Robert Kellegrew – Vice President, General Counsel Greg Strakosch – Chairman, Chief Executive Officer and Co-Founder.

Brian Pitz – Jefferies LLC Louie Toma – Craig-Hallum Capital Group LLC Marco Rodriguez – Stonegate Securities, Inc. Kerry Rice – Needham & Company, LLC James Lee – Potrero Capital Research LLC.

Good day, and welcome to the TechTarget Second Quarter 2014 Earnings Conference Call and Webcast. All participants will be in listen-only mode. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference call over to Mr. Bob Kellegrew, General Counsel. Please go ahead..

Mike Cotoia, our Chief Operating Officer; Janice Kelliher, our Chief Financial Officer. And I'll now turn the call over to Greg..

Great. Thank you, Bob. The momentum in our business continues as evidenced by our healthy Q2 results and Q3 forecasts. Online revenue grew 16% in the quarter, over the same quarter in 2013. Our international business had another solid quarter with revenues increasing over 20%. IT Deal Alert revenue grew 20% sequentially to $4.1 million.

IT Deal Alert continues to make traction in all important areas of revenue growth, new customers, renewals and up-sells. Adjusted EBITDA was up 92% to $5.3 million. Adjusted EBITDA margin was 20% and our gross margin was 73%. The company generated $9.6 million of cash in the quarter bringing our cash balance to $42 million.

We also announced today that our Board of Directors has authorized a $20 million stock repurchase plan. I will now open up the call for questions..

We will now begin the question-and-answer session. (Operator Instructions) At this time we will pause momentarily to assemble our roster. The first question comes from the line Brian Pitz of Jefferies. Please go ahead..

Thank you. Hey, guys, great quarter. Greg, a couple of questions on Account Watch, maybe, you can help us with.

Number one, can you give us a little color on the progress you're seeing with the roll-out so far? Also, we're curious about how the initial feedback from customers is basically looking? And we're basically running, if we're seeing customers starting to test out multiple categories, and then finally, I know it's early but looking at the customer base, how many of your customers are using both QSO and Account Watch? Is there much of an overlap there? Thanks so much..

Yes, it's Greg. Thanks, Brian. So the plan is that, customer should use both Account Watch and Qualified Sales Opportunities, because they have – they offer different solutions and different benefits. In service account like it's very early. We just announced it in March. And then what we're seeing is just kind of a normal 90-day sale cycle.

A little bit elongated because we are integrating it with salesforce.com, which means we've that conversations with sales operation people or IT people. So we've been installing Account Watch at some of our customers. Early results had been positive. The pipeline is building nicely.

And we're – we never thought that Account Watch would be a significant revenue contributor in 2014, because we knew there is going to be a ramp up but we still think that it can be a good contributor for us in 2015. So I guess the summary is still very early days, but so far, so good..

Great, and just maybe one additional one on international. We're hoping to get a sense for the progress you're making with the international of IT Deal Alert..

We had – so Q1 with the first quarter where we were out of beta, with production, we had a very good Q1. And Q2 growth was very healthy, good sequential growth in Q2 versus Q1 faster than the overall growth rate for IT Deal Alert. We expect that to continue in Q3, because again it's – it will only be its third quarter.

But we're also grown us some new geography for IT Deal Alert internationally. So continental Europe will have Qualified Sales Opportunities in Q3 and we're also rolling out IT Deal Alert to Asia-Pacific region which is completely new for us.

So, we expect both of those things to contribute to additional growth from just the normal bringing on new accounts, but those new territories should help us, again, in 2014 and especially 2015..

Great. Thanks for the color..

You're welcome..

The next question comes from Louie Toma of Craig-Hallum Capital Group. Please go ahead..

Hi, nice quarter, guys. Just had a couple of questions.

Could you tell us what the average deal size is for IT Deal Alert this quarter and where you expect that to be trending over time?.

It's in that same neighborhood of $25,000 to $30,000, because we – we're still early days. We expect – we're doing very well with renewals and up-sells. And as we stated in the letter the ups – the revenue renewal rate is in excess of 200%.

So overtime, as the customer base matures, we expect the average deal size to increase on a regular basis because what we're – because customers are adding additional segments..

Perfect, thank you. And in regards to the domestic online revenue it looks like it decelerated a little bit from last quarter.

Could you give us a little bit insight in what you're seeing from your customers in terms of spending, immediate spending, and maybe, why it was down a little bit this quarter relative?.

Yes, I mean, I think that the – we've seen our North American region in branding revenues have stabilized. So it was down a little bit in Q2 but I think that was more of a comparable issue. But over the past four quarters we've been in a fairly tight range for North American online. So we believe that we're – that business is stabilized.

The comparison in Q3 is kind of in line with where we think it's going to, where it will – in the neighborhood of where it will come in so that should be roughly flat in Q3. So we think that – like I said, I think that business is stabilized and any declines, and the decline is pretty slight.

Any decline is behind us and then the other thing about the North America, if you combine the North America and traditional business with the IT Deal Alert business, online has very healthy growth..

Right, right, right, absolutely.

Can you give us a sense for the percentage of IT Deal Alert revenues that is based on annual subscriptions than what you expect…?.

Yes, I mean, at this point that's a small number. So the process that we go through with our customers is, we have this – in the neighborhood of a 90-day sale cycle.

Then we – customers will typically test one segment and then for their next order they might do two or three segments and then the next order might be – the number of segments that they're actually getting that they might actually do and if they'll run that.

So it's kind of at least a year process where our customers are figuring out, what their monthly appetite is for a number of opportunities. And once we – once our customers have kind of figured that out, then they're – it's an opportunity for us to convert it to an annual subscription.

And so we have – we have several annual subscription deals but most of our customers aren't far enough in that process to figure out exactly where they are. Now on the other hand all the Account Watch deals that we're signing are annual subscription deals.

So we believe that, that number, the annual subscription deals we expect to continue to grow each quarter as we go forward and we're looking forward to building up those annual bookings and I think in 2015 and 2016 those – the annual subscription revenues will be significant..

Great. That's all I had. Thank you very much..

You're welcome..

The next question comes from Marco Rodriguez of Stonegate Securities. Please go ahead..

Good afternoon, guys. Thanks for taking my questions.

Just a couple of quick follow-ups, in regard to IT Deal Alerts and the launch in the international markets, can you kind of give a little bit of color and then kind of maybe a comparing contrast of what you're seeing thus far from your international customers in terms of the reception and their thoughts around the products versus the U.S. customers..

Yes, I mean, one of the things that's different is the number of segments that we can do. So obviously the U.S. market is the largest with Qualified Sales Opportunities. We have about 60 segments. In Europe, we have about 25 segments. And in Asia-Pacific our initial launch will be less than that.

So it's – because the markets are smaller, so what we're doing is we're combining some categories. So, that's one thing that's different in terms of the size of the deals, they're a little bit smaller if you would expect, but in terms of customer experience. It's very similar to the U.S. The customers like them very much, the data is very accurate.

And they've given them good information. Their sales team is using to build their sales pipeline..

Got it and do you have any update on the annual guidance you provided in Q2..

Yes, with the – that guidance still holds so we're looking for low- to mid-teens revenue growth for the year, 80% plus EBITDA growth for the year. IT Deal Alert revenues will quadruple from 2013 and international revenues will grow at least 20% in 2014 versus 2013..

Great, thanks a lot, guys..

You're welcome..

The next question comes from Kerry Rice of Needham. Please go ahead..

Thank you. I'm sorry, if some of these questions have been asked. But did you give any sense of what the percentage of revenue from IT Deal Alert came from QSO versus Account Watch..

We didn't disclose that specifically. But the vast majority of it is still Qualified Sales Opportunities. We just announced Account Watch in March. We're seeing at least the 90-day sales cycle. So we have several deals that we sold and is installed, but the majority of the revenue at this point is Qualified Sales Opportunities..

Okay. And then the timing you mentioned in the press release that the events that generally takes place in Q3 is – fall into Q4.

Should we kind of expect that similar event to happen in 2015 than in Q4, or stay in Q3, or how should we think about next year…?.

We haven't calendared the 2015 event schedule but we will do a better job of calendaring that out, so that when you're modeling event for timing for quarter you'll know where those where the revenue falls.

And this is just – really just – this really change when it goes through a week but it was just the first – end of September versus the beginning of October..

Okay.

And if I think about the growth in international revenue was about – I think about 23%, how do I think about, I know that you rolled out IT Deal Alert early in the quarter internationally in the UK, how much of a driver of the IT Deal Alert was in that international growth number?.

We have good growth with IT Deal Alert in the quarter internationally, but we also had good growth – good solid double-digit growth excluding IT Deal Alert. So, international in Europe and Asia-Pac continues to perform very well. We're benefiting from the tailwinds that exist there with the shift from offline to online being behind the U.S.

And just its early days there, most of our sales team has been on the ground for a short period of time, and everyday we're making further penetration into our customer accounts there..

Okay. Thank you very much..

You're welcome..

The next question comes from James Lee of Potrero Capital. Please go ahead..

Thanks. Just to clarify on your IT Deal Alert, the $4.8 million, is that U.S.

only, or do you include international in that?.

So it’s $4.1 million in the quarter and that includes U.S.

and international?.

Okay.

And respect to cash flow, you had a very strong cash flow quarter, what drove that and were there any one-time item in there and how sustainable is that kind of run rate?.

Yes. So, we're always looking at ways to improve our DSO and increase cash collection. The was a few one-time things just in terms of timing did happen that quarter to make it as high as it was, one thing is we had a few large bills that paid in the first week of April that we thought we're going to pay at the end of March.

But that – I mean that rate is not sustainable, because we collected more cash than we had revenue in the quarter..

:.

Okay.

And with regard to buyback, do you expect it to be active in the market immediately after this starting tomorrow, or do you think you have it sort of waiting for to get even more attractive level?.

That – we're in a closed periods of the end of the week, but that's – we will be constantly evaluating that and figuring out what makes the most sense. But I think that the current stock price you think is very attractively priced, I will say that..

All right. Thank you..

You're welcome..

Showing no further questions. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..