TechTarget(TTGT) - 2021 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures Item 1. Financial Statements (Unaudited) Presents unaudited consolidated financial statements and detailed notes on accounting policies, revenue, debt, leases, and acquisitions Consolidated Balance Sheets The company's balance sheet as of June 30, 2021, shows an increase in total assets, primarily driven by higher cash and goodwill, while total liabilities also rose due to increased convertible debt and contract liabilities, with stockholders' equity slightly decreasing | Metric (in thousands) | June 30, 2021 | December 31, 2020 | Change | | :-------------------- | :------------ | :---------------- | :----- | | Assets | | | | | Cash | $109,038 | $82,616 | +$26,422 | | Total current assets | $153,402 | $127,763 | +$25,639 | | Goodwill | $182,222 | $179,118 | +$3,104 | | Intangible assets, net| $105,441 | $108,872 | -$3,431 | | Total assets | $482,218 | $456,568 | +$25,650 | | Liabilities | | | | | Total current liabilities | $52,294 | $46,418 | +$5,876 | | Convertible debt | $195,303 | $153,882 | +$41,421 | | Total liabilities | $288,386 | $254,062 | +$34,324 | | Stockholders' Equity| | | | | Total stockholders' equity | $193,832 | $202,506 | -$8,674 | [7] Consolidated Statements of Income and Comprehensive Income Q2 2021 revenue grew 83% with gross profit up 76%, but net income increased only 7% due to higher operating expenses and tax provision | Metric (in thousands) | Q2 2021 | Q2 2020 | YoY Change (%) | YTD 2021 | YTD 2020 | YoY Change (%) | | :-------------------- | :------ | :------ | :------------- | :------- | :------- | :------------- | | Revenue | $63,711 | $34,796 | 83% | $116,680 | $66,212 | 76% | | Gross profit | $45,821 | $26,011 | 76% | $82,857 | $49,276 | 68% | | Operating income | $11,934 | $6,875 | 74% | $15,155 | $10,459 | 45% | | Net income | $5,120 | $4,773 | 7% | $6,930 | $6,980 | -1% | | Basic EPS | $0.18 | $0.17 | 6% | $0.25 | $0.25 | 0% | | Diluted EPS | $0.17 | $0.17 | 0% | $0.24 | $0.25 | -4% | | Provision for income taxes | $6,328 | $2,092 | 202% | $7,043 | $3,000 | 135% | [9] Consolidated Statements of Stockholders' Equity Stockholders' equity decreased from $202.5 million at December 31, 2020, to $193.8 million at June 30, 2021, primarily due to a reclassification from ASU 2020-06 adoption | Metric (in thousands) | December 31, 2020 | June 30, 2021 | Change | | :-------------------- | :---------------- | :------------ | :----- | | Common Stock | $56 | $56 | $0 | | Treasury Stock | $(199,796) | $(199,796) | $0 | | Additional Paid-In Capital | $363,055 | $345,609 | $(17,446) | | Accumulated Other Comprehensive Income | $1,611 | $3,220 | +$1,609 | | Retained Earnings | $37,580 | $44,743 | +$7,163 | | Total Stockholders' Equity | $202,506 | $193,832 | $(8,674) | [10] - Reclassification due to ASU 2020-06 adoption reduced Additional Paid-in Capital by $30.5 million and increased Retained Earnings by $233 thousand[10][40] Consolidated Statements of Cash Flows For the six months ended June 30, 2021, net cash provided by operating activities significantly increased to $33.9 million, driven by higher net income and working capital changes, while investing and financing activities used less cash | Cash Flow Activity (in thousands) | YTD June 30, 2021 | YTD June 30, 2020 | Change | | :-------------------------------- | :---------------- | :---------------- | :----- | | Net cash provided by operating activities | $33,881 | $21,841 | +$12,040 | | Net cash used in investing activities | $(6,225) | $(8,424) | +$2,199 | | Net cash used in financing activities | $(1,415) | $(15,517) | +$14,102 | | Net increase (decrease) in cash | $26,422 | $(2,097) | +$28,519 | | Cash at end of period | $109,038 | $50,390 | +$58,648 | [15] - The increase in operating cash flow was primarily due to changes in working capital (driven by increases in contract liabilities) and higher stock-based compensation charged to earnings[170] - Investing activities in 2021 were mainly for property and equipment ($6.2 million), while 2020 included a $5.0 million acquisition[171] Notes to Consolidated Financial Statements Provides detailed disclosures for financial statements, covering accounting policies, revenue, assets, debt, equity, taxes, and acquisitions Note 1. Organization and Operations TechTarget, Inc. is a global data and analytics leader and software provider for purchase intent-driven marketing and sales data for enterprise technology vendors, operating a network of approximately 140 websites and 1,151 webinars/virtual event channels - TechTarget is a global data and analytics leader and software provider for purchase intent-driven marketing and sales data for enterprise technology vendors[17] - The company operates a network of approximately 140 websites and 1,151 webinars and virtual event channels, categorized into key market opportunities like Security, Networking, Storage, Data Center, CIO/IT Strategy, Business Applications and Analytics, Application Architecture and Development, and ANCL Channel[17] Note 2. Summary of Significant Accounting Policies Outlines significant accounting policies, including consolidation, revenue recognition, and the impact of ASU 2020-06 on convertible debt accounting - The company adopted ASU 2020-06 effective January 1, 2021, using the modified retrospective method, which reclassified the equity component of convertible notes into the debt component[39][40] | Impact of ASU 2020-06 Adoption (in thousands) | December 31, 2020 | January 1, 2021 | Change | | :-------------------------------------------- | :---------------- | :-------------- | :----- | | Convertible Debt | $153,882 | $194,649 | +$40,767 | | Additional Paid-in Capital | $363,055 | $332,555 | $(30,500) | | Retained Earnings | $37,580 | $37,813 | +$233 | | Deferred Tax Liabilities | $23,848 | $13,348 | $(10,500) | [40] - Other recently adopted ASUs (2017-04, 2018-15, 2016-03, 2018-13, 2019-12) did not have a material impact on the consolidated financial statements[33][35][36] Note 3. Revenue Revenue is disaggregated by North America and International regions, showing significant growth in both, with contract liabilities increasing from $15.7 million to $27.9 million | Revenue Disaggregation (in thousands) | Q2 2021 | Q2 2020 | YoY Change (%) | YTD 2021 | YTD 2020 | YoY Change (%) | | :------------------------------------ | :------ | :------ | :------------- | :------- | :------- | :------------- | | North America | $39,416 | $21,106 | 87% | $72,454 | $40,855 | 77% | | International | $24,295 | $13,690 | 77% | $44,226 | $25,357 | 74% | | Total Revenue | $63,711 | $34,796 | 83% | $116,680 | $66,212 | 76% | [42] | Contract Liabilities (in thousands) | Amount | | :---------------------------------- | :----- | | Balance at December 31, 2020 | $15,689 | | Billings (YTD June 30, 2021) | $128,845 | | Revenue Recognized (YTD June 30, 2021) | $(116,680) | | Balance at June 30, 2021 | $27,854 | [43][44] Note 4. Fair Value Measurements Financial assets and liabilities are measured at fair value, with contingent consideration liabilities decreasing from $2.78 million to $2.24 million | Fair Value Measurements (in thousands) | June 30, 2021 | December 31, 2020 | | :------------------------------------- | :------------ | :---------------- | | Short-term investments (Level 2) | $84 | $84 | | Contingent consideration - current (Level 3) | $2,237 | $1,027 | | Contingent consideration - non-current (Level 3) | — | $1,751 | | Total contingent consideration | $2,237 | $2,778 | [46] - Contingent consideration liabilities are measured using the income approach and discounted cash flow method, utilizing significant Level 3 (unobservable) inputs such as discount rates and probability measures[48][102] Note 5. Cash and Investments Cash balance increased from $82.6 million at December 31, 2020, to $109.0 million at June 30, 2021, while short-term investments remained stable at $84 thousand | Metric (in thousands) | June 30, 2021 | December 31, 2020 | Change | | :-------------------- | :------------ | :---------------- | :----- | | Cash | $109,038 | $82,616 | +$26,422 | | Short-term investments | $84 | $84 | $0 | [50][51] Note 6. Goodwill and Intangible Assets Total intangible assets, net, decreased from $108.9 million to $105.4 million due to amortization, while goodwill increased by $3.1 million with no impairment indications | Intangible Assets (in thousands) | June 30, 2021 | December 31, 2020 | | :------------------------------- | :------------ | :---------------- | | Customer, affiliate, advertiser relationships | $69,697 | $71,688 | | Developed websites, technology and patents | $30,026 | $31,220 | | Trademark, trade name and domain name | $5,579 | $5,788 | | Proprietary user information database and internet traffic | — | — | | Non-compete agreements | $139 | $176 | | Total intangible assets, net | $105,441 | $108,872 | [52] - Amortization expense for intangible assets was $4.3 million for the six months ended June 30, 2021, significantly up from $0.1 million in the prior year, mainly due to 2020 acquisitions[52] - Goodwill increased by $3.1 million from December 31, 2020, to June 30, 2021, with no indications of impairment[7][54] Note 7. Net Income Per Common Share Basic net income per common share for Q2 2021 was $0.18 (up from $0.17), and diluted EPS was $0.17 (unchanged), with diluted shares outstanding increasing due to the convertible bond | Metric | Q2 2021 | Q2 2020 | YTD 2021 | YTD 2020 | | :-------------------- | :------ | :------ | :------- | :------- | | Net income (in thousands) | $5,120 | $4,773 | $6,930 | $6,980 | | Basic EPS | $0.18 | $0.17 | $0.25 | $0.25 | | Diluted EPS | $0.17 | $0.17 | $0.24 | $0.25 | | Basic Weighted Average Shares | 28,152,210 | 27,532,786 | 28,146,414 | 27,768,224 | | Diluted Weighted Average Shares | 32,144,239 | 28,162,913 | 32,121,463 | 28,304,068 | [55] - Diluted weighted average shares outstanding for the three and six months ended June 30, 2021, include 2.9 million shares related to the if-converted basis of the convertible bond[55] Note 8. Convertible Debt and Loan Agreement The company issued $201.3 million in 0.125% convertible senior notes due December 15, 2025, with the net carrying amount increasing to $195.3 million following ASU 2020-06 adoption, and the previous $25 million term loan facility was paid in full - Issued $201.3 million in 0.125% convertible senior notes due December 15, 2025, in December 2020[56] | Convertible Debt (in thousands) | June 30, 2021 | December 31, 2020 | | :------------------------------ | :------------ | :---------------- | | Principal | $201,250 | $201,250 | | Less: debt discount, net | $5,947 | $47,368 | | Net carrying amount | $195,303 | $153,882 | | Fair Value | $254,259 | $218,940 | [66][67] - The $25 million term loan facility with Western Alliance Bank was paid in full in December 2020[68][181] Note 9. Leases and Contingencies The company operates under non-cancelable operating lease agreements, primarily for office facilities, with operating lease liabilities totaling $27.1 million at June 30, 2021, and total lease expense for the six months ended June 30, 2021, at $2.4 million | Operating Lease Liabilities (in thousands) | June 30, 2021 | | :----------------------------------------- | :------------ | | Total future minimum lease payments | $30,801 | | Less imputed interest | $3,662 | | Total operating lease liabilities | $27,139 | | Current operating lease liabilities | $3,657 | | Non-current operating lease liabilities | $23,482 | [76] | Lease Expense (in thousands) | Q2 2021 | Q2 2020 | YTD 2021 | YTD 2020 | | :--------------------------- | :------ | :------ | :------- | :------- | | Operating lease expense | $1,111 | $946 | $2,253 | $1,893 | | Short-term lease expense | $66 | $26 | $142 | $54 | | Total lease expense | $1,177 | $972 | $2,395 | $1,947 | [76] - No material pending claims, charges, or litigation as of June 30, 2021[78][196] Note 10. Stock-Based Compensation The company has stock option and incentive plans for equity awards, with $30.9 million of total unrecognized compensation expense related to stock options and restricted stock units as of June 30, 2021 - As of June 30, 2021, there was $30.9 million of total unrecognized compensation expense related to stock options and restricted stock units, expected to be recognized over a weighted average period of 1.5 years[87] | Restricted Stock Unit Activity (Shares) | December 31, 2020 | June 30, 2021 | | :-------------------------------------- | :---------------- | :------------ | | Nonvested outstanding | 1,478,000 | 1,507,350 | | Granted (YTD 2021) | — | 64,152 | | Vested (YTD 2021) | — | (34,802) | [86] Note 11. Stockholders' Equity The company terminated its November 2018 Stock Repurchase Program and authorized a new $25.0 million May 2020 Repurchase Program, under which no shares have been repurchased as of June 30, 2021, with 5,538,711 shares reserved for equity awards and 4,000,186 shares for convertible notes - The November 2018 Stock Repurchase Program was terminated in May 2020, having repurchased 736,760 shares for $14.8 million in 2020[89][173] - A new $25.0 million May 2020 Repurchase Program was authorized, but no shares have been repurchased under this plan as of June 30, 2021[90][175] - As of June 30, 2021, 5,538,711 shares of common stock were reserved for outstanding options, unvested restricted stock units, and future awards, and 4,000,186 shares were reserved for the conversion of notes[92] Note 12. Income Taxes The company recorded income tax expense of $6.3 million for Q2 2021 and $7.0 million for YTD 2021, with the Q2 expense increasing by approximately $3.2 million due to a UK corporate tax rate increase | Income Tax Expense (in thousands) | Q2 2021 | Q2 2020 | YTD 2021 | YTD 2020 | | :-------------------------------- | :------ | :------ | :------- | :------- | | Provision for income taxes | $6,328 | $2,092 | $7,043 | $3,000 | [93] - The Q2 2021 tax expense increased by approximately $3.2 million due to the UK corporate tax rate increase from 19% to 25%, effective April 1, 2023, which impacted deferred tax assets and liabilities[93] Note 13. Segment Information The company operates as a single operating segment providing purchase intent marketing and sales services, with revenue disaggregated by campaign target area and customer billing address, and long-lived assets primarily in the United States and United Kingdom - The company operates as one operating segment: providing purchase intent marketing and sales services[94] | Net Sales by Campaign Target Area (in thousands) | Q2 2021 | Q2 2020 | YTD 2021 | YTD 2020 | | :----------------------------------------------- | :------ | :------ | :------- | :------- | | North America | $39,416 | $21,106 | $72,454 | $40,855 | | International | $24,295 | $13,690 | $44,226 | $25,357 | | Total | $63,711 | $34,796 | $116,680 | $66,212 | [95] | Long-Lived Assets by Geographic Area (in thousands) | June 30, 2021 | December 31, 2020 | | :-------------------------------------------------- | :------------ | :---------------- | | United States | $197,778 | $195,424 | | International | $106,338 | $106,227 | | Total | $304,116 | $301,651 | [98] Note 14. Acquisitions and Subsequent Events In December 2020, the company acquired BrightTALK Limited for approximately $151.0 million in cash, and subsequently acquired a healthcare B2B media company in July 2021 for $25.0 million cash and $5.0 million contingent consideration - Acquired BrightTALK Limited in December 2020 for approximately $151.0 million in cash, integrating its webinar and virtual event platform[99] | BrightTALK Preliminary Purchase Price Allocation (in thousands) | December 23, 2020 | June 30, 2021 | | :------------------------------------------------------------ | :---------------- | :------------ | | Net Assets acquired | $150,847 | $150,847 | | Goodwill | $71,846 | $74,406 | | Intangible assets | $90,370 | $90,370 | [102] - In July 2021, the company acquired a healthcare business-to-business media company for $25.0 million in cash and $5.0 million in contingent consideration[104] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition, operating results, revenue growth, acquisitions, business trends, liquidity, and critical accounting policies Overview TechTarget is a global leader in purchase intent-driven marketing and sales data for B2B technology companies, helping them identify, reach, and influence IT decision-makers, with a growing audience of 27.6 million registered members and users - TechTarget provides purchase intent-driven marketing and sales data and content curation/creation services for B2B technology companies[107] - The company's audience of registered members and users grew to approximately 27.6 million as of June 30, 2021, up from 20.5 million in 2020, with 6.1 million added from the BrightTALK acquisition[109] - The company anticipates delivering purchase intent-driven marketing and sales data programs to over 2,000 customers in 2021[110] COVID-19 Business Update The COVID-19 pandemic created macroeconomic uncertainty, shifting customer purchasing decisions towards shorter-duration contracts and negatively impacting new customer acquisition for longer-term contracts, while accelerating international revenue due to a shift to online platforms - COVID-19 led customers to focus on shorter duration contracts and negatively impacted the ability to attract new customers to longer-term contracts (over 270 days)[111] - The company experienced an acceleration of international revenue as customers shifted from face-to-face events to online platforms due to COVID-19[119] Executive Summary & Financial Results For the six months ended June 30, 2021, revenue increased by 76% to $116.7 million, significantly boosted by acquisitions and increased customer demand for data-driven marketing products, with Priority Engine™ revenue growing 14% | Metric (in millions) | YTD June 30, 2021 | YTD June 30, 2020 | YoY Change (%) | | :------------------- | :---------------- | :---------------- | :------------- | | Revenue | $116.7 | $66.2 | 76% | | Priority Engine™ Revenue | $28.4 | $25.0 | 14% | [115] - Revenue from longer-term contracts (over 270 days) increased by 121% in Q2 2021 compared to Q2 2020, significantly impacted by acquisitions[115] - International geo-targeted revenue increased over 77% for Q2 2021 compared to the prior year[117] Business Trends IT spending is expected to be positive, driven by catalysts like AI and cloud migrations, while Brexit introduces regulatory challenges, and privacy regulations necessitate evaluating data transfer mechanisms, with legacy global customer revenue growing 61% and other customers 101% in Q2 2021 - IT spending is expected to be positive, driven by catalysts such as AI, security, data analytics, and cloud migrations[119] - Brexit could lead to new regulatory costs and challenges, with UK customer revenue accounting for approximately 14% of total revenue in Q2 2021[120] - The invalidation of the EU-US Privacy Shield Framework requires the company to evaluate additional mechanisms for personal data transfer[120] | Customer Revenue Growth (Q2 2021 vs Q2 2020) | Growth (%) | | :------------------------------------------- | :--------- | | Legacy global customers | 61% | | Other customers (excluding legacy global) | 101% | [120] Key Strategic Initiatives The company's strategic initiatives focus on leveraging purchase intent data, including integrating BrightTALK data into Priority Engine™ and expanding its reach to the SMB market through Priority Engine™ Express, while also improving connectivity, ROI metrics, and attribution - Integrate purchase intent data acquired through BrightTALK into the Priority Engine™ offering[120] - Expand the market reach of purchase intent data to companies in the SMB market through Priority Engine™ Express[120] - Focus on improving connectivity, ROI metrics, and attribution for product offerings[120] Revenue Analysis Total revenue increased by 83% for Q2 2021 and 76% for YTD 2021, with strong growth in both North America and International regions, and longer-term contracts accounting for approximately 40% of Q2 2021 revenue | Revenue (in thousands) | Q2 2021 | Q2 2020 | YoY Change (%) | YTD 2021 | YTD 2020 | YoY Change (%) | | :--------------------- | :------ | :------ | :------------- | :------- | :------- | :------------- | | North America | $39,416 | $21,106 | 87% | $72,454 | $40,855 | 77% | | International | $24,295 | $13,690 | 77% | $44,226 | $25,357 | 74% | | Total | $63,711 | $34,796 | 83% | $116,680 | $66,212 | 76% | [122] - Approximately 40% of revenue in Q2 2021 was derived from longer-term contracts (typically less than nine months, but longer-term contracts started in 2016)[122] Product and Service Offerings The company offers a comprehensive suite of products and services to B2B technology companies, including IT Deal Alert™ for purchase intent data, Channel Offerings for webinars, Demand Solutions for content marketing, Brand Solutions for targeted audience exposure, and Custom Content Creation - IT Deal Alert™: A suite of data and services (Priority Engine™, Qualified Sales Opportunities™, Deal Data™) leveraging purchase intent data to identify and prioritize "in-market" prospects[123] - Channel Offerings: Provides customers with a platform for unlimited live webinars and videos to an unlimited audience[123] - Demand Solutions: Content marketing programs (white papers, webcasts, podcasts, webinars, virtual trade shows, content sponsorships) and display advertising to generate demand and influence buyers[123] - Brand Solutions: Offers direct exposure to targeted audiences through on-network branding, off-network branding, and microsites[123] - Custom Content Creation: Development of white papers, case studies, webcasts, or videos tailored to customer specifications[124] Cost of Revenue, Operating Expenses, and Other This section defines the components of cost of revenue and various operating expense categories, including selling and marketing, product development, general and administrative, depreciation, amortization, and interest and other income (expense), net, with personnel-related costs being a significant component across most categories - Cost of Revenue: Primarily includes salaries, member acquisition, freelance writer expenses, website hosting, vendor expenses for content delivery, stock-based compensation, and facility expenses[126] - Selling and Marketing: Comprises salaries, sales commissions, travel, stock-based compensation, and facility expenses[127] - Product Development: Includes salaries, stock-based compensation, and facility expenses related to website creation/maintenance and technical infrastructure[128] - General and Administrative: Consists of salaries, facility expenses, accounting/legal/professional fees, and stock-based compensation[129] - Depreciation and Amortization: Depreciation for property/equipment (3-12 years useful life); amortization for intangible assets from acquisitions (18 months to 19 years useful life)[130] - Interest and Other Income (Expense), Net: Primarily interest costs and amortization of debt issuance costs on convertible notes, less interest income, and non-operating foreign currency gains/losses[131] Non-GAAP Financial Measure (Adjusted Revenue) The company uses Adjusted Revenue, a non-GAAP measure, to evaluate operating performance by adding back the impact of fair value adjustments to acquired unearned revenue, with Q2 2021 Adjusted Revenue at $67.0 million (92% increase YoY) and YTD 2021 at $125.0 million (89% increase YoY) - Adjusted Revenue is defined as GAAP revenue plus the impact of fair value adjustments to acquired unearned revenue related to services billed by an acquired company prior to its acquisition[135] | Metric (in thousands) | Q2 2021 | Q2 2020 | YTD 2021 | YTD 2020 | | :-------------------- | :------ | :------ | :------- | :------- | | Revenue | $63,711 | $34,796 | $116,680 | $66,212 | | Impact of fair value adjustment on acquired unearned revenue | $3,271 | — | $8,296 | — | | Adjusted Revenue | $66,982 | $34,796 | $124,976 | $66,212 | | Adjusted revenue percentage change | 92% | — | 89% | — | [136] Application of Critical Accounting Policies and Use of Estimates The preparation of financial statements requires management to make continuous estimates and assumptions, with no material changes to critical accounting policies and estimates occurring during the first six months of 2021, other than those noted in Note 2 - No material changes to critical accounting policies and estimates during the first six months of 2021, other than those related to ASU 2020-06 adoption[138] Income Taxes The company uses estimates for its income tax provision, recognizing deferred tax assets and liabilities based on temporary differences, with the Q2 2021 tax expense impacted by the UK corporate tax rate change from 19% to 25%, effective April 1, 2023 - The UK corporate tax rate change from 19% to 25%, effective April 1, 2023, was enacted in June 2021, impacting the value of deferred tax assets and liabilities[140] Results of Operations - Comparison of Three Months Ended June 30, 2021 and June 30, 2020 Q2 2021 revenue grew 83% to $63.7 million, with gross profit up 76%, but operating expenses and income tax provision significantly increased due to acquisitions and tax rate changes | Metric (in thousands) | Q2 2021 | Q2 2020 | YoY Change (%) | | :-------------------- | :------ | :------ | :------------- | | Revenue | $63,711 | $34,796 | 83% | | Cost of revenue | $17,114 | $8,785 | 95% | | Gross profit | $45,821 | $26,011 | 76% | | Gross profit percentage | 72% | 75% | -3% pts | | Selling and marketing | $22,099 | $12,570 | 76% | | Product development | $2,534 | $1,846 | 37% | | General and administrative | $6,208 | $3,267 | 90% | | Depreciation | $1,388 | $1,171 | 19% | | Amortization | $1,658 | $282 | 488% | | Total operating expenses | $33,887 | $19,136 | 77% | | Interest and other expense, net | $(486) | $(10) | 4760% | | Provision for income taxes | $6,328 | $2,092 | 202% | [142][144][145] - Gross profit was negatively impacted by $0.8 million due to amortization of intangibles related to BrightTALK technology acquisition[145] - Selling and marketing expenses increased due to December 2020 acquisitions and a $1.4 million increase in stock-based compensation[147] Results of Operations - Comparison of Six Months Ended June 30, 2021 and June 30, 2020 YTD 2021 revenue grew 76% to $116.7 million, with gross profit up 68%, but operating expenses and income tax provision significantly increased due to acquisitions and tax rate changes | Metric (in thousands) | YTD 2021 | YTD 2020 | YoY Change (%) | | :-------------------- | :------- | :------- | :------------- | | Revenue | $116,680 | $66,212 | 76% | | Cost of revenue | $32,282 | $16,936 | 91% | | Gross profit | $82,857 | $49,276 | 68% | | Gross profit percentage | 71% | 74% | -3% pts | | Selling and marketing | $43,705 | $25,519 | 71% | | Product development | $5,457 | $3,878 | 41% | | General and administrative | $12,643 | $6,622 | 91% | | Depreciation | $2,609 | $2,357 | 11% | | Amortization | $3,288 | $441 | 646% | | Total operating expenses | $67,702 | $38,817 | 74% | | Interest and other expense, net | $(1,182) | $(479) | 147% | | Provision for income taxes | $7,043 | $3,000 | 135% | [142][153][154] - Gross profit was negatively impacted by $1.5 million due to amortization of intangibles related to BrightTALK technology acquisition[154] - Selling and marketing expenses increased due to December 2020 acquisitions and a $2.8 million increase in stock-based compensation[155] Seasonality The company's revenue is affected by seasonal factors, including annual budget approvals, new product launches, and decreased advertising in summer months, while personnel-related expenses do not experience significant seasonal fluctuations - Revenue seasonality is influenced by customers' annual budget approval processes, timing of new product introductions, and historical decrease in advertising during summer months[162] - The majority of expenses are personnel-related and do not experience significant seasonal fluctuations[163] Liquidity and Capital Resources Cash and investments increased to $109.1 million, driven by operating activities, while DSO improved to 54 days, and the company maintains a $25.0 million stock repurchase program and $201.3 million in convertible notes | Metric (in millions) | June 30, 2021 | December 31, 2020 | Change | | :------------------- | :------------ | :---------------- | :----- | | Cash and investments | $109.1 | $82.7 | +$26.4 | [165] - Days Sales Outstanding (DSO) improved to 54 days at June 30, 2021, from 57 days at December 31, 2020[167] | Cash Flow Activities (in millions) | YTD June 30, 2021 | YTD June 30, 2020 | | :--------------------------------- | :---------------- | :---------------- | | Net cash provided by operating activities | $33.9 | $21.8 | | Net cash used in investing activities | $(6.2) | $(8.4) | | Net cash used in financing activities | $(1.4) | $(15.5) | [168] Forward-Looking Statements This section serves as a disclaimer, stating that the report contains forward-looking statements about future activities, events, or developments, which are not guarantees of future performance and involve risks and uncertainties - Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially[187] - Key risks include market acceptance of products, customer/partner/employee relationships, COVID-19 duration, integration of acquired businesses, economic/regulatory changes, and data privacy laws[187] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to market risks, primarily from foreign currency exchange rates and interest rates, detailing international revenue contribution and the short-term nature of investments Foreign Currency Exchange Risk The company has foreign subsidiaries and derived approximately 29% of its YTD 2021 revenue from international customers, increasing exposure to exchange rate fluctuations, though current exposure is deemed immaterial - Approximately 29% of revenue for the six months ended June 30, 2021, was derived from customers with billing addresses outside the United States[190] - The company currently believes its exposure to foreign currency exchange rate fluctuations is financially immaterial and has not entered into hedging transactions, but may consider them in the future[190] Interest Rate Risk The company's market risk exposure to interest rates is primarily related to its cash and investments of $109.1 million, but due to the short-term nature of these investments, there is no material exposure to fair value changes from interest rate increases - Cash and investments totaled $109.1 million at June 30, 2021, held for working capital purposes, primarily in a bond fund[191] - Due to the short-term nature of investments, the company believes it has no material exposure to fair value changes from interest rate increases, but declines would reduce investment income[191] Item 4. Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures and notes the ongoing integration of controls for the recently acquired BrightTALK Limited, with no other material changes to internal control over financial reporting Disclosure Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2021 - Disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2021[193] Changes in Internal Control over Financial Reporting The company is integrating controls and related procedures for BrightTALK Limited, acquired in Q4 2020, with no other material changes in internal control over financial reporting identified during Q2 2021 - The company is integrating controls and related procedures for BrightTALK Limited, acquired in Q4 2020[194] - No other material changes in internal control over financial reporting were identified during Q2 2021[194] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, exhibits, and the official signatures for the report Item 1. Legal Proceedings The company is not currently a party to any material legal proceedings and is unaware of any pending or threatened litigation that could have a material adverse effect on its business, operating results, or financial condition - No material legal proceedings are currently pending or threatened against the company[196] Item 1A. Risk Factors The company's business is subject to various risks, as identified in Item 1A, "Risk Factors" of its 2020 Annual Report on Form 10-K, which could materially affect its business, results of operations, financial condition, and/or liquidity - Business risks are identified in Item 1A, "Risk Factors" of the 2020 Annual Report on Form 10-K[197] Item 6. Exhibits This section lists the exhibits filed as part of this Quarterly Report on Form 10-Q, including the Fourth Amendment to Lease Agreement, certifications from the CEO and CFO, and XBRL documents - Exhibits include the Fourth Amendment to Lease Agreement, CEO and CFO certifications (31.1, 31.2, 32.1), and XBRL Instance, Schema, Calculation, Definition, Label, and Presentation Linkbase Documents[200] Signatures The report is signed by Michael Cotoia, Chief Executive Officer and Director, and Daniel Noreck, Chief Financial Officer and Treasurer, on August 4, 2021 - The report was signed by Michael Cotoia (CEO) and Daniel Noreck (CFO and Treasurer) on August 4, 2021[202]