TechTarget Reports Record Fourth Quarter and Full Year 2007 Results
Q4 2007 Revenues Increase 23% to $28.4 million
2007 Revenues Increase 20% to $94.7 million
Needham, MA – February 13, 2008 – TechTarget, Inc. (NASDAQ: TTGT) today announced financial results for the three months and year ended December 31, 2007. Total revenues for the fourth quarter increased by 23% to $28.4 million compared to $23.1 million for the comparable prior year quarter. Online revenues increased by 23% to $19.0 million compared to $15.4 million for the comparable prior year quarter. Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization, as adjusted for stock-based compensation) increased by 13% to $8.4 million compared to $7.4 million for the comparable prior year quarter.
Total revenues for 2007 increased by 20% to $94.7 million compared to $79.0 million for 2006. Online revenues, which represented 67% of total revenues, increased by 24% to $63.7 million compared to $51.2 million for 2006. In 2007, adjusted EBITDA increased by 22% to $24.6 million compared to $20.1 million for 2006.
“We are pleased to deliver another quarter and year of strong growth both on the top and bottom line,” said Greg Strakosch, Chairman and CEO of TechTarget. "Our primary focus during the quarter was the acquisition of KnowledgeStorm. We finalized due diligence, closed the transaction and made tremendous progress integrating KnowledgeStorm into TechTarget. We’re confident that this acquisition has expanded our competitive lead and allows us to further scale the business.”
Gross profit margin increased for both the quarter and year to 73% and 70%, respectively, compared to 71% and 69%, respectively, as compared to the comparable prior year periods. Online gross profit margin continued to demonstrate high operating leverage, increasing for both the quarter and year to 77% and 76%, respectively, compared to 76% and 75%, respectively, as compared to comparable prior year periods. Adjusted EBITDA margin was 30% and 26%, respectively, for the fourth quarter of 2007 and 2007.
Net income for the quarter was $2.8 million, unchanged from the prior year quarter. Net income for 2007 was $8.2 million, an increase of 14% compared to 2006. Earnings per basic and diluted share for the quarter and year were $0.07 and $0.06 and $0.15 and $0.13, respectively, compared to earnings per basic and diluted share of $0.00 and ($0.46) in the fourth quarter of 2006 and 2006, respectively. As of December 31, 2007, TechTarget had $62 million of cash, cash equivalents and short term investments, and bank debt of $6 million.
Additionally, as separately disclosed, the Company will be restating certain of its filings as a result of overstatements of its provision for income taxes in 2007; the restatement results in increases in net income of $534,000 and $290,000 for the quarters ended June 30, 2007 and September 30, 2007, respectively.
Recent Company Highlights
- Integrated KnowledgeStorm product offerings with TechTarget’s product offerings. Introduced a new lead generation program that combines the TechTarget and KnowledgeStorm offerings called FlexROI™. We sold more than 70 FlexROI programs in the first 60 days since the launch.
- Made significant progress integrating the KnowledgeStorm employee base and reducing expenses. Material sales and operational efficiencies have allowed us to reduce the expense base against the KnowledgeStorm business by approximately 50%, which equates to an annual projected reduction of approximately $8 million. At year end, approximately half of the KnowledegeStorm employees had been integrated into the TechTarget workforce, increasing our capabilities against product development, product management and search engine optimization and marketing. Expense reductions have primarily come from selling & marketing and general and administration.
- Launched five new websites. We expect to launch at least ten new websites in 2008. This is expected to contribute to organic growth in the second half of 2008, 2009 and beyond. We launched our first direct websites outside the United States, SearchStorage.co.UK and SearchSecurity.co.UK. Charter advertisers include Brocade and EqualLogic. Consistent with our sub-segmentation strategy we launched SearchVMWare.com, to provide more specific coverage of VMWare-related topics that were previously covered on our fast-growing SearchServerVirtualization.com site. Charter advertisers include VMWare, Intel, Dell and Red Hat. We also launched SearchFinancialSecurity.com and ConstructionSoftwareReview.com as part of our ongoing strategy to expand into vertical industries.
- Continued to optimize our web sites for search engines. Visits from search engines were up approximately 40% in the quarter. Our success in attracting a growing amount of search engine traffic, as well as the large amount of direct visits to our sites, allows us to attract over 90% of our new registered members with minimal incremental expenses.
Financial guidance for Fiscal Year 2008 and the First Quarter of 2008
For the fiscal year 2008, the Company expects revenue to grow between 25% - 29% and be within the range of $118.0 and $122.0 million and adjusted EBITDA to grow between 34% - 42% and to be within the range of $33.0 - $35.0 million. The Company expects its online growth rate to be approximately 40% in 2008.
For the first quarter of 2008, the Company expects revenues to be within the range of $23.0 million to $24.0 million and adjusted EBITDA to be within the range of $3.0 million to $3.8 million.
Conference Call and Webcast
TechTarget will discuss these financial results in a conference call at 4:30 pm (Eastern Time) today (February 13, 2008). The public is invited to listen to a live webcast of TechTarget’s conference call, which can be accessed on the Investor Relations section of our website at http://investor.techtarget.com. We ask that participants please access the conference call at least 10 minutes prior to the time the conference call is set to begin. The conference call can also be heard via telephone by dialing 888-679-8037 or 617-213-4849 for international callers five minutes prior to the call and referencing conference code 85115918 for both domestic and international callers. For those investors unable to participate in the live conference call, a replay of the conference call will be available via telephone beginning February 13, 2008 at 7:00 p.m. ET through February 27, 2008. To listen to the replay, call 888-286-8010 and use the pass code: 46268289. International callers should dial 617-801-6888 and enter the pass code: 46268289 to listen to the replay. The webcast replay will also be available on http://investor.techtarget.com/ during the same period.
Non-GAAP Financial Measures
This press release and the accompanying tables include a discussion of adjusted EBITDA and adjusted EBITDA Margin, all of which are non-GAAP financial measures which are provided as a complement to results provided in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The term "adjusted EBITDA" refers to a financial measure that we define as earnings before net interest, income taxes, depreciation, and amortization, as further adjusted for stock-based compensation. The term “adjusted EBITDA Margin” refers to a financial measure which we define as adjusted EBITDA as a percentage of total revenues. These Non-GAAP measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. In addition, our definition of adjusted EBITDA and adjusted EBITDA Margin may not be comparable to the definitions as reported by other companies. We believe adjusted EBITDA and adjusted EBITDA Margin are relevant and useful information to our investors as these measures are an integral part of our internal management reporting and planning process and are primary measures used by our management to evaluate the operating performance of our business, as well as potential acquisitions. The components of adjusted EBITDA include the key revenue and expense items for which our operating managers are responsible and upon which we evaluate their performance. In the case of senior management, adjusted EBITDA is used as the principal financial metric in their annual incentive compensation program. Adjusted EBITDA is also used for planning purposes and in presentations to our board of directors. Furthermore, we intend to provide these non-GAAP financial measures as part of our future earnings discussions and, therefore, the inclusion of these non-GAAP financial measures will provide consistency in our financial reporting. A reconciliation of these non-GAAP measures to GAAP is provided in the accompanying tables.
Forward Looking Statements
Certain matters included in this press release may be considered to be "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995. Those statements include statements regarding the intent, belief or current expectations of the company and members of our management team. All statements contained in this press release, other than statements of historical fact, are forward-looking statements, including those regarding: guidance on our future financial results and other projections or measures of our future performance; our expectations concerning market opportunities and our ability to capitalize on them; and the amount and timing of the benefits expected from acquisitions, from new products or services and from other potential sources of additional revenue. Investors and prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward- looking statements. These statements speak only as of the date of this press release and are based on our current plans and expectations, and they involve risks and uncertainties that could cause actual future events or results to be different than those described in or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, those relating to: market acceptance of our products and services; relationships with customers, strategic partners and our employees; difficulties in integrating acquired businesses; and changes in economic or regulatory conditions or other trends affecting the Internet, Internet advertising and information technology industries. Further information about these matters, as well as others, can be found in our Registration Statement on Form S-1 as well as subsequent filings that have been filed with the Securities and Exchange Commission. Except as required by applicable law or regulation, we do not undertake any obligation to update our forward-looking statements to reflect future events or circumstances.
TechTarget, a leading online Information Technology (IT) media company, provides IT companies with ROI-focused marketing programs to generate leads, shorten sales cycles, and grow revenues. With its network of 49 technology-specific Web sites and over six million registered members, TechTarget is a primary Web destination for IT professionals researching which products to purchase. The company is also a leading provider of independent, peer and vendor content, a leading distributor of white papers, and a leading producer of vendor-sponsored webcasts and Podcasts for the IT market. Its Web sites are complemented by numerous invitation-only events and two magazines. TechTarget provides proven lead generation and branding programs to over 1,000 advertisers including Cisco, Dell, EMC, HP, IBM, Intel, Microsoft, SAP and Symantec.
© 2008 TechTarget, Inc. All rights reserved. TechTarget, KnowledgeStorm and the TechTarget logo are registered trademarks, and FlexROI, SearchStorage.co.UK and SearchSecurity.co.UK, SearchVMWare.com, SearchFinancialSecurity.com, ConstructionSoftwareReview.com and SearchServerVirtualization.com are trademarks, of TechTarget, Inc. All other trademarks are the property of their respective owners.