TechTarget(TTGT) - 2019 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Presents TechTarget, Inc.'s unaudited consolidated financial statements for Q3 and 9M 2019, including balance sheets, income, equity, cash flows, and detailed notes Consolidated Balance Sheets Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2019 (Unaudited) | Dec 31, 2018 | | :--- | :--- | :--- | | Cash and cash equivalents | $52,140 | $34,673 | | Total current assets | $81,096 | $70,118 | | Goodwill | $93,540 | $93,687 | | Operating lease assets with right-of-use | $25,518 | $— | | Total assets | $214,017 | $176,463 | | Total current liabilities | $14,841 | $14,553 | | Long-term portion of term loan | $22,784 | $23,714 | | Non-current operating lease liability | $27,614 | $— | | Total liabilities | $66,246 | $43,878 | | Total stockholders' equity | $147,771 | $132,585 | - The significant increase in total assets and liabilities is primarily due to the adoption of the new lease accounting standard (ASU 2016-02), which required the company to record operating lease right-of-use assets and corresponding lease liabilities on the balance sheet for the first time in 2019[7][26][50] Consolidated Statements of Income and Comprehensive Income Financial Performance (in thousands, except per share data) | Metric | Q3 2019 | Q3 2018 | YoY Change | 9M 2019 | 9M 2018 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenues | $33,809 | $30,742 | +10.0% | $98,067 | $89,513 | +9.6% | | Gross Profit | $25,762 | $23,297 | +10.6% | $75,056 | $68,219 | +10.0% | | Operating Income | $6,911 | $3,384 | +104.2% | $17,373 | $12,371 | +40.4% | | Net Income | $5,351 | $3,769 | +42.0% | $12,792 | $10,283 | +24.4% | | Diluted EPS | $0.19 | $0.13 | +46.2% | $0.45 | $0.36 | +25.0% | Consolidated Statements of Stockholders' Equity - Total stockholders' equity increased from $132.6 million at the end of 2018 to $147.8 million as of September 30, 2019[15] - The increase in equity was primarily driven by net income of $12.8 million for the nine-month period, partially offset by the repurchase of common stock for treasury amounting to $4.7 million[15][68] Consolidated Statements of Cash Flows Cash Flow Summary for the Nine Months Ended September 30 (in thousands) | Cash Flow Category | 2019 | 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $29,993 | $17,373 | | Net cash used in investing activities | $(4,271) | $(240) | | Net cash used in financing activities | $(8,163) | $(13,581) | | Net increase in cash and cash equivalents | $17,467 | $3,481 | - The significant increase in cash from operations was mainly due to higher net income and favorable changes in working capital, particularly a decrease in accounts receivable[17][131] - Financing activities in 2019 primarily consisted of treasury stock repurchases ($4.7 million), tax withholdings related to net share settlements ($2.6 million), and term loan principal payments ($0.9 million)[17] Notes to Consolidated Financial Statements - The company provides specialized online content for IT buyers and offers purchase-intent marketing and sales services to enterprise technology vendors via over 140 websites[19] - Effective January 1, 2019, the company adopted ASU 2016-02, recognizing operating lease right-of-use assets of $27.5 million and lease liabilities of $32.1 million upon adoption[26][50] Revenue by Geography (in thousands) | Region | Q3 2019 | Q3 2018 | 9M 2019 | 9M 2018 | | :--- | :--- | :--- | :--- | :--- | | North America | $22,812 | $20,947 | $66,444 | $60,983 | | International | $10,997 | $9,795 | $31,623 | $28,530 | | Total | $33,809 | $30,742 | $98,067 | $89,513 | - On December 24, 2018, the company entered into a $25 million term loan facility with Western Alliance Bank, maturing in December 2023[45] - During the nine months ended September 30, 2019, the company repurchased 317,724 shares of common stock for an aggregate price of $4.7 million under its November 2018 stock repurchase program[68] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q3 and 9M 2019 financial performance, highlighting a 10% revenue increase, strong Priority Engine™ growth, and increasing longer-term contracts Executive Summary - Revenues for the nine months ended September 30, 2019, increased by 10% to $98.1 million compared to the same period in 2018[83] - The company's Priority Engine™ product revenues grew by more than 30% in the first nine months of 2019 compared to the prior year period[83] - Longer-term contracts accounted for 35% of the company's revenue in Q3 2019, indicating a trend towards more stable, recurring revenue streams[83] Results of Operations Comparison of Q3 2019 vs Q3 2018 (in thousands) | Item | Q3 2019 | Q3 2018 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $33,809 | $30,742 | $3,067 | 10% | | Gross Profit | $25,762 | $23,297 | $2,465 | 11% | | Operating Income | $6,911 | $3,384 | $3,527 | 104% | Comparison of 9M 2019 vs 9M 2018 (in thousands) | Item | 9M 2019 | 9M 2018 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $98,067 | $89,513 | $8,554 | 10% | | Gross Profit | $75,056 | $68,219 | $6,837 | 10% | | Operating Income | $17,373 | $12,371 | $5,002 | 40% | - The decrease in General and Administrative expenses in Q3 2019 was primarily due to lower stock-based compensation and the recovery of previously reserved accounts receivable[113] Liquidity and Capital Resources - Cash and cash equivalents totaled $52.1 million at September 30, 2019, an increase of $17.0 million from December 31, 2018, driven by strong cash generation from operations[125] - Net cash provided by operating activities for the first nine months of 2019 was $30.0 million, a significant increase from $17.4 million in the same period of 2018[129][130] - Days Sales Outstanding (DSO) improved to 67 days at September 30, 2019, compared to 83 days at December 31, 2018, indicating better management of receivables[128] - The company repurchased 317,724 shares of common stock for $4.7 million during the first nine months of 2019[135] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are foreign currency exchange rates and interest rates, stemming from international revenues and a variable-rate term loan - The company's primary market risks are foreign currency exchange risk and interest rate risk[149] - Approximately 25% of Q3 2019 revenues were from international customers, exposing the company to foreign currency fluctuations, which are not currently hedged[150] - Interest rate risk stems from the variable-rate term loan, with $24.0 million outstanding at September 30, 2019, tied to the U.S. LIBOR rate[152] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of September 30, 2019, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2019[154] - There were no material changes in the company's internal control over financial reporting during Q3 2019[155] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not a party to any material legal proceedings and is unaware of any pending litigation that would materially affect its business - As of the filing date, the company is not a party to any material legal proceedings[157] Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the company's 2018 Annual Report on Form 10-K were identified as of September 30, 2019 - There have been no material changes to the risk factors disclosed in the company's 2018 Annual Report on Form 10-K[158] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities during the period and provides no information on the use of proceeds from registered securities - The company did not have any sales of unregistered securities during the reporting period[160] Item 6. Exhibits This section lists exhibits filed with the Quarterly Report on Form 10-Q, including CEO/CFO certifications and XBRL financial data files - The exhibits filed include certifications from the CEO and CFO as required by Sarbanes-Oxley, and XBRL instance documents for financial statements[162] Signatures The report was formally signed and dated November 6, 2019, by TechTarget, Inc.'s Chief Executive Officer and Chief Financial Officer - The report was signed on November 6, 2019, by the company's Chief Executive Officer and Chief Financial Officer[165]