TechTarget Inc (TTGT) 2007 Q3 法說會逐字稿

Good day ladies and gentlemen and welcome to the TechTarget third quarter 2007 conference call and webcast.

My name is Aquia and I'll be your operator for today.

At this time, all participants are in a listen-only mode.

We will be facilitating a question and answer session toward the end of the conference.

(OPERATOR INSTRUCTIONS)

As a reminder, this call is being recorded for replay purposes.

Before the call begins I would like to remind everyone that during the course of this conference call TechTarget will make certain statements that may be considered to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Included in particular its guidance and the future financial results.

Investors are cautioned that such forward-looking statements are not guarantees of future performances and involve risks and uncertainties that may, the actual results -- the actual results may differ materially from those contemplated by such forward-looking statements.

Those risks include market acceptance of its products and services; relationship with customers, strategic partners, and its employees; difficulties in integrating acquired businesses; and changes in economic or regulatory conditions; and other trends affecting the Internet, Internet advertising and information technology industries.

For a description of other risks, the Company encourages you to read the section entitled Risk Factors and its Registration Statement on Form S-1, as well as subsequent filings that have made with the Securities and Exchange Commission.

In addition, a forward-looking statement speaks only as of the date of this call, and the Company undertakes no obligation to update these forward-looking statements.

TechTarget's policies regarding financial guidance is as follows, as part of the quarterly earnings for the quarters Q1 through Q3.

It will provide guidance within current quarters in which the call is occurring as part of the Q4 and year-end earnings call.

The Company will provide guidance for both Q1 as well as the full-year.

The Company does not intend to update full-year guidance on a quarterly basis or quarterly guidance until the next scheduled earnings call.

The following members of management will be participating in today's conference, Greg Strakosch, CEO, Chairman, and Co-Founder; Don Hawk, President and CEO, Co-Founder; and Eric Sockol, Chief Financial Officer and Treasurer.

I will now turn the call over to Greg Strakosch.

Please proceed, sir.

Great.

Thank you.

Welcome to TechTarget's second call as a public company.

We've been very busy and have a lot to cover.

We had another very solid quarter and earlier today we announced the acquisition of KnowledgeStorm for $58 million.

One of our goals as a new public company is to establish a track record of consistently delivering results against the expectations that we have set.

With that said, we are pleased to announce that our financial results for Q3 are in line with the guidance that we provided last quarter.

Our CFO, Eric Sockol, will discuss the Q3 financial results in detail.

The three-macro trends that are fueling the growth in our business continue unabated.

The three trends are first the migration of advertising dollars from broad media to targeted media.

Second, advertisers complete focus on ROI, and third and most importantly, pre-purchased research that's primarily conducted on the web.

And it's the most effective way for advertisers to generate qualified sales leads.

We remain convinced that TechTarget is the best-positioned company in the IT media space against these three trends.

In this last quarter we launched two new web sites, bringing our total to 44.

An especially important launch is ITKnowledgeExchange.com, which is a User Generated Content site that takes advantage of Web 2.0 functionality.

Also our new web site launch activity has accelerated.

We are currently working on seven new sites, which we expect to launch before the end of Q1.

We are optimistic about the contributions these new sites will make to our growth in 2008.

Don Hawk will discuss both of these items in further detail later in the call.

In September we held our first annual customer conference, the online ROI Summit in San Francisco.

We hosted hundreds of our customers who consistently told us that we are the clear leader in our space and their trusted partner as they continue to migrate their marketing dollars online to meet their goals of being able to measure ROI and generate qualified sales leads.

We are very focused on scaling our business to take advantage of this very large opportunity.

The topic of scalability is a good transition to now talk about the acquisition of KnowledgeStorm.

For those of you who are not familiar with KnowledgeStorm, they were founded in 1999.

And although they are smaller than us, they were the largest remaining independent pure play online advertising company in our space.

This acquisition increases the scalability of our business in regards to revenue, profit, new advertisers, and traffic.

Additionally, the consolidation allows us to both eliminate a competitor and achieve significant cost synergies.

We've known KnowledgeStorm for a long time and are very familiar with their business.

We're particularly confident in our abilities to integrate this acquisition because we made a very similar acquisition in 2004 when we acquired Bitpipe.

Like KnowledgeStorm, Bitpipe was also an online vendor content site.

And after we acquired it, we were able to strengthen our leadership position, take out significant costs, and grow the revenues.

We paid approximately $58 million for KnowledgeStorm, consisting of approximately $52 million in cash and $6 million in unregistered common stock.

The unregistered common stock is being held in escrow and will be released in stages over an 18-month period.

Even after paying for this purchase, our balance sheet remains very strong as we still have over $56 million in cash and $20 million in available credit facilities.

Now I'd like to share with you our initial internal projections with respect to the KnowledgeStorm deal.

These projections are Pro Forma after we execute on the integration and gain the expected cost reductions.

Our expectation, based on our experience with Bitpipe, is the integration of the operations will be fully complete by the end of Q2 2008.

As an independent company, KnowledgeStorm ran roughly at breakeven.

Our internal Pro Forma projections assume revenue of $12 million to $14 million and adjusted EBITDA of $4.5 million to $5.5 million.

In addition to the adjusted EBITDA contribution, we are acquiring an NOL, which we will estimate will result in approximately a $4 million cash benefit during the first three years.

Factoring in the NOL benefit, we are paying an EBITDA multiple of 10 to 12 times, which is a price we're comfortable paying for a growing, online business.

And we believe it is a good use of our cash.

Our internal Pro Forma does not include any revenue reductions related to GAAP purchase accounting associated with deferred revenues as of the closing date.

At the end of the call, as part of Q4 guidance, I will discuss the impact KnowledgeStorm will have on the fourth quarter.

A few additional comments regarding the assumptions in our Pro Forma, there are assorted non-core revenue streams in the KnowledgeStorm business that we do not plan to continue.

Also we have assumed a certain level of revenue attrition due to customer overlap and the fact that KnowledgeStorm has a number of very small customers that are difficult to serve profitability.

And those customers will not be a primary focus for us.

At this time, I'd like to turn the call over to our CFO, Eric Sockol, who will review Q3 results and discuss the accounting treatment of KnowledgeStorm.

Then Don Hawk will come on and add some color on the acquisition and Q3.

I will then return, give Q4 guidance, and then we will open up the call to questions.

Thanks, Greg.

Before we discuss the results, I'd like to remind everyone that we'll be presenting both GAAP as well as non-GAAP financial measures.

The non-GAAP financial measures, which will be discussed, are adjusted EBITDA and adjusted EBITDA margin.

We're reporting Q3 revenues of $23.3 million, which represents an increase of 15% over Q3 2006.

I will now discuss each of our revenue streams separately.

We're reporting Q3 online revenue of $14.7 million, which is an increase of 17% over Q3 2006 and represents 63% of total revenues for the quarter.

It's worth noting that during 2006 one of our national account customers ran a large marketing program, which was paid for with Intel Co-op marketing dollars.

The Intel Co-op sponsored campaign had a preset duration, which ended in January 2007.

The largest amount of quarterly revenues associated with this Intel Co-op program was recognized during Q3 2006 and equaled approximately $1.3 million.

As we have mentioned previously, many of our customers run advertising campaigns in conjunction with product launches.

Q2 and Q4 have historically been our strongest quarters because Q2 and Q4 are the quarters when IT vendors launched the majority of their new products.

Q3, on the other hand, is relatively slow from a product launch standpoint.

Therefore the revenues associated with this Intel Co-op program had a dramatic impact on year-on-year comparisons.

To illustrate, excluding the impact of this program, TechTarget's year-on-year online revenue growth rate was 31% for Q3 2007.

We are reporting Q3 event revenues of $6.9 million, which is an increase of 17% over Q3 2006 and represents 30% of total revenues for the quarter.

Historically Q3 is a strong events quarter, resulting in a higher percentage of total revenues for the quarter.

On a nine-month basis, events revenue represents approximately 25% of total revenues, which is consistent with its historical percentage.

Our events business continues to compliment our online offering and contribute to our profitability.

We are reporting Q3 print revenues of $1.7 million, which is a decrease of 6% when compared to Q3 2006 and represents only 7% of total revenues for the quarter.

The decrease in print revenues is primarily associated with our CIO Decisions magazine, which we plan to migrate from a print product to an online product in Q4.

Don Hawk will provide more detail on this decision later in the call.

Our two remaining magazines are both leaders in their respective market and continue to be profitable on a stand-alone basis.

With that said, print continues to be a smaller percentage of our overall revenues, and we expect this trend to continue.

Our customer concentration and renewal rates remain favorable during the quarter.

Our top 10 customers represented 26% of total revenues with no one advertiser representing more than 5% of total revenues.

Our quarterly customer renewal rate for the top 100 customers increased to 98%.

Moving on to gross profit, we are reporting total gross profit of 70%, which compares to 67% for Q3 2006.

The online business continues to demonstrate high operating leverage, achieving 74% gross profit, which compares to 71% for Q3 2006.

Regarding adjusted EBITDA, we're reporting Q3 adjusted EBITDA of $5.7 million, which represents an increase of 14% over Q3 2006.

For the quarter, our adjusted EBITDA margin remains strong at 25%.

Compared to Q3 2006, operating expenses excluding stock-based compensation, are as follows as percentage of total revenues.

Selling and marketing expenses increased 3% to 27%, product development expenses decreased by 1% to 7%, and G&A increased by 2% to 12%.

The increase in selling and marketing expenses as percentage of revenues is primarily attributable to our customer ROI Summit held in September 2007 and the hiring of 23 new sales reps in Q2 and Q3.

The decrease in product development is attributable to the increased leverage on salaries.

The increase in G&A is attributable to certain public company costs and additional office space.

Regarding expenses not included in adjusted EBITDA, stock-based compensation was $1.7 million compared to $91,000 in Q3 2006.

For Q3 2007, we're reporting net income of $1.5 million, which is a decrease of 3% compared to Q3 2006.

This decrease is primarily attributable to the increase in stock-based compensation expense.

Excluding stock-based compensation expense, income before provision for income taxes increased by 49% compared to Q3 2006.

Earning per basic and diluted share were both $0.04 compared to a loss per share of $0.16 for Q3 2006.

Our balance sheet and financial position remains strong.

At September 30, 2007 our cash and short-term investments totaled $108.7 million and after taking into account the KnowledgeStorm acquisition, our cash and short-term investments now equal approximately $56 million.

At quarter end our day sales outstanding was 53 days and our current ratio was eight times.

This wraps up my review of the Q3 financial results.

But before I turn the call over to Don, I would like to discuss some of the accounting aspects related to the acquisition of KnowledgeStorm.

As Greg expressed, we are very excited about the KnowledgeStorm acquisition.

As is standard with business combinations, there are certain GAAP purchase accounting pronouncements, which will in the short term limit the amount of revenue which we can, which can be recognized for KnowledgeStorm customer contract existing at the time of closing.

The accounting treatment does not impact the cash flow or business terms associated with these contracts.

Because the majority of the acquired contracts affected have a term of six months or less, we do not expect any impact on reported revenues to extend beyond the end of Q2 2008.

Whereas we just closed the transaction yesterday, the accounting impact on revenue is not yet finalized.

Also as part of the acquisition, we'll be recording additional intangible assets, goodwill, deferred taxes, and other standard purchase price adjustments.

My team and I are working closely with our auditors, Ernst & Young, on all of these matters, which will be finalized as part of the year-end audit.

At this time I'll turn the call over to Don.

Thanks, Eric, and welcome everybody.

We have a lot of exciting things to talk to you about today.

As we frequently mentioned, the biggest trend that's driving our success is the migration of advertising spend from traditional vehicles to online.

We spent a lot of time in Q3 and in early Q4 working on initiatives and plans that will further our ability to scale the business over the long-term to meet this increase in sales demand.

Today I'd like to take you through some of the most important developments and also provide you with an update on some moves that we're making with regard to one of our print properties.

Our acquisition of KnowledgeStorm positions us as the markets clearly dominate source of IT vendor content and lead generation.

It's an area that's already a major business driver for us.

In Q3 '07, for example, our primary lead generation related programs, white papers and web casts, have seen 30% year-over-year growth.

Between our existing lead generation programs and those offered by KnowledgeStorm, the two companies combined will produce approximately two million sales leads for IT vendors during 2007.

KnowledgeStorm alone generates approximately 3.5 million visits a month by IT and business professionals that are looking to research IT purchase decisions.

And it's attracted over a million registered members.

One of the very attractive elements of this deal for us, is that KnowledgeStorm's product approach and their pricing has been particularly well suited to small and mid-sized IT vendors.

Approximately 75% of KnowledgeStorm's year-to-date customers have not done business with TechTarget in 2007.

Some of these accounts are very small and not particularly profitable, so our revenue assumptions for next year do not assume 100% retention on the customer base.

But there's a sizable base of IT vendors that will significantly expand our advertiser base.

Another complimentary attribute of the acquisition is that KnowledgeStorm's offering is primarily based on content syndication.

This is a pole-based approach that takes advantage of their expertise and search engine optimization and search engine marketing to allow IT professionals searching the web for product and solution information to find relevant vendor content.

Our current lead generation offerings have a syndication element, but they emphasize push marketing through outbound email promotions to highly targeted recipients that have indicated interest in a particular topic.

The combination of both companies search engine optimization and search engine marketing expertise and of our pull and our push approaches to lead generation, creates an offering of the strongest value proposition for IT advertisers, the ability to reach active searchers for IT products and solutions and to proactively target highly qualified prospects.

Now having been through a very similar acquisition with Bitpipe three years ago, we're very confident in our ability to integrate KnowledgeStorm.

We eventually will be combining the product offering and selling them through a single integrated sales force.

We'll be able to offer a broader suite of services to some of the customers that we don't currently do business with.

And we'll enhance the reach of our shared accounts.

We'll take advantage of the best attributes of each company's customer service and operational infrastructure to even further improve the experience of our customers.

And we're going to realize significant cost savings with their existing expense base by combing infrastructure and functions where appropriate.

Another initiative we recently undertake and that we're very excited about is the launch of ITKnowledgeExchange.com.

It's our first site devoted entirely to User Generated Content.

Although we've experienced success with User Generated Content features on the other sites in our portfolio, ITKnowledgeExchange represents our most concentrated emphasis to date on facilitating peer-to-peer interaction amongst our users.

The site incorporates a number of important Web 2.0 features, such as the use of tag based navigation that allows user to sell classified content and wiki-based Q&A functionality that allows them to collaborate with each other to respond to inquiries submitted by other users.

Initial user reaction to the site has exceeded our expectations.

Now TechTarget is unique in the market because, as we've discussed previously, we bring together the three forms of content that IT users rely upon, independent expert content, distribution of vendor content, and peer-to-peer interaction.

Our heritage and strong editorials is the backbone of the Company and it's an ongoing area of emphasis for us.

Certainly our acquisition of KnowledgeStorm augments our position as the top source of vendor content.

And a site like ITKnowledgeExchange enables the creation of a critical mass of user generated content.

This supports our long-term scalability because at least in the IT market it tends to be a) very granular, thus it lines up well with the narrowly focused areas that we sell against.

And b) it's focused on problem solving and technology purchase decisions, both of which are related to the marketing objectives of our advertisers.

We also launched SearchTelecom.com in Q3, which provides decision makers in the telecom space with in-depth technical advice, business strategy, and information on new products and services.

SearchTelecom is an example of a capability of TechTarget that's an important driver to our growth and scalability over the long-term.

We've demonstrated a repeated ability to launch new sites out of existing markets that we serve.

In this case we had a strong telecom coverage area and user base within our existing search networking site.

And we were able to quickly execute on a new site launch that within only three months of its launch has over 100,000, highly qualified registered users.

This capability will play a large role for us as we consider our growth plans for 2008.

As Greg mentioned, we're currently in the active planning and pre-launch execution stages for at least seven new site launches between December and April of next year.

These launches are a good cross-section of the various types of launch opportunities that drive our business.

Two of the sites will be geared toward markets outside of North America.

Three of them will address rapidly growing sub-segments within existing markets that we serve with enhanced content and advertising opportunities.

And two others that we're working on will target vertical industries.

You'll be hearing more about these when we reconvene next year to talk about our Q4 and year-end results.

Now while we're certainly working to ensure that we can scale for future growth, we're also very focused on our immediate quarterly growth objectives.

Our online results in Q3 were assisted by particularly strong results in our storage media group, which continues to execute on highly targeted, editorial sponsorship opportunities.

And our data center group, which is being driven by its success against the rapidly growth topic of server virtualization, where we have already over 60,000 registered members in the first full year of operation of SearchServerVirtualization.com.

And by growth in our application development group, whose results were fueled by the rapid growth of the SearchSoftwareQuality.com site that we launched earlier this year.

I'll also note that our acquisition of Technology Guide is off to a great start, with traffic to the sites more than doubling to almost 20 million monthly page views since our acquisition.

We also have some early indications of traction on the advertising sales front.

We expect the Technology Guide sites to be a strong contributor to our 2008 revenues.

One final note to share with you is our decision to cease publication of our CIO Decisions print magazine as of this quarter.

As we've stated in the past, we view print very opportunistically in the context of our overall integrated product offering.

We've selectively utilized print in markets where there's an advertiser demand for integrated marketing programs that incorporate targeted branding and awareness campaigns.

Our other two print publications in the storage and security markets continue to be profitable and continue to benefit our sales efforts against online events in those markets.

We're very confident in the value of the audience of mid-market CIOs that we've built for CIO Decisions.

And we're equally as confident that we can monetize them more effectively through online.

So we're re-deploying our resources appropriately.

Greg will walk you through the financial implications of this decision to cease the print publication for Q4 as he outlines our guidance for the quarter.

So with that I'll turn the call back over to Greg.

And I look forward to discussing your questions in the Q&A.

Okay, thanks, Don.

So before I open up the call for questions, I'd like to share the guidance for Q4.

We are expecting revenue between $27.4 million and $28.6 million.

We are expecting adjusted EBITDA between $7.3 million and $8.3 million.

There are two recent events reflective in our guidance worth noting.

Regarding the discontinuation of CIO Decisions magazine, we are projecting of reduction of $300,000 for Q4 compared to our initial budget.

And at this time we are projecting the newly acquired KnowledgeStorm operations will contribute at least $1 million in GAAP revenue for Q4 and will lose no more than $1 million in adjusted EBITDA in Q4.

So in closing we're very excited about the opportunities in front of us.

And we're glad to take your questions.

Thank you.

(OPERATOR INSTRUCTIONS).

And your first question comes from the line of David Joseph of Morgan Stanley.

Please proceed.

Yes, hi guys.

I just have a couple of questions.

First, online revenue it looked like certainly there was a deceleration.

It sounds like Intel certainly provided a difficult comparison there.

But I was wondering if that was in line with your expectations as well for the quarter?

Did you see lead generation, or what kind of lead generation or even retribution growth you might have seen?

The second question is there's a little bit of a concern here, or economic concerns more recently around subprime and how it might affect a consumer.

I'm wondering if you're seeing anything?

You guys certainly have a good purview into the IT spending world.

I'm wondering if you're seeing anything on the enterprise front?

And then just thirdly, last question is OpEx grew 35%.

You said there was a lot of that related to the ROI Summit.

I was wondering if you excluded the ROI Summit if it would have normalized back down to maybe 23%, 24% of net revenue ex-dot com?

Thank you.

Okay, let me start with the subprime question, Dave.

So in terms of that we're not seeing any effects of that at all in our business.

We're not hearing any of our customers and advertisers talking about any slowdown.

So that hasn't trickled down to us at all.

In terms of your question about the online growth, and in terms of the growth of the audience, audience growth is still going on very strong.

In terms of the macro trends, those are still going as we expected.

So I think the main thing about Q3, and this is always historically true, is the seasonality that Eric talked about.

And most, we get a lot of revenue around new product launches.

So when someone launches a new product they do lots of pod casts and web casts and white papers.

And in the IT space, Q2 and Q4 is really when those product launches are done.

So historically Q2 and Q4 are always the quarters where we make our hay.

So any, in terms of product mix, any sort of difference of a few hundred thousand dollars here or there, I really think it's just a timing issue between Q3 and Q4.

In terms of the OpEx question I'll let Eric tackle that.

Yes, Dave, regarding the operating expenses, if you really look at run rate between Q2 and Q3, the adjusted EBITDA margin was the same percentage this quarter versus the comparable quarter last year.

And definitely the ROI Summit was the majority of that increase.

And as I touched upon, we have hired 23 sales reps in Q2 and Q3.

So those two things combined is really what makes up the majority of the increase.

Our cost structure is, as we talked about the in the past, it's a fixed cost structure with 70% plus being labor related.

So there's really no surprises there in the cost.

So should we - I guess my point being is that should we expect it to remain at current levels as a percent of revenue or should we expect it to come down a little bit?

How should we think about that going forward?

Well I think you'll see if you take the three line items, that being selling and marketing, product development, general and administration.

Product development will definitely be coming down as you see this quarter because of the leverage on salaries.

I think that you will not see big differences.

This is probably a peak because, as we've mentioned, Q3 is a slower quarter revenue wise.

So in Q4 you would see those numbers coming down.

And the other point I'd make, two other points, one is this is our first full quarter with public company costs so that we'll have those continuing to go forward.

But in terms of those sales reps that we hired, we're paying their salaries.

But the way we hire seniors right out of college.

And they don't start to materially contribute revenue for approximately two quarters.

So right now we're kind of in a start-up phase with those new sales reps not contributing.

But they start contributing in 2008, 2009 you'll see some benefit there.

Great.

Thanks, guys.

And your next question comes from the line of Doug Anmuth from Lehman Brothers.

Please proceed.

Hi, this is actually Brian on the call for Doug.

A few quick questions, could you give sort of an organic growth rate in the third quarter if we back out any contribution from I guess Technology Guide would be the only one at this point, right?

Sure hey, Brian, in response to the question about organic growth.

I mean part of our growth strategy is to acquire online properties and products, some of which will be immediately combined with existing products and sites and others, which may not.

It's our internal policy not to disclose publicly revenue growth between organic and non-organic.

On an annual basis we do have an internal organic growth rate target of 20% for online revenues.

And to date nothing has come to our attention, which would cause us to change that target.

Don did mention, and he can expand upon this, that the acquisition of Technology Guide is going very nicely both from a traffic and a revenue perspective.

But we really, it's not our policy to provide detail at that level.

Okay, no problem.

And just another quick one, print was better or the decline was definitely not as severe as we had expected.

And I understand your shutting down or moving the other business online.

Was there anything sort of one-time or exceptional in the third quarter to make this I guess the decline less severe than we had thought?

I wouldn't take the Q3 results and extrapolate too much from that with regard to print.

Certainly as I mentioned in my comments, the remaining publication storage and security, they're solid performers for us.

And the difference in print results from quarter-to-quarter, given that it's off of a small base can be impacted by an advertiser or two coming in for a particular campaign.

So that's probably what you're seeing there with regard to maybe a little bit better than expected print results there.

Like I said, they're not, our print properties help us with regard to our sales of online and with regard to our sales of events.

They're profitable.

Not growth drivers for us, but benefit our efforts in other areas.

All right, thank you very much.

And your next question comes from the line of Jim Friedland of Cowen & Company.

Please proceed.

Thanks, a few questions.

First on the KnowledgeStorm acquisition, are 100% of those revenues online in terms of what you're talking about once you get it integrated?

The second question is now that you've basically acquired the biggest player left, are there any other potential big acquisitions out there?

Or are we just going to see tuck-ins here and there?

And then the third and last question is since we talked a quarter ago on the call, any changes in the competitive efforts or positioning of CMP and IDG?

What are they doing better or worse?

Thanks.

Okay, this is Don.

So I'll take at least the first piece of that and maybe a piece of the second piece of it.

With regard to the revenue mix for KnowledgeStorm, yes, it's 100% online.

And as I alluded to and Greg alluded to in our comments, we're really excited about it because it's related to the piece of our online revenues that are growing the strongest, which is our lead generation piece.

So as I mentioned we saw 30% year-over-year growth with regard to white papers and web casts, which are our primary lead generation vehicles at TechTarget in Q3.

So these guys are also, they also have an online lead generation offering.

And what's great about it is they have a customer base that is comprised at a very high percentage of kind of small to mid-sized vendors that we're not currently doing business with, so very complimentary from that regard and again, 100% online.

You said hey, is there anybody big left that you guys can go after at this point?

We're not going to comment obviously on specific properties that we might be looking at, but if in fact we're left with tuck-ins that's great for us, right?

We've shown a demonstrated ability to be able to execute on those types of deals.

And they do a good job of driving our business in the individual markets where we identify them.

And we do see a lot of those types of opportunities available to us.

Jim, in terms of competitive efforts from the traditional media companies, we haven't seen anything, any significant differences.

The one change that happened at CMP within the past couple of weeks, they announced that their CEO of CMP has been transferred internally.

And they are doing an external search for a CEO.

But in terms of anything in the marketplace, we haven't seen anything different

And Greg, one quick follow-up to that.

Were you guys competing with anyone else for the purchase of KnowledgeStorm?

Yes.

So KnowledgeStorm was, they were represented by a bank and they went through a process.

Okay, great.

Thanks a lot.

And your next question comes from the line of Jordan Rohan of RBC.

Please proceed.

Thanks so much.

I'm just doing a quick math on KnowledgeStorm and it looks particularly accretive to free cash.

If you take $5 million of EBITDA, subtract the net interest expense that you would forego in the acquisition with the $52 million outlay, there's a little bit of CapEx, maybe something else.

You're still talking about accretion net of tax north of $2 million on a go-forward basis after integration.

Do I have that right?

From, Jordan, this is Eric.

We expect the acquisition to be fully accretive in 2009.

There is, and by the way this isn't fully finalized cause we have to go through the value of the intangibles and the amortization period.

But we think by 2009 it's fully accretive.

Okay.

Now that's on an EPS basis.

If I look on a free cash flow and exclude the amortization of intangibles --

Oh, then absolutely, absolutely.

I was speaking from a GAAP perspective, 2009.

Of course prior to that it's probably with almost immediate, if you will.

Right.

It almost has to be somewhere if you're adding $5 million of EBITDA.

Yes.

We expect to be able to implement a lot of the cost synergies very quickly.

And therefore to be creating, as you're speaking, cash flow positive very quickly.

Yes, so Jordan just in terms of what we can do with this business and in terms of the acquisition price, we think it's a great use of cash.

Really helps us scale the business.

We're very bullish on this deal.

All right.

Fantastic.

Thank you guys.

Thanks, Jordan.

And our next question comes from the line of Sandeep Aggarwal of Oppenheimer & Company.

Please proceed.

Thank you.

A couple of questions, one is if you can throw some color in terms of the trends you saw in U.S.

versus international?

And secondly, you talked about these seven new web sites.

If you can provide some color in terms of which category these web sites fall in?

And are there anymore additional original sites?

And the last question is you talked about the old lab of advertisers between KnowledgeStorm and TechTarget.

Can you also talk about maybe the user space in terms of monthly uniques?

Or were those users were kind of overlapping there?

Thank you.

Sure.

So in terms of international, so we remain very bullish on the international opportunity.

It remains a small part of our business today.

It's still less than 2% of our revenue.

It's growing very rapidly.

But it's off a small base.

And two of the web sites of the seven web sites we were talking about launching by the end of Q1, two of those will be our first two international web sites that we launch outside the U.S.

In terms of the other five sites, I don't really want to talk about specifics yet cause we haven't announced them publicly so I don't want to give the competition the advanced notice there.

And then in terms of traffic overlap I'll let Don tackle that.

Yes, just a quick follow-up there on the sites.

The point we're trying to make there, just want to reiterate, is that it's the sites that we're looking at, well we'll tell you exactly what they are next time we get together and they're actually launched, they're a great cross-section of the types of things we generally look at.

And they're a great cross-section of the types of things that drive our business.

So we've got international launches in there.

We have carve outs from existing markets.

And we have vertical industries.

And these are three things that we've shown again and again an ability to execute upon very quickly.

Now with regard to your question on the overlap of the users, again very attractive element of this deal for us, we actually did an overlap analysis between the registered member bases of the two companies.

We saw less than 20% overlap.

So this is going to be great for us in terms of driving our business.

It's going to be fantastic for our advertisers in terms of extending their reach in the IT user and the business user community that are looking for technology solutions.

Thank you.

And there are no more questions at this time.

I would now like to turn the presentation back over to Mr.

Strakosch.

Please proceed.

Great.

I'd just like to thank everyone for taking the time to listen to the call.

We're very enthusiastic and optimistic about the opportunities we have in front of us.

So I hope that that came through.

And thanks again for your time and we'll talk to you next quarter.

Good night.

Thank you for your participation in today's conference.

This concludes the presentation.

You may now disconnect, and have a great day.