Filed On 7/6/07 2:31pm ET · SEC File 333-144381 · Accession Number 950135-7-4211
As Of Filer Filing As/For/On Docs:Pgs Issuer Agent
7/06/07 Constant Contact/Inc S-1 18:600 Bowne of Boston I..01/FA
Document/Exhibit Description Pages Size
1: S-1 Constant Contact, Inc. Form S-1 HTML 1,243K
2: EX-3.1 EX-3.1 Second Amended and Restated Certificate of 23 84K
Incorporation
3: EX-3.3 EX-3.3 Amended and Restated Bylaws 26 60K
4: EX-10.1 EX-10.1 1999 Stock Option/Stock Issuance Plan 10 41K
5: EX-10.2 EX-10.2 Form of Non-Qualified Stock Option 10 35K
Agreement With Executives
6: EX-10.3 EX-10.3 Form of Non-Qualified Stock Option 10 35K
Agreement
7: EX-10.4 EX-10.4 Restricted Stock Purchase Agreement, Dated 7 31K
December 12, 2005
8: EX-10.9 EX-10.9 Letter Agreement, Gail F. Goodman, Dated 2 10K
April 14, 1999
9: EX-10.10 EX-10.10 Letter Agreement, Steven R. Wasserman, 2 12K
Dated December 1, 2005
10: EX-10.11 EX-10.11 Letter Agreement, Richard H. Turcott, 5 21K
Dated December 6, 2006
11: EX-10.12 EX-10.12 2007 Executive Team Bonus Plan 4 16K
12: EX-10.14 EX-10.14 Amended and Restated Investors' Rights 33 106K
Agreement, Dated August 9, 2001
13: EX-10.15 EX-10.15 Amended and Restated Preferred Investors' 56 154K
Rights Agreement, Dated May 12, 2006
14: EX-10.16 EX-10.16 Lease Agreement, Dated July 9, 2002 117 323K
15: EX-10.17 EX-10.17 Loan and Security Agreement, Dated 74 214K
February 27, 2003
16: EX-16.1 EX-16.1 Letter From Vitale, Caturano & Company, HTML 8K
Ltd.
17: EX-23.1 EX-23.1 Consent of Pricewaterhousecoopers Llp HTML 7K
18: EX-23.2 EX-23.2 Consent of Vitale, Caturano & Company, HTML 8K
Ltd.
This is an EDGAR HTML document rendered as filed. [ Alternative Formats ]
As filed with the Securities and Exchange Commission on
July 6, 2007.
Registration
No. 333-
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
FORM S-1
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF
1933
CONSTANT CONTACT,
INC.
(Exact Name of Registrant as
Specified in Its Charter)
| |
|
|
|
|
|
Delaware
|
|
7372
|
|
04-3285398
|
(State or Other Jurisdiction
of
Incorporation or Organization)
|
|
(Primary Standard Industrial
Classification Code No.)
|
|
(I.R.S. Employer
Identification No.)
|
Reservoir Place
1601 Trapelo Road, Suite 329
(Address, including zip code,
and telephone number,
Including area code, of
registrant’s principal executive offices)
Constant Contact, Inc.
Reservoir Place
1601 Trapelo Road, Suite 329
(Name, address, including zip
code, and telephone number,
including area code, of agent
for service)
Copies to:
Approximate date of commencement of proposed sale to the
public: As soon as practicable after this Registration
Statement is declared effective.
If any of the securities being registered on this form are
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, as amended (the
“Securities Act”), check the following
box. o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
CALCULATION
OF REGISTRATION FEE
| |
|
|
|
|
|
|
|
|
|
|
Proposed Maximum
|
|
|
Amount of
|
Each Class of
|
|
|
Aggregate Offering
|
|
|
Registration
|
|
Securities to be Registered
|
|
|
Price(1)
|
|
|
Fee(2)
|
|
Common Stock, par value $0.01 per
share
|
|
|
$86,250,000
|
|
|
$2,648
|
|
|
|
|
|
|
|
|
|
|
| (1)
|
Estimated solely for the purpose of
computing the registration fee in accordance with
Rule 457(o) under the Securities Act of 1933, as amended.
|
| (2)
|
Calculated pursuant to
Rule 457(o) based on an estimate of the proposed maximum
aggregate offering price.
|
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission,
acting pursuant to Section 8(a), may determine.
The information
contained in this prospectus is not complete and may be changed.
These securities may not be sold until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not
permitted.
|
Shares
Common Stock
$
per share
This is an initial public offering of our common stock. We are
offering shares and the
selling stockholders identified in this prospectus are
offering shares.
We expect that the price to the public in
the offering will be
between $ and
$ per share. The market price of
the shares after
the offering may be higher or lower than the
offering price.
We have applied to include our common stock on the Nasdaq Global
Market under the symbol “CTCT.”
Investing in our common stock involves risks. See “Risk
Factors” beginning on page 7.
| |
|
|
|
|
|
|
|
|
|
|
|
Per Share
|
|
|
Total
|
|
|
|
|
Price to the public
|
|
$
|
|
|
|
$
|
|
|
|
Underwriting discount
|
|
|
|
|
|
|
|
|
|
Proceeds, before expenses, to
Constant Contact
|
|
|
|
|
|
|
|
|
|
Proceeds, before expenses, to the
selling stockholders
|
|
|
|
|
|
|
|
|
The selling stockholders have granted an over-allotment option
to the underwriters. Under this option, the underwriters may
elect to purchase a maximum
of
additional shares from the selling stockholders within
30 days following the date of this prospectus to cover
over-allotments.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
|
|
| CIBC
World Markets |
Thomas
Weisel Partners LLC |
|
|
|
| William
Blair & Company |
Cowen
and Company |
Needham &
Company, LLC |
The date of this prospectus
is ,
2007
| Email marketing really is this easy. Constant Contact makes it Create easy to create, send,
and track your email Build your list permission-based email messages More than 200
professional and send email templates that get attention and deliver results. List import wizard
and tools Track Flexible one-screen editing Customizable mailing list the results Easy drag &
drop interface sign-up form for your website Customize colors and fonts Open and click tracking
Unsubscribe management Personalization Summary and List segmentation detailed reporting Easy send
scheduling ConstantContact.com © 2007 Constant Contact. All rights reserved 07-0139 |
Table of
Contents
| |
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
7
|
|
|
|
|
|
23
|
|
|
|
|
|
24
|
|
|
|
|
|
24
|
|
|
|
|
|
25
|
|
|
|
|
|
27
|
|
|
|
|
|
29
|
|
|
|
|
|
31
|
|
|
|
|
|
45
|
|
|
|
|
|
60
|
|
|
|
|
|
82
|
|
|
|
|
|
84
|
|
|
|
|
|
86
|
|
|
|
|
|
91
|
|
|
|
|
|
93
|
|
|
|
|
|
99
|
|
|
|
|
|
99
|
|
|
|
|
|
99
|
|
|
|
|
|
F-1
|
|
| EX-3.1 Second Amended and Restated Certificate of Incorporation |
| EX-3.3 Amended and Restated Bylaws |
| EX-10.1 1999 Stock Option/Stock Issuance Plan |
| EX-10.2 Form of Non-Qualified Stock Option Agreement with Executives |
| EX-10.3 Form of Non-Qualified Stock Option Agreement |
| EX-10.4 Restricted Stock Purchase Agreement, dated December 12, 2005 |
| EX-10.9 Letter Agreement, Gail F. Goodman, dated April 14, 1999 |
| EX-10.10 Letter Agreement, Steven R. Wasserman, dated December 1, 2005 |
| EX-10.11 Letter Agreement, Richard H. Turcott, dated December 6, 2006 |
| EX-10.12 2007 Executive Team Bonus Plan |
| EX-10.14 Amended and Restated Investors' Rights Agreement, dated August 9, 2001 |
| EX-10.15 Amended and Restated Preferred Investors' Rights Agreement, dated May 12, 2006 |
| EX-10.16 Lease Agreement, dated July 9, 2002 |
| EX-10.17 Loan and Security Agreement, dated February 27, 2003 |
| EX-16.1 Letter from Vitale, Caturano & Company, Ltd. |
| EX-23.1 Consent of PricewaterhouseCoopers LLP |
| EX-23.2 Consent of Vitale, Caturano & Company, Ltd. |
Prospectus
Summary
This summary highlights information contained elsewhere in
this prospectus. You should read the following summary together
with the more detailed information appearing in this prospectus,
including our financial statements and related notes, and the
risk factors beginning on page 7, before deciding whether to
purchase shares of our common stock. Unless the context
otherwise requires, we use the terms “Constant
Contact,” “our company,” “we,”
“us” and “our” in this prospectus to refer
to Constant Contact, Inc.
Constant
Contact
Overview
Constant Contact is the leading provider of on-demand email
marketing solutions for small organizations, including small
businesses, associations and non-profits. As of
June 30,
2007, we had over 120,000 customers. Our customers use our email
marketing solution to more effectively and efficiently create,
send and track professional and affordable permission-based
email marketing campaigns. With these campaigns, our customers
can build stronger relationships with their customers, clients
and members, increase sales and expand membership. Our email
marketing solution incorporates a wide range of customizable
templates to assist in campaign creation, user-friendly tools to
import and manage contact lists and intuitive reporting to track
campaign effectiveness. In June 2007, we introduced an online
survey solution that complements our email marketing solution
and enables small organizations to easily create and send
surveys and effectively analyze responses. We are committed to
providing our customers with a high level of support, which we
deliver via phone, chat, email and our
website.
Our email marketing customer base has grown steadily from
approximately 25,000 at the end of 2004 to over 120,000 as of
June 30, 2007. We estimate that approximately two-thirds of
our customers have fewer than ten employees and in the first
quarter of 2007 our top 50 email marketing customers accounted
for approximately 1% of our gross email marketing revenue. Our
email marketing customers pay a monthly subscription fee that
generally ranges between $15 per month and $150 per month based
on the size of their contact lists and, in some cases, volume of
mailings. For the first quarter of 2007, our average monthly
revenue per email marketing customer exceeded $32. We believe
that the simplicity of on-demand deployment combined with our
affordable subscription fees and functionality facilitate
adoption of our solution by our target customers while
generating significant recurring revenue. From January 2005
through June 2007, at least 97.4% of our customers in a given
month have continued to utilize our email marketing solution in
the following month. Since the first quarter of 2002, we have
achieved 21 consecutive quarters of growth in customers and
revenue. Based on the current size of our customer base, we
believe that we are the largest provider of email marketing
services to small organizations.
We acquire our customers through a variety of paid and unpaid
sources. Our paid sources include online marketing through
search engines, advertising networks and other sites; offline
marketing through radio advertising, local seminars and other
marketing efforts; and relationships with over 1,700 active
channel partners, which include national small business service
providers such as Network Solutions, LLC, American Express
Company and VistaPrint Limited as well as local small business
service providers. Our unpaid sources of customer acquisition
include referrals from our growing customer base, general brand
awareness and the inclusion of a link to our
website in the
footer of more than 500 million emails currently sent by
our customers each month. We believe that during the first
quarter of 2007 at least 45% of our new email marketing
customers were generated through unpaid sources.
We were founded in 1995 and our on-demand email marketing
solution was first offered commercially in 2000. In 2006, our
revenue was $27.6 million and our net loss was
$7.8 million, and in the quarter ended
March 31, 2007
our revenue was $9.7 million and our net loss was
$2.7 million.
1
Industry
Background
We believe that small organizations represent a large market for
email marketing. Based on statistics compiled by the
U.S. Small Business Administration and others, we believe
that our email marketing solutions could potentially address the
needs of more than 27.3 million small organizations in the
United States.
To date, however, small organizations have been slower than
large organizations to adopt email marketing. Many small
organizations lack familiarity with the benefits of email
marketing and an understanding of how to prepare, execute and
measure a campaign. Similarly, they often do not have the
technical expertise necessary to implement email marketing
software or the financial resources to hire in-house staff or
retain an outside agency to support the effort. We believe that
existing alternatives, primarily the use of general email
applications, are poorly suited to meeting the email marketing
needs of small organizations. General email applications and
services, such as Microsoft
Outlook®,
America
Online®
or
Hotmail®,
are designed for
one-on-one
emails and do not have the formatting, graphics or links needed
to produce effective email marketing campaigns. The other major
alternative is enterprise email marketing providers that offer
sophisticated services for large organizations with sizeable
marketing budgets and deliver services at a price and scale far
beyond the scope of most small organizations. As a result, we
believe there is a significant opportunity for an email
marketing solution tailored to the needs of small organizations.
Our
Products and Services
We provide small organizations with a convenient, effective and
affordable way to communicate with their constituents. Our email
marketing solution provides customers with the following
features:
|
|
|
| |
•
|
Campaign Creation Wizard. A comprehensive, easy-to-use
interface that enables our customers to create and edit email
campaigns.
|
| |
| |
•
|
Professionally Developed Templates. Pre-designed email
message forms that help our customers to quickly create
attractive and professional campaigns.
|
| |
| |
•
|
Contact List Management. These tools help our customers
build and manage their email contact lists.
|
| |
| |
•
|
Email Tracking and Reporting. These features enable our
customers to review and analyze the overall effectiveness of a
campaign by tracking and reporting aggregate and individualized
information.
|
| |
| |
•
|
Email Delivery Management. These tools are incorporated
throughout our email marketing solution and are designed to
maintain our high deliverability rates.
|
| |
| |
•
|
Image Hosting. This feature enables customers to store up
to five images for free, view and edit these images and resize
them as necessary.
|
| |
| |
•
|
Security and Privacy. We protect our customers’ data
and require that our customers adopt a privacy policy to assist
them in complying with government regulations and email
marketing best practices.
|
In addition, we recently launched an online survey solution to
enable our customers to survey their customers, clients or
members and analyze the responses. Our survey solution provides
customers with a survey creation wizard, over 40 different
preformatted and customizable survey templates, list management
capabilities and live customer support.
2
Business
Strengths
We believe that the following business strengths differentiate
us from our competitors and are key to our success:
|
|
|
| |
•
|
Focus on Small Organizations
|
| |
| |
•
|
Efficient Customer Acquisition Model
|
| |
| |
•
|
High Degree of Recurring Revenue
|
| |
| |
•
|
Consistent Commitment to Customer Service
|
| |
| |
•
|
Software-as-a-Service
Delivery
|
Growth
Strategy
Our objective is to grow our market leadership through the
following strategies:
|
|
|
| |
•
|
Acquire New Customers. We have increased the number of
email marketing customers acquired in each of the past 11
quarters and aggressively seek to continue to attract new
customers by promoting the Constant Contact brand and
encouraging small organizations to try our solutions.
|
| |
| |
•
|
Increase Revenue Per Customer. As of June 30, 2007,
we had an email marketing customer base in excess of 120,000. We
seek to increase revenue from each customer through add-on
services that enhance our solutions such as image hosting.
|
| |
| |
•
|
Provide Additional Products. We plan to continue to
invest in research and development to maintain our leadership
position in email marketing and to develop and provide our
customers with complementary solutions that are easy-to-use,
effective and affordable such as our recently launched survey
product.
|
| |
| |
•
|
Expand Internationally. Customers in over 110 countries
and territories currently use our email marketing solution,
despite limited marketing efforts outside the United States, and
we believe that opportunities exist to more aggressively market
our solutions in English-speaking countries.
|
| |
| |
•
|
Pursue Complementary Acquisitions. We follow industry
developments and technology advancements and intend to evaluate
and acquire technologies or businesses to cost-effectively
enhance our solutions, access new customers or markets or both.
|
Corporate
Information
We were incorporated in Massachusetts in August 1995 under the
name Roving Software Incorporated. We reincorporated in Delaware
in July 2000 and changed our name to Constant Contact, Inc. in
December 2006. Our principal executive offices are located at
Reservoir Place, 1601 Trapelo Road, Suite 329,
Waltham,
Massachusetts 02451, and our telephone number is
(781) 472-8100.
Our
website address is
www.constantcontact.com. Information
contained on our
website is not
incorporated by reference into
this prospectus, and you should not consider information
contained on our
website to be part of this prospectus or in
deciding whether to purchase shares of our common stock.
Constant
Contact®,
Do-It-Yourself Email
Marketing®,
SafeUnsubscribe®,
Email Marketing
101®,
Email Marketing Hints &
Tips®
and other trademarks or service marks of Constant Contact
appearing in this prospectus are the property of Constant
Contact. This prospectus contains additional trade names,
trademarks and service marks of other companies.
3
The
Offering
|
|
|
|
Common stock offered by us
|
|
shares |
| |
|
Common stock offered by the selling stockholders
|
|
shares |
| |
|
|
|
shares |
| |
|
Use of proceeds
|
|
We intend to use our net proceeds from this offering for general
corporate purposes, including the development of new products,
the acquisition of new customers and capital expenditures. We
also intend to use a portion of our net proceeds to repay
outstanding debt. We may use a portion of our proceeds for the
acquisition of, or investment in, businesses, technologies,
products or assets that complement our business. We have no
present understandings, commitments or agreements to enter into
any acquisitions or make any investments. We will not receive
any proceeds from the shares sold by the selling stockholders.
See “Use of Proceeds” for more information. |
| |
|
Proposed Nasdaq Global Market symbol
|
|
CTCT |
The number of shares of our common stock to be outstanding after
this offering is based on the number of shares of common stock
outstanding as of
March 31, 2007, and excludes:
|
|
|
| |
•
|
1,383,497 shares of common stock issuable upon the exercise
of stock options and warrants outstanding as of March 31,
2007 at a weighted average exercise price of $2.61 per share, of
which options and warrants to purchase 406,732 shares of
our common stock were exercisable as of March 31, 2007 with
a weighted average exercise price of $2.73 per share;
|
| |
| |
•
|
787,823 shares of common stock available for future
issuance under our equity compensation plans as of
March 31, 2007; and
|
| |
| |
•
|
120,000 shares of common stock issuable upon the exercise
of a warrant to purchase redeemable convertible preferred stock
with an exercise price of $0.50 per share, which preferred stock
is convertible into common stock.
|
Unless otherwise stated, all information contained in this
prospectus gives effect to a 1-for-100 reverse stock split of
our common stock that was effected on
November 26, 2002,
assumes no exercise by the underwriters of their over-allotment
option, gives effect to the automatic conversion of all
outstanding shares of our redeemable convertible preferred stock
into 13,189,778 shares of our common stock upon the closing
of this offering and gives effect to the restatement of our
certificate of incorporation and amendment and restatement of
our
bylaws to be effective upon completion of this offering.
4
Summary
Financial Information
The following tables present our summary statements of
operations data for the three years ended
December 31, 2006
and for the three months ended
March 31, 2006 and
2007, and
our summary historical, pro forma and pro forma as adjusted
balance sheet data as of
March 31, 2007. The summary
statements of operations data for the three years ended
December 31, 2006 are derived from our audited financial
statements for the three years ended
December 31, 2006
included elsewhere in this prospectus. The summary statements of
operations data for the three months ended
March 31, 2006
and
2007 and the summary balance sheet data as of
March 31,
2007 have been derived from our unaudited financial statements
included elsewhere in this prospectus. Our unaudited financial
statements have been prepared on the same basis as the audited
financial statements and notes thereto and, in the opinion of
our management, include all adjustments (consisting of normal
recurring adjustments) necessary for a fair statement of the
information for the unaudited interim periods. Our historical
results for prior interim periods are not necessarily indicative
of results to be expected for a full year or for any future
period. You should read this data together with our financial
statements and related notes included elsewhere in this
prospectus and the information under
“Selected Financial
Data” and
“Management’s Discussion and Analysis
of Financial Condition and Results of Operations.”
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
Year Ended December 31,
|
|
|
March 31,
|
|
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2006
|
|
|
2007
|
|
|
|
|
(in thousands, except per share and customer data)
|
|
|
Statements of Operations
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
8,071
|
|
|
$
|
14,658
|
|
|
$
|
27,552
|
|
|
$
|
5,429
|
|
|
$
|
9,713
|
|
|
Cost of revenue(1)
|
|
|
2,211
|
|
|
|
3,747
|
|
|
|
7,801
|
|
|
|
1,543
|
|
|
|
2,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
5,860
|
|
|
|
10,911
|
|
|
|
19,751
|
|
|
|
3,886
|
|
|
|
6,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
2,140
|
|
|
|
3,355
|
|
|
|
6,172
|
|
|
|
1,363
|
|
|
|
2,169
|
|
|
Sales and marketing
|
|
|
3,385
|
|
|
|
7,460
|
|
|
|
18,592
|
|
|
|
2,837
|
|
|
|
6,121
|
|
|
General and administrative
|
|
|
856
|
|
|
|
1,326
|
|
|
|
2,623
|
|
|
|
493
|
|
|
|
1,082
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
6,381
|
|
|
|
12,141
|
|
|
|
27,387
|
|
|
|
4,693
|
|
|
|
9,372
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(521
|
)
|
|
|
(1,230
|
)
|
|
|
(7,636
|
)
|
|
|
(807
|
)
|
|
|
(2,390
|
)
|
|
Interest and other income
(expense), net
|
|
|
(34
|
)
|
|
|
(24
|
)
|
|
|
(203
|
)
|
|
|
(150
|
)
|
|
|
(291
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(555
|
)
|
|
|
(1,254
|
)
|
|
|
(7,839
|
)
|
|
|
(957
|
)
|
|
|
(2,681
|
)
|
|
Accretion of redeemable
convertible preferred stock
|
|
|
(3,701
|
)
|
|
|
(5,743
|
)
|
|
|
(3,788
|
)
|
|
|
(2,136
|
)
|
|
|
(253
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common
stockholders
|
|
$
|
(4,256
|
)
|
|
$
|
(6,997
|
)
|
|
$
|
(11,627
|
)
|
|
$
|
(3,093
|
)
|
|
$
|
(2,934
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common
stockholders per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(5.68
|
)
|
|
$
|
(3.23
|
)
|
|
$
|
(4.40
|
)
|
|
$
|
(1.22
|
)
|
|
$
|
(1.02
|
)
|
|
Weighted average shares
outstanding used in computing per share amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
749
|
|
|
|
2,164
|
|
|
|
2,645
|
|
|
|
2,527
|
|
|
|
2,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Operating Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of period number of
customers(2)
|
|
|
25,229
|
|
|
|
47,730
|
|
|
|
89,323
|
|
|
|
57,195
|
|
|
|
104,265
|
|
|
|
|
|
(1)
|
|
Amounts include stock-based
compensation expense, as follows:
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
$
|
–
|
|
$
|
–
|
|
$
|
25
|
|
$
|
2
|
|
$
|
15
|
|
Research and development
|
|
|
–
|
|
|
–
|
|
|
27
|
|
|
1
|
|
|
21
|
|
Sales and marketing
|
|
|
6
|
|
|
–
|
|
|
19
|
|
|
1
|
|
|
11
|
|
General and administrative
|
|
|
17
|
|
|
17
|
|
|
12
|
|
|
1
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
23
|
|
$
|
17
|
|
$
|
83
|
|
$
|
5
|
|
$
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
|
|
We define our end of period number
of customers as email marketing customers that we billed
directly during the last month of the period.
|
5
The following table summarizes our balance sheet data as of
March 31, 2007:
|
|
|
| |
•
|
on an actual basis;
|
| |
| |
•
|
on a pro forma basis to reflect the automatic conversion of all
outstanding shares of our redeemable convertible preferred stock
into shares of common stock upon the closing of the offering and
the assumed expiration of an outstanding warrant to purchase
120,000 shares of our redeemable convertible preferred
stock resulting in a reversal of other expense of $1,048,000
related to previous adjustments to its fair value; and
|
| |
| |
•
|
on a pro forma as adjusted basis to reflect the pro forma
adjustment above, as well as the receipt by us of estimated net
proceeds of $ million from
the sale
of shares
of common stock offered by us, at an initial public offering
price of $ per share, the
mid-point of the estimated price range shown on the cover page
of this prospectus, after deducting the estimated underwriting
discount and offering expenses payable by us and the payment by
us of $565,000 to repay our outstanding indebtedness as
described under “Use of Proceeds.”
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2007
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
|
Actual
|
|
|
Pro Forma
|
|
|
as Adjusted
|
|
|
|
|
(in thousands)
|
|
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and
short-term marketable securities
|
|
$
|
9,802
|
|
|
$
|
9,802
|
|
|
$
|
|
|
|
Total assets
|
|
|
16,326
|
|
|
|
16,326
|
|
|
|
|
|
|
Deferred revenue
|
|
|
6,833
|
|
|
|
6,833
|
|
|
|
|
|
|
Redeemable convertible preferred
stock warrant
|
|
|
1,048
|
|
|
|
–
|
|
|
|
|
|
|
Notes payable
|
|
|
565
|
|
|
|
565
|
|
|
|
|
|
|
Redeemable convertible preferred
stock
|
|
|
35,575
|
|
|
|
–
|
|
|
|
|
|
|
Total stockholders’ equity
(deficit)
|
|
|
(31,469
|
)
|
|
|
5,154
|
|
|
|
|
|
6
Risk
Factors
An investment in our common stock involves a high degree of
risk. In deciding whether to invest, you should carefully
consider the following risk factors. Any of the following risks
could have a material adverse effect on our business, financial
condition, results of operations or prospects and cause the
value of our common stock to decline, which could cause you to
lose all or part of your investment. When determining whether to
invest, you should also refer to the other information in this
prospectus, including the financial statements and related
notes.
RISKS
RELATED TO OUR BUSINESS AND INDUSTRY
If we are
unable to attract new customers and retain existing customers on
a cost-effective basis, our business and results of operations
will be affected adversely.
To succeed, we must continue to attract and retain a large
number of customers on a cost-effective basis, many of whom have
not previously used an email marketing service. We rely on a
variety of methods to attract new customers, such as paying
providers of online services, search engines, directories and
other
websites to provide content, advertising banners and other
links that direct customers to our
website and including a link
to our
website in substantially all of our customers’
emails. In addition, many of our new customers are referred to
us by existing customers. If we are unable to use any of our
current marketing initiatives or the cost of such initiatives
were to significantly increase or our efforts to satisfy our
existing customers are not successful, we may not be able to
attract new customers or retain existing customers on a
cost-effective basis and, as a result, our revenue and results
of operations would be affected adversely.
Our
business is substantially dependent on the market for email
marketing services for small organizations.
We derive, and expect to continue to derive, substantially all
of our revenue from our email marketing solution for small
organizations, including small businesses, associations and
non-profits. As a result, widespread acceptance of email
marketing among small organizations is critical to our future
growth and success. The overall market for email marketing and
related services is relatively new and still evolving, and small
organizations have generally been slower than large
organizations to adopt email marketing as part of their
marketing mix. There is no certainty regarding how or whether
this market will develop, or whether it will experience any
significant contractions. Our ability to attract and retain
customers will depend in part on our ability to make email
marketing convenient, effective and affordable. If small
organizations determine that email marketing does not
sufficiently benefit them, existing customers may cancel their
accounts and new customers may decide not to adopt email
marketing. In addition, many small organizations lack the
technical expertise to effectively send email marketing
campaigns. As technology advances, however, small organizations
may establish the capability to manage their own email marketing
and therefore have no need for our email marketing solution. If
the market for email marketing services fails to grow or grows
more slowly than we currently anticipate, demand for our
services may decline and our revenue would suffer.
U.S.
federal legislation entitled Controlling the Assault of
Non-Solicited Pornography and Marketing Act of 2003 imposes
certain obligations on the senders of commercial emails, which
could minimize the effectiveness of our email marketing
solution, and establishes financial penalties for
non-compliance, which could increase the costs of our
business.
In December 2003, Congress enacted Controlling the Assault of
Non-Solicited Pornography and Marketing Act of 2003, or the
CAN-SPAM Act, which establishes certain requirements for
commercial email messages and specifies penalties for the
transmission of commercial email messages that are intended to
deceive the recipient as to source or content. The CAN-SPAM Act,
among other things, obligates the sender of commercial emails to
provide recipients with the ability to opt out of receiving
future emails from the sender. In addition, some states have
passed laws regulating commercial email practices that are
significantly more
7
punitive and difficult to comply with than the CAN-SPAM Act,
particularly Utah and Michigan, which have enacted do-not-email
registries listing minors who do not wish to receive unsolicited
commercial email that markets certain covered content, such as
adult or other harmful products. Some portions of these state
laws may not be preempted by the CAN-SPAM Act. The ability of
our customers’ constituents to opt out of receiving
commercial emails may minimize the effectiveness of our email
marketing solution. Moreover, non-compliance with the CAN-SPAM
Act carries significant financial penalties. If we were found to
be in violation of the CAN-SPAM Act, applicable state laws not
preempted by the CAN-SPAM Act, or foreign laws regulating the
distribution of commercial email, whether as a result of
violations by our customers or if we were deemed to be directly
subject to and in violation of these requirements, we could be
required to pay penalties, which would adversely affect our
financial performance and significantly harm our business. We
also may be required to change one or more aspects of the way we
operate our business, which could impair our ability to attract
and retain customers or increase our operating costs.
Evolving
regulations concerning data privacy may restrict our
customers’ ability to solicit, collect, process and use
data necessary to conduct email marketing campaigns or to send
surveys and analyze the results or may increase their costs,
which could harm our business.
Federal, state and foreign governments have enacted, and may in
the future enact, laws and regulations concerning the
solicitation, collection, processing or use of consumers’
personal information. Such laws and regulations may require
companies to implement privacy and security policies, permit
users to access, correct and delete personal information stored
or maintained by such companies, inform individuals of security
breaches that affect their personal information, and, in some
cases, obtain individuals’ consent to use personal
information for certain purposes. Other proposed legislation
could, if enacted, prohibit the use of certain technologies that
track individuals’ activities on web pages or that record
when individuals click through to an Internet address contained
in an email message. Such laws and regulations could restrict
our customers’ ability to collect and use email addresses,
page viewing data, and personal information, which may reduce
demand for our solutions.
As
Internet commerce develops, federal, state and foreign
governments may draft and propose new laws to regulate Internet
commerce, which may negatively affect our business.
As Internet commerce continues to evolve, increasing regulation
by federal, state or foreign governments becomes more likely.
Our business could be negatively impacted by the application of
existing laws and regulations or the enactment of new laws
applicable to email marketing. The cost to comply with such laws
or regulations could be significant and would increase our
operating expenses, and we may be unable to pass along those
costs to our customers in the form of increased subscription
fees. In addition, federal, state and foreign governmental or
regulatory agencies may decide to impose taxes on services
provided over the Internet or via email. Such taxes could
discourage the use of the Internet and email as a means of
commercial marketing, which would adversely affect the viability
of our solutions.
In the
event we are unable to minimize our loss of existing customers
or to grow our customer base by adding new customers, our
operating results will be adversely affected.
From January 2005 through June 2007, at least 97.4% of our
customers in a given month have continued to utilize our email
marketing solution in the following month. Such historic
performance is not indicative of future performance, and there
is no guarantee that new customers will demonstrate the loyalty
our existing customers have exhibited in the past or that our
existing customers will continue to use our solutions
consistently. Our growth strategy requires us to minimize the
loss of our existing customers and grow our customer base by
adding new customers. Customers cancel their accounts for many
reasons, including a perception that they do not use our
solution effectively, the service is a poor value and they can
manage their email campaigns without our solution. In some
cases, we terminate an account because the customer fails to
comply with our standard terms and conditions. We must
continually add new customers to replace customers whose
accounts are cancelled or terminated, which may involve
significantly higher marketing expenditures
8
than we currently anticipate. If too many of our customers
cancel our service, or if we are unable to attract new customers
in numbers sufficient to grow our business, our operating
results would be adversely affected.
As we
expand our customer base through our marketing efforts, our new
customers may use our solutions differently than our existing
customers and, accordingly, our business model may not be as
efficient at attracting and retaining new customers.
As we expand our customer base, our new customers may use our
solutions differently than our existing customers. For example,
a greater percentage of new customers may take advantage of the
free trial period we offer but choose to use another form of
marketing to reach their constituents. If our new customers are
not as loyal as our existing customers, our attrition rate will
increase and our customer referrals will decrease, which would
have an adverse effect on our results of operations. In
addition, as we seek to expand our customer base, we expect to
increase our marketing spend in order to attract new customers,
which will increase our operating costs. There can be no
assurance that these marketing efforts will be successful.
The
market in which we participate is competitive and, if we do not
compete effectively, our operating results could be
harmed.
The market for our solutions is competitive and rapidly
changing, and the barriers to entry are relatively low. With the
introduction of new technologies and the influx of new entrants
to the market, we expect competition to persist and intensify in
the future, which could harm our ability to increase sales and
maintain our prices.
Our principal competitors include providers of email marketing
solutions for small to medium size businesses such as Vertical
Response, Inc., CoolerEmail Inc., Broadwick Corporation
(iContact, formerly Intellicontact), Emma, Inc., Got Corporation
(Campaigner®),
Lyris Technologies, Inc. and Topica Inc., as well as the
in-house information technology capabilities of prospective
customers. Competition could result in reduced sales, reduced
margins or the failure of our email marketing solution to
achieve or maintain more widespread market acceptance, any of
which could harm our business. In addition, there are a number
of other vendors that are focused