1. Summary:
Campaign Monitor Finance Pty Ltd.
Primary Credit Analyst:
Paul R Draffin, Melbourne (61) 3-9631-2122; paul.draffin@standardandpoors.com
Secondary Contact:
Karan Rathod, Melbourne +613 9631 2011; karan.rathod@standardandpoors.com
Table Of Contents
Rationale
Outlook
Standard & Poor's Base-Case Scenario
Business Risk
Financial Risk
Liquidity
Ratings Score Snapshot
Recovery Analysis
Related Criteria And Research
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2. Summary:
Campaign Monitor Finance Pty Ltd.
Business Risk: WEAK
Vulnerable Excellent
Financial Risk: HIGHLY LEVERAGED
Highly leveraged Minimal
b- b- b-
Anchor Modifiers Group/Gov't
CORPORATE CREDIT RATING
B-/Stable/--
Rationale
Business Risk: Weak Financial Risk: Highly leveraged
• Concentrated product suite
• Strong competition
• Small earnings base
• Reduced profit margins
• Majority ownership by financial sponsor, Insight
Venture Partners
• Reduced profitability given heavy internal
reinvestment
• Debt to EBITDA in the mid-6x range in 2016
Outlook: Stable
The stable outlook reflects our expectation that Campaign Monitor Finance Pty Ltd.'s revenues will continue to
grow strongly in the next two years; however margins will decline as the group invests heavily in sales, marketing,
and other support functions across its business. This investment is likely to cause the company's EBITDA margins
to fall to the 30%-40% level and debt to EBITDA to be sustained above 5x.
Downside scenario
Downward pressure on the rating could occur if material erosion in the group's competitive position and revenues
undermined our view of the sustainability of the group's capital structure or substantially worsened the group's
liquidity position.
Upside scenario
We consider ratings upside to be unlikely in the near term, but could occur if Campaign Monitor materially
reduced leverage, such that its debt-to-EBITDA was sustained below 5.0x, while maintaining strong revenue
growth and EBITDA margins well above 30%.
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3. Standard & Poor's Base-Case Scenario
Our base-case forecasts indicate that Campaign Monitor will maintain heightened leverage over the next couple of
years, peaking at around 6.5x-7x in 2016, as the company's earnings reduce despite strong revenue growth. This will
be primarily due to substantial investment in its sales, marketing, and back-office operations.
Assumptions Key Metrics
• Revenue growth in the 10-20 percentage range in
fiscal 2016;
• Unadjusted EBITDA margins declining to below
40% in fiscal 2016;
• Minimal capital expenditure of A$1 million-A$2
million per annum; and
• Debt amortization under the cash sweep mechanism
of A$8 million-A$12 million per annum.
Year end June 30 2015A 2016E 2017E
FFO to debt (%) 12.4 8-10 10-12
Debt to EBITDA (x) 4.7 6.5-7.0 5.5-6
A—Actual. F—Forecast. FFO—Funds from operations.
Business Risk: Weak
Our business risk profile assessment on Campaign Monitor reflects our view of the group's narrow product mix, small
earnings base, relatively low barriers to entry, and strong competition. Tempering these factors are the group's diverse
customer base and growing global demand for e-mail marketing products and services. Although the company has
generated high profit margins, we expect the company to substantially increase internal costs, therefore reducing its
EBITDA margins to the mid-30% level (65% in 2015).
Campaign Monitor's business is focused primarily on its e-mail marketing software platform, which is subject to strong
and evolving competition. Although the company's customer base has grown rapidly over the past decade with low
customer churn, Campaign Monitor operates with limited scale and has a narrow business focus. In our view, the
group derives some competitive advantage from its low cost offer and its integration with advertising agencies that
on-sell its product. However, this advantage does not, in our view, provide a material barrier to competition over the
medium-to-long term. Accordingly, ongoing product enhancements and a broadening product range will be important
to maintaining the company's market position. The relaunch of its platform in early 2016 aimed at streamlining user
experience was supportive of maintaining its competitive relevance. The new platform which previously required
coding expertise has been revamped to allow nontechnical users to access the product, therefore broadening the
potential user base. The acquisition of marketing software company GetFeedback in late 2014 is reflective of the
group's strategy to invest in complementary products and services.
Financial Risk: Highly leveraged
Campaign Monitors financial risk profile reflects: 1) our expectation that its debt to EBITDA will exceed 5 times (x) in
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Summary: Campaign Monitor Finance Pty Ltd.

4. the next 2 years and 2) the group's financial sponsor ownership, with the group majority owned by private equity firm,
Insight Venture Partners.
Under our base case, increasing internal reinvestment is expected to erode the group's profitability and absolute
EBITDA, causing fully adjusted debt to EBITDA to increase to about 6.6x in June 2016. Leverage should decline
modestly thereafter, as free cash flow is used to reduce debt under the cash flow sweep, but is expected to remain in
excess of 5x for at least the next 2 years.
Liquidity: Adequate
We assess Campaign Monitor's liquidity as adequate. Over the next 12 months, we expect the group's sources of
liquidity to exceed its uses by more than 1.2x, and expect its sources to exceed uses even if EBITDA were to decline
15% from our base-case expectation. The group's narrow product and earnings focus, small earnings base, and
exposure to new competition constrain upside potential to our liquidity assessment. Furthermore, we consider that the
group's standing in the capital and bank markets is more consistent with an adequate liquidity profile.
Our liquidity assessment is based on the following key assumptions over the next 12 months:
Principal Liquidity Sources Principal Liquidity Uses
• Undrawn revolving credit facility of US$10 million;
and
• Forecast funds from operations (FFO) of A$12
million-A$17 million.
• Capital expenditure of A$1 million-A$2 million; and
• Minimum mandatory debt repayments of about
US$1.8 million.
Ratings Score Snapshot
Corporate Credit Rating
B-/Stable/--
Business risk: Weak
• Country risk: Very low
• Industry risk: Intermediate
• Competitive position: Weak
Financial risk: Highly leveraged
• Cash flow/Leverage: Highly leveraged
Anchor: b-
Modifiers
• Diversification/Portfolio effect: Neutral (no impact)
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5. • Capital structure: Neutral (no impact)
• Financial policy: FS-6 (no additional impact)
• Liquidity: Adequate (no impact)
• Management and governance: Fair (no impact)
• Comparable rating analysis: Neutral (no impact)
Recovery Analysis
The recovery rating of '4' and issue rating of 'B-' on the term loan facility reflect our expectations for an average
(30%-50%; upper half of range) level of recovery in the event of a default.
The debt facilities have first-priority ranking security over all property assets (both intangible and tangible, including all
capital stock of each of its subsidiaries), effectively comprising all of the borrower's present and future subsidiaries. The
facilities are "covenant lite", but benefit from a 'springing' gross debt-to-EBITDA covenant under the revolving credit
facility (RCF) that applies only if the RCF is at least 30% drawn. This covenant is currently set at a maximum of 5.25x,
but reduces progressively over the term of the facilities.
Our recovery assessment assumes that default will occur by 2018, and that the business will be sold as a going
concern. At the time of the hypothetical default, we expect the group's competitive position to weaken due to the entry
of a strong competing service that erodes the group's customer base and forces the group to materially reduce prices
and margins to retain customers.
Related Criteria And Research
Related Criteria
• Criteria - Corporates - General: Methodology And Assumptions: Liquidity Descriptors For Global Corporate Issuers,
Dec. 16, 2014
• Criteria - Corporates - Recovery: Revised Revolver Usage Assumptions For Recovery Analysis In Corporate Ratings,
Nov. 20, 2014
• Criteria - Corporates - Industrials: Key Credit Factors For The Business And Consumer Services Industry, Nov. 19,
2013
• Criteria - Corporates - General: Corporate Methodology: Ratios And Adjustments, Nov. 19, 2013
• General Criteria: Methodology: Industry Risk, Nov. 19, 2013
• General Criteria: Group Rating Methodology, Nov. 19, 2013
• Criteria - Corporates - General: Corporate Methodology, Nov. 19, 2013
• General Criteria: Country Risk Assessment Methodology And Assumptions, Nov. 19, 2013
• General Criteria: Methodology: Management And Governance Credit Factors For Corporate Entities And Insurers,
Nov. 13, 2012
• Criteria - Corporates - Recovery: Criteria Guidelines For Recovery Ratings On Global Industrials Issuers'
Speculative-Grade Debt, Aug. 10, 2009
• Criteria - Corporates - General: 2008 Corporate Criteria: Rating Each Issue, April 15, 2008
Standard & Poor's (Australia) Pty. Ltd. holds Australian financial services licence number 337565 under the Corporations Act 2001. Standard &
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6. Poor's credit ratings and related research are not intended for and must not be distributed to any person in Australia other than a wholesale
client (as defined in Chapter 7 of the Corporations Act).
Business And Financial Risk Matrix
Business Risk Profile
Financial Risk Profile
Minimal Modest Intermediate Significant Aggressive
Highly
leveraged
Excellent aaa/aa+ aa a+/a a- bbb bbb-/bb+
Strong aa/aa- a+/a a-/bbb+ bbb bb+ bb
Satisfactory a/a- bbb+ bbb/bbb- bbb-/bb+ bb b+
Fair bbb/bbb- bbb- bb+ bb bb- b
Weak bb+ bb+ bb bb- b+ b/b-
Vulnerable bb- bb- bb-/b+ b+ b b-
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