Q1 2024 TechTarget Inc Earnings Call - Q&A
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Cameron: Good afternoon. Thank you for attending the TechTarget Reports first quarter 2024 conference call-in webcast. My name is Cameron, and I will be your moderator for today. All lines will be muted during the presentation portion of the call with an opportunity for quick questions and answers at the end. And I would now like to pass the conference over to your host, Charles Rennick, with the General Counsel. You may proceed.
Good afternoon. Thank you for attending pretax target reports first quarter 2024 conference call and webcast. My name is Cameron and I will be your moderator for today all lines will be muted during the patient portion of the call with an opportunity for questions and answers at the end and I would now like to pass the conference over to your host are always writing what.
Charles D. Rennick: The General Counsel you May proceed.
Charles D. Rennick: Thank you, Cameron, and good afternoon, everyone. The speakers joining us here today are Greg Strakosch, our Executive Chairman, Mike Cotoia, our Chief Executive Officer, and Dan Noreck, our Chief Financial Officer. Before turning the call over to Greg, we 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 have posted our shareholder letter on the Investor Relations section of our website and distributed it on an AK. You can also find these materials with the SEC free of charge on the SEC's website at www.sec.gov.
Charles D. Rennick: Thank you Cameron and good afternoon, everyone.
Charles D. Rennick: Speakers joining us here today are Greg straight costs, our executive Chairman, Mike <unk>, Our Chief Executive Officer, and Dan <unk>, Our chief financial officers before turning the call over to Greg We would like to remind everyone on the call of our earnings release process.
Charles D. Rennick: Previously announced in order to provide you with an update on our business in advance of the call. We have posted our shareholder letter on the Investor Relations section of our website and furnished it on 8-K you can also find these materials with the SEC free of charge at the Sec's website at Www Dot SEC dot Gov a corresponding.
Charles D. Rennick: The corresponding webcast, as well as a replay of this conference call, will be made available on the Investor Relations section of our website. Following Greg's introductory remarks, the management team will be available to answer questions. Any statements made today by TechTarget 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 assumptions and are not guarantees of our future performance.
Charles D. Rennick: Webcast as well as a replay of this conference call will be made available on the Investor Relations section of our website.
Charles D. Rennick: Following greg's introductory remarks, the management team will be available to answer questions.
Charles D. Rennick: Any statements made today by tech target that are not factual, including during the Q&A may be considered forward looking statements.
Charles D. Rennick: These forward looking statements, which are subject to risks and uncertainties are based on assumptions and are not guarantees of our future performance.
Charles D. Rennick: Actual results may differ materially from our forecast and from these forward looking statements.
Charles D. Rennick: Forward looking statements involve a number of risks and uncertainties, including those discussed in the risk factors section of our most recent periodic reports on forms 10-Q and 10-K.
Charles D. Rennick: Actual results may differ materially from our forecast and from these forward-looking statements. Such statements involve a number of risks and uncertainties, including those discussed in the risk factors section of our most recent periodic reports on Forms 10-Q and 10-K. These statements speak only as of the date of this call, and TechTarget undertakes no obligation to revise or update any forward-looking statement in order to reflect events that may arise after this conference call, except as required by law.
Charles D. Rennick: Statements 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.
Charles D. Rennick: 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, to the extent available without unreasonable effort, accompanies our shareholder letter.
Charles D. Rennick: 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 measures. The most comparable GAAP measures.
Charles D. Rennick: Extent available without unreasonable effort accompanies our shareholder letter and with that I'll turn the call over to Greg.
Charles D. Rennick: And with that, I'll turn the call over to Greg. Great. Thank you, Charlie.
Speaker Change: Alright, Thank you Charlie.
Gregory Strakosch: On January 10th, we entered into a definitive agreement with Informa to combine TechTarget with Informa Tech's digital business. The combined company will have increased scale with over 8,000 customers in over 20 countries, first-party purchase intent data from over 220 leading digital brands, and a permissioned audience of over 50 million people. The combination increases our TAN by 10 times as we will enter 18 new vertical markets with a unique end-to-end solution across our clients' go-to markets.
Charles D. Rennick: January we entered into definitive agreement with Informa Goodbye and tech target with Informa Tech digital business.
Charles D. Rennick: Combined company will have increased scale with over 8000 customers in over 20 countries.
Gregory Strakosch: First party purchase intent data from over 220, leading digital brands and a permission audience of over 50 million people the.
Gregory Strakosch: The combination increases our Tam by 10 times as you enter 18, new vertical markets with a unique end to end solution across our clients go to market.
Gregory Strakosch: We've been pleased with the progress we've made over the past four months, and we are tracking to have this transaction closed during the second half of 2024. The combination creates a company with a strong financial profile. We expect 2024 pro forma revenues to be over $500 million. Within five years, we expect revenue to grow to over $1 billion and with at least 35% EBIT on mark. We structured the deal so our shareholders will get some immediate benefit by paying out $11.79 per share in cash and long-term benefit by providing the opportunity for shareholders to participate in long-term value creation through a 43% stake going forward.
Gregory Strakosch: We've been pleased with the progress we have made over the past four months and we are tracking that this transaction closed during the second half of 2024.
Gregory Strakosch: The combination creates a company with a strong financial profile.
Gregory Strakosch: Expect 2020 for pro forma revenues to be over $500 million.
Gregory Strakosch: Within five years, we expect revenue to grow to over $1 billion bandwidth at least 35% EBITDA margins.
Gregory Strakosch: We structured the deal so our shareholders will get some immediate benefit by paying out of $11 79 per share in cash and long term benefit by providing the opportunity for shareholders to participate in the long term value creation through a 43% stake going forward.
Gregory Strakosch: In regards to our first quarter, we are pleased to report revenues above consensus, and we believe our investments and product offerings are and will continue to pay off. We are forecasting Q2 revenues to be in the range of $57 million to $59 million, which represents a 12% sequential increase from Q1 and roughly flat year over year. We see that as support for a stabilized business with some signs of a return to normal season outlook.
Gregory Strakosch: In regards to our first quarter. We are pleased to report revenues above consensus and we believe our investments in product offerings are and will continue to pay off we.
Gregory Strakosch: We are forecasting Q2 revenues revenues to be in the range of 57 million to $59 million.
Gregory Strakosch: $9 million.
Gregory Strakosch: Which represents a 12% sequential increase from Q1 and roughly flat year over year, we see that as support for a stabilized business with some signs of a return to normal seasonality.
Gregory Strakosch: This reflects a macro technology environment in which customers remain cautious regarding their sales and marketing investments. We expect this dynamic to continue throughout 2024 because of uncertainty surrounding inflation, interest rates, the presidential election, and geopolitical issues. We expect a better macro environment in 2025 and 2026, which is good timing as the combined company will have additional scale to take advantage of the recovery. I will now open the call to questions.
Gregory Strakosch: This reflects the macro technology environment in which customers remain cautious regarding the sales and marketing investment levels. We expect this dynamic to continue throughout 2024 because of uncertainty surrounding inflation interest rates the presidential election, and geopolitical issues, we expect a better macro environment in 2020.
Gregory Strakosch: In 2026, which is good timing as the combined company will have additional scale to take advantage of.
Speaker Change: The recovery I will now open the call for questions.
Cameron: Perfect. We will now begin the question and answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. If, for any reason, you would like to remove that question, please press star followed by two. Again, to ask a question, press star one. And as a reminder, if you were using a speakerphone, please remember to pick up your handset before asking a question. And we will pause here briefly as questions are registered. And the first question is from the line of Justin Patterson with KeyBank. You may proceed.
Speaker Change: Perfect. We will now begin the question and answer session. If you would like to ask a question. Please press star followed by one on your telephone keypad. If for any reason you would like to remove that question. Please press star followed by Sue.
Speaker Change: Again to ask a question press Star one and as a reminder, if you are using a speakerphone. Please remember to pick up your handset before asking a question and we will pause briefly as questions are registered.
Cameron: And the first question is from the line of Justin Patterson with Keybanc you May proceed.
Cameron: Okay.
Miles Chkubiak: Hi, thanks for taking the question. This is Miles Chkubiak on behalf of Justin.
Miles: Hi, Thanks for taking the question this is miles to kubiak on for Justin.
Miles Chkubiak: Just to start, I would love to get an update on what you're seeing with the macro environment. You touched on a little bit about the transition from R&D spend to S&M spend, but maybe just touch on, you know, any updates you're seeing there and any changes to visibility.
Justin Tyler Patterson: Just to start would love to get an update on what youre seeing with the macro environment.
Justin Tyler Patterson: You touched on a little bit with kind of the transition from R&D spend <unk> spend but maybe just touch on any update you're seeing there and any.
Miles Chkubiak: Any change to visibility.
Miles Chkubiak: Okay.
Michael Cotoia: Thanks, Miles. In terms of the macro, nothing has really changed over the last several quarters. We still see the enterprise technology market being, you know, facing some headwinds with high interest rates, inflation, as we mentioned in the shareholder letter, a lot of international tensions, and we have an upcoming presidential election. When I say we've been in business, we're going to be celebrating our 25th anniversary this year of being in business, and we've managed through several pullbacks, and, you know, our playbook is pretty simple.
Speaker Change: Thanks, Myles in terms of the macro nothing has really changed over the last several quarters.
Miles Chkubiak: You'll see the enterprise technology market being taken.
Speaker Change: Thank you.
Miles Chkubiak: Headwinds with.
Miles Chkubiak: High interest rates inflation.
Michael Cotoia: Mentioned in the shareholder a lot of international.
Michael Cotoia: Yes, we're not calling presidential election, but I'd say, we've been a business, we're going to be celebrating our 25th anniversary this year of being in business, we managed through several pullbacks.
Michael Cotoia: Our playbook is pretty simple, we leverage our strong balance sheet taken opportunities to invest in the right areas around product evolution.
Michael Cotoia: We leverage our strong balance sheet to take an opportunity to invest in the right areas around product evolution, functionality, audience, and content to make sure that we continue to be the leader when it comes to B2B, enterprise B2B marketing and sales services for our customers. So even though there's no real catalyst, we feel that the investments that we're making are paying off. We've done a lot of stuff on the product front.
Michael Cotoia: Functionality audience and content to make sure that we can.
Michael Cotoia: Seems to be the leader when it comes to BBB.
Michael Cotoia: Enterprise <unk> marketing and sales services for a customer.
Michael Cotoia: There's no real catalyst, we still will.
Michael Cotoia: We're making are paying off we've done a lot of stuff on our product plants in terms of leveraging some of the AI functionality and capabilities.
Michael Cotoia: In terms of leveraging some of our AI functionality and capabilities, it's our first full quarter that customers have been able to leverage IntentMail.ai, which we've seen a great retention and increase in usage from sales users that are in our platform that are leveraging our prospect-level intelligence for email outreach and automation, again, based on our prospect-level intelligence, and we combine it with our customers' most recent and most relevant product marketing positioning. So we're seeing healthy adoption of that, retention, and repetitive usage, and our roadmap for that is going to continue to expand the features to work with multi-email sequences and integrations into sales engagement platforms.
Michael Cotoia: Our first full quarter.
Michael Cotoia: Customers have been able to leverage our intent.
Michael Cotoia: Hi.
Michael Cotoia: We've seen great retention.
Michael Cotoia: An increase in usage from sales users.
Michael Cotoia: And are leveraging our prospect level intelligence for E mail outreach and automation again based on our plastic level of intelligence and we combine it with our customers. Most recent the most relevant product marketing positioning so we're seeing healthy adoption on that retention bandwidth usage repetitive usage.
Michael Cotoia: And our roadmap on that is going to continue to expand the features to work remotely E mail sequences and integrations into sales engagement platforms. So continuing around the platform and making sure we're making the right investments.
Michael Cotoia: So continuing around the platform and making sure we're making the right investments. As we mentioned in the shareholder letter and in Greg's opening, You know, 2024 doesn't present a lot of catalysts in terms of high interest rates and, as I mentioned, high inflation. Well, we know a couple things to be true, that the tech market will return, interest rates will lower, and there'll be a recovery. So making sure we're making the right investments today to capture that recovery, and as you can see in our Q1 results and our Q2 forecast, we feel we're doing the right things to navigate this challenging macro environment.
Michael Cotoia: As we mentioned.
Michael Cotoia: Shareholder letter and in Greg's opening.
Michael Cotoia: 2024.
Michael Cotoia: We've got a lot of catalysts in terms of high interest rate when multiple high inflation.
Michael Cotoia: We know a couple of things to be true Submarket, where we saw interest rates are low and there'll be a recovery so making sure we're making the right investments today to capture that recovery and as you can see in our Q1 results and our Q2 forecast.
Michael Cotoia: We're doing the right things to navigate through this challenging macro.
Miles Chkubiak: And then maybe just building off that last point about investments in the product, it seems like there are some upcoming improvements to Priority Engine and maybe a little bit more on the direct integration side. So just would love to hear about how you think about current product priorities as you kind of invest through the cycle. Thank you.
Speaker Change: That's helpful. Thank you and then maybe just building off that last point.
Michael Cotoia: About investments in new products it.
Speaker Change: It seems like Theres, some upcoming improvements priority engine, and maybe a little bit more focus on the direct integration side. So just would love to hear about how you think about current priority product priorities as you kind of invest through the cycle. Thank you.
Michael Cotoia: Yeah, great. As I mentioned, IntentMail, which is a generative AI offering, is one full quarter under use. We've had a big focus on integrations, integrations into our customer CRM and marketing automation platforms, but over the last six to nine months and beyond, we've really made a concentrated effort to integrate our priority engine information and data into other technology platforms. We have reallocated and invested in internal resources to help support customers who want to integrate priority engine data into existing workflows within other platforms.
Miles Chkubiak: Great.
Speaker Change: As I mentioned.
Miles Chkubiak: <unk>.
Miles Chkubiak: Generally operating as one full quarter under us we got a big focus on integrations integrations into our customers CRM marketing automation platforms, but over the last six to nine months and beyond we will remain.
Michael Cotoia: Concentrated effort of integrating our priority engine information and data.
Michael Cotoia: Other technology platforms.
Michael Cotoia: Reallocate.
Michael Cotoia: Absolutely and internal resources to help support customers, who want to integrate priority engine data into existing workflows within other platforms, we have announced some partnerships and we're going to continue to announce a strategic partnerships throughout Q2, Q3 and Q4.
Michael Cotoia: We have announced some partnerships, and we're going to continue to announce some strategic partnerships throughout Q2, Q3, and Q4, and we're working with partners that have a share of a critical mass of joint customers, and our customers are looking to get the benefits of TechTarget's first priority data being leveraged with our partners' existing platforms. So, we're seeing some good success with that, and it's a big focus for us, and we're pleased with where we are with this, and we're pleased with the roadmap.
Michael Cotoia: Working with partners that have a.
Michael Cotoia: We are focused on a share of a critical mass of joint customers and our customers are looking to get the benefits from check targets first party data being leveraged with our partners existing platforms. So we're seeing some good success on that and it's a big focus for us and wait.
Michael Cotoia: Where we are with that I'm pleased the roadmap.
Michael Cotoia: Okay.
Speaker Change: Thanks I appreciate it.
Bhavin S. Shah: The next question is from the line of Bhavin Shah with Deutsche Bank.
Michael Cotoia: The next question is from the line of Bob <unk> with Deutsche Bank You May proceed.
Bhavin S. Shah: Great, thanks for taking my question. Just kind of on that last point in terms of progress improvements, just on intent nail and priority engine, when do we think about that kind of helping translate over to any kind of improvement in long-term revenue as that kind of continues to lag overall total revenue growth?
Speaker Change: Great. Thanks for taking my question just kind of on that last point in terms of product improvements just on the intent now and priority engine. Okay. When do we think about that kind of helping translate over to kind of improvement in the long term revenue is that kind of continues to lag overall core revenue growth.
Michael Cotoia: Yeah, that's a great question, Bhavin. So, the investments we're making now and again, intent mail being one of them, and I'll get into some of our roadmap around Priority Engine, which will help support the question you just asked. It's really important for us on two fronts. Getting our customers to continue to use and be engaged with the platform, as well as the integration story. And those are big investments that we've talked about, and we're making some really, when we look at it, some good progress against both of those areas. So on the intent mail, that's one version of our personal assist product family.
Speaker Change: Yes, that's a great question, Bob and so.
Bhavin S. Shah: The investments, we're making now and again being one of them and I'll get into some of our roadmap priority engine, which will help.
Speaker Change: The question was just asked.
Michael Cotoia: Yes, it's really important for us on two plants getting our customers.
Michael Cotoia: Continue to use.
Michael Cotoia: We engaged in the platform.
Michael Cotoia: As well as the integration stores.
Michael Cotoia: The big investments that we've talked about we're making some really.
Michael Cotoia: When we look at it some good progress against both of those areas.
Michael Cotoia: <unk>, that's one version about personal assist product or product family.
Michael Cotoia: There are other avenues that we're looking to do it in terms of, you know, expanding those features to work with, as I mentioned, multi-email sequences and integrations with sales engagement platforms. So things like SalesLoft and Outreach, and organizations like that that want to have access to CrossFit Global Intelligence as part of their SDR or BDR cadence of outreach to customers. So again, integrations.
Michael Cotoia: There's other avenues that we're looking to deal with in terms of.
Michael Cotoia: Expanding those features to work with as I mentioned, multi email sequences and integrations with sales engagement platform. So things like sales loss in outreach and organizations like that that want to have access to.
Michael Cotoia: <unk> global intelligence as part of the.
Michael Cotoia: SDR or PDR cadence of outreach to customers So again integrations.
Michael Cotoia: Personalized data, prospect-level data, creates stickiness, more engagement, and more use. On the integration strategy, explain what we're doing on that. And in terms of the Priority Engine Roadmap, we have a very large initiative that we're evolving the platform to incorporate other TechTarget offerings into a more common user experience. So that will be driven by a unified visualization of program impact, action intent-based insights to support program decision-making, and the ability to identify and take action on active buying.
Michael Cotoia: First of all I'd say, the prospect level data creates stickiness more engagement and more.
Michael Cotoia: Usage on the <unk> integration strategy I'd say, what we're doing on that end and in terms of the priority Andrew roadmap. We have a very large initiative that we're evolving the platform to incorporate other tech target offerings onto a more into a common user experience so that will be driven by unified visualization of.
Michael Cotoia: Program impact.
Michael Cotoia: And in turn based insights to support program decision, making and the ability to identify and take action with active buying teams. So if you look at this it's more about getting the end to end solution offerings with content demand brand all inside a unified platform. So customers can have access to the insights and visibility.
Michael Cotoia: So, if you look at this, it's more about getting the end-to-end solution offerings from content to demand, to brand, all inside a unified platform so customers can have access, insights, and visibility to updated visualizations of how their overall programs are doing versus being siloed into an intent offering only. So, those, you know, those are the investments that we're making. We're seeing good traction on that, and you'll be seeing some announcements at the end of the second half of 2024 about the roadmap and the overall priority engine platform and capability strategy.
Michael Cotoia: Billety update.
Michael Cotoia: Visualizations of how the overall programs are doing versus gains siloed into eight and 10 offering only so that those are the investments that we're making we're seeing good traction on that and you'll be seeing some announcements at the end of the second half of 2024 about the roadmap and the.
Michael Cotoia: The overall priority engine platform and capability strategy.
Michael Cotoia: And just one follow-up, a little bit more macro-related, but it looks like your top 10 largest kind of legacy customer base, their revenue grew in a quarter, which is great to see for the first time in a while, but the remainder continues to decline year over year. Anything to call out macro-wise, SMB, or...
Speaker Change: Got it that's helpful. There.
Speaker Change: One follow up.
Michael Cotoia: Is it more macro related but it looks like your top 10 largest kind of legacy customer base that their revenue grew in the quarter, which is great to see for the first time in a while but the remainder continues to decline year over year anything to call out macro wise SMB.
Michael Cotoia: Or a large enterprise that you can notice a difference.
Michael Cotoia: Yeah, you know what I'll say on the enterprise accounts. We've talked about over the last several quarters some of the key acquisitions and investments we made with Enterprise Strategy Group and BrightTalk and Extelligent to create this end-to-end go-to-market strategy and product offering to help our customers. So in terms of enterprise accounts... You know, we have more entry points now with our product portfolio position and our capability set to get in there from, you know, research, intelligence, and advisory, to creating strategic content, to putting the programs in place, and then, you know, activating against the right accounts.
Michael Cotoia: Yes.
Michael Cotoia: Our enterprise accounts, we talked about over the last several quarters some of the key acquisitions and investments we made with enterprise strategy group right, Todd and Astellas unit to create this end to end go to market strategy and product offerings to help our customers. So in terms of enterprise accounts.
Michael Cotoia: We have more entry points now with our product portfolio positioning of our capability set to hit any of them.
Michael Cotoia: Sorry, its intelligence and advisory to creating strategic content to put into programs.
Michael Cotoia: Activating against the.
Michael Cotoia: The right accounts and so we're actually seeing great momentum in terms of penetrating different budget stakeholders across the entire go to market strategy.
Michael Cotoia: And so we're actually seeing a great momentum in terms of penetrating different budget stakeholders across the entire go-to-market strategy. And that's, you know, and that makes a lot of sense in terms of, you know, the larger the account, the more pockets, and the more end-to-end that we can get involved in. In terms of the smaller accounts... I think this market is absolutely putting some headwinds against the smaller accounts. But again, I go back to our product offerings that we have today versus that we had two years ago, where we have different price points and different entry points to drive value for our customers.
Michael Cotoia: Yes.
Speaker Change: That makes a lot of sense in terms of the largely towards the more pockets and so more and that we can get involved in terms of the smaller accounts.
Michael Cotoia: This market is absolutely put some headwinds against the smaller accounts, but again I go back to our product offerings that we have today versus that we had two years ago, where we have different entry points and different entry points to drive value for our customers and what I mean by that if a customer on an SMB.
Michael Cotoia: And what I mean by that is, if a customer in an SMB or, you know, smaller account isn't ready to do intent or leverage a priority engine subscription, they might have a need for lower-end-of-the-funnel confirmed projects. They might need some help with their positioning, so we leverage the ESG capabilities with our BrightTalk studios and our content creation.
Michael Cotoia: And what I mean by that is, if a customer in an SMB or, you know, smaller account isn't ready to do...
Michael Cotoia: Smaller tower.
Michael Cotoia: Isn't ready to do in 10 or 11 to priority engine subscription.
Michael Cotoia: Might have a need for lower lower end of the final component projects, we might need some help with your positioning so we leverage the ESG capabilities without lifestyle studios and our content creation and might want to just demand over a quarter versus a year as they navigate through this environment. Yes. It's all of the 14 months since the collapse and Silicon Valley Bank.
Michael Cotoia: A lot of these smaller accounts are looking to rightsize your budget picture in managing expenses and we're looking for true value propositions.
Michael Cotoia: To meet there whether it's.
Michael Cotoia: Content, whether it's the <unk> brand.
Michael Cotoia: Brand positioning Dominion our intent so we feel we're in a pretty good position in terms of engaging and providing value for those SMB customers as well.
Bruce Goldfarb: Thanks so much and I appreciate taking my questions.
Speaker Change: Thanks, so much and I appreciate taking my questions.
Joshua Riley: The next question is from the line of Joshua Riley with Needham. You may proceed.
Michael Cotoia: The next question is from the line of Joshua Reilly with Needham You May proceed.
Joshua Riley: Yeah, thanks for taking my questions. So, as we're looking at the June quarter guidance here, I believe typically, and historically, you guys have talked about how some new product releases by your customers can drive the, you know, the typical seasonality with a sequential increase in revenues. Just wanted to understand, is that normal seasonality, is that what is driving the improved revenues, or is there some other factor at play there that we should be aware of?
Michael Cotoia: Okay.
Speaker Change: Hi, yes, thanks for taking my question.
Speaker Change: So as we're looking at the June quarter guidance here I believe typically historically you guys have talked about how.
Joshua Christopher Reilly: Some new product releases by your customers can drive them.
Joshua Riley: Typical seasonality with a sequential increase in revenues I just wanted to understand is that what the normal seasonality is that what is driving the improved revenues or.
Joshua Riley: Is there some other maybe factor at play there that we should be aware of.
Joshua Riley: Okay.
Michael Cotoia: I think it's a couple things, Josh. First of all, it's the breadth of the product offerings that we have that can really help when you work with customers who might not be ready to do annual or multi-year deals, but they still need to help support their sales targets, pipeline, and revenue forecast. And as we've said before, even in a down market, when that market recovers, there will be a flight back to quality, and that quality is going to be driven by first-party purchase intent data and permission-based audits.
Speaker Change: So I think it's a couple of things Josh I think it's.
Joshua Riley: First of all it's.
Joshua Riley: The breadth of the product offerings that we have that can really when you. When you work with customers who might not be ready to do annual or multi year deals, we still need to help support their sales targets pipeline revenue forecast.
Michael Cotoia: As we've said before even in the down market when that market recovers is going to be a flight deck for quality and quality is going to be driven by first party purchase intent data information based audiences.
Michael Cotoia: But our conversations with those customers that started in the middle of last year when we said we're starting to see some normalization or some, you know, things starting to stabilize are really understanding how we can serve their needs based on what our customers are really focused on today. That's paying off.
Michael Cotoia: But our conversations with those customers started in the middle of last year. When we said, we're starting to see some normalization of some up.
Michael Cotoia: So it's starting to stabilize is really understanding how we can serve their needs based on what our customers.
Michael Cotoia: Really focused on today, that's paying off right now so as we believe it was we came in at 2020 for the portfolio was well architected well position and enabled a light.
Michael Cotoia: So, as we came into 2024, the portfolio was well-architected, well-positioned, and able to, like... accommodate what our customers need again, whether it's around content strategy or brand to demand, to intent, to road map, bottom of the funnel, confirmed projects, and qualified sales opportunities. The quality of our data and the quality of our investments are paying off. Now, we just launched and announced, and we're running a mobile beta slash early adopter program around our account insights fee.
Michael Cotoia: Accommodate what our customers' needs again, leveraging our content strategy or plan to <unk>. So.
Michael Cotoia: So yes bottom of the funnel confirmed projects in qualified sales opportunities.
Michael Cotoia: How do you about data.
Michael Cotoia: And the quality of our investments are paying off now, we just launched and announced.
Michael Cotoia: And we're running multiple.
Michael Cotoia: Multiple data slash early adopter program around account insight suite.
Michael Cotoia: So it's a new priority engine offering that was announced. That really won't have any revenue impact in Q2, but it's a different use case from our prospect level priority engine offerings. This new offering is account insights only.
Michael Cotoia: A new priority engine offering that was announced that really won't have any revenue impact in Q2.
Michael Cotoia: It's a different use case from a prospect level priority engine offerings. This new offering is accounting sites, only where we use for our customers against their programmatic.
Michael Cotoia: It will be used by our customers against their programmatic ABM initiatives and propensity scoring. So again, I go back and say, first-party data is where the gold is. And not only at the prospect level but also at the top level.
Michael Cotoia: AVM initiatives propensity, scoring well again I'll go back and say first party data is where the gold is.
Michael Cotoia: Not only at the prospect level, but also at the top level.
Michael Cotoia: And we believe that with Google announcing that they are, the duplication of third-party cookies, and we're going to sunset that now in 2025. We're creating another revenue stream that's going to be very impactful for our customers with new buyers and new case studies that we weren't able to get into the mix before. So that's what we're focused on. But in terms of June revenue, I mean, we got into this, projected this.
Michael Cotoia: We believe with the future of Google announcing the deal.
Michael Cotoia: The type of cases third party cookies now looking at Sunset that now in 2025, we create another revenue stream that is going to be very important for our customers.
Michael Cotoia: <unk> and new case studies that we werent able to get into the mix before so that's what we're focused on but in terms of the June revenue I mean, we got into this project with this.
Michael Cotoia: 2 quarters ago. It said we expect Q1 to be down around 10%, and Q2 is going to be closing the gap. We're on track with what we've laid out, and we're pleased with the performance of the business.
Michael Cotoia: Two quarters ago, We said, we expect Q1 to be down about 10% to one T. J, let me close the gap.
Michael Cotoia: It's relatively up in Q4, we see an increase in revenue year over year. So we're on track what we've laid out.
Michael Cotoia: We're pleased with the performance of the business.
Joshua Riley: Got it, that's very helpful. And then how should we think about gross margin leverage moving into Q2? As we know, your margins are sensitive to the overall levels of revenue, but then you also have a lot of other investments you're making here. Are there any other considerations that we should be thinking about as we kind of model our Q2 gross margin and going forward?
Speaker Change: Got it that's very helpful and then.
Speaker Change: How should we think about the gross margin leverage moving into Q2 as we know your margins are sensitive to the overall levels of revenue. But then you also have a lot of other investments you're making here are there any other considerations that we should be thinking about as we kind of model. Our Q2 gross margin going forward. Thanks, guys.
Michael Cotoia: Yeah, thanks Josh. So again, we plan for the future. We plan to make the right investments to help the business scale and to drive the market. So, you know, some areas that we've done this year is we've currently implemented a workflow management solution, so it provides MN visibility from our, we'll call it, Contracts to execution, to close, to billing. And we feel that this is the right investment so we can streamline the visibility and the information across all of our product fulfillment sets, our sales, our sales operations teams, and our customer success.
Joshua Riley: Thanks, guys. Yeah, thanks, Josh. So, again, we plan for the...
Speaker Change: Yes, thanks, Josh So again, we planned for.
Joshua Riley: We plan to make the right investments to help the business scale and to enter.
Joshua Riley: To drive margin expansion.
Joshua Riley: Yes.
Joshua Riley: Some areas that we've done this year as well.
Joshua Riley: <unk> implemented a workflow management solution. So it provides and then visibility from a car.
Joshua Riley: From.
Joshua Riley: Contract to execution to close to billing.
Joshua Riley: And we feel that this is the right investment so we can streamline the visibility and the information across all of our.
Joshua Riley: Product fulfillment sets.
Joshua Riley: Our sales our sales operation team and our customer success teams. So we're in the middle of the implemented.
Michael Cotoia: So, we're in the middle of implementing a workflow solution on that. We've expanded the scope a little bit, but in the end, what that will do for us is provide better visibility and be able to create a more efficient cost to sales as we head into Q4 of 2024. So, we're in the middle of doing that right now. It's something that we knew we needed to get done. We made the right investments in that. So, you see a little bit of a cost on that, but in the end, that'll make a... Cost of Sales, and they are more efficient and continue to help expand markets.
Joshua Riley: Our workflow solution on that we expand the scope a little bit but at the end with that will do for us is to provide better visibility and be able to create a more efficient cost of sales as we head into Q4 of 2024. So we're in the middle of doing that right now it's something that we knew we needed to get done we made the right investments on that.
Michael Cotoia: So you're seeing a little bit of cost on that but yeah that'll make a.
Michael Cotoia: Cost of sales and a scale more efficient and continue to help expand margins.
Speaker Change: Got it thanks guys.
Bruce Goldfarb: The next question is from the line of Bruce Goldfarb with Lake Street Capital Markets. Please proceed.
Michael Cotoia: The next question is from the line of Bruce Goldfarb with Lake Street Capital markets. You May proceed.
Bruce Goldfarb: Thank you for taking my call and, Greg, Michael, and Dan, congratulations on the results. Just a question on long-term revenue: where do you expect long-term revenue as a percent of total revenue to be at the end of 2024?
Speaker Change: Thank you for taking my call.
Michael Cotoia: Greg Michael Dan Congrats on the results.
Bruce Goldfarb: Just a question on long term revenue, where do you expect long term revenue as a percent of total revenue to be at the end of 2024.
Michael Cotoia: Bruce, yeah, we expect that to be in the low to mid 30s. You know, when we talk about it. 24, you know, with the pullback and the continued macro environment.
Bruce Goldfarb: Yes, we expect that to be in the low to mid thirties.
Bruce Goldfarb: You know when we talk about.
Bruce Goldfarb: 24, with the pullback in the continue to macro environment.
Michael Cotoia: That's why, like, when you look at this combination that we're doing, we just feel like this is the absolute right time to be doing it. And when you take a look at what we evaluate when we either acquire or do, you know, evaluate the finances. We look at a few things. We look at audience, and we look at permission-based audience.
Speaker Change: That's why I like can we look at this.
Michael Cotoia: Combination that we're doing we just feel like this is the absolute right time to be doing this.
Michael Cotoia: When you take a look at what we evaluate when we either acquire or do.
Michael Cotoia: Evaluate the finance as we look at a few things.
Michael Cotoia: We will get audience and we look at permission based audiences. We look at first party insights and as we predicted.
Michael Cotoia: We look at first party insights. And as we predicted, you know, the last couple of years and going into 2025, first party, purchase, and tenant sites are going to be apprehended. We're going to get content and content capability, voted to drive more revenue on the long-term contracts and look for penetration into new tech-enabled vertical markets. So we take a look at the assets and the quality assets that we have, merging with Informatech's digital business, with industry guys, and around Ambia in the 70 special digital media brands in that line.
Michael Cotoia: Last couple of years and going into 2025 first party.
Michael Cotoia: Its intended sites are going to be a premium if you look at content and content capabilities with <unk>.
Michael Cotoia: Drive more revenue under long term contracts.
Michael Cotoia: Look for penetration into new Tech enabled vertical markets. So it will take a look at the assets and the quality assets we are <unk>.
Michael Cotoia: Emerging with was Informa Tech digital business.
Michael Cotoia: Around industry guys around here and.
Michael Cotoia: And the 70 special digital media brands in that line of business, which is around the intelligence research and advisory combined with our enterprise strategy group business. If you take a look at the <unk> business about 65% of their revenues under long term contracts.
Michael Cotoia: The Ambia business, which is around their intelligence research and advisory combined with their enterprise strategy group business, if you take a look at the Ambia business, about 65% of their revenue is in long-term contracts. So, really important now, the timing is right now, to get all these quality assets together, combined, integrated, and be ready for the recovery. So, yeah, we might be in the low to mid-30s this year, but our 3- to 5-year plan is to have revenue over 50% on the long-term revenue contract.
Michael Cotoia: Really important now the timing is right now to get all of these assets quality assets together combined integrated in and be ready for the recovery.
Michael Cotoia: So, yes, we might be in the low to mid thirties. This year, but up three to five year plan is that revenue over 50% on a long term revenue contracts.
Michael Cotoia: Yeah.
Bruce Goldfarb: Thank you. And then, in terms of the merger with Informatech, are you getting any inbound inquiries from Informatech customers regarding working with TechTarget?
Speaker Change: Thank you and then.
Michael Cotoia: In terms of the merger with <unk>.
Michael Cotoia: Informa Tech are you getting any inbound inquiries from Informa tech customers regarding working with.
Michael Cotoia: With the tech target.
Michael Cotoia: Now, we haven't really got any inbound information from our customers, inbound to us on this. I mean, we're... We're working right now, as we mentioned in the shareholder letter and, I think, Greg's introduction, we're really happy with the progress that we've made. We have really strong conviction about the timing of this. We're focused on our business as usual, but also making sure that we're ready for the combination. So, you know, which we are still scheduled to have complete in the second half of 2024. But we haven't heard directly from, you know, inform us, heck, customers reaching out to us.
Speaker Change: Now, we haven't really gotten any inbound walnut.
Bruce Goldfarb: Customers.
Speaker Change: Inbound to us on this.
Bruce Goldfarb: We're working right now as we mentioned in the shareholder letter I think flex introduction, we're really happy with the progress that we've made we have really strong conviction around on the timing of this.
Michael Cotoia: To start our business as usual, but also making sure that we're ready for the combination so.
Michael Cotoia: We are still scheduled to complete.
Michael Cotoia: Complete in second half of 2024, but.
Michael Cotoia: We haven't heard directly from Yale and fallout tech customers, reaching out to us.
Bruce Goldfarb: Thank you. And then I saw that you weren't active in buyback during the quarter. Are you likely to be quiet until after the Informatech transaction closes?
Speaker Change: Thank you and then and then it sounded like you weren't active on the buyback during the quarter are you likely.
Michael Cotoia: Quiet until after the Informa Tech transaction closes.
Michael Cotoia: Yeah, I think we're going to be fairly quiet. Yeah, we're going to be pretty quiet about that. I think that expires at the end of November 2024 anyway. Great. So it's coming.
Speaker Change: Yeah, I think that's really required.
Speaker Change: We're gonna be pretty quiet on that I think that expires at the end of 2000.
Bruce Goldfarb: November 2024 anyway.
Bruce Goldfarb: Great. So it's coming up anyway. Thank you. Thanks for taking my questions and congratulations on the results.
Speaker Change: Okay, great. So it's coming up anyway.
Speaker Change: Yeah. Thank you thanks for taking my questions and congrats on the results.
Speaker Change: Thank you.
Cameron: There are no additional questions waiting at this time. I would like to pass the conference back over to the management team for closing remarks.
Speaker Change: There are no additional questions waiting at this time I would like to pass the conference back over to the management team for closing remarks.
Bruce Goldfarb: Okay.
Cameron: If you don't have any questions, no calls, no remarks. We appreciate everybody joining us.
Speaker Change: No other questions.
Speaker Change: No closing remarks, we appreciate everybody joining in.
Speaker Change: Talk to you next quarter.
Speaker Change: Thank you everyone.
Cameron: That concludes the TechTarget Reports First Quarter 2024 conference call and webcast.
Speaker Change: That concludes the <unk> cargo reports first quarter 2024 conference call and webcast. Thank you for your participation and enjoy the rest of your day.