Good afternoon ladies and gentlemen, thank you for attending today’s TechTarget Q3 2021 Earnings Release Conference Call. My name is Tia and I will be your moderato for today’s call. [Operator Instructions] I would now pass the conference over to Charles Rennick with TechTarget. You may proceed.

Thank you, Tia, and good afternoon. Joining me here today are Greg Strakosch, our Executive Chairman; Mike Cotoia, our Chief Executive Officer; and Dan Noreck, our Chief Financial Officer. Before turning the call over to Greg, I’d like 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’ve 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. Forward-looking statements involve a number of risks and uncertainties, including those discussed in the Risk Factors sections of our filings with the SEC. The company undertakes no obligation to revise or update any forward-looking statements in order to reflect events that may arise after this conference call, except as required by law. 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. We continue to see broad-based strength across all products, customer segments, and geographies. We expect this positive momentum to carry into 2022. For Q3 2021 GAAP revenue grew 92%, adjusted revenues grew 97%, net income grew 47%, adjusted EBITDA grew 125%, and we raised our revenue and EBITDA guidance for 2021. I will now open the call to questions.

Absolutely. [Operator Instructions] The first question is from Aaron Kessler with Raymond James. You may proceed.

Great. Thanks guys. Congrats on the quarter. A couple of questions. First on the organic guidance for 2022, I believe you’ve indicated high teens organic growth in the shareholder letter of which I believe is the highest in a few years. Excuse me, unpack this a little bit maybe your volume versus pricing growth can maybe Priority Engine growth expectations for 2022 as well. And it looks like you had some nice international strengths in the quarter any additional commentary there? Thank you.

Right. Thanks Aaron. This is Mike. In terms of 2022 guidance, preliminary guidance of high teens growth, we’re seeing good momentum across all facets of the business across the products and across the regions. We talk about the tailwinds that we have accounted, but I also want to make sure that people understand the execution across our product team, sales team, a customer success team has been really strong. And when you couple that with the tailwinds, in terms of positive IT budgets, companies continuing to modernize their sales and marketing organizations, and then the compliance and data privacy regulations where having an opt-in permission-based audience like TechTarget has built over 22 years, and the continued shift from face-to-face events coming on to digital and data-driven online events. Those bode very well for us. And that’s where we give them the guidance of the high teens growth for next year. And in terms of Priority Engine, we think we’re going to be back to 20% plus growth the Priority Engine, again, based on those tailwinds and what customers need. And if you really think about it, our customers, when you focus on this modernization of their sales and marketing organizations through automation and through tools and software, and data, one of the biggest catalysts on that is first party owned and operated purchase intent data. So that is some of the color. In terms of the international, so we continue to see good growth in those same tailwinds really impact us across all of our regions. And I’d also add on there, and we’ve discussed this in previous quarters in previous years. In the other regions outside North America, there was a high focus or a high concentration of budget or a – budget from our customers that has always been allocated to the field of that’s face-to-face events, field marketing and sales work closely in those regions. Those budgets have gone that way in the last year and a half since COVID, we’ve seen that acceleration in the digital transformation from face-to-face to online and data-driven, and we’re continuing to see that in the international space as well.

Got it. Quick follow-up. Any lingering kind of headwinds from COVID you’re still seeing maybe on the Priority Engine Express business, and then any headwinds you’re seeing may from the supply chain challenges impacting marketers budgets as well.

Yes, and the headwinds in terms of Priority Engine Express, we’ve seen good momentum and we’re pleased with the progress that we’ve made across those smaller customers. And as we mentioned before, our Priority Engine has historically been really focused and geared towards marketers and marketing budget holders. We’ve made it, and we’ll talk about this in a little bit. Some of our key investments have been around the sales use case. And when you get into little smaller companies where Priority Engine Express is really a good fit for, there’s one common denominator across all those, they have an inside and outside sales presence, they might not be focused on the marketing, you might not have the sophistication and the tools and the technology for marketing. So, we’re seeing a nice pickup in terms of not only customer adoption, but customer usage on that. And I’m sorry, what was the second question that you had the headwinds on the…

Supply chain challenges?

Yes. So, we obviously keep an eye on that. We have not seen that hit us right now and our customers again, with the healthy IT budgets, in the IT market right now it’s been good. Those are some of the macros that we keep a close eye on. It has not impacted us right now. And most of our customers, if you remember, have gone from hardware to SaaS based software customers. And I think if this was 10 years ago where vendors that primarily bought in TechTarget were selling servers, storage and network hardware equipment. We would see a great impact if that was the case, but because of this transformation to cloud and SaaS and software, it is really not – we’re not seeing that in the budgets.

Got it. That’s helpful. Thanks again in good quarter.

Thanks.

Thank you, Mr. Kessler. The next question is from Bhavin Shah with Deutsche Bank. You may proceed.

Thanks so much for taking my question and congrats on the performance during the quarter. I was wondering if you just dive into more detail on the product enhancements that you talked about to Priority Engine in your shareholder letter. You’ve noted that you’re going to kind of sell these as separate modules going forward, and it’s great to see kind of these updates from a product standpoint. But I guess maybe from a go-to-market perspective, do we – you guys have to make any real changes to kind of address this new sales case that you’re really going after?

Okay, thanks for the question. Let me give you a little bit of summary on the product Priority Engine product enhancement. So in June, we had just launched some additional enhancements and Priority Engine. And the focus on is, Bhavin was really focused on the sales use case. So there were a couple of things that we did in June around integrating and adding the account level signals that we’re seeing from the BrightTALK audience. So, why don’t we do that? We did that, so we could give an expand our customers salesforce up to 2x in terms of accounts that were within their territories, that they had insights around that, that they could go and engage with. We also enhanced some of our inbound converter capabilities and that capability set is tracking visitors accounts that visit our customers websites. And then we took it to a more granular level. We wanted to know which pages they visited. Are they looking at product comparison pages? Are they looking at case studies? Are they looking at demo pages? So that brings greater insights and intent to the salesforce. As we look at our next release that we’ve been working diligently across from our product team, development team, customer success team, I would break it out into two areas. There’ll be data enhancements and user experience or user interface enhancements. And what I mean by that on the data side, we are now for an upsell for offering the opportunity to ingest the BrightTALK, not only the account level, but the prospect level intent information at the individual buying level information into the Priority Engine platform. And that would be up for an upsell. So, we now have the individual buyers inside of BrightTALK who are engaged in virtual video summits, virtual…

That’s very helpful. Just a quick follow-up. I noticed that your long-term revenue ticked down a bit to plus 37%. It sounds more like it’s a matter of seeing more strengths with the more quarterly cadence that the business has given that the strength in the IT environment, is it the right way to read it?

I think it’s an absolutely right way to read it. If you look at the total revenues associated with – associated with long-term contracts year-over-year, we’re roughly about $13 million or a $26 million this year. The percentage decrease from 4% to 37% is from the demand and the success that we’re having selling across all of our purchase intent driven products. So it’s an overall higher denominator in terms of overall revenue, and that’s being accounted for or driven by those tailwinds we’ve talked about in the execution at the company level, across the board.

That makes sense. Thanks for taking my questions and congrats again.

Thank you.

Thank you, Mr. Shah. The next question is from the line of Joshua Reilly, Needham & Company. You may proceed.

Hey guys, thanks for taking my questions. Congrats on the quarter. You mentioned the record demand for quarterly based products in the shareholder letter. I assume that means like content syndication and QSO reports in particular strong, and the high teens growth guidance implies this growth is sustainable into next year. But I’m just curious, what gives you confidence as the economy reopens the growth for those products is sustainable?

Thanks, Joshua. In terms of the quarterly demand, we saw this transition, every company accelerated in digital transformation from whether they were planning to do it over the last – over a course of three or four years. So, they’ve done and they’re working on it right now and over the past 18 months. And clients have gone in there and that’s not to say that there will not be some face-to-face event engagement. We believe that it will always be there, but I do not believe, and we do not believe that we’ll ever go back to the level that we saw pre-COVID. There’s so many reasons for that, hey, it’s more efficient for customers and any vendor to engage digitally and through data to scale their business. It’s more cost-effective to do that. And we’ve always used that analogy. When you go from analog to digital, do you ever really flipped back to analog? And we don’t believe that that’s going to happen in the enterprise B2B space. So there’ll always be a place for face-to-face events, but the demand that we’re seeing again, let’s go back to those tailwinds customers driving to modernize their sales and marketing organizations. They do that through automation, they do that through tools and they do that through data. And first party opt-in permission pays purchase intent data is a real driver in that. Those same customers have seen the efficiencies, the scale and the measurability from going from face-to-face events till digital and demand focused – and data-driven online campaigns. And it’s really hard to go back, because customers don’t want to spend or send 20 people to Vegas for three-day road show and have really nothing to come back to account for that. And just with all the other trends that we’re seeing, not only from the face-to-face shift to online, face-to-face event budget online, but we’re also seeing with Google announcing that they’re going to eliminate third party cookies, and 2023, this all bodes well for us. And we’re going to continue to focus on what we’ve been focused on content, opt-in and permission-based audience, first party intent data, and delivering that to our customers so they can execute what their sales and marketing departments.

Okay, great. And then just one follow-up. You highlighted a 40% adjusted EBITDA margin as the goal for next year in the shareholder letter, which is nicely above my prior estimate. Maybe you can discuss what drivers, including sales efficiency, that’s leading to the school. And how much, if any hiring do you need to do in sales and marketing to hit your – now upper teens sales growth goal for next year?

Well, on the cost side for the EBITDA, I mean, everything’s driven off growth and we’ve given to the growth in terms of mid to upper teens growth for next year.

Well, on the cost side for the EBITDA, I mean everything’s driven off growth and we’ve given to the growth in terms of, mid to upper teens growth for next year. The operating leverage that we have on the businesses, the fixed cost really does drive that. So, you can see in this quarter, we were at 39% EBITDA margin, we continue to grow. You’re not going to see that dollar for dollar in terms of costs. So, we have the way we’ve had this model set up for 22 years with a lot of operating leverage, we’re going to continue to expand our margins and we expect to see our EBITDA margin to be over 40%. In terms of sales efficiencies, we’re going to continue to hire sales people because we believe in driving demand and the demand is there. And it’s there for our taking and we feel that we’re well equipped across, our sales development rep, which are the entry level to our field account executives, who are enterprise and our global reps across all regions. And we’ll continue to peep up and invest in those across the board, as well as our customer success team and our customer success account director team. So, we’re going to ramp that up because we believe that the growth is there. The demand is there and we’re well positioned for the next several years to capture this. So, we don’t see really a challenge in that.

Okay, great. Thanks. Congrats on the strong results.

Thank you.

Thank you, Mr. Reilly. The next question is from Bryan Bergin with Cowen. You may proceed.

Hi, thanks. This is Zack Ajzenman on for Bryan, just a couple of questions. First on converting these non-Priority Engine customers. It’s a bit of a follow-up, but obviously the performance and the non-Priority Engine business over the past 12 months suggests a notable uptick in activity and presumably new clients that have come on that side of the business. So any metrics you can share as it relates to converting these new clients, what initiatives are in place to convert these clients into longer term Priority Engine user.

That’s a great question. Zack, what I would tell you is, when we get these new customers and we’ve seen a lot of new customers come into this migration face-to-face events into online. We work very closely with them to understand how we go out there and capture our information. So it might be a content syndication program – a branding program. It could be qualified sales opportunities. So when we onboard them, we are looking very closely and working very closely to highlight a lot of the intent signals and the intent data that’s being delivered across these 90-day or 180-day programs. And if you looked at our business historically a lot of our revenue might not be under subscription contracts, but it really does act as recurring revenue. It behaves that way. So the game plan is to bring the new customers and with the demand that we’re seeing in the success that we’re having, work with them closely. We help them measure in terms of marketing and sales engagement. They might be leveraging looking at MQLs and SQLs and stay close to those folks, because we have that reoccurring behavior. It becomes a conversation of here’s your always on you have access to not only what you’re engaging with or what people are engaging with you on your content, but you can have the rest of the market that might not know who you are, might not be engaging with you, when you hook on and sign on to a long-term deal with Priority Engine. That’s really the playbook. And we’ve, we mentioned that, that we were executing on that as we got into COVID and navigated through COVID, we’re seeing a big demand for the products such as you mentioned; qualified sales opportunities, branding, lead generation, and that will be the playbook. And those are some of the metrics that we look at.

That’s helpful and just the follow-up on the net annual revenue retention figure. I think the last figure shown was it was about 120%. Can you just help us bridge the key underlying variable supporting that figure? So, how should we think about churn versus pricing, versus upsell versus new customers? Just trying to get a sense of the underlying figure supporting that revenue retention number?

Well on the price increase per Priority Engine is roughly around 10%. And that’s, so that’s a piece of it and then there’s upsell across other products. It contributes as well. And then we’re adding what, obviously we’re getting more growth from adding new customers. So it’s primarily, it’s some price, it’s some upsell, cross-sell and the cross-sell, upsell are primarily selling additional geographies and additional segments of Priority Engine.

Understood. Thank you.

Thank you, Mr. Bergin [ph]. The next question is from Justin Patterson with KeyBanc. You may proceed.

Great. Thank you. Two, if I can first just going back to the commentary on next year it does say high teens or better growth. How do we think about the factors that could actually cause you to grow faster than that high teens number and get sustainably into the 20% plus range? That’s question number one. And then number two, last quarter you had the Xtelligent acquisition. We love to hear more about how you’re thinking about that healthcare vertical? Thank you.

Thanks Justin. I’ll start. I’m going to go backwards on the Xtelligent acquisition. We completed that deal on July 31 and, it was a market that we’ve been looking at for a while. And as we mentioned in the last earnings call, the CEO from Xtelligent was an ex TechTarget employee. So, we knew a few things on that. We knew the business was run pretty well. It was frontend led, it was opt-in permission-based audience, and it was a market that I’ll call it a peripheral market that we’ve been and adjacent market than, what we’ve historically gone after. And we believe as we go into 2022 on that, there is an opportunity for us to – opportunity our plan is execute and launch new Priority Engine segments across the healthcare, IT, intersection, market also deliver and bring to bear, the BrightTALK channel platform to those marketers in that industry. And we expect to be able to equip the sellers going after that, to engage, penetrate and grow that market. In terms of the 20% plus growth for 2022, I mean, we’re thinking that if all the tailwinds continue to stay in our favor, we continue to execute. And we’re seeing that acceleration of continuous acceleration from face-to-face events online monetization of our customer sales and marketing organizations. Google really promoting the elimination of third party cookies in the budgets, the enterprise, IT budgets remain healthy. That market remains healthy. We believe there’s some upside on that. There are obviously some things that we, somebody mentioned earlier about supply chain management pressures and some other pressures that are really out of our control. We have to make sure we’re aware of those and we monitor that, but if those tailwinds continue to stay strong and we continue to execute you could see above 20% growth.

Right. Thank you.

The next question is from Pinjalim Bora with JPMorgan. You may proceed.

Great. Hey, thank you everybody for taking my questions and congrats on the quarter. I wanted to ask about competition since you have been focusing more and more on sales and in dancing those around sales, are you seeing any change in the competitive environments? Is there are a few players who are doing the same.

We have a really unique position in the market because of the content and the opt-in permission-based audience, where people, our members are registered to come into where –into our audience to become members. And there are other, when you talk about the sales market or the sales use case market, there are other players out there that do that. And I think, our ability to continue to drive marketing engagement, marketing investment and then align and bridge marketing to sales, because it’s the same data, but it’s being used differently. And a sales rep uses the data one way and the VP of Marketing uses the data another way, being able to really get that bridge connected and visibility across sales and marketing. It’s just a really unique capability that we have because of that, the cost and investment that we’ve made in the engagements that we’ve, had in terms of a first party purchase intent data and our opt-in permission-based members. So there’s always going to be other data providers out there, many times they are working in the same accounts that we are, and people understand that there’s an investment for both sides of it. So, I just think we’re in a unique position to connect the bridge, connects the dots between sales and marketing and allow both of those organizations, departments within an organization to excel, know what each other, or know what each department is doing and benefit from it.

Understood. One quick follow up on the organic revenue growth guidance of high teens of better for 2022. Is there any way to kind of unpack the current organic growth, given the few acquisitions you have done in the, over the last 12 months?

Yes. I mean, we report on one number and what I can tell you is on the guidance on that, or the insight is across all of our products, all of our regions and all of our customer mix, we’re exceeding expectations – exceeding what we had previously thought we’d be doing this year. So, we don’t feel it all back and look under it and say, okay, X amount was from this type of division because we’re selling it to the same customers. And we have an end-to-end solution that we’re really focused on. So, I can tell you that we see straight across all the products and all the regions and all the customer mix that we have.

Understood. I’ll leave the floor. Thank you.

Thank you. The next question is from the line of Bruce Goldfarb with Lake Street Capital. You may proceed

Guys congrats on the great results and thanks for taking my call. Just a question about M&A. You you’ve been pretty active in the last 12 months with the BrightTALK and ESG in December of 2020 and the Xtelligent, which you mentioned in July of 2021, are you still looking to add pieces? What can you provide any update on your current plans?

Yes, thanks. Yes, I appreciate it. We are always looking to be opportunistic in the market. And when we look at potential acquisitions, we look at a few things on this. We want to make sure, they have to fit a few of the criteria. Are they producing effective in original content in the enterprise B2B tech space? They align or have a permission-based opt-in audience? Do they have first party purchase intent data? And does a compliment our existing revenue product lines. And can we create and turn this into a subscription-based business? And then the last one is always the valuation. If companies are up for sale and being marketed out there, does it make sense financially? And we have a lot of conversations and we are – we’re very prepared. Again, we have, if you look at our balance sheet, it’s a strong balance sheet. It’s ready to take action. When we see it, we won’t go in a rush just to make a decision, to make a purchase for a purchase sake, because we have a lot of momentum organically and we want to make sure we do not disrupt that, but those are the criteria that we look for and we continuously look for, and we’re always in the market observing, talking, listening and figuring out if it’s a right fit for us.

Great. Thank you. In terms of like inflation, are we – is there anything we should build into our estimates in terms of like increased costs for talent acquisition or travel expense or engineering or you guys…

I mean, that’s a good question. I mean, obviously if the doors open up and we get all these board is open up and we have a little bit more travel, there’s going to be a little bit more travel. I would project in 2022 than it wasn’t 2020, and 2021. There was a cost increase obviously with the projections, talent acquisition. I mean, we’ve all seen what’s going on in the world today. I mean, it’s, it costs more to hire people and get in the door right now. So there might be, a slight uptick on that, because we want to make sure that we’re keeping the right people and recruiting the right people. So, I don’t know if it’s a material number in the overall scheme of things, but if you’re looking to build out a model over the next year, I think those are fair areas to look assess and possibly update a little bit.

Great. Thank you. And then, I don’t know if you could provide any color in terms of 2022 in terms of like the percent of revenue that you anticipate will be under a long-term contract?

That’s a good question. We’re looking at, our long-term plan said, bring us some 40% to 50% over the next several years. And we’re really focused on that. And as we get these customers, as our customers come in and new customers that continue to invest in TechTarget, whether it’s on a quarterly or semi-annual basis, we have a keen focus on making sure that they understand what they’re getting. We’re doing a good job of fulfilling, and we’re migrating them into our long-term revenue stream. So our long-term plan, I mean, over the next couple of few years is to still achieve 50%. I think we’ll be on a 40% next year, and that’s when we’re going. And that’s what we’re focused on.

Great. Thank you. That’s all my questions. Congrats again on the fantastic results.

Thank you.

Thank you. [Operator Instructions] There are no more questions at this time. That concludes today’s conference call. Thank you. And have a great day.