Earnings Call Transcript - TTGT Q2 2025

Operator, Operator

Hello, everyone, and a warm welcome to the Informa TechTarget Second Quarter 2025 Financial Results Conference Call and Webcast. My name is Emily, and I'll be coordinating your call today. I would now like to turn the call over to our host, Charles Rennick, to begin. Please go ahead, Charles.

Charles D. Rennick, Host

Thank you, Emily, and good morning, everyone. The speakers joining us here today are Gary Nugent, our Chief Executive Officer; and Dan Noreck, our Chief Financial Officer. Before turning the call over to Gary, we would 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 have posted a press release to the Investor Relations section of our website and furnished it on an 8-K. You can also find these materials with the SEC free of charge at the SEC's website, www.sec.gov. A corresponding webcast as well as a replay of this conference call will be made available on the Investor Relations section of our website. Following Gary's remarks, the management team will be available to answer questions. Any statements made today by Informa 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 most recent periodic reports filed with the SEC. These statements speak only as of the date of this call, and Informa 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 measure, to the extent available without unreasonable efforts, accompanies our press release. With that, I'll turn the call over to Gary.

Gary Nugent, CEO

Thank you, Charlie, and welcome everyone. We appreciate your time today. While we've discussed our Q2 results before, I want to take this opportunity to reaffirm our previous statements and complete the Q2 overview. I want to remind everyone that when we mention the combined company, we refer to the amalgamated results in 2024, which helps us provide more meaningful year-on-year comparisons. I'll continue using this term throughout our discussion. The key messages today are as follows: first, our Q2 10-Q has been filed this morning, ahead of schedule, and we’re confident we can maintain this momentum. We consider this a return to normal service. The second point is about momentum; it is building as we proceed through our foundational year and capitalize on the advantages of our combination. We are reaffirming our full-year guidance, projecting stable revenues with adjusted EBITDA margins exceeding $85 million. We encourage you to look forward to some upcoming product innovations, particularly the launch of the Informa TechTarget Portal this fall. Lastly, we strongly believe that AI presents a significant opportunity for our business, and we're well positioned to thrive in an AI-driven world. Looking at our Q2 results, we reported revenues of $120 million, which is down from $122 million in the prior year on a combined company basis, marking a 1.6% year-on-year decline. However, we achieved sequential growth of over 15.5% compared to Q1. For those following our progress, this is about five percentage points ahead of last year on a combined company basis, indicating that momentum is indeed building. The company recorded a net loss of $399 million, primarily due to a $382 million noncash impairment, and our adjusted EBITDA was $17 million, down from $19 million the previous year on a combined basis. In terms of balance sheet and liquidity, at the end of Q2, we had a solid balance sheet with $62 million in cash and cash equivalents. We have drawn about $120 million from our $250 million revolving credit facility, resulting in net debt of negative $58 million, which aligns with the previous year. Focusing on some Q2 highlights; as previously stated, our market strategy emphasizes investing in relationships with our largest clients, which represent about 50% of our addressable market, valued at $10 billion out of a $20 billion total. We believe that these key players will benefit most from the breadth and scale of our combined capabilities. Consequently, we have dedicated more of our marketing, sales, product management, and customer success resources to serve their needs better, resulting in encouraging year-on-year growth and we expect this to continue in the second half of the year. From a product standpoint, we have acted swiftly to consolidate brands and product portfolios within our Intelligence & Advisory segment. By consolidating brands like Wards, Canalys, ESG, and Omdia under the Omdia brand, we maximize our brand investment returns while eliminating product overlaps, allowing our analysts to spend more time with clients. We are pleased with the progress on this front. Another key product highlight is our repositioning of the NetLine product for the cost-sensitive end of the demand market, which is opening up new revenue streams and has yielded significant year-on-year growth. Additionally, in terms of our editorial efforts and audience engagement, we are proud to have won 45 prestigious online B2B editorial awards in the first half of this year, showcasing our commitment to quality content produced by our expert analysts, researchers, and journalists. Looking ahead to the second half of the year, we are making good progress in integrating our brands, products, and talents, addressing overlaps, and maximizing the benefits of our merger. In July, we announced a reorganization plan to streamline various aspects of our business, which is expected to result in a approximately 10% reduction in our global workforce. This move will enable us to surpass our initial cost savings and synergy goals from the merger process and stay on track to achieve the $45 million in promised synergies by year three. I also want to highlight our upcoming product roadmap, which will be revealed in the fall. We are focusing on three main priorities: unifying all our products and services for a seamless customer experience, enhancing the visibility of our customers' performance and ROI through advanced analytics, and integrating our products with the platforms our customers prefer. The launch of the Informa TechTarget Portal in September will showcase our advancements, particularly in product integration, with three new integrations bringing our total to 13. Finally, I want to emphasize that we view AI as an opportunity for our business, positioning us well in an AI-driven landscape. Our core operations autour content curation and creation, data manipulation, and analysis, are well-suited for AI applications. We believe AI will augment efficiency and quality in our offerings and enhance audience experience. As we sustain and grow our engaged audience, we remain committed to delivering trusted and authoritative content, which is why we take pride in our editorial awards. We recognize that while AI is changing search dynamics, our domain authority remains an asset, positively influencing search and AI engine optimization. As we close this call and move to Q&A, I want to reaffirm our guidance for 2025, expecting the sequential momentum from Q2 to continue into Q3 and Q4. We forecast stable revenues and adjusted EBITDA margins exceeding $85 million for the full year. In conclusion, I reiterate that momentum is building as we unlock the benefits of our combination, and we are excited to be filing ahead of schedule and maintaining this progress. We look forward to sharing our product innovations in the fall. We are optimistic about leveraging AI opportunities and adapting to our evolving marketplace. Now, I'll open it up for questions.

Operator, Operator

Our first question today comes from Joshua Reilly with Needham.

Joshua Christopher Reilly, Analyst

Maybe just starting off in terms of brand consolidation. Can you just discuss the trends you're seeing in Intelligence & Advisory as a large public competitor? Just put up guidance below expectations. I'm curious what you're seeing there in terms of turning customer retention for Omdia.

Gary Nugent, CEO

Yes, thanks for the question. Generally, I would say that the momentum and trend continue. Our Intelligence & Advisory business is performing as expected. We're experiencing a strong and consistent customer renewal rate in both volume and value, and that trend is continuing without any changes. It's fair to say that new business is likely where the market is the most competitive and challenging. This has always been true because the Intelligence & Advisory offering tends to be sticky with customers as we integrate deeply into their workflows and strategic planning cycles. Our outlook for the year remains as expected, with no changes.

Joshua Christopher Reilly, Analyst

Got it. That's helpful. And then as we think about the implied second half guidance, how much of the sequential improvement in revenue in Q3 is from any type of market recovery that you're assuming relative to the operational improvements that you've already highlighted on the call here?

Gary Nugent, CEO

Well, we're not making assumptions around market recovery in any way, shape or form in our guidance. Really, this is based upon the bookings momentum that we have, the revenue pacing momentum that we have. I think as I mentioned earlier before, one of the things that we moved really quickly to do is to get our management information systems combined, such that we had a kind of transparent and real-time view of bookings from customers and revenue from customers. And so we see that on a daily basis. So it really is all about those KPIs, not any assumptions around market recovery.

Joshua Christopher Reilly, Analyst

Excellent. And then last question for me is, can you just review what did you do exactly to the product for NetLine to drive growth in the lower end, more class-conscious end of the market?

Gary Nugent, CEO

Yes, certainly, Josh. I mean, actually the product itself, really, there wasn't a lot of change to the product itself, but there was a lot of change to the go-to-market strategy for the product. And we have built a dedicated go-to-market capability for the product and then positioned it in that sort of volume and cost-conscious end of the demand market. And it is, therefore, really is about the emphasis of the go-to-market behind the product and the positioning of the product. The actual product itself, the engineering of the product itself hasn't materially changed.

Operator, Operator

Our next question comes from Jason Kreyer with Craig-Hallum.

Jason Michael Kreyer, Analyst

Just wondering, as you look at the guide and the implied return to growth in the back half of the year, can you give any either qualitative or quantitative commentary on bookings or on the pipeline that give you confidence in that return to growth?

Gary Nugent, CEO

Our bookings momentum and revenue pacing support the guidance we've provided, reflecting our confidence in it. We are a business that has distinct revenue categories. First, we have subscription revenues, which are recognized over the course of a year and provide us with high visibility. Secondly, we have consulting and advisory revenues, which are project-related and recognized based on the effort level against our backlog. Lastly, we have transactional revenues, for which we typically have about 90 days of visibility through our sales pipeline. Considering this mix, we have a solid understanding of our business outlook.

Jason Michael Kreyer, Analyst

Appreciate that commentary. Just going back to the AI topic. As you look across your business today, what segments or what products are seeing near-term fundamental benefits from the AI category?

Gary Nugent, CEO

I believe the first area where you'll see this impact is in audience experience and how audiences discover and consume content throughout their buying journey. Our audiences consist of decision-makers and influencers involved in significant technology decisions who need to be well-informed and educated before making choices. Typically, they spend about 80% of their buying journey conducting research before engaging in conversations with potential vendors. With AI, we can transform the audience experience. Currently, we have over 220 B2B digital properties that inform, educate, and shape the market daily. However, when someone discovers one of these properties, regardless of how they arrive—be it through a search, direct link, or a brand they recognize—they primarily consume content on that site. We encourage our audience to navigate through the network to learn more and immerse themselves in the subject, but this is easier said than done. The use of AI, particularly large language models, allows us to aggregate content from all our 220 sites and put it into a large language model, enabling our audiences to ask questions and receive answers from our proprietary model we developed internally. We are also working on consolidating all content from the 220 sites along with our research material. This fundamentally enhances the audience's experience in discovering, consuming, and learning about topics. This is one area where we expect to see significant influence. Additionally, much of our work involves data manipulation and analysis. We will be enhancing our ability to derive intent signals from audience data and consumption patterns using AI models. These are just two examples of how we can leverage AI: improving audience experience and enhancing our client value proposition.

Jason Michael Kreyer, Analyst

That's really helpful, Gary. Just one more for me. So as we get into the second half of the year, we're forecasting an uptick in profitability and cash flow. Just wondering what your balance sheet priorities are across like deleveraging, buybacks, M&A. Any key objectives from you?

Gary Nugent, CEO

Dan, do you want to...

Daniel T. Noreck, CFO

Sure. I mean, as we think about the second half of the year, it's really going to be about identifying opportunities for the business with a focus on delevering and then also just building up cash.

Operator, Operator

Our next question comes from Eric Martinuzzi with Lake Street.

Eric Martinuzzi, Analyst

I saw you called out the Canalys business as part of the uptick in the back half. I'm not familiar with that. Are we talking about on the order of $1 million or $2 million or $3 million to $5 million? What does that conference business kind of kick in when it does show up in Q4?

Gary Nugent, CEO

Yes, that's a good question. At the end of the year, there are a series of events called the Canalys Forums. These forums are well-respected conferences held in Europe, Asia, and North America, specifically in the United States. They bring together key decision-makers and influential figures from the technology channel community. Major distributors like TD SYNNEX and Arrow, along with large resellers such as SHI and Computacenter, meet with vendors to discuss business. This all takes place primarily in October and November. The financial impact is generally between $5 million and $10 million, but I won't specify a precise number; it falls within that range. As I mentioned, this contributes to a slight skew in Q4 revenues.

Eric Martinuzzi, Analyst

Okay. That's helpful. As far as macro demand, it looks like the brand and intent business, you characterized it as the most volatile. Are you seeing that across your markets? Or is there a difference between, say, North America and rest of the world?

Gary Nugent, CEO

No, I don't think there are any significant geographical differences. The pattern appears to be fairly consistent across Europe and the Asia-Pacific region. I have previously mentioned that APAC revenues and bookings have been declining year-on-year. While we do have growth in some of our strategic initiatives, it implies that other areas are experiencing declines. We certainly found the APAC market to be challenging this year, but this isn't just an issue tied to brand or intent; it's more of a market-level concern rather than a product-related issue.

Eric Martinuzzi, Analyst

Okay. Fair. And then lastly, you mentioned wanting to work with your customers' preferred platforms. I'm aware of marketing automation platforms that utilize Informa TechTarget data, such as HubSpot. Can you provide other examples of platforms you're considering for integration?

Gary Nugent, CEO

Yes. I mean, typically, the industry sort of calls them CRMs, MAPs, SEPs, SEPs being sales enablement platforms. So you've mentioned, the CRMs of this world are Salesforce and Microsoft Dynamics, et cetera. The marketing automation platforms are the Eloquas and the HubSpots and the Marketos of this world. The sales enablement platforms are things like 6sense and Demandbase and others. Does that help?

Eric Martinuzzi, Analyst

Yes. So your sense is you're pretty well there and you'll have it by the end of the year as far as being able to plug in with all of these?

Gary Nugent, CEO

I believe that by the time of the fall launch, when we will introduce three new integrations to our portfolio, we will have a total of 13. This will provide us with excellent coverage of all the major platforms that our customers prefer, which is beneficial. It's important to note that the landscape is dynamic; sales enablement platforms were nonexistent 5, 6, or 7 years ago, as we primarily dealt with CRM and marketing automation platforms. We are monitoring this situation closely. Additionally, there are a few lead management consolidators or platforms focused on lead management consolidation, including converters that are also on our radar. This demonstrates our clear commitment to integrating into the ecosystems our customers create, ensuring we are easy to work with and facilitating seamless business interactions.

Eric Martinuzzi, Analyst

Got it. Well, congrats on getting back on a normal reporting cadence.

Gary Nugent, CEO

Thank you, Eric.

Operator, Operator

Thank you. Those are all the questions we have for today, and so this concludes our call. Thank you all for your participation, and you may now disconnect your lines.