- Earnings call transcript Q3 2022

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Operator

Good afternoon, and thank you for attending today's TechTarget Reports Third Quarter 2022 Conference Call. My name is Austin, and I will be your moderator for today. [Operator Instructions] I would now like to pass the conference over to our host, Charles Rennick, with TechTarget. Charles, please go ahead.

Charles Rennick

Thank you, Austin, and good afternoon.

are Executive our our Officer; Officer. today Cotoia, Chairman; Chief here Chief our and me Greg Executive Strakosch, Mike Financial Joining Dan Noreck, .

turning process. like Greg, the Before of over everyone call release remind on I'd earnings our call the to to

in letter provide you announced, website Relations of on our the update with we've call, and to of on our advance Investor in the order an furnished posted previously an on As business our X-K. it shareholder section

future the remarks, your our and these statements, made are not assumptions by based factual introductory Following performance. are forecast These will answer TechTarget forward-looking may team not may Greg's available statements. to on Q&A statements. our are management Actual materially questions. differ be are and to forward-looking results considered the which Any from from risks uncertainties today and forward-looking including be of statements during subject guarantees that

in including may forward-looking a involve after These number statements TechTarget discussed any this the the only with required our statements order to Forward-looking Factors date as reflect and speak SEC. to call, obligation call or as revise of uncertainties, section undertakes this in that and filings is of update of those the statements of events risks no conference Risk arise by law.

financial I'll in also Finally, turn non-GAAP financial the GAAP. to over with accordance to prepared letter. reconciliation comparable to With A our we Greg. certain GAAP not the shareholder that, refer these measures may measures measures most of of certain call accompanies

Greg Strakosch

Great. Thank you, Charlie.

flow free XX%. was was $XX $XX.X XX%. gross revenue grew margin was Cash million open XX% to representing call million. now and million, grew an from Longer-term margin EBITDA I And XX% grew operations flow XX%, $XX.X $XX.X margin Adjusted was X% Net $XX.X to Adjusted XX%. grew million. total was million, margin XXXX, million. XX% will EBITDA of Adjusted GAAP $XX.X cash adjusted of GAAP the XX%. $XX.X revenue questions. Net was million. QX was XX% revenue For revenue. to increase to approximately approximately income income approximately gross

Operator

[Operator Justin Patterson with Instructions] question Our from first is KeyBanc.

is your line Justin, open.

Justin Patterson

Perhaps can. if I Great. two

hoping some slowdown little during a elaborate a lot was of quarter? I companies longer you the We've on the you sales more bit First, of saw talk about cycles. could heard

your bit just some what little observations customer in confidence you growth of you and have Could EBITDA really give XX% mid-single-digit around a And the So then behaviour? of curious XXXX about initial the that kind been margins? appreciate secondly, outlook. about talk assumptions

Mike Cotoia

Mike. Yes, Justin, this is

to through to quality. won't assessments terms push to as really with biggest QX. got what their once a Day, on we've well off their marketing Labor our strong in to is they're with macro its the QX It discussed within customers macro sales on when usually you mean In up dollars global are previous budgets. Day customers budgets be. of this in surprising. or a or really our -- deals not we what were out finish evaluate back-weighted we lot did we as with but back those typically at us take we a post flight Day, when dollars two and Labor hold, to set way evaluate When quarter. spending quarter us and to global of talk sales caught the get a quarters QX. And get they before. Labor going see go customers of they're quarter or I the pushed budgets doing going reset, seen QX we for out the as typically, when a we've And big and budgets about uncertainty, Where enablement the seen slowdown, we behavior and a might see It's this -- this reset, back

of about us, they talked funnel we've where of versus pull went lead our on customers some may fortunately portfolio of further real only qualified to and content call shift from opt-in to IT more And downturn, business, XX some we for products really type market what but may years the look their campaigns, think back editorial data of the surprising it's of customers our the with is ago, on the our and So sales not today opportunity first-party strategy, how which sales last back really business resiliency will down HQL shift that's purchase step permission-based intent we brand guided I and react. I some audience, see brands, customers at the our XX% products. current they may larger to big

seen the what of terms right So to before, still going believe that's we But we're initial now. pullback right And seeing be XXXX we've entering in this now. and real. what we're it's global outlook,

we the the pipeline, the case, a teams their believe see understand they're flight customers and quality. this Our targets teams be this prospects they And right buying sales going right enabling talked have reset to within hit. those their looking And accounts, right have accounts. we and to have about investments, at to they're make we to to where too, numbers will the still sure understand and back historically, that be

So quickly. at are point, a going to customers certain reinvest reinvest to and and have our

see they back get don't pretty support to support quickly We sales to we when enough pipeline point the company to have snap of targets the also it the targets.

and current that is QX we'll half. But guidance the to to first TechTarget. into we initial hit see our and having ultimately, numbers XXXX see, back play have customers pipeline well targets hit over to can does you this believe to carry as fill and quality for environment will So to into flight

Operator

is with Raymond open. Kessler Our Aaron, James. line is question from your next Aaron

Aaron Kessler

then the you detail board, kind U.S. of the priority like just still seeing across sounds XX%. growth And Just and on differences of I maybe by as growth just can product slower well kind seeing, seeing? think international It also, pretty you're as is many solid of company size. you're engine that it's

on the does ad bit there the would slowdown color be So Just a helpful. more little side? more

Mike Cotoia

mean Again, had QX I we Yes. growth. we XX% seeing when numbers, report a reported we're the slowdown. to

currency, be at if I the close look think it XX% to constant will you growth.

You I see it America, for I as the the prices with we've U.S. would back mean political EMEA I turmoil. a as some pull in I shape. the war seen, of there tough as mean lot in in high cost, the over is Ukraine. recession, challenges right well of think going EMEA, now is say we the challenging North all a mean, economy there's pretty

growth the we're region priority the now. terms that I right say across saw regions. So And we in would hardest some EMEA good seeing is products, engine. of of probably

that, have As and the programs they and funnel types in budget seeing our of I'd that's spend on probably that may the roughly again what show And down line. ad spend, the as get will doing opportunities really HQLs, that trying and or that's hardest to products. quickly of high-quality qualified are what sales to previous they're programs that further leads. business, sales they're got We've call revenue of shift to outstanding in which to on back measure because opportunity customers we in question, I some shifts in They their any product closing or that. the to XX% our product deals some immediate gen demand shift their and drive pull they're branding of mentioned driving the budget is logos taken net they pipeline, that much deals from so that longer but we trying because has overall allocation for close new

So their shifts those will content impact now EMEA navigating mix, on they're message What North there, out make the meet see keeping is really America. slowdown good we're kind to well but and the sure in what we seeing of customers that we of in what the also it. seeing this are are that's the on on we're seeing product we're the getting as as some an we're but eye based right

Aaron Kessler

like expense take any then your plans, approach, any you're hiring of a in And 'XX. change careful plans bit maybe to to little going but It et kind growth more for sounds plans changes cetera?

Mike Cotoia

and is sure priorities short to that right long we wisely company. term keep will of that continue priorities right the support on DNA do grow we expenses. close help -- XX-year and and We'll the Throughout the areas invest around a our history, make our part in our eye invest to long-term smartly. and But

XX% at finish year We're XXXX we'll XX% see, EBITDA projecting you'll As margin. EBITDA at margin. the

in we'll accordance the projections. expenses manage with revenue So the

paid as We what record we've flow. well have dividends past, execute track and of as us. continue it's in the done on well good for doing really on to cash a that We'll paid free spin

Operator

Deutsche Bank. from is next is with your Our Shah open. Bhavin question Bhavin, line

Bhavin Shah

as in it's of guidance macro to revenue gets know you on we 'XX. the about underlying I worse, kind and the budgets about guide half Just worse maybe for of in get more? XQ XQ and like the expecting the assumptions some back first and Can deceleration guess just what's and think of you a elaborate terms that of terms the about, macro, you in we are the in the focusing think bit kind of little I growth bit but a just embedded it the talked of year? about

Mike Cotoia

uncertainty, behavior look we on at and I us. customer real-time at the macro not it's mean what this behavior look of predictable. is Robin. kind Yes, we to surprising is And global based our

budget, and we you're our happens your customers. of first that all their last the deals and the across budget, budgets got is When couple okay, take drop. over investments I midsized for with coming we They things all booking we across global where happens reassessing saw this must-have performed they you're is when cutting going markets not and happens way and were small, into look regions XXXX were do management direction this of was where would reducing it call pullback typically we the you They saw and quality back a to well. have. putting really years reset. they back September, a versus and from our say, your summer port really cut, not look nice Day hold, what Labor from large So on and this on customers, the the into how pause. business we a you're has budgets the deals delayed get are penetration but What when saw the things I were sort really different quickly, growth

of didn't and in tide bit terms different saying right? high that areas. but of not out one single extra Well, So in and could to They're made investments. take get little will going reset. you I'm really ROI, a free really of lot the it tell they that reset. more past, of Going expenditures a went to take seen quarters that. they're look every companies investing can't to I I've rises a what now they're take? a all How couple scrutinize investments growth, in a going long on at that the

solutions, identify and accelerate and them help they're data to numbers those You'll to partners the that hit. have can best that going meet

and in to terms the really scrutinize end have our so customers the that up well solutions. to ROI-driven for then the reset we quality back in must and I for the quarter And flight being trying them next term, us And or it to flight quality. of long and two, good probably in as good assessment will see -- back think flight drive

Bhavin Shah

there post-Labor I two a or side outside customers? guess specific any then like, on any your larger more on pulled there materially your the have of have back brand impact quarter And in one business, pronounced else? it's And anything whether from a you is impact are or Day, that customers Like seen open?

Mike Cotoia

on of saw fastest business it's the thing measure. because also hardest that's brand, pullback customers and the can Again, terms product definitely we to pull back. the brand that cancel In the

you approximately business, if look close business. business back little even our than to a XX it's XX% maybe And Now XX%. it now, probably XX, ago, XX% at years our of our right was less of

impact us that's said, customer advertising doesn't business. So not something one ad impact a have that's XXX% us, customer. we it's And don't yes, XX% like it it okay, but marketing

wasn't it where somebody pulled So back cancelled. just and

They take well assess and managing just as to going put expense hit. are in You're to have where to targets -- there to make have have They seeing for and pullback. bit a customers, whether terms of this of scrutinized sales But are of when sure data is last look go back and large, we've a or minor back flight back it's they they the -- and seeing a as in always pipeline I it seen market to invest this marketing sales reps to the and I think that quality insights that feed. supporting. Customers financial organizations. every in, really numbers little you're and still again, that. both they And are to small going across time to

Bhavin Shah

one, to it's quick to gets the that that the target? if great EBITDA target last and mean, are you committed for next macro. macro how uncertain worse despite year Just XX% see kind revenue some But and impacted? Will of of that? have kind expenses from kind you of to target? that rebalance Or be opportunities of you to to to continues kind continue the given of longer-term hit I

Mike Cotoia

of to there priority some us We we're map. content our team to that. going. impact going back thing of not don't at about XX-year our enhancements investing that The spending business. areas wisely, And are it. really to buying I want in made we need product, did not look played is type And DNA that key We are keep think content good over other on customers to in doubled development and Well, a to it are pull and self-service of software the have has with that want going the know we we that enablement we that features investments with lot investments and our help discipline towards us. that we're engine DNA a that a that. for glad having making and teams And to the We good services road engage well XXXX. think

here So really we'll we've look there's -- to opportunity years, we a we keep accelerate percent our job. that. If on over XX have managed the good it. something at to and that an we'll provides and way expenses done an eye But growth, it's there, have a

disciplined investing and we're well to and areas, in the well right to we're discipline. that disciplined in are also going execute on it's continue management, We cost business very path

Operator

Jason line with is question from Kreyer your Craig-Hallum. Jason, next Our is open.

Unidentified Analyst

Jason. on for here Carl

you You bit I kind KPIs? a seeing cycles, little business if around earlier but kind you're talk that, was with contract duration, have of could churn? talked any the like these customer sales of And about behaviors, if wondering impact the macro the about metrics just on

Mike Cotoia

Yes. that I letter, since this quarterly as that what seeing first XXXX, the our XX could we QX revenue have is quarters years. -- over Yes. EBITDA we're missed forecasted. numbers. And seen mean our XX share time saw what of with you I and the deals we've in of TechTarget shareholder on you has adjusted some the is both

So to to committed a terms budgets. when so that going frozen, really when run to what a in have record we're telling seeing in had is track XX%, the are going that we that's if at knowing and something of when also and that's that's we their budgets forecast we come of Customers in, are going good recognize. delay us land

I'm We've as their back assessing mentioned, pull flight eventually get numbers I seen investments. the yes, funnel, they And will demand qualified with quality seeing opportunities happen, gen have funnel, that's reset what sales just sure quality that or guidance make on the campaign customers strategy want can support HQLs seen through bottom behavior. and brand they're I seeing, and some and in to we're help that you calls. real hanging budget product terms that what we're shift also, the fruit to from, of customers lower I those they the delayed, deals again, to And what of right seen their of because some and the been But of TechTarget thing. eye keeping that's enough, sales have investing lowest are customer through the and close more so on some can't teams of you've right to they repeat on we've and to focus give and some end back now where current that's a their can your they sure we're go same it. of

Unidentified Analyst

just one Perfect. here me. last And for then

engagement for went duration of deals. opposed saw shorter through or COVID, Priority up prospects more As you products as TechTarget we kind Engine

of wondering you're recession? early of seeing Just stages in that here this if any the

Mike Cotoia

and that some of making of signs going seeing going that, long-term of we're are some think not where are this give customers it or X, X, to delay on to I some they're that's are patterns eye There that see the our -- -- X-year similar people think so assumption the behaviors we'll commitments, commitments. an that. a that, at people navigate But might I through over beginning quarter safe of XXXX. as so next you

Operator

open. Joshua, next from Needham. your is Reilly Our from line is question Joshua

Joshua Reilly

to wanted difference. hit on I base the customer

an customers is more X, we the these that growth different given more who investors software-oriented X you we know years expected this bit growth? a think that you more would back to pulling base versus a of bit than surprised back customer are then. some maybe I very had with legacy have highlight all a point Are cyclical little interesting ago, their guide secular had

Mike Cotoia

we Yes, good folks. a allocated Yes, many ago pulled to have it's had lot a a Josh. back, where for of that percentage as they you X, customers, segmentation they customer when pull you those a X and where our point. had didn't bigger while, of on-prem cloud, years hardware

we've also customers. years, X,XXX to XX would over I gone almost you look last the years, the So over that customers say X,XXX from few too, in last if

We have product suites. different

have We reentry points.

having will they're cancel market, doing But PC the so out is that necessarily of cost small stalwarts market see fast see if growth reductions seeing and back. all XX% that our involved that. back, doing least with it these will And in largest and some midsized firms, a back across look also gone, lot hit happened won't at very you get cutting the that be really of at also even firms, uncertainty, middle of the you're the are folks they assess, that revenue till but and ROI. you pull and some data this reprioritize long-term pull They in customers on making really reset We sure favorable. when of trying in a to think you business macro today, in they're capabilities, global it's these of our have which from September and I all different focused contracts, and you

immune years not ago, happened they're more five to insulated versus yes, So they're from it. but what's

So there will some be back. pull

Joshua Reilly

if that Engine, -- in the XX% been you of at had more due of Express you at pretty long Priority the how the then a SMB XX% look is How decel weakness in much for growth product demand there? general just And much trending consistently time. versus to

Mike Cotoia

I whether see are and quarters of this want they're to general to another I a people it how see you think the across saying, looking off more as hold couple goes demand and of for month. or renewing

prediction and investment. at market watched of strong first-party sudden -- see announcing Priority plays global the And a one on that content environment audience, little is just across sure up a when that across different we customer seen this I our of on navigate back spend, elimination intent it seen think stop, permission-based again, you it's you're segments a play through their a third-party customers macro quality, us out area pullback assess, flight because this across that of their We've the it's not we in always cookies, have back picking now I investment, the well let's is share the well what But really make as end. seeing google commitment. also think in right right come some as you you to say, you My Engine bit got have their the investments. the data, we've to board. for got let's increase let's

Joshua Reilly

And then maybe here. just sneak in I'll X more

here? given M&A ton the is your make a obviously an we versus in returns have down down, How letter of high here buybacks buying growth a acquisition versus should mentioned an to back stock acquisition the in stock have and here you're valuations the investing You to that think appetite you terms of which in the downturn, come and makes from about threshold pretty for sense. and

Mike Cotoia

we've think a a we're so mean That's million be as question. buyback. and companies on content, opportunities the also in looking I based opportunistic. we going the We resets the well going good some we're manage -- for very talked about peripheral and in with recent good past, capabilities markets. there's intent, But be involved $XXX this valuation audience, to announced around to as adjacent really

we at are along to opportunistic And see help organization valuation, can right with that's buybacks. our on playbook, the And right the that so that. be when TechTarget going we the

Daniel Noreck

Yes.

we're we mean I position do can So a both. fortunate. in We're

in million $XXX of we'll $XXX We next cash. million got think generate year. flow we've So cash

going both downward share but valuations shares So previously terms have advantage buybacks good able downward of of a of take back in buying -- taking and taking and downturns also we prices. acquisition advantage good in targets. this And actually be to it aggressive on we're of again, price, as think of take do share, that history market in with any our reinvesting to valuations at also Mike be to said, we terms

prices. We have acquisitions good making that, and history good at of a smart

forward strengthen that. So to that's pullbacks. strong of And of gives look taking to companies really silver opportunity the we advantage these It themselves. the global lining

Operator

is line open. is question Bryan Bergin Bryan, next Our with your Cowen. from

Unidentified Analyst

now anniversary just bumpier? sales touch This that Priority on Bryan. Engine. hoping Caseta of wanted a X positive versus I overall been is might be update for performance we're there little then use the for year surprises on going has maybe case was an Derek expectations, into bit and version to how where where the maybe I the your lapping on and been have progress things

Mike Cotoia

Yes, great.

use it's up sales in that, success really seen We've the we X it, good yes, coming of that. year. watch terms In on

Engine we've leverage know, strategy. for to would historically, nurture marketers the As e-mail Priority and that you markers sold

I sure Engine. We've ways, going trends it various XXXX, using whether side. great we continue the retention, at it's seen different on making our modular on to midyear lot that. like also We've the build the investments beginning and usage Reps half, a of sales we that from mentioned the around really to back back our for new brought adoption to shareholder and also XXXX of software sales them customer -- into and we territory So seen in team launched half management, earlier, upon working Priority in logos, the we're that. put it it's a use as What around net lot in up Priority good case Engine. developer of I'd letter on

the of data areas that the integrations sales our some our key And we're really customer focused on Engine of Priority force. into is through

Now manner expand want that, their to most workflow but up our we analytics sales have it our points in close within ROI we reps information we have certain able dashboards TechTarget these but make the that bidirectional how data sales key our make relevant and today, set environment open deals and to to be follow-up. pipeline, updates also on do and enable within to our force to their help access opportunities, in such and easier, for leverage a where to drive the customers' pipeline, as appropriate one loss are to customers

make more We campaign insights with the on across and with both customers we on to TechTarget, also are want to our side. their marketing side the sales total provide working that sure

both to fuel of for help which their generation visitors couple been really help demand to end-to-end modernize, content, and about Priority with doing their years, Engine a and gen, sales their and website on view you're the their talking lead what bring into marketing. branding, we've So that

on So forgetting We where going continue also we're as with not there's the that market use expand sales that, the a we doing like but lot to We're are the to case. well. we're platform. on

Unidentified Analyst

know maybe kind consumer? you're cautious of more I and any clients reevaluation, just on into lot about leverage what you wondering back could kind could guys to go might here. I a add you pushback a have if seeing one of just and of from I you kind navigate And pushing but if more clients budgets their talked was if pricing

Mike Cotoia

lot don't pushback a see I a of Yes. of We mean, we in do. terms once -- pricing. while, our we in

understand the price we and value that at level. individual I at prospect how data based and the highest both think our highest customers the our where get on account the

focus retention set So to to people we and this, a port, away that to and strategy path and to I access as I customers activation, you providers to existing that. we've to our if been content, and to we they're our means might do their a as it's quickest think not quality, flight they we to customers insight, with, back -- says, drop to I'd I get intent, comes it. back and "I deal going having well most a like our to need data been because precision, low-cost from to that's And current capabilities take to X". of see value have -- want and And that customer navigate through accounts think said, and transparent customer If not where they that continue walk and that. will close to engage your embracing are enables very sometimes we're when the through they There if the customers prospects, our we've capability that. a consistent with reset, content big having campaign their call accurate, get the right CPL

want to pressures. comment the really we So pricing to

Operator

Max, line question Lake is your Street next from from is open. Michaelis Our Capital. Max

Max Michaelis

me. for one Just

taking -- operating Just wage given and you inflation on guys XXXX, as plan into we the as any what your gross margin as are for expectations QX into guide guys' well? are outlook next year for expenses well should the in

Mike Cotoia

Yes.

and I guided XX% we've XX% think -- that our are gross projections margin to will they be with relatively what early EBITDA margin. consistent today,

the in -- of going there's a lot out model, baked to we think would I to be I So and that. change don't

Max Michaelis

then making my question, on like on as well? of my OpEx, wage any though, XXXX plan last inflation, part of should just into we that And just

Mike Cotoia

the there board, I wouldn't companies you're it. turn of out wouldn't trying a including [indiscernible], take take really mean to and change. markets so employees headcount, seeing much manage I there's and a now, of see much the I right expenses across really into you of lot that all I think some

Operator

Burns question from line is your Greg Co. Our Sidoti Greg, next & open. with is

Greg Burns

for growth and Looking Does guidance Engine? your -- guidance at Priority that revenue 'XX. assume

Mike Cotoia

it the growth, the and product, this by quarter-to-quarter out down, but Greg, will it we preliminary product. We don't break we the how but we don't year well break by mid-digit feel gave it's throughout -- run and a

Greg Burns

that then case? out, are those And you percent of deploying what the currently X,XXX customers sales of your called use

Mike Cotoia

don't break we down Again,

Daniel Noreck

still first a that's the It's very small year still growing but nicely base. year, within X small

Operator

That concludes our Q&A. participation. your Thank you for

disconnect now lines. your may You

TechTarget (TTGT) 10 Nov 222022 Q3 Earnings call transcript