Q2 2021 TechTarget Inc Earnings Call
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At this time, we will pause momentarily to assemble our roster.
And the first question comes from Aaron Kessler with Raymond James. Please go ahead.
Hey, Thanks, guys and congrats on the nice upside a couple of questions that may 1st the.
Annie and thank you can give us there I didn't see you and the shelves of 1 of them and reaching the 10-Q, the North America versus international performance and.
And then maybe on the ex Telegent.
Acquisition net you can talk a little bit of maybe the monetization plans. I think you said you were kind of plug that into your platform, but a little bit more details. How you are may be integrating that given it's a kind of different the vertical within health care. Thank you.
Great. Thanks, Darren this is Mike and thanks for the question.
Across the globe, both in North America, and International we saw outpaced performance than we had originally guided to.
The real the tailwind that we talk about and the shareholder letter in the momentum and the industry 1 the transition from face to face of events on the international side face to face of events was pretty dominant and the market pre COVID-19, while the field marketing dollars are being allocated to face to face of events and that has been shipped quickly and that's going to continue.
The move to digital always on and first party purchase intent data driven and there's also a lot of privacy regulations and compliance across the globe and particularly on the international side and so having an opt in permission based audience through our own registration through our own content vehicles.
Our customers really see the value of that and net value continues to increase and.
And then.
Google's announcement of eliminating of third party cookies has really brought a spotlight on this again to enhance the <unk>.
Privacy concerns and the opt in and people wanting to deal and engage with the first party content.
And the North American side as well, we're seeing again as we stated during the shareholder letter.
Big focus for our customers to modernize their sales and marketing departments and they want to do that with first party purchase intent data and having that first party purchase intent data driven with.
Our own active relevant and segmented audience members has really driven the K I would say that we've seen really good growth across all of our products. So our demand generation as well as our priority engine numbers as we've noted and the shareholder letter priority engine grew 20%.
And year over year across the customer segmentation, our global 10, as well as all others and again across all of the Geos.
And then for your second question on the <unk> side. This acquisition as we noted checked all the boxes original content Oct and permission based members and a large amount of for first party purchase intent data.
And we see the opportunity and right now to monetize their purchase intent data and <unk>.
2 our priority engine and subscriptions I would expect that we'll be rolling out new segments, and this market where health care in a sex with.
Software and hardware and we have a really good untapped opportunity right now to grow that for first party purchase intent data that external and brings to bear with the acquisition.
Got it great. Thank you.
The next question comes from Joshua Reilly with Needham. Please go ahead.
Hey, guys. Thanks for taking my questions Congrats on the strong quarter.
So I think if you look at the strong increase from the guidance for the second half of the year here.
How much of that is balanced between the ex Telegent acquisition, the core tech target business kind of outperforming or maybe even greater strength than you anticipated and bright Tac.
Thanks, Josh in terms of the debt.
The the Extell of Gen side really doesn't factor into this guidance that we're doing at the beginning of the year, we provided some guidance because we're operating and reporting under 1 number.
Brian talk and tech targets all of the same customers same accounts were very similar offerings. They complement each other but we're reporting on 1 number and we originally gave.
Modeling guidance of 20% growth for bright talk and you have the numbers from last year and low to mid teens growth and tech target organically.
We're just seeing us accelerate across the original guidance or forecast measures and again just to reiterate we're seeing that across all of the product sides as you've read and the shareholder letter priority engine, which was single digit growth last year. At this time is now 20% growth.
The demand and demand generation and so that's where we're seeing the growth based on what we originally and forecast and we're seeing the accelerant of on those areas.
Okay, Great and then just to follow up on the Google delaying the third party cookies removal from Crown for Europe, My sense is that.
A direct kind of caused any direct lots of business and the near term, but did you have any pipeline building from customers that were looking to switch the intent data providers.
Maybe going to reevaluate the timeline of when they were going to make the change.
Great question first of all we see this as a very strong competitive advantage and Google delaying it a year, we see that it will take as customers really need the plan what the overall marketing strategy is going to be around intent data using third party cookies versus first party cookies I would say it has shown a bright spotlight on this topic, we're having.
A lot of customers.
The conversations with customers on this and they will continue to migrate from the use of third party cookies to first part of purchase intent data contextually relevant and aligned marketing programs and that beer as well for us over the next year year and a half until fully transitions.
Hello.
Thank you.
Youre welcome.
And the next question comes from Bryan Bergin with Cowen. Please go ahead.
Hi, bankruptcies back Adrian on for Brian a couple of questions first on priority engine, certainly seems like the trajectory of stronger than what was contemplated last quarter.
And when there were as guidance and 15% growth and the second half and you maybe.
Against the more color on expectations for the second half and then.
And on that note, maybe talk a little about priority engine express and update on on sales adoption, there and any data points you can share as it relates the progress Omics Omics breath.
Yeah.
Great Yeah Zack.
And you look at our priority engine, and so I'm going to bring US back. The lost Q2, as we got out of co as we enter into the Covid Arena and you saw a lot of pullback in terms of customers committing to long term contracts, but what customers started quickly dealing with shifting the air face to face event budget to demand generation.
And contents and the occasion, they wanted really tight contextual alignment with relevant active opt in and first party members.
As we grew the demand generation list.
The list of clients and revenue throughout Q3, Q4 of 2020 and and throughout the first half of 'twenty 'twenty 1.
1 of our playbook was to engage with those customers make sure they're seeing value and the rois from their demand generation efforts and investments with tech target.
Slowly migrate them into longer term subscriptions are annual subscriptions being powered by our priority engine. When we spoke back in May we expect this to be 15% plus growth. We exceeded those are customers of doing the the migrations from shorter term demand generation to more in.
The greatest long term subscriptions.
In terms of the second half.
Expect it to be very similar in terms of numbers and pretty consistent on the doors in Q2 high teens to 20% and.
And.
I would also say that not all of our customers are back in terms of migrating from short term demand generation programs to longer term subscription. So you know, we're very bullish and the second half on that and we continue to execute and do well against the playbook in terms of priority engine Express and imagine very early in the cycle.
And the launch on priority engine Express we've seen some really good momentum on a percentage wise, it's very high and overall dollar amount. It is still building its base.
In terms of customer revenue and insertion order count and so we're really bullish about that but it's really confirming that we have a really good opportunity and that SMB market that are really focused on sales use cases, a lot of those small companies do not have elaborate sophisticated marketing team.
<unk> or marketing systems, but they all have inside sales force and <unk>.
The sales reps outside reps and they really want to identify which accounts and which contacts with the nos accounts that they should be mobilizing and prioritizing their sales efforts against.
That's helpful. Thanks, and just the follow up I'm looking at the P&L.
Operating leverage this quarter was.
Was pretty impressive actually SG&A and product debt was essentially flat quarter over quarter looks like on an absolute basis, how should we think about investments here going forward and get leverage I know you gave some guardrails on on guidance and 3 Q and for acute and kind of back and to thank looks like the recusal will stay flat and <unk> expenses might pick up a bit.
But can you just talk about a little more broadly about.
Leveraging the model and and.
How should we think about this going forward.
Yes. This is Greg so.
Opex will go up gradually and the second half for the first half we do about half of our employee bases.
Gets reviewed on compensation increases and July and about half for in January so that will.
Increase in response, but in terms of long term operating leverage.
It's a great model there is there's very little incremental cost of sales. So it's a model where.
Most of incremental revenue on a gross.
On a gross basis drops of the bottom line. So you know we target around you know at least of 50% increment. The EBITDA margin so that allows us to reinvest.
Half of the incremental revenue so it's a model where we're able to.
Reinvested of healthy rate and expand margins at the same time. So this type of operating leverage that you see and this quarter and you'll see and this year is pretty consistent and what you've seen with the us for the past several years and what you can expect to see going forward. So if we as we said in the past as we continue to scale revenue.
40% adjusted EBITDA margins are you know.
We're gonna see and the near term and we think and our long term as we scale of the revenue that.
50%.
Adjusted EBITDA margins are achievable.
Great. Thank you.
Yes.
The next question comes from Patrick Colville with Deutsche Bank. Please go ahead.
Great. Thanks, so much this is Bob the non for Patrick Congrats on the strong performance and the quarter Michael in your shareholder letter you mentioned some early cross selling efforts going well with the bright talk can you maybe elaborate on this a bit what do you where are you seeing some success today and maybe what's left and the product side to really drive additional value searches.
Right.
Bobby in terms of the cross selling efforts as I mentioned the acquisition of bright talk just made complete sense for all the reasons that we talked about earlier content the.
And the first part of purchase intent data, but even more importantly, the complementary product offerings. They really focus on webinars videos talks they create a platform where customers can.
And all inclusive platform generate their own content promote it as well as create a demand generation system engine with a net platform our reps and you know.
We're all 1 organization, but our reps of walking the bright talk reps into accounts for where they are spending with tech target might not be spending with bright talk at a material level and the bright talk reps continue to do a great job of walking tech target routes into those accounts that are spending on the bright Todd profit, but maybe not as heavily on the on the tech target solutions and.
And there is a huge hi, I get it back from customers they want to make sure. They have the right mix of media content.
Vehicles out there and we'll engage with the active buyers throughout the entire research process and net combination is working well, it's working well and North America, we're doing it throughout EMEA and we are rolling this out and are a P J as well and we've seen it with really good success.
I'm sorry, what was the second question you had on the product side.
Is there anything left on the product side to really drive additional synergies in terms of and any new product features that you need to come out with.
Yeah very good so.
And are there are a lot of synergies on the product side that we're looking at at the in the short term as well as the long term strategic product roadmap.
Bright talk has of.
Just launched the bright talks central platform, which I call, which I would refer to as an all inclusive of content creation and demand Gen and vehicle for the marketers.
And we obviously have our priority engine platform networks across marketing and sales recently, we announced and priority engine that we are just and account level and.
Intelligence from the bright talk remember from the breakdown of community into priority engine. We did this really to focus on the sales use case and what that has been able to accomplish and the short term. It has allowed our customers sales force to now have double on average 2 ex the amount of accounts.
That are active within their respective territories that they can engage with and so now you have more reps within our accounts, calling on more accounts with the near territory that are active with first party purchase intent signals, which creates a larger engagement and consumption model of the tech target data and the bright talked day to come.
And together so we're keeping that on the account level right now.
We're working on future roadmap strategies in terms of the platform as I mentioned from priority engine as well as bright talked central teams are working closely together and we're really excited about the short and long term on that.
Yeah.
Got it that's super helpful and that segment is nicely to my second question can you, maybe just talk a little bit about the sales use case within some of your larger customers of priority engine.
How has adoption been thus far relative to your expectations and any data points that give you provide just the highlights and the adoption you've seen thus far.
Yes, that's a good question.
The case is going well. So historically this has been a marketing focused use case platform for marketers would have insights into the accounts as well as the active prospects at the current level.
By segment and by geography, and marketers. This is still a big focus for us marketers that are looking to.
You know.
Mobilize against and account based marketing strategy, a b M named accounts strategy. They want to increase their database sales of different use case. So we rolled out of prospect level of intelligence at the beginning of this year, where sales reps. If you think about their cadence they will come in and they'll do a call of <unk>. They have a territory that they call into.
Now once that enable them to rank at the individual prospect level.
Who is most likely to be prioritized first so if I'm a rapid and I came in on Monday morning, and I'm doing the call Blitz I might have.
And active prospect that we've identified and account <unk> number 1 the call into account be it would be number 2 versus just focusing on the individual account level and what that does is it allows sales reps to customize and personalize the individual outreach, whether it's email or phone conversation when they reach out of that individual.
Buying team member and that has seen really good adoption, we've seen sales issues increased by 2 ex <unk>.
And we're.
Driving again very focused around the sales application in the sales use case and this recent press release.
Bob.
And we talked about the ingest and the account intelligence data from bright talk but we also.
Expanded on our functionality with what we call inbound converter and inbound converter is the technology, that's tied into priority engine that tracks.
Tracks the accounts the visit our customers' websites and what we've now done as of we expanded that intelligence and granularity to not only tell you what accounts of visit of your size, but we're now identifying which pages on the customers' websites. Those accounts are engaging with other on product review pages.
Customer success pages demo pages. So it helps prioritize the accounts then we marry that account data into priority engine to show, which individual active members within that accounts buying team are probably the ones that are engaging on those.
Customers websites. So what we're really doing is the anonymize and the account based traffic going onto our customers websites and we're prioritizing and which people they should reach out to you within those accounts and sales of C and a lot of success on that and we are we are focused on bolt on the sales use case and on the marketing use case and features and functionalities on.
Our next rollout or revision, which will come in the late the latter part of the year and in the fourth quarter.
Got it and Super helpful. Last quick 1 if I could squeeze and long term revenue mix downtick and slightly from <unk> is there anything of note impacting the next year or was it just strong performance on some of the the manage the side of the business.
It is 2 things the the.
The overall number grew dramatically you know materially quarter over quarter, and if you look at the overall revenue dollars associated with long term revenue.
They were up.
Double digits quarter over quarter.
So it's just right at the percentage of all our because of the revenue was so much higher.
Makes sense congrats again guys.
Thank you.
The next question comes from Greg Burns with Sidoti and co. Please go ahead.
Good afternoon.
What was the ex Telegent trailing 12 month revenues and EBITDA.
Greg We don't we don't report the average disclosure reasons I can tell you it's.
Yeah.
The main focus of this acquisition was on the content.
The opt in audience and the untapped monetization of first party purchase intent data and the press release, we mentioned that the CEO of Extell agent as a form of tech target and employees spent 11 years here focused on our member and audience acquisition methods and process.
The focus on this number and the focus on this acquisition was around the content the audience and the again the potential in terms of.
The first party purchase intent data and the ability to monetize debt. We also really when we have a lot of good relationships that we with the organizations around the industry and.
We don't really get into any tried a bit we try to avoid any bid process. So what we see as value again around content of audience and first party purchase intent data.
We try to keep that really close to the best again. This did not reach any of the materiality of the thresholds and we did have to disclose it but we also want to make sure we keep a competitive advantage so investors.
The.
So our competitors RMC and how we are trying to value potential of organizations and we want and making sure it's fair to our investors.
Okay and was the health care.
The vertical was this something that you.
You had your eye on for a while there are any other.
And of niche technology verticals that might you might be able to do the same thing kind of plug them into your platform and expand the monetization opportunities.
Yeah, Great question in terms of the health care.
Vertical this is a vertical that we've been keeping our eye on for a couple of years.
And the adjacent vertical you know where health care and the Saks with Iot and infrastructure security hardware and software. It just made all of the sense of the world to US we believe it's going to open the door to new customers opportunities as I mentioned earlier, we believe that we have and untapped.
Revenue opportunity with priority engine, and bringing our purchase intent data onto the axtell agent community and in terms of other <unk>.
For Arctic goals.
There are some other adjacent verticals that are interesting to us and that we're keeping an eye on and <unk>.
Even bright talk when we acquire bright talk they have some audience and verticals and the Fintech space asset management space.
So those are definitely something that we're keeping an eye on now and moving forward.
Okay, great. Thank you.
Yep.
The next question comes from Eric Martin Newsy with Blake The Lake Street capital markets.
Hey, guys. This is Kevin on for Eric Thanks for taking my questions just on the acquisition and I know you just touched on it briefly and the last question, but maybe could you give us a little more color in terms of.
Yeah.
And this 1 of the larger players for content and audience in terms of the health care.
Vertical or was it you know the kind of the quality of the stuff, they're putting out there I know you had a relationship with the founder and stuff, but what really.
And maybe size up the market is what I'm trying to get to.
Alright.
This display was focused not on the.
Size, but on the target and the quality of the content and the audience and the untapped opportunity with the monetize and the purchase intent data. There are a couple of big players out there is I think becker held and hymns debt as part of a nonprofit organization that as a big event every year. This was of the.
The reason why it has fit so well as we know and we know that we know the folks over and extend the gen. We know the type of content and the approach, which mirrors what tech target would do in terms of the enterprise market, we really value of the ARPA and permission based audience members again, we talk about eliminating third party cookies and what's going to have with third party day.
And we just see and opportunity to really monetize.
The large amount of purchase intent and insights.
That they can generate on their sites due to the quality and the targeted.
Focus of the health care market.
Yeah.
Got it thanks, and then just a bigger and bigger kind of question here I know you touch on the letter, but the continued migration from in person events.
Online do you see that go on and is there any been flurry of more in person events and I mentioned international earlier on the call, but if you see any of that coming back.
Anytime soon or not.
I don't see it coming back to where it was before or being anywhere near that and there's a couple of things that really you know the analogy that we use internally is when somebody moves from analog to digital it's really difficult to go back the analog but also when you go from face to face of events to online first party and <unk>.
<unk> driven type of opportunities, it's more scalable, it's measurable and it's less costly I think Ceos of organizations are really done with selling 25 people and Las Vegas or wherever it is to have people out of the office from 5 day setup booze have all of these travel cost and you're seeing that well we have to make this digital.
Transformation of Covid accelerated that we need to capitalize on that and we can grow scale and measure of that more effectively so I really see and this trend moving forward and the positive manner and again this bodes very well for what we built as an organization.
Thanks, guys.
Youre welcome.
The next question comes from Justin Patterson with Keybanc. Please go ahead.
Great. Thank you 2 if I can first just on the M&A environment, how should we think about the the pace of M&A going forward and the opportunity available.
And after the acquisition and just all of a lot of lot of cash on the balance sheet and herself throwing off cash so just curious.
That future pipeline looks like the.
And secondly, you know priority engine growth strong and you've got the new businesses coming in.
Do we think about just the what the normalized growth rate for tax target should be going forward. Thank you.
Right.
Just and in terms of M&A, there is a lot of activity going on and the market and we've seen this for the last couple of years.
We have a model that we look at and we are very active and looking at organizations that fit that model and he and that model really focuses on content opt in registered members first party purchase intent data and or complementary solutions like bright talked bright-eyed check for the boxes on that.
We will get a lot of organizations, we're very selective on what we're going to choose and it needs to fit that I would say for every acquisition, we've done and we've probably looked at 40 and.
We're going to continue to be selective on that we're not going to make a decision just to make a decision.
<unk> got a really fit and the short and long term strategy and what we're really focused on is the business and you know and in terms of normalized growth again, we began the year, we figured we'd provided that model of <unk>.
20%, Brian talk and low to mid teens and tech target you know, it's early but if you look at it and the the trends continue the way where the continuing we continue to execute on how we're executing.
And this would be mid teens plus growth moving forward and mid to high teens.
Great. Thank you.
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