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Executives

Jeremiah Sisitsky - Director of Investor Relations

Gail F. Goodman - Chairman of The Board, Chief Executive Officer and President

Harpreet S. Grewal - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Treasurer

Analysts

Jeffrey L. Houston - Barrington Research Associates, Inc., Research Division

Richard H. Davis - Canaccord Genuity, Research Division

Lauren Slabaugh - Stephens Inc., Research Division

Brian J. Schwartz - Oppenheimer & Co. Inc., Research Division

Michael Anderson - Crédit Suisse AG, Research Division

Brad R. Reback - Stifel, Nicolaus & Co., Inc., Research Division

Richard K. Baldry - Wunderlich Securities Inc., Research Division

Daniel Salmon - BMO Capital Markets U.S.

Constant Contact (CTCT) Q1 2013 Earnings Call April 25, 2013 5:00 PM ET

Operator

Good day, ladies and gentlemen, and welcome to the Constant Contact First Quarter 2013 Earnings Results Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Jerry Sisitsky, Director of Investor Relations. Please go ahead.

Jeremiah Sisitsky

Great. Thank you, Kate. Good afternoon, everyone, and welcome to Constant Contact's investor conference call for the first quarter ended March 31, 2013. With me on the call today is Gail Goodman, Chairman, President and CEO; and Harpreet Grewal, Chief Financial Officer. During the course of this conference call, we'll 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 Factors section of our most recent Form 10-Q and 10-K on file with the SEC. In addition, any forward-looking statements represent our views only as of today, April 25, 2013. 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.

During this call, we will refer to certain non-GAAP financial measures. These financial measures 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 measure is available in the press release announcing our first quarter 2013 financial results. This press release is available in the Investor Relations section of our website at www.constantcontact.com. Additionally, available for download on our IR website is an investor presentation and our historical financial and operating metrics. With that, I'll now turn the call over to Gail.

Gail F. Goodman

Thanks, Jerry. We are pleased with our results for the quarter. Revenue for the quarter was $68.2 million, representing year-over-year growth of about 14% and at the high end of our guidance. We also delivered significantly higher-than-expected profitability, with adjusted EBITDA of $6.8 million and an adjusted EBITDA margin of 10%. Harp will provide more details later in the call.

During the quarter, we generated positive momentum across our financial metrics and our core operating metrics. We added 50,000 new customers and 10,000 net new customer additions in the first quarter. Average revenue per user showed continued gains and, customer retention rates remain within extended ranges during the first quarter. We've strengthened our management team with the addition of Lauren Chacón as Chief Sales Officer, reporting to Chris Litster, who recently was promoted to head all of our go-to market efforts. Lauren joined us from Monster and has considerable experience in leading both global direct sales and partner sales organizations. We are thrilled to add her expertise to the team.

The strength in sales organization contributed to our year-over-year improvement in customer additions. We continue to execute on the evolution from a single product company to a multi-product provider of online marketing tools. We recently introduced our common contacts or CRM functionality and are rolling it out in a phased manner to all of our customers. This new contact management system enables small businesses and nonprofits to upload and keep more data about each contact, to have additional views of their contacts, to tag contacts by source or action and allows them to run targeted campaigns to specific segments of their contact list. It will also enable the tracking of engagement of those contacts over time and across all our different campaign types.

Common contact management is one of the foundational building blocks in our migration to an integrated suite of online marketing tools. We're in the early stages of converting accounts and are pleased with the feedback we've received. We'll continue transitioning customers throughout the year, gathering feedback and making changes to ensure we provide our customers an optimal experience.

Over the last quarter, our team has been highly focused on new customer growth and making sure that customers start with the product most likely to drive great results for them and great conversion and retention for us. This right products first approach is showing early promise, evidenced in our 50,000 gross adds in Q1.

To facilitate our migration to a multi-product company, we've begun merging the various product funnels and sales organizations to create more of an integrated experience, and this will continue over time. As such, we believe it's becoming increasingly less relevant for us to provide specifics about the various metrics of each of our products.

We did want to give you an update on SinglePlatform. We continue to make progress in scaling growth at SinglePlatform. With the addition of Yelp, we further strengthened SinglePlatform's large and growing publisher network. We now have an unparalleled network of hundreds of publishers, allowing our customers' updates to reach more than 200 million searching consumers a month. The publisher network and reach of SinglePlatform is stronger than ever, and engagement and usage continues to grow. SinglePlatform page views, a great indicator of the value we deliver, grew to nearly 30 million in March of 2013, up from only 5 million a year ago. The more page views, the more consumers are searching, finding and viewing SinglePlatform's customer's listings and the more value we're delivering to SinglePlatform customers.

2013 is the year of bringing our products together, continuing the fundamental transformation of Constant Contact into a true multi-product company. This evolution takes time. Meanwhile, our core business remains strong. We're learning our way into selling and cross-selling multiple products, understanding the evolving customer acquisition funnel and economics and testing the optimum way to price and package our product suite. We continue to take a prudent approach to this evolution, setting realistic expectations and timetables. As we continue on this multi-year transformation, our focus is clear: execute to our near-term plans while achieving our goals of accelerating growth. We believe that we have the right strategy, products and team to deliver on this vision.

The board's authorization of a $20 million share repurchase program reflects both our commitment to driving shareholder value and our confidence in the long-term outlook and growth opportunities. We do not take the decline in our value lightly and are committed to delivering superior returns for our shareholders through consistently good execution.

With that, I'll turn it over to Harp to discuss the first quarter in more detail, as well review our outlook for the second quarter and full year of 2013.

Harpreet S. Grewal

Thank you, Gail. In the last few quarters, we have talked about our need for better manage the transformation and the new reality that is Constant Contact, this commitment in the near term against the consistently executing to our expectations and setting the stage for meeting our longer-term objective. Our focus on execution yielded a solid start to 2013. Q1 revenue was at the high-end of our guidance; and profitability, well above guidance.

Revenue for the quarter totaled $68.2 million, representing about 14% year-over-year growth, while adjusted EBITDA of about $7 million or 10% of revenue far outpaced expectations.

We delivered good year-over-year gains across almost all key revenue drivers: new customer additions, ARPU and retention. New customer additions of 50,000 for the quarter exceeded last year, driven by a continued strong demand as reflected in the number of trialers, our ability to convert this demand to paying customers and contribution from SinglePlatform. We ended the quarter with 565,000 unique paying customers, up from 510,000 a year earlier.

ARPU for the quarter was $41.34, compared to $39.56 last year. At times, the positive impact of ARPU growth, that is measured in dimes and quarters, gets lost in the quarterly reporting. When taken across 565,000 paying customers, the $1.78 increase on a year-to-year basis in ARPU translates to about $10 million of incremental high-margin revenue.

Retention rates, meanwhile, also showed nice gains with the year-over-year improvement. Customer retention rates remained within our historical band of 97.8%, plus or minus 50 basis points. It's usual to keep in mind that in any given month, we attrit between 11,000 and 13,000 customers, improvement to retention rates, our core objectives at Constant Contact and we continue to expand increasing efforts to deliver on these expected gains.

Overall, our results for the quarter reflect our commitment to consistent execution, focusing on the drivers that we know drive our business, keeping customers as the top priority, using analytics at the core part of equation and delivering on our near-term objectives and a commitment at all levels of the organization on delivering.

Before proceeding, let me remind you that I will not be reviewing each of the line items on the income statement and balance sheet. Instead, I'll focus on select areas to provide a meaningful insight. We have had an increased focus in the past few quarters on delivering efficiency gains, and the first quarter reflected some positive trends.

Gross margin, for example, showed year-over-year improvement based on efficiencies in supporting and servicing our customers. Constant customer acquisition, as one component of lifetime value, showed improvements versus the prior quarter. Lifetime value per customer, one of our core operating metrics, showed marked gains, driven by a combination of year-over-year improvements in retention, ARPU and a lower cost of servicing and supporting our customers. Customer lifetime value increased approximately $30 or about 4% on a year-over-year basis. When extrapolated over our 565,000 customers, this equates to about $17 million of incremental value.

These results highlight the leverage inherent in our operating model. With almost 600,000 paying customers, we have the ability to drive significant gains in operating leverage. In the quarter, we booked an $820,000 accrual for a potential settlement of litigation related to current and former employees who alleged that we violated the Fair Labor Standards Act and the Massachusetts Overtime Law. As we disclosed in our 10-K, we expected to enter into mediation to resolve this matter. While our efforts to resolve this matter are ongoing, we have deemed it probable that we will do so and, therefore, took an accrual on the quarter.

On the adjusted EBITDA perspective, we have chosen to net out this one-time expense from our non-GAAP financial measures. Adjusted EBITDA for the quarter was $6.8 million, well above the expected range of $4 million to $4.5 million. Adjusted EBITDA margin was 10%, compared to our guidance of 5.9% to 6.6%. Gains in EBITDA in the quarter were driven by both improved operating efficiencies as well as the timing of certain investments were removed from the first quarter to later in the year. This better-than-expected profitability contributed to GAAP net loss for the quarter of $514,000 or $0.02 per share, well outperforming our guidance of a loss of $2.7 million to $3 million.

Turning to the balance sheet now, we ended the first quarter with about $97 million of cash and investments, generated cash from operations of $9 million and free cash flow totaled $4.3 million. As Gail mentioned earlier, we also announced today a $20 million share repurchase program. We begin to -- we intend to begin purchasing shares of common stock pursuant to our 10b5-1 trading plan throughout the end of this year, beginning this quarter.

Our strong balance sheet was roughly $100 million in cash and cash equivalents. And the expectation that will generate over $20 million in free cash flow in 2013 gives us the confidence that we have ample cash to invest in the business, execute on our growth plans and deliver values to shareholders through this repurchase program.

In terms of our outlook, we continue to expect revenue for the full year consistent with our prior guidance but expect to deliver better EBITDA, net income and EPS. For the full year, we are leaving our revenue guidance unchanged and targeting revenue in the $284 million to $289 million range. We expect better than previously guided profitability and raising our full year adjusted EBITDA margins to 15.5% to 15.8%. This represents between 100 and 130 basis points of annual adjusted EBITDA margin expansion and equates to adjusted EBITDA in the range of $44 million to $45.6 million.

We're guiding to an effective tax rate of approximately 40%, capital expenditures as a percent of revenue for the year are expected to be about 8% and free cash flow is expected to be north of $20 million.

Looking ahead to guidance for the second quarter, we are targeting revenue in the $69.9 million to $70.4 million range, representing a year-over-year increase of approximately 13%. Adjusted EBITDA is expected to be in the range of $8.4 million to $8.8 million, representing adjusted EBITDA margin of 12% to 12.5%. Depreciation and stock-based compensation expense for the second quarter are expected to be approximately $5.6 million and $3.7 million, respectively. Keep in mind that the share count related to our guidance does not reflect any impact of the share repurchase program.

Let me end with the following. We are committed to delivering on our expectations and fulfilling our commitments to shareholders. Last year, was less than satisfying to that end, I'm pleased with our first quarter results, and our focus remains on consistently good executions. Our goals related to the transformation of the company from an email marketing provider to a provider of an integrated marketing suite provides exciting growth opportunities, and we remain driven to execute to our ambitions.

With that, I'll turn the call over to the operator to begin the Q&A session.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Jeff Houston with Barrington Research.

Jeffrey L. Houston - Barrington Research Associates, Inc., Research Division

And I guess to begin with, the better-than-expected profitability in the quarter was that, I assume, less TV advertising than initially planned?

Harpreet S. Grewal

No. Actually, I think, it was really resulting from efficiencies in gross margins, lower costs of customer acquisition. We saw a nice gain on the year-to-year basis of customer count. But from a television perspective, we spent what we expected and actually maybe even a little more.

Gail F. Goodman

Yes. We were very pleased with the results of TV. It continues to drive the kind of demand we expected it to, and we definitely did our full expected spend at TV in Q1.

Jeffrey L. Houston - Barrington Research Associates, Inc., Research Division

Great. Then separately, regarding competition, are you competing less with iContact as Focus is focusing less on micro businesses with iContact?

Gail F. Goodman

We saw their commentary in their earnings call. We have not seen that reflect into a decrease in things like Pay Per Click spending yet, so we look forward to that. But, really, have not seen that yet flow through.

Operator

Our next question comes from the line of Richard Davis with Canaccord.

Richard H. Davis - Canaccord Genuity, Research Division

Okay. Two questions. One, I guess, Harp, have you seen a lower churn among the cohort of customers who have a broader suite? I mean, logic would say you should. Is that something that you have enough data points to [indiscernible]?

Harpreet S. Grewal

No. Absolutely, I think one of the reasons our retention rates have been improving, not only this quarter but if you look back at multiple quarters, is that we find that our customers who have purchased more than one product from us tend to stay with us longer. I think in the past we've given statistics that suggests that those customers that have 2 products versus 1, that the retention rate is about 20% better and those who have 3 or more, their retention rates are about 40% better.

Richard H. Davis - Canaccord Genuity, Research Division

And then -- so I noticed in the proxy that you guys are supposed to own more stock personally and stuff like that. But also, I guess more importantly, what is the basis -- or at least the high-level, I was trying to find that you guys will be paid bonuses. In other words, what are you optimizing for as management team this year? Is it EBITDA growth? Is it revenue growth? Just so we can kind of know what you guys are trying to aim at.

Gail F. Goodman

Yes. So it is a mix of the both with a heavy weighting towards revenue growth. So we use, I think, a slightly unusual metric, which is quarterly revenue growth because it neutralizes the subscription revenue kind of get ahead, stay ahead, get behind, stay behind and focuses us on generating new recurring revenue each and every quarter. So there is a heavy emphasis on revenue growth, a good emphasis on margin expansion and then individual executives have metrics associated with their different operating functions.

Harpreet S. Grewal

And the one thing I'd add is in terms of some of the long-term equity that's been granted recently to the core executive team, many of those -- a large part of those performance stock units are focused on delivering revenues with a target of $500 million in the coming years.

Gail F. Goodman

And we have performance-based stock associated with total shareholder return. So real balance on revenue growth and earnings expansion. We expect that by doing that, we would drive the shareholder return. But we definitely have a shareholder return component in our long-term equity compensation.

Operator

Our next question comes from the line of Carter Malloy with Stephens.

Lauren Slabaugh - Stephens Inc., Research Division

This is Lauren Slabaugh in for Carter. My first question is on margin this quarter. You mentioned that it was driven by the timing of investments being moved to later in the year. Could you give a little bit of color on that? And what we should expect for later in the year?

Harpreet S. Grewal

Yes, certainly. I mean, so first of all, a part of it came from just efficiency gains. We did see some nice gains versus our expectations on the gross margin, on constant customer acquisition. And so there is a very large, nice segment that comes from just efficiency gain. We did find that as we went through the quarter, there were some planned spend focused on consulting dollars and product development or other areas, analytics and business intelligence that -- in our ability to kind of absorb those initiatives and invest behind them. They were getting pushed back into Q2 or the second half of the year. And some of our planned hiring, the hiring environment in the Boston area, particularly for developers and actually probably for most folks is very competitive. And so we had an expectation for hiring, which is a little slower than what we expected.

Lauren Slabaugh - Stephens Inc., Research Division

Okay, that's helpful. And then one other quick one. Could you, all, provide any metrics around premium conversions for the social products?

Gail F. Goodman

Yes. Lauren, we're really moving away from getting too detailed on the individual product conversions. What I will say is that we did see nice improvements in our customer success metrics and funnel metrics on that product. So we continue to evolve that product and continue to see success.

Operator

Our next question comes from the line of Brian Schwartz with Oppenheimer.

Brian J. Schwartz - Oppenheimer & Co. Inc., Research Division

I have 2 questions here. Just following up on that, the last question on the timing of investments, I did notice that at least on the sales and marketing line, it did -- it was a little bit lower than what I had modeled. Looks like it's a little bit lower than the historical seasonal trends for Q1. Was that mostly due to the timing of investments? It seems to not make a difference in terms of your gross subs that you acquired as well as the customer acquisition costs. It was a certainly good trend there. I was wondering if there were maybe any other programs that maybe you had held back in the quarter on that line. And then one follow-up.

Harpreet S. Grewal

On the sales and marketing side, I mean, I think, first of all, relative to what we expect the consistency of this to be. The sales and marketing line, we expect it to be the highest in Q1 of the four quarters. And in terms of what we expect it to be, that it will be the highest of the four quarters. We did hold back on television. There were potentially some consulting dollars in the sales and marketing. I think they saw some efficiencies in certain spend which flowed through. But -- so there certainly were efficiencies that were reflected in cost of acquisitions, but it wasn't as if we were looking to hold back any amounts in a material manner.

Brian J. Schwartz - Oppenheimer & Co. Inc., Research Division

Okay, that's great to hear. And then the other follow-up, maybe I'll squeeze 2 in. Can you maybe update how SinglePlatform did at least from a revenue standpoint according to your plan? And if you're still expecting $7 million from them this year? And then, Gail, maybe just from a big picture standpoint, if you could give any commentary on how your end market is doing these days? Your business tends to have a good look into that small business market.

Gail F. Goodman

Yes. So I'll start with the SinglePlatform question. We continue to be extremely excited about SinglePlatform, the value proposition that they offer to merchants and their increasing success at executing against their plans. So in aggregate, we expect our new products to literally generate tens of millions of dollars of revenue this year. And in keeping our guidance the same at -- really behind that is an expectation that SinglePlatform will perform to expectations. And then on the small business environment, always hard to measure exact deltas but I would say while it is not wildly enthusiastic, we are continuing to see optimism move forward, a little less grumbling, a little more interest in beginning to invest in their business. Still looking to see that hiring in small business pick up. We've seen a little here and there but not consistently yet.

Operator

Our next question comes from the line of Michael Nemeroff with Crédit Suisse.

Michael Anderson - Crédit Suisse AG, Research Division

This is Mike Anderson on behalf of Michael. First thing, I just want to ask you a question with respect to the context of your online advertising budget. Can you comment on the expected changes in Google's enhanced campaign program that is expected to roll out sometime this summer? And how you expect those changes may affect your overall cost per click through that channel, as well as your overall customer acquisition costs?

Gail F. Goodman

I mean, I'll just say I know the team is all over it, but I do not know the specifics at that level of detail. But we'd be happy to take that offline and connect you into that team in a little more detail. Do you know anything more?

Harpreet S. Grewal

No, no. I -- absolutely, I think the best thing here is, rather than speaking unintelligently, is connect you to the right people who'll get the answers for you. I will say at a higher -- high level, as we look at sales and marketing leverage for the year relative to, say, our expectations in the year, we actually see some positive trends in that leverage for the rest of the year.

Michael Anderson - Crédit Suisse AG, Research Division

That's helpful. And then just one other -- one question. Just on overall, how's the integration of Bantam's going in terms of becoming the key platform for your products?

Gail F. Goodman

Yes. So when I talked in the script about the integrated contact management system, that is the Bantam technology and team. That is going extremely well. We are thrilled to have that in production and beginning to roll through our accounts. It came out beautifully. And what we're really excited about is really seeing how our small business customers start to use their enhanced capabilities in both segmentation and their enhanced ability to really see engagement across our products. So we're just at the starting gate of being able to see how customers take advantage of the value add we've just given them as the accounts roll through the system.

Operator

Our next question comes from the line of Brad Reback with Stifel financial.

Brad R. Reback - Stifel, Nicolaus & Co., Inc., Research Division

Gail, do you see or envision a time in the future, let's call the future the next year, to -- where sales and marketing on a rolling 4-quarter basis would grow faster than revenues?

Gail F. Goodman

I'm a never-say-never kind of gal but I'm not anticipating that at this point.

Brad R. Reback - Stifel, Nicolaus & Co., Inc., Research Division

Got it. Okay, okay. That's good to hear. Harp, on your commentary around the sort of an increased lifetime value of the customer and the pricing increase, did I get the numbers right? That you said about $10 million of incremental high margin from pricing, about $17 million incremental, from a reduced churn, basically?

Harpreet S. Grewal

Exactly. When the ARPU gains, if you take $1.78, it's a simplistic math. So that's $1.78 times the 565,000 customers. So that gives you about $10 million. And for lifetime value, if you looked at all the ups and downs between cost of service, cost of acquisitions, ARPU gains, the retention gains, it's about a $17 million gain over the course of the year in lifetime value.

Brad R. Reback - Stifel, Nicolaus & Co., Inc., Research Division

So combined, it's about a $27 million gain with super high margins, right?

Harpreet S. Grewal

It's very high margin, yes. A very high margin. We've talked often in the past that not all growth levers are created equal, so the growth that we'd get through retention and ARPU gains is what allows us to deliver increasing profitability, free cash flow and invest back in the business.

Brad R. Reback - Stifel, Nicolaus & Co., Inc., Research Division

So, I guess, what I'm trying to understand is you roughly have a $4 million or $5 million increase in EBIT -- adjusted EBIT this year? Something in that range?

Harpreet S. Grewal

I think if you do the math versus last year, [indiscernible] do it quickly. I'm getting back to you in another question and...

Gail F. Goodman

I think that was a preamble. What's the follow-on to that?

Brad R. Reback - Stifel, Nicolaus & Co., Inc., Research Division

Yes. So if -- so what I'm trying to understand is where the incremental $20 million is going?

Gail F. Goodman

Yes. So I'll start with that. We are definitely investing in SinglePlatform and in the expansion of our product line. If you look year-over-year, we did -- we are expecting R&D as a percent of revenue to move up. And we are continuing to invest in sales and marketing just as a declining percent of revenue. So the absolute dollars goes up, but the percent goes down. But the biggest investments are SinglePlatform and R&D and expanded sales and marketing.

Operator

Our next question comes from the line of Richard Baldry with Wunderlich Securities.

Richard K. Baldry - Wunderlich Securities Inc., Research Division

You have given the strong beat in the profitability side, but you're focused on accelerating growth. I'm sort of curious why you wouldn't have taken the time and the course to push on the spending side a little more given the positive variance you were seeing throughout the quarter?

Harpreet S. Grewal

I mean, I think that means -- I think a couple of reasons, I mean. One thing, that we certainly had a philosophy in the past, and I'd say we have a renewed rigor on this philosophy is to have disciplined spend that's going to result in those sort of returns. And I think -- certainly, for us, we then feel that from a sales and marketing side, there was no limitation that we set on sales and marketing that look at where they can efficiently spend to get the right returns. And they spend up to that efficiently. And we can all spend on consulting and the throw parties and things like that, and that is not what we do.

Richard K. Baldry - Wunderlich Securities Inc., Research Division

And then sticking with the sales and marketing, let's talk a little bit about the seasonality it takes for you to expect the seriousness or the magnitude of the swings throughout. There has been some variations, some here, as you pushed some of the advertising later into the summer. Some you've kind of curved it a little earlier. What we would expect out of the pattern for '13?

Harpreet S. Grewal

Yes. So I'll answer it in a couple of different ways. One maybe just from an overall adjusted EBITDA perspective of which obviously, sales and marketing, obviously, are an important components. But I think that the last quarter results have pulled them out -- pulled out the script and we've noted that the EBITDA kind of trendline we do expect is second quarter being about 12% EBITDA, third quarter growing to a little north of 20% and fourth quarter coming down a little bit from that 20%. I think if you model this out relative to overall guidance, that is overall for EBITDA trend and it's consistent with our Q2 guidance of 12% to 12.5% margin expansion. If you look at sales and marketing specifically, I think what you should expect is that from a dollar perspective, you should see a nice $1 million -- or a little over $1 million, $2 million decrease in sales and marketing costs in Q2, decreasing, again, you have summer seasonality and we come out and market a little bit. And that will be the low point of our sales and marketing spend and then increasing in Q4 or Q3 but not to the levels of Q1, probably more similar to the levels of Q2.

Operator

Our next question comes from the line of Dan Salmon with BMO Capital Markets.

Daniel Salmon - BMO Capital Markets U.S.

Sorry, I jumped on a little bit late so I just wanted to return to the share buyback. And just to understand a little bit your reasoning for doing it now, in particular what led you to that choice of capital deployment as opposed to a special dividend or something else along those lines. Just to understand how the decision came about a bit better.

Gail F. Goodman

Yes. I'll start. It started with just recognizing that we have a really strong balance sheet and good cash flow, which gave us the freedom to enhance shareholder value but still maintain enough capital to invest in the business and keep the flexibility for our investments in the future. We certainly had been talking about a share buyback for some time and this just ended up being kind of when all of that conversation came together.

Operator

I'm not showing any further questions at this time. I'd like to turn the call back to Gail Goodman for closing remarks.

Gail F. Goodman

Thank you. In closing, I just wanted to take a moment to thank all of the investors, partners and customers who reached out to show their support to Constant Contact in the wake of the Boston Marathon tragedy. It was an amazing show of spirit, teamwork, support and courage that united our community. Thank you.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone, have a great day.

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