Q3 2019 Earnings Call
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Please note. This event is being recorded I would like to now turn the conference over to Charles Rhyee Nick.
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Thank you take up and good afternoon, joining me here today, our Greg Strakosch, our executive Chairman my country, our CEO and Dan arc, our CFO before turning the call over to Greg I want to remind everyone on the call of our earnings release process as previously announced in order to provide you with an update on the business that after the call we've posted our shareholder letter.
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With that I'll turn the call over to Greg right. Thank you Charlie.
Well, we had another quarter is very strong performance. This is the third consecutive quarter that we've raised the annual adjusted EBITDA forecast for 2019.
Q3, 2019 revenues grew 10% or $33.8 million.
The three 2009, adjusted EBITDA grew 45% to $11.1 million for the first nine months of 2019, adjusted EBITDA grew 38% to $30.2 million.
Adjusted EBITDA margin was 33% in Q3 2019 versus 25% in Q3 2018.
EBITDA margin for the first nine months from 2019 was 31%.
It is 24% in the same time period in 2008.
Gross margin was 76% in the quarter the same as last year.
Adjusted cash flow was $8.1 million in the quarter, representing 72% of adjusted EBITDA.
Long term contracts, representing 35% center revenue in Q3 2019.
For Q4, 2019, we expect revenues to be between 35 million and $36 million.
Adjusted EBITDA for the fourth quarter 2019 to be between 11 million at $12 million.
We expect the annual revenues to be between $133 million going $134 million and we expect adjusted EBITDA to be between 41 and $42 million I will now open the call it two questions.
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At this time, we will pause momentarily to assemble our roster.
The first question comes from Aaron Kessler with Raymond James Please.
Please go ahead.
Great. Thanks, guys, congrats on a quarter or a couple of questions. Maybe first on the price increases you noted in the letter about 10% a point for 2020 Cats remind me how that's been flowing over the last couple of years I'm. One of your various price increase that and kind of or just kind of any pushback you're seeing from clients on the some of those price.
Nice increases and also just maybe update us on kind of be go to market strategy for a priority engine express I'm kind of pricing cocktails tragedy, there as well thank you.
Sure Aaron in terms of price increase.
24, 2020 that we are estimated to be about Tempur sad, we've been fairly consistent with the last two.
Price increases that we had going into 2019 as was 2018 respectably, yeah, our customers take a look at our data that we offer you know real absorb purchases intent data.
And they have a very large initiative around you know.
Very large data initiatives around their sales and marketing organization. So we haven't really had a push back on the price.
They do want to see in how we get our data.
In terms of you know, providing the right content and publishing the right content across hundreds of technology or really thousands of technology segments.
Owning and operating those sites and communities across our network, well techtarget and really observing in capturing the real untapped that we're getting from buying team members. So there's no it's very clear and Drake taught to spray concise. So we haven't really seen any push back on that and in terms of the pie.
Priority engine Express a you know we wanted to Q. It's right. We've allocated a couple of dedicated reps are selling that priority engine Express solution. We've absolutely early signs are positive we are paying customers right now that our that are paying you know in signing up for annual subscriptions.
Remember these are the customer segmentation. This is the segmentation of customers that typically we didn't have a a pricing or products that would be applicable to them and these customers are.
Typically smaller software vendors or regional value added resellers.
[noise] data looking for ways to identify.
You know who's in market today that they can get their sales teams in front of early so we look at it as you know we break out the out our customer segmentation by our global Tan.
The next 100, and then all others and we believe that there's still a set of you know between four and 5000 a problem.
That are out there that we feel pretty we have a pretty good opportunity to go after what these folks. So we are seeing customers now we're taking their EM import we're looking to you know modesty important modify enhanced position package grades from other additional spin off of that a priority engine express for different.
Segments within knows all others so [noise].
We're off to a good stock.
Great Emeritus quickly on sales and marketing can't talk little about the leverage there it looks like your.
Pretty flattish sales and marketing on absolute basis. This year. Despite revenues up it's kind of walk us through kind of a the leverage expectation going forward and tells a marketing as well.
Yes, we we continue.
The way we have the set up is weekend quickly reallocate you know exist in sales and marketing resources to the opportunities or provide a present growth opportunities protect target.
Along the way we May you know add some headcount if we see this you know still up up but for now the way we're set up as we can take our current resources at our employees and we see an opportunity that has a high growth potential we'll allocate those resources on fly make sure that we have a good opportunities or support.
And you know again as we continue to see growth you might see some additional resources being added but for now we can quickly do that were pretty agile one and we haven't you don't nimble set up.
Great. Thank you all know congrats on the eat up a 20 year anniversary.
Thank you.
The next question comes from Marco Rodriguez with.
Stonegate capital. Please go ahead.
Good afternoon, guys. Thanks for taking the questions.
I'm wondering if I could follow up on a the priority engine Express.
Any sort of update you can provide us with in terms of when you think that might.
Roll out to more than just a a beta testing if you will and then if all so maybe you can kinda talk little bit about what you guys have kind of learned thus far and the feedback from these initial clients and what sort of expectations you might have to either address that or someone repackaged program.
Right.
Mark why a in terms of rolling this out more than just the beta testing, we expect us to be fully rolled out in a yeah.
First quarter of 2020 and yeah. As you recall, we started you know beta testing Sop watch this back into Q2, we then allocated a couple of fuel a dedicated sales rep resources to the priority engine Express opportunity.
I've seen some early traction with some of these smaller accounts and again all these deals that were signing our annual subscription deals along the way we weren't a couple of things I mean, you know there were a different use cases for these smaller accounts, we have software vendors that have a very specific niche. We have also we've identified.
Through our learnings from the of the beta launch.
We have Seattle, you know value added resellers in a lot of that might be not only national but regional resellers.
Yeah, and you know, they're looking to really identified be opportunities in the projects in the buying teams that are in their regions in and really aligned with what they go to market on.
And so they really want to focus on the active prospects and the opportunities and the potential project, where they're not really focused on would be you know as much on the marketing initiatives. So we want to make sure that we have the right user interface ease of use for those regional resellers their sales teams inside sales and outside.
Bill has have easy in quick access to the potential projects and buying teams within their market. So we'll make sure that we have take that feedback and apply an integrated into our go forward strategy, but we expect us to be fully rolled out in Q1 of 2020.
That's helpful. So kind of sounds like maybe somebody.
Yeah, we see interface and perhaps some of the end result needs to be somewhat customize a little bit more for these smaller type clients I I'm assuming that.
The platform is relatively easily change for that sort of a I put.
Yeah, I mean, we're always making modifications revisions and updates to the priority engine platform.
We weren't as we get capture some of the warnings in the input from well again a lot of these smaller customers that weve never had historically.
In order to so we want to take that feedback and make sure that we can adapt and we have the ability to do that within our priority engine.
Platform you know.
I don't want you know fairly easily so it's it's.
Well, we will be able to do the after these guys you know without too much work.
Gotcha.
And last question here I'm, just wondering if maybe you could provide a little bit of an update on the customer success team have you kind of who kind of hit a steady state in terms of your your head count and in any sort of a color that you can provide the kind of quantify that groups progress on impacting a revenue growth and client retention.
Yeah. So the cost for success team I'd say this has been a.
First full year that Weve implemented this I will go into our fourth quarter.
This team has done a really good job of again the way. This is aligned really goes back to how we've aligned our sales force and we have our field account executives, who are you know signing on that new logos, who we've seen some really good growth there and previously before we had this customer success team those reps would try to manage.
Those accounts now they handing it off too.
Our customer success team to properly onboard we sit and make sure we're setting the right expectations leveraging our use cases.
We're seeing you know much better engagement with our customers within the priority engine platform. We can track all that we've we've invested in some technology. So we can you know that focus on the customer success and tougher management across all our customers.
We're seeing this ramp up nicely in the results.
Our showing it well see a lot increase in retention across you know these customers that have signed off to enroll deals you know we're always looking to evaluate how we expand success across you know not only this set of accounts, but other accounts. So we don't see any abnormal increasing span for customer success a into.
Yes men split up there are no there might be some pockets within cost of success that we may look to expand daughter provide additional resources, but we feel that where I properly staffed and you know <unk> at the current rate as a business now and help us so moving forward.
Got it thanks, Mike I appreciate your time.
Sure.
The next question comes from.
<unk> Goldfarb.
Yes.
Lake Street capital markets.
Please go ahead.
Hi, good Greg Congrats on the great quarter and all the progress.
Thanks for taking my questions.
So first again, you know given that some more challenging environment for some of your larger customers because a tariff.
Is there a chance that they do not renew priority engine and instead sign up for priority engine Express.
HM.
Yes. Good question this is Mike.
Actually you know, we're not gonna be offering priority engine express to those you know when you mentioned those global accounts. Those top 10, you know we know that they have the budgets to you know baskin priority engine, a what I wouldn't say is you know and priority engine expressive if you recall the way, we classify or accounts, we bucket them at the three.
Three areas, we have our top 10 global accounts, which are the big names that you all know that I've been around for many years, we hope that next 100, which I would consider like high growth cloud based cloud born type of organizations and then we have.
Today all others.
On the all others, you know that when you take a look at our total customer pool, there's about 300 customers.
What we haven't had is the opportunity to sell from you know was up from 1300, a one to 5000 tons, we never really had a solution and an opportunity to get engage with those customers and to bring value at a reasonable price and to provide <unk> not for not only us but them as well that is where the priority.
An express will be focused on so in terms of the global folks you know they go up they go down sometimes it can be a little bit inconsistent I know, they're down this quarter, what I really would take away from that is if you look at our customer segmentation all off two years my customer concentration.
We're pretty pleased <unk>, what the direction that that's going you know a couple of years ago. Yeah. A couple of the top 10 global accounts.
Reduce their spend dramatically within a quarter, we would feel that hit in that quarter. Today, we are more diversified as a business than we ever have been and so our focus is to win is to invest in these products such as priority engine express to continue to expand or a customer.
Segmentation and diversity. So we can reach that what I would say between their customer number 1300 5000 I'm one of the key things are probably raise express them out of beta you get is limited that's how the smaller price for that wouldn't be that solution would it make sense for larger organizations. So they have the way the.
Products are ratified.
You're not going to see there's really no risk of cannibalization.
Great. Thank you and then lastly, if Xerox buys HP.
Is there any potential to tuck target.
Oh, I'm actually looking to buy HP, Inc. So yeah, we do some business, what what h. <unk> or each bank.
Probably not don't want you know it actually might provide a little bit of a an opportunity for us, but there you know they're not buying Hewlett Packard enterprise in you know if that goes through I don't see that you know hurting ethanol.
Great. Thank you very much and congrats again on the quarter.
Thank you.
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