Hello everyone. And welcome to the TechTarget Q4 2021 Earning Release Call [Operator Instructions]. I'll now hand over to your host, Charlie Rennick of the General Council to begin. Charlie, please go ahead..

Thank you, and good morning. Joining me 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, I’d like to remind everyone on the call 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’ve posted our shareholder letter on the Investor Relations section of our Web site and furnished it on an 8-K. Following Greg’s introductory remarks, the management team will be available to answer your questions.

Any statements made today by TechTarget that are not factual may be considered forward-looking statements. These forward-looking statements are based on assumptions and are not guarantees of our future performance. Actual results may differ materially from our forecast.

Forward-looking statements involve a number of risks and uncertainties, including those discussed in the Risk Factors sections of our filings with the SEC. The company 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.

We may also 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’ll turn the call over to Greg..

Thank you, Charlie. 2021 was a banner year for TechTarget. We successfully integrated acquisitions, enjoyed healthy revenue growth at over a $100 million in adjusted EBITDA and strengthened our balance sheet to strong free cash flow and a $400 million convertible debt offering that we completed in December.

We remain optimistic about 2022 and beyond, as we have four tailwinds in our back. The first tailwind is a healthy IT environment. The second tailwind is the modernization of the sales and marketing organization through the use of data.

The third tailwind is growing compliance and sensitivity to privacy issues, which we benefit from because of our first party data and permission based audiences. And the fourth tailwind is the acceleration of the migration of face-to-face budget online.

Today we're releasing four annual metric to demonstrate that our strategy is working and that we’re executing at a high level. We are also releasing today annual guidance for 2022 with expected revenues between $300 million and $315 million and adjusted EBITDA between $120 million and $125 million. I will now open a call to questions..

[Operator Instructions] Our first question comes from Justin Patterson of KeyBanc. .

You discussed how Priority Engine is no longer the primary source of revenue growth. Could you highlight some of the key products where you're seeing momentum? And I wish you to think about the growth rates there. And then second, just diving deeper into Priority Engine.

Could you compare and contrast the revenue opportunity for the marketing version versus the sales version, give me already of a footfall in marketing department. How should we think about the pace of that sales product scaling out? Thank you..

In terms of Priority Engine and what we're seeing is really strong growth across all of our product lines. And as we noted in the shareholder letter the Priority Engine revenues grew 20% year-over-year, and that represents about 25% of our overall revenue.

So our largest -- some of the other products that we talk about are our purchasing 10 data driven, demand generation solutions, and we see those that would represent close to the 40% to 50% of our overall revenue and those are growing at a very healthy clip.

And the reason why we're seeing that grow is because of the tailwinds that Greg had mentioned on the introduction.

Having a permission based audience with all privacy concerns and compliance issues out in the market, our customers really want to go and engage and capture trusted and verified IT buyers in the IT decision making process and because of our owned and operated sites, content of sites across all the major enterprise technology categories, our members come in they often they're permission based.

We understand what they're doing based on the content that they're reading. And that's very relevant for our customers because they want to know who's actually doing what in terms of engaging with content and how to follow-up with them.

So we're seeing everything across the board grow and everything that we do across all of our suite of products is driven by our first party person data, which is a good benefit for us. And in terms of the Priority Engine, yes, we've historically and we will continue to sell in the marketing departments. There are two different use cases.

The marketing departments will leverage out data to go after very specific marketing initiatives like ABM strategies, going after specific accounts, competitive depositioning.

What we noticed over the last couple years was the data that our marketers were receiving from Priority Engine was getting leveraged by these sales teams, and those sales teams were being able to identify which of accounts that they should go target. Now the data is very similar but the way they use the data is very differently.

So what we did was we increased the -- we had a launch in November, an update release that really focused on the sales use case, an updated user interface so sales reps could go and see which individual prospects were engaging at which individual content at a specific time and date.

So we captured that timeline, better user interface to manage their territory, enable them to like take the prospects and enter them into their CRM system, understand which accounts and prospects within their territories were engaging on their own vendors Web site.

So being able to capture that information and put it into a sales use case and into the sales process has been very beneficial. So we expect to see, both on the marketing and sales side, the revenues grow, being able to get the consistent data across marketing and sales, helps create that that's been missing between sales and marketing for years.

So that's a big focus on that and we think that both will enable growth across Priority Engine..

And one point I would add there, I want to make sure this isn't misconstrued, Priority Engine it's still our lead pop product offering and our very biggest growth opportunity.

It's just that today, all as Mike said, we're seeing strength across the Board and all products are growing, but certainly Priority Engine is our biggest and best growth opportunity..

The next question comes from Aaron Kessler. Aaron, your line is now open. .

Just maybe a couple questions, on the customer metrics. I appreciate that. Maybe you provide a little bit more details around that makes simply around organic growth. Some of those customer metrics that will be helpful, and then just the guidance for it like relatively in line with expectations, Q1 a little bit made light estimate.

So just it a little bit of a sequential decline. Can you just discuss the sequential decline for Q1? Is that just more the advertising like product, that would be more seasonal and you expect that to snap back more in Q2. Thank you. .

On the Q1 sequential decline, that's normal based on but it's an and seasonality and that's pretty consistent with previous years. So Q1 your lowest revenue number, IT vendors don't have all their budget set until later in the quarter. And then you'll see Q2 ramp up, Q3 relatively consistent up a little bit from Q2. And then the biggest quarter is Q4.

So I think if you look historically, you'll see that sequential from Q4 to Q1 is roughly, down 13% to 15%.

In terms of the annual numbers that were laid out, we started to report on these numbers last year and we have our net revenue retention, we saw our total comp was up 80%, increase in a $100,000, spenders up 80%, increase in million dollar customers up over 70%.

And sort for these annual numbers are exactly what we wanted to prove what thesis was for the acquisition of BrightTALK in -- we saw organic growth, which we don't break down the organic versus the acquisition, but we saw healthy organic growth as well as acquisition growth, but it really does validate why we made this acquisition.

And we're selling it the same customers. We’re selling very complimentary products. The TechTarget side selling contents indication and tech based solutions as well as Priority Engine and on the BrightTALK side webinars and virtual events.

And so when we have existing conference, they become more engaged with our entire portfolio and spend more of their combined offerings with us. And as we deliver those revenues and increased revenues, we have the very similar operating margins. So you'll see the healthy margins as we resulted in this quarter at 40%.

So in terms of your overall question, we're seeing a good balance between the organic as well as to the acquisition, and that's really does validate the thesis why we made that acquisition..

And maybe quickly on the healthcare IT acquisition you made recently, just any updates on that in terms of the progress with integration,.

You know that, we closed that on August 1st and right now, we've done a few low hanging -- things in terms on the operational side, but we are enabling Xtelligent to continue to run and our plans for that will be to launch new products into that market, launch new segments and Priority Engine, be able to leverage some of our channel products on the BrightTALK side to help with the audience and lead generation opportunities in Xtelligent.

But that integration will happen throughout the end of this throughout the middle and end of this year in terms of operationalize and laying out those new product. .

Our next question comes from Bhavin Shah of Deutsche Bank..

Just maybe on that point that you talked about what you're seeing in terms of BrightTALK.

Can you just maybe talk about exactly what are the areas where you're seeing good cross sell opportunity and what's driving that, and kind of what's resonating with customers?.

So Bhavin, if you look back at the acquisition and why we made that acquisition, there were several reasons, one that their permission based audience, their content strategy, and the ability to throw off really valuable first party purchasing intent data, but also the complementary product offering.

At TechTarget, we're very -- tech based, white papers that are fueling all the information, our editorial teams and all that gets captured into our Priority Engine platform. BrightTALK is very webinar, virtual based type of information, fires going on, to research different topics, they'll spend to 20, 30, 40 minutes on a webinar.

And that is so very much complimentary.

So in terms of the low hanging fruit, in 2021, what we did was we left both organizations, run fairly separately, but where we would identify accounts that we’re spending with BrightTALK, we’re not spending with TechTarget or spending with TechTarget, not spending with BrightTALK, we would start introducing each other's sales force into those accounts to show the complete story.

Tech based, webinar based, virtual based, bringing it all together, being able to engage with our IT team members and capturing that intent and delivering that through Priority Engines and really big value. We've accelerated that where our customers want a mixed media, vehicle, strategy, they wanted end-to-end solution.

And so we are identified not only customers that are spending with us and with one side and not the other, but customers that are spending with both.

How do you tie that together in a lot? And then how do we actually bring what we're delivering what we're calling this content to close strategy where we can get in with some of our analysts and experts even earlier in the stage to help our customers with their messaging and strategic positioning through content creation that can then be delivered and executed through webinars, as well as tech space and ultimately capturing the Priority Engine platform and delivered back to our customers to help them close more deals, that's where we see a lot of the synergies in the end-to-end capabilities..

There's dozens of vendors and competing for these deals. And most vendors get eliminated without ever getting a chance to talk to the vendor. So the way the vendors have responded by that, they are producing a tremendous amount of content.

So if you go to any software vendors, Web site, you'll see that they have multiple white papers and multiple webinars. And TechTarget has been the leading distributor vendor produced white papers basically forever, and BrightTALK is the leading distributor of vendor produced webinars.

So a very natural fit a similar product offering but done with separate budgets. So those product offerings were very complimentary and really set itself up for a very healthy cross selling opportunity..

And just given the early success you had with BrightTALK.

I mean, how do you think about the appetite for potential future M&A goes forward or is it still a bit of digestive period with both BrightTALK and Xtelligentl?.

No, I mean, we are very optimistic when it comes to M&A, and we're having many -- we have regular discussions having about what bid and some of the criteria that we've talked about before is still very consistent today.

We're looking at different content strategies, good relevant content, permission based audience, the ability to throw off first party purchase intent data, as well as there’s other complementary product lines.

So we are actively -- we continuously look at and have discussions, and we don't have an report today, but it's something that we'll keep our keep our eyes on..

Just the last one for me in terms of your guidance for ‘22.

How are you thinking about some maybe marketing budgets potentially moving back towards face-to-face events? Is that a potential headwind going forward just fully appreciating that online solutions are hearsay? Are you going to maybe see a shift a little bit towards in person using conferences and like?.

Yes, I think that the major shift has obviously gone from face-to-face events to online and digital. I don't think face-to-face events will go away, and I think there will be some pockets of face-to-face events, which is normal. I mean, sellers want to get out and meet clients face-to-face. There will be some events out there.

I think a good analogy that we had used.

I think in a lot of earnings, which we talked to the folks is it's almost like the newspaper business, right? Like newspapers everything, you get 99% of your information online, but every once in a while you still want get a newspaper and it's still out there and it's still available for people that want to pick up that newspaper.

I think the face-to-face events will still be out there. But I think, once you switch from the other analogy -- from an analog to digital type of mindset, it's really hard to go back, you can scale the business more with the digital, you can measure it more and it's more cost effective. So I think, you hit it right.

There might be -- I don't think there's going to be a tailwind coming back at us. I think there will be a place for face-to-face events. I think it'll be pretty small..

Our next question, from Greg Burns of Sidoti..

Just looking at the guide, I guess like the midpoint of the EBITDA margin is it's around 39%. And I think you previously messaged, last quarter about targeting over 40% EBITDA margins.

Can you just talk about what's implied in the guidance and is that a function of just the mix of revenue that you see you going forward?.

I think it at the exact midpoint it's 39% at the high in the range, it's the 40%. I believe based on you seeing those Q4 results that we achieve 40% EBITDA margin, we believe that we're going to be able to achieve that for the year in 2022.

That percentages it's part of a range and it's a small range based on $315 million number, it's a fairly small and historically been a pretty accurate range. So I just think it's just rounding..

And then when we look at the customer metrics, what percent of those customers are utilizing kind of the Priority Engine for a sales use case? I'm just trying to get a sense of where we are in terms of starting to penetrate that market? And how much of your business is currently tied to that sales use case?.

So we watched the updated version and Q4. So I think in the past, sales were using a Priority Engine but we didn't have any seat license type of arrangement on that. So that is brand new. So there's a different people were using it, but we weren't necessarily monetizing it by this module approach.

Starting in Q1, we have the marketing use case and now we have the sales use case where we're starting to on the features and functionality, the workflow, the user interface, and also see licenses for sales reps. So it's very early, we've seen strong adoption on this and as go through the year we'll continue to monitor that.

But the appetite is there for sales people to get access the data that we have been delivering to marketing departments, they want it in a different manner, so this has been a good move for both our customers and for us to have a module approach that really suits the need for what our customer needs.

And most of the times, our customers want it for both marketing and sales. So when you have that situation and you have the same data being delivered and cut up and delivered to each of the constituents and the way they need it and want it and consume it, that should be a really good cause of tailwind for us..

We are excited about the opportunity to sell the sales version to all of our marketing use case customers. Now we have a separate module. And historically, we've always focused on selling to the kind of 1,500 largest IT organizations that had a sophisticated enough marketing organization to take advantage of our services.

But now with this sales use case, we think that use case we think that opens up the market to about 18,000 software companies. So a huge expansion of our team by having this separate sales module available to sell. But in terms of question it's top of the first, very early days..

Our next question comes from Jason Kreyer of Craig-Hallum..

I wanted to stay with that same theme. So just going back to that platform upgrade from November. Wanted to see if there's any early feedback that you've provided. And then maybe if you can just talk about the selling process as you go to market to a marketing team versus going to market to sales team.

And just curious if there are any particular challenges going to the sales teams or any particular like benefits as you go in separately, just kind of what your sales guys are seeing as they go to market separately..

In terms of the selling process, many times we'll continue to work with marketing and have them bring in their sales counterpart. And when you can get marketing and sales on the same page or in line with an investment that they're going to make, that's a win-win for everybody.

So our sales will go in, they'll work on the market, we’ll show how they use their data from Priority Engine, and what they're doing and what they're looking for.

We'll bring in or ask to be brought in up the head of inside sales, a sales executive, show them the data, show how we can carve it up on and portray this and showcase this for both of their use cases. And it works pretty well.

Now, if a marketing person doesn't want to buy the solution from us, that doesn't say that our teams won't go to a sales leader and go in the through the sales door as well, and then work it inversely and go back sales and then go back to marketing later on, but having them get a seat at the table together to talk about how the data and the platform can work for both of their needs and their KPIs is a pretty powerful sales meeting.

And it's a high get it factor. In terms of -- your other question was based. It was sort of a follow up to the previous one where we are fairly early innings on this. We've watched the sales use case, the early results of our launch, which was in Q4, it's only been a month or two, is that we've seen it uptick in sales usage and engagement.

And what we'll do is we'll look at how often sales reps are in the tool, how long they're in the tool, how many pages when they're in the platform and they're looking at early sign first in a very positive..

As you look at that process longer term, I'm just curious, because you talked about, you've got -- you're going to a sales opportunity with a marketing guy and with a sales guy, do you envision having some of your sales reps being equipped to sell both the sales and the marketing and do you see that as kind of an opportunity to maybe have better success going into these opportunities?.

Our reps will sell both the sales and marketing, if that was your question, and getting those guys together is going to be a good dynamic to have. So our sales teams will walk in. We'll have one sales up on our side, engage in the account, work with marketing, work with the client sales team.

Together then bring them in together, and then say, okay, here's how it works for both of you and I think that's a kind of the playbook that will lay out..

And then I just wanted to understand this content to close solution a little bit better. You kind of alluded to it earlier, but wondering if you can talk more about just that go to market process..

So based on what we have to offer today, it's pretty unique, and I don't think there's anybody else that can do it. Through our analysts and our publishers, our market experts, we now have the ability and we're actually doing this of engaging with accounts at different levels and early in this whole cycle.

So as accounts are looking at organizing and trying to figure out their strategic messaging, and what's their play in the market, they need to do that with relevant content.

And so being able to have an analyst group, our publishers, our market experts, working with those customers but at different levels within heads of products, C-levels, AR, like different avenues within those accounts. They're helping them craft and create their concept to a content strategy.

And now being able to take that content and implement it into a purchased intent led sales and marketing enablement program, whether it's through virtual events, webinars, custom content, case studies, customs content indication, and all the way through to the platform where we're engaging and identifying and delivering, which accounts and which buyers that they should prioritize and sell to in order to help them close.

And by this year, we really have a focus on tighter integrations into our customer's workflow, to help with a bidirectional data fee, to help them with their opportunities and pipeline and close one loss reports. We have that strategic end to end campaign almost closed loop capability from content to again, helping our customers close more business..

And sorry to keep asking questions, but I'm just curious because that content to close, occurs earlier in that life cycle, how do you monetize this solution?.

Well, we will be chalking for the -- our customers all need really good content, and it's really hard for our customers to generate and produce really good content. And so our opportunity here is our custom content and analyst division to go in there and say, we understand your markets. We understand your competitive landscape.

We also understand the technology landscape, the validation opportunity. So when we go out there and help this content creation arm, we're going to charge them for that.

But there's a big value for our customers because they don't want to go out there end use ineffective content, hire more content producers when they can have the really good strategists like us, helping them craft that as the content gets built, it's in a multimedia format. It then needs to get executed through a campaign.

Hence, that's where the BrightTALK and TechTarget, Xtelligent all the stuff comes in, where we can have that integrated campaign to help them engage with permission based, audience members that we own and then help close the loop on the back with the platform Priority Engine to show them better attribution and ROI..

Our next question comes from Bryan Bergin of Cowen..

First one, can you provide an update on specific initiatives under way to expand the international presence? Maybe talk about regions that are highest priority for you and any key barriers to consider?.

Bryan, on the international side, we are in throughout EMEA, offices in Singapore, Sydney, Latin -- Mexico and India. And right now we still have a lot of room in those areas. So the other reason why we made the acquisition of BrightTALK is that they had offices in very similar areas too. So we're we still in the right places.

We're still seeing a big transition from face-to-face event. You look at the international business, and you look at the tailwinds that we talk about in the catalyst and this whole from face-to-face to online, that was really prominent in the international markets throughout EMEA and throughout APJ.

So being able to go out there and focus on grabbing those we'll call field marketing dollars, enablement dollars, bringing them online and digital, we have a long way to go on that and we're seeing good success and our international business is growing at a healthy rate.

We'll continue to invest in those same regions right now with more sales, marketing, customer success. Because again, as we roll out priority edge in and we get to the international pieces where it's more of a sales use case, we'll need more support, which we've already lined up in the budget to help support sales users in those regions as well.

So we're going to stick in those regions and continue to focus on that because we still have a long way to go..

And then what’s the underlying growth part target for Priority Engine in that 2022 outlook? And just following up on one of the prior questions around potential online face-to-face.

Can you help us just how think about normalized growth pace in the non-Priority Engine business over time?.

That's a good question? I think with the priority numbers, we would probably say very similar to the overall numbers high teens of 20% growth.

Again, and then in terms of the online numbers outside of Priority Engine pretty similar, I mean, we have a really large, as we mentioned like to demand gen, like all of our products are purchased intent led, first party purchase intent led. So we'll see in good growth across the demand, which is more your content syndication.

And also through our branding elements because of our own sites, Google limited third party cookies, people really want to focus on trusted and verified audience members that's really important. So I would say would to the overall growth, very similar to the non-product side 20% non Priority Engine products of 20% plus as well..

Just a quick one on margin.

So the keys to hitting that 40% EBITDA margin level, just talk about mix and GM versus potential SG&A leverage?.

The margins are consistent across all the products set, it's all revenue growth. The operating leverage that we have, if we hit our revenue targets, we'll hit our 40%. If we exceed them, we'll [beat] the 40%..

Next question comes from Joshua Reilly of Needham..

So starting off we've seen generally strong results from big legacy tech as well as some of the more modern cloud vendors.

Is that consistent with what you're seeing in terms of spending my customer segment? And then what are you hearing from just more broadly customers in terms of their willingness to grow their spend over the coming year, given some of the economic uncertainty now with interest rates?.

Joshua in terms of big tech and growth, I would say this, we have legacy global 10 accounts. Now those aren't our largest accounts but those are -- what you just call big tech legacy accounts and those represent about 17% to 20% of our overall business with any quarter. And they're grown at a decent rate.

Everything else, all the way to the other 2,600 customers, we're seeing a good balance across all of them. BC backed, large SaaS based organizations. So right now, I would say I would summarize it by every region, by every product mix and by every customer class, it's been really well balanced and really exceeded expectations.

Going to your second question in terms of growth, is there any concern out there in the market? I know the inflation numbers came out today and they were high, you hear about cost pressures. For us, based on the way our business is set up, it's not directly impacting us today.

You might see something that it impacts some of our customers where their cost models are falling off or getting a little bit tough. But as of right now, we have had no signs that our customers are slowing down, investing in intent led person intent driven marketing and sales solutions to help grow their market share.

They do understand, it's really critical for them to be in front of audiences at all times. And if you look at the dynamics of our customer base over the last 10 years, it's changed dramatically. It used to be -- we used to have a predominantly all on-prem hardware some software types that would be selling units.

Now most of our customers are SaaS based, cloud based they're selling solutions and their customers are running their businesses on those solutions. So that definitely plays into our advantage in terms of the whole evolution of the enterprise IT market and where it is today.

So right now, I don't see any pullback and all indicators saying it's going to be a good year for us based on the guidance that we put up..

And then one more for me here, when you look at the annual net revenue retention of 150% for 2021, clearly a lot of that was driven by having BrightTALK to cross sell for the first time.

Going forward though, what do you guys think is a more sustainable rate for NRR here? And then, should we expect another strong year given the penetration of BrightTALK still is early into the core tech target customer base?.

I think, I'd mention two things on the NRR number. The 150% number. I mean, as I mentioned earlier, the huge benefit of the acquisition was -- being able to have existing customers become more engaged and spend more with our combined offerings, that whole complementary product suite, virtual events, webinars, content syndication was huge.

So this really played out the way we go. When we were on the call last year, we talked about the benefits of this acquisition, why we're doing this acquisition, selling to the same customers and moving forward from there and seeing success that has proven out.

In terms of expectations, I would say that I'm looking at this a year down the road, I would think that the expectations would be the strong ones that we had in 2020 and 2019 of about 120%.

We'll see how this plays out, but they're going to be healthy either way, but the 150% really did help validate the thesis of why we made this acquisition in that it's working..

Our next question comes from Eric Martinuzzi of Lake Street..

Just a clarification. And then a question on the revenue guidance.

Is there any revenue and you either the Q1 or the 2022 revenue guidance?.

No, that's all GAAP revenue..

And then curious on the headcount, where did we finish the headcount at the end of 2021 and then what's the plan investing in headcount in 2022? Where does that go to by the end of the year?.

Our headcount was roughly approximately [1,000]. I don't have the exact number on, and we are hiring and still we expect the headcount to go up that headcount to go up 10% this year..

And the primary focus of the hiring?.

Product development, customer success sales..

Our next question comes from Pinjalim Bora of JP Morgan..

Thank you for screening me in. Most of my questions have been answered, but one question that I have was when I'm doing an organic kind of calculation. I know you're, you don't give inorganic contributions, but seems like the guidance implies about an 18% growth, which should give little bit of dissolution from say mid 20s organic growth last year.

You obviously have a new sales product. You outline the four trends out there, which I'm guessing it's actually -- most of them are actually strengthening.

Is there an outside chance that that organic growth everything done at the end of the year could actually be close to 25% or accelerate or would you say this is just a low of large number and it's bound to decelerate?.

Pinjalim, couple things on that. Yes, we don't -- we didn't break out, as we talked about in the last call, organic versus combined. But in terms of growth, like if you look at the business and you look at our improved business profile over the years, even pre pandemic at a small number, we were growing in high single digits to low double digits.

And now we're at high teams were to 20% growth. So our whole business profile has improved tremendously almost 2x. Now you have larger numbers, back then we're $120 million, $115 million company, we're $300 million organization now. But to answer your question, this is a range that we see that we feel that we can meet.

Now, if there are increased improvements in the markets, everything works perfectly, the adoption on the sales use case, could there be upside to the number, there could be, but we're on January -- February 10th right now, and we're trying to provide the best guidance and what I would call what we call internally a 2x improvement of the business profile from a few years ago based on the growth rates at larger numbers, I think this is a really good projection forecast and we're going to go, hopefully, go execute hit and beat it..

At this time, we currently have no further questions. Therefore, this concludes today's call. You may now disconnect your lines, and have a lovely day..