TechTarget, Inc. (NASDAQ: TTGT) today filed its Quarterly
Report on Form 10-Q for the quarter ended September 30,
2009. TechTarget also announced today its results for the third
quarter of 2009, and that the Company’s Audit Committee has
concluded its previously disclosed investigation involving an
improper accounting practice. The accounting practice related to
certain customer credits being improperly removed as liabilities
from the Company’s balance sheet. The Audit Committee conducted the
investigation with the assistance of counsel and forensic
accounting experts. Consistent with the Company’s November 9,
2009 press release, the Audit Committee has concluded that the
improper conduct associated with the accounting practice was
limited to a single individual, who was promptly terminated from
his position upon discovery of the practice. The Audit Committee’s
investigation found no other improper conduct in connection with
any other accounting practice.
To correct the improper accounting related to the customer
credits, the Company has recorded a net adjustment for the quarter
ended September 30, 2009, which increased liabilities by
$967,000 and decreased income before taxes by $967,000. The net
adjustment accumulated over several years and includes $57,000 from
2004 to 2006, $362,000 from 2007, $561,000 from 2008 and ($13,000)
for the nine months ended September 30, 2009. Total
professional fees related to the investigation are approximately
$1.5 million, of which approximately $1.2 million will be recorded
in the 2009 fourth quarter results, with the remaining amount to be
included in the first quarter of 2010.
As a result of filing its Form 10-Q for the quarter ended
September 30, 2009, the Company is now current with its
Securities and Exchange Commission reporting requirements and
believes that it is now in compliance with Nasdaq’s Listing
Rule 5250(c)(1), and the Company expects to receive
confirmation of this compliance from Nasdaq in the coming days.
In addition, the Company is announcing that Eric Sockol has
announced his resignation as Chief Financial Officer of TechTarget.
Mr. Sockol will remain in his role for a brief transition
period while the Company conducts the search for his
replacement.
Third Quarter Results
Total revenue for the third quarter of 2009 was $23.1 million
compared to $27.0 million for the comparable prior year quarter.
Online revenue was $18.2 million compared to $20.4 million for the
third quarter of 2008 and represented 79% of total revenues. Total
gross profit margin was 72% compared to 69% for the comparable
prior year quarter. Online gross profit margin was 74% compared to
73% for the comparable prior year quarter.
Adjusted EBITDA (earnings before interest, taxes, depreciation,
and amortization, as further adjusted for stock-based compensation)
for the third quarter of 2009 was $4.4 million compared to $6.2
million for the comparable prior year quarter. The third quarter of
2009 includes a prior period adjustment of $967,000 which reduced
reported adjusted EBITDA.
Net loss for the third quarter of 2009 was $1.4 million compared
to a net income of $707,000 for the comparable prior year quarter.
Adjusted net income (net income adjusted for amortization and
stock-based compensation, as further adjusted for the related
income tax impact) for the third quarter of 2009 was $2.5 million
compared to $3.6 million for the comparable prior year quarter. The
third quarter of 2009 includes a prior period adjustment which
reduced income before taxes by $967,000 and reduced adjusted net
income by $587,000. Net loss per basic share for the third quarter
of 2009 was ($0.03) compared to net income per basic share of $0.02
for the comparable prior year quarter. Adjusted net income per
share (adjusted net income divided by adjusted weighted average
diluted shares outstanding) for the third quarter of 2009 was $0.06
compared to $0.08 for the comparable prior year quarter.
As of September 30, 2009, TechTarget had $78.6
million of cash, cash equivalents and short and long-term
investments. Outstanding bank debt was $750,000 as of
September 30, 2009. Our net cash, as defined as cash, cash
equivalents and investments less bank debt increased by $11.3
million compared to December 31, 2008.
Updated Financial Guidance
On November 9, 2009, the Company provided the following
financial guidance for the fourth quarter of 2009: total revenues
within the range of $21.8 million to $22.8 million; online revenue
within the range of $19.0 million to $19.8 million; events revenue
to within the range of $2.8 to $3.0 million; and adjusted EBITDA
within the range of $4.5 million to $5.3 million, excluding costs
associated with the investigation into the now-concluded accounting
matter.
The Company is currently undergoing its 2009 audit, but
estimates that its Q4 2009 results will be above the midpoint of
the range for each of the metrics provided, excluding costs
associated with the accounting investigation.
Release of Fourth Quarter and Full Year 2009 Results
The Company expects to complete its annual 2009 audit and file
its Form 10-K for the year ended December 31, 2009 on a
timely basis. TechTarget expects to hold a conference call to
discuss its fourth quarter and full year 2009 results no later than
the first week of March; the exact date and detailed information
for that call will be announced no less than ten days prior to the
call.
Non-GAAP Financial Measures
This press release and the accompanying tables include a
discussion of adjusted EBITDA, adjusted net income and adjusted net
income per share, 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 net
income” refers to a financial measure which we define as net income
adjusted for amortization and stock-based compensation, as further
adjusted for the related income tax impact for the specific
adjustments. The term “adjusted net income per share” refers to a
financial measure which we define as adjusted net income divided by
adjusted weighted average diluted shares outstanding. 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, adjusted net income and adjusted net
income per share may not be comparable to the definitions as
reported by other companies. We believe adjusted EBITDA, adjusted
net income and adjusted net income per share are relevant and
useful information because it provides us and investors with
additional measurements to compare the Company’s operating
performance. These measures are 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. Adjusted
net income is useful to us and investors because it presents an
additional measurement of our financial performance, taking into
account depreciation, which we believe is an ongoing cost of doing
business, but excluding the impact of certain non-cash expenses and
items not directly tied to the core operations of our business.
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. These
and other important risk factors are discussed or referenced in our
Annual Report on Form 10-K/A filed with the Securities and
Exchange Commission, under the heading “Risk Factors” and
elsewhere, and any subsequent periodic or current reports filed by
us with the SEC. 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.
About TechTarget
TechTarget (http://www.techtarget.com), a leading online
technology media company, gives technology providers ROI-focused
marketing programs to generate leads, shorten sales cycles, and
grow revenues. With its network of more than 60 technology-specific
websites and more than 7.5 million registered members, TechTarget
is a primary Web destination for technology professionals
researching 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 webcasts,
podcasts, videos and virtual trade shows for the technology market.
Its websites are complemented by numerous invitation-only events.
TechTarget provides proven lead generation and branding programs to
top advertisers including Cisco, Dell, EMC, HP, IBM, Intel,
Microsoft, SAP and Symantec.
(C) 2010 TechTarget, Inc. All rights reserved.
TechTarget and the TechTarget logo are registered trademarks of
TechTarget. All other trademarks are the property of their
respective owners.
TECHTARGET, INC.
Consolidated Balance
Sheets
(in $000’s)
September 30,2009 December
31,2008 (Unaudited) Assets Current assets:
Cash and cash equivalents $ 21,884 $ 24,130 Short-term investments
47,519 42,863 Accounts receivable, net of allowance for doubtful
accounts 15,623 17,622 Prepaid expenses and other current assets
4,604 6,251 Deferred tax assets 2,979 2,959 Total current assets
92,609 93,825 Property and equipment, net 3,502 3,904
Long-term investments 9,247 2,575 Goodwill 88,957 88,958 Intangible
assets, net of accumulated amortization 13,680 17,242 Deferred tax
assets 4,346 3,369 Other assets 93 139
Total assets
$ 212,434 $ 210,012
Liabilities and Stockholders’ Equity Current liabilities:
Current portion of bank term loan payable $ 750 $ 3,000 Accounts
payable 3,322 3,404 Income taxes payable 59 — Accrued expenses and
other current liabilities 1,850 2,908 Accrued compensation expenses
638 702 Deferred revenue 9,273 8,749 Total current liabilities
15,892 18,763 Long-term liabilities: Other liabilities 527
312 Total liabilities 16,419 19,075 Commitments — —
Stockholders’ equity: Preferred stock — — Common stock 42 42
Additional paid-in capital 230,850 221,597 Warrants 2 2 Accumulated
other comprehensive loss 37 (77 ) Accumulated deficit (34,916 )
(30,627 ) Total stockholders’ equity 196,015 190,937
Total liabilities and stockholders’ equity $
212,434 $ 210,012
TECHTARGET, INC.
Consolidated Statements of
Operations
(in $000’s, except share and
per share amounts)
Three Months Ended September30, Nine Months
Ended September30, 2009 2008 2009
2008 (Unaudited) Revenues: Online $ 18,191 $ 20,420 $
52,274 $ 57,701 Events 4,865 5,496 10,991 16,743 Print — 1,080 —
3,430 Total revenues 23,056 26,996 63,265 77,874 Cost of
revenues: Online (1) 4,789 5,462 14,445 16,113 Events (1) 1,741
2,328 4,277 7,078 Print — 580 — 1,758 Total cost of revenues 6,530
8,370 18,722 24,949 Gross profit 16,526 18,626 44,543 52,925
Operating expenses: Selling and marketing (1) 8,644 8,161
24,183 25,490 Product development (1) 2,276 2,788 6,551 8,440
General and administrative (1) 5,486 3,662 13,469 10,915
Depreciation 510 579 1,544 1,884 Amortization of intangible assets
1,166 1,259 3,562 4,071 Total operating expenses 18,082 16,449
49,309 50,800 Operating income (loss) (1,556 ) 2,177 (4,766
) 2,125 Interest income (expense), net 130 248 194 934
Income (loss) before provision for income taxes (1,426 )
2,425 (4,572 ) 3,059 Provision for (benefit from) income
taxes 12 1,718 (283 ) 1,736 Net income (loss) $ (1,438 ) $
707 $ (4,289 ) $ 1,323 Net income (loss) per common share:
Basic $ (0.03 ) $ 0.02 $ (0.10 ) $ 0.03 Diluted $ (0.03 ) $ 0.02 $
(0.10 ) $ 0.03 Weighted average common shares outstanding:
Basic 41,811,821 41,533,020 41,775,152 41,355,812 Diluted
41,811,821 43,116,678 41,775,152 43,393,429
(1) Amounts include
stock-based compensation expense as follows:
Cost of online revenue $ 95 $ 265 $ 407 $ 406 Cost of events
revenue 64 53 117 100 Selling and marketing 1,479 1,057 4,285 3,796
Product development 89 140 352 420 General and administrative 2,521
648 4,331 2,107
TECHTARGET, INC.
Reconciliation of Net Income
(Loss) to Adjusted EBITDA
(in $000’s)
Three Months Ended September30, Nine Months
Ended September30, 2009 2008 2009
2008 (Unaudited) Net income (loss)
$ (1,438 ) $ 707 $
(4,289 ) $ 1,323 Interest income
(expense), net 130 248 194 934 Provision for (benefit from) income
taxes 12 1,718 (283 ) 1,736 Depreciation 510 579 1,544 1,884
Amortization of intangible assets 1,166 1,259 3,562 4,071
EBITDA 120 4,015 340 8,080
Stock-based compensation expense 4,248 2,163 9,492 6,829
Adjusted EBITDA $ 4,368 $ 6,178
$ 9,832 $ 14,909
TECHTARGET, INC.Reconciliation of Net Income (Loss) to
Adjusted Net Income and Net Income (Loss) per Diluted Share
toAdjusted Net Income per Share(in $000's, except
share and per share amounts)
Three Months
EndedSeptember 30,
Nine Months
EndedSeptember 30,
2009 2008 2009 2008 (Unaudited)
Net income (loss) $ (1,438 )
$ 707 $ (4,289 ) $
1,323 Amortization of intangible assets 1,166 1,259 3,562
4,071 Stock-based compensation expense 4,248 2,163 9,492 6,829
Impact of income taxes 1,499 571 3,497 3,728
Adjusted net
income $ 2,477 $ 3,558 $
5,268 $ 8,495 Net income (loss) per
diluted share $ (0.03 ) $
0.02 $ (0.10 ) $ 0.03
Weighted average diluted shares outstanding
41,811,821 43,116,678 41,775,152
43,393,429 Adjusted net income per share
$ 0.06 $ 0.08 $ 0.12
$ 0.20 Adjusted weighted average diluted shares
outstanding 41,811,821 43,116,678
43,939,888 43,393,429
Options, warrants and restricted
stock, treasury method included in adjusted weighted
average diluted shares above
1,721,684 — 1,164,736 —
Weighted average diluted shares
outstanding 41,811,821 43,116,678
41,775,152 43,393,429
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