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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

Richard H. Davis - Canaccord Genuity, Research Division

Kyle Chen

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

Michael Huang - Needham & Company, LLC, Research Division

Joe del Callar - Cowen and Company, LLC, Research Division

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

Daniel Salmon - BMO Capital Markets U.S.

Constant Contact (CTCT) Q3 2013 Earnings Call October 24, 2013 5:00 PM ET

Operator

Good day, ladies and gentlemen. Thank you for standing by, and welcome to the Constant Contact Third Quarter 2013 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Mr. Jerry Sisitsky. Sir, you may begin.

Jeremiah Sisitsky

Great. Thank you very much. Good afternoon, everyone, and welcome to Constant Contact's investor conference call for the third quarter ended September 30, 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-K and 10-Q on file with the SEC.

In addition, any forward-looking statements represent our views only as of today, October 24, 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 third 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, let me now turn the call over to Gail.

Gail F. Goodman

Thanks, Jerry. I am pleased to announce another set of solid quarterly results. Our core business performed well, and some of our newer growth initiatives are showing early signs of promise. Each of our 3 growth drivers: new customer additions, ARPU and retention, performed well in the quarter, with customer additions showing year-over-year increases for the third consecutive quarter.

We delivered another quarter of meaningful improvement to lifetime customer value and margins. Our platform strategy continues to advance as our products are becoming more and more integrated and easier to use. And we're harnessing the organization's passion for data and analytics, leveraging predictive analytics and Big Data to drive increasing value to our customers and our business.

Our revenue for the quarter was $72 million, up approximately 13% year-over-year. Our adjusted EBITDA was $14.8 million, around 21% adjusted EBITDA margin and better than the guidance we provided. We delivered 45,000 new customer additions, significantly better than last year, and the third quarter in a row of year-over-year growth in customer additions.

We have a powerful financial model with 3 distinct growth drivers: new customer additions, ARPU growth and improved retention. Based on the strength of these levers, we are expecting revenue to grow more than 13% in 2014 and for adjusted EBITDA margins to increase by more than 200 basis points. We've made good progress bringing our individual products together into a suite of marketing tools. Our new contact management functionality is in market, with roughly half of our current customers now using significantly enhanced CRM functionality. We expect the rollout to existing customers to be completed over the next few months.

2013 has been an impressive year for product enhancements. Our engineering organization has been busy improving all aspects of our online marketing suite with major enhancements across all of our products. We believe that our continued transformation to a marketing platform will allow us to take advantage of powerful trends in the marketplace. Email, social media and mobile are no longer separate ideas. Campaigns are now multichannel, launching to both social media and email and being viewed and acted on from mobile devices.

Small businesses, much like larger organizations, are starting to realize there is no one campaign type or channel to reach all of their customers and prospects, and they're increasingly turning to multiple marketing campaigns launched to all channels to reach and engage. The vast majority of small organizations have no way to get a single, complete view of their customers across campaign types and across channels. Our multiproduct strategy helps bridge this gap by providing a complete, integrated customer profile and providing a single place to launch and track multiple campaign types, helping them better understand their customers and leverage those insights and data to drive more relevant communications across all channels.

This platform approach allows small businesses to significantly expand their reach and increase the effectiveness of their marketing efforts. We are uniquely positioned to deliver on this vision. And our customers are increasingly looking to use their mobile devices to manage their marketing tasks.

So far in 2013, we've launched 6 new mobile applications to help our customers use EventSpot, SaveLocal and MyLibrary from their smartphones and tablets, and each of these apps is available for Android as well as iOS. We've also been working in the last few months on improvements to our QuickView mobile email marketing app, adding in new templates that help customers create and send newsletters right from their iPhone or iPad.

We've been busy in other areas of the business as well. We continue to test different pricing and packaging opportunities for our existing tools, testing increased price points for bundles of our products and services. While still quite early, we're learning a great deal and seeing some promising results. Bundles are producing higher ARPU, which is more than offsetting the expected reduction in conversion rates when compared to our control group.

We'll continue these tests over the course of the fourth quarter. We're becoming increasingly confident that we're uncovering how to deliver greater value to our customers at higher price points. We anticipate providing additional details on our next earnings call.

In the past few years, we've made significant improvements to grow our partner network and drive customer growth through this channel. In Q3, we continued to see traction from those investments.

Staples joined our list of strategic partners in the quarter. In the initial phase of this partnership Staples is teaming up with us to educate small businesses with online marketing workshops in select Staples stores. Last week, we also announced the launch of a new program with Microsoft to provide best practices in online marketing in Microsoft retail stores across North America. We're excited to work with both Staples and Microsoft to extend the reach -- our reach to prospective customers.

Our AppConnect partnerships are also gaining traction. In this quarter, we integrated with multiple new AppConnect partners, one partner alone resulted in approximately 1,000 new customers in the quarter. We've long thought that the partner channel is critical to our aspirations and are pleased with the traction evidenced in the last few quarters.

Our focus is on utilizing advanced analytics to drive both revenue growth and expanded profitability through improved conversion rates, cross-sell efforts and retention. Equally important, we're collecting and analyzing data to drive success for our customers. Our recent Big Data initiative involved analyzing more than 45 billion of our customers' emails to determine the best time to send a campaign. Our analysis help to predict the time of day when Constant Contact customers should send their emails so that the number of email opens and clicks are optimized, driving success for our customers and for Constant Contact.

Our test group of customers saw great results, seeing meaningful lift in open rates and the analysis suggests that on average, using this data to adjust the time of send could yield a 15% to 25% lift in the performance of their campaigns. In August, this project was recognized with the Computerworld 2013 Data+ Editor's Choice Award, which honors organizations for their ability to make better decisions using Big Data.

Overall, I'm pleased with our third quarter results and our prospects looking forward. As we enter the fourth quarter of 2013, we find ourselves in a significantly stronger position versus last year. Our evolution to a suite provider, while still in its early innings, is making good progress, which we expect to accelerate in 2014. Our focus remains clear: execute consistently on our near-term growth plans while driving accelerating growth and expanding profitability. I believe we are setting the stage to deliver exactly that in 2014.

With that, I'll turn it over to Harp to discuss the third quarter in more detail as well as review our outlook for the fourth quarter and our initial view into 2014.

Harpreet S. Grewal

Great. Thank you, Gail. The third quarter represented another solid quarter, both financially and operationally. Over the course of the past year, the entire company has recommitted itself to driving consistently good results by focusing on the core fundamentals of the business. We have better identified the key leading indicators of our business, assigned clear and unambiguous ownership, set targets, linked compensation to these targets and fostered transparency in reporting to enable better accountability and alignment. The renewed focus is yielding meaningful gains, which we expect to build upon in 2014 as reflected in our expectations that revenue will reaccelerate and margins grow meaningfully next year.

Financial and operating highlights in the third quarter reflect our focus on growing the top line while continuing to expand margins. Revenue for the quarter of a little over $72 million or 13% year-on-year growth was in line with our expectations. For the third consecutive quarter, profitability exceeded expectations.

Adjusted EBITDA totaled $14.8 million or about 21% of revenue, representing 32% growth versus EBITDA of $11.3 million last year. We delivered the third consecutive quarter of year-over-year growth in customer additions, and we saw continued improvement in customer lifetime values, driven by gains in ARPU and retention along with lower cost of customer acquisition and improved gross margin.

Our 3 primary growth levers: new customer additions, ARPU and retention, all performed well and continue to show strength in the quarter. New customer additions increased year-over-year and totaled 45,000. We ended the quarter with 585,000 unique-paying customers, up from 540,000 in the prior year. ARPU for the quarter was $42.13 compared to $41.79 last quarter and $40.35 last year, improving $1.78 or 4.4% on a year-over-year basis.

Our ARPU calculations since we acquired SinglePlatform about a year back has excluded the 10,000 customers associated with SinglePlatform at the time of the acquisition. We did so to provide a more apples-to-apples comparison to historical trend lines in light of not being able to recognize a substantial part of SinglePlatform's deferred revenue per GAAP rules.

As we anniversary the acquisition, it is useful to look at ARPU inclusive of the 10,000 customers. In doing so, ARPU for the quarter would have equaled $41.40 compared to $41.06 last quarter and $39.59 last year, improving $1.81 or 4.6% on a year-over-year basis. Looking ahead, we continue to expect to find ways to drive ARPU growth through a combination of list growth, cross sell and bundling and pricing. I'm increasingly confident that we can accelerate the rate of ARPU growth in 2014.

Customer retention rates show continued improvement both sequentially and the prior year. While attrition rates remained within historical band of 2.2% per month, plus or minus 50 basis points, the underlying dynamics are showing positive trends. This improvement has driven the average number of months the customer stays with us to approximately 50 months, up from about 45 months a few years back, representing a 10% improvement in retention.

For the second consecutive quarter, we delivered more new customers at a lower cost of customer acquisition versus the prior year. Cost of acquisition in the third quarter declined to about $550 versus $700 last year, with about 45,000 new customers this quarter versus 35,000 a year ago. From an absolute dollar basis, we spent slightly less in sales and marketing in the third quarter of this year, about $24.6 million versus last year, which was about $24.9 million, but secured considerably more customers. More customers on lower absolute sales and marketing spend is not an inconsequential data point.

We expect that we deliver year-on-year reduction in cost of acquisition in 2013, the first time since we went public in 2007. Looking forward to 2014, we hope to deliver stable to decreasing cost of customer acquisition on an annual basis.

Adjusted EBITDA for the quarter was $14.8 million or approximately 21%, well above guidance and about a 300 basis point improvement versus last year. Gains in adjusted EBITDA were driven by efficiencies in sales and marketing, improving gross margins and G&A leverage. As was the case the last 2 quarters, we are again increasing our full year adjusted EBITDA guidance, both on a dollar basis and as a percent of revenue. The better-than-expected profitability contributed to non-GAAP net income for the third quarter of $9 million or $0.29 per share, outpacing our guidance of $0.23 to $0.25 per share.

Turning to the balance sheet. We ended the third quarter with about $107 million in cash and investments, generated cash from operations of over $13.7 million and free cash flow of $9.2 million. We would expect to end the year with free cash flow well north of $20 million.

During the quarter, we continued to repurchase shares under our $20 million share repurchase program. We repurchased 150,000 shares at an average price of about $19 for a total of approximately $2.9 million in the quarter. This brings our total purchases for the year to 250,000 shares at a total cost of about $4.5 million.

We intend to continue repurchasing shares throughout the remainder of this year. Although with the stock up more than $0.50 -- 50% since we initially announced the buyback, we would expect to purchase fewer shares if the stock price continues to rise.

For the fourth quarter of 2013, we should deliver higher sequential revenue growth versus last year. Our near-term outlook is somewhat tempered by uncertainty associated with actions coming out of Washington, but are confident that Q4 will set the foundation for accelerated revenue growth next year.

For the fourth quarter, we expect revenue to be in the range of $74.5 million to $75.2 million. We expect adjusted EBITDA margin to be between 19.2% and 19.9%, translating to EBITDA in the range of $14.3 million to $15 million.

For the full year 2013, we expect revenue to be in the range of $285 million to $285.7 million. We are, again, raising profitability guidance for the year and expect full year adjusted EBITDA margins to be between 16% and 16.2%. This represents 150 to 170 basis points of annual margin expansion and equates to EBITDA in the range of $45.5 million to $46.2 million.

We are also, at this time, providing initial guidance for 2014. We expect revenue growth to accelerate in 2014 and are guiding to more than 13% revenue growth for the year. In addition to accelerating revenue growth, we also expect to meaningfully expand profit margins. We look to grow adjusted EBITDA margins by more than 200 basis points, equating to an EBITDA margin of more than 18%.

Let me end with the following thoughts. The lessons we learned from our performance in 2012 make us a stronger company today. The results in the first 3 quarters of this year underscore the gains we are making. Our success in achieving this is attributable to the hard work and dedication of everyone at Constant Contact. We look forward to building on these gains in the fourth quarter and in 2014.

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 Richard Davis.

Richard H. Davis - Canaccord Genuity, Research Division

I mean, you're pushing on all the metrics in the right direction. Do you think about trade-offs? And Gail, you kind of talked about it on the pricing side. But in other words, if retention improves, would you put more dollars in the marketing efforts, or are you kind of comfortable? And Harpreet talked about cost of customer acquisition coming in a little bit. But how do you kind of modulate those things or is the answer like, listen, we're trying to push on 5 things at once in a good way. I just kind of -- what your thought process is there.

Gail F. Goodman

Yes, I mean, you are absolutely right that sometimes, pushing on one lever has a negative impact on the others. So customer growth can drive cost of acquisition in the wrong direction; kind of ARPU growth and bundling might drive conversion rates and customer growth down. The way we're trying to look at this is by starting from our revenue growth goals and our profitability expansion goals. So if we had a trade-off, we would lean to the ones that drove the most revenue growth as long as it didn't sacrifice our profit expansion growth. And in most cases, that's enough of a miles -- of a yardstick that we can figure out the right choice.

Richard H. Davis - Canaccord Genuity, Research Division

Got it. No, that's helpful. I appreciate that.

Operator

Our next question comes from Michael Nemeroff.

Kyle Chen

This is Kyle Chen in for Michael Nemeroff. I was wondering if you can talk a little bit about what the impact of the government shutdown and debt ceiling uncertainty in early October had on your overall customer acquisition trend in the first couple of weeks of the quarter, how they compare to historical patterns? And I guess, how much conservatism you're baking into your outlook, particularly for the early part of 2014 to account for that potential downstream impact of the shutdown that may not be availably -- immediately seen?

Gail F. Goodman

Yes. It is hard to absolutely quantify what the impact of those 16 days, and I would say more importantly, the growing uncertainty about what might happen in the future and how that might play through into the economy will have on our business. We did see some modest decline in engagement during that shutdown period, but it was modest and on the margin. What we are more concerned about is how uncertainty feeds into the hiring practices and investment philosophy of small businesses going forward. We haven't built a tremendous amount of that into the model. The good news is we're pretty far into our quarter already, and our guidance is driven by trend lines we can see clearly.

Kyle Chen

Okay. And I was also wondering if you can update us on what you're seeing in terms of the potential decrease in open and click there is relative to Google's new segmented inbox. Last quarter, you mentioned that you saw a small decline for Gmail customers. Wonder if you're seeing any further degradation in those trends, and if there's any strategies you can use to mitigate these changes.

Gail F. Goodman

Yes, so just to start by level setting kind of everyone on the call, what's interesting about the change in Gmail is that it only affects those who actually use a Gmail app to read their email, not everyone who has a gmail.com address. So if you have your Gmail sent to your Apple iPhone and you just use the normal Apple Mail app, you're not seeing the impact of their foldering. So when you step back and look at the stats, and these are stats from Litmus, they're an email deliverability company, about 4% of all mail is read on a Gmail client. So to start, the potential universe to be impacted is relatively small, smaller than the gmail.com email address universe. What we are seeing for those folks is some decline in open rates but not significant either. And I think we're really a seeing a few things happening there. One is as consumers adopt to that new interface, they actually are looking at their promotional emails, and Gmail is doing a nice job of letting them know in their main inbox that they have new promotional emails waiting. Might be a little more time shifted, but we are seeing that they are continuing to visit the emails that they enjoy. We're also seeing marketers begin to nudge their consumers to pull their emails from the promotion box into the inbox to essentially make them a safe sender and reestablishes them as going into the inbox going forward. And then I think the big uncertainty is whether consumers will actually turn off the foldering. I am a Gmail user and finding that some of the foldering is actually having me miss emails I care about. And I've heard from other consumers that they're starting to turn that off. And I think we're just in the early innings, so we really can't be sure how that will play through.

Operator

Our next question comes from Jeff Houston.

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

It seems like a pretty, pretty good development in your product portfolio with the CRM functionality. Could you talk a bit about how the engagement habits or the behavior habits have changed with users that have that functionality rolled out to them versus the ones that do not?

Gail F. Goodman

Sure. I'll start with saying that we are getting good feedback on the new contact management functionality, particularly some of the new reporting, things like do not open reports and other things that were not available. We're just starting to see our customers begin to use new functionality like tags to be able to do segmentation over time. We are seeing no degradation in their ability to use this product and get emails out, so that kind of all of our usage stats have stayed stable. But perhaps the best data we're seeing is from new users who are coming in to the new contact management system for the first time. We are seeing them upload more lists and larger lists early on, and I think that really is due to the ease-of-use of the new system. So all of the stats are going in the right direction, and we are definitely bringing our customer base along and educating them about new capabilities as we go.

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

Great. Then separately, switching to some of the competitive dynamics, with the acquisition of ExactTarget by Salesforce, have you seen any change in the leads or the activity that comes through Salesforce?

Gail F. Goodman

Yes. We -- as you know, we tend to operate considerably downstream from ExactTarget, and even I would say downstream from the bulk of the Salesforce user base. So while we have -- while we definitely have lots of users who use our Salesforce integration, that was never a very good, I would say, lead source for us. So I don't know that we've seen any change there at all, and ExactTarget really didn't change our competitive dynamics.

Operator

Our next question comes from Michael Huang.

Michael Huang - Needham & Company, LLC, Research Division

Just a couple of questions for you guys. First of all, it's great to see kind of the favorable trends around cost of acquisition. Now if I recall correctly, I think last year, you had a strong kind of lead base. Those like conversion rates were impacted by a -- by perhaps a distraction from the core focus here. So I was wondering, are you seeing more leads on less sales and marketing dollars? So the impact and efficiency of sales and marketing spend can drive and lead flow? Or is it just a function of better conversion rate?

Harpreet S. Grewal

I think it's kind of a function of both, actually. So I think as I look at Q3, what I consider the top of the funnel demand generation, we continue to drive higher numbers of trialers for the most part. So we're getting -- or using our spend, which we spend marginally less this year in sales and marketing than we did in the third quarter of last year, and we're getting better demand generation. And then obviously to your point, we're focusing on the conversion side of it, and we're seeing some gains on the conversion side. So I think we're seeing it on both ends.

Michael Huang - Needham & Company, LLC, Research Division

Now with respect to demand generation, is there a channel or 2 that you'd like to call out that perhaps are helping to drive kind of the better demand generation, or is it something else?

Gail F. Goodman

Yes, so...

Michael Huang - Needham & Company, LLC, Research Division

Maybe it's a partner channel or...

Gail F. Goodman

Well, I would -- yes, I was actually going to head there. All of our channels are performing well. So I'll just start by saying mass media is working well. We are seeing both volume and efficiency gains in our online pay-per-click channel. But the channel where we've been investing for a few years that's starting to deliver more meaningfully is our partner channel. That's large partners. It's our solution providers, and it's our AppConnect partnerships. So really, those investments are starting to pay out. It's part of what's driving our increased confidence in 2014 that we can grow revenue over this year.

Michael Huang - Needham & Company, LLC, Research Division

Got you. Okay. And then just a question on kind of the trends in gross add growth. I mean, that's great to see. I would attribute some of the growth to some favorable comparisons. And just wondering, as I think about kind of Q1 of next year, should we expect this growth to continue? So I mean, could we see something north of -- I believe Q1 of this year, like, you did 50k of gross adds, which is great, but makes for a tougher bar to clear as we get into next year. How are you thinking about whether or not this gross add growth is sustainable or not?

Harpreet S. Grewal

No, I mean, first of all, at this point, what I'd say is it's too early to kind of talk about how we're looking at 2014 in terms of gross adds, net adds and the like. I think what we have done and what we're showing over the course of this year -- and you're right, Q3 was comparing to a weak quarter last year -- is that we have shown the ability to take increased demand generation, improved conversion, better penetration in the partner channel and what effectively drive about 5,000 incremental gross adds a quarter. So that's a really good start. I think we look to build upon that, but it's way too early to say, hey, in Q1 we're going to build -- go north of 50 or 55 or whatever the case may be.

Operator

Our next question comes from Peter Goldmacher.

Joe del Callar - Cowen and Company, LLC, Research Division

It's Joe for Peter here. So we believe you're one of the best early practitioners of a Big Data technique. And so your example of the optimal time-specific campaign analysis was interesting. So what other programs are you discovering or are you looking at that will help accelerate your growth next year? And how are you going about incentivizing your staff to operationalize these programs?

Gail F. Goodman

So the nice thing about Big Data is it has potential to impact both the business and our customers, and we're actually working on both. The team, on the impacting the business, the key places they've been working are conversion and retention. And this team is -- they're just champions. They've been doing a great job, not just coming up with the analysis, but really working with the operating executives to make sure the analysis is both understood and operationalized. A clear example of that is lead scoring and kind of bringing that into our Salesforce.com implementation. It's a very clear home run for the business, driving some very nice improvements in conversions, building that confidence for 2014. On the customer side, you heard about opens and clicks, but what we're also really working to do is personalize the end product experience to make suggestions about what the next best marketing activity is, and you'll hear more about that. That's very early, but you'll hear more about that as we head into 2014.

Operator

Our next question comes from Brian Schwartz.

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

Gail, the leading indicator, as your commentary here on the call as well as the next year's guidance, they do paint a very positive outlook here for the business. Just hoping to dive a little deeper into the momentum, the confidence that you have. I think you mentioned that the partner ecosystem is scaling nicely here for the business. A couple other -- I was wondering if you could give just your thoughts on a couple other potential drivers. And that is, does the end market from the macro standpoint, is the end market feeling healthier these days than we've seen in the recent past? Also, the prior acquisitions that you've done, especially with SinglePlatform, are they starting to scale where they're meaningfully going to contribute here next year? Or is there anything else that maybe is company-specific that's giving you the confidence to put out the accelerating growth with better margin targets for next year?

Gail F. Goodman

Yes, so lifting up to the anchors of our confidence for 2014, the first starts with the fact that our core metrics are all performing well. But then we layer in new initiatives that are scaling, and SinglePlatform hitting that first anniversary is right at the top of the list. So that team is executing beautifully, their growth is accelerating and we're seeing really nice gains in that business. Our other newer products are also gaining traction. Probably I would highlight Social Campaigns as one of the stars for this last quarter. And then the pricing and packaging work we're doing, while it's incredibly early and we're not ready to talk about it in great detail, holds tremendous promise for our ARPU leverage as we head into next year. And it's really the combination of that with the operating disciplines that we've put in place over the last year, a growing strengthening team with clearer operating metrics, clear owners, the things Harpreet was talking about, where we really have our eye on the ball, and there's little chance that we would strike out on any of these metrics.

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

And then just one last follow-up that I had. With the SinglePlatform business, it sounds like that business is executing very well right now. I do believe that it does operate with a separate distribution system with the sales force for that organization. Are there plans in 2014 or maybe beyond to eventually push out the other Constant Contact products for that SinglePlatform team to cross sell and upsell?

Gail F. Goodman

Yes, so we are, again, beginning to do some cross sell. Actually this last couple of quarters, we've been selling SinglePlatform into the Constant Contact base. We now have the SinglePlatform product on our website and in the core billing system, so that we can make that kind of a more comfortable cross-sell and an easier entry point. And as we head into 2014, we are starting to truly build the plans for how we look more like one company to the customer, and we make sure that we're finding opportunities on kind of both sides to find the right time to introduce the other products. So whether you come in for SinglePlatform and we introduce Email Marketing or Social Campaigns or we kind of go the other way. So definitely, look for more news on that in 2014.

Operator

And our next question comes from Dan Salmon.

Daniel Salmon - BMO Capital Markets U.S.

I was just curious, yesterday, Facebook announced that they were opening up custom audiences to all advertisers, small- and medium-size businesses alike, and it looks like MailChimp is an early partner. I was wondering, is that an opportunity for Constant Contact?

Gail F. Goodman

So we definitely are doing some early work exploring how small businesses can most effectively use Facebook advertising in general and custom audiences in specific. So we actually have not a custom audiences test, but a test in market now with a small set of customers amplifying their social campaigns with Facebook ads, really trying to understand efficacy, spend level required for success and how we might bring a product to market that makes that available to small businesses. So definitely in the mix and stay tuned for updates over time.

Operator

That concludes our Q&A. I'd like to turn the call over to Gail Goodman for closing comments.

Gail F. Goodman

Just want to thank everyone for joining us on the call this evening. We appreciate your continued interest and support. Good night.

Operator

Ladies and gentlemen, that does conclude today's conference. Thank you for your attendance. You may all disconnect. Have a great day.

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