TechTarget(TTGT) - 2024 Q3 - Quarterly Results

Letter to Shareholders Q3 2024 Performance and Market Outlook The company returned to year-over-year revenue growth in Q3 2024, showing improved cash collection and anticipating low to mid-single-digit market growth - Returned to year-on-year revenue growth in the third quarter of 2024[1] - The broader tech B2B market is expected to show low to mid-single-digit growth in Q4 2024 and through early 2025[1] - Days Sales Outstanding (DSO) improved to 64 days as of September 30, 2024, down from 70 days in the prior year, indicating stronger cash collection[1] Strategic Investments and Product Development TechTarget invested in content and platforms, launching new products like 'Account Intent Feeds' and 'Market Monitor™' to enhance customer data - In April, launched TechTarget Account Intent Feeds, a Priority Engine-based offering delivering actionable account data directly into customers' CRM and ABM platforms, including a partnership with 6Sense Revenue AI Platform[1] - In July, launched TechTarget Market Monitor™, a service to help customers understand real-time sales and marketing dynamics, initially available to Enterprise Strategy Group customers[3] - In October, announced Priority Engine – Demand, an annual subscription offering designed to unify the customer experience across all TechTarget solutions[4] Q3 2024 Financial Highlights Q3 2024 GAAP revenue grew 2% to $58.5 million, resulting in a $1.7 million net loss, with Adjusted EBITDA at $16.5 million and strong operating cash flow Q3 2024 Financial Results | Metric | Value | Change (YoY) | | :--- | :--- | :--- | | GAAP Revenue | $58.5 million | +2% | | GAAP Net Loss | $1.7 million | N/A (vs. $1.7M income) | | Adjusted EBITDA | $16.5 million | -5% | | Adjusted EBITDA Margin | 28% | N/A | | Cash Flow from Operations | $19.7 million | N/A | | Free Cash Flow | $15.6 million | N/A | Update on Combination with Informa Tech's Digital Businesses The proposed merger with Informa Tech's Digital Businesses is on track for a Q4 2024 close, with a shareholder vote scheduled for November 26, 2024 - The proposed combination with Informa Tech's Digital Businesses is expected to close in Q4[7] - A Special Meeting for TechTarget shareholders to vote on the combination is scheduled for November 26, 2024, at 10am ET[7] Balance Sheet, Liquidity, and Repurchase Plan As of September 30, 2024, TechTarget held $355.8 million in cash and investments, with $417 million in convertible notes outstanding - As of September 30, 2024, the company had approximately $355.8 million in cash, cash equivalents, and short-term investments[8] - The company has approximately $417 million in aggregate principal amount of convertible senior notes outstanding[9] - No repurchase activity occurred during Q3 2024, with the company still authorized to repurchase up to $92.9 million under its existing program, subject to Informa's approval[11] Conference Call and Webcast This section provides logistical details for the Q3 2024 financial results conference call and webcast, including replay information - A conference call to discuss financial results was scheduled for 5:00 p.m. (Eastern Time) on November 12, 2024[13] - The public was invited to listen via a live webcast or telephone, with specific access codes provided[14] - A replay of the conference call will be available via telephone and webcast until December 12, 2024[14] Non-GAAP Financial Measures and KPIs This section defines key non-GAAP financial measures and KPIs, such as Adjusted EBITDA and Free Cash Flow, used for internal management and investor analysis - Defines non-GAAP measures including 'Adjusted EBITDA', 'Adjusted Net Income', 'Free Cash Flow', and 'Adjusted Gross Profit'[15] - Defines the Key Performance Indicator 'DSO' (days sales outstanding) as a measure of the quality and status of receivables[15] - The company uses these non-GAAP measures in its internal management reporting, planning processes, and as principal financial metrics in its annual incentive compensation program[15] Legal Disclosures Additional Information and Where to Find It This section directs investors to the definitive Proxy Statement/Prospectus (Form S-4) filed with the SEC for complete information on the proposed transaction - Investors are urged to read the definitive Proxy Statement/Prospectus (Form S-4) filed with the SEC on October 25, 2024, for important information about the proposed transaction[17] Participants in the Solicitation TechTarget, NewCo, Informa, and their respective directors and certain executive officers may be deemed participants in the solicitation of proxies - TechTarget, NewCo, Informa, and their respective directors and executive officers may be considered participants in the proxy solicitation for the proposed transaction[18] No Offer or Solicitation This communication is for informational purposes only and does not constitute an offer to sell securities or a solicitation of any vote or approval - This communication is for informational purposes only and is not an offer to sell securities or a solicitation of votes[19] Cautionary Note Regarding Forward-Looking Statements This section warns that the document contains forward-looking statements subject to significant risks and uncertainties, including those related to the merger and economic conditions - The press release contains forward-looking statements that involve substantial risks and uncertainties[20] - Key risk factors include potential failure to complete the proposed transaction, difficulties in integrating businesses and achieving synergies, and adverse effects from economic, political, and regulatory conditions[22] - The company undertakes no obligation to update any forward-looking statements[23] Consolidated Financial Statements Consolidated Balance Sheets As of September 30, 2024, total assets increased to $733.0 million, driven by higher cash, while total liabilities slightly rose to $483.5 million Consolidated Balance Sheet Summary (Unaudited) | (in thousands) | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total current assets | $405,855 | $371,473 | | Cash and cash equivalents | $278,519 | $226,668 | | Total assets | $732,970 | $699,888 | | Total current liabilities | $38,677 | $36,990 | | Convertible senior notes | $412,154 | $410,500 | | Total liabilities | $483,494 | $476,961 | Consolidated Statements of Operations and Comprehensive Income (Loss) Q3 2024 revenue grew 2% to $58.5 million, but the company reported a net loss of $1.7 million due to increased operating expenses, including transaction costs Statement of Operations Summary (Unaudited, in thousands) | | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Revenue | $58,472 | $57,128 | | Gross Profit | $36,451 | $38,178 | | Operating Income (Loss) | $(1,848) | $469 | | Net Income (Loss) | $(1,716) | $1,742 | | Diluted EPS | $(0.06) | $0.06 | Consolidated Statements of Cash Flows For the nine months ended September 30, 2024, operating cash flow was $40.9 million, while investing activities provided $10.7 million, leading to a $51.9 million increase in cash Statement of Cash Flows Summary (Unaudited, in thousands) | | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $40,945 | $53,800 | | Net cash provided by (used in) investing activities | $10,694 | $(88,167) | | Net cash provided by (used in) financing activities | $227 | $(98,710) | | Net increase (decrease) in cash | $51,851 | $(132,417) | Reconciliation of GAAP to Non-GAAP Financial Measures Reconciliation of Gross Profit to Adjusted Gross Profit This table reconciles GAAP Gross Profit to Adjusted Gross Profit, showing Q3 2024 GAAP Gross Profit of $36.5 million adjusted to $39.3 million, with a 67% Adjusted Gross Margin Gross Profit Reconciliation (Q3 2024, in thousands) | Metric | Value | | :--- | :--- | | Gross Profit (GAAP) | $36,451 | | Stock compensation | $725 | | Depreciation and amortization | $2,103 | | Adjusted Gross Profit (Non-GAAP) | $39,279 | Reconciliation of Cash Provided by Operations to Free Cash Flow This table details the calculation of Free Cash Flow, showing Q3 2024 Free Cash Flow of $15.6 million derived from $19.7 million in operating cash flow less capital expenditures Free Cash Flow Reconciliation (Q3 2024, in thousands) | Metric | Value | | :--- | :--- | | Net cash provided by operating activities | $19,732 | | Purchases of property and equipment | $(4,172) | | Free Cash Flow (Non-GAAP) | $15,560 | Reconciliation of Net Income (Loss) to Adjusted EBITDA This table reconciles GAAP Net Income (Loss) to Adjusted EBITDA, showing Q3 2024 GAAP Net Loss of $1.7 million adjusted to an Adjusted EBITDA of $17.4 million, with a 28% margin Adjusted EBITDA Reconciliation (Q3 2024, in thousands) | Metric | Value | | :--- | :--- | | Net income (loss) (GAAP) | N/A | | Adjustments (Interest, Taxes, D&A, etc.) | N/A | | Adjusted EBITDA (Non-GAAP) | $17,373 | Reconciliation of Net Income (Loss) to Adjusted Net Income This table reconciles GAAP Net Income (Loss) to Adjusted Net Income, showing Q3 2024 GAAP Net Loss of $1.7 million adjusted to an Adjusted Net Income of $13.5 million, or $0.42 per diluted share Adjusted Net Income Reconciliation (Q3 2024, in thousands) | Metric | Value | | :--- | :--- | | Net income (loss) (GAAP) | $(1,716) | | Total Adjustments | $15,183 | | Adjusted net income (Non-GAAP) | $13,467 | | Adjusted net income per diluted share | $0.42 |