TechTarget Inc (TTGT) 2014 Q1 法說會逐字稿

Good afternoon, everyone, and welcome to the TechTarget Q1 2014 Earnings Conference Call. (Operator Instructions) Please note today's event is being recorded. And at this time I'd like to turn the conference call over to Mr. Bob Kellegrew, General Counsel. Sir, please go ahead.

Thank you, Jamie. Before turning the call over to Greg, I want to remind everyone on the call of our earnings release process. As you saw, we issued our press release at 4:00 p.m. today. As previously announced, in order to provide you the usual update on the business ahead of the call, we have posted a letter to the stockholders from Greg on our Investor Information section on the website. We have also furnished it with our 8-K filing.

The stockholder letter is intended to provide supplemental information about the quarter ended March 31, 2014. On the call today, Greg will briefly summarize our financial results for the most recently completed quarter, 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 forward-looking statements are not guarantees of our future performance, and involve risks and uncertainties, and the actual results may differ materially from those contemplated by such forward-looking statements.

These risks, along with other items, 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, and other trends affecting the internet, internet advertising, and information technology industries.

For a description of these and other risks, we encourage you to read the section entitled Risk Factors in our Annual Report on Form 10-K, as well as other filings we have made. 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 Team will be available to answer your questions - Mike Cotoia, our Chief Operating Officer, Janice Kelliher, our Chief Financial Officer, and Kevin Beam, our President. I now turn the call over to Greg.

Thanks, Bob. We are happy to report 20% online revenue growth in Q1. Our strategy to use our strong balance sheet and healthy cash flow to invest in the business during the downturn is paying off. We continue to make good progress with the rollout of IT Deal Alert, and with the continued expansion of our direct international operations.

Based on this progress, today we are raising our 2014 guidance. In terms of revenue, our previous guidance was for double digit revenue growth. We are raising that today to low to mid teen revenue growth. Previously IT Deal Alert, we said that revenue would at least triple in 2014. We are now saying that revenue will at least quadruple in 2014.

In regards to adjusted EBITDA, previous guidance said that it would grow by at least 50%, and we are now forecasting it will at least grow by 80% in 2014.

So at this time, I would like to open up the call to questions.

(Operator Instructions) Marco Rodriguez, Stonegate Securities.

Good afternoon, and thank you for taking my questions. I had a real quick housekeeping item first off. International online revenues in the quarter, what was the amount?

That--I cannot--it was up over 20% from last year. We will have--the exact amount will be in our Q.

Got it. Okay. Then I was wondering if you could talk a little bit more in regard to the IT Deal Alert launch in the UK. How did that kind of track according to your expectations?

So in the UK, we launched in about 20 different categories. We're in about 60 categories in the U.S. At the end of last year, we were beta testing in the UK. As you know, it's off to a good start. A lot of the customers that are using it in the U.S. have UK sales operations, and it's off to a good start, where we're happy with it.

Good. Okay. And then can you provide a little more color in regard to the roadmap for the remaining launches of that product in the rest of Europe and APAC for this year?

Yes. So we are--the second half of this year we're looking to do the rest of Europe outside the UK, and also APAC. So I'd say second half of this year is when we'll be launching those.

Are you expecting it to be kind of like a launch all at once, or is it kind of a stair? How should we think about that?

It will probably be gradually. So we're working on all of them, and as we're ready in each of those markets, we'll roll them out when they're ready.

Okay. Got it. And can you talk a little bit also, Greg, in regard to the refresh launch of the self-service offering Account Watch? How has that been received, and any new client adoptions, major client adoptions you can discuss?

So it's very early. We just announced it and we're starting to have customers buy it. And we're starting to implement those. But very good initial reaction in the marketplace from it. Our customers really like that it's integrated with Salesforce.com. Most of our customers use Salesforce.com. So it's performing as we would expect. I think it's--will be a very good business for us in the second half of this year and in 2015.

Got it. Then wondering if you could also discuss a little bit more in regard to multiple segment orders for IT Deal Alert by your customers. Are there any specific segments that they are kind of going to or are there any other sort of overriding trends that are driving that?

Yes, so basically we're in about 60 different segments for IT Deal Alert qualified sales opportunities in the U.S. And since it's a new product most of our customers do an initial test of one segment. But most of our customers play in more than one segment. So that's under the initial test phase is one segment. And based on the success our customers are having with it, when they renew they're adding additional segments.

So I wouldn't say there's a particular one. It depends on what type of company you are. So if you're a security company, we have multiple security topics. You might add on one, two, or three of that. Same for storage or applications or cloud computing, whichever market you play in.

But that's a big part of our strategy is--it's kind of four-pronged for this year. One is continue to penetrate new customers, which we are doing successfully. We know they're going to just do a test of one segment. Get them to renew. And then when they do renew for the second order, get them to do more segments. And then once customers kind of figure out what their run rate is, what the right number of segments--what the right number of opportunities for them, at that point we want to migrate them to annual subscriptions.

Got it. And is there any sort of--I know this is a difficult question to answer, but any sort of range as far as what is the average amount of segments that your clients play in?

Yes. It's tough to say an average, because--I'll give you a little color on it. We have about 1,000 customers. And we think that there's about 15 customers that basically play in almost every segment that we're in. So these--the very large companies--you know who they are, and they're basically in every segment.

We have another 150 to 200 customers I'd say could be in five to 10 segments. And then roughly 800 customers that would be four or less segments. So really it depends on company size here.

But one of the nice things about this product, it has a very strong value proposition whether you're a small company, a medium sized company, or a large company.

Got it. Okay. And in terms of the people that you've seen order the multiple segments here, is there anything that's overriding or driving their decisions, or is it just a function of well, I wanted to see what that one segment's like, if it works then I'll throw it out, or is there anything else that's kind of moving that decision?

Yes, I mean it's basically based on the tests that they're running and the results that we're seeing. So the customers that we're seeing the best success with are the customers that are executing in the right way and kind of following our best practices and our playbook. The customers that are doing that are very pleased with it, and we're seeing them order and reorder into additional segments.

Got it. Thanks a lot, guys.

Aaron Martin, AIGH Investment Partners.

Hi, Greg. Congratulations on the return to growth. I just want to understand, you said on the--you talked about 1,000 customer starts you feel are--were you talking about current customers or customers that you're targeting or customers that are customers in the online business that you'd like to translate into Deal Alert?

Yes, so we have about 1,000 customers for our traditional products. In the quarter we had about 125 using IT Deal Alert. So when I'm talking about the 1,000 customers that we eventually want to sell to IT Deal Alert, that's how it breaks down into those kind of three size categories.

Are you able to give a breakdown of those 125 customers? How many of them are the ones that play across all the categories?

Yes, I mean so those tend to be our largest customers, and a high majority of our largest customers are at least running a trial. So that's going as planned.

Okay. And in terms of the international rollout of IT Deal Alert, you talked about the second half of the year. Considering that most of the rollouts are more, at least initially more of a beta, and then maybe customers will take one area. When I look at the Deal Alert revenue that your guidance for 2014--is it safe to assume that's basically--most of that is U.S.-based?

Yes. It's primarily U.S. We have about 10% of the IT Deal Alert revenue in Q1 was the UK.

Okay. So in order to get to the quadrupling number, that's really talking about the existing program in the UK and U.S. that are out already, and then we'd look to the international--think maybe contribute a little bit and layer on top of that in 2015. Is that how I should think of it?

Yes. I think that the--because there's a definite--we have to roll it out. The sales team takes it out to customers. They have to educate what the customers are. We've been seeing it's about a 60 to 90 day sales cycle. When the customers try it, one segment, that's another 90 days. So yes, I think that non-UK revenue for IT Deal Alert will contribute to 2015.

Okay. That's all for me. Thanks a lot.

Thanks, Aaron.

And ladies and gentlemen, at this time we've reached the end of the Q&A session. We do thank you for attending today's conference call. You may now disconnect your telephone lines.