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Operator
Good day, ladies and gentlemen, and welcome to TechTarget Fourth-Quarter and 2009 Conference Call and Webcast.
My name is Keisha, and I will be your coordinator for today.
At this time, all participants are in listen-only mode.
Following introductory remarks by Greg Strakosch, TechTarget's CEO, Chairman and Co-Founder, we will be facilitating a question-and-answer session for today's conference call.
(Operating Instructions)
As a reminder, this conference call is being recorded for replay purposes.
I will now turn the call over to Rick Olin, Vice President and General Counsel.
Rick Olin - VP, General Counsel
Thank you, operator.
Before turning the call over to Greg, I want to briefly remind everyone on the call of the earnings release process that we began using last year and are using today and plan on using going forward.
As you saw, we issued our press release at 4 p.m.
today.
And, as we previously announced, in order to provide the usual update on the business ahead of this call and hopefully save you all some time and effort, we have posted on the investor section of our website and furnished with our 8-K filing today management's prepared remarks.
These remarks are meant to function as a script [or] otherwise would for this call.
On the call today Greg will provide a brief summary and financial guidance for Q1, and then management will devote the rest of the call to answering your questions.
Additionally, I would like to remind everyone that, during the course of this conference call and the Q&A session, 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, including particularly its guidance as to future financial results.
Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ completely from those contemplated by such forward-looking statements.
These risks include market acceptance of our products and services, relationships with customers, strategic partners and our employees, difficulties in integrating acquired businesses and changes in economic or regulatory conditions or other trends affecting the Internet, Internet advertising and information technology industries.
For a description of these and other risks, the Company encourages you to read the section entitled risk factors in our annual report filed on form 10-K, as well as our other filings that we have made with the Securities and Exchange Commission.
In addition, the forward-looking statements speak only as of the date of this call, and the Company undertakes no obligation to update these forward-looking statements.
Following Greg's introductory remarks, in addition to Greg, the following members of our management will be available to answer your questions, Don Hawk, President and Co-Founder, and Eric Sockel, Chief Financial Officer and Treasurer.
I will now turn the call over to Greg.
Greg Strakosch - CEO, Chairman, Co-Founder
Great.
Thank you, Rick.
Welcome to the call.
It feels like we are starting to turn a corner.
Online revenue was up in Q4.
This is the first time in a year that quarterly online revenue increased on a year-over-year basis.
We are forecasting low double-digit online revenue growth for both Q1 and 2010.
We are expecting this growth, despite the fact that the economic conditions remain challenging.
When the economy improves, we expect online revenue growth rates to return to our historical norms.
Guidance for Q1 of 2010 is as follows.
Total revenue between $19.7 million and $20.7 million, online revenue between $17.5 million and $18.3 million, event revenue between $2.2 million and $2.4 million.
An adjusted EBITDA between $1.6 million and $2.4 million.
These adjusted EBITDA numbers include $300,000 in one-time costs associated with the accounting investigation and $400,000 in one-time costs associated with relocation of our corporate headquarters.
I will now open up the call for questions.
Operator
(Operator Instructions)
Your first question comes from the line of Colin Sebastian with Lazard.
Please, proceed.
Colin Sebastian - Analyst
Okay.
Thanks very much.
First, congratulations on getting back to growth.
And, along those lines, I wonder, first of all, if you can rank the investment initiatives that you're planning for the year ahead in terms of the near-term impact on your business and then the capital outlay that's required for each of those initiatives.
Greg Strakosch - CEO, Chairman, Co-Founder
Well, in terms of the -- we're doing site launches.
Those tend to have a gradual ramp-up.
There's not a large amount of capital required for that.
A secondary where we're very focused is our international expansion, and that is more of a longer-term investment.
It's not a huge capital investment.
But the margins that we'll receive on our International business will be somewhat lower in the short term.
Another area where we're investing is against the largest accounts.
And so, that entails hiring some headcount, and that tends to be gradual as the revenue grows.
And then probably the most capital-intensive is we're starting to get a little bit more active with some acquisitions.
And there's some capital required there, although we don't foresee doing any very large acquisitions in the short term.
Mostly it would be like the ones that -- the last two that we've done that we've just recently announced where they're tuck-in acquisitions.
Colin Sebastian - Analyst
Okay.
And then, either, Greg, or Don, you talk -- can you talk a little bit more about the custom programs, perhaps some concrete examples of what those entail and whether you're actively rolling these out currently with some of your top funders?
Don Hawk - President, Co-Founder
Yes, this is Don.
I'll take that one.
So the largest vendors that we sell to tend to have initiatives that they pursue where they like to get broad reach for those initiatives across -- broadly across the IT professional space.
They tend to be combinations of branding and lead gen.
And the key characteristic of these programs is that they need help in creating the content that is to be promoted.
So, if -- again, from previous discussions you're familiar with our model where vendors bring us their content assets and ask us to help them to promote them to our audience, in these custom program examples the vendors actually want us to help build out the content and build out the appropriate for the type of audience they're looking to reach.
So, we are doing these types of programs today.
We've done them in the past on an ad hoc basis, but we haven't had as good of a functional capability against these as we have going into 2010.
It hasn't been as big of a priority for us in the past as it's going to be in 2010.
So, we have done these types of programs.
They're with, again, the largest vendors that we do business with, the HPs, the IBMs, vendors like that.
But we do see it being a big area of growth for us going forward.
Colin Sebastian - Analyst
Okay.
And then, I guess, lastly, Eric, in terms of G&A and realizing that there are a number of nonrecurring or non-cash charges, can you give us some sense as to what the normalized quarterly run rate in G&A should be going forward?
Eric Sockel - CFO, Treasurer
Well, as far as normalized -- our guidance is -- you know we don't give at the specific expense line item.
Our G&A costs, or, actually, our operating costs were pretty flat Q3 to Q4.
And we would expect them to be pretty much in line with Q4, with just normal type of compensation increases and things of that nature.
There shouldn't be anything unusual from our Q4 run rate.
Colin Sebastian - Analyst
Okay.
All right.
Thanks very much.
Operator
Your next question comes from the line of Jim Friedland with Cowen and Company.
Please, proceed.
Jim Friedland - Analyst
Thanks.
First, a question on the acquisition front -- so, you guys are saying mostly tuck-ins ahead.
Are those tuck-ins in guidance or, if you guys do a bunch of these, could we see some incremental growth on top of that -- call it, 10% plus online growth that you've guided to?
And then just a housekeeping on effective tax rates -- should we be using 44% this year?
Thanks.
Greg Strakosch - CEO, Chairman, Co-Founder
Yes, so, on the acquisitions, those have potential upside.
Basically, what the strategy is -- we try to buy properties that are under-monetized, but have good content and good traffic.
And then we plug it into our sales infrastructure, and we tend to be able to monetize those pretty well.
So, that could be some upside in terms of the year if we're able to do some additional ones.
I'll let Eric --
Eric Sockel - CFO, Treasurer
Yes.
Greg Strakosch - CEO, Chairman, Co-Founder
-- answer the tax question.
Eric Sockel - CFO, Treasurer
Hey, Jim.
Jim Friedland - Analyst
Eric.
Eric Sockel - CFO, Treasurer
As far as the effective tax rate, what we -- we are a taxpayer because we make money.
And the thing that kind of makes the effective tax rate fluctuate so much is the stock-based comp, because of the tax treatment.
Only about half of the stock-based comp is deductible for taxes.
So, I would recommend backing out stock-based comp, only using half of it as -- for deductibility, and then using a tax rate of around 40% would be appropriate, because we're at about 35% federal and maybe it's 41% when you add state to it.
Jim Friedland - Analyst
Right.
Which would get us to the effective tax rate.
Eric Sockel - CFO, Treasurer
Right.
But you have to back-out the stock-based comp and then apply a 41% tax rate.
Jim Friedland - Analyst
Yes, okay.
Great.
And then just on that question was the potential for upside with the tuck-ins.
These small acquisitions -- these two small deals that you've made, is that in the current guidance or would -- whatever comes of that, will that be incremental?
Greg Strakosch - CEO, Chairman, Co-Founder
Yes, that will be -- that should be incremental going forward.
Jim Friedland - Analyst
Okay.
Great.
Great.
Thanks, guys.
Operator
Your next question comes from the line of Doug Anmuth with Barclays Capital.
Please, proceed.
Douglas Anmuth - Analyst
Hey, guys.
How are you doing?
A couple questions for you -- so, first, I just wanted to follow up, Don, I guess on the custom programs.
And, in particular, I'm curious about the size of these programs.
How much more revenue can one of these single programs generate versus what you have previously done in terms of bundled programs when you had multiple components to them?
And then, also, if you could comment on the margin profile of those programs -- and I have a couple of follow-ups as well.
Thanks.
Don Hawk - President, Co-Founder
Yes, so, with regard to deal size, they tend to [skew] larger for sure.
And, at the very high end, some of these programs can be multimillion dollar opportunities for us.
None of the ones that we're working on out of the gates are of that size.
So, when we give the kind of directional guidance that we've given with regard to online revenue growth this year, those type of opportunities would, essentially, be upside to that.
But, even your -- I'll call them your bread-and-butter custom program opportunities tended to be six-figure deals.
And they have very good margins associated with them.
Again, one of the reasons we have pursued a centralized capability against this, instead of attacking these opportunities somewhat ad hoc, is that we can bring better efficiencies to bear with regard to the cost.
So, if we get to help a vendor go out and create content, we're able to do that very inexpensively and maintain very good margins on these deals.
So, it's not a situation where this custom revenue is at a margin profile that's dramatically different than the rest of our online business, and it's not going to bring down our overall margin for the business.
Douglas Anmuth - Analyst
And is there any kind of target in terms of a percentage of the online revenue that you will do over the next year or three years, let's say, that you think theses programs could represent?
Don Hawk - President, Co-Founder
I think it's a little early for us to draw conclusions on that.
Like I said, I'd leave it at the fact that we're pretty excited about this opportunity.
We don't see it becoming the majority of our business, but it's a very good growth opportunity, and it has a good amount of runway for us.
Douglas Anmuth - Analyst
Okay.
Another one, Don -- in the -- toward the end of the comments that you had prepared, you talked about using more data basically around user interactions and how that's been a game-changer for you.
Can you provide a little bit more color there and maybe quantify what kind of lift you're seeing when you're using more data and what that's meaning in terms of lead gen effectiveness at the end of the day?
Don Hawk - President, Co-Founder
Sure, it's an area we're really excited about.
In our opinion, the entire game here over the long term is scalability.
Vendors are going to be increasing demand, both as the economy comes back and just in terms of the general direction of their marketing budgets with regard to lead gen.
And their request from us and from anybody in this space is going to get more and more specialized.
So, if you're in this business, the whole shooting match, if you will, is regard to how much yield you're able to get out of you audience.
The approach that we're taking now, with regard to bringing additional data points about our users to bear against how we message to them, is allowing us to make much more efficient use of our lists.
So, directionally, the guidance I give you there is that we're seeing something in the neighborhood of five times the response rate, or the acquisition rate, if you will, from our audience from bringing these data points to bear versus what we have seen previously when we were messaging to them really just based on what they told us they were interested in.
So, again, just to re-cover ground we may have discussed previously, what we're doing is we're actually observing what they do in our sites, and tailoring what we send to them exactly to what they have done and what the interactions that they've had with us have shown.
And that has been very dramatic in terms of its impact on response rate and acquisition rate.
Douglas Anmuth - Analyst
Okay.
And then just a last one -- can you talk a little bit more about the site pipeline, I guess, new site pipeline?
Obviously, talk a little bit about health care IT and, I guess, the new site of SearchHealthIT.com.
Any clarity on how many additional sites you have planned and in what categories we should be thinking about them over the next year or so?
Unidentified Company Representative
Well, I think -- I see the health I.T.
That's one.
The areas of the market that are very strong -- still things going around the data center, data center consolidation, virtualization, green IT.
So, those are areas that are strong.
And, in terms of this acquisition we just announced this week, eBizQ, we were going to launch a site around that topic; we ended up acquiring one instead.
So it's -- I think you'll probably see launches of roughly at least one per quarter.
Douglas Anmuth - Analyst
Okay.
Great.
That's it for now.
Thanks, guys.
Operator
Your next question comes from the line of Sameet Sinha with JMP Securities.
Please, proceed.
Randy Katz - Analyst
Hello.
This is Randy Katz, in for Sameet.
A couple questions around -- let's start with the Events business.
If we look at the guidance you had given for 2010 -- low double-digit online growth and declines around 25% an event -- that gets us to around that 90% and 10% split.
I guess, first of all, when we're attending events, the attendance in the last 18, 24 months has been pretty poor.
I'm wondering what kind of decline we should continue to see after 2010.
I mean, is this segment core to you or is this something that perhaps we could even have potential to continue to see those same declines moving forward, or do you see a rebound in the Events segment as the economy does continue to rebound, is my first question?
Also, on the Events business, if we look at 25% decline in that business year-over-year and the guidance for the quarter in the Events segment of $2.2 million, $2.4 million, that's actually growth in the first quarter.
So, I was hoping you could give us a sense of what the variability may look like by quarter if there's certain quarters we may pull back heavier than others.
Obviously, the first quarter is not going to be a contributor to that downside.
If you could give us a sense of the --
Unidentified Company Representative
Yes --
Randy Katz - Analyst
-- that would be helpful.
Unidentified Company Representative
Yes, so, in terms of the events calendar, Q1 is a small quarter, because we don't do as many events during the winter.
So Q2 and Q3 and Q4 there's more events.
And most of the events that we cut are in Q2 and Q3 and Q4.
But it will be a little bit -- I said this in the comments -- a little bit choppy throughout the year based on the event schedule.
So, that will be reflected in the quarterly guidance that we give each quarter.
In terms of the overall event environment, it's very challenging.
But two things to understand about our model -- one is that most of our event revenue is exhibit revenue.
So most of the events that we do are on a qualified model.
If you have the right demographics, you can come for free.
So, the decline that people are seeing on the paid events has been very dramatic.
But I think, in general, the Events business has been weak; that's why we've cut back on our event schedule.
But looking long term as the event -- as the economy improves, the Event business will improve too.
And I think what we're targeting is a long-term ratio -- 90% online and 10% events is a good amount.
And our online revenue will be growing we believe very significantly when the economy improves.
So, that means that event revenue will be growing as well to keep up with that.
While most marketing budgets are shifting towards online, because it's very measurable and that's where most of the research is done, IT vendors still want to do events.
They still want to look prospects in the eye.
So, the event that -- unlike the Print business, which I think is going to go away eventually, I think that the Event business will be here to stay.
And that will be a small, but an important part of our business.
Randy Katz - Analyst
Sure.
Okay.
Thank you.
And then, in terms of guidance, I think that, if we look at -- even if we add back the incremental expense associated with the accounting investigation -- the $400,000 for facility relocation, that would still get us to an implied margin in the first quarter in the 13% range or so.
For 2010, your guiding towards 18% to 22%.
Can you give us a sense of something that could be shifting those numbers in the back half of the year, any other one-time expenses in the first quarter, perhaps, or is it just conservatism as we look out into the year on the 18% to 22% range?
Eric Sockel - CFO, Treasurer
Randy, this is Eric.
If you look at last year's Q1 of 2009, we only produced an 8.7% EBITDA margin.
So it's very common for us in the first quarter of the year to have an EBITDA margin that is much lower than what end up for the entire year.
In 2009, if you were to add back those non-reoccurring professional fees related to the accounting matters, we achieved an 18% EBITDA margin even though we only had 9% EBITDA margin in Q1 of that 2009.
So, the ranges that have been given for the year are consistent with the ranges that we're giving for Q1 from an EBITDA margin percentage.
Unidentified Company Representative
It's a revenue issue.
So the reason that the EBITDA is lower in Q1 is that there's -- most of the cost base is fixed.
And, as revenue increases in subsequent quarters, that's what's driving the higher margins in those quarters.
Does that make sense?
Randy Katz - Analyst
Yes, thank you.
Operator
Your next question comes from the line of Sandeep Aggarwal with Collins Steward.
Please, proceed.
Sandeep Aggarwal - Analyst
Thanks for taking my questions.
Actually, I have a bunch of them.
One is that -- what kind of properties are seeing more visible signs of recovery in terms of online ad spend?
And which type of properties you think are still lagging behind?
Don Hawk - President, Co-Founder
So, in -- Sandeep, this is Don.
In my prepared comments, I talked a little bit about some of the areas where we were seeing strength.
And it was interesting to us that some of the media groups where we have a more of a concentration of small to midsize customers where we were really taking it on the chin a bit when the downturn was in full force, we're actually seeing -- starting to see a decent amount of recovery there.
So, markets like enterprise applications, our Windows-related websites, for example.
We've been seeing some strength in the application development space now.
So, these markets are doing better than they were during the downturn, which makes us optimistic that the recovery is underway here.
And then the markets that really remain strong even during the downturn were the areas of IT that had strong spending rationales.
Right?
These are areas where either there was cost-savings involved for making that type of IT purchase or it was an area that was non-discretionary, something like compliance.
So, markets like storage for us, like data center, the virtualization space, these are markets that really did withstand the downturn very well.
And they're even getting stronger now as we're moving out into what we hope to be a good-size recovery.
Sandeep Aggarwal - Analyst
And a similar type of question -- but we hear mixed things about enterprise IT demand pick-up.
So I guess the question is what kind of -- what other missions do you have in terms of enterprise demand pick-up in terms of time and how -- I guess, basically -- and how does that impact a delay in enterprise IT demand?
How does that impact your guidance?
Don Hawk - President, Co-Founder
Well, I don't know if we view it that homogenously.
Right?
I think we view it as a collection of individual markets within enterprise IT.
And that's the answer I was just giving you.
So that's, I guess, the good thing about our model, in that it is a portfolio of markets is that we benefit as those various markets recover.
So, as I was saying, the markets with the strongest spending rationales are the ones that stayed strong.
Other markets that really had spending decisions deferred during the downturn we're starting to see those pick back up now.
I don't know if I'm answering your question.
But I don't know if we have a firm and fast opinion about general enterprise IT demand.
We look at it more as a market-by-market dynamic that we need to keep track of and that influences our business.
Sandeep Aggarwal - Analyst
Sure.
That's all right.
And then just two more question.
And one is about -- what do you think about this Google Apps Marketplace?
It seems like in your press release you were saying that you did some work.
I'm just wanting to know did you work with Google on this launch of Google Apps Marketplace?
And is that maybe an indirect competitive threat for the TechTarget's business model?
Unidentified Company Representative
Yes.
No, what the press release refers to is proprietary research on the market that we do with Google.
And so, what we have done is our second study with Google where we do research with IT professionals about how they use search and how they use the Internet during the research process.
So, that's what that is -- that's what that refers to.
Sandeep Aggarwal - Analyst
And just -- what are your views on the Google Apps Marketplace?
Is that -- does that pose any threat for TechTarget business model?
Unidentified Company Representative
No, I -- we don't really see that being very relevant to what we're doing here.
Sandeep Aggarwal - Analyst
Okay.
And just last question -- and sorry for stealing so much of time.
But just any update on the CFO position?
And, Eric, we would love to continue to chat with you, but since there was just -- I was just wondering is there any update on the CFO position.
Unidentified Company Representative
Yes.
So, we have hired a recruiter that we're working with.
And we have started to interview candidates.
So, we're in the early days of interviewing people.
So, we're -- that process has been kicked off.
And when we have something to announce, we'll put something out there.
Sandeep Aggarwal - Analyst
Thank you very much.
Operator
There are no further questions at this time.
I would like to thank everyone for their participation in today's TechTarget Fourth-Quarter and 2009 Conference Call and Webcast.
This concludes the presentation.
You may now disconnect your lines.
Good day.