TechTarget Inc (TTGT) 2010 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the TechTarget Fourth Quarter and Year End 2010 Conference Call and Webcast.

My name is Eric and I will be coordinator for today.

At this time, all participants are in a 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.

(Operator Instructions).

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

I will now turn the call over to Mr.

Rick Olin, Vice President and General Counsel.

You may proceed.

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, are using today, and plan on using going forward.

As you saw, we issued our press release earlier 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 Information section of our website and furnished with our 8-K filing today management's prepared remarks.

These remarks are meant to function as the script otherwise would for this call.

On the call today, Greg will provide a brief summary of our financial results for the most recently completed quarter and full year, and then management will devote the rest of the call to answering your questions.

Additionally, I'd 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 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 that actual results may differ materially from those contemplated by such forward-looking statements.

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 the other filings 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 Jeff Wakely, Chief Financial Officer and Treasurer.

I will now turn the call over to Greg.

Great.

Thank you, Rick.

We had a record of $24.3 million in online revenue in Q4.

Our previous high watermark from online revenues was $20.6 million.

Online revenue for the year was up 14% and adjusted EBITDA was up 42% for the year.

We are guiding for 14% online revenue growth in 2011 and 33% adjusted EBITDA growth in 2011.

Despite there being a relatively flat IT market environment in 2010, we were able to gain market share due to our investments, primarily in our new Activity Intelligence Platform and our international operations.

We believe we will see further upside when the economy improves.

As a reminder, please make sure that your model has 37 million shares to reflect the 5.9 million shares self-tender we did in December of 2010, as many financial websites have not made that update yet.

I will now open up the call to questions.

(Operator Instructions).

And our first question will come from the line of Colin Sebastian from Lazard.

You may proceed.

Great.

Thanks, and a good quarter.

First question, based on the comments in the script and the return to normalized spending patterns along with a stronger pipeline, could you clarify, is that centered on the Enterprise Application sites you mentioned or is this upturn really across-the-board?

And then secondly, regarding the shift in the mix to more [Legion].

Is that a byproduct of the macro rebound and larger ad budgets or is that more closely tied to the rollout of the Activity Intelligence Platform?

And I have one follow-up.

Thanks.

Sure.

Colin, this is Don.

On the first question, it's definitely more broad-based than just the Enterprise Applications Group.

[In the comments], I certainly pointed out the strength that we have in Enterprise Applications because that's something that has really taken a sharp upturn for us in the latter half of 2010.

But we're definitely seeing strength across-the-board in all the media segments that we serve, and we feel pretty good about that.

In relation to the second question, I believe you were asking whether or not the upturn in Legion was specifically because of our Activity Intelligence Platform or whether it was a -- kind of symptomatic of the general upturn in advertising budgets.

I would like to think that we had a good part in driving that success through Activity Intelligence.

Certainly, the kind of growth that we saw in 2010 was beyond what I would say was the growth in the advertising budgets from the customers that we service.

So, a lot of that had to do with the fact that we had additional capabilities that we could bring to bear that led them to spend that money with us, and we think that puts us in good position heading into 2011.

Certainly, as the economy improves, we get a disproportionate benefit from that because we have the leading position that we have.

So really, I think the answer there is both.

But in 2010, in particular, I think a lot of that was driven by some of the investments that we made during the downturn.

Okay.

I guess related to that, in the script you talked, of course, about gaining market share.

I think you got [it to] 14% growth online for 2011.

And is that an expansion of or an acceleration of market share gains?

And is that coming from the shift from offline, or are you also seeing some movements from other, say, competing online platforms?

Thanks.

Yes.

I think it's -- when the marketing budgets are relatively flat, what we're seeing is a shift of allocation from offline to online.

And I think it's one of the good parts of a downturn is it really accelerates that shift.

Our belief is when marketing budgets start to grow again, most of those new incremental dollars will be allocated to online.

And we will get -- as the leader in online IT, we will get a big share of that, and that's how we will get back to our historical growth rate of 20% plus.

Okay.

Thanks very much.

Your next question will come from the line of Jim Friedland from Cowen and Company.

Please proceed.

Hi, thanks.

This is [Kevin Copeland] in for Jim.

Could you just tell us -- give us a little color on what you're seeing in the first quarter to date?

And then also, just looking out into the year, could you help us out with the quarter-to-quarter trends?

Does it make sense to see -- to look at Q3 as an easy comp?

And I have just one housekeeping question on the shares outstanding.

Is that 37 million, is that basic or diluted?

Thanks.

You want to tackle that first, Jeff?

Yes.

The 37 million is the basic shares.

So, fully diluted, there's another 2 million that really come into play on a fully diluted basis, that you would need to model (inaudible - microphone inaccessible) 39 on a fully diluted basis.

Okay.

Then in terms of, Kevin, your question about seasonality, what we're seeing is normal seasonality coming back into the business -- the seasonality that we saw before this last downturn for the 10 years of the business.

So basically, how that typically works is the beginning of Q1, people are still figuring out their budgets and figuring out their marketing plans.

And so the end of Q1 tends to be strong, leading into a strong Q2 when there's a lot of product launches.

Q3, which is the summer, tends to be a little bit less than Q2, and then Q4 is the biggest quarter of the year with a lot of product launches and a big end-of-the-year push.

So we're expecting, if you go back to pre-downturn, that type of seasonality to be back in the business in 2011.

And in terms of Q1 specifically, it's very normal.

We're having very encouraging conversations with a lot of our advertisers about their marketing plans for the end of this quarter and into Q2.

Okay, great.

And just on engagement, what are you guys seeing as far as just how much the IT professionals are using your sites?

We've continued to see great trends on that front.

Interestingly, during the downturn we had good trends on that front as well, so it isn't as if when the purchasing activity stopped, the research activity stopped along with it, which actually makes us feel pretty good about the amount of pent-up demand that exists out there for IT services and for products, which obviously translates into advertising demand for us.

So it was strong during the downturn.

It continues to be strong now.

Okay.

Thanks a lot.

At this time, I'm showing no further questions in queue.

Ladies and gentlemen, that concludes TechTarget's conference for today.

They thank you for your participation and you may now disconnect.

Everyone, have a great day.