Good afternoon. Welcome to TechTarget 2020 Fourth Quarter and Full Year Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Charles Rennick, General Counsel. Please go ahead.

Thank you, Kate, and good afternoon. Joining me here today are Greg Strakosch, our Executive Chairman; Mike Cotoia, our Chief Executive Officer; and Dan Noreck, our CFO. Before turning the call over to Greg, I want to remind everyone on the call of our earnings release. 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, the management team will be available to answer your questions. Any statements made today by TechTarget that are not factual may be considered forward-looking statements. 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 in 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 finished the year on a very strong note. Our momentum from 2020 has carried into 2021. We had an extremely busy Q4. We closed two acquisitions and completed a $200 million convertible debt offering. Our results for Q4 2020. Revenue grew 28% to approximately $45.9 million. We recognized approximately $1.2 million from the nine days that we owned BrightTALK. Excluding the BrightTALK revenue contribution, TechTarget revenue grew 24% in the quarter. Adjusted EBITDA grew 53% to approximately $18 million. Adjusted EBITDA margin was 39%, long-term contracts represented 34% of revenue, gross margin was 76%. And adjusted free cash flow was $13.6 million, representing 76% of adjusted EBITDA. I will now open the call to questions.

[Operator Instructions] Our first question is from Aaron Kessler from Raymond James. Go ahead.

Great. Thanks, guys and congrats on the quarter and the year. Just a couple of questions. First, maybe just in terms of the 2021 guidance, kind of how should we think about maybe the drivers that would lead to more of the high end of the range, kind of what needs to go right? And then maybe on the quarter, maybe it's probably still early, but can you comment on traction with the expanded sales use case of the product? And then maybe just the linearity you saw during Q4, maybe into the early part of Q1 here, just the traction you're seeing as well?

Hey, Aaron, it's Mike. In terms of the 2021 guidance to get to the high end, obviously, as we've talked about in the past several quarters. We see this early transition -- when the early innings of this whole transition for data-driven sales and marketing organizations had enterprise B2B companies to really drive their marketing and sales efforts. And we're seeing a quick adoption on that in terms of what we're able to offer on our first-party purchase intent data. We're still seeing those trends shift from face-to-face events, obviously, have been depleted. We don't believe that those will ever come back to even pre-COVID levels. So as companies get more adept and inclined to adopt first-party purchase intent data to help fuel sales and marketing organizations, we feel we're in a really good position on that. Remember, our investments start at the content level. We produce the content, we have a registered opt-in audience which creates, first, the largest first-party purchase intent network for enterprise B2B technology marketing and sales to use. You have some macro trends going on in the market in terms of third-party cookies, midstream data that are going to come under questions and going to come on to some scrutiny. So we feel we can execute on that. Obviously, the integration and the work with BrightTALK and ESG, as we work through those, that could help accelerate and get to the higher end into the market. In terms of the sales use case, we got a very strong focus on our Priority Engine sales use case. As you know, we launched back in the beginning part of Q4 some modifications which was really some big updates for Priority Engine. Typically, and even now, we still sell into marketing organizations. Marketers take our data. They leverage…

Got it, great. And then, just finally, international. I didn't see that broken out. Can you provide any color around international numbers for the quarter?

Yes, the international numbers grew almost 30%, about 29%. We're seeing great success in the international markets. Again, when you look at those international markets, they're typically a little bit behind in the U.S. markets around data-driven and digital. You see some of these regions that are very heavily concentrated in face-to-face events. So this whole digital transformation, which could have been projected to happen over two, three, four years, has been accelerated with the COVID opportunity. So we continue to -- with the pandemic right now. So we continue to invest in those markets, and we continue -- we project to see solid growth in 2021.

Great. Thank you, guys.

You're welcome.

Our next question is from Jason Kreyer from Craig and Hallum. Go ahead.

Thank you. Just wanted to ask on the last couple of quarters, we've talked about your customers opting for shorter-duration agreements as opposed to Priority Engine. So wondering if any of that changed in Q4 or early here in Q1. And then maybe you can also elaborate on just as things open up a little bit more, what is the strategy to go back to some of those customers and try to get them into that longer-term subscription?

Jason, yes, good question. So as I mentioned, since March, when we've had the -- March of 2020, when the pandemic came in, a lot of our customers' mindset was we have to hunker down, we want to navigate through this. And especially for smaller customers, too, we don't want to commit to: a, something that's new; and b, something that's long term. So our customers have come to us knowing again that we have a really good relationship with our audience because of the content investments that we're making to our audience across our 140-plus sites. They have come in to help navigate through this through Q3, Q4. And listen, they're still navigating through some uncertainty with the pandemic, so we're seeing some good growth. Now our playbook on that is to stay close to those customers, make sure they understand that all of our intent-led lead-generation programs and other programs are working, walk them through how to transition from that three- or six-month to an annual subscription with Priority Engine. And not only with Priority Engine, still highlight the value of integrating it with content marketing, contextually aligned branding messaging so that they are surrounding the buying team members throughout the entire buy journey. So that's our playbook on that. We're on it. We're seeing some good momentum as we head into 2021, where there is some customers that were 90-day programs or 180-day programs starting to transition into that longer-term commitment around Priority Engine and integrating it with our content marketing, and we are staying very focused on that execution.

And you mentioned that prospect-level intelligence just a little bit ago. But wanted to see if you had any updates there as far as how that pipeline has continued to progress over the last few quarters. Any specific feedback you've gotten from some of the early users?

Yes. The feedback we've got has been extremely positive. Sales reps want to get information in their workflow, so what we provide to -- in market is a very important part of our overall value prop and use case. However, the data is going to be able to fit into their sales force or any CRM system. Now sales reps have sales-enablement platforms, SalesLoft, Outreach IO, things like that. They need a cadence that works with that. So our focus is making sure that we continue this momentum of sales rep usage, people that have identified themselves as sales reps through our data to make sure that they have access to the data that aligns with their territories, individual prospect levels in their workflows, whether it's a sales force, or a sales-enablement platform, cadence. And that's a big focus for us to make sure that we continue our tight integration into what works well for the sales folks as well as the marketing departments.

Perfect. Last one for me. Just on the BrightTALK acquisition specifically. I mean it seems like there's a lot of opportunity for revenue synergies there. Can you talk about how -- over the course of '21 here, how you expect to that kind of layer in and impact the model?

Yes, great question. We're really excited with the BrightTALK acquisition. And first thing I'll say is a lot of organizations acquire other organizations in there -- with a cost synergies focus. That's not the focus right now. BrightTALK and their team have done an excellent job. They've had a lot of momentum, and our goal is to stay, help support and accelerate that momentum. There are a lot of, I would call, low-hanging fruit cross-sell opportunities. Think about what BrightTALK does. They provide not only the content to create talks in webinars and videos and summit, but they also have a registered membership, an audience. TechTarget, on the other hand, has the combining team purchase intent data and engaged audience so we're going to be looking at, a, out of the gate, what are the best opportunities to cross-sell and upsell our customers. We will look later on down the road at how do we leverage our audiences, how do we leverage the intent data that we're getting from the BrightTALK platform and integrate it into Priority Engine. We're going to look to drive membership and intent to the BrightTALK community because they have an active and engaged community. So those are the things that we're looking at. But in the short term, we are keeping that momentum flying. We are engaged with these -- with both teams to identify which customers have an opportunity to get cross-sell opportunities and provide world-class customer service.

All right. Thanks, guys.

Our next question is from Eric Martinuzzi from Lake Street. Go ahead.

Yes. I wanted to make sure I understand the guidance for 2021. So I'm going to refer to that part of the shareholder letter. I noticed you used an upper case adjusted revenue expression. Should we anticipate seeing a GAAP revenue plus a non-GAAP adjustment getting us to an adjusted revenue each quarter as we go throughout the year?

Eric, I'll have Dan, our CFO, answer that.

Yes. Eric, you can expect to see that reconciliation done in the future shareholder letters.

Okay. And that will ripple through to the adjusted EBITDA?

Correct.

Okay.

So in the letter, we put the $5 million in Q1 and $11.5 million for the year, that's the current schedule for the deferred revenue that we're -- under GAAP we're not allowed to recognize.

Yes. And from my experience with this, it kind of tapers quarter-by-quarter, with each successive quarter being less than Q -- the first quarter. Is that correct way to think about it?

That's a fair assessment how to look at it, yes.

Okay. Now, you guys talked about the acquisitions, checking a lot of boxes. One of the things I looked for was the incremental profitability, and I see you finished out 2020 with adjusted EBITDA margins in the 34% range. And if I do the math on the guidance for 2021, I'm coming up with something less than that. Help me understand that decrease in adjusted EBITDA margin.

Yes. So, the -- both of those acquired businesses, margin was a little bit lower than TechTarget, so that's one. Over time, we believe that their margin structure will come in line with the TechTarget property. In the meantime -- in the short term, these acquisitions were based on revenue synergies. So we have no -- we haven't -- there's really no expense synergies that we've been able to achieve yet, and we don't have big plans for that. But obviously, there'll be some expense synergies over time. For example, this quarter, we're paying three CFOs, so -- but that's not going to be a long-term thing. So -- but if you look out over the next couple of years, you'll continue to see margin expansion in line with historical TechTarget margin expansion.

Okay, that's helpful. And then, I don't know if you can disclose it, but I'm curious to know, do we have a revenue number for either BrightTALK or for ESG? I wouldn't expect them to be audited, but revenue number for 2020 for either BrightTALK or ESG.

So, we've disclosed a BrightTALK revenue number in the convertible debt offering, approximately $50 million. ESG is not -- has not been disclosed, and it's not required to be disclosed, so we're not going to for competitive reasons.

Okay. And then, lastly, the -- historically, price increases would have happened in Q4 and impact your long-term contract commits. What can you tell us about either maybe the percentage of the price increase? What percentage of the Priority Engine customers that -- what percentage of the revenue kind of impacted by that? How much more we can -- how do we benefit from the price increase on the legacy business?

Yes. I mean we implemented a double-digit price increase with the additional features and functionalities that are focused around the sales use cases. We've had a lot of positive feedback on that. People are trying to become data-driven sales and marketing organizations. They understand our first-party purchase intent. We don't get a lot of pushback on the price, Eric, and so we expect that to continue. And we are looking at additional features, functionality, integrations down the road, so we believe we have some pricing power even moving in the near and long term.

But as far as, if I look back on 2020, we had revenue in the year of $148 million. I know your price increase doesn't impact 100% of that base. What -- would that be like, 1/3 or 1/2 of that price increase -- 1/3 or 1/2 of the revenue base impacted by the price increase? Help me understand that.

Yes. I would look at it and say, in rough numbers, we're pricing around 1/3 on that. And as you know, that when we -- customers sign up at different months of the year for long-term contracts. So if you have -- if all of our customers start in January, you would recognize -- even it was 1/3, you'd have recognized 1/3 of that revenue would be in price increases on that. Customers sign up in February, March, April, May, so you get a pro rata amount that's affecting the increase. But I would use for your estimates about 1/3.

Okay. All right. Thanks for taking my questions and congratulations on the very busy Q4.

Thank you.

This concludes our question-and-answer sessions. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.