Q1 2022 TechTarget Inc Earnings Call
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Our first question comes from Justin Patterson from Keybanc, Justin Your line is open. Please go ahead.
Great. Thank you very much two if I.
Dan first can you talk about how the content the closed model has changed.
Our stations with customers now, we should think about that growth rate persisting.
<unk> unique.
Unique macro environment like we're in currently and then secondly, just on priority engine I noticed you called out traction with small customers during this quarter.
Any way to think about how we can envision the small opportunity playing out over the next year next months and years. Thank you.
Hey, Justin this is Mike.
In terms of the content to close.
This is a capability that we have and we've launched and really focused on.
By looking at how buyers.
Really engaged in with how they research information online. So there's two parts to this.
Buying teams want to make sure they have a very self service get information and access to relevant information when they need it.
Average content, whether its editorial content that we produce vendor content from our vendors custom content.
Market data back to content.
And unique content that is relevant throughout the entire buying cycle.
When we have made some of the acquisitions over the last two years one of the key acquisitions, we made with ESG.
Enterprise strategy group, which was focused on creating.
Market research driven content per customer for our vendors to go engage with their buyers.
As part of the ESG offering there we're getting into accounts very early at different buying centers and tech target historically have done if you take a look at how we've historically done our business, we will work with our customers to execute on our program they'll come to us with content, we execute the program we tightened the <unk>.
Priority engine, we integrate it with our other purchase intent driven solutions, we help our customers prioritize and mobilized against accounts and against active prospects with the ESG offering we are now enable to get into our customers at a very early cycle, whether it would be a product group.
Chief content strategist C level folks who are shaping their positioning messaging and overall content.
Formulation. They are looking to make sure that they are creating relevant content, that's going to help engage by leveraging our technical validation our market validation of our economic validation type of content. So it seamlessly fits in when we start building and helping our customers positioned very early there.
Product or their company positioning it dovetails right into a strategy to put into it and execute it in a.
360 campaign through our content syndication and our demand generation as well as our integrated products around brand.
Hi.
Qualified sales opportunities priority engine and help our customers then prioritize and mobilize and ranked can help.
Have a better propensity youre close deals. So it's part of the entire process that we're doing and why that's so important is when you look at the attendees or the buying team.
Constituents people want information.
Our near on their schedule they want a self service model they want to make sure. They have access to relevant information to help them make acquisition decisions for their respective companies in the technology, they're going to buy being able to integrate the content strategy with the ESG offering all the way through the campaign execution and the prioritization of accounts of individuals' provides an end to.
And solution that Theres no other but there is no other vendor that can produce or supply our customers. So it's really putting the pieces together.
Made a competitive advantage in terms of priority engine, yes.
Identify that.
To see success as you saw the 20% growth in priority engine.
A lot of traction with the <unk>.
Companies that are that we see under $50 million in revenue. So we have new logos and new traction and we expect that if you look at our.
Total addressable market that we've identified are above 18.
500 customers potential customers and prospects.
We are sub 3000, we feel theres a lot of upside on that and why we're seeing some good success on that is because last year, we put a lot of efforts and development in.
And the priority engine solution around the sales use case because.
These smaller companies might not have the sophistication of auto marketing resources, and technologies and automation and tools, but the one constant throughout all of those companies is that they have a sales force and that Salesforce needs Valley.
<unk> first party data not only at the account level, but at the individual prospect intelligence level as well as the buying centers.
To make sure they can identify and target the buying centers and so that sales use cases proven out well for us and we expect that to see continuous growth.
Okay.
Thank you. Our next question is from Aaron Kessler from Raymond James Your.
Your line is open. Please go ahead.
Great. Thanks, a couple of questions maybe first just on the maybe the upside to the quarter end to the increased guidance for the year can you call out any particular areas that are driving that is that kind of a sales used case or is that more kind of across the board.
And then last quarter, you also called out kind of strengths and content syndication and brand name, maybe just an update there and is there any concern maybe as the economy weakens a little bit that advertisers would pull back on advertising as we've seen historically and then maybe a couple of follow up questions. Thanks.
Great and yes, we've seen.
Obviously, we had a great I'll report a great Q1 with a beat we raised our overall annual guidance both both on the revenue and on the adjusted EBITDA side, we are seeing strength across all of our products in all of our regions right now and.
If you take a look at the trends that we talk about in the market.
Healthy and competitive enterprise it market.
Denise modernizing their sales and marketing departments, Internet privacy, which bodes really well with our content permission based audience and first party data and companies transitioning with their digital transformation investing in their digital transformation because of the shift from face to face events.
Online and digital.
Going to continue to see the growth on that.
So we've seen it.
I will say, we understand that as you mentioned that there is some volatility in the market right now I mean, we see that inflation rates are high.
And the interest rates are high and.
Some of the valuations of the companies are low, but what we see is one cost and other trends that I just mentioned.
Those are still figuring out in the short and long term around the modernization of sales and marketing departments privacy.
And the shift to digital transformation. So we expect this to continue to see growth.
We haven't really seen the impact today, obviously, where we're looking at that and keeping an eye on it but those four trends that we've mentioned consistently over the last six to eight quarters really contend also unchanged notion bear well for us.
On the cognizant that accretion in the other products.
Go ahead.
I was going to add a follow up question, but he can continue on that.
On the content syndication and the brand.
Talk about priority engine.
We reported growth of 20% in priority engine is a flagship product.
First party purchase intent data.
At the account at the individual prospect level, which continues to really do very very well in the market.
But I also think that people have.
I understand that the priority engine solution helps support and is a catalyst for all of our other products everything that we've driven is purchase intent.
So what our customers are looking at priority engine and they are in the platform. There's a lot of things that they can identify they can identify tier share awards, how they're competing against their competitors in terms of content or granting our engagement so being able to have that type of data to show our customers helps accelerate the investment.
Around all of our purchase intent led products, including content syndication, including architecturally aligned brand elements. So in this market today and this should be really true in any market, but when you see market volatility our customers really tend to hone in on quality and ROI and try.
Turning to capture share of voice and market share. So priority engine does a great job as a standalone, but its really integrated with all of our other products to show well.
Our customer sets, where they're falling behind where theyre gaining traction. So it really helps support our other solutions that we bring to bear for our customers.
Got it great and just anything you highlighted kind of U S versus international trends are fairly consistent.
Pretty consistent I mean, we're seeing growth across as you saw strong growth across North America, as well as outside the region and again across all the products.
Got it great. Thanks, so much.
Thank you. Our next question is from John .
<unk> from JP Morgan Pendulum. Your line is open. Please go ahead.
Yeah.
Hey, guys. This is already on for zoom, congrats on the quarter and the detail you guys provided I appreciate that.
First question is for the guidance you guys kind of provided for the for Q2 and for the four years was the result.
It looks like the second half is going to be a bit for the first half is that just conservatism or kind of customers' indicating any kind of tapering in their investments.
From the dynamic there please.
Sure.
That's pretty consistent with how we.
The seasonality of the business and how we do when you look at different comps.
Really what we were.
We look at is the overall annual guidance of being up 20% EBITDA.
EBITDA margin being at 40% and then.
There were a lot of folks are.
I'd like to see is our free cash flow being at $100 million. So as we mentioned in the opening rule 60 organization Rose 60 company doing well both on the top line the expanding margins the EBITDA margin and the cash flow that is really how it lays out based on comps and historical numbers.
Understood. Thank you and then you can.
First a little bit on kind of the inflation in wages and everything kind of two related are you guys seeing any kind of uplift in terms of your priority engine and <unk> integrated offering and then number two on kind of your own and are you guys seeing anything in terms of.
Hiring and capacity and your ability to hire people in the tight labor market.
Yeah good.
Good questions.
<unk>.
On the priority engine, the bright talk offering yes, we did launch that we're integrating though we have integrated and offered customers that our priority is to have access to the bright talk.
<unk> abilities and purchase intent insights, which is really valuable if you take a look at our our organization historically, we've been very tech space White papers case studies.
Editorial content.
That really valuable purchase intent insights from customers or from buying teams view.
Viewing webinars has been very valuable for us and for our customers and it really helps close out that.
I'll say 360, <unk> purchase intent insights and data information. So we have added the bright talk option of for any priority engine customer they have to pay a fee for it to have access to that data and has been growing pretty well in terms of hiring capacity I think every company has been challenged.
It's better.
I'd say, it's easier to hire.
People in this market, we've all seen and read the press clippings, you've seen what's going on with the labor market.
I will say, we've done a really good job.
Hiring.
Really good people across the key areas of our investment and product development product marketing on our sales side.
Technology engineering, and it is competitive but I would say our team has done a really good job and we have a really strong tenure in terms of people that stay with the company for a long time, so that bodes well so.
Against the market I'd say will hold up pretty well.
Great. Thanks for the detail congrats again on the quarter.
Thank you.
Thank you. Our next question is from Stephan <unk> from Deutsche Bank. Your line is open. Please go ahead.
Great. Thanks for taking my questions and congrats on a great start to the year just following up on the last question regarding the macro and the impact that could have on the spending environment does your commentary thus far in your shareholder letter, it's pretty clear that you haven't seen any impact yet, but maybe if you go month by month into March and April I mean noticed any change in spending patterns or they've been changing.
End user traffic and then as customers talk about customers focusing more of our wide projects are you seeing a shift in spending from some of your brand solutions maybe priority engine.
Alright.
In terms of the.
Macro in month to month, we haven't seen that right now our bookings our revenue has been strong I mean, we see we obviously observe what's going on in the market.
But across our bookings our revenue and across the regions.
Pretty strong and I think it does go back to as I mentioned earlier, and others inflation and interest rates and company's valuations have gone down inflation rates.
Interest rates are going up but those trends remain the same and yes.
Environment like if you look at enterprise it today versus 10 years ago.
Companies are running their business on software SaaS and cloud, it's really hard to cut back on that.
If you ask a company to go cut back 10% of your it budget it would be really hard because they are running their sales their marketing finance, you'll see around the ERP.
The cloud management really difficult to do so.
I also think in this trend when things get.
Tighter and if that does happen.
We look at it and say there'll be some more scrutiny on purchases right people might be looking at play Alright, I'm spending 50, 5678 figures out there to us that usually translates into more research online and people have to make sure they're getting the right information to make sure. They are adjusted.
Buying their expense where their investments are going to put in and that bodes really well for a company that invest in content permission based audience and can throw off the first party purchase intent signals. So if I'm also on the vendor side I have to make sure I understand the quality of the data that I'm getting how to leverage the data that I'm getting.
To identify where my existing customers what they are doing what my prospects are doing and where the buying centers live and we are the window pane into our customers' markets via for Sonars and Theyre buying teams. So that wallet that we have should bode well and we may see a shift down the road.
If things tighten up from some branding to demand Gen.
Demand at the priority engine, the beauty of the business and the power of the business is that all of our products.
<unk> intent led because of their content permission based audience and first party data so as long as we're there to support our customers on that we feel we're in a really good position.
Okay.
Super insightful in the mid to shift gears, a little bit can you just provide an update on what youre seeing within the health care. It market. How is the integration of <unk> and progressed, thus far this year.
Sure. Good question, so healthcare market's done well.
<unk> done some.
In the heart.
Some operational efficiencies in terms of like campaign fulfillment and execution on that making sure that we're coordinating our efforts.
That business is running on its own we're really excited about that because our plan on that was to let this one provide a year as we start developing additional priority engine segments leveraged the bright talk channel platform that we can then go in and sell a position into our health care and <unk> customers, we believe thats going to.
Bring a competitive advantage and help grow audience and revenue and.
Eventually long term subscription revenue. So it's it's on track from the acquisition of what we're doing we're really excited about that.
Great Congrats again.
Thank you.
Okay.
Yeah.
Thank you. Our next question is from Jason <unk> from Craig Hallum. Jason. Your line is open. Please go ahead.
Thank you.
Two for me. So first just in the shareholder letter you talked about conversations with clients around inflation and interest rates COVID-19 things like that clearly you're not seeing any of that impacting the fundamentals I think you've already alluded to that but just curious if you can give some color on how those conversations progressing and how you anticipate that manner.
First thing in the business over time, and then just as a follow up any updated commentary on the sales use case and how that's progressed over the course of the quarter.
Alright.
In terms of all types of our customers I mean.
Most of our customers understand that.
The enterprise market is competitive and it's fairly healthy and.
When a volatile market like we have seen right now happens.
Whether that's a quarter or near term.
Most of our customers understand.
Their focus becomes on quality and ROI like Theres not you can have as many tools platforms, whatever you want to do and maybe when market to scream and people are investing a lot across a lot of different tools and platforms and technologies.
When they start seeing things getting tightened up they really want to focus on quality data.
And Ross.
And understanding where their buyers are there existing customers too because they've got to get really tight with them as well as prospects and what those buying centers are doing everything about our model for 23 years. When you think about the model that we've had with ESG and bright talk in an external Jed when you produce.
And in publishing relevant information, that's going to help assist buying teams make very key decisions for their respective organizations have a permission based audience and have access to first party purchase intent insights, especially during a time when Google eliminating third party cookies.
Coming under scrutiny privacy with non permission based audience members customers really hone in on that so I mean, I can't predict the future but.
The way we look at this and what we're seeing is that this is a short term volatile market.
Our customers understand quality and ROI and we understand that those trends that we mentioned are not going away when I talk about those trends again, I just want to make sure they're healthy and competitive market modernizing sales and marketing departments privacy and this whole shift has a digital transformation from face to face event.
Buyers want a self service they want information on their dime on their time and how they want it.
Bodes really well for us as far as the sales use case. It has worked really well historically as you all as you know Jason when we want priority engine was really focused on the marketing.
The marketing.
Use case, and it's still at <unk>.
Marketers are the key to what we're doing because they're the ones that absorbed data will leverage AVM plays will do with nurturing campaigns competitive takeout.
Takeout campaigns alliance campaigns, and that's been really critical that data had gotten into the hands of sales and sales, saying Wow. This is really accurate start I know these accounts is the active prospects.
That we can deliver account.
And prospect level intelligence because of this permission based volume is such a huge competitive advantage and then we layer this into a different workload for sales use cases territory management.
Helping them to easily updated to their CRM system rank and stack their individual prospects not just at the at the carnival, but at the prospect level and we've seen really good adoption on that.
And we see it by our youth usage and by also the numbers and the revenue I will say, we are spending a lot of investment.
On the marketing use case as well, making sure we're updating the integrations.
Integration platform as a service investment, we're making to get at the tight integration of both in the marketing and sales to make sure we have analytics to show and dashboards to show how our market is doing against their ABM strategy or against the competitive takeout strategy with our partner and alliance strategy. So having both of these investments work in China.
Painlessly should bode well because when you can bring marketing and sales together with the commonality of really quality data and you can get them on the same page we're doing a lot for our customers and in turn they are doing a lot for their business.
Perfect nice quarter. Thank you.
Thank you. Our next question is from Joshua Reilly from Needham and K. Joshua Your line is open. Please go ahead.
Hey, guys. Congrats on the strong execution and thanks for taking my questions here I'm curious what are the trends that you're seeing in <unk> report given that these were primarily quarterly agreement that now performed pretty well during the Covid era.
Customers, who are using these reports during COVID-19 adopt priority engine are.
Are you seeing that Theyre also keeping the <unk> reports in place going forward as well or what color can you give us there.
Yes, Josh we don't break out the revenue by by product, but I will tell you.
Part of the overall purchase intent driven solutions that we offer the <unk> reports and.
And we've seen continued success and really how customers are doing this right.
They are leveraging an integrated approach, we're seeing that more and more in terms of priority engine, but to also leverage the content syndication contextually alive granting in <unk>. So priority engine. If you really break this down we'll identify the accounts and the individual prospects and market right now that are there.
We're ranking based on their first priority purchase intent behavior, there in size or the type of pump. They are reading. It also shows which of those vendor which of those prospects and customers are not only active but the active with you Mr or Mrs. Lender. So now those content syndication play comes in and gets integrated because we want to identify who's active.
Let them to engage with good content and content syndication into branding elements. So they're actually engaging with the customer and then the <unk> portion fits in nicely. Because these are further down funnel something to happen in the next 12 months do you want to get the <unk> team. So they work really well together and we're actually seeing.
Some of our overall revenue, which was historically only.
Priority engine. These integrated online content syndication <unk> branding and priority engine turn into long term contracts and that's really important because priority to.
I don't care, if it's at 18% growth of 25% growth I'm looking at the long term revenue where customers are taking there.
Content marketing they are to us via branding and part of it and their priority engine to stay in front of buyers, especially during <unk>.
Times of market volatility, that's what works out so we're seeing good demand across all of that.
Got it no that makes sense. That's helpful. And then on gross margin it was down sequentially, but up nicely year over year, which is the more important.
[noise] metric given the seasonality around that can you just speak to that seasonality around gross margin and what we should expect here in the rest of the year.
Yes, I think.
The sequential Q4 revenue.
So Q1 Q1 is typically our lowest revenue quarter Q4 is our highest revenue quarter I think that Youll see Dan what do we have adjusted Rosemont.
Yes, I would model at 76% for the year and in that range it might be up a point data point during the quarters, but around 76%.
Pretty consistent.
Got it thanks guys.
Yeah.
Thank you. Our next question is from Eric <unk> from Lake Street, Eric Your line is open. Please go ahead.
Yes, <unk> you pointed out the indicators of healthy spend it spending environment as you're kind of growth point number one just curious to know your organic traffic how much did that increase year on year.
I don't think we report that I can tell you that.
Our organic traffic is still in the mid 90%.
So we haven't seen.
The deployment action we've seen.
Eric I don't have the exact numbers on that but we've seen that been fairly strong the Google algorithm changes.
Been pretty.
Payroll for US right now at the end of the day, they are going to favor good content and good quality content and relevant content. So.
Organic traffic is in the 90% plus and it has been consistent for the last many years.
Okay, and then you also talked about.
Sorry go ahead.
I still think that we see strong double digit growth on organic traffic to our websites.
So okay in terms of the question about.
It spending activity, that's we're not seeing any slowdown at all in terms of the amount of research. A fact, we are seeing growth pretty pretty very healthy growth to our traffic levels.
Okay. That's helpful. And then you talked about the content syndication.
Anything any numbers you can give us around the demand for it sounds like ESG is.
Really good strong demand for their services any numbers that you can give us associated with that.
Yes.
Across the board, we've seen strong growth across all the product I'll say like when you look at content syndication.
And you take a look at what the markets are and what's going on in that.
No.
We can know who every player is in the market have a view into those markets for our customers.
And identify those by accounts individual prospects or buying centers.
Our customers they have a real challenge and we understand this are producing really good relevant content and updating that content and making it in.
Impactful and relevant to engage with the right prospects and buyers.
ESG capability set with dear analysts and validated.
Ill take.
Take market research driven data and helped drive this content that is very strategic strategic for our customers and they are working with them early in the sales cycle before a campaign, even starts and they're understanding their product strategy their roadmap it could even be before a product gets launches they know.
All the information about data so when we can equip our customers with really valuable and relevant content.
That really does help that is such a huge ingredients.
Because it can be all technology and trying to scrape the web in Tribeca.
Our customers were going to show them, who is active with their active in and who to engage with it.
It's up to us to help our customers get them to engage with them effectively and consistently so we'd only for break out the numbers, but we do see a really good opportunity with this whole.
Content to close helping our customers from the beginning be very strategic on this generate the right content put into the right campaigns helped prioritize a mobilized against the right accounts and provide a higher propensity for our customers to close business and that's the end game.
Mhm Okay.
And then last question for me the global 10, they're typically 18% to 20% of your revenue.
Interested in the customer stratification in tier one was at about the same as it's historically been.
Yes it has.
Okay. Thank you, yes, that's on the quarter and outlook.
Thank you.
Okay.
Thank you.
Our next question is from Brian <unk> from Cowen Brian . Your line is open. Please go ahead.
Hi, Good morning. Thank you can you purchased comment specifically on your growth outlook for priority engine for the balance of 2022.
Okay.
Yes, Brian I mean, we were projected overall growth for the year.
20%.
As I mentioned earlier.
I know, it's a number in priority engine is our flagship.
I'm, sorry flagship purchase intent product.
And we put a metric out there of 20% growth.
Not that concerned with.
The actual number of their product because it does support and it is the catalyst for all of our products. So people had asked this before.
You guys got to call when you get the Covid bump is that coming back down and I look at it and say listen if you look at the business profile of tech target and pre Covid.
We're growing in high single digits low double digits and now we're growing at 20%.
When you can highlight to you or your customers.
Yes priority engine is the Trojan horse to get you in there and provides need number one platform in our estimate in the market because of the content first party purchase intent data permission based bodies.
But it provides so much more than that it also shows our customers.
How they're doing against their competition, which their share of voice.
We can show a view into an account and say they are 22 active prospects right now inside of this account that are active on hybrid cloud, but none of them are active with you.
So the customers first instinct is why aren't they active with May and our response to that is you don't have the right or the most relevant content in front of these folks so theyre going to go invest and producing more content coming to us now to say, we need more content because not only do we want to know who those two people are.
And that account and are looking at hybrid cloud, we want to make sure we're engaging and influencing 510 15 or all 22 of those so that's the number is 20% growth for the year, but again I'm looking at this long term revenue under long term contracts, we reported 41% of the revenue this quarter targeted before.
3% plus this year and we're doing the right things and that's not just from priority engine, that's from our other products as well.
Hopefully that helps.
Yes, that's fair Okay. And then second question is a follow up on volume or I guess activity. So just to your analogy about face to face events, becoming like traditional newspapers to the benefit of the virtual events in the webinar format I'm curious what you're expecting in the volume of activity that bright talk will host this year. So.
Any quantification or expected user flow or event count that's going to flow through bright spot this year versus last year.
Yes, that's a good question, we're doing a lot of it.
Production of the new products on the on the bright talk side and combining with.
Tech target in ESG so.
So we just we just launched a product called our analysts' original so we're leveraging the ESC analysts on a topic that's hot in the market the 12 and in the market.
Posted on the <unk> platform and we want to make sure that those are episodic.
Content and topics relevant and scheduled throughout the year, we just launched our summits onto Brian talk again, where our customers can host their own summit or they can have an editorial or an expert in the industry analysts and they can again around the around a topic that will pick or topic that <unk>.
And then we just want to thank all of our at summit solution. So people talk about some.
Some of these larger.
Industry events, like Vmware or RSA info sack and a lot of these are in person, but they are also offering a hybrid model on that and online registry for your model.
<unk> actually do help us as well because we're on the floor at those events like for Vmware All we've posted the best of Vmware ups. Those are all the best products that get judged by our guys. So what does that do.
It provides really good content for us it provides acquisition to audience, but it also provides a revenue stream on sponsorships and things that we're doing and we're doing that for VM World. We have the at summit for Intelsat I think in Europe in June and RSA here in North America. So it will start.
See any activity on the Brightcove platform, but again it will be integrated with all of our offerings in terms of what we levered with ESG on the analyst side, what we're doing on our editorial side and on the Brightcove platform.
Okay.
Thank you. This is all the questions we have today.
This completes our call. Thank you all for joining you may now disconnect your lines and have a lovely day.
Goodbye.
[noise].