Constant Contact — Q3 2015 Earnings Presentation
36 slides from Constant Contact's earnings presentation, Nov 2, 2015
Slide 1: Q3 FY2015 Earnings Presentation
Q3 FY2015 Earnings Presentation November 2, 2015
Slide 2: Forward Looking Statements and Other Important Cautions
Forward Looking Statements AND OTHER IMPORTANT CAUTIONS This presentation contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
Slide 3: Additional Information in Connection with Acquisition
Additional information in connection with acquisition Additional Information About the Acquisition and Where to Find It This communication is being made in respect of the proposed transaction involving Constant Contact and Endurance. A special stockholder meeting will be announced soon to obtain sto
Slide 4: Agenda
AGENDA Endurance to Acquire Constant Contact Transaction Overview Q3 FY2015 Financial & Operating Metrics FY2015 & Preliminary FY2016 Guidance Supplemental Information Hari Ravichandran Founder & Chief Executive Officer Marc Montagner Chief Financial Officer CALL PARTICIPANTS
Slide 5: Endurance to Acquire Constant Contact: Strategic Rationale
Full solutions provider to help SMBs start on the web and grow their business Builds on existing deep partnership between Endurance & Constant Contact Creates significant operational and financial scale, expected to enhance free cash flow generation and accelerate delivery of long-term financial tar
Slide 6: Strong track record in execution of strategic acquisitions
Strong track record in execution of strategic acquisitions Endurance has a strong track record of integrating web service companies into its platform. 2010 2012 2014 2015 Key examples from the last five years include:
Slide 7: Transaction Overview
Definitive agreement signed October 30, 2015 Transaction Overview Transaction delivers significant value Pro forma for Constant Contact and the ACE data center transactions. Please see Non-GAAP Information slides for the definition of Constant Contact adjusted EBITDA. $32.00 per share in cash Transa
Slide 8: Endurance overview
ANALYTICS WORD OF MOUTH BULK BUYING AFFILIATE NETWORK INTERNAT’L PARTNERS 1997 2014 ONWARD cms mobile builders Domains UPSELL CHANNELS ORDER FLOW SALES FLOOR MARKETPLACES CAMPAIGNS CONTENT LED MARKETING MARKETING-LED SOLUTIONS NEW hosting Tech Service Basic Other Niche $20+ a month Targeted high pri
Slide 9: Constant Contact overview
c Delivering Success Higher opens and clicks driving more revenue for customers Affordable Solutions Starting at $20/month with larger customers paying hundreds per month Key Differentiators Brand, integrated suite, customer education, coaching and support Market Leader ~650,000 small business and n
Slide 10: SMB solutions: brand and cross sell opportunities
SMB SOLUTIONS value-creating brand and cross sell opportunities Opportunity to leverage Endurance’s sophisticated marketing funnel and low-cost distribution platform to market new products Hosting Web Presence Solutions Domains Backup Email Marketing Social Media SinglePlatform Full Product Suite Ho
Slide 11: Q3 Review and Current Initiatives
KEY Q3 INITIATIVES Q3 review and Current INITIATIVES Fiscal 2015 initiatives expected to drive results in fiscal 2016 and beyond Gateway initiatives Positive indicators International expansion Growing Brazil presence and additional testing in Mexican market Partnerships Scaled joint marketing progra
Slide 12: Financial & Operating Metrics
FINANCIAL & OPERATING METRICS
Slide 13: Q3 2015 Key Financial Metrics
Q3 2015 key FINANCIAL metrics GAAP Revenue ($M) UFCF, as reported ($M) Adj. Revenue ($M) Capital Expenditures ($M) 18% 15% 2% 15% -13% Free Cash Flow* Adj. EBITDA ($M) 3.7% of adjusted revenue 5.1% of adjusted revenue * Free cash flow defined as cash flow from operations, less capital expenditures a
Slide 14: Year to Date 2015 Key Financial Metrics
Year to date 2015 key FINANCIAL metrics GAAP Revenue ($M) UFCF, as reported ($M) Adj. Revenue ($M) Adj. EBITDA ($M) 20% 13% 16% 16% Free Cash Flow* 29% Capital Expenditures ($M) 4.3% of adjusted revenue 4.7% of adjusted revenue * Free cash flow defined as cash flow from operations, less capital expe
Slide 15: Historic Operating Metrics
Historic operating metrics Note: Please refer to Non-GAAP Information slides for definitions and other important information about total subscribers and ARPS. Total Subscribers (‘000s) ARPS ($) Year to Date ARPS ($) Year to Date Total Subscribers (‘000s) 17%
Slide 16: Monthly GAAP Revenue per Subscriber by Age
Monthly GAAP revenue per subscriber* by age * Calculated as monthly GAAP revenue attributable to included subscribers for the applicable time period, divided by the number of those subscribers. (1) Based on data for active subscribers that account for approximately 70% of our total revenue. (2) Base
Slide 17: Year to Date & Revised FY2015 Guidance – Standalone
Year to date & revised fy2015 guidance – Standalone (1) Q1 FY2014 FY2015 Q2 Q3 Q4 Full year y/y growth $152.8M $159.0M $164.9M $175.2M $652.0M Adjusted Revenue $178.7M $183.3M $190.3M ~$194M ~$745-$750M 17% 15% 15% ~11% ~14% - 15% Adjusted EBITDA Q1 Q2 Q3 Q4 Full year $59.1M $56.5M $58.0M $62.0M $23
Slide 18: FY2016 Preliminary Guidance
FY2016 preliminary guidance annual view Endurance Standalone(1) ~11% to 13% y/y growth Adjusted Revenue Adjusted EBITDA Capex ~11% to 13% y/y growth ~5% as % of revenue FCF* ~15% to 20% y/y growth Combined Entity Pro Forma Basis (2) ~10% to 12% y/y growth Approx. $400M for full year 2016 ~5% as % of
Slide 19: Transaction Financing
Transaction FINANCING (in $MM) Standalone at 9/30/2015 PF Financing Adjustment (1) PF Combination Existing Term Loan $1,029 $1,029 Revolving Credit Facility 70 (70) Capital leases 5 5 Cash (35) (27) (62) Incremental Term Loan 735 735 Secured Net Debt $1,069 $638 $1,707 Senior Unsecured Notes $350 $3
Slide 20: Investment Highlights
Strengthens the company’s position as a leader in the SMB online marketing space Extends core capabilities to product development and subscriber engagement Creates significant operational and financial scale, expected to enhance free cash flow generation and accelerate delivery of long-term financia
Slide 21: Supplemental Information
SUPPLEMENTAL INFORMATION cendurance.com / D4
Slide 22: Capitalization & Debt
CAPITALIZATION & DEBT Dec 31, 2014 March 31, 2015 June 30, 2015 Sept. 30, 2015 Revolver $50 $21 $35 $70 First Lien Debt 1,037 1,034 1,032 1,029 Total Senior Debt $1,087 $1,055 $1,067 $1,099 Deferred Purchase Obligations 25 45 33 52 Capital Lease 8 7 6 5 Total Debt $1,120 $1,107 $1,106 $1,156 Cash 34
Slide 23: Cash Return on Invested Capital (CROIC)
Cash Return On Invested Capital (CROIC) CROIC UFCF ADJUSTED INVESTED CAPITAL UFCF is calculated as GAAP cash flow from operations less capital expenses and leases, or as Free Cash Flow (FCF) plus interest paid. Please see Non-GAAP Information slides for further details Calculated as total debt (whic
Slide 24: Historic Financial & Operating Metrics
Historic FINANCIAL & Operating metrics Adj. Revenue ($M) Adj. EBITDA ($M) Note: Please refer to the Non-GAAP Information slides for additional important information on adjusted revenue, adjusted EBITDA, total subscribers and ARPS. Total Subscribers (‘000s) ARPS ($)
Slide 25: Non-GAAP Information
NON-GAAP INFORMATION 25
Slide 26: Non-GAAP Reconciliation Statement
Non – GAAP Reconciliation Statement The following table reflects the reconciliation of ARPS and adjusted revenue to revenue calculated in accordance with GAAP (all data in thousands, except ARPS data): The following table reflects the reconciliation of Adjusted EBITDA to net loss calculated in accor
Slide 27: Non-GAAP Reconciliation Statement (cont.)
Non – GAAP Reconciliation Statement (cont.) The following table reflects the reconciliation of cash flows from net cash provided by operating activities to Free Cash Flow (“FCF”), Unlevered Free Cash Flow (“UFCF”), and Unlevered Free Cash Flow (as reported) (all data in thousands, except per share d
Slide 28: Non-GAAP Reconciliation Statement (cont.)
Non – GAAP Reconciliation Statement (cont.) The following table provides a reconciliation of income tax expense included in the Adjusted EBITDA table above and in our consolidated statements of operations and comprehensive loss to the income taxes paid amount in our consolidated statements of cash f
Slide 29: Calculation of Cash Return on Invested Capital
Calculation of Cash Return on Invested Capital (in $ millions) FY2011 FY2012 FY2013 FY2014 TTM - Q1'15 TTM – Q2’15 TTM – Q3’15 GAAP Cash Flow from Operations $ 46.3 $ 55.3 $ 32.6 $ 142.9 $ 155.1 $ 172.7 172.2 Dividend from Minority Interest - - - (0.2) (0.2) (0.2) - Capital Expenditures and Capital
Slide 30: Adjusted P&L Reconciliation Statement
ADJUSTED P&l Reconciliation Statement Three Months Ended June 30 Three Months Ended September 30, Nine Months Ended September 30, Year Ended December 31, (in $ millions) 2014 2015 2014 2015 2014 2015 2014 GAAP Revenue $152.0 $182.4 160.2 188.5 457.9 548.3 $629.8 Purchase Accounting Adjustment 7.0 0.
Slide 31: Non-GAAP financial measures definitions
Adjusted EBITDA, free cash flow, unlevered free cash flow, unlevered free cash flow (as reported), cash return on invested capital, adjusted revenue, average revenue per subscriber, average subscribers, net debt, and the other non-GAAP measures listed below are non-GAAP financial measures and should
Slide 32: Unlevered Free Cash Flow and CROIC definitions
Unlevered Free Cash Flow (as reported), or UFCF (as reported), is a non-GAAP financial measure that we calculate as UFCF plus integration and restructuring expenses, transaction expenses and charges, certain legal advisory expenses, and dividend related payments. We believe that this presentation pr
Slide 33: Average Revenue Per Subscriber definition
Average Revenue Per Subscriber, or ARPS, is a non-GAAP financial measure that we calculate as the amount of adjusted revenue we recognize in a period, including marketing development funds and other revenue not received from subscribers, divided by the average of the number of total subscribers at t
Slide 34: Adjusted Operating Income definition
Adjusted Operating Income is calculated by subtracting the sum of the Adjusted Operating Expenses, as defined above, from adjusted revenue. Our non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in our industry, as other companies
Slide 35: Non-GAAP Reconciliation Statement: Constant Contact
Non – GAAP Reconciliation Statement (cont.) Constant Contact In addition to the results prepared in accordance with generally accepted accounting principles (GAAP), the company reports certain non-GAAP financial measures and other defined financial metrics. Management of the Company does not conside
Slide 36: Constant Contact Net Income to Adjusted EBITDA
For the three-month period ending TTM Period ending (All figures in thousands) September 30, 2014 December 31, 2014 March 30, 2015 June 30, 2015 June 30, 2015 Net income $ 5,198 $ 6,248 $ 3,550 $ 3,826 $ 18,822 Income tax expense $ 3,224 $ 1,239 $ 693 $ 2,390 $ 7,546 Interest income and other (incom