Q2 2023 TechTarget Inc Earnings Call
Good afternoon, and thank you for joining detect target reports second quarter 2023 conference call and webcast. My name is Kate and I will be the moderator for todays call all lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end I would now like to pass the call over to our host.
Charles Rennick with Tech target you May proceed.
Thank you Kate and good afternoon, joining me here today are Greg straight Tosh, our executive Chairman, Mike can tell you, our chief Executive Officer, and Dan <unk>, our CFO 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 our business in advance of the call. We posted our shareholder letter on the Investor Relations section of our website and furnished an 8-K.
Following greg's introductory remarks, the management team will be available to answer your question.
Any statements made today by check target that are not factual, including during the Q&A maybe considered forward looking statements. These forward looking statements, which are subject to risks and uncertainties are based on assumptions and are not guarantees of our future performance.
Actual results may differ materially from our forecast from these forward looking statements.
Forward looking statements involve a number of risks and uncertainties, including those discussed in the risk factors sections of our filings with SEC each state.
And speak only as of the date of this call and tech target 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, we may also refer to certain financial measures not prepared in accordance with GAAP. A reconciliation of certain of these non-GAAP financial measures to the most comparable GAAP measures.
The extent available without unreasonable efforts our company as our shareholder letter.
I'll turn the call over to Greg great. Thank.
Thank you Charlie.
We're pleased that we hit our Q2 2023 forecast. Despite the continued macro weakness in the technology market during the quarter.
While it's too early to say that we are seeing a recovery. We believe the environment feels like it is stabilizing we are maintaining our previous guidance for 2023.
Well nobody wishes for a downturn historically, we've taken advantage of these sound cycles by using our market leadership and strong balance sheet to reinvest.
Optimize the business for the eventual upswing, we're optimistic that we are currently doing the right things that will pay off for our customers employees and shareholders in the future I will now open up the call for questions.
Okay.
Absolutely we will now begin the question and answer session.
To ask a question. Please press star followed by a one on your telephone keypad.
It's just not getting as bad anymore. Thank you.
Yeah, Justin in terms of navigating through the downturn and taking this opportunity to invest back into the business.
That's gonna help us accelerate what we believe will get back to normalize growth, which we've seen in the past with double digit growth. So there's a lot of areas that we're really focused on during the downturn and I'll play book has always been.
Making sure that we're being aggressive with <unk>.
Product and feature Rollouts.
Making sure we're doing the right things internally to reallocate resources to pivot against the right initiatives and the right priorities and and part of this was around timing of the map of the macro as you as you are asked as well cause. We know then the letter we don't seem the mackerel improving tremendously, but we are seeing some signs of staples.
Nation as we mentioned last year at this time, if we went into the slowdown it might take three or four or five quarters for companies to navigate through this but at one point, they're gonna need to feed their pipeline and there's typically a flight back to quality around first party data prospect Global intelligence.
Mark and alignment in proximity and that's not really a matter to us if it's more of a matter of when and when we think when that comes back up.
We will see you know the growth that we used to double digit growth moving forward with incrementally, but our margins expand and an overall margin expansion.
Thank you. Thank you.
Thank you.
Next question will be from the line of <unk>.
Needham and company. Your line is now open.
Hi, This is Robert.
Thanks for taking my question with the cycle incrementally challenging how should we think about trends in the second half of the year you know given the normal seasonality.
10% sequential increase in revenue from Q3 Q for seasonality still in place.
Yeah, I think as we look at it and it would take.
Take a look at the covered medical conditions.
It's sort of it's sort of changed a little bit this year. So we've been pretty like if you look at the overall guidance that we reaffirmed his share of 25 to 3200 $25 million to $230 million in revenue was $65 million to $70 million in EBITDA.
I don't think UNC any major swings in terms of Q3 Q for I think you'll see some growth in queue or versus Q3, it's kinda early to tell on that but it does go back to what we're really focused on the investors were making around the products ambassadors were making along the content side Ah Jamie I opportunities that we're working on is in order.
Innovation, and then our customers that really need to.
Focus on building that pipeline going into the end of the year and it's a 2024 and the best way to build a pipeline is through quality data quality insights at the account and the prospect level. So you can really marry it out in terms of you can reconcile the range based on what we gave for guidance, which is well in line with what we have.
On the analyst side and plugging the Q4 numbers that you see.
We're gonna alive that range that we are we are announced back in may. So that's how I would look at it right now.
Got it from a couple of color in it.
One thing we've heard from competitors as new business cases, where the most challenged in the current environment. You know how would you position the techtarget products that in terms of use cases for new customer acquisition.
Showing existing customers and.
Thanks.
Yeah, what I was saying that is I think in this type of map when we talked to customers.
New business cases, and that new logos is always challenge because it's always you know as.
As you can see in the tech market, there's been a pullback on on spending there's been lay offs and things like that but again. This goes back to there comes a point in time and this happens drunk every downcycle when our customers need to really engage and built up a believable.
Believable.
Worthy pipeline.
And so when that happens I think there are three things that will bear fruit on that number one there'll be applied that net new logo acquisition too there's always gonna be land and expand protect your existing customers and I believe three as we get through this expense cleansing cycle, the customer is going to be very.
Particular in terms of what investments they make to make sure they're really driving our lives with a product innovation into alignment to our markets into our prospect level intelligence. We think we check all the boxes on that so we will see that you know hopefully sooner rather than later, but this is something that we're we're planning to go one of 2024.
Got it thank you.
Thank you.
The next question will be from the lineup.
Sure with extra Bank. Your line is now open.
Great. Thanks for taking my questions just just kind of following up on what you saw kind of plan for the corner and what you're saying today can you just maybe elaborate a little bit more from a product perspective on any changes you're seeing from priority engine could maybe you're familiar they're kind of more marketing focus solutions and they needed from our customer kinda cohort perspective mortgage customers read smaller.
Customers any kind of different you've seen in terms of improvement stabilization that'll be helpful.
Sure. So bobbing on July 20th we announced one of our largest.
Uh-huh watches on priority engine, two or three or four key areas that we really wanted to focus on number one was ER salesforce integration with our new Salesforce connected and what we're really focused on that we've talked about this in previous earnings calls was enabled our customers to really leverage they're all first party data.
And a lot of with Tech targets first party account and prospect level data, but also allow our customers who are using third party data driven AVM platforms to think that data with their first party data within their own CRM system.
[noise] with Tech targets first party data at the account in prospect level that ultimate cadences workflows AVM strategies sales outreach because you want to combine all the data.
Understand not only at the college level, which prospects that you can should focus on based on their activity. So that's been a pretty big enhancement for US we also wants.
Wants to meet you while you watch interface to help on the sales side reps within our accounts have a shortcut to the most critical account.
Countless territory data for example, they can favorite some of your account and store them favorites some of their prospects and have it right in front of them with one click they get add to the a C. R round they can view contact smell.
By context, who gradually view their marketing content to heavy quicker more engaged conversation.
The other thing that we watch was Ah Ah our account journey visualization, it's been really key for us.
I wanted to show how the account is engaged in across the target network. What buyers are researching what are they researched when did it become a lead. It also has the sales reps within our clients how in wind on what are they doing to engage with those accounts. So now we have insights that help them show.
This is what your marketing investments have done with tech target. This was the outreach that we are seeing this is what your sales teams are doing or not doing so it's all about attribution visualization and holding everybody accountable that was a really a big launch and then we update our new opportunity dashboards, we want to make sure.
We're getting as much attribution and visualization of transparency you about the data that we're providing to the accounts and the prospect level Cdpr consent based prospect numbers are buying teams.
And show how those efforts are working against opportunities that are being created so they can look back and see the impact and that marketing level and that marketing spent as well as opportunities that have been created and how are we accelerating them from opportunity creation date to close one as well as close loss. So there's a lot more than we can do.
At that around insights about why you Wanna deal why he might lose a deal. So that's part of the roadmap.
In terms of the other marketing opportunities and products I mean, we're in a really good position today versus you know probably a breath of products is expanded so we have different avenues to walk in and show value for our customers. So for example, if a customer today in a chopping macro doesn't want to sign up for one two year.
You already answered subscription, but they have a need around content strategy about positioning their product shown in economic validation why they should you know choose a technology by you should choose their solution. We can walk in there with content strategy in content and ailment services, we can walk in there with webinar capable.
<unk> not only to promote to our members but to help our customers promote their own database, where we.
Re launched an updated our whole pass pass redwoods, one click the register based on the information we know about.
Prospects when a customer's database that are already opted in and permission based.
We walked into our branding elements are content marketing elements demand generation elements. So now what a customer says I can't commit to act, but I have these problems at Y and say, we have a reason to engage and deliver badge I would say we've seen some <expletive> shot shiny.
Point with some of our strategic analysis lots of accounts and we talked about this last quarter, how we revamped a sales organization.
Created pods that we have an E. S G, which is I've taught in the neighborhood services.
Opportunity and capability set a bright talking a truck driver up all engaged within these accounts.
They are bringing that end to end capabilities shot, but entering with a customer needs, but hasn't demand Ah pinpoint values that they need. So we're seeing some signs of that I think is somebody else mentioned in the call I think a lot of our clients are being very very close to their existing clients. They wanna be in front of.
[noise] existing clients I think it's it's Margaret can turn.
Hindus to go from stabilization of growth, you'll see a flight back to that new logo focus penetration as well as men and expand.
Super incentive film detailed.
Quick follow up on AI and in the letter you talk a lot about something to make him the opportunity there how.
Are we thinking that maybe the opportunity on leveraging cause I'm gonna generate a I.
Content creation side of things and being able to kind of offer more articles and features leveraging kind of January I think.
Yeah, that's a great question, so I mean.
When you look at Jenny Yeah, you've got to look at the market that we shot and if we get a lot of questions wrong generative day off.
The markets and the constituents, we'd server at the technology Biotechnology bad.
Technology by your side, we've all seen.
Demographics that buyers driving towards the millennial stage by it was really deep insightful content. He was a Harvard business review started it came up the end of 2022, that's the millennials.
54% of millennials Tech buying stage, one rep free experience, they wanna get gauge with relevant content.
We serve an unbelievable opportunity and when you remember why.
People go to Tech jargon.
Because of our market alignment a contact that we serve up we dominate organic Google organic search.
We're serving the buyers information so one of the things that we worked on we hired Paul Healy Who's running our general strategic strategy. On this is when customers go to Google, which we continue to dominate come to touch archetypes, we're gonna be able to as.
As part of a roadmap setup a prompt type.
Capability sat through Jan AI to help serve up all the knowledge based content and the insights around that particular topics that those researchers are looking at and I will say this but there's nobody else that I can think of in this enterprise for you to be tucked area because of their lack of investments in content and are strong investments and content that can serve data.
So if I go in there as a buyer I go to Google search X Y Z I end up on a tough target community I'm reading my articles and they get prompted what else were you looking for.
What else can we help you with asked a few questions where we can sure about content from a bright type community, which is protect.
Protected right now than the content or enterprise strategy group research content market insights everything shoved up for that fire. So it provides a better experience and then the flip side.
More engagement more insights and more capabilities for us the product ties to our customers.
[laughter].
Thanks for taking my question.
The next question will be from the line of Brian , Oregon with T. D. Cohen. Your line is now open.
Hi, guys. Good afternoon. Thank you I wanted to start this kind of a double click on the feeling of stabilization. So can you just talk a little bit more about that.
Confidence in calling.
Feeling is it is it resulted more leads within yourselves funneled, an actual signings or is it just a slower level.
Can you give us a sense of what's.
Contractually committed and that revenue outlook as well to give comfort in the full year.
Mmm, Yeah, we don't we noticed the squalls, what we have contractually committed upper body, here's what I can tell you is.
Which saved through the conversations with the sales teams without customer as a customer success teams. The conversations feel like they act like where we stayed in the shareholder letter is more of a stabilization as you saw at the beginning of the year was a little bit of a free fall people didn't know it was still lay offs going on and there's cost cutting but it's also some of the breath of our offerings.
We talked about a few minutes ago, given us other entry points to get into the door to bring value our customers that might not want to sign as I mentioned earlier, one or two or three year deal, but now we have a reasonable engage around again messaging around creating leaves.
Driving you know increasing in our database, even branting activities sort of seeing that I would say you know we don't disclose it but we've seen it training bookings to we've seen deals that have you looked in the past quarter, where they may have committed and we added a certain percentage of the sales force you know four cats.
I pulled back we're seeing some of those are a lot more of those kind of fruition in terms of sign itself. It's early I don't Wanna say, we're out of this but the signs that we've seen over the last 30 45 days.
Trending.
Cautiously optimistic.
Okay.
And then as it relates to maybe Precancel gap, okay. So just from stuff or anything to be mindful of on free cash flow maybe conversion off the EBITDA for the second half and as you you generate casual can you just give us a sense on capital in case your priorities How're you feeling about M&A appetite here, just given that large cash position versus more active sherry from deployment.
Yeah. So no no real change in strategy, we're looking at Ah M&A opportunities.
And that's been Sanchez overlooking if share buybacks and potential.
That by back so we will continue to be opportunistic on both fronts.
Thanks.
Thank you.
The next question will be from the line of Spruce Lake.
Street Capital Your line is now open.
Thank you and thanks for taking my questions and congrats on your results, especially given the current macro environment.
Thanks Bruce.
Have you guys have you seen a recovery in demand from accounts.
Packet by the collapse of Silicon Valley Bank.
Oh, well I would say, we don't we don't break it down, but I would say Bruce that's four and a half months also there's still some repercussions doing lots of that what I would tell you is.
We haven't won at any cash collection issues that we'd be automat, we're still engage in conversations they are.
Some of those accounts a good amount of those accounts are spreading good watching their budget like of all people I don't want to save all companies, but when you're Vichy back and you're running to grow at all costs, and then put brakes jam to a halt.
You're very careful on what you spend and you wanted to make sure that you're getting out and you can attribute your investments to that R. A y.
I believe we continue to navigate this both for four and a half months into the market.
Perhaps on that.
Our conversations are about that but what do you need to do what do you need to accomplish what you need right now and how can we help you and then hears about the products that not everything like 50 you.
Gotta put the right product with the right solutions in front of you versus I would say pre.
That should be the collapse, we could be in those conversations and their appetite might've been bigger than it should have been where they wanted to get everything. So we're gonna see this gradually I. Thank god, but we haven't seen an adverse impact right now but in terms of.
Conversations and go forward opportunity, but it's still fairly early as four plus months since that March 8th.
Thank you and and do you do you.
That's been installed base could support a price increase in 2024, I guess assuming.
You know.
No.
You know.
I guess, if if we can improve in the macro I guess.
You know I don't want to answer right now if you asked me today and I don't have a crystal ball I would say that'd be very careful until any flights increase but it also depends on the feature in functionality launches that we have coming down the road, which might warrant a price increase but we're not there yet and we're taking this.
Week by week quarter by quarter, and it will let you know when the level of watching it.
And then have you seen any change in your search rankings with the arrival of B I assisted search you know like champion.
G P T.
C N a search rankings.
Search rankings continue to grow we all say we have Ah, we dominate an enterprise b tack a search traffic to our enterprise day, I'd say with 120%.
If you type in January I generally they are what is what is generated.
Target is ranked number one we have a lot of articles I don't know the exact but it's hundreds that are ranked non organically. So we continue to do really well in that in Google and Microsoft thing will continue to drive.
Researchers to trusted in sourced communities and publishers and that's really key differentiated from what we offer.
Alright. Thank you and then my last one is I mean, you guys were active on the buyback during the quarter.
Do you think you'll be active or.
Would you think I'm a appetite give it you know.
Current prices current stock price.
Yeah, I mean, we're gonna like I said, we're going to continue to be opportunistic.
You know that in our track record.
You know it though.
Mm I respect that you know like the theater and of course on that strategy.
[noise] great.
Thank you congrats again and thanks for taking my questions.
Thanks Bruce.
Thank you the.
The next question will be from the lineup cash Rodman with Goldman Sachs. Your line is now okay.
This is triggered him off the couch. Thanks for taking the question just one for me I wanted to.
What was meant in the shareholder letter by you're using my phone on to optimize your organization with an iron streamlining operations and proven go to market processes.
Reducing expenses, where appropriate can you maybe touch on more more so what what you meant by that does that mean potential risks are in you know anything around that might be really helpful.
Ah Jacob you're probably well aware, we made a few acquisitions over the last couple of years and so they're allowed to spend systems and one of the things that we had a real big focus on this year with streamlining those systems.
Concedes the reporting the customer experience. So for example, we had so we have three different salesforce instances. We continue we integrated added one we're looking at other work flow management tools and solutions.
The way, we deliver our data to our customers or way with cats right. We're streamlining that which then we can take some of those resources and reallocate them to other projects that our priorities. We don't plan a rip we plan on making sure we believe with the right head count we plan on driving the most.
Efficiencies, but we also want to make sure that we're properly staff to align with those priorities in those opportunities that we have and that's what we meant by that.
Awesome. Thank you so much.
Thank you.
That concludes today's Q&A session and today's conference call. At this time you may now disconnect. Your lines. Thank you for your participation.
[noise] concludes today's Q&A session and today's conference call. At this time you may now disconnect. Your lines. Thank you for your participation.