Q2 2022 TechTarget Inc Earnings Call

We all see at the high interest rates inflation consumer confidence.

Talking about whether we're in a recession or not in a recession. So I think it's pretty safe to say that a lot of customers are probably spending more time scrutinizing their budgets.

We have some customers that are you know Mike.

Extend some of their sales cycles as they extend and navigate through this macro but in the other hand, we have other customers that are very opportunistic and aggressive with incremental and they want to take advantage of this choppiness to gain market share. So it's hard to really put a blanket statement on the set of customers or do you want actually set of customers are doing y.

I will say that.

Over the last couple of years, what we see is customers.

Customers have spent a lot of money trying new tactics or new solutions out in the market and I think as the market gets tighter volatile a little more choppy like we're experiencing today.

Those investments will be highly scrutinized customers, who really want to focus on quality and ROI and I think that tech target solutions should hold up pretty well based on our first party purchase intent data as well as our permission based audience members and we do talk about the trends.

The shareholder letter.

The it environment, but the other three trends around modernizing sales and marketing departments to data and automation.

<unk>, the privacy regulations, which really bodes well for us without permission based members.

Still a long term transition of budgets from face to face to online for better measurement scale and efficiencies.

Those are not as economically sensitive and I think in the long term those trends are going to continue to bode well. So what I would say on that is.

We have a mix of what's going on in terms of customers some being aggressive some being.

Really scrutinizing their budgets, we don't refer a recession by any by any means but I think based on our quality of our data and our audience, we're better positioned than most.

Thank you.

Welcome.

Yes.

Thanks Kim.

Our next question comes from the line of Aaron.

<unk> of Raymond James.

Your line is now open. Please go ahead.

Great. Thank you and congrats on the quarter purchase on the priority engine may for sales teams. If we can get an update there just kind of what type of traction you're seeing with this product.

Also just a lot of companies have reported kind of lower brand advertising budgets, but curious what you are saying something about more of the brand advertising side of the business as well in this environment. Thank you.

Sure.

In terms of the priority engine sales used case that was a big focus heading into 2022.

How did you remember historically, we focused on the marketing buyers, where they would use it for their ABM strategy nurture strategy.

Building onto their net new.

Building their account database in their prospect database.

On the sales strategy, we've seen really good traction on that.

The information that marketers have we want to make sure that it's into the sales use cases, so very focused on territory management, making sure that we have the right prospect level intelligence. So when a customer goes in there and they're using them for their marketing sales case, and then they start leveraging the reps to use priority engine.

We've done really well is going to engage with the reps and they are whether they are <unk> str's inside sales reps or even outside reps to work and train them on how to use the data and we've seen really good traction in terms of once we show them how to use the data which accounts in their territory should be focused on and which can be.

<unk> prospects within those accounts they should call because they have all the information of their hands what their research in which competitors are influencing those accounts within a rep's territory in their key entry points of research, we're seeing good adoption on that and we're going to continue with the ability for trade.

We're investing heavily in customer success, and our sales enablement training to empower the reps to leverage within our vendors our clients' accounts.

To leverage the data and the optimal way. We are also very focused started I've mentioned this before of getting tighter bi directional integration into salesforce as well as other.

Marketing and sales technologies. So I mentioned Salesforce was done with Marcelo <unk> hub spot, but we're now really.

Working on partnerships with integrations around sales and age engagement and sales enablement platform such as.

Sales loss in outreach so as we continue to get that data into the our customers' sales force.

Sales forces workflow, we expect to see continued traction in terms of the.

Brands.

The one advantage that we have.

First party data where our.

Branding or AD revenue.

<unk> is high quality and it's also high value in a tight price.

We've seen them.

Continued momentum on the brand side, you will see and I expect to see some of these accounts may pull back a little bit on some of their brand expense and really focus more on the data and the demand generation and the.

Project confirmation type of data, but the brand revenues fared well, it's growing well.

We've all seen the announcements.

The announcements and the vision of.

Google eliminating third party cookies later on so I think that brings good attention to us and I think our customers will continue to evaluate their brand strategy and the last thing I'd say is the.

The branding piece of our overall revenue is a very small piece of the overall tech target revenue.

Yes, I would just add and so ranting.

10% of revenue or less.

Second thing I would add in is in the B to B ranting World is very different than the BDC branding world. It's basically an opposite business model consumer branding is basically unlimited.

Web inventory with kind of low prices and the and the.

<unk> Robyn the IC space, specifically, we benefit from a scarcity of inventory.

Only a finite number of million dollar purchases going on at any one time.

And the Big picture, it's low quantity very high quality premium pricing. So we are definitely much more.

<unk> than the consumer Internet and the and in Q2.

Branding spending represents.

Healthy growth.

Great. Thank you.

Thanks Keith.

Our next question comes from the line of <unk> Shah of Deutsche Bank. Your line is now open. Please go ahead.

Good morning. Thanks. This is Dan on for Bob and I wanted to just touch quickly on the guidance as it relates to macro I know you mentioned, some kind of deal cycles elongated or maybe greater scrutiny on deal cycles and it's good to see the reaffirmed the full year revenue guidance, but maybe you can just help us think about kind of what's embedded in.

That guidance in terms of a continuation of some of those trends or additional conservatism that you've built and should.

Macro get incrementally worse throughout the rest of the year.

Yeah.

Yeah. Good question, so I mean.

We're keeping a close eye on in the overall macro we have a lot of conversations with our customers as I mentioned earlier, yes. There is some customers that might extend their scrutinize some of the budget spend.

On the other hand, there are still a lot of customers that are very opportunistic and.

Finding incremental and accelerating their spend.

It's like what I mentioned earlier, it's not a one size fits all right now so I think we're taken some of that into consideration and.

Things can change quickly for the up or down I mean over the last six months, it's been a self fulfilling prophecy that we're going to be heading into a recession, everyone talks about it when everyone talks about it everyone starts thinking about it and then they start scrutinizing everything that theyre looking at.

You know, we will see how things turn and there could be some upside to that but there also could be some some pause in some fits and starts with that as well so things can change quickly in this but we.

We provided guidance and you've seen how we've done against our guidance in the past and we built the right guidance and reaffirming our annual guidance for the year is the right thing at this time.

Great. Thank you.

Okay.

Hi, Craig Please go <unk> Hi, Jason. Please go ahead.

Okay. Thank you.

So two questions from me guys. So just any.

Any commentary on international markets I know, we've heard that Europe's been a tougher market you seem to buck that trend in the quarter. So just any commentary there and then the second one can you give any like usage rates around like video or webinar I'm, just curious because as face to face events come back online I think there's a fear that people are going to use video.

Oh less so I'm wondering if you've got any metrics that can validate more usage on that platform.

Jason on the international side.

You know again healthy growth in the quarter.

When we talk about those secular trends, especially around privacy ranked GDP or how the European privacy laws, there's really bodes well short and long term without permission based on audience members.

Awesome.

<unk> identified that in the international markets.

As all transition from <unk> to.

Online and data driven is probably a little bit behind the.

North America market. So again, we look at long term secular trends and what's going to benefit us and our customers in the long term I think that bodes well for us and you're right on the base the base markets face to face events. It was heavily concentrated face to face events pre COVID-19.

Driver navigate a lot of him navigated online during Covid, we are seeing some face to face in the short term, but as the market gets tight you take a look at these companies are trying to build a digital transformation.

The leverage data online tactics for better scale, and measure ability and rois and that bodes well for us now.

There are also some short term you know.

Headwinds.

There's obviously some tighter markets.

Recession based markets right now in EMEA.

Uh huh.

You also have the a war going on right now when we have these conversations in February you know there is no impact, but you have a macro inflation heading into a recession definitely in EMEA.

We have the war in Ukraine, and you have some short term macro headwinds. So there is a little bit of pause and hesitancy, but we're still seeing good growth across the board and that's the color I can give you today and again as I mentioned earlier.

We'll take a look at this market over the next 30, 60, 90 days, but I really focus on the long term trends in the long term trends still bode very well for us.

In terms of usage rates.

You know, we don't track and monitor video webinar usage rates versus face to face events, we do see that there's been a pickup in some face to face events, but every study that we've seen and what we've looked at and when we talk to our end user group as well as our customers.

It's really being driven by the end users the actual technology buyer does not have the enthusiasm as much as the vendor to go to a trade show spend three days out of the office to go out there and travel and to be there. So yes, we expect that there'll be a pickup in face to face events, but if you look at the long term on this.

And how today's buyer.

Is a little bit different than yesterday's buyer, they're very familiar and comfortable with online leveraging data and okay with researching purchases large purchases on near time and by leveraging the online capabilities with information and content.

Still believe that that's a long term opportunity protect target on this market. So people that have good content leveraging online leveraging data again farewell.

We're seeing with the events that had been held they've been relatively poorly attended certainly attendance well less than then.

And then pre Covid and this whole training.

People wanted to do as much self service researches possible kind of goes against the trade show motto, which is interface with vendors out for us and all of the research, we're saying is that.

The buyers want to minimize that.

These are million dollar purchases, so there's going to be some involvement but they want it to be as late in the process as possible. So.

We don't we don't see.

Any bounce back.

The face to face that.

They said to that being a threat to our business and long term. We think there is going to just like they were pre COVID-19. We think that business is going to continue to shrink.

Thanks Kim.

Our next question comes from the line.

Of course, you are really of Needham and Cowen. Please go ahead.

Alright, Thanks, guys for taking my questions and nice job on the quarter here.

If you look at your mix of customers shifted a lot more towards cloud members' homes as we all know a lot of capital in the last five years and generally they will have large net cash balance of either cushioning any potential macro weakness.

Versus prior downturns, when you got a greater exposure to large global client it vendors that had more sensitivity to the strong dollar.

Yes, Josh Joshua I think today's customer segmentation definitely is a competitive advantage for us right now.

Take a look at today's market, where it's a lot of it is spending and investing in cloud SaaS.

Utility type of solutions today.

Today's ITT is helping drive and run businesses. So if you look at five or six or go back 10 years ago. When there was downturns if.

If you were a hardware company and yourselves server storage and networks and it was a downturn people were just delayed the purchase they will push it off for six months 12 months, a year and they were just deal with older equipment.

<unk> it environment is.

They are running their business, whether it's finance sales marketing.

Customer experience to these cloud types of solutions in the SaaS based solutions.

Very hard to stop invest.

Investing in that or stop.

Not completing a project because it would be and it'll be very impactful in a negative way to the business.

Right now it is a competitive advantage people that invest in technology and to work with their business organic competitive advantage and they don't want to lose that so I think today's customer segmentation is much better.

So much better about that today than we did 10 years ago, and I think that'll continue to be in that movement. Yeah empathize that those companies are financially very healthy the business models is different it's all subscription.

So.

In the past as Mike was saying.

Tech companies would see their revenue decline in the downturn and that's just not that we're not saying that today the subscription revenue.

It is very stable. So you know why it may get harder to win new deals their base of revenue is very steady and it is one thing to always remember about technology companies. There are always under intense pressure to generate revenue no matter what the environment is.

And so if you have stable revenues with your existing Triptan and youre under intense pressure to generate new revenue.

We don't believe that's the formula for people to reduce.

Investments and things like that we provide.

That is intent data that makes your sales team more strategic more intelligent more productive helps them when deal. So we we think we're in kind of the sweet spot.

Services, we provide really for for any economic environment.

Okay, Great and then I have two more quick questions.

One how are you thinking about priority engine price increases this year given that you've had some.

Good price increase in the last couple of years, but really match the innovation that you've delivered and then second are there revenue synergies between tech target and bright part.

Playing out as you expected.

Guys.

Great.

The price increases for priority engine. This year, we'll evaluate that going into 2023.

Our focus right now Josh was to make sure that we expand on the sales use case.

This year was the first year that we launch where we would charge a seat license for additional sales reps. So our routes and our product teams and our customer success teams are really focused on adoption and on boarding and making sure. Our sales reps that are leveraging priority engine are getting the most value out of that and as we continue to do that we'll be able.

To sell more seat licenses, which we haven't done before so in terms of price increase we'll evaluate that at the end of the year.

In terms of revenue synergies, yes, so we've done a really good job and it's not just right talk and talk target. We are ESG rights architect target, where we continue to introduce each of our.

Opportunities to the other folks across the company, so and when I look at the business today I see there are so many entry points for us to get into an account whether it's on web based video base tax base database.

Let me add generation priority engine branding content enablement strategies, our reps are really well equipped to make sure that they're aligning with their resources across the entire organization to say okay. This customer has this pain point, where two years ago, we might not have been able to really address that pinpoint in the most effective manner. So they are <unk>.

Produced in each other into those accounts, having joined conversations working together collaboratively and we've seen good success on that.

Okay.

Okay.

Okay. Thank you. Our next question comes from the line of Brian Bakken of Cowen. Your line is now open. Please go ahead.

Yeah.

Hi, Thanks, This is Jack <unk> on for Brian .

We have a lot of conversations on the M&A side, and we have consistent conversations and when we have those conversations and we're looking at several things do they fit into our content model do they fit into our permission based audience model and are they going to help accelerate our lead in the birth party purchasing 10 model.

However, we also know that valuations.

Our movement, so and especially in the private markets, where it takes a little longer to catch up in the public markets everybody sees what's going on in the public market.

Robert companies, it takes a little bit longer for them to see so we're starting to see those valuations get more checks come more in line and so those conversations will continue to happen and it also has to be the right deal for the buyer and the seller, but we are very active in those conversations we're going to continue with the buyback we've done this.

Donuts rebalance historically over the course of our.

For a long time and its been very accretive for our shareholders and it's been good for the business. So we're going to continue with the buyback and then we also know that we have some converts coming up in 2025 and 2020 sacks.

Our goal is to make sure it will leverage the free cash flow of strong free cash flow that we generate.

A lot of that off when it comes due in cash versus stock that is our goal with our cash.

Thank you for taking my question.

Thank you ladies and gentlemen, thank you for joining us on that tax target reports second quarter 2020 conference call and webcast.

Go ahead.

You may now disconnect your lines.