Good day, ladies and gentlemen, and welcome to the TechTarget First Quarter 2012 Conference Call and Webcast. My name is Amy, and I will be your coordinator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I will now turn the call over to Rick Olin, Vice President and General Counsel.

Thank you, operator. Before turning the call over to Greg, I want to briefly remind everyone on the call of our earnings release process. As you saw, we issued our press release at 4 p.m. today. And as previously announced, we will provide the usual update on the business ahead of this call and hopefully, save you all some time and effort. We have posted on the Investors Information section of our website and furnished with our 8-K filing a letter to shareholders from Greg. This letter is intended to provide supplemental information about the quarter ended March 31. On the call today, Greg will provide a brief summary of our financial results for the most recently completed quarter, and then management will devote the rest of the call to answering your questions. Additionally, I'd like to remind everyone that during the course of this conference call and the Q&A, TechTarget will make certain statements that may be considered to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, particularly, guidance as to future financial results. 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 risks include: 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. For a description of these and other risks, the company encourages you to read the section entitled Risk Factors in our annual report filed on Form 10-K, as well as other filings we have made with the Securities and Exchange Commission. In addition, the forward-looking statements speak only as of the date of this call, and the company undertakes no obligation to update these forward-looking statements. Following Greg's introductory remarks, in addition to Greg, the following members of our management will be available to answer your questions: Mike Cotoia, Chief Operating Officer; and Janice Kelliher, Chief Financial Officer and Treasurer. I'll now turn the call over to Greg.

Thanks, Rick. We continue to be optimistic about the progress that we are making with our new product platform, Activity Intelligence, and our direct international expansion despite weakness in the IT market. As I stated in my letter to shareholders released earlier today, using the 6 largest global IT vendors by revenue as a barometer, their aggregate revenue for their most recently reported public quarter was down about $200 million compared to the same quarter as a year ago, which was flat on a percentage basis. When comparing to the same prior quarter to 2010, revenue was up almost $10 billion in the quarter or 9.8%. This is a clear indication there has been a deceleration in the growth in the global IT market. For the past few years, although our sense has been that IT vendor advertising budgets have been flat, we've been able to grow online revenues in the low-double digits, both due to the secular shift of advertising dollars from off-line to online, as well as market share gains that we've achieved due to our investments in Activity Intelligence and international expansion. Recently, we started to see evidence that some IT vendors' North American advertising budgets are being cut and/or delayed, which is negatively affecting our growth rate. Additionally, this deceleration has affected all segments of our customer base. For Q2 2012, we expect overall revenues to be between $26.1 million and $27.3 million. We expect online revenues to be between $23 million and $24 million. We expect event revenues to be between $3.1 million and $3.3 million. We expect adjusted EBITDA to be between $5.6 million and $6.3 million. In regards to the outlook for the rest of 2012, it is difficult at this time to determine if the pullback in spending is a temporary condition or a new level of spending. Therefore, until that becomes clear, we will continue to invest in growth areas while carefully controlling discretionary spending, such as travel and entertainment and the filling of new and replacement positions, in order to maintain healthy adjusted EBITDA margins and cash flow. I will now open up the call for questions.

[Operator Instructions] Our first question is from Colin Sebastian with Robert Baird Co.

I have a couple of questions. I was curious if there's a little more color you could provide on trends you saw through the quarter and into early Q2. We heard from a couple of other companies in the display ad space that there was some incremental weakness towards the end of the quarter, and it sounds like that may be consistent with what you saw. And then secondly, taking a step back and looking at the enterprise IT market from a higher level, obviously, the pace of change is very rapid there, both in the software and hardware markets. But I wonder beyond the tough macro backdrop, if that pace of change is having a structural impact on the ad market, maybe stretching the refresh cycles a bit and affecting the way that buyers are buying and advertisers are advertising.

Yes. I don't think there's anything structurally that's changed. I think that -- what we're hearing from our customers is that they're not seeing very robust demand for hardware and software. I don't think it's structural. I think it's people are very cautious about spending CapEx dollars because of the uncertain macro, and therefore, that translates to people being very cautious when deploying their advertising budgets. And so to -- merging over to your first question, we definitely saw that show up at the end of the first quarter, where we saw budgets start to be delayed and/or cut. So anyway in my opinion -- it's not structural. The rapid change of hardware and software is good for our business, because whenever there's a lot of change, there's a need for users to do a lot of research and then there's needs for marketers to get a lot of information out to influence the market.

Okay. And maybe just one follow-up on the outlook then. I know you're not providing specific guidance, but you do mention healthy EBITDA margins in the press release -- or in the shareholder letter. And maybe you could provide a little more color on what that might mean. You've been able to generate some pretty healthy margins in the past and in tough periods. If we should expect that to continue as well.

Yes, I think you should expect that to continue. You can see the margin that we're guiding to for the second quarter. So we're -- it's one of the nice things about our business model. It does enjoy very healthy margins, and that's something from management's perspective, that we'll stay very focused on. We -- most of our discretionary costs are labor, which is about 75% of cost. So we have a lever there in terms of how quickly we fill open positions. So as we've proven through this whole downturn, we have a very good track record at controlling expenses and maintaining 20%-plus margins, as well as very good cash flow conversion.

Our next question is from Sameet Sinha from B. Riley.

I know you -- excuse me, you referenced the traction of Nurture & Notify. Can you just qualitatively talk about and -- talk about what sort of uplift are you seeing? Are you able to push through the price increases due to this new functionality that you have in your platform? And secondly, just going back to that -- actually, I'm talking about the question. Is there any structural change in online or just IT advertising in general that you'd want to just -- maybe it's -- I don't know if it's maybe social, maybe some other sorts of media getting more traction, and this could be an opportunity for you. So if you can just elaborate on that a little more.

Yes. So second -- to the second question. I really don't see any structural change. The use case for IT professionals -- when they're looking at new technology, there's over 100 vendors in every technology sector. They go online to come up with a shortlist of 3 or 4 vendors that they'll invite in, which is manageable. And when they are trading that shortlist, they're looking for independent content on the web. They're looking to connect with their peers on the web, and they want to get vendor content on the web, things like white papers and webcast and podcast. And that's our content strategy, and we're the leader in each of those 3 types of content. And so traffic is still growing. So we don't -- I don't see any structural change in how the IT professionals are conducting their research and due diligence online. And what really drives the bus is the IT professional behavior. So therefore, we're also not seeing any change in how advertisers are looking at it. In terms of Activity Intelligence, very -- a really big, bright spot for us in the quarter, and we're very bullish on it going forward. We have over 300 customers are using the Activity Intelligence Dashboard. We just rolled out Nurture & Notify in March, and we've got some nice wins on that. And the customers that are kind of really implementing the product correctly are giving us great reports that they're seeing very significant and material increases in their conversion rate. So we're -- we just need to keep getting out there, getting deeper penetration within the customers and showing them how to use it and let them track and see the type of results that are achievable because this is so different from anything else that is out there. So we have a lot of momentum with that product, and we believe that that's going to continue to generate a lot of momentum. It will be a very significant contributor to both the top and bottom line for us.

If I can do just one quick follow-up to my first question. Have you done any sort of price elasticity or sensitivity analysis? Maybe in these tough times, any chance that you could probably reduce your prices and, hence, continue to be the strategic partner for your -- for the advertisers?

Yes. The way we think about pricing is we're the premium-priced player in the market. Our leads are very -- are the -- have the best quality because they're very targeted in their active researches. So we're able to command a premium. So we think that we're priced appropriately. And another key thing, just as a reminder in terms of the differences in the B2B market versus the B2C market. In the B2C market, there tends to be a lot more elasticity because there's so much inventory out there. In the B2B market, there's a very finite amount of people at any one time researching $1 million or more purchase. So I think you'll definitely continue to see us maintain our premium price strategies. We don't believe that if we -- we don't believe there's that type of elasticity, if we lowered price, that we generate a lot more revenue.

Our next question is from James Dobson with Benchmark.

I want to touch one more time on the sort of the change and I guess the ad environment and maybe from a different angle. You mentioned how the IT vendors have seen sort of a declining revenues quarter. But it seems like the outsource IT vendors, while it's a newer space, are growing very robustly. Is that impacting maybe the demand for new IT and hence the demand for advertising?

I don't think so. If you look at the companies that we referred to, companies like IBM, they're very active players in that space. I think it's -- my opinion is that there's nothing structural -- any changes going on here. What you have is a very weak macro with buyers having -- in terms of the IT buyers, trying to push out purchases as long as possible until they have more confidence to unleash their CapEx budgets. And the advertising budget is kind of the same sort of scenario, where people are doing a maintenance amount of spending. But in terms of having an increased marketing budgets, they want to have confidence that there's going to be a payoff. The challenge with the weak macro and when there's not a lot of confidence is what you see is purchasing cycles get pushed out, because everyone's delaying, delaying, delaying, until the -- to very last possible minute. So I think that's -- we're hearing this pretty, very consistently from our customer base that their customers are delaying their CapEx purchases, and therefore, they're delaying their advertising purchases. So that's what I think is what is happening. I think it's pretty clear that that's what it is and not some -- that the whole business model of the IT business has changed in the past 60 days. I'm not seeing that.

Okay. And could you maybe give us a little bit more color on some of the new artificial -- or I'm sorry, Activity Intelligence products that you mentioned in your prepared remarks?

Yes. So we-- I don't want to go into specifics. I mean, the one specific thing we just announced is Nurture & Notify in March. And basically, what that product is, is when you get a lead on a -- we will give you a realtime update on future activities of -- on that lead's behavior. So up until now, all -- when you get a lead, it's from that date and moving backwards, and this is going to give future updates in realtime. So that's very powerful use case for salespeople. In terms of future products that we haven't announced yet, I don't want to go into detail on that. But I will say is that some of the things that we're looking at are going to be -- unlike the first 2 products that we announced, the Dashboard and Nurture & Notify, which are tied to a specific marketing campaigns, we're looking at some services that are not tied to marketing campaigns that would have more of a recurring revenue structure. And we think that we can get a couple of those products announced this year, and we're very excited about that.

Our next question is from William Bird from Lazard.

I was wondering if you could talk just a little bit about what you saw in the March quarter in pricing and how you see pricing developing in the June quarter.

Yes. So pricing was very stable. As I said before, we definitely -- in the B2B space, we benefit from the scarcity of inventory and the scarcity of IT professionals that are out there researching 6-figure, 7-figure, 8-figure purchases. So we've had a lot of success maintaining our premium pricing. That was definitely that case in the March quarter, and we expect that to be the case in the June quarter. And we're also very disciplined in our pricing. Our -- we don't chase deals on a price basis. We're -- our salespeople are very good at justifying the premium that our media commands because of the high quality of the audience and the high quality of the leads that we generate because these are people that are actively researching very large purchases.

And in your outlook, you mentioned that you saw weakness in all 3 customer segments. Was there any segment that was much weaker than the other?

No. I think there's just kind of a general malaise in the market in terms of buyers being very cautious with their spending. I -- so I think that all -- I think all 3 segments, the VC-backed start-ups, the medium-sized companies and the very large multi-billion dollar global players, all saw the same symptoms. And in this case, they all reacted in a similar way, in terms of being very cautious with their advertising spend, in terms of either cutting some budgets or pushing budgets back.

And do you think there's much influence of timing, or do you think it's more permanent budget cuts?

I think it's timing. We've seen this. As you know, it's -- this downturn has been very stubborn. We're going on 5 years, and we've seen a lot of fits and starts. So we've seen this happen before, where there's temporary pullbacks and then it comes back. We've seen that -- it's happened at least once each of the last 3 years. So that's what we think it is. That's what we're hopeful it is. But we don't have a crystal ball to say that definitively at this point, that it's -- you know it's temporary when it's in the rearview mirror. So it's something that we're watching very, very closely, and this -- it kind of this -- it came up pretty quickly, and the improvement will come back very quickly.

This concludes our question-and-answer session. The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect your lines.