Gregory Strakosch - Co-Founder and CEO Kevin Beam - President Mike Cotoia - COO Janice Kelliher - CFO Jane Freedman - VP and General Counsel.

Kerry Rice - Needham & Company Brian Pitz - Jefferies LLC Eric Martinuzzi - Lake Street Capital Markets LLC Mike Malouf - Craig-Hallum Capital Group LLC Marco Rodriguez - Stonegate Securities, Inc. Kyle Evans - Stephens Inc..

Good day and welcome to the TechTarget Full-Year and Fourth Quarter 2014 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded.

I’d now like to turn the conference over to Jane Freedman, Vice President, General Counsel. Please go ahead..

Kevin Beam, our President; Mike Cotoia, our Chief Operating Officer; and Janice Kelliher, our Chief Financial Officer. With that, I'll turn the call over to Greg..

Thanks. Thank you, Jane. We are very pleased with our Q4 and 2014 results. We finished the year very strongly which gives us good momentum for 2015. We are very optimistic about the two new IT Deal Alert products that we recently launched. Deal Data for Data Scientists and Priority Engine for Marketing and Inside sales.

This joins our existing IT Deal Alert product qualified sales opportunities for field and channel sales. In regards to our international revenues in 2015, we believe that they can grow -- we can grow them in the neighborhood of 20% again.

We are confident that core North American revenues will return to growth in 2015 and we believe that we will grow IT Deal Alert revenues at least 50%.Our full-year guidance for 2015 is for revenues to be between $120 million and $124 million and adjusted EBITDA to be between $28 million and $30 million. I’ll now open the call for questions..

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Kerry Rice of Needham. Please go ahead..

Thanks a lot. So Greg, there was some seasonality, maybe some unexpected seasonality on IT Deal Alert growth.

Can you talk -- maybe add some context around that and if there was anything else there, was Europe weaker than you expected or any other maybe things to cause that to slow down? And then the second question is international is a little bit stronger than we expected and was there -- where would you highlight the pockets of strength if not more broadly for the international business?.

Yes, so in terms of the seasonality on IT Deal Alert, for the year and for the second half, the revenue came out where we thought it would, just kind of the revenue numbers for Q3 and Q4 were inverted.

And basically what happened at the end of Q3, in September, we had some large customers that wanted accelerated delivery of qualified sales opportunities. So it took some Q4 -- so revenue that we thought was within Q4 and pushed it into Q3.

And then when we got to the end of the year, that pattern didn’t repeat itself and customers weren’t asking for accelerated deliveries at the end of the year because of the holidays and sales team were focused on closing existing business. So I think it was just – it was only a few hundred thousand dollars and it was just a slight timing difference.

Now in terms of international, I’d say we saw strength across the board. We saw strength in all regions, very strong in Europe, very strong in Asia, and we saw good strength with all product lines. I wouldn’t say that there was one specific thing internationally that stands out. It was just very strong across the board..

Thank you..

The next question comes from Brian Pitz of Jefferies. Please go ahead..

Thanks. Greg, couple more questions on IT Deal Alert.

As you continue to rollout IT Deal Alert to more customers, just curious what type of pricing power you actually see or perhaps since you might be willing to lower the price in order to drive sales, basically what are clients saying regarding price when you speak to them? And just separately, wondering if you could give us a sense for the IT spending outlook based on discussions with clients into 2015 and beyond? Are you seeing any major changes? Thanks..

Sure. So let’s talk about the macro environment IT spending, our budget and our guidance is assuming that the IT environment in 2015 is similar to 2014. So if there is an increase on IT spending that could be upside to that to those numbers and of course there would be risk if we saw a decrease.

It’s also what our customers are saying I think customers are feeling that CapEx spending should improve in 2015. I think they’ve -- there has been some false starts the past couple of years. I think people are kind of in a wait and see mode. But I’d say, I think that the environment people are hopeful that it’s going to be better this year.

In terms of pricing on IT Deal Alert, pricing has been very stable; we’re very disciplined on our pricing. And so, I think in the long-term we could have some pricing power.

There is certainly some evidence of that when we have some customers that want to put a filter on qualified sales opportunities, for example, they say, hey we only want to sell the companies with more than 5,000 employees or less than a 1,000 employees when they put that type of filter and it’s usually a 50% up charge that we have been successful in getting.

So the strategy now is it’s the product is still so new is to keep the pricing where it is and get as many people using as possible, obviously part of the strategy with Priority Engine and Deal Data is to get IT Deal Alert integrated with our customers workflow and I think those types of things happen, there is potential for pricing power in the future..

And maybe just a quick follow-up to the first question that was asked regarding the shortfall, should we assume that there is going to be some slip into Q1 as well, because if I look at the guidance, it looks a whole lighter than maybe it’s kind of the numbers that are out there? Just wanted to clarify for sure..

Well Q1, seasonally is always the smallest quarter of the year for us and Q4 seasonally is always the largest quarter of the year.

So we tend not to get too tied up in the specific quarters and look more of it on an annual basis and I think that the annual guidance that we are releasing today is probably higher than most of the analyst forecast, so that’s kind of what we’re looking at..

Thanks..

The next question comes from Eric Martinuzzi from Lake Street Capital Markets. Please go ahead..

Yes. I’ve heard you talk in the past about international growth in a range of kind of a two to three year, 20% to 25% range. You said specifically 20% coming into 2015.

Is that just conservatism that there is in fact a potential for the higher end of that previous range that you talked about?.

Yes, I mean, we’ve been pretty consistent that our target is 20% revenue growth and it’s obviously it’s not an exact number, some years it can be -- it could be higher like -- higher than that.

So that’s our long-term target and basically what we’re affirming with our guidance today is that we’re -- we feel good that we will reach that long-term target again in 2015. Obviously, where the upside is -- upside to that is good, but that’s what we’re guiding towards today..

Okay. And then, if I look at the Q1 guidance, where my own knowledge probably were I overshot was on the event side.

I looked at the last couple of years, 900,000 to a million for Q1 and you’re looking for 500,000 to 600,000, is that -- could you take me a layer deeper there?.

Yes. So that’s just basically timing of events. So part of our events business is custom events that are we schedule them when we sell them. So it’s somewhat -- it’s not as predictable as an editorial event that we schedule a year ahead of time. So that’s just basically a timing issue.

In terms of our events number for the year, it’s been what we’re guiding to is what we’ve been telling people we were going to do. So it’s just timing..

Okay. All right. And then, IT Deal Alert, it’s interesting to me how you and your customers are going through this iterative process about how best to use it, the qualified sales opportunities. Do you have anything just anecdotally somebody who maybe part away and then stopped and has [technical difficulty] and really is making good use of it.

So is this kind of a multi [quarter] [ph] process that they have to redo processes internally to take full advantage?.

Well, the best practice is with qualified sales opportunities is that you give them -- you give these opportunities to either your field sales team or your channel sales team, because that was the way these opportunities are flushed out, those are the best people to follow-up on them.

So what we’ve -- so with these new products, Priority Engine, we’ve a lot of our customers are very focused on getting leads for their inside sales team. And so that’s really where a Priority Engine comes in, where this is a -- that product will generate prioritized call list for the inside sales team.

So, it’s really just a matter that the purchase intent data that we have is extremely powerful and very accurate and very predictive and our customers recognize that and it’s just a matter of them being able to use the data in the most effective way to win deals and generate revenue and generate market share.

So, now we have these three products, one for data scientist, one for marketing and inside sales and one for field sales and channel sales. So the key is for our customers to use the -- use this data in the way that they can get the most ROI..

But back to my question about any example where somebody was pressing the gas and then let up and is now repressing the gas?.

No. I mean, we’ve had many customers that have just continued to invest more in it. So I don’t think we’ve seen customers that have come in and stopped and come in, we may have some of that, but that’s certainly not the -- that’s not the norm..

Okay. And then, Janice, it may have been in the shareholder letter somewhere, but I missed it.

If it was [technical difficulty] around $8 million of cash from ops, what was the cash from ops number in the quarter as well as the CapEx?.

Yes, so we haven’t disclosed the statement of cash flows, but the CapEx number was somewhere around 0.8..

Okay. All right. Thanks for taking my questions..

Okay. Thank you..

The next question comes from Mike Malouf from Craig-Hallum Capital Group. Please go ahead..

Great. Thanks for taking my questions. Greg, can you talk a little bit about the strength in the domestic side.

You talked I think in the letter about the IT Deal Alert maybe having a positive effect, but - and you commented on the macro side earlier, are you seeing that resurgence in that quarter or was that a surprise to you as you look out into 2015?.

No, it wasn’t a surprise. I mean, we got a lot of questions from investors, was IT Deal Alert going to be cannibalistic for the core and we were pretty consistent saying no, that it wasn’t, it’s a different service.

And what we’ve -- Q3 we saw a return to growth on core North American of 1% and I see was 19% this quarter, so another significant increase.

And we think that will carry into growth for 2015, but basically what is happening is as we go into our customers and we explain to them the IT Deal Alert and how we’re able to collect this data, that really enforces the value proposition that we’re the place for IT buyers go to do their research.

And one of the questions that people ask us -- our customers ask us is how can I improve my purchase consideration versus my competitors? And the answer is early in the process when people are doing their initial research, that’s we need to be in front of them and influence them with branding and white papers and webcast.

And so that’s just -- it’s just a -- it’s a very virtuous circle, our branding products, our lead generation products and our IT Deal Alert products I think we’re seeing good success with that and I think the marketing teams that we’re selling the core North American products are getting really good feedback from their sales teams about the IT Deal Alert products which just -- again, it reinforces the value proposition that we’re the place where this research is happening and if we want to give our sales team a better chance to success, we need to be influence them early, because there is all this research that is out there that shows that 70% of IT buyers, research is done before they contact vendors.

So lots of vendors are getting eliminated without ever speaking to their prospects. And so it’s really the dynamic has changed where you need to have a lot of content on the Internet in front of these buyers when they’re doing that initial research and we are the best place in the market to advertise those vehicle.

So I think that’s what we’re seeing..

Great.

And then, on the Deal Data product are you -- what kind of pricing are you using on that? And then on the Priority Engine side, are you still thinking about entering new verticals like for instance financial analysts and things like that?.

Yes, so on the Deal Data, that pricing is custom, because basically it’s based on which geographies people want and how many segments they want. So it’s not really any pricing, it depends on what the customers are looking for.

And then, in terms of the market research business, yes, we’re collecting post Deal Data in addition to the pre Deal Data and we think by collecting this post Deal Data and we will be able to figure out things like real time market share that there will be opportunity to generate revenue off of that post Deal Data.

So that’s up and I think that we would be -- that’s something that we would be introducing later on this year..

Okay, great. Thanks a lot for that help..

The next question comes from Marco Rodriguez with Stonegate Capital. Please go ahead..

Hi, guys. Thanks for taking my questions. Most have been asked and answered. Just kind of a quick follow-up here in regard to the new IT Deal Alert products, perhaps maybe you can give a little color here.

These new product generations that you’re rolling out with, are these kind of being driven by an internal team there at TechTarget that is interacting with the clients or is it more of just the clients coming back to you guys and saying, gee, we wish we had this?.

Yes, I mean we’re -- we spend a lot of time talking to our customers about how they’re interacting with the product and what success they’re having or what challenges they’re having. So based on those numerous conversations with our customers we came up with these two new products.

So basically the Deal Data, some of our customers have these data scientist teams and they just want the raw data. We run our own set of algorithms and we weight certain buying signals. But some customers have their own algorithms and their own buying signals that they want to weight.

So they just want the raw data to -- the raw purchase intent data to do their own analysis on, so we came up with that product.

And then the Priority Engine, as I alluded to it before, the qualified sales opportunity is really a -- it’s a great product for field sales and for channel sales, but a lot of our customers want to have a big investment, an inside sales and want to try to make those inside sales teams more productive and more efficient.

So the Priority Engine is 100% integrated with salesforce.com and can create daily prioritized call list for inside sales teams so they can call and order the very best opportunities within their assigned territories. And then when they do call them they’ll also have some intelligence about that.

Furthermore, a lot of our customers that are marketing teams did have very specific tasks; we’re saying hey, how can we use this data to get some -- to run some of these marketing campaigns? So we had within salesforce.com, we built some tools to make it very easy to generate those campaigns.

So an example would be, a lot of our customers do seminars.

So say if one of our storage customers want to do a cloud storage seminar in Chicago, they could go into Priority Engine and say, hey, we want the names of anyone that’s researched cloud storage content in the past 90 days within driving distance of Chicago, and that would pop up a list of people that they could then gear their -- that marketing campaign for.

So we’re basically just giving our customers the tools to make it very easy to organize and use the data to help them complete their jobs whether you’re field sales, whether you’re inside sales, whether you’re marketing or whether you’re a data scientist..

Got it. That’s helpful. And then last quick question, on the guidance for IT Deal Alert, obviously you’ve got the annual numbers out there in the next quarter.

Just wondering if you could perhaps put a little bit more color in terms of how you expect that to kind of ramp and if there are any other seasonal effects that we should be thinking about aside from the Q3, Q4? Thanks..

Yes, so, the Priority Engine is sold as an annual subscription and it’s -- we saw it in 80 different segments and it’s $90,000 per year for an annual subscription per segment. And then for customers that can only buy quarterly, it’s $30,000 per quarter. So just as you know with subscription revenue we will be recognizing the revenue pro rata monthly.

So that revenue or any of the subscription revenue that we sell will build over the course of the year..

Thanks a lot..

You are welcome..

[Operator Instructions] The next question comes from Kyle Evans from Stephens Inc. Please go ahead..

Hi. Thanks for taking my questions. The first one I’ve got is, if I think about the IT dealer product suite by the number of categories, so I have got Deal Data, Priority Engine and QSO along one axis and I’ll lay these segments on the other.

Are there some places where some of your vertical markets or your tech end markets are intersecting with those products and kind of lighting up and hitting big results for you guys? I’m asking because we’re kind of looking for places to look for channel checks and I’m wondering if like, for instance you guys were having notable success with Priority Engine and Virtualization or you were doing a really good job with Deal Data and Security.

Are there are some places where those pumping the metrics were its kind of lighting up?.

Yes, so I think where the most customer interest is in the topics you would expect kind of the hot topics where there is healthy spending.

So anything around cloud, anything around virtualization, anything around data analytics, around security, those -- as you would expect, those are the most popular topics because those are the most competitive topics where vendors are active right now..

Did you see a particular appetite for one of the products over the other by vertical?.

No. And as most of the revenue at this point is qualified sales opportunities because we just announced the Deal Data and Priority Engine products in January. But I think over time what you’ll see, what we expect is that customers will use both -- use both, if you have -- or all three products if you have data scientist teams.

So we think most of our customers that are using qualified sales opportunities are excellent prospects for a Priority Engine because they already know how good the data is..

Got you. And you addressed some of this in talking about the brand awareness capabilities and the value of being high up in the funnel for your client base.

But just specifically looking at the 19% growth that you put up in the quarter and the mid single-digit guidance that you’ve for North American core, can you help reconcile those two?.

Yes, I mean, I would say, the 19% was one quarter. So I don’t think that -- we’re not going to say okay, one quarter is 19% so its 19% forever now.

So 19% was a great number and I’d say we’re going to try to exceed the mid single digits, but in terms of looking where it was coming from last year which was flat and down the year before, we think that mid single digits growth is the appropriate benchmark at this point of the year..

Okay.

Lastly, any change in the competitive landscape?.

No, I would say kind of what we’ve been seeing for the past several quarters is still the same..

Okay. Thank you..

You are welcome..

The next question comes from [indiscernible] Capital. Please go ahead..

Good afternoon and best of luck in year ahead. A question regarding the qualified sales opportunities, can you give some, frame a reference -- do you have any, in which customers did you get no success for what possibly you currently have four, five, six, seven different segments inside these large companies that are all purchasing from you.

And the question was, I guess, why were you so effective at cross-selling across this large enterprise and what maybe are you trying to show your other sales people so they can duplicate that same success where you have many beachheads with only one segment with another larger company?.

Yes, I think that the -- how fast we’re able to rollout is somewhat is a function of how their sales teams are organized and how they go to market.

So if they get one customer that has rolled it out in multiple categories they’ve centralized sales team, they centralize channel sales, a lot of the qualified sales opportunities with their channel partners. But some of our other large customers have multiple sales teams.

So therefore each different technology segment they have a different sales team. So I think its each major account has a different set of challenges, none of them are really organized the same way..

Got it.

And how common is it among, if you look at the top 50 or so IT companies out there, technology companies, how common is it for them to have a centralized sales effort? Is that by far the minority or is that more common?.

Well I think there is kind of a demarcation when you get after about the top 12 it has tens of billion of dollars of revenue. Those one are more likely to have multiple sales teams. I think once you get pass that top 12 and those are the 12 that could be in most of the segments.

When you get pass that, most of the sales teams tend to be more centralized..

Got it. Thanks very much..

You are welcome..

And we have a follow-up from Kerry Rice from Needham. Please go ahead..

Just a quick follow-up on some of the new products whether it’s Deal Data or a Priority Engine or maybe even the post Deal Data that you guys haven’t rolled out.

Can you talk about what -- how do you think about the opportunity? It sounds like the Deal Data is a little more niche customized and maybe Priority Engine is a larger opportunity, and I know Priority Engine was just recently rolled out in January, but do you have any early thoughts about how the uptake has been there?.

Yes, so Deal Data is basically for two sets of customers. Customers that have their own data scientist teams, and that -- at this point that’s the handful of the largest customers to have their own data scientist’s team and also for customers that don’t use salesforce.com, because Priority Engine is 100% integrated into saleforce.com.

So if you’re not on salesforce.com you can't use Priority Engine. But you can -- we can get the purchase intent data into any CRM system. So that’s Deal Data. So that’s the site to that opportunity. Now most of our customers use salesforce.com and basically all of our customers have a marketing team and all of our customers have an inside sales team.

So we believe that the opportunity there is a very good one. In terms of initial rollout, as you know we just announced in January, we scheduled over 100 demos, so customers when we are talking to customers and saying hey, we have this product, you want to learn more about it, the interest level is very high.

It’s somewhat of a sales cycle, because we have to talk to them about the product. But it integrates to salesforce.com, so even though if that’s done in minutes, people want to understand that so often that they have to get a sales operations person involved to talk about that integration.

We’re happy with the number of those deals that we sold in the first month, but it’s too early to draw a conclusion from that. We always have early adopters that want to get the latest and greatest.

So we’re -- we think it’s off to a really good start and we’re optimistic about it, but we will -- we’re going to -- you will know a lot more over the coming months, what type of traction we get with it..

All right. Thank you..

You are welcome..

And we have a follow-up from [indiscernible] Capital. Please go ahead..

Thank you.

So Greg regarding your inside and outside sales force at TechTarget, can you give us a sense for how materially you hope to expand the sales force in the upcoming 12 months that 10%, 15%, 20% or some other number?.

So we have a sales team right now of about 80 people, and we’re looking to add about 20 new people this year..

Got it. Great. Thank you..

You are welcome. End of Q&A.

As there are no other questions, the conference is now concluded. Thank you for attending today's presentation. You may now disconnect..