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TechTarget Revenue Drops Year Over Year, But Exceeds Target

TechTarget, a b2b media company, announced its financial results on May 9th. In a shareholder letter, the company said, “We are pleased with the continued stabilization of our business during the first quarter and happy to announce we beat our first quarter revenue target.”

• Revenue: $51.6 million, down 10% from Q1 2023
• Geographic Breakdown: 62% North America; 38% International
• Operating loss: -$10.9 million, compared to an operating income of $315,000 in Q1 2023.

Several factors contributed to the down quarter, including significant macro headwinds. In the 10-Q release, the company wrote, “Because most of our customers are b2b technology companies, the success of our business is intrinsically linked to the health, and subject to the market conditions, of the IT industry.” It explains that significant headwinds are tied to inflation, high interest rates, the presidential election, and other geopolitical issues.

Customer demographics are an indication of where the pressure on the business exists. Revenue from companies that TechTarget classifies as legacy global customers (its 10 historically largest on-premises hardware technology companies) increased by 1%. When excluding the legacy global customers, revenue decreased by approximately 12%.

One area that the business spends time thinking about—and discussed on the earnings call—is the split between short-term and longer-term contracts. By definition, any contract with a term over 270 days is classified as a longer-term contract. As can be seen in the chart below, the majority of contracts are short-term.

Longer-term contracts allow for more predictable revenue, similar to a subscription business. In some cases, partners keep their spending uninterrupted. On the earnings call, the company said it expects to finish the year in the low-to-mid 30s (%) for long-term revenue contracts.

To help push growth on the long-term contracts, CEO Mike Cotoia talked about many of the product updates that are coming. One area TechTarget invested in was reducing friction for partners to understand how campaigns were performing.

It’s more about getting the end-to-end solution offerings from content to demand to brand all inside of a unified platform so customers can have access and insights and visibility to the updated visualizations of how their overall programs are doing instead of being siloed into an intent platform only.

Looking forward, TechTarget is forecasting $57-59 million in second-quarter revenue, which would be flat year over year but up 12% from Q1. The company also expects customers to remain hesitant about sales and marketing spend for the remainder of the year.

On January 10th, TechTarget and Informa announced a convoluted merger whereby Informa would own 57% of what they called New TechTarget. In exchange for that 57%, Informa would provide:

• $350 million of cash so TechTarget shareholders could receive $11.79.
• Omdia, the fourth-largest technology research firm
• Industry Dive, a b2b publisher with 37 websites
• Various other digital media brands, including InformationWeek, Light Reading, Dark Reading, Networking Computer, and AI Business
• Netline, an intent-driven lead generation platform
• “Access to IIRIS, Informa PLC’s proprietary B2B data platform.”

By merging all of Informa Tech’s assets with TechTarget, the new entity would have a total b2b audience of ~50 million—truly massive. According to the deal presentation, the pro forma revenues in 2024 would be over $500 million, with the goal of hitting $1 billion in revenue within five years of closing.

And the Informa Tech assets contribute directly to the goal of increasing long-term contracts. Mike Cotoia, CEO of TechTarget, explained why the Informa Tech deal is so important.

We expect that to be in the low-to-mid 30s [by the end of 2024]. When we talk about 2024 and the continued macro environment, when you take a look at what we evaluate when we acquire or evaluate different assets, we look at a few things. We look at audience, and we look at permission-based audience. We look at first-party insights. We look at content and content capabilities to drive more revenue on long-term contracts and look for penetration into new tech-enabled veritcal markets.

If you take a look at the quality assets that we are merging with with Informa Tech’s digital business … the Omdia business combined with our enterprise strategy group business, if you take a look at the Omdia business, about 65% of their revenue is under long-term contracts. So, the timing is right now to get all of these quality assets, combined, integrated, and ready for the recovery. So yeah, we may be in the low-to-mid 30s this year, but our 3-5 year plan is to have revenue over 50% on long-term revenue contracts.

As for whether the deal closes and when, Gregory Strakosch, co-founder and executive chairman, said, “We’ve been pleased with the progress we’ve made over the last four months and are on track to have this transaction closed during the second half of 2024.”