Q2 2024 TechTarget Inc Earnings Call - Q&A

The leading comprehensive solution and a growing that's fragmented market and drives continued performance and value for our shareholders, customers, partners and employees. I will now open the call to questions.

Operator: to continue performance and value for our shareholders, customers, partners, and employees. I will now open the call for questions.

Operator: We will now begin our question and answer session. At this time, if you would like to ask a question, please press the 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, it is star one. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking a question. We'll pause briefly here as questions are registered. Our first question comes from Justin Patterson with the company KeyBank. Justin, your line is now open.

Speaker Change: We'll now begin our question and answer session at this time. If you would like to ask a question, please press star, follow by one on your telephone keypad. If for any reason you would like to remove that question, please press star, follow by two.

Again, to ask a question, it is star one. As a reminder, if you're using this speaker phone, please remember to put up your hand set before asking a question. We'll pause briefly here as questions or registered.

Speaker Change: Our first question comes from Justin Patterson with the company KeyBank. Justin, your line is now open.

Justin Patterson: Great, thank you very much. Good afternoon. Could you talk first, just on the macro side, some of the trends you're starting to see in Q3? How's the environment changed versus what you saw over the course of Q2? And then secondarily, could you also elaborate more on the opportunity around TechTarget Market Monitor and how you're going to market there? Thank you.

Justin Patterson: and correct. Thank you very much. Good afternoon. Could you talk first on the macroside? Some of the trends are starting to see in Q3. How's the environment change versus what you saw with the course of Q2?

Speaker Change: And then secondarily, could you also elaborate more on the opportunity around TechTarget Market Monitor and how you're going to market there? Thank you.

Mike: Great, Justin, this is Mike. In terms of the macro trends, Q3 versus Q2, I'd say it's very similar in terms of what we've experienced really over the last few years. We've done a really good job in terms of our product development, our product portfolio, how we engage with accounts, product offerings, and a value proposition that can really benefit our customers across their entire go-to-market strategy, from their strategy to content creation and positioning, to brand and content, all the way to demand and intent.

Great, Justin, this is Mike. In terms of the macro trends Q3 versus Q2, I'd say it's very similar in terms of what we've experienced really over the last

Speaker Change: Oh, of course.

Contended interest rates being high in inflation, as Greg mentioned in the shareholder letter, international tensions, and then we have an upcoming presidential election.

Speaker Change: None of these are catalysts to really explode and help out the market. In terms of how we're navigating through this, I think we've done a really good job in terms of our product development, our product portfolio.

Speaker Change: how we engage with accounts, product offerings, and a value proposition that can really...

Speaker Change: benefits our customers across the entire go-to-market strategy.

Speaker Change: from their strategy to content creation and positioning to brand and content, all the way to demand and attack.

Mike: We have a lot of different avenues to walk into a customer, even during downtime. So, when a customer might not be ready to do X, Y, Z, there's an opportunity to drive value through other areas of the business. So, I think it's pretty consistent from Q2 to Q3.

Speaker Change: We have a lot of different avenues to walk into a customer, even during a downtime. So when a customer might not be ready to do X, Y, Z, there's an opportunity to drive value through other areas of the business.

Mike: In terms of Market Monitor, that was one of our priority engine releases that helps our clients really understand the real-time dynamics in the markets that they serve, in the markets that they go after. So, that will include the types of accounts and buying teams that are currently actively researching their respective topics and technologies. We can then provide them with the topics that are generating the most interest within those segments. Christom Patterson, Martin Insight. We can also show top performing content and how that resonates. So, as you can see, that really helps our customers mobilize and focus on the top accounts, top prospects, and top customers with the market insights that TechTarget can deliver with their go-to-market strategy.

Speaker Change: So I think it's pretty consistent from Q2 to Q3. And in terms of Market Monitor, that was one of our priority engine, you know, releases that helps our clients really understand the real-time dynamics in the markets that they serve, in the markets that they go after.

Speaker Change: So that will include the types of occult and buying teams at a college as we research in, you know, the respective topics and technologies.

Speaker Change: We can then provide to them the topics that are generating the most interest within those segments, provides competitive and market insights.

Speaker Change: We can show top-performing content and how that resonates. So as you can see, that really helps our customers mobilize and focus on the top accounts, top prospects, top customers with the market insights that TechTarget can deliver with their go-to-market strategy.

Speaker Change: Great, thank you.

Operator: Our next question comes from Joshua Reilly with the company Needham. Joshua, your line is now open.

Speaker Change: [inaudible]

Joshua Reilly: Great, thanks for taking my questions and, once again, nice job in a pretty challenging macro environment. So, if you look at the layoffs that, you know, you've seen across a lot of your customers, a lot of your kind of champions within these customers have been displaced over the last 18 months. Are you seeing any stability in their ability to land positions at new potential customers and bring you guys back into their go-to-market process, or is there still too much fragmentation and uncertainty with some of these employees getting new positions?

Speaker Change: Great, thanks for taking my questions and once again, nice job in a pretty challenging macro environment.

Speaker Change: So if you look at the layoffs that, you know, you've seen across a lot of your customers, a lot of your kind of champions.

Speaker Change: within these customers have been displaced over the last 18 months.

Speaker Change: Are you seeing any stability in their ability to land positions at new potential customers and bring you guys back into their go-to-market process, or is there still too much fragmentation and uncertainty with some of these employees getting new positions?

Mike: Yeah, Josh, when we see customers that have, you know, been impacted by layoffs and so far today, we've seen them land in other positions, and typically when that happens, that's a good thing for TechTarget, they bring us in, they understand our value proposition, and I don't want to say we're the first company they call, but I'm going to guess we're on top of the dial when they make that phone call, so right now, we've seen them get impacted, we've seen them land in new positions, and we've seen them call us and bring us in, so that really hasn't changed over the last few quarters.

Speaker Change: Yeah, Josh, when we see customers that have, you know...

Speaker Change: It impacted by layoffs and so far today we've seen them land in other positions and typically when that happens That's a that's a good thing for TechTarget. They bring us in they understand our value proposition

Speaker Change: And I don't want to say we're the first company they call, but I'm going to guess we're on top of the dial when they make that phone call. So, right now, we've seen them get impacted, we've seen them land in new positions, and we've seen them call us and bring us in. So, that really hasn't changed over the last few quarters.

Joshua Reilly: Got it. And then, um... You know, as I know you're going to be describing this more at September Analyst Day, but as you've had some more time to review the assets of Informatech, maybe just a couple things, any updated thoughts around the timeline to close the transaction? And then, secondarily, any updated thoughts or confidence around the synergies and combined growth trajectory when the deal closes? Thanks, guys. Yeah, no problem. Well, I'll tell you in the combination, we continue to miss you.

Speaker Change: Got it. And then.

Speaker Change: You know, I know you're going to be describing this more at the September Analyst Day, but

Speaker Change: As you've had some more time to review the assets of Informatech, maybe just a couple things, any updated thoughts around the timeline to close the transaction, and then secondarily, any updated thoughts or confidence around the synergies and combined growth trajectory when the deal closes. Thanks, guys.

Speaker Change: Yeah, no problem. Yeah, what I'd say in the combination, we continue to make good progress in the combination. We did file the S-4 back in, at the end of June timeframe. We're on track. We've scheduled an investor.

Speaker Change: We've got to understand the assets of employment tax, I don't know the assets of the people the business, how they work, you know, and I will propose to offer you a lot of going forward. We've got a lot of a lot of diligence on that on both sides.

Speaker Change: We've expanded and laid out a proposed operating model, we've looked at the executive team, what we call Executive Minus One, Executive Minus Two. So we've made all the right moves to make sure that we're ready for the close, which we expect to be on time.

Speaker Change: In terms of the synergies, what we stated, we still feel very confident on the numbers that we stated. We was 25 million expanse of 20 million revenue over the course of this couple of years, postscores, and we still feel very confident on those numbers.

Speaker Change: Great, thank you guys.

Operator: Our next question comes from Bruce Goldfarb with the company Lake Street Capital Markets. Bruce, your line is now open.

Speaker Change: Our next question comes from Bruce Goldfarb with the company Lake Street Capital Markets. Bruce, your line is now open.

Bruce Goldfarb: Thank you. Greg, Michael... Congratulations on your results. Thanks for taking my questions. Can you comment on demand trends? What do you see in international versus North America?

Bruce Goldfarb: Thank you. Greg, Michael, congratulations on your results.

Bruce Goldfarb: Thanks for taking my questions. Can you comment on demand trends? What do you see in international versus North America?

Mike: I think you see a little bit of that. We've been pretty consistent, Bruce, in terms of, if you go back to last August... A year ago today, when we had our earnings call, we said, then we figured out where I'm going to be navigating the bottom right now. We took the bottom, and we're going to be navigating for that.

Speaker Change: Yeah, I think you see a little bit of a...

Speaker Change: We've been pretty consistent, Bruce, in terms of, if you go back to last August ...

Speaker Change: year ago today when we had our earnings call we said we feel that we're going to be navigating the bottom right now we hit the bottom we're going to be navigating to that and I think that's pretty consistent across the board what you see in the US

Speaker Change: You also see it internationally. You might see some areas in some regions in internationally that might be pinched a little tougher because some companies are one of the logical organizations trying to centralize their budget.

Speaker Change: where they might want to manage everything out of North America and then allocate it to the respective fields, but other accesses to it in a centralized manner.

Bruce Goldfarb: So, I think what we see here in the United States, we see across the many as well as they back, again, there are, you know, tell me eight gap regions within the eight gap, and you see some of the consolidation and centralization of projects coming back to the global headquarters, bottom of those companies are based in the U.S., but it's fairly consistent across the board.

Bruce Goldfarb: Great, thank you. And then, in terms of seasonal trends, are you seeing any signs of a Q4 budget flush? And the second half of the year, are you seeing any, you know, is there a probability we'll see more long-term contracts?

Speaker Change: Great, thank you. And then, are you seeing, in terms of seasonal trends, are you seeing any signs of a Q4 budget flush?

Speaker Change: and the second half of the year, are you seeing any, you know, is there a probability we'll see more long-term contracts?

Mike: Yeah, what I can tell you is that when we look at the business, when we see signs of seasonality trends, to us, it's a positive sign. So from Q1 to Q2, our revenue grew sequentially 14%. We had a year-over-year increase of 1% in revenue, but that Q1 to Q2 was, again, something that we had predicted back in February and May when we laid out the budget. That's a good sign.

Speaker Change: You know, I can tell you that it was basically, you know, when we look at the business.

Speaker Change: When we see signs of seasonality trends, to us, it's a positive sign. So from Q1 to Q2, our revenue grew sequentially 14%.

Speaker Change: We've got a year-over-year increase of 1% of revenue, but that's Q1 to Q2.

Speaker Change: was, again, something that we had predicted back in February and then when we made our land out the budget, that's a good sign. And that, you know, historically we see Q1 being the lowest court of Q2 out of the job Q3, off slightly from Q2 and then the ramp up in Q4.

Mike: And that, you know, historically, we see Q1 being the lowest quarter, Q2 having a jump, Q3 off slightly from Q2, and then the ramp-up in Q4. So based on what we've seen so far, we like the signs in terms of the seasonality, and historical trend lines that are coming back into business. As you recall, we didn't see that last year. It was pretty flat, you know, throughout the quarters, roughly $57 to $58 million every quarter.

Speaker Change: So, based on what we've seen so far...

Speaker Change: and...

Speaker Change: We'd like the signs in terms of the seasonality, historical timelines that are coming back to the business, as you recall, we didn't see that last year. It was pretty flat, you don't know the corners, roughly 57 to get $9 every quarter.

Mike: So those are good signs. I don't want to predict what we'll see in Q4. Again, we have high interest rates, inflation, international tensions in the upcoming presidential election, but, you know, typically, we have seen when interest rates get caught.

Speaker Change: Those are good sides, I don't want to predict what this makes you full of, again, we have high interest rates in place in international taxes and upcoming prisons, but, you know, typically we have seen a way in such rates get caught.

Mike: Investors really reward our technology customers around growth, and you see technology companies investing more in sales and marketing. What we're seeing today, what we've seen in the last year and a half, there's been a lot of investments in our companies for R&D, and that R&D has to turn into ROI. And so, you know, one of the triggers that we see, or one of the catalysts, which has historically been seen, is cotton interest.

Speaker Change: and that's a really good reward, you know, our technology customers.

Speaker Change: and you see technology companies and that's one of the sales and marketing. What we're seeing today, what we've seen the last year and a half, there are a lot of investments from our companies.

Mike: on R&D. And that R&D has to turn into ROI. And so, you know, one of the triggers that we see, or one of the catalysts, which is historically seen, is a cotton interest rate.

Mike: Great. And then, in terms of the product roadmap, where do you expect to invest post-COVID? and Informatech. I'll tell you what we're investing in now for TechTarget because it shouldn't really change and deviate much. As you saw in Q2, we announced our account in 10 feeds. So again, it's a priority engine-based offering that delivers a continuous stream of our first party account insights into CRM and ABM systems. So this is a separately purchased subscription that plugs into our clients' current workflows.

Speaker Change: Great, and in terms of product roadmap, where do you expect it to invest post, you know, the informant and form a tech combination?

Mike: And clients can identify, engage, and convert target accounts through programmatic and social advertising. They do a lot of account prioritization, ABM segmentation, and creation, and it's really valuable insights for sellers. We also announced a partnership with Sixth Sense, an AI platform for our joint customers. So Sixth Sense and TechTarget have a lot of joint customers. They link our account insight fees through a direct integration right into Sixth Sense's Revenue AI platform to easily leverage our first-party insights.

Charlie: Africa. Well, I'll tell you a little bit about the fact that Charlie, because it should really change in these eight months. They should start on Q2 and announce our account in 20 years. So, that's again, to try our engine base for offering that as a continuous stream of our first party.

Mike: And it actually drives value for both. So, you can expect to see more integrations around ABM platforms and other types of platforms that organizations have. Previous Justin brought up Market Monitor and what we're seeing on that, any insights? Again, these are all offshoots of Priority Engine.

Speaker Change: A part insights into CRM and ABM system.

Mike: So this is a separately purchased subscription that plugs into our client's current workflows. And clients can identify, they can engage, and convert target accounts through programmatic and social advertising. They do a lot of account prioritization, APM segmentation and creation, and it's really valuable insights for sellers.

Mike: We also announced the partnership with six cents revenue AI platform for our joint customers. The success and technology of a lot of joint customers, it wins our accounting site fees.

Mike: and doing direct integration, writing the successes revenue AI platform to easily leverage our first product insights. We're actually drives values for both offerings.

Speaker Change: So he's going to expect to see more integrations about AVM platforms and other types of com.

Prattons with their organizations have.

Mike: Previous, Justin brought up Market Monitor and what we're seeing on that, have any insights. Again, so this is all...

Mike: And ultimately, the roadmap is to consolidate all the options into a platform to create a unified solution for clients to manage. So as we've talked about, we really can help out, and we bring value to our customers across their entire go-to-market strategy. From intelligence and advisory with their strategy and their product marketing, positioning, all the way to brand and content, to intent and demand that converts and drives that revenue and that demand for the R&D investments that our customers make.

Mike: and the world map is to consolidate all the offerings and to a platform to create unified solution for clients to manage. As we talked about...

Mike: We really can help out and we bring value to our customers across the entire go-to-market strategy.

Mike: from in Thompson, advised you with their strategy and a product marketing position in all the way to grants and content.

Mike: to intent and demand that converts and drives that revenue and that demand for the R&D investments that our customers made. That's going to be very consistent, plan and continue to accelerate those opportunities, and making sure we have a unified platform to bring all of our solutions together for our customers to leverage across their go-to-market.

Mike: That's gonna be very consistent, plan, and continue to accelerate those opportunities and make sure we have a unified platform to bring all of our solutions together for our customers to leverage across their go-to-market. Thank you very much. Congratulations again.

Mike: Alright, thank you very much. Thanks. Congrats again.

Operator: Our next question comes from Bhavin Shah with the company Dorshabank. Bhavin, your line is now open.

Speaker Change: I next question comes from Bevin Show with a company door shabank. Bevin, your line is not open.

Bhavin Shah: Great, thanks for taking my questions. The first one, just kind of in the past, you guys talked about the opportunity to benefit from the deprecation of third-party cookies. Now that kind of seems like it's no longer happening from the Google side. Do you have to kind of adjust your go-to-market messaging or anything kind of as you go forward? Yeah.

Bhavin Shah: Great, thanks for taking my questions. The first one, just kind of in the past you guys talked about the opportunity to benefit from the deprecation of third party cookies. Now that kind of seems like it's no longer happening from the Google side. Do you have to kind of adjust your go-to-market messaging or anything kind of as you go forward?

Mike: Yeah, you know, Bhavin, good question. First of all, marketers have been educated over the last couple of years, several years, regarding the value of first party versus third party. So if anything, you know, Roulos sort of caught between a rock and a hard place in terms of what they have to do, and would they've been doing a regular way across the EU, across the United States, but across for the last two years, you know, the conversation with Martinuz is really clear that the first part of the entire commission-based studies is really the quality and ability to soar to drive, you know, impact.

Mike: Yeah, you know, Bhavin, good question. First of all, marketers have been educated over the last couple of years, several years, regarding the value of first party versus third party. So if anything, you know,

Mike: Google's sort of coffee between a rock and a hard place in terms of what they have to do and what they've been doing with regulators across the EU across the United States.

Mike: But over the last two years...

Mike: You know, the conversation with Martin is really clear that, first part of your insights on permission-based studies are really the quality in the bill too.

Mike: so as to drive, you know, impact.

Mike: So, what I've read and what we've learned from Google is that they're going to sort of come in this in-between, where they're going to have to be very transparent on the options of whether you want to...

Mike: and I don't know what you, but I'm going to bet with a lot of those folks that have that option presented right in front of them while they're doing the research. We're going to click now on that.

Mike: So, things may change a little bit, but I think we've actually benefited from the last couple of years of education, what's going on in the market, and the value of first-party data and permission-based audiences.

Bhavin Shah: Super helpful, and just a quick follow-up. I know that from the show, the letter that you guys did discuss, kind of what 2024 guidance should be, that should be sort of, kind of, rely upon that, or is that no longer valid?

Speaker Change: That's super helpful. And just a quick follow-up, I noticed in the shareholder letter that you guys didn't discuss 2024 guidance. Should we still kind of rely upon that, or is that no longer valid?

Speaker Change: Yeah, well, we are very confident.

Speaker Change: that we're going to be closing the transaction with the film attack.

Speaker Change: Hello, it's you for what?

Bhavin Shah: BF4.

Speaker Change: It's really not going to be an actual number that...

Bhavin Shah: Perfect, thanks for taking my question.

Speaker Change: Thank you very much.

Operator: At this time, there are no other questions registered in queue. Thank you for your participation, and enjoy the rest of your day.

Speaker Change: Thank you.

Operator: At the time there are all the questions registered in Q.

Operator: Thank you for your participation and enjoy the rest of your day.

Speaker Change: Episode 2

Speaker Change: www.globalonenessproject.org www.globalonenessproject.org

Mike: Well, we are very confident that we're going to be closing the transaction with the film and the chat. It's really true about it.

Mike: Yeah, we're the problem. What I'm saying in the combination, we continue to make good progress in the combination. We did think that we had the school up back at the end of June timeframe.

Mike: It's really not going to be an actual number that is going to be, you know, going forward. To go forward, folks, this is going to be about the combined confidence coming together in two four. Moving forward, Charles. You know, we just thought we didn't want to cross confuse the market on that. We want to make sure that that was communicating focused on our two three numbers today.

Mike: And I think that's pretty consistent across the board. What you see in the U.S., you also see internationally; you might see some areas in some regions internationally that might be pinched a little tougher because some companies, a lot of the logical organizations are trying to centralize their budget, but they might want to manage it in North America and then allocate it to the respective fields, but other accesses to it, in a centralized manner.

Mike: We're on track. We scheduled an investor for the morning of September 19th. And yeah, we've got to understand the assets of employment tax. I don't know the assets of the people running the business.

Mike: How they will work in our proposed operating model going forward. We've got a lot of diligence on that on both sides. So we expanded and laid out our proposed operating model. We've looked at the executive team, what we call executive minus one executive minus two.

Mike: So, when I run and look at what we want, we'll see that they're going to sort of come in this immediate way where they're going to have to be very transparent on the options of whether you want to have your cookie trapped and not tracked. And I don't know what you, but I'm going to bet with a lot of those folks that have that option presented right in front of them while they're doing the research, we' So things may change a little bit, but I think we've actually benefited from the last couple of years of education on what's going on in the market, and the value of the first part of the data and permission based on.

Mike: So I think what we see here in the United States is what we see across many as well as in A back. Again, there are, you know, Tony A back regions within A back. You see some of the consolidation and centralization of budgets coming back to the global headquarters. A lot of those companies are based in the U.S., but it's fairly consistent across the board.

Mike: And we mean all the right moves to make sure that we're ready for the clause, which we expect to be on time. In terms of the synergies, what we stated, we still feel very confident on the numbers that we stated. We were taught by many expanses of employment and revenue over the course of this couple years. Posts closed, and we still feel very confident on those numbers.