Good afternoon. Thank you for attending the TechTarget Reports Third Quarter 2023 Conference Call and Webcast. My name is Alexis and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call. There’s an opportunity for questions-and-answers at the end. I would now like to pass the conference over to Charles Rennick. You may proceed.

Thank you, Alexis, and good afternoon, everyone. Joining me here today are Greg Strakosch, our Executive Chairman; Mike Cotoia, our CEO; and Dan Noreck, our CFO. Before turning the call over to Greg, I'd like to remind everyone on the call of our earnings release process. As previously announced, in order to provide you with an update on our business in advance of the call, we've posted our shareholder letter on the Investor Relations section of our website and furnished it on an 8-K. Following Greg's introductory remarks, the management team will be available to answer your questions. Any statements made today by TechTarget that are not factual including during the Q&A may be considered forward-looking statements. These forward-looking statements, which are subject to risks and uncertainties are based on assumptions and are not guarantees of our future performance. Actual results may differ materially from our forecast and from these forward-looking statements. Forward-looking statements involve a number of risks and uncertainties, including those discussed in the Risk Factors section of our filings with the SEC. These statements speak only as of the date of this call, and TechTarget undertakes no obligation to revise or update any forward-looking statements in order to reflect events that may arise after this conference call except as required by law. Finally, we may also refer to certain financial measures not prepared in accordance with GAAP. A reconciliation of certain of these non-GAAP financial measures to the most comparable GAAP measures to the extent available without unreasonable efforts accompanies our shareholder letter. With that, I'll turn the call over to Greg.

Great. Thank you, Charlie. As stated last quarter, we feel like we are bouncing along the bottom of the sales cycle. While we haven't seen material signs of improvement yet, we also haven't seen material cycles suggest further deterioration is on the horizon. We excited our guidance range for Q3 and are maintaining our 2023 full year guidance. We are pleased that an extremely difficult year in the technology market, we expect to produce 30% adjusted EBITDA line. Our philosophy is to use our leadership position and strong balance sheet during the downturn to prepare for a future recovery in demand through investments in the value we provide to our technology buyers and our product offering for our customers. Our experience tells that these investments will be rewarded when spending returns to more normalized levels. I will now open the call to questions.

Absolutely. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from the line of Justin Patterson with KeyBanc. You may proceed.

Hi. Great. Thank you very much. I wanted to tease out a little bit more about the just road map of additional product improvements. You noted that you've significantly increased R&D investments over the past two years. As we head into a macro that isn't necessarily getting worse but hasn't necessarily thought out. How should we think about just the micro level growth vectors these product initiatives that potential for reigniting revenue growth into next year? Thank you.

Great. Thanks, Justin. As we've said throughout the year, as we've navigated this choppy environment, it's really important for us to put the right investments against the right priorities. And under those key investments around our product as well as our content strategy but I'll focus on the product side. When we announced the July launch of our updated Priority Engine, we added some key focus areas. One of it was our Salesforce sync and integration so that we can get our first-party data aligned with our customers' first-party data, as well as being able to sync and leverage the data with any third-party platforms that they are choosing. And that's really important because that creates stickiness, that creates better uses of our data and that was something that we didn't have before. When we look at that in the long-term road map because we eventually will see an uptick in the market, the more that we can get our data in front of our customers and as part of that July release that we had, which also shows our account journey visualizations, which can highlight and show attribution in terms of what our customers are spending with us and how that's impacting their – and how that's a positive ROI on their marketing and sales spend. That's a positive thing. I want put a short-term when the market is down but when the market comes back there's going to be a keen eye towards quality of data, quality of investment and ROI against every marketing and dollar spend. We just released as you saw in the announcement yesterday, our IntentMail AI. So this is part of our personalized assist AI-driven product strategy. We see a really strong competitive advantage when it comes to generative AI types of road maps and technologies and offerings because of our prospect level opt-in level of intent insights. So we know that sellers need to spend more time selling and they need to be laser-focused on personalized engagement to buying team members. So when we launched IntentMail AI, our focus is on three areas: relevancy, efficiency and precision focus that will enable our customers' sellers to be able to personalize their outreach based on leveraging TechTarget's proprietary first-party profit level intelligence for more effectiveness, efficiency and ultimately for goals to generate more pipeline and close more business. Those investments that we're making today are pertinent not only for today and tomorrow but when the market picks up because we want to make sure we're putting ourselves in the best position to capture that upside.

Thank you.

Thank you for your question. The next question comes from the line of Bhavin Shah with Deutsche Bank. You may proceed.

Great. Thanks for taking my question and nice to see the stabilization in the demand environment. Can you just elaborate on what you're seeing just with your customers both existing and new customers. Are existing customers changing their buying behavior upon renewals, down selling, expanding and kind of invoicing behavior, are they self-thinking on the longer-term contracts? Any more insight there would be appreciated.

Yes. Thanks, Bhavin. Customer – I would say the customer behavior – existing customer and even prospect behavior very consistent with what we reported in August. I think it's no surprise that every – most enterprise B2B technology companies are navigating through a very uncertain environment. We're still seeing cost cutting. We're seeing customers really trying to streamline their expense, their headcount. And so that also changes kind of the mindset in terms of when they and how they purchase. We've seen a great six, seven years run towards building the long-term contracts on the long-term revenue. And very similar like as we entered into COVID periods well, this is a pullback, where I think a lot of our customers are trying to navigate on a short-term quarterly viewpoint. And so, when I look at what we've done as an organization over the past three-plus years, that's important in terms of some of the acquisitions we made in the depth and breadth of our product offerings, because we want to make sure that we're aligned with our customers being able to engage with those folks. If they can't commit to long-term deals, how do we talk to them? How do we get in front of them and provide value? Through our ESG and BrightTALK acquisition it might be around content and position and strategy in terms of, how they want to position their products in their company. We have the opportunity to pivot and talk about top of funnel, mid funnel, lower-end funnel, confirmed projects, contextualized brand when it plays and customers are and there's still a lot of customers that are signing up for long-term deals, just not as much as they were pre-pullback. We want to talk about our first-party level intent at the prospect at the account level to priority engine. So we are pivoting with our customers. We're staying engaged as they navigate, and we want to make sure that we're in the best position through some of these investments we are making for when the overall market picks up, we're going to be able to see it across all of our products and our long-term revenue strategy.

Super helpful. Just one follow-up on IntentMail AI. Can you just talk about the opportunity to monetize that over time? Is that something, you're going to look to do? And then just in terms of the impact to the margin profile of the business, that would be appreciated. Thank you so much

Yes, I'll start with the second question. The beauty of -- we made some investments on our product development and engineering staff and we've been very consistent with that, throughout Q2 really a lot in Q3 and even heading into Q4. But as this gets ramped up, we're leveraging the same intent that we've always had that delivers any of the products that we do, whether it's our lead Demand Gen, that's driven by Intent, Priority Engine, qualified sales opportunities. So the margin profile will stay very consistent. And when the market goes up, you'll see expanded margins on that. On the second part of that question I -- in terms of the real focus right now for us, and I think with a lot of our customers is about retention and usage. We want to make sure that our customers have a reason to engage, with our platform understand the data that we're delivering and get more sales usage in there. As you saw in the press release, we had 35 big customers with 500 reps leveraging it. You saw the feedback in the press release, that was launched earlier. And our goal is to expand that and make that GA generally, available to all customers using Priority Engine at the end of the quarter. So getting our customers entrenched, increasing their usage, going back to our July launch and being able to visualize what they're seeing, and being able to get our data in the workflows that they're using whether it's through sales or marketing, all part of the grand scheme of what we're building for the long time.

Great. Thanks for taking my questions.

Thank you for your question. The next question comes from the line of Bryan Bergin with TD Cowen. You may proceed. Q – Zachary Ajzenman: Hi. Thanks. This is Zach Ajzenman on for Brian. First question on Priority Engine just kind of a follow-up on the renewals question. So renewals usually overweighted towards the end of the calendar year. So just trying to get a feel for what your sense is on the upcoming, renewal cycle for Priority Engine and what assumptions are embedded in the 4Q view? Does the IntentMail AI going GA potentially offset, some of the broader headwinds here into year-end?

So I'll start with the Q4 renewals. Everything that we baked in our forecast, has everything what we reported for our forecast and our guidance ties everything in there, current renewals, the impact in Q4. And in terms of IntentMail AI that's really a 2024 and beyond impact. And I would say Zach, the impact on that our initial impact is really well aligned with our customers. And it's about better visibility, better usage, better leverage of our data so that retaining and making sure our customers see a better experience not only in the marketing side, which we've been really well known for but on the sales side, which is really important right now for both marketers and sales. So you won't see a revenue impact either way up or down based on what we report and what we're launching.

Got it. Okay. And the follow-up just one on the long-term contract revenue. So it looks like some further declines here in 3Q. I believe roughly half that bucket is Priority Engine. But maybe can you just shed a little more light on what comprises the other half of long-term contracts and whether the performance here is in line better or worse than what we're seeing on the overall long-term contract revenue line?

Yes. Majority of the long-term revenue is tied to Priority Engine. The other components that we do have customers that will sign up a long-term programs that have content syndication our integrated product offerings branding studios, our channel through our Bright Talk offering. So we have a lot of that baked in there. So as I mentioned earlier in terms of the percentage of our overall I think it was 36%, which was down that's directly aligned to what's going on with the market. And a lot of folks can or a lot of our customers really trying to navigate the next quarter never mind the next year. And that is -- that's pretty consistent with what we've seen. But I then pivot back to the reasons why we made some of those acquisitions and the products now that we have to go in and introduce or engage with our customers whether it's around building our strategic content strategy for a new product launch or a new company positioning all the way down to confirmed projects, which are bottom of the funnel type of products that we have to offer gives us a better opportunity to stay engaged bring value and actually engage with new personas that we hadn't been able to engage with before. So that's our playbook as everyone continues to navigate the uncertainty in the environment.

That's helpful. Thank you.

Thank you for your question. The next question comes from the line of Bruce Goldfarb with Lake Street Capital. You may proceed.

Hi, thanks for taking my question. Congrats on the quarter. Just a few questions. Do you have visibility into 2024? Do you expect to grow in 2024?

Bruce we're actually right now I think the best approach is to provide the guidance on 2024 during our February call. We've all seen a lack of visibility. It does nobody any favors announce what we see in 2024 things continue to change quarterly. Like I said, before we feel like we're navigating at the bottom of the cycle. It's not a matter of if it's a matter of when it turns. But I think we'd be a little bit getting ahead of our skis if we started announcing that right now.

Okay. And then how is the activity at Bright Talk versus the historical?

I mean, everything is now integrated in terms of our product offering. So we have we don't break that down in terms of our Bright Talk product x, y, z, TechTarget product A B and C versus ESG. Our goal over the last two years was to integrate all of our offerings, to provide a content strategy. That content strategy turns into a program strategy. That turns into an insights capability and capture that can be delivered back to our customer sales and marketing departments. And I would say in terms of what we're doing across all three of those as well as in the health care market, we're working against the plan and making sure that we're doing the right things on that.

Thank you. And what's the M&A pipeline look like? Are you still be an opportunity...

Yeah. I think we're consistent with years. We're very opportunistic in terms of M&A. We always look for areas where it's either, a good content strategy, in audience strategy and additional capability strategy that aligns with our overall offering and long-term goals and revenue. And so we're always -- we're consistently in conversations and that's been consistent throughout the last couple of years.

Okay. And then lastly, do you think expenses will come down in 2024?

Well, we do a good job of managing the expenses. We still -- as I mentioned we are making some investments in areas that we need to make sure we are aligned and put us in a position to capitalize on the up-tick. And some of those expenses that we're looking at or what I would call investments, are on the product, the content and the engineering side. Now with that being said, we have a really good track record of managing our discretionary managing our hiring, if somebody leaves. And we don't -- we need to backfill them. We might not backfill them. If we have a major initiative, we might realign resources internally. We have a really capable strong skill set sales force that can adapt and they've moved in different positions before. And we take that approach in terms of how we manage the business. So I don't know if I would say that the expenses will go down, but we're going to continue to manage and make sure we're prioritizing the right investments, against the right opportunities.

Great. Thank you. Congrats on the quarter and congrats also on IntentMail AI. It sounds really interesting.

Thank you.

Thank you for your question. The next question comes from the line of Jacob Staffel with Goldman Sachs. You may proceed.

Hi guys. Thanks for the time today. It's good to hear that there is a little bit of stabilization that we're assuming near the bottom of this macro pressure cycle that we're in. Actually just one quick one for me and I apologize if this was touched on earlier, but another company that you are familiar with definitive healthcare noted that they see a lot of really strong top of the funnel activity. It's just a function of converting that top of the funnel to bottom of the funnel. Can you talk about the top of the funnel activity? And maybe how those conversion rates to bottom of the funnel have trended this quarter? I guess 3Q thus far and 4Q against maybe 2Q and prior periods?

Yeah. We don't really disclose the conversion rates on top of the funnel to the bottom of the funnel. But let me give you a little bit of color. What you see in the market right now, even on customers across the enterprise tech space deals are being elongated. What was six months is now 12 months or nine to 12 months, sometimes 18 months. So that -- you can see that in terms of people doing their research and that's tied to their customers that are pushing off deals, because they're also trying to navigate the uncertainty. But it really goes back in terms of what our main focus on or one of our main focus is, and that's on the content strategy. So we know that, today's buyers demographics continue to change. And at the end, they want a repless experience. They want to make sure they have information that's relevant to them and trusted when they're making 5- 6- 7- 8-figure deals. One of the notes that we mentioned was our organic traffic was up 20% year-over-year and that's coming off a 50% increase in the previous year. So our goal right now is to make sure, we're turn those pages or visits in the new network members to then serve them up with the most relevant content to draw up the most obvious intent signals to help our customers, a, by top of the funnel, b, have the right conversations to drive those to mid-funnel and ultimately be in the best position to close those deals. So that's really our focus. But I think you can see throughout the entire market deals have taken longer. And that's been happening throughout the course of 2023. I expect that to go into 2024, but we're doing all the right things around our content and our product offerings to make sure that we are in the best position to capture that uptick.

Thanks so much.

Thank you for your question. The next question comes from the line of Kunal Madhukar with UBS. You may proceed.

Hi. Thank you for taking the question. One on the total customers so that's the number that you disclose annually. And it's been a while but can you talk about trends around total customers and then how that translates into number of seats per customer or average spend per customer and how that has trended over the year? And then it was interesting you mentioned COVID. So when we look at the high watermark in your revenue which was last year as we think of the growth coming out as the macro improves, how should we think of that within the overall macro outlook, which may be more capital constrained higher cost of capital and increased focus in your enterprise customers for profitability? Thank you.

Charlie it's the last for you. In terms of total customers it's in the Q that we -- around 2,900 total customers. In terms of seats not all of our customers are Priority Engine customers. So we don't disclose seats because we have a majority of our customers or a lot of our customers are spending with us on their marketing and their branding go-to-market strategy for their content creation and their positioning strategy. So that's not a seat in terms of that. In terms of the macro and the outlook, yes, we see what you're seeing in terms of cost of capital and high inflation rates and their focus on getting back to profitability. That's everything. That's -- those are all three key areas that all of our customers or most of our customers are very focused on. What I would tell you is, there comes a point in time when our customers' pipeline does not support the revenue targets that they need to hit there's still revenue targets. So during a period of pullback in the market, customers may take an approach of I'll try to do this on my own, or I will purchase less cost effective less costly and cheaper data. Well, it will constrict in terms of their overall budget process. But all that stuff and all those decisions ultimately turn into a formula where the pipeline that they are providing their sales is rolling up does not support the revenue targets. And what we've seen typically in the past is a flight back to quality. We are in a position unlike any other company I know that actually is in the middle of two core constituents. The sales of technology and the buys of technology. We provide a service for both. And so making sure that we all stay in that position to serve our buying community who are the members as well as the selling community who are our customers is really critical to help capture that.

Got it. Thank you.

Thank you for your question. The next question comes from the line of Andrew Marok with Raymond James. You may proceed.

Great. Thank you for taking my question. Kind of more of a from a theoretical perspective, do I have it right that you would benefit more if a more complex or confusing area and IT arose and there needed to be better clarification of information around it? Just thinking for example like generative AI right now especially given that there are so many vendors out there competing for mind share with their solutions.

Yeah. That's a good way to look at this. I don't want to theoretically mention that. I think we'll bring a tremendous amount of value around complexity in the market. But I would also say like any major technology initiative in the market among enterprise B2B tech we're going to have security or storage or UI or AI generative AI, we're providing a true value to both sides of the equation, to the buyers of the technology because that content investment is so critical the editorial content, the analyst content, our vendor content that we capture, our Bright Talk community content everything there help serve those buyers. And we actually can help guide them because we have the proximity depth and breadth with each of these specific markets. So when you get like a generative AI topic that comes out is hot, we rank really well on that. When you look at our organic search results. I think we rank between one and two on over 1,000 GenAI terms. I think if you Google generative AI we're currently ranked number organically. So we are in a really good position to help buyers who are trying to figure out what this all means, get to the answer or as clear to an answer as possible while they're going through their research journey. So I don't want to just assume theoretically that we'd be perfect across the board on that, but that is absolutely a service that we provide and an opportunity to help our buyers.

I did just Google Generative AI and you are number one organic. So thank you for the color.

You bet.

Thank you for your question. [Operator Instructions] There are currently no further questions in queue. So that concludes the TechTarget Reports Third Quarter 2023 Conference Call and Webcast. Thank you for your participation. You may now disconnect your lines.