Q1 2023 TechTarget Inc Earnings Call
[noise] good afternoon, ladies and gentlemen, and thank you for attending today's take target report first quarter of 2023 financial results Conference call.
My name is Danielle and I'll be the moderator for today's call.
All lines will be needed during the presentation portion of today's call with an opportunity for questions and answers at the end. If you would like to ask a question. Please press star followed by one on your telephone keypad.
My pleasure to hand, the conference over to our House, Charlie <unk> General Counsel you May proceed Charlie.
Thank you Daniel and good afternoon, joining me here today are Greg Ray costs are executive Chairman like Toyota Chief Executive Officer, again, or our Chief Financial Officer.
Before turning the call over to Craig I would like to remind everyone on the call of our earnings release process.
As previously announced in order to provide you with an update on our business in advance of the call will be posted our shareholder letter on Investor Relations section of our web site and furnished it on an 8-K.
Following Greg introductory remarks management team will be available to answer your question.
Any statements made today by type targets that are not factual, including during the Q&A may be considered forward looking statements.
These forward looking statements, which are subject to risks and uncertainties are based on some shins and are not guarantees of our future performance.
Actual results may differ materially from our forecast and from these forward looking statements.
Forward looking statements involve a number of risks and uncertainties, including those discussed in the risk factor section of our filings with the S. E C U.
Statements speak only as of the date of this call and Techtarget undertakes no obligation to revise or update any forward looking statements in order to reflect events that may arise. After this conference call, except as required by law.
Finally, when he may also refer to certain financial measures not prepared in accordance with gap.
Reconciliation of certain of these non-GAAP financial measures to the most comparable got measures to the extent available without unreasonable efforts Ah companies are shareholder letter with that I'll turn the call over to Craig.
Right. Thanks, Charlie.
Revenue was approximately $57.1 million a decrease of 16%.
Adjusted EBITDA, what approximately $17.6 million, which is 31 per cent of revenues.
Walker term revenue was 41 per cent of total revenue.
Free cash flow was $14.7 million, which represents 26 per cent okay.
The technology market continues to be the sea by weak demand widespread lay offs and budget cuts.
If that wasn't counting not the leading technology bank failed in the quarter, which we believe increased negative sentiment among our customers.
My results reflect these talented challenging background environment.
I will now open the call for questions.
Wow.
Certainly if you would like to ask a question. Please press star followed by one on your telephone keypad. If for any reason at all you would like to remove that question. Please press star followed by two again to ask a question. Please press star one as a reminder, if you are using a speakerphone. Please remember to pick up your handset before asking your question.
Pause here briefly as questions are registered.
The first question comes from the line of it just in Paterson of Keybanc you May proceed.
Great. Thank you very much so if I can first and the letter U T that some of your thoughts on AI a bit I'm curious how much when when do you think we can start seeing some of the benefits from it.
Swelling into the business and just kind of frame some of that the investment that you're making into it right now and then secondarily, you're just thinking about EBITDA guidance for the year.
<unk> noted that reinvestment into one of the few areas you can control in this market right now how should we think about just the guard rails around it annual EBITDA guidance. Thank you.
Right Yeah, Justin this is Mike in terms of.
Benefits in the framework around some initiatives.
Even work with AI technology for quite some time, but we see an opportunity in the business and we recently announced the appointment of Paul Healy to run on AI strategy.
See several key areas that we'll see.
<unk> needs to help really accelerate the business.
I think it's important to note that there's a lot of analysis right now about AI and when you go to see a lot of content being disseminated across the entire world.
Been content, not really specific addressing common concerns and needs. So there's going to be a cop called content.
And that's going to be healthier in the market.
For publishers and strategic content providers Techtarget, we believe it's a competitive advantage.
Well you have a lot of insights relevant insights mobile content.
We supply technology buyers to help them do their research staying in jail, so within a business for 25 years from up next year.
Riding posture, providing technology buyers.
Really strong content to help them when they're doing their research out of the conflict that we've invested with extract and we've been able to maintain and gather really valuable insights.
Thereby came level.
Level and so what we see is the opportunity to help our customers action against the insights that we can deliver the product portfolio and the product suite. So as you know for years, what kind of at the mercy of our customers to action against.
The data and the delivery is that we've.
We.
Provided to them in their campaigns.
But now we will be able to have a very strategic insightful next steps to help them actually trigger very specific email outreach follow conversations and in content or strategies.
Hudson, enabling business, a very strong opportunity for us and it's something that we've made some investments and on ESPN bright talking type jobs together.
We have the content that we provided an editorial in the animal sides.
Also our customers need to have an effective content strategy.
Being able to leverage that content strategy from our capabilities compiler with AIG as well will help them provide that.
Effective content strategy.
Engaged with those buyers and we talked about this before this fine key demographic.
Changes to change.
What about I think we mentioned this in our lost earnings call. It over 50% of technology by he's wanting to wrap less experience, which.
Which means they really rely on content to make decisions.
Decisions about 678 figure acquisitions, they want it can't be fooled by 10 broad base irrelevant contact it's not recent and relevant.
So being able to help our customers tying in those insights to help power.
Empower their constant strategy will be in effect to play for us that we have is a publisher and as a community with proprietary first party gave him sites.
So what cited above that opportunity.
Terms of the.
EBITDA margins for the year and we thought it's really important we understand that the technology market is really challenge right. Now I think you can see that through all the.
It'll be announcements on the lay offs and budget cards. It's just threw out and then you check on the collapse of Silicon Valley Bank that had.
30000, plus customers all technology focus Mendez M V C backed.
So it's challenging on that front.
But in terms of EBIT, we still need to make sure that we manage downturns in the past we have a very effective playbook. We believe there's still a really good opportunity to make the right investments in the right areas one of them I had just mentioned around.
You can talk about some other ones live in the car were on some of the product and you know since we're doing so we want to make sure that we're being opportunistic manage our discretionary spending like we have as part of our playbook for 24 years, and we will do a good job on that we have a track record on that in terms of battery else. You know, we're estimate about 30% EBITDA margin I think those are.
Right.
That's the right ballpark to assume with the updated guidance and to go forward strategy.
Great. Thank you Mike.
Thank you. The next question comes from the line of Josh Riley of Needham. Please proceed.
Hi, This is Ron really on for triage. Thanks for taking my question, you know kind of carrying on with a very good topic or any silicone Valley bank, how should we think about the impact.
No S. P P influence of confidence come on your customer base and.
I mean can you remind us of your exposure to venture backed startups and you don't have things improved.
Subsequent to the corner and on trends with these customers.
Mmm Yeah, great question in terms of the Silicon Valley as you know they were you know.
100% focused on the enterprise market and a lot of those customers they serve which I believe some of 30000.
A lot of them were BBC dot clubs, our business has evolved in a nice way over the last several years in terms of our customer segmentation.
If you look back at our business 10 years ago posted 40% of our business was.
Got it through our top 10 global tops.
And today, that's below 20% and we have 3000 tons from Seagate Mad.
Imagine like we've spanned across all customers sizes segmentations in the enterprise speed speed.
Silicon Valley Bank the economy.
Sure the economy the macros.
Technology specific macro environment was challenging as it as it was.
<unk> noted that in queue for restarting Q1, there's no surprises on there you can see by the lay offs and see by the cuts and that we're seeing Dana Danielle which is still carry that.
You too.
Silicon Valley Bank brought another.
World of.
Uncertainty and a lot of changes to the market.
So if you can imagine those customers, which we serve we have a good size about customer base that serves those smaller possible for BC back software based organizations.
They all went through a very challenging period, there's a lot of uncertainty and gymnast and I don't think you see a lot of the V. C's right now ready to hand over another shot where they want to make sure that these companies are making the right.
Decision from your expenses discretionary spending making the line out of touch.
We are a premium player on the market and we always want to strive to be the premium plan because of our top 10 investment.
First party purchasing 10 data those line items get scrutinized across all segments of our customer base and that includes the V C bagpipes.
So we believe that that caused another dissolves in a negative way to the to the economy and I think we've all seen that everything is red and you've seen through the technology landscape.
So we are dealing with it will work with our customers to make sure. We're dealing with it I would also say that we talk about the enterprise type market and that is the worst performing sector right now.
In the markets.
It's also the probably the most solve longterm sector in the market.
Well, we have the ability to see if you can talk to 100 investors. It's 100 out of 100 would say the longterm viewpoint. The enterprise it'll be touch sector is very strong and something that they would invest in Bangkok. So that's important for us. So yes, we're managing through a downturn in the market our business is 100% alike.
Prize <unk>. So we are going to feel that pain, I think others that we've talked to probably feel a little bit worse as well, but when that market turns around we also capture the upside and that's why we're making those investments.
I mentioned earlier.
Got it thanks.
Kinda mentioned.
The tech industry have you started to see some.
Those impacted Atlanta, and new opportunities and you don't have to be started bringing you guys and they were champions of your products you know like their last jobs and sales and marketing.
Well some of those people are still looking for jobs. So that makes it very challenging and then the people that are staying with the topic that may be novel caught him a letter.
Very hesitant again this whole.
Mood of uncertainty.
Uncertain and your husband and your very cautious about spending even the budget that you have you might see some pick ups and some.
In terms of some pocket that we see that the mood is very.
Focused on uncertainty and for those folks who both said I will tell you. This we have really good relationships. We have a good brand and we have a good recognition with our customers typically if somebody does get laid off and goes to another customer and this has happened they will call us to bring a cent and I can tell you that that's happening.
The thing that you just wanted to make sure I have some of those books not landed a job yet you're looking for a job in the books that have remained in their jobs at one part of the layout very hesitant in terms of making that additional standards that investment right now until we see more clarity visibility into their job and into the market.
Got it.
Yep.
Thank you. The next question comes from Brian Bergen F. T. D. Cowan you May proceed.
Hi, guys. Good afternoon. Thank you.
Wanted to ask a question on the outlook kind of your visibility to it can you comment on the macro assumption that you've been embedded here in the outlook through the second half of this year cause it just any insights around your current visibility relevant to where you typically would be at this point of the year and I and I guess, how much in that twenty-three outlook is is the sin verse.
A qualified pipeline or work you have to go get still thanks.
Yeah. Thanks, Brian I mean, we take a look I mean it is you know as we look at Q2, then like you mentioned the second half.
Well, we have walked right now we have visibility into we look at all those dynamics on it. We also were taken into account like the policy environment like the behavior that we're seeing with customers know that turns.
More for the positive yeah, there can be some upside of that number.
You know every time that we think that there is gonna be.
We're hoping that things can be improved like you said nobody's tonic for the Silicon Valley Bank collapsed right and I don't think people fully understood I want to make sure people understand that they were 100 per cent aligned to the enterprise Tech space, where 100% of lines and then price tag space. So we see that but.
But in terms of that we look at what we are booked the conversations that we're having.
You know typically you've seen the cycles were Q2 Q1, two threes pretty even with huge in the queue for really ramps up.
I think six months out is really hard at the terminal going into Q for right now so a lot of what we <unk>.
Providing in terms of our guidance is what we see now because it's very it changed pretty fast and the last.
Five or six months is pretty pretty consistent with.
The tech market pullback and that hasn't changed so it's hard to give you I.
I don't want to say, a crystal ball, but like yeah, Here's what I think things will get better because based on what we've seen right now the tech market is in a lot of uncertainty doubt and there's a lot of dizziness on us.
Okay, now I understood and make makes complete sense.
And they did that follow ups.
Sharon 11 talks about new product capabilities for prior yeah James.
Focus on some integrations with other platforms and related work protein needed to kind of tease that out a bit more than what you're working on there yeah.
Yeah, absolutely. So we've made someone else, but you'll see a lot of announcements over the next.
Month, and a half to two months in terms of what we're doing so let me give you some feedback what's going on a lot of it's focused on a number one a tech enabled integrations got rid of a lot of our customers to leverage our propriety first party attempt data at the prospect and that's the account level not only within their C. R Ram and marketing automation platform.
But within other platforms, whether it's their homegrown platforms and 10 providers ADM platforms that power other sales and marketing campaigns. So that's really important for us because it's key to make sure that our customers have access to the data that we supply the proprietary data whether it's in.
Your own you know whether it's in the priority Andrew platform, whether it's in their CRM or if they have other platforms that power programmatic work nurturing campaigns or X y Z.
And working with our customers as well as some apartments throughout the community is really important for US. We've also is going to be released the features that will improve priority engine is a direct workflow tool, including enhanced email still helpful sales and marketing.
Have very specific and relevant in real time information about how they can action against for example, being able to work the marketing and sales team that X Y Z organization was on your website and not only on your website today well what pages. They were on your website. So on the market is side taken into.
Twitter within their workflows, whether it's in their own marketing automation of through another platform outweighs the target those organizations with the appropriate message also being able to alert sales reps to say it again.
Unique individuals prospect level that this new member of the bond came became an addict of prospects on the technology initiatives that you sell it.
In your respective territory.
For most apt to push.
Push that out and that information off the sales reps provides them very tangible easy and laid out.
To engage in Personalised the outreach, whether it's you know sales are on the marketing side.
We've talked about in the past, where all this out as well and announcing this ah are tied to salesforce integration within our customers around around Salesforce most of the marketing automation.
Five directional.
Data analysis and workflows.
I would bring this up is because we want to make sure that we are tied to the opportunity data.
And we can identify.
Investments.
Oregon investments and showed such Oregon investments that we've identified prior to the opportunity, becoming an opportunity and our customer salesforce. So we've identified and then post opportunity creation gate, how would we celebrate it.
Opportunity right in front of our customers sales and marketing Department.
So those are really key and then one last thing, which I'm really excited for it on this is again, both the marketing and sales users will.
We'll be updating and enhancing our visualization ironic tone activity dashboards and timelines.
It's really important that we can show our customers investments beat me with a tech target are working so when you have a look back on a visualization.
And a visualization platform. This isn't the last nine months here is how good investments with Charlie engaged.
With buyers or we've identified the buyers and how you progressed the buyers right in front of them, which again rule out.
Customers to trigger the most actionable and relevant next steps.
Really important and stuff that we've been working on for quite some time and you'll be announcing that so as you can see our product announcements enabled customers.
The leverage of data across any and all their platforms that they used to go to market increase the usage reliance with sales and marketing to see results and to show attribution an hour. While those are the three focus areas that we are really honing in on our priorities and our platform investments.
Okay. I appreciate all would you tell them that just just a follow up on it or are you at a point, where you're able then on the other side of this leverage the investments you've made here essentially you know into next year margin standpoint.
Yes, I'll go on that is to make the investments now.
During the down economy, where everybody's getting impact some worse than others that we've seen.
Put the right investments in around the product of content strategy in a couple of key areas.
And was this market turns which we all know that the enterprise VW Tech marketing a longterm is going to be a strong market still has the thesis of modernising their sales and marketing departments Labyrinth burst party data leveraging other data such as well and make it more effective for sales and marketing departments.
This will help with our long term growth margin expansion and what we've been talking about for the last five years.
Okay. Thank you.
Thank you.
[noise]. Thank you. The next question comes from the line of Bruce Goldberg Lake Street Capital markets and you May proceed.
Hi, Thanks for taking my call.
Just a question like in the shareholder letter you highlighted strategic investments are there certain technologies are areas.
Sort of a shopping list for your.
Kind of targeting.
In terms of investments.
Last question, we just discussed.
Was the investments, we're making the priority Andrew platform and capabilities integrations around usage around tracking about island. That's that's one of them rose.
We're also seeing some investment will make it to concentrate investments around our content from content enablement services. So the business, we've seen and we've seen throughout the market today's buyer enterprise <unk> technology buying it wants to spend less time, working and dealing with sales reps had vendors and one more time.
Research with relevant content.
Anytime in on their time, and so making sure that we have the right concept, it's attracting those buyers, but then helping our customers wouldn't effective and thoughtful carpet strategy together to our investments with E. S. G.
Talk as well as tech target and leveraging some of the information we talked about around that AIG capabilities to help accelerate our customers who have access to the most relevant content.
Gage with buyers at the right time is really key because vendors that do not have a content strategy.
Fact of adult content strategy will miss out on this because the buyers of technology.
You might want to rely on.
No allergy reps vendors they won't have information on their time, and then I would just say in the other investments and we look at we're always looking at.
Can you guys hear me.
Yes, yes.
Okay and the other investments that we're making us we're always evaluating M&A capabilities and M&A prospects across the hall.
10 data technology enabled audience.
So we're going to continue to work on that.
Great. Thank you and then how would you compare like same customer sales metrics, you know service same store sales basis.
This year versus last year.
But what we do is we are not we disclosed out on an annual basis. So that was February numbers and we will all report on that next February as well. So we do it on an annual basis.
Great. Thank you that those are all my questions.
Welcome.
Thank you.
The next question comes from the line that's cash Rangan Goldman.
Goldman Sachs you May proceed.
Hey, guys. This is check up on for cash thanks for taking the question I'm I'm a little late.
So I apologize if this has touched.
Alrighty, one thing I wanted to touch on was.
It has become a lot more topical and they use cases huh.
I'm a lot more parent and seemingly widespread right I mean, we're still on track down.
50 per cent. The other day are there are there implications around target I mean like like are are you working too.
To implement a enter your product offering and then how are you viewing it as you know something of a competitive differentiator or something that might close to my.
Target offers.
Color on that.
Yeah, absolutely yeah. We have brought this up early but I have no problem re trusting us in terms of.
J I N R.
Workflow and our investments over the course of several years and we see publicly techtarget publishers of relevant thoughtful content and originated as a content as soon as you have a competitive advantage in this market right now.
There are other will say content providers that are you know.
Sites that might be put faith anglers and trying to get more page views in traffic, that's really not a ball ball game and we believe that publishers have spent.
I've spent years on invested in quality and thoughtful content to attract a very engaged relevant and reach an audience.
They can then extract very powerful and propriety first party purchasing tenants rights heavy huge competitive advantage over other companies in this space so on that side.
Feel great competitive now leveraging those first party.
Purchasing 10 in our propriety purchasing panic insight will absolutely help.
Customers in terms of woodwork embedding all gonna be rolling out announcing down the road.
Instead of our products. So for example.
We have always relied been at the mercy of our customers to follow up make sure the leveraging our data making sure that everything is being done and that's hard when you're getting that off to be able to leverage our first party insights and then.
Provide a recipe.
Very specific recipe in further action has to say Mister sales up from Mississippi, you need to communicate with this buying team number.
Who's inside through this their entry points of this they are trying to address this pain point and you have the information to do that it's gotta be really relevant because technology buyers.
They're smart.
Handing 5678 figures on these at purchases they want relevant insightful information and they want really good outreach in terms, when Venezuela, which is to make sure they understand their pinpoints their needs and to address that we have that data now to make sure that we're action that day ended up putting on one customer's workflow that's.
Gonna be beneficial the only thing that's going to be able to help us help accelerate our content enablement services, our customers need to have the content strategy on the marketing side product marketing marketing and you'll be able to take the insights that we have held pollen helped generate more content that is gonna be personalised specific.
To the technology by teams at scale.
It's very it's critical for on our side and for our customers.
Okay, I guess, just a quick follow up though.
From my perspective, if a customer can.
Maybe more easily generate their own unique content using generative associated technologies does that sort of phased out the area of business, but.
Target offers that service then.
Like how how should we be thinking about that if that makes sense.
Yeah for the customers.
[noise] customers are not publishers of content.
The news and you're spending hours.
Technology. So they don't have the insights into 29 million opt in.
Maybe professionals, who are looking at the most deep right involving content around 100 specific market segments.
We also Mary up the vendor content appeared appear content a bright talk community that has all the engagement don't have access to that and I'll I'll tell you can't fool.
Technology buyers like it's gotta be relevant it's gotta be real it's gotta be.
It's gotta be trusted so buyers want trusted sources of content, we have a great reputation on that so I guess I'm Gonna go back to my original statement.
Strategic publishers and content providers that really serve and invest in thoughtful and independent contract will be served well in this space.
Okay, Okay, no I I I appreciate that thank you so much like.
Yep.
Thank you spare currently no additional questions registered at this time, so that will conclude our time a question and answer as well as today's call. Thank you for participating you would know disconnect your lines.
So that will.