TechTarget, Inc. (TTGT) Q4 2025 Earnings Call Transcript

Good afternoon. Thank you for attending today's Informa Tech Target fourth quarter 2025 financial results conference call and webcast. My name is Tamiya and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad. I would now ask to pass the conference over to your host, Charles Rennick, General Counsel. You may proceed.

Thank you, Tamia, and good afternoon everyone. The speakers joining us here today are Gary Nugent, our Chief Executive Officer, and Dan Norick, our Chief Financial Officer. Before turning the call over to Gary, we would like to remind you that in advance of this call, we posted a press release to the Investor Relations section of our website and furnished it on an AK. You can also find these materials on the SEC's website at www.sec.gov. A replay of today's conference call will be made available on the Investor Relations section of our website. Following opening remarks from Gary and Dan, you'll be available to answer questions. Any statements made today by Informatec targets that are not historical, 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 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 factor section of our most recent periodic report filed on Form 10-K and the forward-looking statement disclaimer in our earnings release filed earlier today. These statements speak only as of the date of this call, and Informatec target undertakes no obligation to revise or update any forward-looking statements in order to reflect events that may arise after this conference call. 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 directly comparable GAAP measures to the extent available without unreasonable efforts. And with that, I'll turn the call over to Gary.

Thank you, Charlie. And good afternoon, everyone. As always, we appreciate you taking this and engagement means a great deal to us. I am pleased to report that Q4 2025 marked another step forward in our journey to establish Formatec target as the indispensable partner to the beast. During 2025 we laid the groundwork to return the business to top-line revenue growth in 26 and accelerate. Slightly different from previous calls I will begin with an overview of our strategic progress and some market positioning and following that our Chief Financial Officer Dan Norrick will provide an overview of our financial performance and then afterwards we'll open the floor. We start by highlighting the significant strides we've made in combining and transforming our business to become a market leader in what is a large and dynamic addressable market, a $20 billion addressable market. And while we currently only, therefore, we currently only hold a 2.5% market share and the opportunities for expansion and growth remain. In 2025, we achieved full year revenue of $486.8 million on a combined company basis. In line with our guidance of being broadly flat year. The innovation plan has been the key driver of this progress. As we seek to leverage the bright AI technology to improve our process operations under the Omdia brand, we have created a comprehensive market intelligence platform. Together, the expertise of Canalys will find our market position in November as the analyst firm of the year. I then integrated our portfolio of brand-to-demand products. The ITT platform was the first offering to leverage our combined audience data. On the subject of our go-to-market strategy, we focused on the largest customer AI. As I've said before, we firmly believe that generative and agentic AI will be a huge positive for our business. Actually, market data is in our market data, go-to-market intelligence solutions. The key capabilities will be AI-driven problem identification and engage prospects and AI-driven content insights. And whether utilizing our pre-built AI skills or deploying their own, our customers will be fueled by the second area that we're focusing on is personalized content experience efficacy of our go-to-market program we're targeting with our larger customers lamented strategic review and a decision to focus on fewer larger relationships they have consolidated those relationships further very well positioned to be our ambition is to become the indispensable partner to the beast our objective is to return the business to top-line revenue growth for the Our strategy is to continue to build our house on the land that we own, by which I mean producer and nurturing that proprietary market. We need to leverage the breadth and scale of the product portfolio to go-to-market efforts on the largest customers. We need to make ourselves easier to simplify the expertise. And on that point, I'm incredibly grateful to our dedicated colleagues and their teams for the hard work and commitment. Thank you for your time.

I look forward to updating you on our financial results. and good afternoon everyone i am pleased to be able to report on 2025 results that i think delivered in line with or ahead of our guidance and market expectations and operational discipline 486 point right in line with our guidance of being under 90.4 company basis while revenues remain stable our focus on operational excellence and strategic reorganization with accelerated delivery of cost synergies drove strong margin expansion. Our adjusted EBITDA reached easing our guidance of $85 million, representing a healthy 10% increase from 2024's 78-point company basis to an adjusted EBITDA margin of 17.9% in 2025, a meaningful improvement of 180 basis points from the prior year. Our fourth quarter performance was particularly strong with revenues of $140.7 million, representing a solid 3% year-over-year increase on a combined company basis. Q4 adjusted EBITDA of $41.6 million represented a 56% year-over-year increase, with our adjusted EBITDA margin expanding to around 30% compared to approximately 20% in the corresponding quarter of the prior year on a combined company basis. Our Q4 performance reflected some seasonal upswing in the business but also benefited from our strategic initiatives that are gaining traction, which allowed us to accelerate the realization of some cost savings along with some favorable phasing impacts. Our quarterly progression throughout 2025 tells a story of building momentum. Following the seasonally slower first quarter, each of the remaining quarters of the year showed positive sequential revenue progression, a trend we expect to continue in 2026. From a year-over-year perspective, revenue performance consistently improved from a minus 6 in Q1, narrowing to a minus 2% in Q2, getting back to growth in Q3 at plus 1%, and over the comparative sheet also reflects a strong financial foundation that supports our strategic initiatives while maintaining the flexibility to capitalize on growth opportunities that may arise. At the end of 2025, we had cash and cash equivalents on the balance sheet of around $41 million and had utilized around $107 million of our $250 million facility, resulting in a net debt of approximately $66 million, not vastly different to the approximately $62 million at the end of 2024, despite significant cash expenditures in the year on acquisition, integration, and restructuring costs. Our free cash flow reflects the impact of our integration and restructuring investments in 2025. On an adjusted basis, we delivered meaningful cash flow demonstrating the net debt at year end relative to adjusted EBITDA for the year was just 0.8 times and slightly lower than at the end of 2024, illustrating the strong cash-generating characteristics of our business. Now, quickly turning to our guidance for 2026, following the substantial progress made with our combination program in 2025, the priority for 2026 is to build on the foundations laid and to return to growth in 2026. Our assumption is that the market environment will remain similar to that in 2025. Nevertheless, we expect to grow our revenues in 2026. That, coupled with our continued cost discipline, annualization of synergies, and operational leverage, we expect our adjusted EBITDA growth further to a range of $95 million to $100 million, marking a further meaningful improvement on our adjusted EBITDA margin. Q1-2026 will reflect this guidance reflects our confidence in the progress we've made through our strategic initiative and the strong foundation we've established for sustainable growth. In conclusion, our financial model is built to every additional dollar of revenue delivered sustainable over time.

Happy to answer your questions operator will you please open up the line for q a absolutely we will now begin the question and answer session if you would like to ask a question please press star followed by one on your telephone keypad if for any reason at all you would like to remove that question please press star followed by two again to ask a question please press star one the first question comes from eric martinuzzi with lake street you may proceed i wanted to first of all congratulate you on the fourth quarter results and overachieving versus the adjusted EBITDA for the year, but I was particularly impressed with the go-to-market strategy results.

Your comment in the press release talks about an approximate 10 percent growth in revenue from your largest customers. Was that a full-year basis or was that a Q4 metric, Gary?

Hi, Eric.

Good to hear from you. that's a two-year basis um and on a combined company basis okay and then you know there was a time when the the different tiers of customers if i go back to like uh the end of 2024 you talked about the 7500 customers that the combined entity had and that there were 70 customers that were over a million dollars a year in billing is that the the tier of customers that we're talking about here or are you stratifying the customer base differently oh no but we are stratifying the customer base differently it's not it's not the same um we we have a bit i mean if you if you

recall i've actually go back to we have identified that about 10 billion dollars of our 20 billion dollar addressable market sits with about 150 to 200 clients in the marketplace and we've then further prioritize that down to a cohort of six and then a further number that I'm posting.

And then is there, you know, you've got so many different products that you're offering customers now. What was resonating with that largest cohort? What, you know, first of all, did they contract in their use of any of the products? And then what was it that they expanded their use of?

Well, you appreciate it's a bit of a, you know, a mixed picture when you go down to the kind of individual customers there, we saw really strong demand for our demand products.

And then given the total revenue on the Performa combined basis actually declined 1%, obviously the smaller customers contracted to sort of offset the success that you had with the higher tier, as you put it, the 30 portfolio customers. Was there any themes to recognize across the smaller customer base, either, you know, smaller enterprise or SMB themes?

I suppose the theme I would talk to is much more about international markets for us. I think what we saw in particular was in the Asia-Pacific region and the triangle between sort of Singapore and China and Korea. That was definitely a market that we...

And then, Dan, as we're doing our modeling here for 2026, obviously the top line, you didn't want to put too fine a point on it, but as I'm looking at the growth that you had in the back half of 2025 on the pro forma combined, you were up 1% in Q3, you were up 3% in Q4. you know is it a prudent starting point to kind of take the blend there and say hey if we are going to grow let's let's put it in maybe a start with a two percent and just use that as a baseline or is that too aggressive no I Eric I

think that the way you're laying it out makes sense you know I think you could go maybe a little higher than that 2%, but I think the way you're thinking about modeling makes sense to me.

And then last question is around the source of the incremental adjusted EBITDA. Obviously, revenue is not going to be – revenue we're planning on to be a little bit higher in 2026, but let's just for discussion say we're talking about a flat revenue in 2026 versus 2025. In 2025, that adjusted EBITDA number was around, what was it, 87.3 million, and yet you're guiding to kind of a midpoint of 97.5. So just to keep it simple, call it 10 million of incremental adjusted EBITDA. What is it that's getting you there? Is this primarily going to be driven by further synergies on the bringing of the two entities together or what's driving that?

Yeah, Eric, so if you think about where the synergies sort of landed in 2025, they were really back half loaded. So, you're really going to start to see the impact of that throughout the full year as opposed just to being combined or contained for the second half of the year.

Got it. Okay, thanks for taking my questions. Thank you. Thanks, Eric.

Thank you. As a quick reminder, if you'd like to ask a question, please press star 1 on your telephone keypad. There are no more questions remaining at this time. This concludes today's conference call. Thank you for your participation. You may now disconnect your line.