Q3 2021 TechTarget Inc Earnings Call
Good afternoon, joining me here today are Greg straight cause our executive Chairman, Mike Toy out, our Chief Executive Officer, and Dan Nurik, 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 the business in advance of the call we posted our shareholder letter on the <unk>.
Investor Relations section of our web site and furnished it on an 8-K following Greg introductory remarks, the management team will be available to answer your questions.
Any statements made today by target that are not factual may be considered forward looking statements. These forward looking statements are based on assumptions and are not guarantees of our future performance actual results may differ materially from our forecast.
Forward looking statements involve a number of risks and uncertainties, including those discussed in the risks risk factors section of our filings with the SEC. The company undertake no obligation to revise our update any forward looking statements in order to reflect events that may arise. After this conference call except as required by law. We may also refer to financial measures not prepared in accordance with gap.
A reconciliation of these non-GAAP financial measures the most comparable GAAP measures accompanies our shareholder letter.
With that I'll turn the call over to Greg great. Thank you.
We can use a broad base strength across all products customer segments and geographies.
We expect this positive momentum to carry the 2022 Q.
Q3, 21 gap revenue grew 92% adjust.
Adjusted revenues grew 97%.
Income grew 47%.
<unk> EBITDA grew 125%.
And we raised our revenue and EBITDA guidance for 2021, I will now open the call to questions.
We will now begin the question and answer session.
My.
Question.
Followed by one touchdowns.
Okay.
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Well.
Followed by team once again to ask a question star warm all this time.
Also a reminder.
Okay.
We will now for example.
Questions to generating machine.
The first question is.
Christine.
Great. Thanks, guys, congrats on a cold or a couple of questions first on the organic guidance for 22, I believe you indicated high teens organic growth and their shareholder letter, which I believe is the highest in a few years.
Excuse me I'm packets little bit maybe volume Bruce price and grow can maybe priority injured growth expectations for 22 as well.
And then it looks like you have some nice international strength in the quarters any additional commentary there. Thank you.
Alright, Thanks, Sharon this is Mike.
In terms of.
2022 guidance.
Preliminary guidance from high teams growth, where we're seeing good momentum across all the absolute facets of the business across the products and across the regions. We talk about the tailwinds that we will be counted but I also want to make sure that people understand the execution across out product team sales seem a customer success team has been.
[noise] really strong and when you couple that with the Tailwinds in terms of Ah.
Positive.
Budgets.
Companies continuing to modernize their sales and marketing organizations and then the compliance and data privacy regulations were having an opt in permission based audience like Techtarget is built over 22 years.
And the continued shipped them face to face events coming on to.
Digital and data driven online events, those bode very well for us and that's what we give them the guidance of the you know the high teens growth for next year.
In terms of priority engine, we think we're going to be back to 20% plus growth for priority engine again based on those tailwinds customers need and if you really think about it our customers. When you focus on this modernization of their sales and marketing organizations through automation and tools and soft.
Sure.
<unk> data.
One of the biggest catalyst on that is first party owned and operated purchase intent data. So that has some of the color.
In terms of the international we continue to see good growth in those same tailwinds really impact us across all of our regions and I'd also add on there and we've discussed this and previous quarters in previous years.
In the other regions outside North America, there was a high focus or a high concentration of budget or a budget from our customers that has always been allocated the field events face to face events.
Field marketing and sales work closely in those regions those budgets have gone that way in the last year and a half since Colbert, we've seen that acceleration in the digital transformation from face to face to online and data driven and we're continuing to see that on the international space as well.
Alright, just a quick follow up any lingering kind of headwinds from Covid, you're still saying maybe on the curtains Express business and then any headway interesting maybe from the supply chain challenges impacting marketers budgets as well.
Yeah on the headwinds in terms of priority engine Express we've seen good momentum and we're pleased with the progress that we've made it across those smaller customers and as we mentioned before priority engine has historically been really focusing geared towards marketers and marketing uhm.
Get older we made it and we'll talk about this in a little bit some of our key investments has been around the sales use case and when you get in a little smaller companies were priority engine Express is really a good fit bore you know there's one common denominator across all those they have an inside and outside sales presence they might not be focused on the marketing.
You might not have the sophistication of the tools and the technology for marketing. So we're seeing a nice pick up in terms of not only customer adoption, but customer usage on that and I'm sorry, what was the second question that you had the headwinds on me so much.
Like any challenges.
Yeah. So you know, we obviously keep an eye on that.
We have not seen that hit US right now in our customers again with a healthy I T budgets and the market right now it's been good.
Those are some of the macros that we keep a close eye on it is not impacted us right now and you.
Most of our customers. If you remember have gone from hardware to Sass based software customers and I think if this was 10 years ago, where vendors there primarily part in tech target or selling servers storage and network hardware equipment, we would see a greater.
Impact if that was the case, but because of this transformation the cloud and SaaS in software. It is really not we're not seeing that in the budgets.
Got it that's helpful I couldn't <unk>.
Thanks.
The next question is from the South.
You May proceed.
Thanks, So much for taking my question that congrats on the performance and a quarter I was wondering if he just dive into more detail on the product enhancements do you talk to that to priority engineering. Your shareholder letter you noted that you've got to kind of fell these a separate module going forward and it's great to see kind of these updates from a product standpoint, but I guess, maybe from a go to market prospect.
<unk> <unk> you guys have to make any real changes to kind of address this new feels case that you're really going after.
Alright. Thanks for the question, let me give you a little bit of suddenly on the product priority engine product enhancements. So in June we.
Just watch some additional enhancements priority entered in the focus on his father was.
Really focused on the sales use case. So there were a couple of things that we did in June around integrating and adding the account level signals that we're seeing from the break talk audience. So why don't we do that we.
We did that so we could give and expand our customers salesforce up to two works in terms of accounts that within their territories that they had insights around that that they could go and engage with we also enhanced some of our inbound converter capabilities and that capability set is.
Tracking visitors accounts that visit our customers websites and then we took it to a more granular level, we wanted to know which pages. They visit are they looking at product comparison pages are they looking at case studies or are they looking at.
Uhm demo pages, so that brings greater insights and intend to the Salesforce as we look at our next release that we've been working diligently across from our product team development team customer success team I would break it out into two areas there'll be data enhancements and user experience or use.
Interface enhancements and what I mean by that on the data side. We are now for an upsell for.
Offering the opportunity to ingest the bright talk not only the account level, but the prospect level intent information at the individual buying level information into the priority engine platform and that would be up burnup cells. So we now have the individual buyers inside a break talk who.
We're engaged in virtual video summit spiritual events Webinars now adjusted into priority engine for to upsell for an upcharge.
We're also taking a look at making sure we understand certain key areas around content preferences.
When you have a sales rep that can understand if they're buying team or their prospects of the customers are engaged in webcast versus white papers.
Those sales teams have a cadence with a follow up on whether they use it you know those sales enable them plop ones like outreach and sales loft to have that better information and more accurate information if they're prospector customers looking at webcast versus white papers versus case studies enables a better cadence follow up in terms of the user interface.
We want to make sure. This is seamless we want to make sure. This is personalised and so making sure that the sales reps have quick links to access to all of the following information like at a click of a button there identifying their customers and prospects around what content, they're using were caught that they're engaging with also our customers.
Have come back towards this year and said the information is so powerful how can you also provide us an account journey in a bind journey. So now as part of this integration in this upgrade we're gonna be able to provide day to day events on the account level about strictly very critical information and engagement levels.
The 90 day, you look back so it's just not a point in time, it's going to continuous the buying journey information that we can share with sales teams within our customers within our customer accounts and other features like you know find new accounts and buyers that reps have not engaged in and serve to step to the top and a unique view.
Because we don't want our customer sales teams to miss any opportunity or deal so being able to do all that you know in a sales interface is going to be very impactful for the team.
That's very helpful. Just a quick follow up I noticed.
Long term revenue kicked down a bit to 37% it sounds more like it it's a matter of seeing more strength, but the the more quarterly cadence that the business has given that the strength and the environment is it the right way to read it.
I think it's it's an absolutely right way to read it if you look at the total revenues associated with that you know associated with longterm contracts year over year, where roughly about $13 million or $26 million. This year. The percentage decrease board at 37% is from the demand and the success that we're having.
Selling across all of our you know purchase intent ribbon product. So it's an overall higher denominated in terms of overall revenue in the.
<unk> were driven by those till ones, we've talked about in the execution at the company level across the board.
That makes sense, thanks for taking my questions and congrats again.
Thank you.
Thank you Mr Shaw.
Questions from the line of Joshua.
Company you May proceed.
Hey, guys. Thanks for taking my question Congrats on the quarter, you mentioned record demand for quarterly based products and the shareholder letter I assume that means like content syndication.
And <unk> reports in particular strong and the high teens growth guidance implies this growth is sustainable you know in the next year, but I'm just curious what gives you confidence.
As the economy reopens.
That growth for those products is sustainable.
Mmm Thanks Joshua in.
In terms of in terms of the quarterly demand. We saw this transition every company accelerated the digital transformation from.
Whether they were planning to do it over the last you know over a course of three or four years, so they've done and they're working on it right now and over the past 18 months.
And.
Clients have gone in there and that's.
That's not to say that they will not be some face to face event engagement. We believe that will always be there, but I do not believe in we do not believe that will ever go back to the level that we saw pre COVID-19. There's so many reasons for that eh, it's more efficient for customers and any vendor do engage digitally enter.
Data to scale their business, it's more cost effective to do that and we've always use that analogy. When you go from analog to digital do you ever really flipped back to analog and we don't believe that that's going to happen in the enterprise <unk> space. So they'll always be a place for face to face events, but the demand that we're seeing again, let's go back to those tailwind.
Customers.
Thriving to modernize their sales and marketing organizations, they do that through automation, they do that through tools and they do that through data and first party at the information age purchases intent data is a real driver in that.
Those same customers have seen the efficiencies the scale and the measurability.
From going from face to face events.
So digital and demand phone and data driven online campaigns and it's really hard to go back because customers don't want to spend or send.
20 people to Vegas for a three day roadshow and have really nothing to come back.
<unk>.
Drew account for that and just with all the other trends that we're seeing not only from the face to face shift to online and face to face have been punched online, but we're also seeing with Google announcing that they're going to eliminate third party cookies and 2023. This all bodes well for us and we're going to continue to focus on what we've been focused on.
On content at Dana permission based audience first party intent data and delivering that to our customers. So they can execute with their sales and marketing departments.
Okay, Great and then just one follow up you highlighted.
A 40% adjusted EBITDA margin is the goal for next year and the shareholder letter, which is nicely above my prayer estimate maybe you can discuss what drivers, including sales efficiency units, leading to the school and how much if any hiring due in sales and marketing to hit your.
Upper team sales growth goal for next year.
Well on the cost side for the EBITDA, I mean, everything's driven off growth and we've given to the grilled in terms of.
Mid to upper teens growth for next year, the operating leverage that we have on the businesses.
Fixed the fixed costs really does drive that so you can see in this quarter. We were at 39% EBIT margin. We continue to grow you're not going to see a dollar for dollar in terms of cost. So we have the way. We've had this model set up for 22 years with a lot of operating leverage we're going to continue to.
Expand our margins and we expect to see our EBIT margin to be over 40% in terms of sales efficiencies.
We're going to continue to hire salespeople, because we believe in driving demand and the demand is there and it's there for you know for our taking and we.
We feel that were well equipped to cross our sales development rep, which of the entry level to a field account executives who are enterprise in our global wraps across all regions and we will continue to.
Beef up and invest in those across the board as well as our customer success team and our customers success account director team. So you know we're going to ramp that up because we believe that the growth is via the demand is there and we're well positioned for the next.
Several years to capture this so we don't see really a challenge in that.
Okay, great. Thanks, Congrats on the strong results.
Thank you.
Thank you Mr.
The next Christmas and Brian birds in this town person.
I think this is zack as men on for Brian just a couple of questions first I'm I'm converting these non priority entering customers, that's a bit of a follow up but obviously the performance and.
And non priority engine business over the past 12 months suggest a notable <unk>.
Uptick in activity and presumably new clients that have come on that side of the business. So any metrics you can share as it relates to converting these new clients what initiatives are in place to convert these clients into longer term already in Geneva.
That's a great question so.
Yeah, what I would tell you when we get these new customers and we've seen a lot of new customers come in to this.
Migration face to face events onto one into online.
We worked very closely with them to understand how.
How are we go out there and capture of information so it might be a content syndication program.
Enter branding program it could be qualified sales opportunities so when we onboard them.
We are looking very closely and working very closely to highlight a lot of the intent signals and the intent day lesbian deliberate across seas, 90 day or 180 day programs and if you looked at our business historically, a lot of our revenue might not be and a subscription contracts.
But it really does act as recurring revenue it behaves that way. So the game plan is to bring the new customers and what the demand that we're seeing in the success that we're having work with them closely we help them measure in terms of.
Marketing and sales engagement they might be looking at <unk> and SQL say close to those folks because we have that reoccurring behavior. It becomes a a conversation of here's your always on you have access to not only what you are engaging with or what people are engaging with you on your content, but are you getting out of the <unk>.
Rest of the market that might not know who you are or might not be engaged in with you when you Hogan and sign onto a long teeth.
Long term deal with priority engine naturally the playbook and we've we've mentioned that that we're executing on that as we got in the Covid and navigated through Covid, we're seeing a big demand for their products such as you mentioned qualified sales opportunities branding lead generation and that will be the playbook and those are some of the metrics that we look at.
That's helpful. Just to follow up on the net annual revenue retention figure I think the last figure show and was it was about 120 per cent can you just help US bridge. The the key underlying variable supporting that figure <unk>. So how should we think about churn versus pricing.
Versus up sell versus new customers, just trying to get a sense of the underlying figure supporting that from your attention number.
Well on a.
Price price increase for priority and Jen.
Is roughly around 10%.
And that's.
So that's a piece of it and then there's upsell across other products contributes as well and then we're adding.
Uhm.
Well, obviously will get more growth from from adding new customer. So it's primarily.
It's Ah it's some price it's at some upsell crosstown and that cross out ourselves are primarily selling additional geography's, an additional segments of priority on some.
Understood. Thank you.
Thank you Mr. Brandon. The next question is from Justin.
You May proceed.
Alright, great. Thank you to if I can first just going back to the commentary on next year. It does say hi teams or better growth. How do we think about the factors that could actually cause you to grow faster than that high teens number and get sustainably into the 20 per cent plus range that's <unk>.
The number one and a number two last quarter you have the X intelligent acquisition love to hear more about how you were thinking about that health care of political thank you.
Thanks, Justin.
So I'm Gonna go backwards on the Accelerant acquisition, we completed that.
<unk> on July 31st.
You know it was a market that we've been looking out for awhile and as we mentioned in the last.
Earnings call the CEO from Axtell, Joe was next target employees. So we knew a few things on that we knew the business was running pretty well. It was ponton led it was often permission based audience and it was a market I'll call. It a peripheral market that we've been in adjacent market then.
And what we historically gone after.
And we believe as we go into 2022 on that there is an opportunity for us to.
Tony our plan is to execute and launch new priority engine segments across the health care I T.
Intersection market.
Also deliver and bring to bear.
The bright talk channel platform to those marketers in that industry, and we expect to be able to equip the seller is going after that to engage penetrate and grow that market.
In terms of the 20% plus growth for 2022.
I mean, we're we're thinking that if all that tailwinds continue to stay in our favor we continue to execute.
<unk>.
And we accept we're seeing that acceleration of continuous acceleration face to face events online.
<unk> of our customer sales and marketing organizations, Google really promoting.
The.
The elimination of third party cookies.
In the budget the enterprise.
I T budgets remain healthy that market remains healthy.
We believe there is some upside on there.
There are obviously some things that we somebody mentioned early about supply chain management pressures and some other pressures that are really out of our control.
We have to make sure we're aware of those and we monitor that but if those tailwinds continue to stay strong and we continue to execute.
You can see above 20% growth.
Great. Thank you.
The next question.
<unk>.
Mmm Christine.
Oh, Great Hey, Thank you everybody for taking my questions and congrats for the quarter Uhm I wanted to ask about competition. Since you have been focusing more and more on sales intense signals come round sales are you seeing any change in the competitive advantage since there are.
Or a few players who are doing the same.
You know we.
We have a really unique position in the market because of the content and the opt in permission based audience, where people are members are registered to come into <unk> into a rod them to become members.
And there are other.
You know when you talk about the sales market of the seals use case market. There are other players out there that do that and I think you know our ability to.
To continue to drive marketing engagement marketing investment and then online and bridge marketing to sales because it's the same data, but it's being used differently and a sales rep uses the data one way and the V. P of marketing uses the date or another way being able to really get that bridge connected and <unk>.
<unk> ability across sales or marketing is just a really unique capability set that we have because of that the cotton investment that we've made in the engagements that we've we've had in terms of first party purchase intent data in our ups and permission based members. So there's always going to be other.
Data providers out there.
Many times they are working in the same accounts that we are in people understand that there is an investment for both sides of it so.
I just think we're in a unique position to connect the bridge connect the dots between sales or marketing and allow both of those organizations departments within an organization to excel no what each other or know what each department is doing and benefit from it.
Understood one quick follow up on the organic revenue growth guidance of hiking to better for 2022 is there any way to kind of unpack the current organic growth given the fee excavations have done that over the last 12 months.
Yeah, I mean, we you know we report on one number and what I can tell you is on the guide and so on that or the inside is across all of our products all of our regions and all of our customer mix.
We're exceeding expectations exceed on what we had previously thought we'd be doing this year. So we don't feel it all back and look under it and say Okay X amount was from this type of division because we're selling into the same customers and we have an end to end solution that we're really focused on so I could tell you that we see scrape across all the products and all the <unk>.
<unk> and all the customer mix that we have.
Understood and feed the floor. Thank you.
Thank you.
The next question is from the lineup. Please <unk> what makes free capital you May proceed.
Guys. Congrats on the great results and thanks for taking my call.
So question about M&A, you you've been pretty active in the last 12 months with the bright talk and E. S. G. In December of 2020, and the next Telegent, what you mentioned.
July of 21.
Are you still looking to add pieces what.
Can you provide any update on your current plans.
Alright.
Yeah Yeah.
No I appreciate it we are always.
Looking to be opportunistic and the market and when we look at potential acquisitions.
Look at a few things on this we want to make sure they have to fit a few of the criteria.
Are they producing effective original content in the enterprise BTB Tech space.
Line or have a permission based often audience do they have first party purchase intent data and as a compliment.
Our existing revenue.
Product lines and can we create and turn this into a subscription based business and then the last one is always the valuation of companies are up for you know.
Mail and being marketed out there does it make sense financially and we have a lot of conversations and we are we're very prepared again, we have if you look at our balance sheet is a strong balance sheet, it's ready to take action when we see it we won't go into rush just to make a decision to make a purchase for a purchase sake.
Because we have a lot of momentum organically and we want to make sure we do not disrupt at but those are the criteria that we look for in we continuously look for and we're always in the market observing talking listening and figure it out if it's the right fit for us.
Great. Thank you in terms of Blake.
Like inflation.
<unk> is there anything we should build and or estimates in terms of like increased costs for talent acquisition or travel expense or engineering.
How are you guys.
That's a good question I mean, obviously if.
As the.
Doors open up and we get all these board is open up and we have a little bit more travel there's gonna be a little bit more travel I would project in 2022, then it wasn't 2020 in 2021.
There was a cost increase obviously with the with the projections talent acquisition, Yes, I mean.
You know.
We've all seen what's going on in the world today, I mean, it's cost more of our people and give them the door right now so there might be a slight uptick on that because we want to make sure. We're keeping the right people in recruiting the right people. So you know I don't know if it's a material number in the overall scheme of things, but if you're looking filled out a model over the next year I think those are fair.
Areas to look assess and possibly update a little bit.
Great. Thank you and then.
I don't know if you could provide any color in terms of 2022 in terms of like the percent of revenue that you anticipate will be under long term contract.
That's a good question, we're looking at a long term plan is it.
Bring with some 40% to 50% over the next several years and we're really focused on that and as we get these customers as our customers come in in new customers yet.
Continue to invest in talk target, whether it's on a quarterly or semiannual.
<unk>.
We haven't seen focus on making sure that they understand what they're getting we're doing a good job of fulfilling and we're migrating them into our locked.
Longterm revenue streams. So our long term plan I mean over the next few years is still cheap 50% I think we'll be all to 40% next year, and that's where we're going and that's what we're focused on.
Great. Thank you that's all my questions. Congrats again on the fantastic results.
Thank you.
Thank you.
Again to ask me a question please pray star one.
There are no more questions at this time.
That concludes today's conference call. Thank you and have a great day.
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Uh-huh.
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Uh-huh.
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