TechTarget(TTGT) - 2024 Q2 - Quarterly Results

Shareholder Letter & Business Update This section details the company's Q2 2024 financial and operational performance, strategic initiatives, and future outlook, alongside updates on the Informa Tech combination Q2 2024 Performance and Market Overview The company reported strong Q2 2024 performance with revenue up 1% year-over-year, exceeding targets despite cautious customer spending, while significantly improving cash collection and reducing doubtful account reserves - Revenue for Q2 2024 increased by 14% sequentially and 1% year-over-year, exceeding the company's target[1] - Market headwinds, including high interest rates and inflation, continued to cause cautious customer spending and discretionary expense reductions among technology vendors[1] Cash Collection Improvement | Metric | June 30, 2024 | June 30, 2023 | | :--- | :--- | :--- | | DSO (Days Sales Outstanding) | 66 days | 79 days | - The reserve for doubtful accounts decreased by $1.5 million from year-end 2023, indicating improved accounts receivable quality[2] Strategic Investments and Product Development The company continued to invest in high-quality content and its product roadmap, launching 'TechTarget Account Intent Feeds' and 'TechTarget Market Monitor' while partnering with 6Sense - Announced general availability of 'TechTarget Account Intent Feeds', a new offering from the Priority Engine platform that delivers weekly account data into customer CRM and ABM systems[4] - Established a partnership with 6Sense Revenue AI Platform, allowing for direct integration of TechTarget's Account Intent Feeds to enhance mutual customers' value[5][6] - Launched the initial rollout of 'TechTarget Market Monitor', a service providing real-time insights on buyer research, topics, and content, initially for Enterprise Strategy Group customers with plans for a broader rollout in H2 2024[7] - The long-term product strategy is to consolidate all customer solutions within the Priority Engine platform to create a unified, integrated solution[4] Q2 2024 Financial Highlights In Q2 2024, the company generated $58.9 million in GAAP revenue, a 1% year-over-year increase, but profitability declined with net income falling 51% to $1.3 million and Adjusted EBITDA decreasing 10% to $16.7 million, while maintaining strong cash flow from operations at $11.9 million Q2 2024 Key Financial Metrics | Metric | Value | YoY Change | | :--- | :--- | :--- | | GAAP Revenue | $58.9 million | +1% | | Net Income | $1.3 million | -51% | | Net Income Margin | 2% | N/A | | Adjusted EBITDA | $16.7 million | -10% | | Adjusted EBITDA Margin | 28% | N/A | | Cash Flow from Operations | $11.9 million | N/A | | Free Cash Flow | $7.7 million | N/A | Update on Combination with Informa Tech Progress continues on the combination with Informa Tech's Digital Businesses, with a Form S-4 registration statement filed and the transaction anticipated to close in the second half of 2024 - The combination aims to create a leading global B2B growth accelerator by merging complementary technology, expertise, and data[9] - A Registration Statement on Form S-4, containing a preliminary proxy statement/prospectus, has been filed with the SEC[9] - The transaction is expected to close in the second half of 2024[9] Financial Position and Capital Allocation As of June 30, 2024, the company held a strong liquidity position with $339.4 million in cash and investments, $417 million in convertible senior notes outstanding, and $92.9 million remaining for stock repurchases - As of June 30, 2024, the company had approximately $339.4 million in cash, cash equivalents, and short-term investments[10] - Total outstanding convertible senior notes amount to $417 million in aggregate principal[10] - There was no repurchase activity in Q2 2024, with $92.9 million remaining authorized for repurchase of common stock and convertible debt under the November 2022 Program[11] Outlook and Future Events The company will host an Investor Morning on September 19, 2024, and projects Q3 2024 revenue between $57.0 million and $59.0 million, with an expected net loss and Adjusted EBITDA forecasted between $16.0 million and $17.0 million - An Investor Morning is scheduled for September 19, 2024, at NASDAQ in New York City[12] Q3 2024 Guidance | Metric | Guidance Range | | :--- | :--- | | Revenue | $57.0M - $59.0M | | Net Loss | ($1.9M) - ($1.2M) | | Adjusted EBITDA | $16.0M - $17.0M | Financial Statements This section presents the company's consolidated balance sheets, statements of operations, and cash flows, along with reconciliations of GAAP to non-GAAP financial measures Consolidated Balance Sheet As of June 30, 2024, total assets were $717.1 million, an increase from $699.9 million at year-end 2023, driven by increased cash, with total liabilities at $480.3 million and stockholders' equity at $236.8 million Selected Balance Sheet Data (in thousands) | Account | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $237,405 | $226,668 | | Total current assets | $388,693 | $371,473 | | Total assets | $717,148 | $699,888 | | Convertible senior notes | $411,602 | $410,500 | | Total liabilities | $480,338 | $476,961 | | Total stockholders' equity | $236,810 | $222,927 | Consolidated Statements of Operations For Q2 2024, revenue was $58.9 million, slightly up from $58.4 million in Q2 2023, but net income significantly decreased 51% to $1.3 million due to higher operating expenses, resulting in diluted EPS of $0.05 Statement of Operations Highlights (Q2, in thousands) | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Revenue | $58,914 | $58,429 | | Gross Profit | $36,797 | $39,329 | | Operating Income (Loss) | ($2,528) | $650 | | Net Income | $1,312 | $2,675 | | Diluted EPS | $0.05 | $0.10 | Consolidated Statements of Cash Flows For the six months ended June 30, 2024, net cash provided by operating activities was $21.2 million, down from $28.0 million in 2023, with net cash used in investing activities at $10.8 million, ending the period with $237.4 million in cash Cash Flow Summary (Six Months Ended June 30, in thousands) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $21,213 | $27,974 | | Net cash used in investing activities | ($10,766) | ($83,462) | | Net cash provided by (used in) financing activities | $424 | ($51,776) | | Net increase (decrease) in cash | $10,737 | ($106,501) | | Cash and cash equivalents at end of period | $237,405 | $238,022 | Reconciliation of GAAP to Non-GAAP Measures This section provides reconciliations for key non-GAAP metrics, including Adjusted Gross Profit of $39.4 million, Free Cash Flow of $7.7 million, Adjusted EBITDA of $16.7 million, and Adjusted Net Income of $13.3 million for Q2 2024 Reconciliation of Gross Profit to Adjusted Gross Profit Adjusted Gross Profit for Q2 2024 was $39.4 million (67% margin), compared to $41.8 million (71% margin) in Q2 2023, adjusted primarily for stock compensation and depreciation & amortization Adjusted Gross Profit Reconciliation (Q2, in thousands) | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Gross Profit (GAAP) | $36,797 | $39,329 | | Stock compensation | $637 | $831 | | Depreciation and amortization | $1,981 | $1,613 | | Adjusted Gross Profit | $39,415 | $41,773 | Reconciliation of Cash Provided by Operations to Free Cash Flow Free Cash Flow for Q2 2024 was $7.7 million, an increase from $6.0 million in Q2 2023, calculated by subtracting $4.2 million in capital expenditures from operating cash flow Free Cash Flow Reconciliation (Q2, in thousands) | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $11,918 | $9,756 | | Purchases of property and equipment | ($4,246) | ($3,743) | | Free Cash Flow | $7,672 | $6,013 | Reconciliation of Net Income (Loss) to Adjusted EBITDA Adjusted EBITDA for Q2 2024 was $16.7 million (28% margin), a decrease from $18.5 million (32% margin) in Q2 2023, adjusted for interest, taxes, D&A, stock-based compensation, and transaction expenses Adjusted EBITDA Reconciliation (Q2, in thousands) | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Net income (loss) (GAAP) | $1,312 | $2,675 | | Adjustments (Interest, Taxes, D&A, etc.) | $1,950 | $3,162 | | Stock-based compensation expense | $11,343 | $12,684 | | Transaction and related expenses | $2,069 | $0 | | Adjusted EBITDA | $16,664 | $18,547 | Reconciliation of Net Income (Loss) to Adjusted Net Income Adjusted Net Income for Q2 2024 was $13.3 million, or $0.42 per diluted share, compared to $14.4 million, or $0.45 per diluted share, in Q2 2023, after adjustments for amortization, transaction expenses, and stock-based compensation Adjusted Net Income Reconciliation (Q2, in thousands) | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Net income (loss) (GAAP) | $1,312 | $2,675 | | Total Adjustments | $11,989 | $11,752 | | Adjusted Net Income | $13,301 | $14,427 | | Adjusted Net Income per Diluted Share | $0.42 | $0.45 | Guidance This section provides the company's financial guidance for the third quarter of 2024, including revenue, net loss, and Adjusted EBITDA projections Q3 2024 Financial Guidance The company projects Q3 2024 revenue between $57.0 million and $59.0 million, with an anticipated net loss and Adjusted EBITDA forecasted between $16.0 million and $17.0 million Q3 2024 Guidance (in thousands) | Metric | Low Range | High Range | | :--- | :--- | :--- | | Revenue | $57,000 | $59,000 | | Net Loss | ($1,900) | ($1,200) | | Adjusted EBITDA | $16,000 | $17,000 | Appendix This section provides details on the conference call, definitions of non-GAAP financial measures, and important legal disclosures regarding forward-looking statements and the Informa Tech transaction Conference Call and Webcast Information This section provides logistical details for the Q2 2024 financial results conference call and webcast held on August 8, 2024, including dial-in numbers and replay access - A conference call to discuss financial results was scheduled for 5:00 p.m. (Eastern Time) on August 8, 2024[14] - Details for accessing the live webcast and telephone replay are provided, with the replay available through September 7, 2024[15] Non-GAAP Financial Measures and KPIs Definitions This section defines the non-GAAP financial measures and Key Performance Indicators (KPIs) used in the report, such as Adjusted EBITDA, Free Cash Flow, and DSO, explaining their utility for investors and internal management - Defines 'Adjusted EBITDA' as earnings adjusted for interest, taxes, D&A, stock-based compensation, and other one-time charges[16] - Defines 'Free Cash Flow' as net cash from operations less purchases of equipment and other capitalized assets[16] - Defines 'DSO' (days sales outstanding) as net accounts receivable divided by total revenue for the period, multiplied by the number of days in the period[16] Legal Disclosures and Forward-Looking Statements This section contains important legal information for investors, detailing SEC filing references, proxy solicitation participants, and a comprehensive cautionary note on forward-looking statements and associated risks - Directs investors to the Form S-4 registration statement filed with the SEC for important information regarding the proposed transaction with Informa Tech[17] - Discloses that the company, NewCo, Informa, and their respective directors may be deemed participants in the solicitation of proxies from TechTarget's stockholders[18] - Warns that forward-looking statements are subject to substantial risks and uncertainties, including the failure to complete the proposed transaction, inability to realize anticipated benefits, and macroeconomic factors[20][21]