PART I. FINANCIAL INFORMATION This section presents TechTarget's unaudited consolidated financial statements and management's discussion and analysis for the company [Item 1. Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents TechTarget's unaudited consolidated financial statements, including balance sheets, income statements, equity statements, and cash flows, with detailed accounting notes [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets%20as%20of%20March%2031%2C%202019%20and%20December%2031%2C%202018) The Consolidated Balance Sheets present the company's financial position, detailing assets, liabilities, and equity as of March 31, 2019, and December 31, 2018 | Metric | March 31, 2019 (in thousands) | December 31, 2018 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Total assets | $202,612 | $176,463 | | Total liabilities | $67,487 | $43,878 | | Total stockholders' equity | $135,125 | $132,585 | [Consolidated Statements of Income and Comprehensive Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income%20for%20the%20three%20months%20ended%20March%2031%2C%202019%20and%202018) This statement outlines the company's financial performance for the three months ended March 31, 2019 and 2018, detailing revenues, expenses, and net income | Metric | Three Months Ended March 31, 2019 (in thousands) | Three Months Ended March 31, 2018 (in thousands) | YoY Change (in thousands) | YoY Change (%) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------ | :------------- | | Revenues | $29,972 | $27,299 | $2,673 | 9.8% | | Gross profit | $22,960 | $20,574 | $2,386 | 11.6% | | Operating income | $4,375 | $2,594 | $1,781 | 68.7% | | Net income | $3,290 | $2,094 | $1,196 | 57.1% | | Basic Net income per common share | $0.12 | $0.08 | $0.04 | 50.0% | | Diluted Net income per common share | $0.12 | $0.07 | $0.05 | 71.4% | [Consolidated Statements of Stockholders' Equity](index=5&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity%20for%20the%20three%20months%20ended%20March%2031%2C%202019%20and%202018) This statement details changes in stockholders' equity for the three months ended March 31, 2019 and 2018, including common stock, treasury stock, and retained earnings | Metric | Balance, December 31, 2018 (in thousands) | Balance, March 31, 2019 (in thousands) | | :-------------------------------- | :---------------------------------------- | :--------------------------------------- | | Total Stockholders' Equity | $132,585 | $135,125 | | Treasury Stock Cost | $(177,905) | $(181,030) | | Additional Paid-In Capital | $307,014 | $309,348 | | Retained Earnings | $3,637 | $6,927 | - The company purchased **220,297 shares** of common stock through stock buyback for **$3,125 thousand** during the three months ended March 31, 2019[15](index=15&type=chunk) - Stock-based compensation expense contributed **$3,179 thousand** to additional paid-in capital for the three months ended March 31, 2019[15](index=15&type=chunk) [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20three%20months%20ended%20March%2031%2C%202019%20and%202018) This statement presents cash flows from operating, investing, and financing activities for the three months ended March 31, 2019 and 2018 | Metric | Three Months Ended March 31, 2019 (in thousands) | Three Months Ended March 31, 2018 (in thousands) | YoY Change (in thousands) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------ | | Net cash provided by operating activities | $9,804 | $3,795 | $6,009 | | Net cash used in investing activities | $(1,333) | $(98) | $(1,235) | | Net cash used in financing activities | $(4,283) | $(4,229) | $(54) | | Net increase (decrease) in cash and cash equivalents | $4,178 | $(544) | $4,722 | | Cash and cash equivalents at end of period | $38,851 | $25,422 | $13,429 | [Notes to Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed information on accounting policies, financial statement components, and disclosures, covering revenue, fair value, goodwill, leases, and stock compensation [Note 1. Organization and Operations](index=7&type=section&id=Note%201.%20Organization%20and%20Operations) TechTarget, Inc. provides specialized online content and purchase-intent marketing services for IT buyers and enterprise technology vendors - TechTarget, Inc. is a leading provider of specialized online content for enterprise IT product and service buyers, and purchase-intent marketing and sales services for enterprise technology vendors[20](index=20&type=chunk) - The company operates a network of over **140 websites**, each focusing on a specific IT sector (e.g., storage, security, networking) to support IT and business professionals' purchasing decisions[20](index=20&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=7&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) This note details significant accounting policies, including consolidation, estimates, revenue recognition, and the Q1 2019 adoption of new lease accounting guidance - The company adopted ASU No. 2016-02, Leases (Topic 842), in the first quarter of 2019 using a modified retrospective approach, resulting in the recording of operating lease assets (right-of-use) of **$27.5 million** and operating lease liabilities of **$32.1 million** as of January 1, 2019[27](index=27&type=chunk)[28](index=28&type=chunk)[49](index=49&type=chunk) - Revenue is recognized when performance obligations are satisfied by transferring promised goods or services to customers, following a five-step process[26](index=26&type=chunk) - **No material changes** to critical accounting policies and estimates occurred during the first three months of 2019, other than those related to leases[21](index=21&type=chunk) [Note 3. Revenues](index=9&type=section&id=Note%203.%20Revenues) This note disaggregates revenue by geographic area and details contract liabilities, including deferral and recognition of unearned revenue | Geographic Area | Three Months Ended March 31, 2019 (in thousands) | Three Months Ended March 31, 2018 (in thousands) | | :---------------- | :--------------------------------------------- | :--------------------------------------------- | | North America | $20,278 | $18,850 | | International | $9,694 | $8,449 | | Total Revenues | $29,972 | $27,299 | | Contract Liabilities Activity | Amount (in thousands) | | :---------------------------- | :-------------------- | | Balance at December 31, 2018 | $5,573 | | Deferral of revenue | $1,946 | | Recognition of previously unearned revenue | $(1,925) | | Balance at March 31, 2019 | $5,594 | [Note 4. Fair Value Measurements](index=10&type=section&id=Note%204.%20Fair%20Value%20Measurements) This note describes fair value measurements of financial assets, categorizing them into Level 1, Level 2, and Level 3 inputs | Asset (December 31, 2018) | Fair Value (in thousands) | Level 1 (in thousands) | Level 2 (in thousands) | Level 3 (in thousands) | | :------------------------ | :------------------------ | :--------------------- | :--------------------- | :--------------------- | | Money market funds | $15,070 | $15,070 | - | - | | Short-term investments | $500 | - | $500 | - | | Total assets | $15,570 | $15,070 | $500 | - | - As of March 31, 2019, there are **no investments measured at fair value** as remaining short-term investments matured in Q1 2019, and money market accounts are now considered cash[36](index=36&type=chunk) [Note 5. Cash, Cash Equivalents, and Investments](index=10&type=section&id=Note%205.%20Cash%2C%20Cash%

PART I [Business](index=3&type=section&id=Item%201.%20Business) TechTarget is a global leader in purchase intent-driven marketing and sales services for enterprise technology vendors - The company operates a network of over **140 websites** focused on specific IT sectors, serving as a key resource for IT and business professionals[13](index=13&type=chunk) - Key Operational Metrics (as of Dec 31, 2018) | Metric | Value | | :--- | :--- | | Registered Members | ~20.0 million | | Customers in 2018 | ~1,300 | - The company's core strategy includes continuing innovation in data-enabled marketing services (like IT Deal Alert™), expanding long-term subscription contracts, growing its international presence (**32% of 2018 revenues from international programs**), and selectively acquiring complementary businesses[27](index=27&type=chunk)[29](index=29&type=chunk) - TechTarget's main product suites are IT Deal Alert™ (data-driven services like Priority Engine™), Demand Solutions (lead generation through content like white papers and webcasts), and Brand Solutions (display advertising and microsites)[36](index=36&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk) - Primary competitors include media companies like J2 Global, Madison Logic, QuinStreet, and International Data Group, as well as data-oriented businesses such as 6sense and Bombora[49](index=49&type=chunk) [Risk Factors](index=16&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks related to its business operations, data privacy, and financial condition - The business is heavily dependent on advertising spending from the IT industry, which is cyclical and can fluctuate significantly, impacting revenues[61](index=61&type=chunk)[62](index=62&type=chunk) - A significant portion of revenue comes from short-term contracts (typically six months or less), which may not be renewed, creating revenue uncertainty[66](index=66&type=chunk) - International operations, which accounted for **32% of online revenues from geo-targeted campaigns in 2018**, face risks from currency fluctuations, regulatory changes, and economic uncertainty like Brexit, with approximately **12% of revenues from UK-based customers**[72](index=72&type=chunk)[74](index=74&type=chunk) - The company faces significant risks from evolving data privacy laws, particularly the EU's General Data Protection Regulation (GDPR), which imposes stringent requirements and substantial penalties for non-compliance[92](index=92&type=chunk) - As of December 31, 2018, the company had **$93.7 million of goodwill** on its balance sheet, which is subject to impairment risk that could negatively impact earnings[112](index=112&type=chunk) - A limited number of stockholders, including directors and executive officers, beneficially own approximately **42% of outstanding common stock**, giving them substantial influence over corporate matters[118](index=118&type=chunk) [Unresolved Staff Comments](index=29&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the Securities and Exchange Commission - There are no unresolved staff comments[119](index=119&type=chunk) [Properties](index=29&type=section&id=Item%202.%20Properties) The company's global headquarters is a leased 74,000 sq ft office in Newton, MA, with smaller leased offices worldwide - As of December 31, 2018, the company leases approximately **74,000 square feet** for its global headquarters in Newton, Massachusetts, with the lease term running through December 31, 2029, and an option to extend for an additional five years[120](index=120&type=chunk) [Legal Proceedings](index=29&type=section&id=Item%203.%20Legal%20Proceedings) The company is not a party to any material legal proceedings or aware of any materially impactful pending litigation - The company is not currently a party to any material legal proceedings[121](index=121&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=30&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) TechTarget's common stock trades on Nasdaq under 'TTGT', with no dividends paid and a **$25.0 million** stock repurchase program - The company's common stock is listed on the Nasdaq Global Market under the trading symbol **\"TTGT\"**[123](index=123&type=chunk) - The company has not paid any cash dividends in the last three fiscal years and does not anticipate paying them in the foreseeable future, intending to retain earnings for business development[125](index=125&type=chunk) - Issuer Purchases of Equity Securities (Q4 2018) | Period | Total Shares Purchased | Average Price Paid Per Share | Total Value (Approx.) | | :--- | :--- | :--- | :--- | | Nov 2018 | 30,316 | $15.13 | $458,700 | | Dec 2018 | 213,109 | $12.49 | $2,661,700 | | **Total Q4** | **243,425** | **$12.82** | **$3,120,400** | - In November 2018, the Board of Directors approved a new stock repurchase program authorizing the purchase of up to **$25.0 million** of its common stock, which expires in December 2020, with approximately **$21.9 million** remaining available as of December 31, 2018[132](index=132&type=chunk) [Selected Financial Data](index=33&type=section&id=Item%206.%20Selected%20Financial%20Data) This section provides a five-year summary of key financial data, including revenues, net income, and Adjusted EBITDA - Selected Financial Data (2014-2018) | Metric (in thousands) | 2018 | 2017 | 2016 | 2015 | 2014 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | **$121,333** | **$108,556** | **$106,625** | **$111,826** | **$106,203** | | Operating Income | $16,621 | $10,410 | $6,791 | $12,170 | $7,459 | | **Net Income** | **$12,955** | **$6,803** | **$2,419** | **$7,186** | **$4,081** | | Diluted EPS | $0.45 | $0.24 | $0.08 | $0.21 | $0.12 | | **Adjusted EBITDA** | **$30,282** | **$21,958** | **$18,536** | **$24,499** | **$21,459** | | Total Assets | $176,463 | $173,169 | $170,077 | $177,859 | $177,484 | | Total Stockholders' Equity | $132,585 | $120,747 | $117,563 | $160,001 | $155,846 | - Reconciliation of Net Income to Adjusted EBITDA (2018) | Line Item (in thousands) | Amount | | :--- | :--- | | Net income | $12,955 | | Interest expense, net | $1,300 | | Provision for income taxes | $1,888 | | Depreciation and amortization | $4,548 | | **EBITDA** | **$20,691** | | Stock-based compensation | $9,113 | | Other expense, net | $478 | | **Adjusted EBITDA** | **$30,282** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance, revenue growth, shift to longer-term contracts, and liquidity position - Financial Performance Summary (2018 vs. 2017) | Metric (in thousands) | 2018 | 2017 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $121,333 | $108,556 | 12% | | Gross Profit | $92,374 | $80,220 | 15% | | Operating Income | $16,621 | $10,410 | 60% | | Net Income | $12,955 | $6,803 | 90% | - Online Revenue Breakdown (2018 vs. 2017) | Revenue Stream (in thousands) | 2018 | 2017 | % Change | | :--- | :--- | :--- | :--- | | **Total IT Deal Alert** | **$59,049** | **$49,529** | **19%** | | Total Core Online | $62,284 | $58,859 | 6% | | **Total International Online** | **$38,673** | **$35,180** | **10%** | | Total North America Online | $82,660 | $73,208 | 13% | - The company phased out its events product line in 2017 to focus on its data-driven online offerings, with events revenue at **zero in 2018**, down from **$0.2 million in 2017** and **$4.8 million in 2016**[151](index=151&type=chunk)[159](index=159&type=chunk) - Cash flow from operations increased to **$23.9 million in 2018** from **$18.6 million in 2017**, primarily due to higher net income[217](index=217&type=chunk)[219](index=219&type=chunk) - In December 2018, the company entered into a new five-year, **$25.0 million term loan agreement** with Western Alliance Bank, replacing its previous credit facility[228](index=228&type=chunk)[235](index=235&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=53&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are foreign currency exchange fluctuations and interest rate changes, with quantified impacts - The company is exposed to foreign currency risk as **26% of its 2018 revenues** were from customers with billing addresses outside the U.S., where a hypothetical **10% unfavorable movement** in foreign exchange rates would have decreased operating income by approximately **$125,000** for the year[249](index=249&type=chunk) - Interest rate risk stems from the **$25.0 million variable-rate term loan**, where a **200 basis point (2%) increase** in interest rates would increase annual interest expense by approximately **$0.5 million**[252](index=252&type=chunk) [Financial Statements and Supplementary Data](index=54&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section contains the company's audited consolidated financial statements for 2018, including the independent auditor's report - Consolidated Balance Sheet Highlights (as of Dec 31) | Metric (in thousands) | 2018 | 2017 | | :--- | :--- | :--- | | Cash and cash equivalents | $34,673 | $25,966 | | Total Current Assets | $70,118 | $67,608 | | Goodwill | $93,687 | $93,793 | | **Total Assets** | **$176,463** | **$173,169** | | Total Current Liabilities | $14,553 | $23,986 | | Long-term portion of term loan | $23,714 | $22,339 | | **Total Liabilities** | **$43,878** | **$52,422** | | **Total Stockholders' Equity** | **$132,585** | **$120,747** | - Consolidated Statement of Income (Year Ended Dec 31) | Metric (in thousands) | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Total Revenues | $121,333 | $108,556 | $106,625 | | Gross Profit | $92,374 | $80,220 | $76,408 | | Operating Income | $16,621 | $10,410 | $6,791 | | **Net Income** | **$12,955** | **$6,803** | **$2,419** | - The company adopted the new revenue recognition standard, ASC 606, on January 1, 2018, using the modified retrospective method, resulting in a one-time reduction of deferred revenue by **$3.5 million**[274](index=274&type=chunk)[308](index=308&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=80&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting principles or financial disclosure - None reported[365](index=365&type=chunk) [Controls and Procedures](index=80&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2018 - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2018[367](index=367&type=chunk) - There were no changes in internal control over financial reporting during the fourth quarter of 2018 that materially affected, or are reasonably likely to materially affect, internal controls[368](index=368&type=chunk) - The independent registered public accounting firm, BDO USA, LLP, issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2018[372](index=372&type=chunk)[373](index=373&type=chunk) [Other Information](index=82&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[380](index=380&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=82&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2019 Proxy Statement - The required information for this item is incorporated by reference from the company's 2019 Proxy Statement[382](index=382&type=chunk) - The company has adopted a Code of Business Conduct and Ethics, which is available on its investor relations website[384](index=384&type=chunk) [Executive Compensation](index=82&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive and director compensation is incorporated by reference from the company's 2019 Proxy Statement - The required information for this item is incorporated by reference from the company's 2019 Proxy Statement[385](index=385&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=82&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership and related stockholder matters is incorporated by reference from the company's 2019 Proxy Statement - The required information for this item is incorporated by reference from the company's 2019 Proxy Statement[386](index=386&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=82&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the 2019 Proxy Statement - The required information for this item is incorporated by reference from the company's 2019 Proxy Statement[387](index=387&type=chunk) [Principal Accountant Fees and Services](index=82&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the company's 2019 Proxy Statement - The required information for this item is incorporated by reference from the company's 2019 Proxy Statement[388](index=388&type=chunk) PART IV [Exhibits, Financial Statement Schedules](index=83&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the consolidated financial statements and exhibits filed with the Form 10-K, with financial statement schedules omitted - This item lists the financial statements and exhibits filed with the Form 10-K, with financial statement schedules omitted[391](index=391&type=chunk) [Form 10-K Summary](index=86&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company has not provided a summary for this item - None[398](index=398&type=chunk)

TechTarget, Inc. (NASDAQ:TTGT) Q4 2018 Earnings Conference Call February 6, 2019 5:00 PM ET Company Participants Charles Rennick - General Counsel Greg Strakosch - Executive Chairman Mike Cotoia - Chief Executive Officer Dan Noreck - Chief Financial Officer Conference Call Participants Eric Martinuzzi - Lake Street Mike Malouf - Craig-Hallum Capital Group Marco Rodriguez - Stonegate Capital Aaron Kessler - Raymond James Operator Good afternoon and welcome to the TechTarget Incorporated Fourth Quarter and Fu ...