Good evening, and welcome to the TechTarget Q3 2019 Earnings Release Conference Call. [Operator Instructions]. Please note, this event is being recorded. I would like to now turn the conference over to Charles Rennick. Please go ahead.

Thank you, Jacob, and good afternoon. Joining me here today are Greg Strakosch, our Executive Chairman; Mike Cotoia, our CEO; and Dan Noreck, our CFO. Before turning the call over to Greg, I want to remind everyone on the call of our earnings release process. As previously announced, in order to provide you with an update on the business in advance of the call, we have posted our shareholder letter on the Investor Relations section of our website and furnished it on an 8-K. Following Greg's introductory remarks, management team will be available to answer your questions. Any statements made today by TechTarget that are factual may be considered forward-looking statement. These forward-looking statements are based on assumptions and are not guarantees of our future performance. Actual results may differ materially from our forecast. Please refer to our Risk Factors and our periodic reports filed with the SEC. These statements speak only as of the date of this call, and TechTarget undertakes no obligation to update them. We may also refer to financial measures not prepared in accordance with GAAP. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures accompanies our shareholder letter. With that, I'll turn the call over to Greg.

Great. Thank you, Charlie. We had another of very strong performance. This is the third consecutive call that we have raised the annual adjusted EBITDA forecast for 2019. Q3 2019 revenues grew 10% to $33.8 million. Q3 2019 adjusted EBITDA grew 45% to $11.1 million. For the first 9 months of 2019, adjusted EBITDA grew 38% to $30.2 million. Adjusted EBITDA margin was 33% in Q3 2019 versus 25% in Q3 2018. Adjusted EBITDA margin for the first 9 months of 2019 was 31% versus 24% in the same time period in 2018. Gross margin was 76% in the quarter, same as last year. Adjusted cash flow was $8.1 million in the quarter, representing 72% of adjusted EBITDA. Long-term contracts represented 35% of revenue in Q3 2019. For Q4 2019, we expect revenues to be between $35 million and $36 million. We expect adjusted EBITDA for the fourth quarter of 2019 to be between $11 million and $12 million. We expect the annual revenues to be between $133 million and $134 million. And we expect adjusted EBITDA to be between $41 million and $42 million. I will now open the call to questions.

[Operator Instructions]. The first question comes from Aaron Kessler with Raymond James.

Congrats on the quarter. A couple of questions, maybe first on the price increases you noted in the letter of about 10% I believe for 2020, can you just remind us how those have been flowing over the last couple of years with your various price increases? And kind of -- just kind of any pushback you're seeing from clients on some of those price increases? And also just maybe update us on kind of the go-to-market strategy for Priority Engine Express pricing, sales strategy there as well?

Sure, Aaron. In terms of price increase for 2020 that we are estimating to be about 10%. We've been fairly consistent with the last two price increases that we had going into 2019 as well as 2018, respectively. Our customers take a look at our data that we offer, real and observe purchases intent data, and they have a very large initiative around -- they have very large data initiatives around their sales and marketing organization. So we haven't really had a pushback price. They do understand how we get our data in terms of providing the right content and publishing the right content across hundreds of technology or really thousands of technology segments. Owning and operating those sites and communities across our network throughout TechTarget and really observing and capturing the real intent that we're getting from buying team members, so there's -- it's very clear, it's very taut, it's very concise, so we haven't really seen any pushback on that. And in terms of the Priority Engine Express, we went into Q3. We've allocated a couple of dedicated reps to selling our Priority Engine Express solution. We've got some -- early signs are positive. We have paying customers right now that are paying and signing up for annual subscriptions. And remember, these are the customer segmentation, this is the segmentation of customers that typically we didn't have a pricing or a product that would be applicable to them. And these customers are typically smaller software vendors or regional value-added resellers that are looking for ways to identify who's in market today that they can get their sales teams in front of early. So we look at it, as you know, we break out our customer segmentation by our global 10, then next 100 and then all others. And we believe that there's still a set of between 4,000 and 5,000 accounts that are out there that we feel pretty -- we have a pretty good opportunity to go after with these folks. So we are seeing customers now. We're taking their input. We're looking to possibly modify, enhance, position, package, create some other additional spinoffs of this Priority Engine Express for different segments within those all others. So we're off to a good start.

Great. And maybe just quickly on sales and marketing, can you talk about the leverage there? Looks like you've seen pretty flattish sales and marketing on absolute basis this year despite revenues up, can you just kind of walk us through kind of the leverage expectation going forward in sales and marketing as well?

Yes. We continue -- the way we have the setup is we can quickly reallocate existing sales and marketing resources to the opportunities that provide or present growth opportunities for TechTarget. One way we may add some headcount if we see this scale up. But for now, the way we are set up is we can take our current resources and our employees, and if we see an opportunity that has a high growth potential, we'll allocate those resources on the fly, make sure that we have a good opportunity to support those. And again, as we continue to see growth, you might see some additional resources being added. But for now we can quickly do that, we're pretty agile and we have a nimble set up.

Our next question comes from Marco Rodriguez with Stonegate Capital.

I'm wondering if I could follow up on the Priority Engine Express. Any sort of update you can provide us with in terms of when you think that might roll out to more than just a beta testing, if you will? And then if also maybe you can kind of talk a little bit about what you guys have kind of learned thus far from the feedback from these initial clients and what sort of expectations you might have to either address that or somewhat repackage the program?

Right. Marco, in terms of rolling this out more than just a beta test, and we expect this to be fully rolled out in first quarter of 2020. As you recall, we started beta testing soft launch this back in Q2. We then allocated a couple of few dedicated sales rep resources to the Priority Engine Express opportunity. We've seen some traction with some of these smaller accounts. And again, all of these deals that we're signing are annual subscription deals. Along the way we've learned a couple of things. I mean there are different use cases for these smaller accounts. We have software vendors that have a very specific niche. We have also -- we've identified through our learnings of the beta launch, we have channel -- value-added resellers. And a lot of that might be not only national but regional resellers. And they are looking to really identify the opportunities and the projects and buying teams that are in their regions and really allow what they go-to-market on. And so they really want to focus on the active prospects and the opportunities in the potential projects where they're not really focused on would be as much on the marketing initiatives. So we want to make sure that we have the right user interface, ease of use for those regional resellers so that their sales team, inside sales and outside sales, have easy and quick access to the potential projects and buying teams within their market. So we'll make sure that we have taken that feedback and apply and integrated into our go-forward strategy. But we expect this to be fully rolled out in Q1 of 2020.

That's helpful. So kind of sounds like maybe some of the -- at least the interface and perhaps some of the end result needs to be somewhat customized a little bit more for these smaller-type clients. I'm assuming that the platform is relatively easily changed for that sort of output?

Yes. I mean we're always making modifications, revisions and updates to the Priority Engine platform. As we learn -- as we get and capture some of the learnings in the input from, again, a lot of the smaller customers that we've never had historically, and often to sell, we want to take that feedback and make sure that we can adapt. And we have the ability to do that within our Priority Engine platform. I don't want -- fairly easily. So it's -- we'll be able to do that for these guys without too much extra work.

Got you. And last question here, I'm just wondering if maybe you can provide us a little bit of update on Customer Success team. Have you kind of hit a steady state in terms of your headcount? And any sort of color that you can provide that kind of quantifies that group's progress on impacting revenue growth and client retention?

Yes. So the Customer Success, I would say this has been the first full year that we've implemented this. We're going to the fourth quarter. This team has done a really good job of -- again, the way this is aligned really goes back to how we've aligned our sales force. And we have our field account executives who are signing on net new logos, who we've seen some really good growth there. And previously, before we had this Customer Success team, those reps were trying to manage those accounts. Now they're handing it off to our Customer Success team to properly onboard, make sure we're setting the right expectations, leveraging our use cases. We're seeing much better engagement with our customers within the Priority Engine platform. We can track all of that. We've invested in some technology so we can -- that focus on the customer success and customer management across all of our customers. So we're seeing this ramp up nicely and the results are showing it. We've seen a large increase in retention across these customers that have signed on for the annual deals. We're always looking to evaluate how we expand success across not only this set of accounts but other accounts. So we don't see any abnormal increase in spend for Customer Success investments, but if there are -- there might be some pockets within Customer Success that we may look to expand on or provide additional resources, but we feel we're properly staffed at the current rate of business now and help us out moving forward.

The next question comes from Bruce Goldfarb with Lake Street Capital Markets.

Greg, congrats on great quarter and all the progress. So first, in -- given that some more challenging environment for some of your larger customers because of tariffs, is there a chance that they do not renew Priority Engine and instead sign up for Priority Engine Express?

Bruce. Yes. Good question. This is Mike. Actually, we're not going to be offering Priority Engine Express to those -- when you mention those global accounts, those top 10, we know that they budgets to invest in Priority Engine. What I would say is -- and Priority Engine Express, if you recall the way we classify our accounts, we bucket them into 3 areas. We have our top 10 global accounts, which are the big names that you all know that have been around for many years. We have the next 100, which I would consider like high-growth, cloud-based, cloud type of organizations, and then we have today all others. On the all others, that when you take a look at our total customer pool, it's about 300 customers. What we haven't had is the opportunity to sell from 1,300 and went to 5,000 customers. We never really had a solution and an opportunity to get engaged with those customers and to bring value at a reasonable price and to provide growth for not us but them as well. That is where the Priority Engine Express will be focused on. So in terms of the global folks, they go up, they go down, sometimes they can be a little bit inconsistent. I know they're down this quarter. What I really would take away from that is, if you look at our customer segmentation over the last 2 years and our customer concentration, we're pretty pleased with the direction that, that's going. A couple of years ago, if a couple of top 10 global accounts reduced their spend dramatically within the quarter, we would feel that hit in that quarter. Today, we are more diversified as a business than we ever have been. And so our focus is to invest in these products such as Priority Engine Express to continue span up customer segmentation and diversity so we can reach that, what I would say, between customer number 1,300 and 5,000.

And one of the key things of Priority Engine Express, the amount of data you get is limited, that's also smaller price, so that wouldn't be -- that solution wouldn't make sense for larger organizations. So the way the products are stratified, there's -- you're going -- there's really no risk of cannibalization.

Great. Thank you. And then lastly, if Xerox buys HP, is there any potential to TechTarget?

As you know, they're going to buy HP Inc. So we do some business with HPI or HP Inc. Currently not doing a lot -- it actually might provide a little bit of an opportunity for us. But they're not buying Hewlett Packard Enterprise. And if that goes through, I don't see that hurting us at all.

The question answer session is now over. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.