Q1 2021 TechTarget Inc Earnings Call
[music].
Good day and welcome to the Teck targets first quarter 2021 earnings release conference call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero.
After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on the Touchtone phone to withdraw your question. Please press Star then two.
Please note. This event is being recorded I would now like to turn the conference over to Charlie Rennick General Counsel. Please go ahead.
Thank you Betsy and good afternoon joining.
Joining me here today are Greg straight cost of our executive Chairman, Mike <unk>, Our Chief Executive Officer, and Dan <unk>, Our Chief Financial Officer.
Before turning the call over to Greg I would like to remind everyone on the call of our earnings release process as previously announced in order to provide you with an update on our business and advance of the call. We've posted our shareholder letter on the Investor Relations section of our website and furnished it on an 8-K.
Following greg's introductory remarks, the management team will be available to answer your questions.
Any statements made today by tech targets that are not factual, including during the Q&A maybe considered forward looking statements. These forward looking statements, which are subject to risks and uncertainties are based on assumptions and are not guarantees of our future performance.
Actual results may differ materially from our forecast and from these forward looking statements. Please refer to our risk factors and our most recent public reports filed with the SEC, including and our annual report on form 10-K, and our quarterly reports on form 10-Q. These statements speak only as of the date of this call and tech target undertakes no obligation to update them to reflect future events or circumstances.
Finally, we may also refer to certain financial measures not prepared in accordance with GAAP. A reconciliation of certain of these non-GAAP financial measures to the most comparable GAAP measures accompanies our shareholder letter with that I'll turn the call over to Greg.
Alright, Thank you Charlie.
The momentum we had at the end of 2020 has carried into 2021 as we continue to benefit from strong execution of some significant tailwind and producing the following positive results adjust.
The adjusted revenue grew 85% to approximately $59 million.
Adjusted EBITDA grew 123% to approximately $19 million adjust.
Adjusted EBITDA margin was 33% and.
Adjusted gross margin was 75%.
Longer term contracts represented 42% of revenue and all time high.
Free cash flow was $12 $6 million representing.
Representing 66% of adjusted EBITDA.
Based on momentum we are experiencing today, we are raising our annual guidance, we expect adjusted revenues between $245 million and $250 million, we expect adjusted EBITDA of between $80 million and $85 million I will now open the call to questions.
We will now begin the question the answer session to ask a question you Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys.
And if at any time. Your question has been addressed and you would like to withdraw. Your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
Okay.
Yeah.
Our first question comes from Jason <unk> with Craig Hallum. Please go ahead.
Yeah. This is bailey on for Jason.
Just wanted to say congratulations on a quarter and.
I appreciate you taking the taking the question.
Uh huh.
One thing we noticed is it seems like you guys are starting to see an opportunity.
Emerging and long term subscriptions.
I was wondering if you might be able to talk through what you're hearing from customers and what gives the confidence and the acceleration and priority engine revenue.
Great.
Thanks for the question this is Mike.
Yeah, one of our major goals over the last few years has been to increase our longer term revenue metrics as the total as a percentage of total revenue when we launched the priority engine and several years that obviously of the main goal is very important for our customers to stay in front of the air potential customers and prospects throughout the into.
All of you buying journey.
And 2020, we saw a little bit of a pullback on that due to the.
COVID-19 situation and the pandemic environment setting in and when.
Customers pull back in terms of the commitment to long longer term contracts, but the importance of that and for our customers to stay in front of the of imagine prospect.
And existing customers is incredibly powerful all based on the first party purchase intent data that we have to offer and we finished the year last year and 4% growth and Q1, we've seen priority and revenues grow 7% and we're seeing better conversations and better bookings across the priority engine and we expect the longer term contracts on.
The associated with priority engine moving goal of 15% plus for the proceed for the next quarter and we project that to happen for the remainder of the year.
As he noted we sort of record high of 42% of our long term contracts long term level of being a part of our overall revenue.
Excited to see that and we believe that the momentum and the tailwind where everything is going in terms of the overall market play of favorable for us. So we feel that there is some good upside on that number.
Excellent.
Really appreciate that.
That's great news.
And if I could get another.
Related to Brighthouse.
And I'm not because of one of for a full quarter. Just wondering if you might be able to provide any kind of tangible customer feedback on.
And the acquisition based on what your customers are saying.
Yeah, I believe our customers are very excited about the opportunity to work.
You know with tech target and bright talk together as one organization.
<unk> brings a very unique advantage of the market is something that we did not have previously to the acquisition the rich content webinar platform.
<unk> provides a very great out of a very good opportunity to capture not only permission based members.
Net of our registered on the Brightcove community, but it also enables those those of audience members to throw of first party purchase intent data for our customers. The leverage tech target is very tech space in terms of content syndication on the lead generation and priority ads and the way we provide.
Provide caught into the markets of marrying that up with video base Webinars Summit's virtual trade events is very complementary and being able to catch the purchase of intense signals.
Throughout the entire buying and purchase process for every one of the top.
Our buying team members is critical.
And we've seen results of 30 minutes and the 30 plus minutes of average dwell time and the ability on the on a bright bright talk webinar and on the summit and the webcast. So that's really important to be able to throw off very strong purchase intent signals from our customers want to see everything under one umbrella and they're excited for it we're excited for the opportunity.
We have a lot of joint initiatives going on between the organizations to make sure that we are providing the right information again it all goes back to relevant content registered opt in and permission based audience members and first party purchase intent.
Data that is really the core value proposition that we bring together under one umbrella.
And that's fantastic color really appreciate that.
Through the door monopolize the line, but one last thing on the mobile Ids and and third party cookies.
You know that's the topic you talked about and the industry is somewhat fixated on as of late.
Just curious you know how much of it becomes the topic with customers and and potential customers and are we at the point, yet where customers are evaluating these privacy standards of purchasing decisions or do you see that becoming a key component of the conversation.
Yeah. That's of Great question, I'm going to really focus on one of those metrics. Yeah first of all of privacy and compliance continues to be and ever evolving focus farrar for not only on customers, but their prospects and their customers that of members on our sites.
<unk> announced last year that they would eventually eliminate the use of third party cookies and day of followed up with that announcement and that is projected to and next year that bodes very very well for tech target, because we own and operate a massive amount of.
Communities of 141 enterprise technology specific sites with over 20 million registered members right talk with over 8 million registered members who are at the information base.
Third party cookies being eliminated our customers really value. The first party data of the permission based audience members. So that is actually a very favorable competitive advantage and tailwind for us and we are we expect that as one of the three major tailwind when we talk about customers modernize and net sales and.
The marketing outlets and leveraging first party information and first party data on purchase intent data the announcing of Google of eliminated and the third party use of third party cookies, and then overall budget shifted from face to face of events for the online and digital and data driven this all bodes well for us not only on the show up but the long term.
And thank you very much I think that's sort.
So I'll read out from from our corner.
Congratulations again and I appreciate it.
Thank you.
The next question comes from Aaron Kessler of Raymond James. Please go ahead.
Great. Thanks, guys a couple of questions.
On the sales of adoption I know you've had some good traction with that product and just give us an update on what you're seeing from sales of adoption of priority engine.
Also maybe just an update on kind of priority engine Express I assume you'll see that the.
Start to accelerate as the.
The company started to go back and office, a little bit more and then maybe finally just on the events are kind of landscape. How do you think do you expect that to progress throughout 'twenty. One do you expect there'll be mostly digital and patterns of metal and that'll be more of a permanent shift or do you think of there could be some headwinds as the events are starting to kick off again and thank you.
Right. Good question, Darren and I'm going to take them and order in terms of the sales of adoption as you remember going into this year, we and we made some new updates and launch of new updates the priority engine and very much. The those updates we're very focused on sales of adoption, we still work very closely with the marketing organizations of the marketing organizations.
And to make sure that they have the opportunity of these target accounts and leverage the ABM strategy and drive net new but on the sales adoption, what we noticed was and what we heard back from our customers through our customer success team once they want to access the day and a little bit differently, they need it and more personalized it needs to be and their workflow it.
And to be their territory specific so we're really focused on that and that is the we've seen some good adoption and the usage numbers continue to increase quarter over quarter I think the number one move that we did on that well we're seeing great benefit is the.
And the prospect level of intelligence, so when we looked at this before the.
When we showed the priority engine of comps by region or by Technology segment. It would rank those at the account level.
And from one two you name it can be thousands in terms of ranking.
And our sales Rep would take the same cadence if he or she was calling into J P. Morgan.
They may be talking about threat intelligence, but now with the individual prospect intelligence level.
All of those can now understand within their own territory, what individuals buying team members are engaged in what the award of the points of entry. So that the same example of J P. Morgan or you know Raymond James and somebody Who's looking you know looking at that account and now they can identify it and say okay Mike.
Toya with focus on identity, and access management, but Dan Norick, and Aaron Kessler and focused on threat management and E Mail security all within that same accounts and you can now personalize and customize and really go over and engage with that individual prospect.
With more with more information or more data we've seen good success on that we're still continuing and of focuses on tighter integrations and ATI.
And of our customers workflows and so.
A few quarters back we're very one direction, we would push our information and of our customers CRM system.
Now, we're having and there's more of a dark by director of we have access to key data components, and our customer and CRM system opportunities pipeline lifecycle of the deal one of them make sure of priority engine is aware of client opportunities. So we can show when we alerted the client of the intense signals and near reps are seeing more usage.
And the tool to learn more and one of the sales process on the client side was actually initiate the throughout the journey of the deal we're going to continue to focus on the house.
And we look moving forward over the next couple of quarters, it's kind of really of a focus on <unk>.
Sales and usage and sales of adoption and we will be leveraging some of the account level data that we're getting from our bright talks of audience members, who will be able to expand our reps.
Territory in terms of the intense signals that we can pick up at the account level.
And we're really focused on some other areas around what we call inbound converter, which is.
More about.
The traffic that we and the insights that we pick up around visitors to our client website, so being able to have more deep granular high you know high target the high data type of information about where they on.
The comparison pages, where they own the product page. So those focuses on actually boding well for us and our customer feedback has been very positive towards the priority engine Express and I would say that was the product they've got probably had the most adverse.
Reaction or impact from last year, you know, we have a lot of SMB customers and in North America, when the pandemic hit and it was Oh. This is a new way of doing things and people started go on and remote people did not want to commit to long term longer term contracts and what's the.
On the C of pick up on that in terms of bookings and interests people are getting through the pandemic I don't think we're out of the woods and the pandemic, yet and take the best position without people you know back congregating in the Apis and collaborating and doing some things, but we're seeing a pick up on the bookings and that's helped us with that 7% growth and.
Q1 move and the 15% plus and the remaining parts of the year and on your event landscape.
I believe events and start coming back a little bit in 2020, one, but I think it's predominantly going to be digital events and as you get into 2020 two.
You may see a mix of some hybrid of events I think that bodes well for us to my belief and we've proven that the tech target over the 22 years. When you were born online and new digitally driven and you do a much better job and chairs of understand the audience data and the delivery and the scale. So there will be face to face events.
Companies trying to mine.
Migrate to online and they don't have the platform, they probably and I know they don't have the audience and they don't have the skill set and the history of making this happen and so on 2020. One I think predominantly we're gonna have a of digital.
The upscale in terms of face to face of event and in 2020 two times. If it goes the hybrid we're gonna be and a really good position. We're really excited of what the right talked folks of developing in terms of the FERC of oil trade events in the summit evaluate hybrid models. They know the business really well we have the platform on that we have the K.
The ability we have the audience, we have the opportunity.
Great. Thank you Greg.
Congrats on the court.
The next question comes from Justin Patterson with Keybanc capital markets. Please go ahead.
Great. Thank you two if I can first the appreciate the new metrics from the shareholder letter you called out over 10000 prospective customers.
And the investments you need to make to really accelerate the pace of adoption within that customer base and.
And secondarily, what do you see of the key factors to add more customers that are spending over $100000 of anyway. Thank you.
Oh, great. Thanks, Justin.
You know in terms of the adoption if you look back at the top of the five years ago, we probably didn't have the right.
Product solution set to go out there and create more adoption and and and acquired net new logos that would really be the long tail right. So we identify that we have 1500 and 85 customers and we believe that there's a big opportunity of growth.
New logos at the long tail side of this and that's a really big focus for us with priority edge of priority engine Express the bright talk seminars webinar series of events. We have now a a more complete product offering that will be able to help us with the long tail all the way in Vienna.
Price and we wanted to make sure we provided those metrics because again, we have 1500 and 85 customers.
And that that shows that there's an opportunity we've identified close to 10000 and she noted of other technology companies could be doing business and as we evolve and develop the products and the solutions and cross pollinate and across all.
All of our departments, we are of great opportunity. There. We noted in the latter of that we had 225 customers that are spent a $100000 of greater than $100000.
I think this is a really good track records and show when we get customers and because we understand their business. We have the content the audience and we segment it and we can align their go to market strategy with very specific markets through our owned and operated and massive community.
Well, we get good relationships and the air and we start with these guys and these customers and we grow on the six figures and the more and then with 25 customers out of spent more than a million dollars again and even some of the new metrics that we laid them out and.
It just shows the track record of growing needs of customers a lot and they have different divisions.
Different go to market strategies Alliance partners channel ADM and marketing.
And inside sales are now we are out of opportunity product opportunities. We have a really good opportunity on that so that's I think what we're gonna be focused on and making sure that we're getting those.
And once we get a customer and the door, we actually do a really good job of growing that customer and I gotta of Greg chime and for some follow up.
Yeah, So I'd say the the main.
And as Mike that we're selling into the different groups.
And the organization, we're cross selling products and we're selling into the additional.
The additional geographies. So that's how we're growing people too over the 100000 and over a million.
And then of claims of the investments the kind of hit that you know get more companies along the tale of two places we're investing we're adding some we are adding more sales heads to go after that and we're also investing and more.
And kind of self service on the on the back and to support those customers and so I'd say those are the true places where investments are being made but there you know those are fairly incremental investment so they're not gonna change on.
The margin structure of the business as we make those investments.
Great. Thank you.
The next question comes from Joshua Reilly with Needham and co.
Oh, Hey, there great. Thanks, guys and so starting off are you are you seeing customers increasingly willing to make our annual commitments on priority engine or how should we think about the activity of customers buying quarterly versus annual subscriptions and then second on kind of the same point, you mentioned and the Cheryl.
The letter that small customers interested in the sales use case.
And with pretty strong how should we think about the applicability for both SMB and large enterprise to be buying of the additional CLC.
Oh, good good question, Hey, Josh its Mike.
In terms of your first question are we seeing the increasing and customers looking at annual commitments of longer term commitments and the answer to that is yes. What we are seeing right now as we've navigated through this pandemic.
And you saw last year, the number of priority engine of growth or low single digits on that it really was off to a good start and then it just really pulled back when the pandemic came in you know what.
What we saw on that were small to mid sized companies and even some of the larger companies that might have been up for renewal maybe day, you know transition and pivoted. The lead Gen. And then the smaller companies that will let red and our buy pulled back in March April may and into the rest of the year as they wanted to get more clarity on in terms of the pandemic and the outcome.
Tom.
We started seeing a little bit of are we sort of pick up at the end of Q4 as you can sort of and a number as you can see on our numbers and priority engine growth and Q1 at 7% and of imagine we believe that the priority engine number will grow mid teens plus throughout the rest of the year. So if things stay the way. They are right now we are.
Conversations are good the customers are starting to come out of the you know out of the Shadows and say, we can commit the longer term the world hasn't and and we're going to move forward from there.
In terms of the SMB versus the enterprise and want to make sure I get this question right I'd say the F&B the well are different for a couple of reasons and they don't have a very sophisticated marketing stack of marketing technology, you know flow and what they did was they really want to rely on their sales folks are there.
Our sales teams to drive net new opportunity now that doesn't mean that they don't have any marketing capabilities, because we deal with a lot of very smart marketing departments with the S. M. B organization, but their real focus is lots of build and STR team of sales development Rep team or business development Rep team inside team, let's give.
And the tools and let's give him a fact of tools and really the advantage that we have is we're going to let those folks know who to call.
Within an organization based on the real and observed first party purchase intent data by the activities and actions are taken on our owned and operated sites and.
And it really helps and and priority engine and some of our other metrics, where we're providing entry point, but why does the who are they engaging with who do they have installed. So we're really trying to put the piece of the puzzle I guess, it's not about massive amount and we have the most.
Breadth and depth of the biggest breadth and depth of information and the enterprise I T B to B space bar, none, but you really wanted to make sure you understand there are only so many enterprise deals going on around any specific topic to be able to leverage the first party data and get it to the sales reps. That's a good that's a really good thing on the enterprise.
Side, it's great because he of the marketers, it's a great opportunity and a bridge the marketing and sales departments together. So many times and marketing can be destroyed from sales were actually help and bring that together through you know our capabilities and priority engine and we're seeing some of our enterprise accounts really double down.
In terms of their sales usage, where it may have started with 30 of 40 reps, but its going to 200 reps and they're seeing great success on that no. Our playbook on the out is to make sure and.
And we got these guys focused on using our priority engine and our integrated marketing platforms that we that we're enabling them to have access to.
Build additional segments technology segments within the same G O.
And then expand across the other geos and help connect the dots. So of account a enterprise accounts a is leveraging of our solution on our platform and North America around all flash storage, but they also of an entry point and thought you know hyper converged infrastructure or identity and access man.
And whatever it is we wanted to make sure that we're expanding that right here, where the Norwegian we're layering on more content market and creating custom content, then we're taking that across EMEA and to the individual countries and EMEA APAC and Latin America. So we see a lot of road map on that across the SMB mid market and <unk>.
Enterprise.
Okay, Great and just one more from me. So what are you seeing and demand from the the kind of the global 10 vendors and we know the concentration is down you know pretty dramatically to roughly 20% of revenue but.
They've been kind of showing some signs of life actually recently and their results.
And I'm just curious how is that impacting their spend with you guys and the last couple of quarters here.
Yeah, and as you can see we saw an increase and their spend as well and and some of those assets and some of those.
And global 10.
A stronger position and some of the others and I'm going to leave them nameless yeah. Some of the folks that have really made that transition to a cloud and SaaS based strategy of doing quite well others are trying to catch up.
But you know a lot of those companies were very heavily focused and face to face of events you know not only in North America, but throughout the region. So that transition and if they were trying to get online and be digitally driven and do a digital transformation.
Yeah. It has been accelerated if they were looking at it over the next three years that happened and the and the last 12 months and now we're starting to see those global 10 and focus on digital.
And an always on strategy more than we've seen before but that could still be a little bit choppy I would say I'm glad you pointed out that you know the concentration of 20, roughly 20% of our overall business. You know 10 years ago. It was all of a 40% of our overall business and that that was low.
The weighted towards those guys because they can be a little bit unpredictable and they can have quick pullback from quick acceleration. So.
We're really happy and it's been a big focus for us by driving net new logos and drive and the mid market and even that upper end of the mid market and the low enterprise, but they are out of 20% overall concentration right.
Great. Thanks, guys congrats on the quarter. Thank.
Thank you.
The next question comes from Bryan Bergin with Cowen. Please go ahead.
Hi, Thanks. This is Jack easement on for Brian just a couple of questions from us starting with the legacy business.
It's accelerating in recent quarters and much of that has to do with <unk>.
Customers are asking for short term of marketing arrangements, which is well understood but.
And it's driven the top line.
And outperformance as well how should we think about the sustainable growth rate for the non priority engine business moving forward as these kind of the unusual growth rates.
Decelerate going forward.
Right. Good question and thank you. So I think in terms of the the shorter term you know uptick and I remember a few things number one a lot of the business, which is the trends that we're seeing again I'm going to go back to.
Copies of shift and their budgets and North America, as well as the international and near field budgets face to face events to online and that's a really powerful trend and I can tell you.
I don't see that going back to the the the numbers that it was before like when and when you go from digital when you shift from analog to digital very difficult to switch back to the analog if you look at and in Layman's terms, there's more scale and there's more flexibility, there's more and Pat.
It is a huge cost savings for customers when they do on that so they're going to adopt that and so now what they do is because they were doing events before.
A lot of these customers were not.
Familiar with intent data and subscriptions or on the 10th data they would default or pivot to lead Gen and.
Now theyre getting comfortable with the lead generation the bet and now they look at it and say gosh, none of what do I need the Legion I mean lead Gen on owned and operated sites that are throwing off third party purchase intent data because you know you can see the message that as people are getting as Google has announced the elimination of.
You know using third party cookies are tough with one of them know that we know our audience and it's the permission based audience on our first product purchase intent data now you get into that transition, where they're now getting comfortable with digital.
Our strategy with data and we transition them to and integrated.
Purchase intent priority engine through content marketing to contextually in line brand messaging on owned and operated sites that of Bird drive and first party purchase intent data that is the roadmap and how we take the lead.
Lead generation increased to longer term deal increased from 40% to our goal of later on to the North of 50 and a couple of years, that's really the playbook.
Got it makes sense and and just the follow up on priority engine historically, there's been some annual feature and functionality enhancements, including.
From last year, enhancing the sales and use case.
Can you provide any.
A notable enhancements that that may be and sort of for this year.
Yeah, that's a good question and so the we.
We had some of those sales use cases that we're enhancing the.
Sales effectiveness and and you said you know we.
We've updated our alert system. So sales reps can get awards within the specific territories one of the biggest things and we did was made sure that we.
We customize and personalize everything to our sales reps territories before for them before the big Batched up it was more set up the market and so we wanted to make sure we transition at the sales as I mentioned early on the call the prospects the prospect level of intelligence.
The sales Rep and if you look through the life of the sales rep on Monday of of Cob lifts and they have their 25 accounts and their territory and maybe they have 50 accounts and their territory and they can actually go out there and ranked their accounts right and our priority engine, but a lot of rats. One of ranked there are prospects. The actual people so prospect day might work and account one of.
One of us.
On the FERC accounts, but number two could be the most active level and the most act of individual prospect could be working for accounts and Frank 227.
And then.
It's really important for reps to have that ease of use and the functionality to identify and prioritize prioritize.
At the prospect level as well as well as the account level better integration of Salesforce has been very poor at one of the things that I'd, rather come back and meeting our customers' wraps of come back. They said, we'd love to actually of more insights at the current level as well and at the individual prospect level, we have a really good opportunity with the the bright talk.
Account data that we can start integrating it into our sales use cases, and so the reps get out of more entry points.
They're using priority engine into their territory based on the account intelligence.
We're going to look at personalizing from additional.
The territory usage for a couple of and so there's a big focus on that there's going to be tighter integrations and to not only the CRM system on which is typically sales force.
And not only of the marketing automation platforms, you know Marc Cadieux and I'll go on but we're gonna of looking at tight integration of the sales nail on the platforms, you know outreach and companies like that so that's of great question and that's the big focus for us and you'll see more as we announce some of these and the low end of the second quarter and we look into the back half of the year.
Yeah.
Yeah.
They are kind of hit.
Historical cadence has been one day too.
The major enhancements upgrades per year and you.
You'll continue to see that.
You know for for every year.
It's early enough and that's mega trend of people digitizing and modernizing their sales and marketing organization that theres still a lot of innovation.
And two ways, our customers are innovating and we see what specific customers day in and then we can integrate that for all of our customers to use and then also obviously, we're talking to customers all the time and we're coming up with a with different innovations as well from from customer feedback. So I think you'll continue to see you know.
A couple of upgrades every year and it's there's a there's a very robust product roadmap.
Thanks for the color.
This concludes our question and answer session and concludes the conference call. Thank you for attending today's presentation. You may now disconnect.