportunity. We’re very fortunate to have Scott with us. He brings more than 15 years of experience in the global software and public accounting industry. Most recently, he served as Vice President of Global Finance at Pitney Bowes Software, a $450 million division and a leading global provider of location intelligent solutions. He also spent ten years in finance at MapInfo after starting his career at Coopers and Lybrand.

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