Jane Freedman - General Counsel Greg Strakosch - Chairman, CEO and Co-Founder.

Kerry Rice - Needham Kyle Evans - Stephens Inc. Mike Malouf - Craig-Hallum.

Good day and welcome to the TechTarget Fourth Quarter 2015 Earnings Release and Full Year Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

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

Thank you, Laura. Before turning the call over to Greg, I want to remind everyone of our earnings release process. As previously announced, in order to provide you with an update on the business in advance of the call, we have posted Greg’s Letter to Stockholders on the Investor Relations section of our website and furnished it on an 8-K.

On the call today, Greg will briefly summarize our results for the fourth quarter and full year. Following Greg’s introductory remarks the management team will be available to answer your questions.

On the call in addition to Greg, we have Kevin Beam, our President; Mike Cotoia, our Chief Operating Officer; and Janice Kelliher, our Chief Financial Officer. During this call, any statements made by TechTarget that are not factual, may be considered forward-looking.

These forward-looking statements are based on assumptions and are not guarantees of future performance. Our actual results may differ materially from expectations please refer to our risk factors and other factors in our annual and quarterly reports filed with the SEC.

In addition, the forward-looking statements speak only as of the date of this call, and the company undertakes no obligation to update these statements. Also during the call we may refer to financial measures not prepared in accordance with GAAP.

A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures accompanies our Shareholder Letter. With that, I will turn the call over to Greg..

Great, thanks Jane. TechTarget executed very well in 2015. We faced a challenging macro-environment all year as our largest customers business plans were unexpectedly disrupted by the strong dollar. We are in an early innings of a major trend as our customers want to take advantage of Big Data to grow their market share.

This trend is gaining momentum we are well positioned to take advantage of this trend with our proprietary IT purchase intent data. We introduced three major products under the IT Deal Alert umbrella in 2015. Deal Data, Priority Engine and TechTarget Research, all three are off to a good start and will contribute to revenue growth in 2016.

Our organic traffic in search was up 14% in 2015 as our investment in independent high quality content continues to pay off. Financially in an environment where marketing budgets were flat at best we grew revenue and profits. 2015 was our 12th consecutive year of being cash flow positive.

We repurchased approximately $15 million worth of stock in 2015 and our Board has authorized an additional $20 million to be used for stock repurchases, reflecting our confidence in the business. I will now open the call to questions..

Thank you [Operator Instructions] And our first question will come from Brian Fitzgerald of Jefferies..

Hi guys, this is John on for Fitz. Quick question for you, you announced the launch of the Research product then you noted that you signed the first few contracts already last quarter could you talk a little bit about the types of customers that you’re signing for that product and how they are engaging with it? Thanks..

Yeah so it’s -- we’ve been signing up tenders, it’s typically their market research are competitive intelligence teams and they are very interested in seeing what customers’ future buying plans as well what is happening in the specific markets in terms of who is winning deals who is losing deals street price and et cetera.

So that’s the first place that we’re going to. On the investor side, what we’re learning there is investors want to have some historical data so they can see some trends. So we anticipated that so that will be a later developing revenue stream..

Great, thank you. And then have you guys -- you noted that the largest 12 clients kind of struggled in Q4. Have you seen any turnaround in the beginning of the year so far? Have you heard anything qualitative that has given you some optimism for the rest of 2016? Thanks. .

It’s still early in the year. And as you know seasonally as you know Q1 is always -- it’s always slow it’s the smallest quarter of the year. So I think on the positive side for 2016 is, no one is going to be caught off guard with the strong dollar last year it was unexpected this year people know about it.

Also our largest customers will be calendaring the effects of the strong dollar. So my expectation is that those two factors will be favorable. But in terms of what we’re thinking for the year I think that’s reflected in our annual guidance..

Great, thank you. .

You’re welcome. .

The next question comes from Kerry Rice of Needham..

Thanks a lot. Maybe to dovetail with that last question, you did provide the details between top spenders and kind of the balance of the customers.

Within those top spenders is there anything you would call out maybe anybody that is still actually positively spending versus the contraction? And or is maybe some of that contraction largely driven by the Dell-EMC merger and a fall-off in spending there? That’s the first question.

And then you highlighted for IT Deal Alert that you expect about 40% growth in 2016 with upside to 50%. Could you talk a little bit about what would be those -- would drive the up to 50% growth is there anything has the Priority Engine kind of the outperformance or anything there? And then I will have one follow-up question. Thanks. .

Yeah so in terms of the top 12, and I don’t want to get into specific customers. But those companies many of those customers have more than 50% of their revenue outside the U.S. and they were severally affected by the strong dollar. So as I said that’s across the board.

And then it’s no secret that some of those top customers are in the middle of mergers and spin offs and divestitures which can create additional uncertainty. So I think it's pretty clear what’s going on with the top customers. I mean everyone they’re all public and everyone can follow what’s happening there.

In terms of IT Deal Alert I’d say the fastest places growing we’re seeing very good acceleration with Priority Engine. As you can see we doubled the number of new customers that we brought in this quarter versus last quarter. But starting to sign some annual contracts, which is a nice development. So I think there is some very good upside there.

And then TechTarget Research I think there is definitely upside there. I think because it’s new that we’re forecasting somewhat conservatively because there is not, you don’t have a past track record to go on. But we fired our few sales people there.

We started to sign some deals, pipeline is building nicely, the customers that have seen the data have really liked it, it’s very unique. So I think that’s another area where there would be some significant upside. And then of course it’s still very early innings and we have new products that we’ll be announcing this year as well.

So all those things combined I think provide the potential for upside..

Great.

And just one follow-up on the strong organic search, is there anything that you have changed or tweaked that kind of led to that ultimate high or anything that you would call out there?.

Yeah I think there is a few things. We continue to invest in very specific targeted content. I think we’ve seen a retrenchment from our competitors. I think they’re producing less quality of relevant content, so that helps us. And then in general I would say that we the Google the way the algorithm is changing.

It’s very focused on the quality of the content, which really plays to our strength. So we’ve done some things there with our editorial team just to reinforce what we’ve always been doing.

But there was another algorithm refresh on January 8th by Google and we’ve been performing very well with double-digit traffic growth since that refresh since that new algorithm change in January. So all things very positive on that front..

Thank you..

Next we have a question from Kyle Evans of Stephens..

Hi, thanks for taking my questions. Few more on the Research product, Greg I believe you said in the past that will be in Deal Alert I just first wanted to confirm that..

That’s correct..

Okay.

And then going forward I’m hoping you’re going to say yes, so you are going to be breaking out Research in progress there and any more detail maybe in your commentaries on the calls going forward?.

Yeah. I mean I don’t expect that we are going to break it out from a line item and report on the revenue and let the whole world know exactly what we are doing. But yeah we’ll continue to provide color so you get a feel for what’s happening there and I think it’s going to be very positive. So we’ll definitely be giving some color on that..

Okay. Can you detail some of your thinking around the -- you gave basically a $10 million run rate by the end of next year, you’ve got your first deals in hand, the simple math is you 100 up at 100,000 to get to that goal.

What were some of the things that you were thinking about when you put that fourth quarter of next year out here as a timeline?.

Yeah. So we look at the number of customers that we think that are good candidates to buy it. We look at the number of sales people that we’ve hired and have plans to hire and kind of what revenue ramp would be for those sales people. We’ve made some assumptions on renewal rates and up sells and cross sells.

So kind of the basic things you do as you do a revenue build up. But as you know this is a very large opportunity our customer spend huge amounts of money and have dedicated budgets for this and there is obviously Gartner and IDC and Forester, there is a lot of companies generating hundreds of millions of dollars in the space.

So it’s a very big opportunity for us..

How much historical data do you need before you can kind of pursue the investment community? I think about all the overpriced data products that we buy and my peers buy and my clients buy and if you in fact have real time pricing and market share and street pricing to me $100,000 seems very reasonable..

Yeah, I think the early adopters, two or three quarters of trend data, everyone we show in the investment community, we saw a chorus [ph] with the data they’re saying, hey this is extremely interesting. It’s very unique, we’ve never seen anything like this, we can see how it would be very valuable.

But just looking at one quarter without being able to discern a trend it’s hard for me to take action on it. So I think that every quarter that we generate more data there will be more people interested. Obviously year-over-year data is going to be extremely attractive.

So I think we definitely have early adopters looking for quarter-over-quarter and then more people as we get to year-over-year that product will gain traction..

Okay. One last question and then I’ll get back in the queue. Could you talk specifically about IT Deal Alert in that top 12 and then also internationally, international is the one place where it looks like you came up a little bit short and were maybe going backwards. Interested in your thoughts in both of those areas..

So international as you would imagine is the most directly affected, those budgets are most directly affected by the strong dollar and the other part that you can imagine international is -- has a higher percentage of revenue from big customers, because they do so much business over there.

So I think that’s the story on the international IT Deal Alert. And then in terms of the top 12 we definitely -- what we saw a weakness across the board from the top 12 across all products. Because when they are cutting budgets we have pretty good penetration there. They’re cutting across the board. .

When you look at your IT Deal Alert customer base is the top 12 fairly well representative there?.

Yeah in general our business is about 40% from the 12, about 40% from mid-sized companies and 20% from DC back startups. And I would say that that breakout is generally reflective in our IT Deal Alert products as well..

Okay, great. Thank you. .

You're welcome. .

The next question comes from Mike Malouf with Craig-Hallum. .

Great, thanks for taking my questions. I’m curious Greg if you could comment. I know that we had previously asked and I think we have had discussion about the concern that perhaps North American core online revenue could be cannibalized by a real successful IT Deal Alert.

It looks like IT Deal Alert continues to do well even on the international side you are still looking for 10% growth. But the real swing factor is as the North American core online. So I’m just wondering has there been some sort of unanticipated cannibalization that’s going on in that..

Yeah now when I think the numbers prove that out. Since we’ve announced IT Deal Alert in zero to $23 million of revenue in two and half years. Our North American core revenue has been roughly flat. So that IT Deal Alert revenue has been incremental growth. And I would say that the IT Deal Alert is actually reinforces the value proposition of the core.

Because the Great thing about the IT Deal Alert is it identified deals that are in progressed. And that was maybe some maybe in the middle of the process. And what our customers are always asking us is hey how can we influence these deals early.

And then the answer there as well you got to be influencing these people early in the research process with branding, with microsites with white papers, with webcast. So I think that that’s I think the number speaks for themselves that hasn’t been cannibalistic and I think that it’s actually reinforces the value proposition..

Okay. And then just switching gears on the investor side of the new product. You said that that’s -- that they really need some history on that before they step up.

Are you planning to sort of back basically populate the dataset with the historical data and then give it to the investors or are you just going to have to wait for some time to go by to populated with sort of future data and then give it to?.

Yeah, so we weren’t collecting the specific data that we’re collecting today is much more in depth than the data we were collecting in the past because we weren’t using we now have the idea to product size it. So that data that we’re collecting that’s going to have to be we have to be patient and just each quarter we’ll have new data.

But the first time we published it was Q4 of this year and we don’t have data from before then to publish..

How long do you think it will take to get some traction there then?.

Well in the storage space for example in Q1 we’ll have our second quarter and Q2 we’ll have our third quarter. So I think we will as we continue to get quarter-over-quarter, we’ll start to get some early adopters. We’ve had a quite a few investors that are very interested in the date we’re having a lot of conversations. And the feedback has been good..

Okay, great. Thanks a lot..

You’re welcome..

Showing no further questions, the conference is now concluded. Thank you for attending today’s presentation you may now disconnect..