UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
For the transition period from to
Commission file number: 1-33472
TECHTARGET, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
04-3483216
(I.R.S. Employer
Identification No.)
275 Grove Street
Newton, Massachusetts 02466
(Address of principal executive offices) (zip code)
(617) 431-9200
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class
Common Stock, $0.001 Par Value
Trading Symbol(s)
TTGT
Name of each exchange on which registered
Nasdaq Global Market
Securities registered pursuant to Section 12(g) of the Exchange Act:
None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer a smaller reporting company or an emerging growth company. See the definitions of the "large
accelerated filer," "accelerated filer," "non-accelerated filer," "smaller reporting company" and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
Non-Accelerated Filer
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☐
Accelerated Filer
Smaller reporting company
Emerging Growth Company
☐
☐
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided
pursuant to section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of
the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $707.1 million as of June 30, 2020 (based on a closing price of $30.03 per share as
quoted by the Nasdaq Global Market as of such date). In determining the market value of non-affiliate common stock, shares of the registrant’s common stock beneficially owned by officers, directors and affiliates
have been excluded. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
The registrant had 28,137,116 shares of Common Stock, $0.001 par value per share, outstanding as of February 17, 2021.
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Annual Report on Form 10-K incorporates by reference certain information from the registrant’s definitive proxy statement for the 2021 annual meeting of stockholders, which the registrant
intends to file pursuant to Regulation 14A with the Securities and Exchange Commission not later than 120 days after the registrant’s fiscal year end of December 31, 2020.
TABLE OF CONTENTS
PART I
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Item 2.
Item 3.
PART II
Item 5.
Item 6.
Item 7.
Properties
Legal Proceedings
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Reserved
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.
Controls and Procedures
Item 9B.
Other Information
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Item 15.
Exhibits and Financial Statement Schedules
Exhibit Index
Item 16.
Form 10-K Summary
Signatures
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Forward-Looking Statements
Certain information included in this Annual Report on Form 10-K may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of
1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements. All statements, other than statements of historical
facts, included or referenced in this Annual Report on Form 10-K that address activities, events or developments which we expect will or may occur in the future are forward-looking
statements, including statements regarding the intent, belief or current expectations of the Company and members of our management team. The words “will,” “believe,” “intend,”
“expect,” “anticipate,” “project,” “estimate,” “predict” and similar expressions are also intended to identify forward-looking statements. Such statements may include 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, new products or services and other potential sources of additional revenues. Such forward-looking
statements are not guarantees of future performance and involve risks and uncertainties. These statements speak only as of the date of this Annual Report on Form 10-K 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, including
continued increased sales of our IT Deal Alert™ offerings and continued increased international growth; relationships with customers, strategic partners and employees; the duration
and extent of the COVID-19 pandemic; difficulties in integrating acquired businesses; changes in economic or regulatory conditions or other trends affecting the internet, internet
advertising and IT industries; data privacy laws, rules and regulations; and other matters included in our filings with the SEC. The occurrence of any of these risks and uncertainties
may cause our actual results to differ materially from those anticipated in our forward-looking statements, which could have a material adverse effect on our business, results of
operations and financial condition. We undertake no obligation to update our forward-looking statements to reflect future events or circumstances.
PART I
Item 1.
Business Overview
TechTarget, Inc. (“we” or the “Company”) is a global data and analytics leader and software provider for purchase intent-driven marketing and sales data which delivers
business impact for business-to-business (“B2B”) companies. Our solutions enable B2B technology companies to identify, reach, and influence key enterprise technology decision
makers faster and with higher efficacy. We improve information technology (“IT”) vendors’ abilities to impact highly targeted audiences for business growth using advanced
targeting, first-party analytics and data services complemented with customized marketing programs that integrate demand generation, brand marketing, and advertising techniques.
We enable enterprise technology and business professionals to navigate the complex and rapidly-changing enterprise technology landscape where purchasing decisions can
have significant financial and operational consequences. Our content strategy includes three primary sources which enterprise technology and business professionals use to assist
them in their pre-purchase research: independent content provided by our professionals, vendor-generated content provided by our customers and member-generated, or peer-to-peer,
content. In addition to utilizing our independent editorial content, registered members appreciate the ability to deepen their pre-purchase research by accessing the extensive vendor-
supplied content available across our website network. Likewise, these members derive significant additional value from the ability our network provides to seamlessly interact with
and contribute to information exchanges in a given field. To advance our ability to provide purchase intent-driven marketing and sales data, we have been acquisitive. During 2020,
we acquired BrightTALK Limited, a technology media company that provides customers with a platform to create, host and promote webinar and video content, The Enterprise
Strategy Group, Inc., a leading provider of decision support content based on user research and market analysis for global enterprise companies, and Data Science Central, LLC, a
digital publishing and media company focused on data science and business analytics.
We had approximately 26.9 million and 20.0 million registered members and users – our “audiences” – as of December 31, 2020 and 2019, respectively. During the second
quarter of 2020, the Company ended a partnership with a company covering the Belgium, Netherlands, and Luxembourg (“Benelux”) region. This reduced our member number by
0.5 million. Additionally, we restated our 2019 membership to remove the Benelux member number as of December 31, 2019 (0.5 million). We believe that we have sufficient
members within our remaining database to support our business needs within the Benelux region. As a result of the BrightTALK acquisition, we added approximately 6.1 million
unique users of the BrightTALK platform to our audiences. While the size of our registered member and user base does not provide direct insight into our customer numbers or our
revenues, the value of our services sold to our customers is a direct result of the breadth and reach of this content footprint. This footprint creates the opportunity for our clients to
gain business leverage by targeting our audiences through customized marketing programs. Likewise, the behavior exhibited by these audiences enables us to provide our customers
with data products to improve their marketing and sales efforts. The targeted nature of our member
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and user base enables B2B technology companies to reach a specialized audience efficiently because our content is highly segmented and aligned with the B2B technology
companies’ specific products.
Through our ability to identify, reach and influence key decision makers, we have developed a broad customer base and, in 2020, delivered marketing and sales services
programs to approximately 1,590 customers.
Please refer to the section below titled “Our Strategy” regarding our longer-term growth plans.
Business Trends
Our proprietary purchase intent data and lead generation solutions are attractively positioned to benefit from the rapid adoption of data-driven processes for sales and
marketing workflows, especially to navigate the complex and rapidly changing IT buyer landscape where purchasing decisions can have significant financial and operational
consequences. Information technology spending is no longer a discretionary item for most companies. Modern organizations see the digital transformation as a necessary investment
to remain competitive, a long-term dynamic that has benefitted our customers.
Our business is impacted by macro-economic conditions. Because our customers are B2B technology customers, the success of our business is intrinsically linked to the
health and market conditions of the enterprise technology industry. There are multiple trends in our market that we believe will support sustained growth for the solutions we offer.
We are seeing our customers shift their marketing budgets from face-to-face event sponsorships to online lead generation as a result of the COVID-19 pandemic. We believe that
much of this shift will become permanent as we do not believe the face-to-face business will return to its pre-COVID-19 spending levels. This shift has been evident primarily in our
international operations as those markets had significantly more face-to-face events than our customers in North America. Today, most of those deals are short-term, mirroring their
marketing campaigns. We see an opportunity to migrate more of our international customers’ budgets from face-to-face event sponsorships to intent-based lead generation and then
graduate those customers to annual Priority Engine™ subscriptions. We believe this is achievable as the majority of our customers view the use of data to make their sales and
marketing organizations more intelligent, efficient and effective as a strategic priority.
In addition, a migration to subscription-based business models has built in more resilience and predictability to most of our customers’ business and financial profiles, which
in turn has kept their spending levels on sales and marketing relatively stable as compared to past economic downturns. We have been at the forefront of these trends as reflected by
the significant growth of revenues from our flagship Priority Engine™ subscriptions.
Available Information
Our website address is www.techtarget.com. We make our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and
amendments to these reports, available free of charge through our website as soon as reasonably practicable after we electronically file such material with, or furnish such material
to, the Securities and Exchange Commission (“SEC”). The SEC maintains a website, at www.sec.gov, that contains reports, proxy and information statements and other information
regarding issuers that are filed electronically. Our Code of Business Conduct and Ethics, and any amendments to our Code of Business Conduct and Ethics, Corporate Governance
Guidelines and Board Committee Charters, are also available on our website. The information contained on our website is not a part of, or incorporated by reference into, this Annual
Report on Form 10-K.
Industry Background
Enterprise technology and business professionals’ reliance on online content to research major purchase decisions, and the transition by B2B technology companies of
marketing expenditures from offline to online channels, have been consistent trends that have benefitted us. Going forward, there are some important related trends that we believe
our business strategy is well positioned to benefit from:
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Technology Marketers and Sales Organizations are Increasingly Using Audience Data to Drive Decisions. In the enterprise technology market in particular,
companies are increasingly using data to help them determine which prospective accounts should be prioritized for marketing or sales follow-up. We believe we are
uniquely positioned to provide data around the purchase intent of specific prospective accounts and potential buyers because of the nature of content we create and
our product focus in these data-driven areas.
There is a Continued Focus on the Ability to Measure and Improve Return on Investment (“ROI”). Our customers are increasingly focused on measuring and
improving their ROI in marketing and sales. Before the advent of internet-based marketing, there were limited tools for accurately measuring the results of such
activities in a timely fashion. The internet
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has enabled B2B technology companies to track individual members and their responses to marketing. With the appropriate technology, vendors now have the ability
to assess and benchmark the efficacy of their online programs cost-effectively and in real-time. We believe our offerings benefit as our customers continue to
leverage insights gained from this measurement, and that the data and related services we are providing will assist them to optimize their marketing programs going
forward.
Enterprise Technology Purchasing
Over the past two decades, enterprise technology purchases have grown in size and complexity. The enterprise technology market comprises multiple large sectors such as
storage, security and networking. Each of these sectors can be further divided into sub-sectors addressing more granular areas of specialization within an enterprise’s technology
environment. For example, within the multi-billion-dollar storage sector, there are numerous sub-sectors such as storage area networks, storage management software and backup
software. Furthermore, the products – and therefore the enterprise technology – in each sub-sector may represent entirely independent markets. For example, the market around
backup software for use in Windows® environments can be completely distinct from that addressing Linux® environments.
In view of the complexities, high cost and importance of enterprise technology decision-making, enterprise technology purchasing decisions are increasingly being
researched by teams of functional experts with specialized knowledge in their particular areas, rather than by one central enterprise technology professional, such as a Chief
Information Officer (“CIO”). For these reasons and more, the enterprise technology purchasing process typically requires a lengthy sales cycle. The “sales cycle” is the sequence of
stages that a typical customer goes through when deciding to purchase a product or service from a particular vendor. Key stages of a sales cycle typically consist of a customer
recognizing or identifying a need; identifying possible solutions and vendors through research and evaluation; and finally, making a decision to purchase the product or service.
Through various stages of this sales cycle, enterprise technology and business professionals rely upon multiple inputs from independent experts, and peers. Although there is a vast
amount of information available, the aggregation and validation of these inputs from various sources can be difficult and time-consuming.
The long sales cycle for enterprise technology purchases, as well as customers’ need for significant information support, requires substantial investment on the part of B2B
technology companies. These realities drive the significant marketing expenditures observable in the enterprise technology market. In addition, given the continued acceleration of
technological change, at any given time, there are often multiple solution possibilities to any enterprise technology or business need. With each new product or product enhancement,
B2B technology companies implement new marketing outreach, and as a result, enterprise technology and business professionals are required to continuously engage in research to
stay abreast of the latest developments that could benefit their companies.
The Opportunity
Prior to widespread internet adoption, enterprise technology buyers researching purchases relied largely on traditional enterprise technology media, consisting of broad print
publications and large industry trade shows. Today, enterprise technology and business professionals are demanding specialized online content tailored to the specialized sub-sectors
of enterprise technology solutions that they must understand. As enterprise technology, vendors and business professionals have all become much more specialized, the internet has
become a preferred purchase research medium, which has dramatically increased research activity, accelerated information consumption and improved professional decision-making.
B2B technology companies seek high-ROI marketing opportunities that can provide them access to the specific sectors of enterprise technology buyers aligned with the
solutions they sell. To be more efficient and effective, they need to distinguish these prospective buyers from accounts or individuals who are not yet ready to engage in the buying
process. Thus, they look for assistance in identifying the specific accounts and individuals who are actively researching upcoming purchases. To more quickly and successfully
position their respective solutions against alternatives being considered, they also seek assistance from marketing service providers to help influence these audiences by utilizing data
driven insights to enable advanced demand-generating content marketing and targeted branding.
Enterprise technology and business professionals rely on our content for decision support information tailored to their specific purchasing needs. Our specialized content
strategy and comprehensive services enable B2B technology companies to better identify, understand, reach and influence enterprise technology and business professionals who are
actively researching purchases in specific enterprise technology sectors. Our solutions benefit from the following competitive advantages:
•
Large and Growing Community of Registered Members and Users. We had approximately 26.9 million registered members and users as of December 31, 2020. With
our acquisition of BrightTALK Limited, we added approximately 6.1 million unique users of the BrightTALK platform, which is included in our total number of
registered members and users. The targeted nature of our member and user base enables B2B technology companies to reach a specialized audience efficiently
because our content is highly segmented and aligned with the B2B technology companies' specific products and services.
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•
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Strong Customer Relationships. We have developed a broad customer base. During 2020, we delivered marketing services programs for approximately 1,590
companies, who are our customers.
Substantial Experience in Online Content and Purchase Intent Data. We have over 20 years of experience in developing our online information content, with a focus
on providing targeted information to enterprise technology and business professionals and a highly refined audience to technology vendors. Our experience enables
us to develop relevant new online properties rapidly and to acquire and efficiently integrate select properties to further serve enterprise technology and business
professionals. We have also developed an expertise in implementing integrated, targeted marketing campaigns designed to maximize the measurability of, and
improvement in, ROI.
Proprietary Data on the Research Behavior of our Registered Members, Site Visitors and Users. Through our analytical platforms, we collect information on
millions of interactions that our members, users and visitors (and the companies, or accounts, that they are associated with) have with the content on our websites and
that we send to them via email. Collection and analysis of this information allows us to increase the relevance of our informational offerings to our members and
improves our customers’ ROI by allowing us to deliver better prospects to them more efficiently. This analytics platform not only guides everything we do on our
own properties; it is also available to our customers in a variety of forms to aid them in directly optimizing their efforts.
Significant Brand Recognition among B2B technology companies and Enterprise Technology and Business Professionals. Our brands are well-recognized by B2B
technology companies who value our integrated marketing capabilities and comprehensive high-ROI services. At the same time, our sector-specific offerings
command brand recognition among enterprise technology and business professionals, who rely on these websites because of their specificity and depth of content.
Our Solutions
Our solutions consist of:
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IT Deal AlertTM. A suite of data and services for B2B technology companies that leverages the detailed purchase intent data that we collect on enterprise technology
organizations and professionals researching IT purchases on our network of websites. Through proprietary scoring methodologies, we use this insight to help our
customers identify and prioritize accounts and contacts whose content consumption around specific enterprise technology topics indicates that they are “in-market”
for a particular product or service. The suite of products and services include Priority Engine™, Qualified Sales Opportunities™, and Deal Data™. Priority Engine™
is a subscription service powered by our Activity Intelligence™ platform, which integrates with customer relationship management and marketing automation
platforms from salesforce.com, Marketo, Eloqua, Pardot, and Integrate. The service delivers lead generation workflow solutions that enable marketers and sales
forces to identify and understand accounts and individuals actively researching new technology purchases and then to engage those active prospects. Qualified Sales
Opportunities™ is a product that profiles specific in-progress purchase projects, including information on scope and purchase considerations. Deal Data™ is a
customized solution aimed at sales intelligence and data scientist functions within our customer organizations. It renders our Activity Intelligence data into one-time
offerings directly consumable by the customer’s internal applications.
Demand Solutions. Our offerings enable our customers to reach and influence prospective buyers through content marketing programs, such as white papers,
webcasts, podcasts, videocasts, virtual trade shows, and content sponsorships, designed to generate demand for their solutions, and through display advertising and
other brand programs that influence consideration by prospective buyers. We believe this allows B2B technology companies to maximize ROI on marketing and
sales expenditures by capturing sales leads from the distribution and promotion of content to our audience of enterprise technology and business professionals.
Brand Solutions. Our suite of brand solution offerings provide B2B technology companies with direct exposure to targeted audiences of enterprise technology and
business professionals actively researching information related to their products and services. We leverage our Activity Intelligence™ platform to enable significant
segmentation and targeting of specific audiences that can be accessed through these programs. Components of brand programs may include on-network branding,
off-network branding, and microsites and related formats.
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Custom Content Creation. We also at times create white papers, case studies, webcasts or videos to our customers’ specifications. These customized content assets
are then promoted to our audience within both demand solutions and brand solutions programs.
As a result of our recent acquisition of BrightTALK we are now able to provide a platform that allows our customers to create, host and promote webinar, virtual
event and video content.
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Our solutions benefit enterprise technology and business professionals and B2B technology companies in the following ways:
Benefits to Enterprise Technology and Business Professionals
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Provide Access to Integrated, Sector-Specific Content. Our offerings provide enterprise technology and business professionals with sector-specific content from the
three fundamental sources they value when researching enterprise technology purchasing decisions: industry experts, peers and vendors. Our independent staff
creates content specific to the sectors we serve and the key sub-sectors within them. This content is integrated with other content generated by our network of third
party industry experts, member-generated content and content from B2B technology companies. The reliability, breadth, depth, and accessibility of our content
offerings enable enterprise technology and business professionals to make more informed purchases.
Increase Efficiency of Purchasing Decisions. By accessing targeted and specialized information, enterprise technology and business professionals are able to
research important purchasing decisions more effectively. Our integrated content offering minimizes the time spent searching for and evaluating content and
maximizes the time available for assimilating quality information. To support enterprise technology and business professionals’ information consumption
preferences, we provide this specialized, targeted content through a variety of media types matching the critical stages within the purchase decision process.
Benefits to B2B technology companies
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Provide Unique Data About In-Market Prospects. Our Activity Intelligence™ analytical product platform captures and interprets the content consumption behaviors
of our large base of targeted enterprise technology and business professional members as they research technology needs. This allows us to provide B2B technology
companies with powerful behavioral insight to help them more effectively identify and pursue prospective buyers. Vendors who are increasingly making use of data
to drive their marketing and sales strategies make use of our offerings as a key input to driving their progress against this objective.
Target Active Buyers Efficiently. Our highly targeted content attracts specific, targeted audiences who are actively researching purchasing decisions. Using our
database of registered members and users and information we collect about their product interests, we are able to accurately target those registered members and
users most likely to be of value to B2B technology companies, and support vendor-customer’s execution with scalable marketing services programs that help
influence these prospective buyers.
Generate Measurable Results. Our targeted online content offerings enable us to generate and collect valuable business information about each member and user and
their technology preferences. As registered members and users access content, we are able to build a profile of their technology interests, and their companies’
interests, as they evolve over time. Through experience, we have identified patterns that are indicative of purchase intent. We leverage this insight to improve ROI on
the programs we execute for our clients by focusing specifically where active demand exists. We provide this intelligence directly to B2B technology companies for
their own use. This helps them drive continuous improvement in their own marketing and sales workflows and outcomes, whether focused specifically on prospects
we provide them or on those they have otherwise obtained, which our information enriches and makes more actionable.
Maximize Awareness. As a leading distributor of B2B enterprise technology white papers, webcasts, videocasts, virtual events and podcasts, we offer B2B
technology companies the opportunity to educate enterprise technology and business professionals during the research process, prior to any direct interaction with
vendor salespeople. By distributing proprietary content and reaching their target audiences via our platform, B2B technology companies can educate audiences,
demonstrate much of their product capabilities and proactively brand themselves as specific product leaders. As a result, enterprise technology and business
professionals are more aware of, and more knowledgeable about, the vendor’s specifications and product and therefore more likely to consider the vendor. Increased
consideration of our B2B technology customers’ offerings combined with accurate purchase intent insight around those prospects who are actively researching a
purchase significantly reduces vendor prospecting costs and time expended on inactive accounts.
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Our Strategy
Our goal is to deliver superior performance by continuously enhancing our position as a global leader in purchase intent driven marketing and sales services that deliver
business impact for B2B technology companies by strengthening our offerings in our three core capability areas: – our specialized content that connects enterprise technology and
business professionals with B2B technology companies in the sectors and sub-sectors that we serve, the purchase intent insight analytics and data services our content and member
traffic enables, and the marketing services we provide to clients to help meet their business growth objectives.
In order to achieve this goal, we intend to:
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Continue to Innovate in the Area of Data-Enabled Marketing Services. We believe our ability to leverage our content and audience to identify in-market prospective
buyers is a core competency and a key driver of our future growth. Our IT Deal Alert™ suite of offerings, built on our Activity Intelligence ™ analytic product
platform, consists of multiple recently developed products and services that provide B2B technology companies with data-enabled optimization solutions. We intend
to further develop our existing product offerings with new features and launch additional offerings that extend our capabilities based on our customers’ requirements.
Expand Long-term Contractual Relationships with Customers. Several of our newly introduced data-enabled marketing products are being offered to our customers
on a subscription basis, on multiple quarter, annual or longer agreements, subject to our customers’ right of termination. We intend to expand the number of
subscription contracts with our customers, which allows us to work more closely with them in achieving their marketing objectives over an extended period and
provides us with stable revenue streams from the continued growth of these products and our successful renewal efforts.
Expand into Complementary Sectors. We intend to complement our current offerings and content by continuing to expand our business in order to capitalize on
strategic opportunities in existing, adjacent, or new sectors that we believe to be well-suited to our business model and core competencies. Based on our experience,
we believe we are able to capitalize rapidly and cost-effectively on new market opportunities.
Continue to Expand Our International Presence. We intend to continue to expand our reach into our addressable market by increasing our presence in countries
outside the U.S. We have pursued this strategy by launching our own websites directed at members in the United Kingdom, India, Spain, France, China, Australia,
and Singapore, and by acquiring specific properties or companies with attractive properties. We previously expanded by acquiring the Computer Weekly and
MicroScope online properties in the United Kingdom and E-Magine Médias SAS, which we call LeMagIT, in France. More recently, we launched German and
Portuguese language websites, as well as websites directed towards members in Latin America. We expect to further penetrate foreign markets by directly launching
additional sector-specific websites directed at these foreign locales and at additional international markets and by making strategic acquisitions and investments in
overseas entities. We believe that our integrated product offering across regions continues to resonate with international marketers and is contributing to our success.
We plan to continue investing in these capabilities as we seek opportunities to increase our global reach.
Selectively Acquire or Partner with Complementary Businesses. Historically, we have used acquisitions as a means of expanding our content and product and service
offerings, web traffic and registered members. Our acquisitions to date can be classified into three categories: content-rich blogs or other individually published sites,
typically generating less than $1 million in annual revenues; early stage revenue sites, typically generating between $1 million and $20 million in annual revenues;
and later stage revenue sites, typically generating greater than $20 million in annual revenues. As we evaluate companies within these ranges, we consider the
following attributes: operations primarily in the enterprise IT market; provides original content which enables us to obtain additional first party purchase intent data;
has a registration-based model; has different or complementary product offerings primarily sold on a subscription basis; provides significant cross-sell and upsell
opportunities; can be acquired as a reasonable price. A company does not have to have all of the attributes, but has to have some of the above attributes. We intend
to continue to pursue selected acquisition or partnership opportunities in our core markets and in adjacent markets for products with similar characteristics.
Platform and Content
Our content platform consists of a network of specialized websites and webinar and video offerings that serve the needs of enterprise technology and business professionals
who are making corporate purchase decisions. At critical stages of the purchase decision process, these content offerings through different channels meet enterprise technology and
business professionals’ needs for expert, peer and B2B technology company information and provide a platform on which B2B technology companies can launch targeted marketing
campaigns that generate measurable, high ROI.
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The table below provides a representation of the key market opportunities we address for our B2B technology company customers.
Audience: Market Categories Sites
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Audience: Market Categories Sites (cont.)
Market Categories
Based upon the logical clustering of our members’ respective job responsibilities and the marketing focus of the products being promoted by our customers, we currently
categorize our content offerings to address the key market opportunities and audience extensions across a portfolio of distinct market categories. Each of these marketing categories
services a wide range of enterprise technology sectors and sub-sectors and is driven by the key areas of enterprise technology and business professionals’ interests described below:
•
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Security. Every aspect of enterprise computing now depends on secure connectivity, data and applications. The security sector is constantly growing to adapt to new
forms of threats and to secure new technologies such as mobile devices, wireless networks, virtualized systems and cloud computing solutions. Compliance
regulations, cloud computing adoption, and highly publicized identity and intellectual property thefts are driving interest and investment in increasingly sophisticated
security solutions that supplement common “perimeter” security solutions such as firewalls and antivirus software. Our online properties in this sector, which include
SearchSecurity.com, SearchCloudSecurity.com, SearchFinancialSecurity.com, and SearchMidMarketSecurity.com, offer navigable and structured guides on B2B
technology companies and enterprise technology solutions in key sub-sectors such as network security, intrusion defense, identity management and authentication,
data and application security, security-as-a-service, cloud security and security information management software.
Networking. Broadly defined, the networking market includes the hardware, software and services involved in the infrastructure and management of both enterprise
and carrier voice and data networks. As new sub-sectors of networking have emerged and grown in importance, technology networking professionals have
increasingly focused their investments in such technologies as VoIP, wireless and mobile computing, social networking and collaboration, application performance,
data center fabrics, convergence, software-defined networking (“SDN”) and providing cloud services. Our online properties in this sector, which include
SearchNetworking.com, and SearchUnifiedCommunications.com aim to address the specialized needs of these technology networking professionals by offering
content targeted specifically to these emerging growth areas.
Storage. The storage sector consists of the market for disk storage systems and tape hardware and software that store and manage data. Growth is fueled by trends
inherent in the industry, such as the ongoing need to maintain and supplement data
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stores, and by external factors, such as expanded compliance regulations and increased focus on disaster recovery solutions. Recent trends reflect an increased
emphasis on solid state storage and cloud storage. At the same time, established storage sub-sectors, such as backup and Storage Area Networks (“SANs”) have been
invigorated by new technologies such as disk-based backup, continuous data protection, data deduplication and storage virtualization. Our online properties in this
sector, which include SearchStorage.com, SearchDataBackup.com, and SearchDisasterRecovery.com, address enterprise technology and business professionals
seeking solutions in key sub-sectors such as fibre channel SANs, solid state storage, virtualization IP & iSCSI SANs, Network Attached Storage (“NAS”), backup
hardware and software, and storage management software.
Data Center and Virtualization Technologies. Data centers house the systems and components, such as servers, storage devices, routers and switches, utilized in
large-scale, mission-critical computing environments. A variety of trends and new technologies have reinvigorated the data center as a priority among IT and
business professionals. Technologies, such as blade servers, server virtualization, converged infrastructure and cloud computing, have driven renewed investment in
data center-class computing solutions. Server consolidation is a focus, driven by the decline in large-scale computing prices relative to distributed computing models.
These trends have put pressure on existing data center infrastructure and are driving demand for solutions that address this. For example, the deployment of high-
density servers has led to increased heat output and energy consumption in data centers. Power and cooling have thus become a significant cost in enterprise
technology budgets, making data center energy efficiency a priority. Our key online properties in this sector provide targeted information on the B2B technology
companies technologies and solutions that serve these sub-sectors. Our properties in this sector include sites such as SearchDataCenter.com, covering disaster
recovery, power and cooling, mainframe and UNIX® servers, systems management, and server consolidation, and SearchCloudComputing.com and
SearchAWS.com, which cover private, public and hybrid cloud infrastructure. SearchServerVirtualization.com covers the decision points and alternatives for
implementing server virtualization, while SearchVMware.com focuses on managing and building out virtual environments on the most widely installed server
virtualization platform. SearchConvergedInfrastructure.com covers converged and hyper-converged infrastructure solutions. SearchITOperations.com covers
DevOps, the impact of Agile Development, containers, microservices and event-driven computing upon enterprise technology operations, as well as the deployment
of hybrid cloud architectures and multi-cloud management.
We also cover servers, application and desktop solutions deployed in distributed computing environments. The dominant platform, Windows, no longer represents
an offering of discrete operating systems but rather a diverse computing environment with its own areas of specialization around enterprise technology. As Windows
servers have become more stable and scalable, they have taken share in data centers and currently represent one of the largest server sub-sectors. Given the breadth
of the Windows market, we have segmented our Windows-focused media based on enterprise technology and business professionals’ infrastructure responsibilities
and purchasing focus. Our online properties in this sector include SearchWindowsServer.com, covering servers, storage, and systems management; and
SearchDomino.com, targeted toward senior management for distributed computing environments. This network of sites provides resources and advice to enterprise
technology and business professionals pursuing solutions related to such topics as Windows backup and storage, server consolidation, and upgrade planning.
SearchEnterpriseDesktop.com focuses on the deployment and management of end-user computing environments. SearchMobileComputing.com covers the enterprise
technology management issues surrounding the increasing deployment of personal technologies such as tablets and smartphones in the workplace. Combined with
our two properties that focus on server virtualization, SearchVirtualDesktop.com and BrianMadden.com, each focusing on desktop virtualization, this gives us a
comprehensive offering addressing the fast-growing area of virtualization technologies.
CIO/IT Strategy. Our CIO/IT Strategy sites provide content targeted at CIOs, and senior enterprise technology executives, enabling them to make informed
enterprise technology purchases throughout the critical stages of the purchase decision process. CIOs’ areas of interest generally align with the major sectors of the
IT market; however, CIOs increasingly are focused on the alignment between enterprise technology and their businesses’ operations. Data center consolidation,
compliance, ITIL/IT service management, disaster recovery/business continuity, risk management and outsourcing as well as including Software as a Service
(“SaaS”) and cloud computing have all drawn the attention of IT executives who need to understand the operational and strategic implications of these issues and
technologies on their businesses. Accordingly, our targeted information resources for senior IT executives focus on ROI, implementation strategies, best practices
and comparative assessment of vendor solutions related to these initiatives. Our online properties in this sector include SearchCIO.com, which provides CIOs in
large enterprises with strategic information focused on critical purchasing decisions; and SearchCompliance.com, which provides advice on enterprise technology-
focused regulations and standards to enterprise technology and business executives and other senior enterprise technology managers. The CIO/IT Strategy category
also includes online resources and events targeted to IT decision makers in prominent vertical industries. SearchHealthIT.com provides strategic IT purchasing
information and advice to senior IT and clinical professionals in hospitals, medical centers, university health centers and other care delivery organizations, as well as
organizations in the life sciences sector. InternetofThingsAgenda.com covers the implications of the emergence of the Internet of Things upon IT infrastructure and
strategy.
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Business Applications and Analytics. Our Business Applications and Analytics market category focuses on mission critical software such as enterprise resource
planning (“ERP”), databases and business intelligence, content management enterprise resource planning, and customer facing applications such as customer
relationship management (“CRM”) software for mid-sized and large companies. Because these applications are critical to the overall success of the businesses that
use them, there is a high demand for specialized information by IT and business professionals involved in their purchase, implementation, and ongoing support. Our
applications-focused properties in this sector include sites such as SearchCustomerExperience.com, SearchOracle.com, SearchSAP.com, SearchHRSoftware.com,
SearchSQLServer.com, and SearchERP.com. These sites are leading online resources that provide this specialized information to support mission critical business
applications such as CRM, sales force automation, databases and ERP software. The information produced by these applications is seen as a corporate asset that is
essential for gaining competitive advantage through informed, data-driven decisions that can help improve operational efficiency, enable business agility, and
improve sales effectiveness and customer service. As a result, business intelligence and analytics have become pervasive as various organizations increasingly rely
on mission critical information to optimize their businesses. SearchBusinessAnalytics.com, SearchDataManagement.com, and SearchContentManagement.com,
cover the business intelligence, data management, content management and collaboration disciplines associated with such initiatives. SearchCloudComputing.com
focuses on cloud-based or SaaS deployments of key business applications.
Application Architecture and Development. The application architecture and development sector is comprised of a broad landscape of tools and languages that enable
developers, architects and project managers to build, customize and integrate software for their businesses. Our application architecture and development online
properties focus on development in enterprise environments, the underlying languages such as .NET, Java and XML as well as related application development tools
and integrated development environments (“IDEs”). Several trends have had a profound impact on this sector and are driving growth. The desire for business agility
with more flexible and interoperable applications architecture continues to propel interest in microservices. Application integration, application testing and security,
as well as internet and mobile applications are also key areas of continuing focus for vendors and developers Our online properties in this sector include sites such as
TheServerSide.com, which hosts independent communities of developers and architects, SearchSoftwareQuality.com, which offers content focused on application
testing and quality assurance, and SearchAppAchitechture.com, which serves Architects, IT Managers and Line of Business Executives who are interested in
adapting existing architectures to meet the speed, scale and agility needs of today’s modern applications.
Channel. Our Channel sites address the information needs of channel professionals—which we have classified as resellers, value added resellers, solution providers,
systems integrators, service providers, managed service providers, and consultants—in the enterprise technology market. As enterprise technology and business
professionals have become more specialized, B2B technology companies have actively sought resellers with specific expertise in the vendors’ sub-sectors. Like
enterprise technology and business professionals, channel professionals require more focused technical content in order to operate successful businesses in the
markets in which they compete. The resulting dynamics in the B2B technology channel are well-suited to our integrated, targeted content strategy. Our online
properties in this sector include SearchITChannel.com. In addition to these websites, TechTarget channel media is able to profile channel professionals accessing
information on any website within the TechTarget Network. As channel professionals resell, service and support hardware, software and services from vendors in a
particular enterprise technology sector, the key areas of focus tend to parallel those for the sub-sectors addressed by our IT-focused properties: for storage, backup,
storage virtualization and network storage solutions such as fibre channel SANs, NAS and IP SANs; for security, intrusion defense, compliance and identity
management; for networking, wireless, network security and VoIP; for systems, consolidation, cloud, converged infrastructure and server virtualization.
Customers
We market to B2B technology companies targeting specific audiences who are actively researching purchasing decisions. We maintain multiple points of contact with our
customers in order to provide support throughout their organization and during critical stages of the sales cycle. As a result, individual customers often run multiple marketing
programs with us in order to reach discrete portions of our targeted audience. Our products and services are delivered under both short-term contracts that run for the length of a
given marketing program, typically less than six months, and via integrated, longer-term contracts covering various client needs across approximately a year or longer. We have
developed a broad customer base and delivered campaigns to approximately 1,590 customers in 2020. During 2020, 2019, and 2018, no single customer represented 10% or more of
total revenues.
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Sales and Marketing
We have an internal direct sales department that works closely with existing and potential customers to develop customized marketing programs that provide highly targeted
access to enterprise technology and business professionals. We organize the sales force by the sector-specific market categories that we operate and have a global accounts team that
works with our largest customers. Additionally, we organize certain individuals into Customer Success Teams. Those teams facilitate the usage and renewal of certain of the
Company’s products. We believe that our sector-specific sales organization and integrated approach to our product and service offerings allows our sales personnel to develop a high
level of expertise in the specific sectors they cover and to create effective marketing programs tailored to the customer’s specific objectives. As of December 31, 2020, our sales and
marketing staff (including the sales and marketing staff of our acquired companies) consisted of approximately 440 people. The majority of our sales staff and marketing staff is
located in our Newton, Massachusetts headquarters and our offices in San Francisco, California, London, England and Sydney, Australia. The majority of the BrightTALK sales and
marketing staff is located in London, England, Denver, Colorado, New York, New York and San Francisco, California.
We pursue a variety of marketing initiatives designed to support our sales activities by building awareness of our brand with B2B technology companies and positioning
ourselves as a “thought leader” in ROI-based marketing. These initiatives include purchasing online sponsorships in media vehicles that reach technology marketers, as well as
engaging in direct communications with the database of relevant contacts we have built since inception. Examples of our direct communications include selected e-mail updates on
new product launches and initiatives. We also produce videocasts, blogs and white papers for technology marketers where we provide information on the latest best practices in the
field of online B2B technology marketing.
Through our Press and Public Relations activities, we develop and maintain relationships with key analysts, publications and influencers covering B2B marketing and sales
topics.
Online Member and User Acquisition
Our primary source of traffic to our websites is through non-paid traffic sources, such as our existing registered member and user base and organic search engine traffic.
Organic search engine traffic is also a key source of new registered members for our sites. Because our sites focus on specific sectors of the enterprise technology market, our
content is highly targeted and is an effective means for attracting search engine traffic and from this, growing our membership. We also make marketing expenditures designed to
supplement our non-paid traffic and registered members. We employ a variety of other marketing vehicles such as keyword advertising on the major search engines and targeted list
rentals of e-mail subscribers from a variety of targeted partners, media sources, and data providers.
Technological Infrastructure
We have developed an expandable operations infrastructure using leading Cloud infrastructure providers and an off-site data center to maintain our websites and online
offerings. All of the critical components of the system are redundant, allowing us to withstand unexpected component failure and to undergo maintenance and upgrades. Our
infrastructure is scalable, enabling us to make additions that fit into the existing environment as our system requirements grow based on traffic, member, and customer growth. Our
critical data is copied daily to an online backup storage solution. We maintain a quality assurance process to constantly monitor our servers, processes, and network
connectivity. We leverage industry standard network and perimeter defense technologies, DDoS protection systems, web application firewalls, and enterprise grade DNS services
across multiple vendors. We believe that continued development of our technological infrastructure is critical to our success. We have made, and will continue to make,
technological improvements and investments in this infrastructure to improve our ability to service our members and customers.
Competition
The market for B2B technology companies marketing spend is highly competitive, and in each of the sectors we serve, as well as across the products and services we offer,
our primary competitors include media companies that produce content specifically for enterprise technology and business professionals, providers of technology-based point
solutions for data analysis and other service providers. Our primary media competitors, each of which possesses substantial resources to compete, are J2 Global, Madison Logic, and
International Data Group. In the online market we generally compete on the basis of target audience, quality and uniqueness of information content, ease of use of our websites for
IT and business professionals, and the quality and quantity of sales leads generated for B2B technology companies. We also compete for the members who comprise our target
audiences primarily with the media companies that produce content specifically for enterprise technology and business professionals such as J2 Global, and International Data
Group. In the data-oriented businesses, we compete with providers of predictive analytics and internet-based analysis including companies like 6sense, Infer, Bombora and
Aberdeen. In general marketing services, we compete with list and lead providers of various types such as ZoomInfo Technologies Inc. As a result of our acquisition of
BrightTALK, we expect to compete with a number of web-based meeting, webinar and virtual event providers and physical event providers, such as LogMeIn, Intrado and
ON24. Many of these
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providers possess substantially more resources to compete. As we continue to expand internationally, we expect to compete with many of the competitors mentioned above, as well
as with established media companies based in particular countries or geographical regions.
Member and User Privacy
We gather in-depth business information about our registered members and users who provide us or our partners with such information through e-mail, telephone, or other
means, including through the submission of webforms displayed on our websites. We also gather information about visitors of certain content on our websites by tracking their
content consumption or the content consumption of the companies they work for. We post our privacy policy on our websites so that our members, users and others who visit our
websites can access and understand the terms and conditions applicable to the collection and use of their information. Our privacy policy discloses the types of information we
gather, how we use it, and how a member or user can correct or change this information, including how a member or user can unsubscribe to our communications and those of our
partners. Our privacy policy also explains the circumstances under which we share a member's or user’s information and with whom. Members and users who register receive offers
via e-mail, telephone, and other means, such as targeted advertising online or on mobile devices regarding areas of specific interest to them and that are relevant to their professional
interests; these offers contain content created either by us or our third party B2B technology customers. To uphold our obligations to our members and users, we impose constraints
that are consistent with our privacy policy on the customers and third parties to whom we provide member and user data, including through the use of contractual terms and
conditions or data processing agreements, where applicable, that are generally consistent with our obligations to members and users and as set forth in our privacy policies.
Consumer Protection and Privacy Regulation
General. Advertising and promotional activities presented to members and visitors to our websites are subject to federal and state consumer protection laws that regulate
unfair and deceptive practices. We are also subject to various other federal and state consumer protection laws, including the ones described below. We are also subject to the laws
and regulations of various other jurisdictions in which we target members and website visitors.
CAN-SPAM Act. The Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (the “CAN-SPAM Act”) regulates commercial e-mails and provides
a right on the part of the recipient to request the sender to stop sending commercial electronic marketing messages (“commercial e-mails”), and establishes penalties for the sending
of e-mail messages that are intended to deceive the recipient as to source or content. Under the CAN-SPAM Act, senders of commercial e-mails (and other persons who initiate those
e-mails) are required to make sure that those e-mails do not contain false or misleading transmission information. Commercial e-mails are required to include a valid return e-mail
address and other subject heading information so that the sender and the internet location from which the message has been sent are accurately identified. Recipients must be
furnished with an electronic method of informing the sender of the recipient’s decision not to receive further commercial e-mails. In addition, the e-mail must include a postal
address of the sender and notice that the e-mail is an advertisement. The CAN-SPAM Act may apply to the e-newsletters that our websites distribute to registered members and to
some of our other commercial e-mail communications. The U.S. Federal Trade Commission (the “FTC”) has issued regulations related to the CAN-SPAM Act, including
interpretations of such act that indicate that e-newsletters, such as those we distribute to our registered members, will be exempt from most of the provisions of the CAN-SPAM Act,
provided that they do not contain predominantly marketing content. The CAN-SPAM Act and the FTC’s CAN-SPAM trade regulation rule allow for civil penalties that run into the
millions of dollars. Several states have enacted additional, more restrictive and punitive laws regulating commercial email. Foreign legislation exists as well, including Canada’s
Anti-Spam Legislation and the European laws that have been enacted pursuant to the General Data Protection Regulation “(GDPR)” and European Union Directive 2002/58/EC and
its amendments. We use email as a significant means of communicating with our existing members as well as potential website visitors and members. At this time, we are applying
the applicable legal requirements to e-newsletters and all other e-mail communications and believe that our e-mail practices comply with the requirements of the CAN-SPAM Act,
state laws and applicable foreign legislation.
Telemarketing Rules. Laws regulating telemarketing in the U.S., including the Telephone Consumer Protection Act (the “TCPA”), the Federal Communications Commission
(“FCC”) rules thereunder, the Telemarketing and Consumer Fraud and Abuse Prevention Act and the FTC’s Telemarketing Sales Rule, including their do-not call provisions, and in
the other jurisdictions where we do business, could apply to our calls to members and individuals who visit our websites. If any of these laws apply to our telemarketing, and we are
found liable for violating them, we could be subject to financial penalties.
Other Consumer Protection Regulation. The FTC and many state attorneys general are applying federal and state consumer protection laws to require that the online
collection, use and dissemination of data, and the presentation of web site content, comply with certain standards for notice, choice, security and access. In many cases, the specific
limitations imposed by these standards are subject to interpretation by courts and other governmental authorities, and courts may adopt these developments as law. In addition, the
FTC has published self-regulatory principles to address consumer privacy issues that may arise from so-called “behavioral targeting” (i.e. the
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tracking of a member’s or user’s online activities in order to deliver advertising tailored to their interests) and to encourage industry self-regulation for public content. Although the
FTC excluded from the principles contextual advertising, with respect to other types of behavioral targeting that include the storage of more, and potentially sensitive, data or that
collects information outside of the “traditional Web site context” (such as through a mobile device or by an ISP), the FTC has stated that it will continue to evaluate self-regulatory
programs and bring law enforcement actions where appropriate. Further, the FTC has indicated that it is considering regulations regarding behavioral advertising, which may include
implementation of a more rigorous opt-in regime. An opt-in policy would prohibit businesses from collecting and using information obtained through behavioral targeting activities
from individuals who have not voluntarily consented. The FTC has also issued further clarifying guidance regarding consumer privacy and data collection with a particular focus on
the mobile environment. A few states have also introduced legislation that, if enacted, would restrict or prohibit behavioral advertising within the state. In the absence of a federal
law pre-empting their enforcement, such state legislation would likely have the practical effect of regulating behavioral advertising nationwide because of the difficulties behind
implementing state-specific policies. In addition, states (including California) are considering and/or implementing new comprehensive privacy laws (such as the California
Consumer Privacy Act) which may have an impact on how we can conduct our business.
Privacy. In addition, the European Union (“EU”) and its member states, the United Kingdom, Canada and numerous other countries have laws, rules and/or regulations
dealing with the collection and use of personal information obtained from their citizens. Regulations have focused on, among other things, the collection, use, disclosure and security
of information that may be used to identify or that actually identifies an individual, such as an e-mail address, a name, or in some cases, an IP address. These laws also provide
consumers the right to access the information a company has collected on them, correct it, request that it be deleted, or to stop the sale of such information to third parties.
Additionally, the EU requires informed consent for the placement of a cookie on a user device.
While we believe that we are operating our business in compliance with the laws and regulations that apply to us, such laws and regulations continue to be the focus of
legislative bodies, courts, and regulators at the state and federal level as well as in other countries. This enhanced focus may result in amendments to existing laws and regulations,
the enactment of new laws and regulations, and new guidance and interpretation by governmental agencies or the courts. All of these factors could materially impact our business
and results of operations.
Intellectual Property
We regard our copyrights, domain names, trademarks, trade secrets and similar intellectual property as important to our success, and we rely upon copyright, trademark and
trade secrets laws, as well as confidentiality agreements with our employees and others, and protective contractual provisions, to protect the proprietary technologies and content that
we have developed. We pursue the registration of our material trademarks in the U.S. and elsewhere. Currently, our TechTarget trademark and logo, as well as certain other marks
and logos, are registered in the U.S. with the U.S. Patent and Trademark Office and in select foreign jurisdictions and we have applied for U.S. and foreign registrations for various
other marks. In addition, we have registered over 1,600 domain names that are, or may be, relevant to our business, including “www.techtarget.com,” “www.knowledgestorm.com,”
“www.bitpipe.com,” and those leveraging the “search” prefix used in the branding of many of our websites. We also incorporate a number of third party software products into our
technology platform pursuant to relevant licenses. We use third party software to maintain and enhance, among other things, the content generation and delivery, and support our
technology infrastructure. We are not substantially dependent upon these third party software licenses, and we believe the licensed software is generally replaceable, by either
licensing or purchasing similar software from another vendor or building the software functions ourselves.
Human Capital Resources
As of December 31, 2020, we had approximately 940 full-time employees worldwide, which includes employees from our recent acquisitions. Other than a small number of
employees in the United Kingdom and France, none of our current employees are represented by a labor union or are the subject of a collective bargaining agreement. TechTarget is
an innovative company in a dynamic environment that fosters a collaborative culture among its energetic, driven and workforce. We value our employees, let them know the
objectives and goals, challenge them, equip them with the right tools and resources to succeed, and then empower them to get the job done. At TechTarget, we give employees
direct responsibility for generating results while allowing their ideas to be the catalyst for entirely new areas of opportunity. Our key human capital objectives in managing our
business include attracting, developing and retaining top talent while integrating diversity, equity and inclusion principles and practices into our culture.
We strive to attract a pool of diverse and exceptional candidates and support their career growth once they become employees. Our efforts begin during the recruitment
process by offering candidates an outstanding, comfortable and welcoming candidate experience where they are able to learn as much about our company and culture as we are able
to learn about them. Once hired, we ensure that employees are rewarded, recognized and engaged based on their contributions. We also emphasize in our performance evaluation and
career development efforts internal mobility opportunities for employees to drive professional development and we consistently promote approximately 25% of our workforce to
positions with increased responsibility each year. Our goal is a long-term, upward-bound career at TechTarget for every employee, which we believe also drives our retention efforts.
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Our ability to retain our workforce is also dependent on our ability to foster an environment that is safe, respectful, fair and inclusive of everyone and promotes diversity,
equity and inclusion inside and outside of our business. We accomplish this with the strong culture we have built over the past 20+ years and through the efforts of our active culture
committees – Women in Business at TechTarget, Health & Fitness at TechTarget, TechTarget Gives and TechTarget Diversity & Inclusion Committee. Each committee has their
own distinct mission, but all look to cultivate leadership skills, develop best business practices, encourage knowledge sharing, give back to the community, and provide personal
growth and development opportunities while allowing for a wide range of perspectives and experiences.
Seasonality
The timing of our revenues is affected by seasonal factors. Our revenues are seasonal primarily as a result of the annual budget approval process of many of our customers,
the normal timing at which our customers introduce new products, and the historical decrease in marketing activity in summer months. The timing of revenues in relation to our
expenses, much of which do not vary directly with revenues, has an impact on the cost of revenues, selling and marketing, product development and general and administrative
expenses as a percentage of revenues in each calendar quarter during the year.
The majority of our expenses are personnel-related and include salaries, stock-based compensation, benefits and incentive-based compensation plan expenses. As a result, we
have not experienced significant seasonal fluctuations in the timing of our expenses period to period.
Item 1A.
Risk Factors
Risks Relating to Our Business and Operations
The risks and uncertainties set forth below, as well as other risks and uncertainties described elsewhere in this Annual Report on Form 10-K including in our consolidated
financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” or in other filings with the SEC,
could materially and adversely affect our business, financial condition, operating results and the trading price of our common stock. Additional risks and uncertainties that are not
currently known to us or that are not currently believed by us to be material may also harm our business operations and financial results. Because of the following risks and
uncertainties, as well as other factors affecting our financial condition and operating results, past financial performance should not be considered to be a reliable indicator of future
performance, and investors should not use historical trends to anticipate results or trends in future periods.
Risks Related to our Business and Operations
Because we depend on our ability to generate revenues from the sale and support of purchase intent driven advertising campaigns, fluctuations in advertising spending could
have an adverse effect on our revenues and operating results.
The primary source of our revenues is the sale and support of purchase intent-driven advertising campaigns to our customers. Any reduction in advertising expenditures
could have an adverse effect on the Company’s revenues and operating results. We believe that advertising spending on the internet, as in traditional media, fluctuates significantly
as a result of a variety of factors, many of which are outside of our control. Some of these factors include:
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variations in expenditures by advertisers due to budgetary constraints;
the cancellation or delay of projects by advertisers or by one or more significant customers;
the cyclical and discretionary nature of advertising spending;
the relocation of advertising expenditures to competitors or other media;
general global economic conditions and the availability of capital, as well as economic conditions specific to the internet and online and offline media industry; and
the occurrence of extraordinary events, such as natural disasters, disease outbreaks (such as the novel coronavirus), acts of terrorism and international or domestic
political and economic unrest.
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We have been adversely impacted by the new coronavirus disease (“COVID-19”) pandemic and could experience additional adverse impacts that could be material to the
Company’s business, operating results, financial condition and liquidity.
Our business was adversely impacted by the effects of the spread of the new coronavirus disease (“COVID-19”). We are witnessing the far-reaching impact that COVID-19
is having on our employees, customers, vendors, members, stockholders, and other stakeholders, as well as the global economy and society at large. While we have responded
proactively to address the effects of COVID-19 and to mitigate its potential impacts to our business, including through the elimination of all non-essential travel, transitioning our
entire workforce to a remote work environment, and enhancing access to certain health and safety resources for our employees, beginning in March 2020 we saw certain customers
extend their normal sales cycles and budget shifts as some customers moved from long-term commitments to shorter-term marketing campaigns as they began to navigate through
the pandemic. New customer acquisition has become harder as some potential customers have been less apt to spend on new products or services.
We believe our strong financial position provides us with the flexibility to weather this period of economic uncertainty and the opportunity to respond quickly to our
customers with the content and services they expect. However, the restrictive measures local, state, and federal governments (including in the countries outside the U.S. in which we
operate) have implemented to prevent the spread of COVID-19, including restrictions on the operation of non-essential businesses, shelter in place orders, travel restrictions,
quarantines, school closures, and other community response and social distancing policies and guidelines, will continue to affect the way we and our customers conduct and operate
our respective businesses. We remain open and continue to provide the content and services that are important to our customers. Moreover, our dedicated employees continue to
collaborate with each other and our customers and their sales and marketing teams, to deliver high quality, impactful campaigns. While we will continue to actively monitor
government restrictions impacting our business and remain focused on business continuity, including reducing expenses and managing liquidity, given the fluid nature of COVID-
19, the uncertainty of the pandemic’s duration location, extent and severity of resurgences, and the unknown effects of potential future government actions in response to COVID-19,
we cannot estimate the duration or magnitude of its impact on the global economy, our business or our financial results.
Because most of our customers are in the enterprise technology industry, our revenues are subject to characteristics of the enterprise technology industry that can affect
advertising spending by B2B technology companies.
Because most of our customers are in the enterprise technology industry, the success of our business is closely linked to the health, and subject to market conditions, of the
enterprise technology industry. The enterprise technology industry is characterized by, among other things, volatile quarterly results, uneven sales patterns, short product life cycles,
rapid technological developments, frequent new product introductions and enhancements and evolving domestic and international laws and regulations, particularly with respect to
data privacy and data protection. As a result, our customers’ advertising budgets, which are often viewed as discretionary expenditures, may increase or decrease significantly over a
short period of time. Many of our customers continue to scrutinize their spending on advertising campaigns. Prior market downturns in the enterprise technology industry have
resulted in declines in advertising spending, which can cause longer sales cycles, deferral or delay of purchases by B2B technology companies and generally reduced expenditures
for advertising and related services. Our revenues and profitability depend on the overall demand for advertising services from our customers. We believe that demand for our
offerings has been in the past, and could be in the future, disproportionately affected by fluctuations, disruptions, instability or downturns in the enterprise technology industry,
which may cause customers and potential customers to exit the industry or delay, cancel, reduce or reallocate any planned expenditures for our purchase intent data offerings. Any
slowdown in the formation of new B2B technology companies or decline in the growth of existing B2B technology companies, may cause a decline in demand for our offerings.
In addition, the marketing and advertising budgets of our customers may fluctuate as a result of:
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weakness in corporate enterprise technology spending, resulting in a decline in enterprise technology marketing and advertising spending, a trend that we have seen
in the past and that may continue in the future;
increased concentration in the enterprise technology industry as a result of consolidations, leading to a decrease in the number of current and prospective customers,
as well as an overall reduction in marketing and advertising spend;
reduced spending by combined entities following such consolidations, leading to volume and price compression and loss of revenue; and
the timing of marketing and advertising campaigns around new product introductions and initiatives.
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Our future growth will depend in large part on continued increased sales of our data driven products and services.
We sell a suite of data driven products and services, which is based on our Activity Intelligence™ analytics. Our increase in revenues in the year ended December 31, 2020,
compared to the year ended December 31, 2019, was driven in part by an increase in sales of data driven products. We expect that data driven products, as well as the expansion of
the features in our current product offerings, will be major components of our future growth. The failure of our data driven products to meet anticipated sales levels, our inability to
continue to expand our data driven products successfully, or the failure of our current or new products and services to achieve and then maintain widespread customer acceptance
could have a material adverse effect on our business and financial results. In addition, competitors may develop a service or application that is similar to our data driven product
suite, which could also result in reduced sales for those product offerings.
Our revenues are primarily derived from short-term contracts that may not be renewed.
Our customer contracts are primarily short-term, typically six months or less, and are generally subject to termination without substantial penalty by the customer at any
time, generally with minimal notice requirements. We cannot assure you that our current customers will fulfill their obligations under their existing contracts, continue to participate
in our existing programs beyond the terms of their existing contracts or enter into any additional contracts for new programs that we offer. In addition, our efforts to enter into
longer-term arrangements with customers for our IT Deal Alert™ products and services may not be successful. If a significant number of customers or a few large customers decided
not to continue purchasing marketing and advertising services from us, then we could experience a rapid decline in our revenues over a relatively short period of time. Any factors
that limit the amount our customers are willing to and do spend on marketing or advertising with us could have a material adverse effect on our business.
If we are unable to deliver content and services that attract and retain a critical mass of members and users, our ability to attract customers may be affected, which could in turn
have an adverse effect on our revenues.
Our success depends on our continued ability to deliver original and compelling content and services to attract and retain members and users, as well as our ability to garner
a critical mass of members of our websites or users of the BrightTALK platform. Our member and user base is primarily comprised of corporate enterprise technology and business
professionals who demand specialized websites and content tailored to the sectors of the enterprise technology products for which they are responsible and that they purchase. Our
content and services may not generate engagement with our websites or the BrightTALK platform or continue to attract and retain a critical mass of members and users necessary to
attract customers and generate revenues consistent with our historical results and expectations of future results. We also may not develop new content or services in a timely or cost-
effective manner. Our ability to develop and produce this specialized content successfully is subject to numerous uncertainties, including our ability to:
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anticipate and respond successfully to rapidly changing enterprise technology developments and preferences to ensure that our content remains timely and interesting
to our members;
attract and retain qualified editors, writers, freelancers and technical personnel;
fund new development for our programs and other offerings;
successfully expand our content offerings into new platform and delivery mechanisms; and
promote and strengthen the brands of our websites, webinar platform and our name.
If we are not successful in maintaining and growing our member base through the deployment of targeted and compelling content, our ability to retain and attract customers
may be affected or we may be required to obtain licensed content which may not be at reasonable prices, which could in turn have an adverse effect on our revenues, and operating
results.
We depend upon internet search engines to attract a significant portion of the visitors to our websites. These visitors can become members, and if we were listed less prominently
in search result listings as a result of changes in the search engines’ algorithms or otherwise, our business and operating results could be harmed.
We derive a significant portion of our website traffic from users who search for enterprise technology research and editorial content through internet search engines. A
critical factor in attracting members to our websites is whether we are prominently displayed in response to an internet search relating to enterprise technology content. Search result
listings are determined and displayed in accordance with a set of formulas or algorithms developed by the particular internet search engine. The algorithms determine the order of the
listing of results in response to the user’s internet search. From time to time, search engines revise their algorithms. In some instances, these modifications may be detrimental and
cause our websites to be listed less prominently in unpaid search results or not at all, which will result in decreased traffic from search engine users to our websites. Our websites
may also become listed less prominently in unpaid search results, for other reasons, such as search engine technical difficulties, search engine technical changes and changes we
make to our websites. In addition, search engines have deemed the practices of some companies to be inconsistent with search engine guidelines and have decided not to list their
websites in search result listings at all. Although we could mitigate certain algorithm changes affecting our traffic with increased marketing expenditures, if we are listed less
prominently or not at all, in search result listings, traffic to our websites could decline, which could impact our operating results. Increased marketing spend to increase site traffic
could also impact our operating results.
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Further, we use search engine optimization (“SEO”), to enhance the visibility of our websites and optimize ranking in search engine results. Our ability to successfully
manage our SEO efforts across our owned and operated websites depends on our ability to adapt and respond to changes in search engine algorithms and methodologies and changes
in search query trends. If we fail to successfully manage our SEO strategy, our owned and operated websites may receive less favorable placement in organic or paid listings, which
would reduce the number of visitors to our sites, decrease conversion rates and repeat business and have a detrimental effect our ability to generate revenue.
There are a number of risks associated with our international operations, as well as the expansion of those operations, that could adversely affect our business.
The Company derives a significant portion of its revenues from customers with billing addresses outside of the U.S. For the year ended December 31, 2020 approximately
39% of our revenues were derived from international geo-targeted campaigns, which are campaigns that are targeted at members who reside outside of North America. We have
offices in the United Kingdom, France, Germany, Singapore and Australia. We also publish websites in Spanish, French, German, Portuguese and Chinese, targeting members
worldwide who speak those languages.
In addition to many of the same challenges we face domestically, there are additional risks and costs to doing business in international markets, including:
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limitations on our activities in foreign countries where we have granted rights to existing business partners;
the degree to which our foreign-based customers transition from print to online purchase intent data;
the adaptation of our websites and purchase intent data programs to meet local needs;
our foreign-based competitors having greater resources and more established relationships with local advertisers;
more restrictive data privacy and data protection regulation, which may vary by country and for which there may be little, conflicting or no guidance;
more restrictive website licensing and hosting requirements, which may result in our websites being blocked, may require changes to how we operate our websites,
or may involve regulatory or enforcement actions against us that could be harmful to our business;
more extensive labor regulation, which may vary by country;
difficulties in staffing and managing multinational operations;
difficulties in finding appropriate foreign licensees or joint venture partners;
difficulties following changes in local business operations or structure;
distance, language and cultural differences in doing business with foreign entities;
foreign (and domestic) political and economic uncertainty;
less extensive adoption of the internet as an information source and increased restriction on the content of websites;
currency exchange-rate fluctuations; and
potential adverse tax requirements.
Brexit. The United Kingdom’s June 2016 referendum, in which voters approved an exit of the United Kingdom from the European Union, commonly referred to as “Brexit,”
resulted in significant general economic uncertainty as well as volatility in global stock markets and currency exchange rate fluctuations. In March 2017, the United Kingdom served
notice to the European Council under Article 50 of the Lisbon Treaty of its intention to withdraw from the European Union. As of January 30, 2020, the United Kingdom’s
membership in the European Union was terminated and an eleven month transition period began which expired on December 31, 2020. In December 2020, the United Kingdom and
the European Union agreed on a trade and cooperation agreement, under which the United Kingdom and the European Union will now form two separate markets governed by two
distinct regulatory and legal regimes. The trade and cooperation agreement covers the general objectives and framework of the relationship between the United Kingdom and the
European Union, including as it relates to trade, transport and visas. Notably, under the trade and cooperation agreement, United Kingdom service suppliers no longer benefit from
automatic access to the entire European Union single market, United Kingdom goods no longer benefit from the free movement of goods and there is no longer the free movement of
people between the United Kingdom and the European Union. Depending on the application of the terms of the trade and cooperation agreement, we could face new regulatory costs
and challenges. The full effect of Brexit remains uncertain and depends on the application of the terms of the trade and cooperation agreement. Moreover, the overall impact of
Brexit may create further global economic uncertainty, which may cause a subset of our
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customers to more closely monitor their costs in the affected region. Our revenue generated from customers who have billing addresses within the United Kingdom was
approximately 12% and 10% of our total revenues for the years ended December 31, 2020 and 2019, respectively.
As a result, we may face difficulties and unforeseen expenses in expanding our business internationally and, if we attempt to do so, we may be unsuccessful, which could
harm our business, operating results and financial condition.
Competition for customers’ marketing and advertising spending is intense, and we may not compete successfully, which could result in a material reduction in our market share,
the number of our customers and our revenues.
We compete for potential customers with a number of different types of offerings and companies, including: broad‑based media outlets such as television, newspapers and
business periodicals that are designed to reach a wide audience; general purpose portals and search engines; and offline and online offerings of media companies that produce content
specifically for IT and business professionals, including International Data Group, J2 Global, Madison Logic, and contact providers such as ZoomInfo Technologies Inc. as well as
webinar providers such as LogMein, Intrado and ON24. Customers may choose our competitors over us not only because they prefer our competitors’ online offerings to ours but
also because customers prefer to utilize other forms of marketing and advertising services offered by our competitors that are not offered by us and/or to diversify their marketing
and advertising expenditures. Many of our current and potential competitors have longer operating histories, larger customer bases, greater brand recognition and significantly
greater financial, marketing and other resources than we have. They may also offer different pricing than we do, which could be more attractive to customers. Competitors have
historically responded, and may continue to respond, to market conditions by lowering prices to try to attract our customers. As a result, we could lose market share to our
competitors in one or more of our businesses and our revenues could decline.
We may not innovate at a successful pace, which could harm our operating results.
Our industry is rapidly adopting new technologies and standards to create and satisfy the demands of users and advertisers. It is critical that we continue to innovate by
anticipating and adapting to these changes to ensure that our content‑delivery, demand generation and data driven products and services remain effective and interesting to our
members, customers and partners. In addition, we may need to make significant expenditures to achieve these goals. If we fail to accomplish these goals, we may lose members and
the customers that seek to reach those members, which could harm our operating results. Existing and planned efforts to develop new products, including any subscription-based
offerings, may be costly and ultimately not successful.
We may be unable to continue to build awareness of our brands, which could negatively impact our business and cause our revenues to decline.
Building and maintaining recognition of our brands is critical to attracting and retaining our member base. We intend to continue to build existing brands and introduce new
brands that will resonate with our targeted audiences. In order to promote our brands, we may find it necessary to increase our marketing budget, hire additional marketing and
public relations personnel or otherwise increase our financial commitment to creating and maintaining brand loyalty among our customers. If we fail to promote and maintain our
brands effectively, or incur excessive expenses attempting to promote and maintain our brands, our business and financial results may suffer.
If we do not retain our key personnel, our ability to execute our business strategy will be adversely affected.
Our continued success depends to a significant extent upon the recruitment, retention and effective succession of our executive officers and key management. Our
management team has significant industry experience and would be difficult to replace. These individuals possess sales, marketing, financial and administrative skills that are critical
to the operation of our business. The competition for these employees is intense. The loss of the services of one or more of our key personnel could have a material adverse effect on
our business and operating results.
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We may not be able to attract, hire and retain qualified personnel cost-effectively, which could impact the quality of our content and services and the effectiveness and efficiency
of our management, resulting in increased costs and losses in revenues.
Our success depends on our ability to attract, hire and retain qualified technical, editorial, sales and marketing, customer support, financial and accounting and other
managerial personnel at commercially reasonable rates. The competition for personnel in the industries in which we operate is intense. Our personnel may terminate their
employment at any time for any reason. Loss of personnel may also result in increased costs for replacement hiring and training. If we fail to attract and hire new personnel or retain
and motivate our current personnel, we may not be able to operate our businesses effectively or efficiently, serve our customers properly or maintain the quality of our content and
services. In particular, our success depends in significant part on maintaining and growing an effective sales and customer retention force. This dependence involves a number of
challenges, including the need to hire, integrate, motivate and retain additional sales and sales support personnel and train new sales personnel, many of whom lack sales experience
when they are hired, as well as increased competition from other companies in hiring and retaining sales personnel.
General domestic and global economic, business or industry conditions and financial market instability may adversely affect our business, as well as our ability to forecast
financial results.
The U.S. and international economies have experienced inconsistent, unpredictable growth and a certain degree of instability, magnified at times by factors including
changes in the availability of credit, volatile business and consumer confidence and unemployment. These and other macro‑economic conditions have contributed to unpredictable
changes in the global economy and expectations of future global economic growth. If the economic climate in the U.S. and abroad deteriorates, our customers or potential customers
could reduce or delay their purchases of our offerings, which would adversely impact our revenues and our ability to sell our offerings, collect customer receivables and, ultimately,
our profitability.
Because all components of our budgeting and forecasting are dependent upon estimates of growth or contraction in the economy generally, and in the IT market specifically,
it can be difficult for us to accurately estimate future income and expenditures. We cannot predict the duration of current economic conditions or the duration or strength of an
economic recovery in the U.S. or worldwide generally or in the IT industry or in any of its segments. Further adverse changes may occur as a result of global, domestic or regional
economic conditions, changing consumer confidence, unemployment, tariffs, declines in stock markets, or other factors affecting economic conditions generally. These changes may
negatively affect the sales of our offerings, increase exposure to losses from bad debts, increase the cost and decrease the availability of financing, or increase the risk of loss on
investments. Any recent growth we have experienced internationally would be negatively affected by any future global downturn.
Risks Related to Acquisitions
We may fail to identify or successfully acquire and integrate businesses, products and technologies that would otherwise enhance our product and service offerings to our
customers and members, and as a result our revenues may decline or fail to grow.
We have acquired, and in the future may acquire or invest in, complementary businesses, products or technologies. Acquisitions and investments involve numerous risks
including:
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difficulty in assimilating the operations and personnel of acquired businesses;
potential disruption of our ongoing businesses and distraction of our management and the management of acquired companies;
difficulty in incorporating acquired technology and rights into our offerings and services, which could result in additional expenses and/or technical difficulties in
delivering our product offerings;
potential failure to achieve additional sales and enhance our customer base through cross-marketing of the combined company’s products and services to new and
existing customers;
potential detrimental impact to our pricing based on the historical pricing of any acquired business with common customers and the market generally;
potential litigation resulting from our business combinations or acquisition activities; and
potential unknown liabilities associated with the acquired businesses.
Our inability to integrate any acquired business successfully, or the failure to achieve any expected synergies, could result in increased expenses and a reduction in expected
revenues or revenue growth. As a result, our revenues, results of operations or stock
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price could fluctuate or decline. In addition, we may not be able to identify or successfully complete acquisitions, which could impact our ability to expand into complementary
sectors in the future.
We may fail to realize the anticipated benefits of our acquisitions or those benefits may take longer to realize than expected.
Our ability to realize the anticipated benefits of our acquisitions will depend, to a large extent, on our ability to effectively integrate the acquired businesses with our
business, which will be a complex, costly and time-consuming process. We will be required to devote significant management attention and resources to integrate the business
practices and operations of the acquired businesses with ours. The integration process may disrupt our business and, if implemented ineffectively, could result in the full expected
benefits of the acquisitions not being realized. The failure to meet the challenges involved in the integration process and to realize the anticipated benefits of the acquisitions could
cause an interruption of, or a loss of momentum in, our operations and could adversely affect our business, financial condition and results of operations.
Additional integration challenges could include:
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difficulties in achieving anticipated synergies, business opportunities and growth prospects from the acquisitions;
difficulties in the integration of operations and systems;
difficulties in conforming standards, controls, procedures and accounting and other policies, business cultures and compensation structures;
difficulties in the assimilation of employees;
challenges in obtaining new customers; and
challenges in attracting and retaining key personnel;
Many of these factors are outside of our control and any one of them could result in increased costs and liabilities, loss of customers and other business relationships,
competitive response, decreases in the amount of expected revenues and diversion of management’s time and energy, any of which could adversely affect our business, financial
condition and results of operations and result in us becoming subject to litigation. In addition, even if the acquired businesses are integrated successfully, the anticipated benefits of
the acquisitions may not be realized within the anticipated time frame, or at all. All of these factors could cause reductions in our earnings per share, decrease or delay the expected
accretive effect of the acquisitions and negatively impact the price of our common stock. As a result, our acquisitions may not result in the realization of the full anticipated benefits.
Risks Related to Data Privacy, Security and Intellectual Property Rights
We may have limited protection of our intellectual property rights; which others could infringe.
Our success and ability to compete are dependent in part on the strength of our proprietary rights, on the goodwill associated with our trademarks, trade names and service
marks, and on our ability to use U.S. and foreign laws to protect them. Our intellectual property includes, among other things, our original content, our editorial features, logos,
brands, domain names, the technology that we use to deliver our services, the various databases of information that we maintain and make available by license, and the appearances
of our websites. We claim common law protection on certain names and marks that we have used in connection with our business activities. Although we have applied for and
obtained registration of some of our marks in the U.S. and other countries where we do business, we have not been able to obtain registration of all of our key marks in certain non-
U.S. jurisdictions due to prior registration or use by third parties employing similar marks. In addition to U.S. and foreign laws and registration processes, we rely on confidentiality
agreements with our employees and third parties and other protective contractual provisions to safeguard our intellectual property.
Policing our intellectual property rights and identifying infringers worldwide is a difficult task, and even if we are able to identify infringers, we may not be able to stop them
from infringing our intellectual property. We cannot be certain that third party licensees of our content will adequately protect our proprietary rights. Intellectual property laws and
our agreements may not be sufficient to prevent others from copying or otherwise obtaining and using our content or technologies. In addition, others may develop non-infringing
technologies that are similar or superior to ours. In seeking to protect our marks, copyrights, domain names and other proprietary rights, we could face costly litigation and the
diversion of our management’s attention and resources.
Furthermore, the relationship between regulations governing domain names and laws protecting trademarks and similar proprietary rights is still evolving. Therefore, we
might be unable to prevent third parties from acquiring domain names that infringe or otherwise decrease the value of our trademarks and other proprietary rights. Any impairment in
the value of these important assets could cause our stock price to decline.
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We could be subject to claims from third parties based on the content on our websites created by us and third parties. These claims could result in costly litigation, payment of
damages or the need to revise the way we conduct our business.
We could be subject to infringement claims from third parties, which may or may not have merit. Due to the nature of content published on our online network, including
content placed on our online network by third parties, and as a creator and distributor of original content and research, we face potential liability based on a variety of theories,
including defamation, libel, negligence, copyright or trademark infringement, or other legal theories based on the nature, creation or distribution of this information. Such claims
may also include, among others, claims that by providing hypertext links to websites operated by third parties, we are liable for wrongful actions by those third parties through these
websites. Similar claims have been brought, and sometimes successfully asserted, against online services. It is also possible that our members could make claims against us for losses
incurred in reliance on information provided on our networks. In addition, we could be exposed to liability in connection with material posted to our internet sites by third parties.
For example, many of our sites offer members an opportunity to post comments and opinions that are not moderated. Some of this member-generated content may infringe on third
party intellectual property rights or privacy rights or may otherwise be subject to challenge under copyright laws. Such claims, whether brought in the U.S. or abroad, could divert
management time and attention away from our business and result in significant cost to investigate and defend, regardless of the merit of these claims. In addition, if we become
subject to these types of claims and are not successful in our defense, we may be forced to pay substantial damages. These claims could also result in the need to develop alternative
trademarks, content or technology or to enter into costly royalty or licensing agreements. Our insurance may not adequately protect us against these claims. The filing of these claims
may also damage our reputation as a high-quality provider of unbiased, timely analysis and result in customer cancellations or overall decreased demand for our services. We may
not have, in all cases, conducted formal evaluations of our content, technology and services to determine whether they expose us to any liability of the sort described above. As a
result, we cannot be certain that our technology, offerings, services or online content do not or will not infringe upon the intellectual property or other rights of third parties. If we
were found to have infringed on a third party’s intellectual property rights or otherwise found liable for damages as a result of such claims, the value of our brands and our business
reputation could be impaired, and our business could suffer.
Changes in laws and standards relating to marketing, data collection and use, and the privacy of internet users could impact our ability to conduct our business and thereby
decrease our marketing and advertising service revenues while imposing significant compliance costs on the Company.
We use e-mail as a significant means of communicating with our members. The laws and regulations governing the use of e-mail for marketing purposes continues to
evolve, and the growth and development of the market for commerce over the internet may lead to the adoption of additional legislation and/or changes to existing laws. If new laws
or regulations are adopted, or existing laws and regulations are interpreted and/or amended or modified to impose additional restrictions on our ability to send e-mail to our members
or potential members, we may not be able to communicate with them in a cost-effective manner. In addition to legal restrictions on the use of e-mail, internet service providers and
others typically attempt to block the transmission of unsolicited e-mail, commonly known as “spam.” If an internet service provider or software program identifies e-mail from us as
“spam,” we could be placed on a restricted list that would block our e-mail to members or potential members who maintain e-mail accounts with these internet service providers or
who use these software programs. If we are unable to communicate by e-mail with our members and potential members as a result of legislation, blockage or otherwise, our business,
operating results and financial condition could be harmed.
We collect information from those who visit or register as members or users on our websites or webinar platform, co-branded sites, or for services, respond to surveys or,
in some cases, view our content. Subject to each member’s permission (or right to decline, which we refer to as an “opt-out”, a practice that may differ across our various websites
and platforms, depending on the applicable needs and requirements of different countries’ laws), we may use this information to inform our members and users of services that they
have indicated may be of interest to them. We may also share this information with our customers for members and users who have elected to receive additional promotional
materials and have expressly or implicitly granted us permission to share their information with third parties. We also collect information on our members and users based on their
activity on our sites. The U.S. federal government and certain states have adopted or proposed limitations on the collection, distribution and use of personal information of internet
users.
Although, to date, our efforts to comply with applicable international, federal and state laws and regulations have not hurt our business, additional, more burdensome laws
or regulations, including more restrictive consumer privacy and data security laws, could be enacted or applied to us or our customers. Such laws or regulations could impair our
ability to collect member and user information that helps us to provide more targeted content to our website visitors, platform users, members and users and detailed lead data to our
customers, thereby impairing our ability to maintain and grow our audience and maximize revenue from our customers. Additionally, the FTC and many state attorneys general are
applying federal and state consumer protection laws to require that the online collection, use and dissemination of data, and the presentation of website content, comply with certain
standards for notice, choice, security and access. Courts may also adopt these developing standards. In many cases, the specific limitations imposed by these standards are subject
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to interpretation by courts and other governmental authorities. A few states have also introduced legislation that, if enacted, would restrict or prohibit behavioral marketing and
advertising within the state. In the absence of a federal law pre-empting their enforcement, such state legislation would likely have the practical effect of regulating behavioral
marketing and advertising nationwide because of the difficulties behind implementing state-specific policies or sending targeted advertising to individuals based on their
perceived commercial interests. In the event of additional legislation in this area, our ability to effectively target our website visitors and members may be limited. We believe that
we are in compliance with applicable consumer protection laws, but a determination by a state or federal agency or court that any of our practices do not meet these laws and
regulations could create liability to us, result in adverse publicity and negatively affect our businesses. New interpretations of these standards could also require us to incur additional
costs and restrict our business operations.
Overall privacy laws also are expanding in ways that may impact our business. For example, the state of California has adopted a new comprehensive privacy law, the
California Consumer Privacy Act (“CCPA”), which took effect in January 2020 and became enforceable in July 2020. We may be required to devote substantial resources to
implement and maintain compliance with the CCPA, and noncompliance could result in regulatory investigations and fines or private litigation. Moreover, in November 2020,
California voters approved a new privacy law, the California Privacy Rights Act (“CPRA”), which amends the CCPA to create new privacy rights and obligations in California.
Several other states are also considering bills similar to the CCPA or other generally applicable privacy laws that may impose additional costs and obligations on us and may impact
our ability to conduct our business.
Furthermore, the U.S. Congress also is considering comprehensive privacy legislation. At this time, it is unclear whether Congress will pass such a law and if so, when
and what it will require and prohibit. There are open questions as to whether a federal law will supplement or pre-empt these emerging state laws, as well as how this potential law
will impact the requirements of existing US laws related to personal data, including CAN-SPAM and TCPA. Moreover, it is not clear whether any such legislation would give the
Federal Trade Commission (“FTC”) any new authority to impose civil penalties for violations of the Federal Trade Commission Act in the first instance, whether Congress will grant
the FTC rulemaking authority over privacy and information security, or whether Congress will vest some or all privacy and data security regulatory authority and enforcement power
in a new agency, akin to EU data protection authorities.
In addition, there are laws in a growing number of countries around the world that may impact our business. The regulatory framework for the collection, use,
safeguarding, sharing, transfer and other processing of information worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. Globally, virtually
every jurisdiction in which we operate has established its own data security and privacy frameworks with which we must comply, with additional laws and amendments being passed
on a regular basis. The EU and its member states, the United Kingdom, Canada and several other countries and certain states, such as California have regulations dealing with the
collection and use of personal information obtained from their citizens. Other countries are considering laws as well. Regulations in these jurisdictions have focused on the
collection, processing, transfer, use, disclosure and security of information that may be used to identify or that actually identifies an individual, such as a name, e-mail address or
online identifier (such as an IP address in certain cases). These laws also provide consumers the right to access the information a company has collected on them, correct it, request
that it be deleted, or to stop the sale of such information to third parties.
The General Data Protection Regulation (“GDPR”) of the European Union became effective in May 2018 and was designed to, among other things, harmonize disparate
data privacy laws found across Europe. GDPR implemented more rigorous principles relating to the data privacy and data protection, including, among other things, enhanced
disclosure requirements regarding how personal information is obtained, used, and shared, limitations on the purpose and storage of personal information, mandatory data breach
notification requirements and enhanced standards for data controllers to demonstrate that they have obtained valid consent for certain data processing activities. Its application and
scope are extensive and penalties for non-compliance are significant, including fines of up to 20 million Euros or 4% of total worldwide revenue. In the event the Company is
deemed not in compliance with GDPR, or fails to maintain compliance, then the Company would be exposed to material damages, costs and/or fines if an EU regulator or EU
resident commenced an action. Failure to comply or maintain compliance could cause considerable harm to us and our reputation (including requiring notification to customers,
regulators, and/or members), cause a loss of confidence in our services, and deter current and potential customers from using our services.
Further, the European Union also is considering proposals for the Regulation on Privacy and Electronic Communications (“ePrivacy Regulation”) which will replace the
ePrivacy Directive and is intended to align with the overall EU data privacy and protection framework, including GDPR. The ePrivacy Regulation could disrupt the Company’s
ability to use or transfer data or to market and sell its products and services, which could have a material adverse effect on our business, financial condition, and operating results.
Our customers may implement compliance measures that do not align with our services, which could limit the scope and delivery of services we are able to provide. Our
customers may also require us to take on additional privacy and security obligations, causing us
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to incur potential disruption and expense related to our business processes. If our policies and practices, or those of our customers, are, or are perceived to be, insufficient or if our
members, website visitors or customers have concerns regarding our data privacy and data protection practices, particularly with respect to GDPR or the pending ePrivacy
Regulation, then we could be subject to enforcement actions or investigations by regulators or lawsuits by private parties, member engagement could decline and our business could
be negatively impacted.
In addition, there are new and evolving requirements being imposed on the transfer of personal data from other countries to the United States, particularly transfers from
the European Union. For certain data transfers and processing activities between the EU and the U.S., our company had relied in part on Court of Justice of the European Union the
EU-U.S. Privacy Shield Framework (“the EU Privacy Shield”). The Company self-certified to the EU Privacy Shield and Swiss Privacy Shield most recently on March 6, 2020. On
July 16, 2020, however, the Court of Justice of the European Union (“CJEU”) invalidated the EU Privacy Shield. The CJEU upheld the adequacy of EU Standard Contractual
Clauses (“SCCs”) issued by the European Commission for the transfer of personal data to data processors established outside of the EU, however, the court made clear that reliance
on SCCs alone may not necessarily be sufficient in all circumstances and that their use must be assessed on a case-by-case basis taking into account the surveillance laws and right of
individuals in the destination country. The CJEU’s decision took effect immediately. The Company uses several mechanisms to transfer personal data from the EU to the U.S.
(including having previously relied on the EU Privacy Shield) and are evaluating what additional mechanisms may be required to establish adequate safeguards for the further
transfer of personal data. If supervisory authorities issue guidance on transfer mechanisms, including circumstances where the SCCs cannot be used and/or start taking enforcement
action, we could suffer additional costs, complaints, and/or regulatory investigations or fines. Moreover, if we are otherwise unable to transfer personal data between and among
countries and regions in which we operate, it could affect the manner in which we provide our services and could adversely affect our financial results.
In order to continue receiving personal data from the United Kingdom following Brexit, the Company may be required to meet standards for cross-border transfer imposed
by the UK itself.
Our digital properties collect and use data about our website visitors’, platform users and members’ online behavior, and the revenue associated with this activity could be
impacted by government regulation and enforcement, industry trends, self-regulation, technology changes, consumer behavior and attitude, and private action. We also use such
information to call website visitors and members who have provided their telephone numbers to be enrolled as a member or user (for free). Our partners may then follow-up to try to
sell products or services to such individuals.
We also work with our partners to deliver targeted advertisements based on members, user, and website visitors’ perceived commercial interests. Many of our users
voluntarily provide us with contact and other information when they visit our websites. We may utilize data from third party sources to augment our user profiles and marketing
databases so we are better able to personalize content, enhance our analytical capabilities, better target our marketing programs, and better qualify leads for our partners. If changes
in user sentiment regarding the sharing of information results in a significant number of visitors to our websites refusing to provide us with contact and other information, our ability
to personalize content for our users and provide targeted marketing solutions for our partners would be impaired. If our users choose to opt-out of having their data used for
behavioral targeting, it would be more difficult for us to offer targeted marketing programs for our partners. If we are unable to acquire data from third party sources for whatever
reason, or if there is a marked increase in the cost of obtaining such data, our ability to personalize content and provide marketing solutions could be negatively impacted.
The use of such consumer data by online service providers and advertising networks is a topic of active interest among federal, state, and international regulatory bodies,
as well as self-regulatory organizations, and the regulatory environment is unsettled. Federal, state, and international laws and regulations govern the collection, use, retention,
disclosure, sharing and security of data that we receive from and about our website visitors and members through cookies and other similar technologies. Our privacy policies and
practices concerning the collection, use, and disclosure of user data are posted on our websites.
There are new and expanding proposals for laws and regulations regarding “Do Not Track” requirements that protect users’ right to choose whether or not to be tracked
online. These proposals seek, among other things, to allow consumers to have greater control over the use of private information collected online, to forbid the collection or use of
online information, to demand a business to comply with their choice to opt out of such collection or use, and to place limits upon the disclosure of information to third party
websites. Any such laws and regulations could have a significant impact on the operation of our advertising and data businesses. U.S. regulatory agencies have also placed an
increased focus on online privacy matters and, in particular, on online advertising activities that utilize cookies or other tracking tools. Consumer and industry groups have expressed
concerns about online data collection and use by companies, which has resulted in the release of various industry self-regulatory codes of conduct and best practice guidelines that
are binding for member companies engaged in online behavioral advertising (“OBA”) and similar activities. These codes of conduct and best practice guidelines govern, among
other things, the ways in which companies can collect, use and disclose user information for
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OBA purposes, how companies must give notice of these practices, and what choices companies must provide to consumers regarding these practices.
We may be required or otherwise choose to adopt Do Not Track mechanisms, and we may be required to abide by certain self-regulatory principles promulgated by the
Digital Advertising Alliance and others for OBA and similar activities, in which case our ability to use our existing tracking technologies, to collect and sell user behavioral data, and
permit their use by other third parties could be impaired. This could cause our net revenues to decline and adversely affect our operating results.
We believe that we are in material compliance with all laws, regulations and self-regulatory regimes that are applicable to us. However, as referenced above, these laws,
regulations, and self-regulatory regimes may be modified, and new laws may be enacted in the future that may apply to us and affect our business. Further, data protection authorities
may interpret existing laws in new ways. We may deploy new products and services from time to time, which may also require us to change our compliance practices. Any such
developments (or developments stemming from enactment or modification of other laws) or the failure to anticipate accurately the application or interpretation of these laws could
create liability for us, result in adverse publicity, increase our future compliance costs, make our products and services less attractive to our members and customers, or cause us to
change or limit our business practices, and materially affect our business and operating results. Further, any failure on our part to comply with any relevant laws or regulations may
subject us to significant civil, criminal or contractual liabilities.
Increased exposure from loss of personal, confidential, and/or proprietary information due to our cybersecurity systems or the systems of our customers, vendors, or partners
being breached could cause us to incur significant legal and financial exposure and liability, and materially adversely affect our business, operating results and reputation.
We currently retain personal, confidential, and/or proprietary information relating to our members and users, employees, and customers in secure database servers. Our
industry is prone to cyber-attacks by third parties seeking access to our data or data we have collected from website visitors and members, or to disrupt our ability to provide service.
We have experienced and will continue to experience cyber-attacks targeting our database servers and information systems. Cyber-attacks may involve viruses, malware,
ransomware, distributed denial-of-service attacks, phishing or other forms of social engineering (predominantly spear phishing attacks), and other methods seeking to gain unlawful
access. We may not be able to prevent unauthorized access to these secure database servers and information systems as a result of these third party actions, including intentional
misconduct by criminal organizations and hackers or as a result of employee error, malfeasance or otherwise. A security breach could result in intentional malfunctions or loss or
corruption of data, software, hardware or other computer equipment, the misappropriation of personal, confidential and/or proprietary information, disruptions in our service, and in
the unauthorized access to our customers’ data or our data, including intellectual property, business opportunity, and other confidential business information. Additionally, third
parties may attempt to fraudulently induce our employees, vendors, or customers into disclosing access credentials such as usernames, passwords or keys in order to gain access to
our database servers and information systems.
Our online networks could also be affected by cyber-attacks, and we could inadvertently transmit viruses across our networks to our members or other third parties. Cyber-
attacks continue to evolve in sophistication and volume, and inherently may be difficult to detect for long periods of time. Although we have developed systems and processes that
are designed to protect our data and user data, to prevent data loss, to disable undesirable accounts and activities on our platform, and to prevent or detect security breaches, we
cannot assure that such measures will provide absolute security, and we may incur significant costs in protecting against or remediating cyber-attacks.
Providing unimpeded access to our online networks is critical to engaging with our website visitors and members and providing superior service to our customers. Our
inability to provide continuous access to our online networks could cause some of our customers to discontinue purchasing marketing and advertising programs and services and/or
prevent or deter our members from accessing our networks. We may be required to expend significant capital and other resources to protect against cyber-attacks. We cannot assure
that any contractual provisions attempting to limit our liability in these areas will be successful or enforceable, or that our customers or other parties will accept such contractual
provisions as part of our agreements.
Many states and foreign jurisdictions in which we operate have enacted laws and regulations that require us to notify members, website visitors, customers and, in some
cases, governmental authorities and credit bureaus, in the event that certain personal information is accessed, or believed to have been accessed, without authorization. Certain
regulations also require proscriptive policies to protect against such unauthorized access. Additionally, increasing regulatory demands are requiring us to provide heightened
protection of personal information to prevent identity theft and the disclosure of sensitive information. Should we experience a loss of personal,
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confidential, and/or proprietary information, then efforts to regain compliance and address penalties imposed by contractual provisions or governmental authorities could increase
our costs significantly.
Our business, which is dependent on centrally located communications and computer hardware systems, is vulnerable to natural disasters, telecommunication and systems
failures, terrorism and other problems, as well as disruption due to maintenance or high volume, all of which could reduce traffic on our networks or websites and result in
decreased capacity for marketing and advertising space.
Our operations are dependent on our communications systems and computer hardware, all of which are located in data centers operated by third parties. These systems could
be damaged by natural disasters, power loss, telecommunication failures, viruses, hacking and similar events outside of our control. Our insurance policies have limited coverage
levels for loss or damages in these events and may not adequately compensate us for any losses that may occur. In addition, terrorist acts or acts of war may cause harm to our
employees or damage our facilities, our customers, our customers’ customers and vendors which could adversely impact our revenues, costs and expenses and financial position. We
are generally uninsured for losses and interruptions to our systems or cancellations of events caused by terrorist acts and acts of war.
Our ability to attract and maintain relationships with our members, customers and strategic partners depends on the satisfactory performance, reliability and availability of
our internet infrastructure. Our internet marketing and advertising revenues relate directly to the number of advertisements and other marketing opportunities delivered to our
members. System interruptions or delays that result in the unavailability of internet sites or slower response times for members would reduce the number of advertising impressions
and leads delivered. This could reduce our revenues as the attractiveness of our sites to members and advertisers decreases. Our insurance policies provide only limited coverage for
service interruptions and may not adequately compensate us for any losses that may occur due to any failures or interruptions in our systems. Further, we do not have multiple site
capacity for all of our services in the event of any such occurrence.
In addition, our networks and websites must accommodate a high volume of traffic and deliver frequently updated information. They have experienced, and may experience
in the future, slower response times due to higher than expected traffic, or decreased traffic, for a variety of reasons. There have been instances where our online networks as a
whole, or our websites individually, have been inaccessible. Also, slower response times, which have occurred more frequently, can result from general internet problems, routing
and equipment problems involving third party internet access providers, problems with third party advertising servers, increased traffic to our servers, viruses and other security
breaches that are out of our control. In addition, our members depend on internet service providers and online service providers for access to our online networks or websites. Those
providers have experienced outages and delays in the past and may experience outages or delays in the future. Moreover, our internet infrastructure might not be able to support
continued growth of our online networks or websites. Any of these problems could result in less traffic to our networks or websites or harm the perception of our networks or
websites as reliable sources of information. Less traffic on our networks and websites or periodic interruptions in service could have the effect of reducing demand for marketing and
advertising on our networks or websites, thereby reducing our revenues.
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Our business depends on continued and unimpeded access to the internet by us and our members and users. If government regulations relating to the internet change, internet
access providers may be able to block, degrade, or charge for access to certain of our products and services, which could lead to additional expenses and the loss of customers.
Our products and services depend on the ability of our members and users to access the internet. Currently, this access is provided by companies that have significant market
power in the broadband and internet access marketplace, including incumbent telephone companies, cable companies, mobile communications companies, and government-owned
service providers. Some of these providers have taken, or have stated that they may take measures, including legal actions, that could degrade, disrupt, or increase the cost of member
access to our advertisements or our third party publishers’ advertisements by restricting or prohibiting the use of infrastructure to support or facilitate our offerings, or by charging
increased fees to us or our members to provide our offerings. On December 14, 2017, the Federal Communications Commission voted to repeal the net neutrality rules which were
intended, in part, to prevent network operators from discriminating against legal traffic that traverses their networks. It is unclear whether or if such a repeal will be subject to
challenge or preemption if the U.S. Congress passes new laws regarding net neutrality. In addition, as we expand internationally, government regulations concerning the internet, in
particular net neutrality, may be nascent or non-existent. This regulatory environment, coupled with the potentially significant political and economic power of local network
operators, could cause us to experience discriminatory or anti-competitive practices that could impede our growth, cause us to incur additional expense, or otherwise negatively
affect our business. Such interference could result in a loss of existing customers, and increased costs, and could impair our ability to attract new customers, thereby harming our
revenues and growth.
Risks Related to Our Financial Statements and General Corporate Matters
If we do not maintain proper and effective disclosure controls and procedures and internal control over financial reporting, our ability to produce accurate financial statements
could be impaired, which could adversely affect our operating results, our ability to operate our business and investors’ views of us.
Ensuring that we have adequate disclosure controls and procedures, including internal financial and accounting controls and procedures, in place to help ensure that we can
produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be re-evaluated frequently. On an ongoing basis, both we and our
independent auditors document and test our internal controls and procedures in connection with the requirements of Section 404 of the Sarbanes-Oxley Act and, as part of that
documentation and testing, identify areas for further attention and improvement. Implementing any appropriate changes to our internal controls may entail substantial costs in order
to modify our existing accounting systems, take a significant period of time to complete, and distract our officers, directors and employees from the operation of our business. These
changes may not, however, be effective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate
financial statements on a timely basis, could increase our operating costs and could materially impair our ability to operate our business. In addition, investors’ perceptions that our
internal controls are inadequate or that we are unable to produce accurate financial statements may materially and adversely affect our stock price.
Our ability to raise capital in the future may be limited.
Our business and operations may consume resources faster than we anticipate. In the future, we may need to raise additional funds to expand our sales and marketing and
service development efforts or to make acquisitions. Additional financing may not be available on favorable terms, if at all. If adequate funds are not available on acceptable terms,
we may be unable to fund the expansion of our sales and marketing and research and development efforts or take advantage of acquisition or other opportunities, which could
seriously harm our business and operating results. If we incur debt, the debt holders would have rights senior to common stockholders to make claims on our assets and the terms of
any debt could restrict our operations, including our ability to pay dividends on our common stock. Furthermore, if we issue additional equity securities, stockholders will experience
dilution, and the new equity securities could have rights senior to those of our common stock. Any debt financing is likely to have financial and other covenants that could have an
adverse impact on our business if we do not achieve our projected results. Because our decision to issue securities in any future offering will depend on market conditions and other
factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, our stockholders bear the risk of our future securities offerings
reducing the market price of our common stock and diluting their interest.
The impairment of a significant amount of goodwill and intangible assets on our balance sheet could result in a decrease in earnings and, as a result, our stock price could
decline.
We have acquired assets and businesses over time, some of which have resulted in the recording of a significant amount of goodwill and/or intangible assets on our
consolidated financial statements. We had $179.1 million of goodwill and $108.9 million of net intangible assets as of December 31, 2020. The goodwill was recorded because the
fair value of the net tangible assets and/or intangible assets acquired was less than the purchase price. We may not realize the full value of the goodwill and/or intangible assets.
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We evaluate goodwill and other intangible assets with indefinite useful lives for impairment on an annual basis or more frequently if events or circumstances suggest that the asset
may be impaired. We did not have any intangible assets, other than goodwill, with indefinite lives as of December 31, 2020. We evaluate other intangible assets subject to
amortization whenever events or changes in circumstances indicate that the carrying amount of those assets may not be recoverable. If goodwill or other intangible assets are
determined to be impaired, we will write-off the unrecoverable portion as a charge to our earnings. If we acquire new assets and businesses in the future, as we intend to do, we may
record additional goodwill and/or intangible assets. The possible write-off of the goodwill and/or intangible assets could negatively impact our future earnings and, as a result, the
market price of our common stock could decline.
The trading price of our common stock may be volatile and decline substantially.
The trading price of our common stock may be volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. In
addition to the factors discussed in this “Risk Factors” section and elsewhere in this Annual Report on Form 10-K, these factors include:
•
•
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•
•
•
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•
our operating performance and the operating performance of similar companies;
the overall performance of the equity markets;
announcements by us or our competitors of acquisitions, business plans, commercial relationships or new product or service offerings;
threatened or actual litigation;
changes in laws or regulations relating to the provision of internet content;
any change in our Board of Directors or management;
publication of research reports about us, our competitors or our industry, or positive or negative recommendations or withdrawal of research coverage by securities
analysts;
our sale of common stock or other securities in the future;
large volumes of sales of our shares of common stock by existing stockholders; and
general political and economic conditions.
In addition, the stock market in general, and historically the market for internet-related companies in particular, have experienced price and volume fluctuations that have
often been unrelated or disproportionate to the operating performance of those companies. Securities class action litigation has often been instituted against companies following
periods of volatility in the overall market and in the market price of a company’s securities. Such litigation, if instituted against us, could result in substantial costs, divert our
management’s attention and resources and harm our business, operating results and financial condition.
Our full year and quarterly operating results are subject to fluctuations, and these fluctuations may adversely affect the trading price of our common stock.
We have experienced fluctuations in our full year and quarterly revenues and operating results. Our revenues and operating results may fluctuate from quarter to quarter due
to a number of factors described in this Risk Factors section, many of which are outside of our control. Specifically, our results could be impacted quarter by quarter by changes in
the spending priorities and marketing budget cycles of customers; the addition or loss of customers; the addition of new sites and services by us or our competitors; and seasonal
fluctuations in marketing spending, based on product launch schedules, annual budget approval processes for our customers and the historical decrease in marketing spending in the
summer months. Due to the foregoing as well as other risks described in this Risk Factors section, our results of operations in one or more quarters may fall below the expectations
of investors and/or securities analysts. In such an event, the trading price of our common stock is likely to decline.
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Provisions of our certificate of incorporation, bylaws and Delaware law could deter takeover attempts.
Various provisions in our certificate of incorporation and bylaws could delay, prevent or make more difficult a merger, tender offer, proxy contest or change of control. Our
stockholders might view any transaction of this type as being in their best interest since the transaction could result in a higher stock price than the then-current market price for our
common stock. Among other things, our certificate of incorporation and bylaws:
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authorize our Board of Directors to issue preferred stock with the terms of each series to be fixed by our Board of Directors, which could be used to institute a
“poison pill” that would work to dilute the share ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our
Board;
divide our Board of Directors into three classes so that only approximately one-third of the total number of directors is elected each year;
permit directors to be removed only for cause;
prohibit action by written consent of our stockholders; and
specify advance notice requirements for stockholder proposals and director nominations. In addition, with some exceptions, the Delaware General Corporation Law
restricts or delays mergers and other business combinations between us and any stockholder that acquires 15% or more of our voting stock.
Our substantial indebtedness could adversely affect our financial condition.
In December 2020, we issued $201.3 million in aggregate principal amount of 0.125% convertible senior notes due 2025 (the “Notes”). This significant amount of
indebtedness we carry could limit our ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements, stock repurchases or
other purposes. It may also increase our vulnerability to adverse economic, market and industry conditions, limit our flexibility in planning for, or reacting to, changes in our
business operations or to our industry overall, and place us at a disadvantage in relation to our competitors that have lower debt levels. Any or all of the above events and/or factors
could have an adverse effect on our results of operations and financial condition.
Servicing our indebtedness will require a significant amount of cash, and we may not have sufficient cash flow from our business to pay our indebtedness.
Our ability to make payments of the principal, to pay interest and special interest on or to refinance our indebtedness, including the Notes, or to make cash payments in
connection with any conversion of notes depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business
may not continue to generate cash flow from operations in the future sufficient to service our indebtedness, including the Notes, and make necessary capital expenditures. If we are
unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring indebtedness or obtaining additional equity capital on
terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be
able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.
Future sales of our common stock in the public market could depress the market price of our common stock.
Our directors, executive officers and significant stockholders beneficially own approximately 6.9 million shares of our common stock, which represents 25% of our
outstanding shares as of December 31, 2020. In addition, 5,775,627 shares of our common stock are reserved for issuance upon the exercise of stock options and upon conversion of
our Notes. If these additional shares are sold, or if it is perceived that they will be sold in the public market, the trading price of our common stock could decline substantially.
A limited number of stockholders have the ability to influence the outcome of director elections and other matters requiring stockholder approval.
Our directors, executive officers and significant stockholders beneficially own approximately 25% of our outstanding common stock as of December 31, 2020. These
stockholders, if they act together, could exert substantial influence over matters requiring approval by our stockholders, including the election of directors, the amendment of our
certificate of incorporation and bylaws and the approval of mergers or other business combination transactions. This concentration of ownership may discourage, delay or prevent a
change in control of our company, which could deprive our stockholders of an opportunity to receive a premium for their stock as part of a sale of our company and might reduce our
stock price. These actions may be taken even if they are opposed by other stockholders.
Item 1B.
Unresolved Staff Comments
None.
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Item 2.
Properties
As of December 31, 2020, we are leasing approximately 74,000 square feet of office space for our global headquarters in Newton, Massachusetts, through December 31,
2029. The Company has an option to extend the term for an additional five-year period subject to certain terms and conditions. Additionally, we have smaller leased offices
throughout North America, Europe, Asia and Australia. In conjunction with our recent acquisitions, we acquired additional leased offices throughout North America and the United
Kingdom.
Item 3.
Legal Proceedings
We are not currently a party to any material legal proceedings, and we are not aware of any pending or threatened litigation against us that could have a material adverse
effect on our business, operating results or financial condition.
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PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock is listed on the Nasdaq Global Market under the trading symbol “TTGT”.
Holders
As of February 17, 2021, according to our transfer agent’s records there were 66 common stockholders of record.
Dividends
We did not declare or pay any cash dividends on our common stock during the three most recent fiscal years. We currently intend to retain earnings, if any, to fund the
development and growth of our business and do not anticipate paying cash dividends on our common stock in the foreseeable future. Our payment of future dividends, if any, will be
at the sole discretion of our Board of Directors after considering various factors, including our financial condition, operating results, cash needs and growth plans, as well as
restrictive covenants in our debt agreements.
Equity Compensation Plan Information
Information relating to compensation plans under which our equity securities are authorized for issuance is set forth under “Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters” in Item 12 of this Annual Report on Form 10-K.
.
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Stock Performance Graph
The following graph compares the cumulative total return to stockholders of our common stock for the period from December 31, 2015 to December 31, 2020, to the
cumulative total return of the Russell 2000 Index and the S&P 500 Media Industry Index for the same period. This graph assumes investment of $100 on December 31, 2015 in our
common stock, the Russell 2000 Index and the S&P 500 Media Industry Index and assumes any dividends are reinvested.
COMPARATIVE STOCK PERFORMANCE
Among TechTarget, Inc.,
the Russell 2000 Index and
the S&P 500 Media Industry Index
TechTarget Inc.
Russell 2000
S&P 500 Media Industry
12/15
12/16
12/17
12/18
12/19
12/20
$
$
$
100.00 $
100.00 $
100.00 $
106.23 $
121.31 $
122.40 $
173.35 $
139.08 $
135.78 $
152.05 $
123.76 $
116.90 $
325.03 $
155.35 $
162.12 $
736.11
186.36
188.18
The information included under the heading “Stock Performance Graph” in Item 5 of this Annual Report on Form 10-K is “furnished” and not “filed” and shall not be
deemed to be “soliciting material” or subject to Regulation 14A, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of
that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act.
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Purchases of Equity Securities by the Issuer
During the fourth quarter of 2020, we did not repurchase any shares of our common stock.
Item 6. Reserved
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Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and
accompanying notes included elsewhere in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and
assumptions. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and
elsewhere in this Annual Report on Form 10-K, particularly under the heading “Risk Factors.” Please refer to our “Forward-Looking Statements” section on page 3 of this Annual
Report on Form 10-K.
Overview
Background
TechTarget, Inc. is a global data and analytics leader and software provider for purchase intent-driven marketing and sales data which delivers business impact for B2B
companies. Our solutions enable B2B technology companies to identify, reach, and influence key enterprise technology decision makers faster and with higher efficacy. We improve
IT vendors’ abilities to impact highly targeted audiences for business growth using advanced targeting, first-party analytics and data services complemented with customized
marketing programs that integrate demand generation, brand marketing, and advertising techniques.
We enable enterprise technology and business professionals to navigate the complex and rapidly-changing enterprise technology landscape where purchasing decisions can
have significant financial and operational consequences. Our content strategy includes three primary sources which enterprise technology and business professionals use to assist
them in their pre-purchase research: independent content provided by our professionals, vendor-generated content provided by our customers and member-generated, or peer-to-peer,
content. In addition to utilizing our independent editorial content, registered members appreciate the ability to deepen their pre-purchase research by accessing the extensive vendor
supplied content available across our website network. Likewise, we believe these members derive significant additional value from the ability our network provides to seamlessly
interact with and contribute to information exchanges in a given field. To advance our ability to provide purchase intent-driven marketing and sales data, we have been
acquisitive. During 2020, we acquired BrightTALK Limited, a technology media company that provides customers with a platform to create, host and promote webinar and video
content, The Enterprise Strategy Group, Inc., a leading provider of decision support content based on user research and market analysis for global enterprise companies, and Data
Science Central, LLC, a digital publishing and media company focused on data science and business analytics.
We had approximately 26.9 million and 20.0 million registered members and user – our “audiences” – as of December 31, 2020 and 2019, respectively. During the second
quarter of 2020, the Company ended a partnership with a company covering the Benelux region. This reduced our member number by 0.5 million. Additionally, we restated our 2019
membership to remove the Benelux member number as of December 31, 2019 (0.5 million). We believe that we have sufficient members within our remaining database to support
our business needs within the Benelux region. As a result of the BrightTALK acquisition we added approximately 6.1 million unique users to our audiences. While the size of our
registered member base does not provide direct insight into our customer numbers or our revenues, the value of our services sold to our customers is a direct result of the breadth and
reach of this content footprint. This footprint creates the opportunity for our clients to gain business leverage by targeting our audiences through customized marketing programs.
Likewise, the behavior exhibited by these audiences enables us to provide our customers with data products to improve their marketing and sales efforts. The targeted nature of our
member base enables B2B technology companies to reach a specialized audience efficiently because our content is highly segmented and aligned with the B2B technology
companies’ specific products.
With it, we have developed a broad customer base and, in 2020 delivered, purchase intent data programs to approximately 1,590 customers.
Executive Summary
Our total revenues for the year ended December 31, 2020 increased approximately $14.4 million, of which approximately $1.2 million was related to the acquisition of the
BrightTALK, to $148.4 million, or 11% compared with 2019, driven primarily by higher lead generation revenues. Our business was impacted by the effects of the spread of
COVID-19. We are witnessing the far-reaching impact that COVID-19 is having on our employees, customers, vendors, members, stockholders, and other stakeholders, as well as
the global economy and society at large. While we have responded proactively to address the effects of COVID-19 and to mitigate its potential impact on our business, including
through the elimination of all non-essential travel, transitioning our entire workforce to a remote work environment, and enhancing access to certain health and safety resources for
our employees, beginning in March, 2020 we saw certain customers extend their normal sales cycles and budget shifts as some customers moved from long-term commitments to
shorter-term marketing campaigns as they began to navigate through the pandemic. New customer acquisition has become harder as some potential customers have been less apt to
spend on new products or services. Additionally, we noted a shift to our digital offerings
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among our international customers as they were more reliant on face to face events. Revenues from our Priority Engine™ product increased 5% to $52.4 million in 2020 compared
to 2019.
Longer-term deals amounted to 34% of our revenue in the fourth quarter of 2020, which is consistent with 34% in the fourth quarter of 2019. The amount of revenue that we
derived from longer-term contracts in the fourth quarter of 2020 increased by approximately $2.7 million, an increase of 22% compared to the amount that we recognized in the
fourth quarter of 2019.
Gross profit percentage of 75% for 2020 was consistent with 2019 and 2018 gross profit percentage of 76%.
Business Trends
The following discussion highlights key trends affecting our business.
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Macro-economic Conditions and Industry Trends. 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. Despite the current uncertainty in the economy, there are several factors indicating
positive IT spending over the next few years is likely. There are several IT catalysts such as AI, security, data analytics, and cloud migrations, to name a few. Our
growth continues to be driven in large part by the return on the investments we made in our data analytics suite of products, IT Deal Alert™, which continues to
drive market share gains for us. While we will continue to invest in this growth area, management will also continue to carefully control discretionary spending such
as travel and entertainment, and the filling of new and replacement positions, in an effort to maintain profit margins and cash flows.
COVID-19. Throughout 2020, we have been impacted by COVID-19 in multiple ways; we noted an acceleration of our international revenue as customers in those
regions moved from face-to-face events to online platforms; we noted a reticence among certain of our customers to enter into longer-term contractual relationships
which had a negative impact on the percentage of revenue under longer term-contracts; we noted our ability to expand our new logo acquisition with our Priority
Engine Express offering was negatively impacted. We anticipate certain of these trends to continue throughout 2021.
Brexit. The United Kingdom’s June 2016 referendum, in which voters approved an exit of the United Kingdom from the European Union, commonly referred to as
“Brexit,” resulted in significant general economic uncertainty as well as volatility in global stock markets and currency exchange rate fluctuations. In March 2017,
the United Kingdom served notice to the European Council under Article 50 of the Lisbon Treaty of its intention to withdraw from the European Union. As of
January 30, 2020, the United Kingdom’s membership in the European Union was terminated and an eleven-month transition period began. In December 2020, the
United Kingdom and the European Union agreed on a trade and cooperation agreement, under which the United Kingdom and the European Union will now form
two separate markets governed by two distinct regulatory and legal regimes. The trade and cooperation agreement covers the general objectives and framework of
the relationship between the United Kingdom and the European Union, including as it relates to trade, transport and visas. Notably, under the trade and cooperation
agreement, United Kingdom service suppliers no longer benefit from automatic access to the entire European Union single market, United Kingdom goods no longer
benefit from the free movement of goods and there is no longer the free movement of people between the United Kingdom and the European Union. Depending on
the application of the terms of the trade and cooperation agreement, we could face new regulatory costs and challenges. The full effect of Brexit remains uncertain
and depends on the application of the terms of the trade and cooperation agreement. Our revenue generated from customers who have billing addresses within the
United Kingdom was approximately 12% of our total revenues for the years ended December 31, 2020.
Customer Demographics. In the year ended December 31, 2020, revenues from our legacy global customers (a static cohort comprising of our 10 historically
largest on premises hardware technology companies), decreased by approximately 9% compared to the prior year. Revenues from our largest 100 customers,
excluding the legacy global customers described above, increased by approximately 17% compared to the prior year. Revenues attributable to our remaining
customers, which includes venture capital-backed start-ups that primarily operate in North America, increased by approximately 14% over the prior year.
Our key strategic initiatives include:
•
•
Geographic – During 2020, approximately 39% of our revenues were derived from international campaigns.
Product –Purchase intent data continues to drive our product road strategy. During 2021, we intend to improve upon our sales use case by expanding our sales alerts
and inbound converter features among other strategic objectives. We will also incorporate the purchase intent data from BrightTALK into Priority Engine™.
36
•
Our revenues were up 11% in 2020 compared to 2019, which was primarily driven by the increases noted above. We have looked extensively at the dynamics
between IT Deal Alert™ and other offerings and have evaluated whether our growth in IT Deal Alert™ customers is taking away from other products for those same
accounts. However, our data indicates that this is not the case, and while our sales team is leading with IT Deal Alert™, our sales team continues to emphasize the
benefits of integration across our product offerings.
Sources of Revenues
•
Sources of Revenues
Revenue for the twelve-month periods ended December 31, 2020, 2019 and 2018 by geo-target were as follows (in thousands):
Revenue
North America
International
Total Revenues
Twelve Months Ended December 31,
2020 vs.
2019
2019 vs.
2018
2020
2019
% change
2018
% change
$
$
90,919 $
57,457
148,376 $
89,582
44,375
133,957
1% $
29%
11% $
82,660
38,673
121,333
8%
15%
10%
We sell customized marketing programs to B2B technology companies targeting a specific audience within a particular enterprise technology or business sector or sub-sector. We
maintain multiple points of contact with our customers to provide support throughout their organizations and their customers’ IT sales cycles. As a result, our customers often run
multiple advertising programs with us in order to target their desired audience of enterprise technology and business professionals more effectively. There are multiple factors that
can impact our customers’ marketing and advertising objectives and spending with us, including but not limited to, IT product launches, increases or decreases to their advertising
budgets, the timing of key industry marketing events, responses to competitor activities and efforts to address specific marketing objectives such as creating brand awareness or
generating sales leads. Our products and services are generally delivered under short-term contracts that run for the length of a given program, typically less than nine months. In
2016, we began to enter into longer-term contracts with certain customers, and in the quarter ended December 31, 2020 approximately 34% of our revenues were from contracts in
excess of 270 or more days (“longer-term contracts”).
Product and Service Offerings
We use our offerings to provide B2B technology companies with numerous touch points to identify, reach and influence key enterprise technology decision makers. The
following is a description of the products and services we offer:
IT Deal Alert™. IT Deal Alert™ is a suite of products and services for B2B technology companies that leverages the detailed purchase intent data that we collect about end-user
enterprise technology organizations. Through proprietary scoring methodologies, we use this insight to help our customers identify and prioritize accounts whose content
consumption around specific enterprise technology topics indicates that they are “in-market” for a particular product or service. We also use the data directly to identify and further
profile accounts’ upcoming purchase plans.
•
IT Deal AlertTM. A suite of data and services for B2B technology companies that leverages the detailed purchase intent data that we collect on enterprise technology
organizations and professionals researching IT purchases on our network of websites. Through proprietary scoring methodologies, we use this insight to help our
customers identify and prioritize accounts and contacts whose content consumption around specific enterprise technology topics indicates that they are “in-market”
for a particular product or service. The suite of products and services includes Priority Engine™, Qualified Sales Opportunities™, and Deal Data™. Priority
Engine™ is a subscription service powered by our Activity Intelligence™ platform, which integrates with customer relationship management and marketing
automation platforms from salesforce.com, Marketo, Eloqua, Pardot, and Integrate. The service delivers lead generation workflow solutions that enable marketers
and sales forces to identify and understand accounts and individuals actively researching new technology purchases and then to engage those active prospects.
Qualified Sales Opportunities™ is a product that profiles specific in-progress purchase projects, including information on scope and purchase considerations. Deal
Data™ is a customized solution aimed at sales intelligence and data scientist functions within our customer organizations. It renders our Activity Intelligence™ data
into one-time offerings directly consumable by the customer’s internal applications.
37
•
•
•
•
Channel Offerings. Our offering allows our customers to deliver unlimited live webinars and videos to an unlimited audience.
Demand Solutions. Our offerings enable our customers to reach and influence prospective buyers through content marketing programs, such as white papers,
webcasts, podcasts, videocasts, virtual trade shows, and content sponsorships, designed to generate demand for their solutions, and through display advertising and
other brand programs that influence consideration by prospective buyers. We believe this allows B2B technology companies to maximize ROI on marketing and
sales expenditures by capturing sales leads from the distribution and promotion of content to our audience of enterprise technology and business professionals.
Brand Solutions. Our suite of brand solutions offerings provides B2B technology companies with direct exposure to targeted audiences of enterprise technology and
business professionals actively researching information related to their products and services. We leverage our Activity Intelligence™ platform to enable significant
segmentation and targeting of specific audiences that can be accessed through these programs. Components of brand programs may include on-network branding,
off-network branding, and microsites and related formats.
Custom Content Creation. We also at times create white papers, case studies, webcasts or videos to our customers’ specifications. These customized content assets
are then promoted to our audience within both demand solutions and brand solutions programs.
As a result of our recent acquisition of BrightTALK we are now able to provide a platform that allows our customers to create, host and promote webinar, virtual event and
video content.
Cost of Revenues, Operating Expenses and Other
Expenses consist of cost of revenues, selling and marketing, product development, general and administrative, depreciation, amortization, and interest and other expense, net.
Personnel-related costs are a significant component of each of these expense categories except for depreciation, amortization and interest and other expense, net.
Cost of Revenues. Cost of revenues consists primarily of: salaries and related personnel costs, member acquisition expenses (primarily keyword purchases from leading
internet search sites), lead generation expenses, freelance writer expenses, website hosting costs; vendor expenses associated with the delivery of webcast, podcast, videocast and
similar content; and other offerings; stock-based compensation expenses; facility expenses and other related overhead.
Selling and Marketing. Selling and marketing expenses consist primarily of salaries and related personnel costs; sales commissions; travel-related expenses; stock-based
compensation expenses; facility expenses and other related overhead. Sales commissions are recorded as expense when earned by the employee, based on recorded revenue.
Product Development. Product development includes the creation and maintenance of our network of websites, advertiser offerings and technical infrastructure. Product
development expense consists primarily of salaries and related personnel costs; stock-based compensation expenses; facility expenses and other related overhead.
General and Administrative. General and administrative expenses consist primarily of salaries and related personnel costs; facility expenses and related overhead;
accounting, legal and other professional fees; transaction-related expenses; and stock-based compensation expenses.
Depreciation. Depreciation expense consists of the depreciation of our property and equipment and other capitalized assets. Depreciation is calculated using the straight-line
method over their estimated useful lives, ranging from three to eleven years.
38
Amortization of Intangible Assets. Amortization of intangible assets expense consists of the amortization of intangible assets recorded in connection with our acquisitions.
Separable intangible assets that are not deemed to have an indefinite life are amortized over their estimated useful lives, which range from eighteen months to nineteen years, using
methods that are expected to reflect the estimated pattern of economic use.
Interest and Other Expense, Net. Interest expense, net consists primarily of interest costs and the related amortization of deferred issuance costs on our Notes and amounts
borrowed under our current and our prior loan agreements and amortization of premiums on our investments, less any interest income earned on cash, cash equivalents and short-
term and long-term investments. We historically have invested our cash in money market accounts, municipal bonds, government agency bonds, U.S. Treasury securities, and
corporate bonds. Other expense consists primarily of non-operating gains or losses, primarily related to realized and unrealized foreign currency gains and losses on trade assets and
liabilities.
Application of Critical Accounting Policies and Use of Estimates
The discussion of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with
accounting principles generally accepted in the U.S. The preparation of these consolidated financial statements requires us to make estimates, judgments and assumptions that affect
the reported amount of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including
those related to revenue, long-lived assets, goodwill, stock-based compensation, contingent liabilities, self-insurance accruals and income taxes. We base our estimates of the
carrying value of certain assets and liabilities on historical experience and on various other assumptions that we believe to be reasonable. In some cases, changes in the accounting
estimates are reasonably likely to occur from period to period. Our actual results may differ from these estimates under different assumptions or conditions.
We believe the following critical accounting policies affect our more significant judgments used in the preparation of our consolidated financial statements. See the notes to
our consolidated financial statements for information about these critical accounting policies as well as a description of our other accounting policies.
Revenue Recognition
We generate substantially all of our revenues from the sale of targeted marketing and advertising campaigns, which we deliver via our network of websites and data analytics
solutions (see above “Product and Service Offerings”). We recognize revenue when performance obligations are satisfied by transferring promised goods and services to customers
in an amount the Company expects to receive in exchange for those goods or services. The Company enters into contracts that can include various combinations of its offerings
which are generally capable of being distinct and accounted for as a separate performance obligation. When performance obligations are combined into a single contract, we utilize
stand-alone selling price (“SSP) to allocate the transaction price among the performance obligations. Our estimates of SSP for each performance obligation require judgement that
considers multiple factors such as historical pricing trends, pricing practices within different geographies.
Revenue from our brand and demand solutions is primarily recognized when the transfer of control occurs. Certain of the contracts within brand and demand solutions are
duration-based campaigns which, in the event of customer cancellation, provide the Company with an enforceable right to a proportional payment for the portion of the campaign
based on services provided. Accordingly, revenue from duration-based campaigns is recognized using a time-based measure of progress, which the Company believes best depicts
how it satisfies its performance obligations in these arrangements as control is continuously transferred throughout the contract period. Revenue from microsites is recognized
ratably over the life of the contract. Revenue from custom content creation is recognized over the expected period of performance using a single measure of progress, typically based
on hours incurred. Payments received in advance of services being rendered are recorded as deferred revenue.
Changes in judgements regarding these assumptions could impact the timing of revenue recognition.
Long-Lived Assets
Our long-lived assets consist primarily of property and equipment, capitalized software, goodwill, and other intangible assets. Goodwill and other intangible assets have
arisen from our acquisitions. The amount assigned to intangible assets is subjective and based on our estimates of the future benefit of the intangible assets using accepted valuation
techniques, such as discounted cash flow. Our long-lived assets, other than goodwill, are amortized over their estimated useful lives, which we determine based on the consideration
of several factors including the period of time the asset is expected to remain in service. Intangible assets are amortized over their estimated useful lives, which range from eighteen
months to nineteen years, using methods of amortization that are expected to reflect the estimated pattern of economic use. The carrying amounts of our acquired intangible assets
are periodically reviewed for impairment whenever events or changes in circumstances indicate the assets may not be recoverable or their useful life is shorter than originally
39
estimated. Consistent with our determination that we have only one reporting segment, we have determined that there is only one reporting unit and test goodwill for impairment at
the entity level. We evaluate the carrying value and remaining useful lives of long-lived assets, other than goodwill, whenever indicators of impairment are present. We evaluate the
carrying value of goodwill annually using the two-step process required by Accounting Standards Codification (“ASC”) 350, Intangibles – Goodwill and Other (“ASC 350”). The
first step of the impairment test is to identify potential impairment by comparing the reporting unit’s fair value with its net book value (or carrying amount), including goodwill. The
fair value is estimated based on a market value approach. If the fair value of the reporting unit exceeds it carrying amount, the reporting unit’s goodwill is not considered to be
impaired and the second step of the impairment test is not performed. Whenever indicators of impairment are present, we would perform the second step and compare the implied
fair value of the reporting unit’s goodwill, as defined by ASC 350, to it carrying value to determine the amount of the impairment loss, if any. As of December 31, 2020, there were
no indications of impairment based on our analysis, and our estimated fair value exceeded our carrying value by a significant margin.
Business Combinations and Valuation of Goodwill and Acquired Intangible Assets
The Company uses its best estimates and assumptions to allocate fair value to the net tangible and identifiable intangible assets acquired and liabilities assumed at the
acquisition date. Any residual purchase price is recorded as goodwill. The Company’s estimates are inherently uncertain and subject to refinement and can include but are not
limited to, the cash flows that an asset is expected to generate in the future, and the appropriate weighted-average cost of capital.
During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the fair value of these tangible and
intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill. In addition, uncertain tax positions and tax-related valuation allowances are initially
recorded in connection with a business combination as of the acquisition date. The Company continues to collect information and reevaluates these estimates and assumptions
quarterly and records any adjustments to the Company’s preliminary estimates to goodwill provided that the Company is within the measurement period. Upon the conclusion of the
measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the
Company’s consolidated statement of operations.
Stock-Based Compensation
We measure stock-based compensation at the grant date based on the fair value of the award and recognize stock-based compensation in our results of operations using the
straight-line method over the vesting period of the award. We use the Black-Scholes option pricing model to determine the fair value of stock option awards. We calculated the fair
values of the options granted using the following estimated weighted average assumptions:
Expected volatility
Expected term
Risk-free interest rate
Expected dividend yield
Weighted-average grant date fair value per share
Years Ended December 31,
2019
2020
2018
40%
6 years
0.34%
—%
39%
6 years
2.15%
—%
39%
6 years
2.82%
—%
$
11.29
$
8.08
$
11.94
The expected volatility of options granted in 2020, 2019, and 2018 was determined using a weighted average of the historical volatility of our stock for a period equal to the
expected life of the option. The risk-free interest rate is based on a zero-coupon U.S. treasury instrument whose term is consistent with the expected life of the stock options. We
have not paid and do not anticipate paying cash dividends on our shares of common stock; therefore, the expected dividend yield is assumed to be zero. We applied an estimated
annual forfeiture rate based on historical averages in determining the expense recorded in each period.
Internal-Use Software and Website Development Costs
We capitalize costs of materials, consultants and compensation and related expenses of employees who devote time to the development of internal-use software and website
applications. We begin to capitalize our costs to develop software and website applications when planning stage efforts are successfully completed, management has authorized and
committed project funding, and it is probable that the project will be completed, and the software will be used as intended. Our judgment is required in determining the point at
which various projects enter the state at which costs may be capitalized, in assessing the ongoing value of the capitalized costs and in determining the estimated useful lives over
which the costs are amortized, which is generally three years. To the extent that we
40
change the manner in which we develop and test new features and functionalities related to our internal use software and websites, assess the ongoing value of capitalized assets or
determine the estimated useful lives over which the costs are amortized, the amount of internal use software and website development costs we capitalize and amortize in future
periods would be impacted. We review capitalized internal-use software and website development costs for recoverability whenever events or changes in circumstances indicate that
the carrying amount of the asset may not be recoverable. We would recognize an impairment loss only if the carrying amount of the asset is not recoverable and exceeds its fair
value. There were no impairments to internal-use software and website developments costs during the years ended December 31, 2020, 2019 or 2018. We capitalized internal-use
software and website development costs of $6.1 million, $5.1 million, and 3.0 million for the years ended December 31, 2020, 2019, and 2018, respectively.
Income Taxes
We are subject to income taxes in both U.S. and foreign jurisdictions, and we use estimates in determining our provision for income taxes. We recognize deferred tax assets
and liabilities based on temporary differences between the financial reporting and income tax bases of assets and liabilities using statutory rates expected to be in effect when such
differences are settled.
Our net deferred tax liabilities are comprised primarily of book to tax differences on stock-based compensation, basis difference in convertible debt and timing of deductions
for right-of-use assets and lease liabilities, accrued expenses, depreciation, and amortization.
Results of Operations
The following table sets forth our results of operations for the periods indicated:
Revenues:
Total cost of revenues
Gross profit
Operating expenses:
Selling and marketing
Product development
General and administrative
Depreciation and amortization
Total operating expenses
Operating income
Interest and other expense, net
Income before provision for income taxes
Provision for income taxes
Net income
Comparison of Fiscal Years Ended December 31, 2020 and 2019
Revenues
2020
$
148,376
37,344
111,032
100% $
25
75
Years Ended December 31,
2019
($ in thousands)
133,957
31,858
102,099
100% $ 121,333
28,959
24
92,374
76
2018
55,455
7,827
18,983
5,946
88,211
22,821
(317)
22,504
5,436
17,068
$
37
5
13
4
59
16
(0)
16
4
12% $
52,462
8,107
14,088
4,703
79,360
22,739
(691)
22,048
5,173
16,875
39
6
11
4
59
17
(1)
16
4
12% $
47,779
8,869
14,557
4,548
75,753
16,621
(1,778)
14,843
1,888
12,955
Years Ended December 31,
2020
2019
Increase
($ in thousands)
Percent
Change
100%
24
76
39
7
12
4
62
14
(2)
12
1
11%
Total revenues
$
148,376 $
133,957 $
14,419
11%
Revenues for the year ended December 31, 2020 (“fiscal 2020”) increased 11% over the year ended December 31, 2019 (“fiscal 2019”). The increase in revenues was mainly
due to increases in our lead generation business and our growth in international revenue due to shifts in marketing spend resulting from the impacts of COVID-19. Priority Engine™
revenues were up 5% in fiscal 2020 compared to fiscal 2019.
41
Cost of Revenues and Gross Profit
Total cost of revenues
Gross profit
Gross profit percentage
Years Ended December 31,
2020
2019
Increase
Percent
Change
$
$
37,344
$
($ in thousands)
31,858
$
111,032
$
102,099
$
75%
76%
5,486
8,933
17%
9%
Cost of Revenues. Cost of revenues for fiscal 2020 increased by $5.5 million as compared to fiscal 2019. The increase in cost of revenues in fiscal 2020 was primarily driven
by the increase in variable costs attributable to contracted services costs related to fulfilling campaigns.
Gross Profit. Our gross profit is equal to the difference between our revenues and our cost of revenues for the period. Gross profit percentage was 75% for fiscal 2020 and
76% for fiscal 2019.
Operating Expenses and Other
Operating expenses:
Selling and marketing
Product development
General and administrative
Depreciation and amortization
Total operating expenses
Interest and other expense, net
Provision for income taxes
2020
Years Ended December 31,
Increase
(Decrease)
2019
($ in thousands)
Percent
Change
$
$
$
$
55,455 $
7,827
18,983
5,946
88,211 $
(317) $
5,436 $
52,462 $
8,107
14,088
4,703
79,360 $
(691) $
5,173 $
2,993
(280)
4,895
1,243
8,851
374
263
6%
(3)
35
26
11%
(54)%
5%
Selling and Marketing. Sales and marketing costs increased by $3.0 million for fiscal 2020 as compared to the fiscal 2019 primarily as a result of an increase in salaries and
related costs (including an increase in stock compensation of $1.6 million).
Product Development. Product development costs decreased by $0.3 million in fiscal 2020 as compared to fiscal 2019. Pay and benefit costs decreased by $0.5 million,
primarily due to an increase in the amount of labor costs capitalized as internal use software. Decrease was offset by stock-based compensation costs increasing by $0.1 million
primarily due to increase in stock price and costs of services and software increasing by $0.1 million.
General and Administrative. General and administrative costs increased by $4.9 million in fiscal 2020 as compared to fiscal 2019 primarily due to higher legal and
professional fees relating to our acquisitions and other matters of approximately $4.3 million and an increase in stock-based compensation costs of $0.6 million.
Depreciation and Amortization. Depreciation expense in fiscal 2020 increased by $1.2 million as compared to fiscal 2019 primarily due to depreciation relating to new
additions placed in service during 2020 and an increase in amortization expense relating to acquired intangibles.
Interest and Other Expense, Net. Interest and other expense, net in fiscal 2020 decreased by $0.4 million as compared to fiscal 2019. Primarily due to the increase in interest
expense of $0.2 million from our issuance of convertible notes and the related amortization of costs associated with the offering and the amortization of the amount of the convertible
note categorized into equity offset by foreign currency-related gains of $0.7 million in fiscal 2020 as compared to $51 thousand in fiscal 2019. The foreign currency-related gains
and losses were due to changes in exchange rates in currencies where we record accounts receivable and accounts payable in the normal course of business, largely the United
Kingdom and Australia.
42
Provision for Income Taxes. Our effective tax rate was 24.2% and 23.5% for the years ended December 31, 2020 and 2019, respectively. The higher rate in 2020 as
compared to 2019 was primarily due to higher income and increase in non-deductible expenses and offset by increase in excess tax benefits of stock-based compensation. The
effective tax rate differs from the statutory rate primarily due to permanent differences of non-deductible expenses, excess tax deductions from stock-based compensation, state
income taxes, and foreign income taxes.
Comparison of Fiscal Years Ended December 31, 2019 and 2018
Revenues
Total revenues
$
133,957 $
121,333 $
12,624
10%
Revenues for the year ended December 31, 2019 increased 10% over the year ended December 31, 2018. The increase in revenues was due to our successful efforts in
obtaining new Priority Engine™ customers and existing customers increasing their spend for data driven marketing products. Priority Engine™ revenues were up 34% in fiscal
2019 compared to fiscal 2018 which was driven by the addition of approximately 210 new Priority Engine™ customers.
Years Ended December 31,
2019
2018
Increase
($ in thousands)
Percent
Change
Cost of Revenues and Gross Profit
Cost of revenues:
Total cost of revenues
Gross profit
Gross profit percentage
Years Ended December 31,
2019
2018
Increase
($ in thousands)
Percent
Change
$
$
31,858
$
102,099
$
76%
28,959
$
92,374
$
76%
2,899
9,725
10%
11%
Cost of Revenues. The increase in cost of revenues in fiscal 2019 was primarily driven by the increase in variable costs attributable to contracted services costs related to
fulfilling campaigns attributable to the increase of $12.6 million in revenues.
Gross Profit. Our gross profit is equal to the difference between our revenues and our cost of revenues for the period. Gross profit percentage was 76% for both fiscal 2019
and fiscal 2018.
Operating Expenses and Other
Operating expenses:
Selling and marketing
Product development
General and administrative
Depreciation and amortization
Total operating expenses
Interest and other expense, net
Provision for income taxes
2019
Years Ended December 31,
Increase
(Decrease)
2018
($ in thousands)
Percent
Change
52,462 $
8,107
14,088
4,703
79,360 $
(691) $
5,173 $
47,779 $
8,869
14,557
4,548
75,753 $
(1,778) $
1,888 $
4,683
(762)
(469)
155
3,607
1,087
3,285
10%
(9)
(3)
3
5%
(61)%
174%
$
$
$
$
43
Selling and Marketing. Sales and marketing costs increased by $4.7 million for fiscal 2019 as compared to the fiscal 2018 primarily as a result of an increase in salaries and
related costs (including an increase in stock compensation of $4.0 million).
Product Development. Product development costs decreased by $0.8 million in fiscal 2019 as compared to fiscal 2018. Primarily due to an increase in capitalized software
costs of $2.2 million offset partly by higher compensation costs of $1.2 million.
General and Administrative. General and administrative costs decreased by $0.5 million in fiscal 2019 as compared to fiscal 2018 primarily due to lower professional fees of
$0.6 million and bad debt expense $0.7 offset by an increase in stock-based compensation costs of $0.8 million.
Depreciation and Amortization. Depreciation expense in fiscal 2019 increased slightly when compared to fiscal 2018 primarily due to the mix of new additions and their
depreciable lives.
Interest and Other Expense, Net. Interest and other expense, net in fiscal 2019 decreased by $1.1 million compared to fiscal 2018. The $1.1 million change was primarily due
to decrease in interest expense of $0.6 million due to a lower interest rate on the new loan and foreign currency-related gains of $52 thousand in fiscal 2019 compared to foreign
currency-related losses of $0.5 million in fiscal 2018. The foreign currency-related gains and losses were due to changes in exchange rates in currencies where we record accounts
receivable and accounts payable in the normal course of business, largely the United Kingdom and Australia.
Provision for Income Taxes. Our effective tax rate was 23.5% and 12.7% for the years ended December 31, 2019 and 2018, respectively. The higher rate in 2019 as
compared to 2018 was primarily due to higher income and a lower tax benefit related to excess tax deductions from stock-based compensation. The effective tax rate differs from the
statutory rate primarily due to these permanent differences of non-deductible expenses, excess tax deductions from stock-based compensation, state income taxes, and foreign
income taxes.
Selected Quarterly Results of Operations
The following table presents our unaudited quarterly consolidated results of operations for the eight quarters ended December 31, 2020. The unaudited quarterly consolidated
information has been prepared on the same basis as our audited consolidated financial statements. You should read the following table presenting our quarterly consolidated results
of operations in conjunction with our audited consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. The operating results
for any quarter are not necessarily indicative of the operating results for any future period.
Total revenues
Total cost of revenues
Total gross profit
Total operating expenses
Operating income
Net income
Net income per common share:
Basic
Diluted
Seasonality
For the Three Months Ended
2020
2019
Jun. 30
Sep. 30
Dec. 31 Mar. 31
Jun. 30
Sep. 30
31,416 $
8,151
23,265
19,681
3,584 $
34,795 $
8,784
26,011
19,135
6,876 $
36,244 $
9,212
27,032
20,560
6,472 $
45,921 $
11,197
34,724
28,835
5,889 $
29,972 $
7,012
22,960
18,585
4,375 $
34,286 $
7,952
26,334
20,246
6,088 $
Dec. 31
35,890
8,847
27,043
21,678
5,365
33,809 $
8,047
25,762
18,851
6,911 $
2,207 $
4,774 $
6,782 $
3,305 $
3,290 $
4,151 $
5,351 $
4,083
0.08 $
0.08 $
0.17 $
0.17 $
0.24 $
0.24 $
0.12 $
0.12 $
0.12 $
0.12 $
0.15 $
0.15 $
0.19 $
0.19 $
0.15
0.14
Mar. 31
$
$
$
$
$
The timing of our revenues is affected by seasonal factors. Our revenues are seasonal primarily as a result of the annual budget approval process of many of our customers,
the normal timing at which our customers introduce new products, and the historical decrease in advertising in summer months. The timing of revenues in relation to our expenses,
much of which do not vary directly with revenues, has an impact on the cost of revenues, selling and marketing, product development, and general and administrative expenses as a
percentage of revenues in each calendar quarter during the year.
44
The majority of our expenses are personnel-related and include salaries, stock-based compensation, benefits and incentive-based compensation plan expenses. As a result, we
have not experienced significant seasonal fluctuations in the timing of our expenses period to period.
Liquidity and Capital Resources
Resources
At December 31, 2020, our cash, cash equivalents and investments totaled $82.7 million. Our cash, cash equivalents and investments increased by $25.2 million during fiscal
2020, primarily due to the cash generated from operations and the issuance of our convertible notes. Partially offset by the cash generated from acquisitions, the repurchase of shares
under our stock repurchase plan and the extinguishment of our term loan. Additionally, we utilized cash for purchases of property and equipment and other capitalized assets. We
believe that our existing cash, cash equivalents, and investments, and our cash flow from operating activities will be sufficient to meet our anticipated cash needs for at least the next
12 months. Our future working capital requirements will depend on many factors, including the operations of our existing business, our potential strategic expansion internationally,
future acquisitions we might undertake, and the expansion into complementary businesses. To the extent that our cash and cash equivalents, investments and cash flow from
operating activities are insufficient to fund our future activities, we may need to raise additional funds through bank credit arrangements or public or private equity or debt
financings. We also may need to raise additional funds in the event we determine in the future to effect one or more additional acquisitions of businesses.
Cash, cash equivalents and investments
Accounts receivable, net
Cash, Cash Equivalents and Investments
2020
As of December 31,
2019
$
$
82,700
40,183
$
$
57,499
27,102
$
$
2018
35,173
30,042
Our cash, cash equivalents and investments at December 31, 2020 were held for working capital purposes and were invested primarily in bonds. We do not enter into
investments for trading or speculative purposes.
Accounts Receivable, Net
Our accounts receivable balance fluctuates from period to period, which affects our cash flows from operating activities. The fluctuations vary depending on the timing of
our service delivery and billing activity, cash collections, and changes to our allowance for doubtful accounts. We use days sales outstanding (“DSO”) as a measurement of the
quality and status of our receivables. We define DSO as net accounts receivable at quarter end divided by total revenues for the applicable period, multiplied by the number of days
in the applicable period. DSO was 57 days at December 31, 2020, 69 days at December 31, 2019 and 87 days at December 31, 2018. The debtor days exclude our December 2020
acquisitions. The change in DSO year over year is primarily due to the timing of payments from all classes of customers.
Cash Flows
Net cash provided by operating activities
Net cash (used in) provided by investing activities
Net cash (used in) provided by financing activities
Operating Activities
2020
Years Ended December 31,
2019
(in thousands)
2018
$
$
$
52,453 $
(175,747) $
153,366 $
39,449 $
(10,847) $
(10,721) $
23,877
1,692
(16,778)
Cash provided by operating activities primarily consists of net income adjusted for certain non-cash items including depreciation and amortization, the provision for bad
debt, stock-based compensation, deferred income taxes, and the effect of changes in working capital and other activities.
The increase in cash provided by operating activities in fiscal 2020 compared to fiscal 2019 was primarily the result of increases in non-cash stock compensation of $2.6
million, a $1.9 million increase in depreciation and amortization expense and changes in operating assets and liabilities, primarily driven by a $7.0 million increase in accrued
expenses and a $2.9 million increase in other liabilities.
45
The increase in cash provided by operating activities in fiscal 2019 compared to fiscal 2018 was primarily the result of increases in non-cash stock compensation of $5.1
million, a $3.9 million increase in net income as well as changes in operating assets and liabilities, primarily driven by a $2.5 million increase in income taxes payable and a $2.6
million decrease in accounts receivable.
The increase in cash provided by operating activities in fiscal 2018 compared to fiscal 2017 was primarily the result of a $6.2 million increase in net income offset in part by
changes in operating assets and liabilities, primarily driven by increases in accounts receivable and contract liabilities of $1.5 million and $2.0 million, respectively, in 2018.
Investing Activities
Cash used in investing activities in the year ended December 31, 2020 was $175.7 million; which consisted of $6.7 million for the purchase of property and equipment and
other capitalized assets, made up primarily of computer equipment and related software and internal-use development costs, and $174.0 million for the purchase of various
businesses during 2020, offset in part by $5.0 million from sales of short-term investments.
Cash used in investing activities in the year ended December 31, 2019 was $10.8 million; which consisted of $6.3 million for the purchase of property and equipment and
other capitalized assets, made up primarily of computer equipment and related software and internal-use development costs, and $5.0 million for the purchase of investments, offset
in part by $0.5 million from the maturity of short-term investments.
Cash provided by investing activities in the year ended December 31, 2018 was $1.7 million; $7.6 million from the net sales and maturities of short-term and long-term
investments, partially offset by $5.5 million for the purchase of other capitalized assets, made up primarily of website development costs, computer equipment and related software
and internal-use development costs and $0.4 million for cash used to acquire the operating assets of a business.
Capital Expenditures. We have made capital expenditures primarily for computer equipment and related software needed to host our websites, internal-use software
development costs, as well as for leasehold improvements and other general purposes to support our growth. Our capital expenditures totaled $6.7 million, $6.3 million, and $5.5
million for the years ended December 31, 2020, 2019, and 2018, respectively. A majority of our capital expenditures in 2020, 2019, and 2018 were internal-use software and website
development costs and, to a lesser extent, computer equipment and related software. Additionally, during 2018, the Company expended funds relating to leasehold improvements at
its corporate offices.
We expect to spend approximately $10.5 million in capital expenditures in 2021, primarily for internal-use software and website development costs and computer equipment
and related software. We are not currently party to any purchase contracts related to future capital expenditures. We believe we can fund these future additions through cash
generated from operations.
Financing Activities
During 2020, we received net proceeds from our convertible notes offering of approximately $195 million. Additionally, we received proceeds from the exercise of stock
options in the amounts of $0.6 million, $0.4 million and $1.0 million in the years ended December 31, 2020, 2019, and 2018, respectively. These inflows were offset by $14.8
million, $7.1 million, and $7.1 million used for the repurchase of shares under our stock repurchase programs in 2020, 2019, and 2018, respectively, as well as $3.5 million, $2.8
million, and $3.2 million related to tax withholdings on net share settlements in 2020, 2019, and 2018, respectively.
Common Stock Repurchase Programs
In November 2018, we announced that our Board had authorized a $25.0 million stock repurchase program (the “November 2018 Repurchase Program”) whereby we are
authorized to repurchase our common stock from time to time on the open market or in privately negotiated transactions at prices and in the manner that may be determined by
management. During the last quarter of 2019 we repurchased 94,125 shares of common stock for an aggregate purchase price of approximately $2.3 million pursuant to the
November 2018 Repurchase Program. In the twelve months ended December 31, 2020 we repurchased a total of 736,760 shares for an aggregate purchase price of approximately
$14.8 million under the “November 2018 Repurchase Program.” We terminated this repurchase program in May 2020.
In May 2020, we announced that our Board had authorized a $25.0 million stock repurchase program (the “May 2020 Repurchase Program”) whereby we are authorized to
repurchase our common stock from time to time on the open market or in privately negotiated transactions at prices and in the manner that may be determined by management. No
amounts were repurchased under this plan during 2020.
46
Repurchased shares were recorded under the cost method and are reflected as treasury stock in the accompanying Consolidated Balance Sheets. All repurchased shares were
funded with cash on hand. (see Note 12 to our Consolidated Financial Statements).
Convertible Senior Notes and Contractual Commitments
In December 2020, the Company issued $201.25 million in aggregate principal amount of 0.125% convertible senior notes due December 15, 2025, unless earlier
repurchased by the Company or converted by the holder pursuant to their terms. Interest is payable semiannually in arrears on June 15 and December 15 of each year, commencing
on June 15, 2021.
The Notes are governed by an Indenture between the Company, as issuer, and U.S. Bank, National Association, as trustee. The Notes are unsecured and rank senior in right
of payment to the Company’s future indebtedness that is expressly subordinated in right of payment to the Notes and equal in right of payment to the Company’s unsecured
indebtedness that is not so subordinated.
Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of common stock,
at the Company’s election.
The Notes have an initial conversion rate of 14.1977 shares of common stock per $1,000 principal amount of Notes. This represents an initial effective conversion price of
approximately $70.43 per share of common stock and 2,858,706 shares issuable upon conversion. Throughout the term of the Notes, the conversion rate may be adjusted upon the
occurrence of certain events. Holders of the Notes will not receive any cash payment representing accrued and unpaid interest, if any, upon conversion of a Note, except in limited
circumstances. Accrued but unpaid interest will be deemed to be paid by cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s
common stock paid or delivered, as the case may be, to the holder upon conversion of Notes.
As of December 31, 2020, our principal contractual commitments consist of obligations under leases for office space and our Convertible Debt. The offices are leased under
non-cancelable operating lease agreements that expire through 2029.
The following table sets forth our commitments to settle contractual obligations in cash as of December 31, 2020:
Contractual Obligations
Convertible Senior Notes
Operating leases
Total
Total
$
$
201,250 $
35,604
236,854
$
Payments Due By Period (in thousands)
Less than
1 Year
1–3 Years
3–5 Years
More than
5 Years
— $
4,723
4,723
$
—
8,868
8,868
$
$
201,250
$
7,717
208,967
$
—
14,296
14,296
See Note 9 to our Consolidated Financial Statements for further information on our Convertible Senior Notes and Note 10 to our Consolidated Financial Statements for
further information with respect to our operating leases.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Recent Accounting Pronouncements
See Note 2 to our Consolidated Financial Statements for recent accounting pronouncements that could have an effect on us.
47
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is
primarily a result of fluctuations in foreign exchange rates and interest rates. We do not hold or issue financial instruments for trading purposes.
Foreign Currency Exchange Risk
We currently have subsidiaries in the United Kingdom, Hong Kong, Australia, Singapore, Germany and France. Approximately 30% of our revenues for the year ended
December 31, 2020 were derived from customers with billing addresses outside of the United States and our foreign exchange gains/losses were not significant. Currently, our
largest foreign currency exposures are the euro and British pound. We performed a sensitivity analysis on the impact of foreign exchange fluctuations on our operating income, based
on our financial results for the year ended December 31, 2020. For the year ended December 31, 2020, we estimate that a 10% unfavorable movement in foreign currency exchange
rates would have decreased operating income by less than $100 thousand assuming that all currencies moved in the same direction at the same time and a constant ratio of non-
U.S. dollar denominated revenue and expenses to U.S. dollar denominated revenue and expenses. Since a portion of our revenue is deferred revenue that is recorded at different
foreign currency exchange rates, the impact to revenue of a change in foreign currency exchange rates is recognized over time, and the impact to expenses is more immediate, as
expenses are recognized at the current foreign currency exchange rate in effect at the time the expense is incurred. We currently believe our exposure to foreign currency exchange
rate fluctuations is financially immaterial and therefore have not entered into foreign currency hedging transactions.
We continue to review this issue and may consider hedging certain foreign exchange risks through the use of currency futures or options in the future. The volatility of
exchange rates depends on many factors that we cannot forecast with reliable accuracy. Our continued international expansion increases our exposure to exchange rate fluctuations
and as a result such fluctuations could have a significant impact on our future results of operations.
Interest Rate Risk
At December 31, 2020, we had cash, cash equivalents and investments totaling $82.6 million. The cash, cash equivalents and investments were held for working capital
purposes. We do not enter into investments for trading or speculative purposes. Due to the short-term nature of these investments, we believe that we do not have any material
exposure to changes in the fair value of our investment portfolio as a result of changes in interest rates. Declines in interest rates, however, would reduce future investment income.
48
Item 8.
Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
Reports of Independent Registered Public Accounting Firms
Consolidated Balance Sheets as of December 31, 2020 and 2019
Consolidated Statements of Income and Comprehensive Income for the Years Ended December 31, 2020, 2019, and 2018
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2020, 2019, and 2018
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019, and 2018
Notes to Consolidated Financial Statements
49
Page
50-53
54
55
56
57
58
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of
TechTarget, Inc.
Newton, Massachusetts
Opinion on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of TechTarget, Inc. and subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related
consolidated statements of income and comprehensive income, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2020, and the
related notes to the consolidated financial statements (collectively referred to as the consolidated financial statements). We also have audited the Company’s internal control over
financial reporting as of December 31, 2020 based on criteria established in Internal Control —Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission (“COSO”).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and
2019, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2020, in conformity with accounting principles generally
accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December
31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
Change in Accounting Principle
As discussed in Note 10 to the consolidated financial statements, the Company changed its method of accounting for leases as of January 1, 2019 due to the adoption of Accounting
Standards Codification Topic 842, Leases.
Basis for Opinion
The Company’s management is responsible for the consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the
Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether
the consolidated financial statements are free from material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was
maintained in all material respects.
Our audit of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due
to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation
of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also
included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
consolidated financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance
50
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the consolidated financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated
to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex
judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the
critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Revenue Recognition - Refer to Note 2 and 3 to the Consolidated Financial Statements
Critical Audit Matter Description
The Company derives revenues primarily from the sale of targeted marketing and advertising campaigns. The Company’s product offerings can be sold on a stand-alone basis or
together as part of a bundled offering, resulting in multiple performance obligations under ASC 606, Revenue from Contracts with Customers. The allocation of the transaction price
to each performance obligation within a campaign and the timing of revenue recognition, requires management’s judgment.
Given the accounting complexity and the management judgment necessary to identify performance obligations in the campaigns and determine the timing and allocation of revenue
in campaigns with multiple performance obligations, auditing revenue recognition for such campaigns required a high degree of auditor judgment and an increased extent of effort.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the recognition of revenue from multiple-performance-obligation campaigns included the following, among others:
-
-
-
We tested the effectiveness of controls over revenue recognition, including those over the identification of performance obligations included in the transaction, the
allocation of transaction price to these performance obligations, and the timing of revenue recognition.
We evaluated the Company’s accounting policies in the context of the applicable accounting standards.
We selected a sample of revenue campaigns, including those campaigns that we considered individually significant, and performed the following:
o We obtained related contracts and evaluated whether the contracts properly documented the terms of the campaign in accordance with the Company’s
policies.
o We tested management’s identification of distinct performance obligations by evaluating whether the underlying goods, services, or both were highly
interdependent and interrelated.
o We evaluated whether the Company appropriately determined all performance obligations in the campaign and whether the methodology to allocate the
transaction price to the individual performance obligation was appropriately applied based on their stand-alone selling prices.
o We compared the transaction price to the consideration expected to be received based on current rights and obligations under the contracts and any
modifications that were agreed upon with the customers.
o We evaluated whether the value allocated to each performance obligation was appropriately recognized in the correct accounting period.
o We obtained evidence of delivery of the performance obligations of the campaign to the customer.
BrightTALK Limited Acquisitions - Refer to Note 5 to the Consolidated Financial Statements
Critical Audit Matter Description
The Company completed the acquisition of BrightTALK Limited And its wholly owned subsidiary BrightTALK, Inc. (“BrightTALK”) for cash consideration of approximately $151
million on December 23, 2020. The Company accounted for the acquisition of BrightTALK under the acquisition method of accounting for business combinations. Accordingly, the
purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values. The method for determining fair value varied depending
51
on the type of asset or liability and involved management making significant estimates, with the assistance from independent fair value specialists, related to assumptions such as the
discount rates, customer attrition, and revenue growth projections.
We identified the valuation of the intangible assets of BrightTALK as a critical audit matter because of the significant estimates management makes to determine their fair value.
This requires a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to
evaluate the reasonableness of management’s assumptions related to the discount rates, customer attrition, and revenue growth projections.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the fair value of assets acquired and liabilities assumed for BrightTALK included the following, among others:
-
-
-
We tested the effectiveness of controls over the valuation of intangible assets, including management’s controls over forecasts of revenue growth projections, customer
attrition rate, and selection of the discount rate.
We assessed the reasonableness of management’s revenue growth projections and customer attrition rate by comparing these assumptions to historical results and certain
peer companies.
With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology and (2) valuation assumptions by:
o Testing the source information underlying the determination of the valuation assumptions and testing the mathematical accuracy of the calculation.
o Developing a range of independent estimates and comparing those to the assumptions selected by management.
o Evaluating whether the fair value models being used is appropriate considering the Company’s circumstances and valuation premise identified.
o We evaluated whether the estimated future cash flows were consistent with evidence obtained in other areas of the audit.
/s/ Stowe & Degon, LLC
Westborough, Massachusetts
March 1, 2021
We have served as the Company’s auditor since 2019.
52
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
TechTarget, Inc.
Newton, Massachusetts
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of income and comprehensive income, stockholders’ equity, and cash flows of Tech Target, Inc. and
subsidiaries (the “Company”) for the year ended December 31, 2018, and the related notes (collectively referred to as the “consolidated financial statements”). In our
opinion, the consolidated financial statements present fairly, in all material respects, the results of the Company’s operations and its cash flows for the year ended
December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated
financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ BDO USA, LLP
We have served as the Company's auditor from 2011 to 2019.
Boston, Massachusetts
March 12, 2019
53
TechTarget, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)
Assets
Current assets:
Cash and cash equivalents
Short-term investments
Accounts receivable, net of allowance for doubtful accounts of $1,754 and $1,899, respectively
Prepaid taxes
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Goodwill
Intangible assets, net
Operating lease assets with right-of-use
Deferred tax assets
Other assets
Total assets
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
Current operating lease liability
Current portion of debt
Accrued expenses and other current liabilities
Accrued compensation expenses
Income taxes payable
Contract liabilities
Total current liabilities
Non-current operating lease liability
Long-term portion of debt
Other liabilities
Deferred tax liabilities
Total liabilities
Commitments and contingencies (See Note 10)
Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued or outstanding
Common stock, $0.001 par value; 100,000,000 shares authorized; 55,633,155 and 54,903,824 shares issued, respectively;
28,122,603 and 28,142,519 shares outstanding, respectively
Treasury stock, at cost; 27,510,552 and 26,761,305 shares, respectively
Additional paid-in capital
Accumulated other comprehensive income (loss)
Retained earnings
Total stockholders’ equity
Total liabilities and stockholders’ equity
See accompanying Notes to Consolidated Financial Statements.
54
December 31,
2020
2019
82,616
84
40,183
796
4,084
127,763
13,661
179,118
108,872
26,031
216
907
456,568
4,303
3,611
—
16,539
5,789
487
15,689
46,418
26,943
153,882
2,971
23,848
254,062
—
56
(199,796)
363,055
1,611
37,580
202,506
456,568
$
$
$
$
52,487
5,012
27,102
1,017
1,813
87,431
12,371
93,639
710
26,385
136
936
221,608
2,036
2,571
1,241
2,476
3,679
65
4,335
16,403
28,170
22,473
—
1,611
68,657
—
55
(184,972)
317,675
(319)
20,512
152,951
221,608
$
$
$
$
TechTarget, Inc.
Consolidated Statements of Income and Comprehensive Income
(in thousands, except per share data)
Revenues:
Total revenues
Cost of revenues:
Total cost of revenues(1)
Gross profit
Operating expenses:
Selling and marketing(1)
Product development(1)
General and administrative(1)
Depreciation and amortization, excluding depreciation of $991, $296, $0 included in cost of
revenues
Total operating expenses
Operating income
Interest (expense) income and other (expense) income, net
Income before provision for income taxes
Provision for income taxes
Net income
Other comprehensive (loss) income, net of tax:
Unrealized gain on investments
Foreign currency translation adjustments
Other comprehensive (loss) income
Comprehensive income
Net income per common share:
Basic
Diluted
Weighted average common shares outstanding:
Basic
Diluted
2020
For the Years Ended December 31,
2019
2018
$
148,376 $
133,957 $
121,333
37,344
111,032
55,455
7,827
18,983
5,946
88,211
22,821
(317)
22,504
5,436
17,068 $
— $
1,930
1,930
18,998 $
0.61 $
0.61 $
27,855
28,675
31,858
102,099
52,462
8,107
14,088
4,703
79,360
22,739
(691)
22,048
5,173
16,875 $
— $
(104)
(104)
16,771 $
0.61 $
0.60 $
27,874
28,312
$
$
$
$
$
28,959
92,374
47,779
8,869
14,557
4,548
75,753
16,621
(1,778)
14,843
1,888
12,955
15
(295)
(280)
12,675
0.47
0.45
27,738
28,653
159
4,899
200
3,855
(1)
Amounts include stock-based compensation expense as follows:
Cost of revenues
Selling and marketing
Product development
General and administrative
$
$
$
$
410 $
10,560 $
550 $
5,289 $
210 $
8,936 $
408 $
4,663 $
See accompanying Notes to Consolidated Financial Statements.
55
TechTarget, Inc.
Consolidated Statements of Stockholders’ Equity
(in thousands, except share and per share data)
Balance, December 31, 2017
Issuance of common stock from stock options
and restricted stock units
Purchase of common stock through stock
repurchase program
Stock-based compensation expense
Tax withholdings related to net share settlement
of RSU’s
Unrealized gain on investments (net of tax
provision of $11)
Unrealized loss on foreign currency translation
Net income
Balance, December 31, 2018
Issuance of common stock from stock options
and restricted stock units
Purchase of common stock through stock
buyback
Tax withholdings related to net share settlement
of RSU’s
Stock-based compensation expense
Unrealized loss on foreign currency exchange
Net income
Balance, December 31, 2019
Issuance of common stock from exercise of
options
Issuance of common stock from restricted stock
awards
Purchase of common stock through stock
buyback
Impact of net settlements
Deferred tax effect from Convertible Debt
Stock-based compensation expense
Equity component of convertible senior notes
Unrealized gain on foreign currency exchange
Net income
Balance, December 31, 2020
Common Stock
Treasury Stock
Number of
Shares
53,338,297
$
$0.001
Par Value
Number of
Shares
53 25,855,182 $
Cost
(170,816) $
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
(Loss) Gain
Retained
Earnings
(Accumulated
Deficit)
Total
Stockholders’
Equity
300,763 $
65 $
(9,318) $
120,747
779,028
—
—
—
1
—
—
—
—
—
471,098
—
(7,089)
—
1,004
—
8,397
—
—
(3,150)
—
—
—
54,117,325
$
—
—
—
54 26,326,280 $
—
—
—
—
—
—
(177,905) $
—
—
—
307,014 $
763,323
1
—
—
385
—
—
411,849
(7,067)
—
23,176
—
—
—
54,903,824
$
23,176
—
—
—
—
—
—
—
55 26,761,305 $
—
—
—
—
(184,972) $
(2,790)
13,066
—
—
317,675 $
—
—
—
—
15
(295)
—
(215) $
—
—
—
—
(104)
—
(319) $
50,000
1
666,844
—
—
—
—
550
—
—
—
—
—
12,487
—
—
—
—
—
55,633,155
$
736,760
—
12,487
—
—
—
—
—
—
—
—
—
—
—
56 27,510,552 $
(14,824)
—
—
—
—
—
—
(199,796) $
—
(3,539)
(10,559)
17,869
41,059
—
—
363,055 $
—
—
—
—
—
1,930
—
1,611 $
See accompanying Notes to Consolidated Financial Statements.
—
—
—
—
—
—
12,955
3,637
$
—
—
—
—
—
16,875
20,512
$
—
—
—
—
—
—
—
—
17,068
37,580
$
1,005
(7,089)
8,397
(3,150)
15
(295)
12,955
132,585
386
(7,067)
(2,790)
13,066
(104)
16,875
152,951
551
—
(14,824)
(3,539)
(10,559)
17,869
41,059
1,930
17,068
202,506
56
TechTarget, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Operating Activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
2020
For the Years Ended December 31,
2019
2018
$
17,068 $
16,875 $
12,955
Depreciation and amortization
Provision for bad debt
Amortization of investment premiums
Stock-based compensation
Amortization of debt issuance costs
Deferred tax provision
Changes in operating assets and liabilities:
Accounts receivable
Operating lease assets (ROU)
Prepaid expenses and other current assets
Other assets
Accounts payable
Income taxes payable
Accrued expenses and other current liabilities
Accrued compensation expenses
Operating lease liability (ROU)
Contract liabilities
Other liabilities
Net cash provided by operating activities
Investing activities:
Purchases of property and equipment, and other capitalized assets
Purchases of investments
Proceeds from sales and maturities of investments
Acquisitions of business, net of acquired cash
Net cash (used in) provided by investing activities
Financing activities:
Tax withholdings related to net share settlements
Purchase of treasury shares and related costs
Proceeds from exercise of stock options
Term loan proceeds
Debt issuance costs
Proceeds from the issuance of convertible senior notes
Loan Agreement and Term loan principal payment
Net cash (used in) provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental disclosure of cash flow information:
Cash paid for taxes, net
6,937
218
—
16,809
47
(203)
97
2,757
(260)
850
1,222
633
6,213
322
(3,110)
(118)
2,971
52,453
(6,660)
(111)
5,042
(174,018)
(175,747)
(3,539)
(14,824)
551
—
(12)
194,940
(23,750)
153,366
57
30,129
52,487
82,616 $
4,999
339
—
14,217
9
(1,097)
2,601
2,736
1,011
(74)
164
2,524
(792)
94
(2,920)
(1,237)
—
39,449
(6,335)
(5,012)
500
—
(10,847)
(2,790)
(7,067)
386
—
—
—
(1,250)
(10,721)
(67)
17,814
34,673
52,487 $
4,548
986
73
9,113
298
(137)
(1,548)
—
(150)
11
332
(398)
(212)
336
—
(2,025)
(305)
23,877
(5,538)
—
7,600
(370)
1,692
(3,150)
(7,089)
1,005
25,000
(44)
—
(32,500)
(16,778)
(84)
8,707
25,966
34,673
4,906 $
3,581 $
2,625
$
$
See accompanying Notes to Consolidated Financial Statements
57
TechTarget, Inc.
Notes to Consolidated Financial Statements
Years Ended December 31, 2020, 2019, and 2018
(In thousands, except share and per share data, where otherwise noted or instances where expressed in millions)
1. Organization and Operations
TechTarget, Inc. and its subsidiaries (the “Company”) is a leading provider of specialized online content for buyers of enterprise information technology (“IT”) products and
services, and a leading provider of purchase-intent marketing and sales services for enterprise technology vendors. The Company’s service offerings enable technology vendors to
better identify, reach and influence corporate IT decision makers actively researching specific IT purchases. The Company improves vendors’ ability to impact these audiences for
business growth using advanced targeting, analytics and data services complemented with customized marketing programs that integrate demand generation and brand advertising
techniques. The Company operates a network of approximately 140 websites, each of which focuses on a specific IT sector such as storage, security or networking. IT and business
professionals have become increasingly specialized, and they have come to rely on the Company’s sector-specific websites for purchasing decision support. The Company’s content
platform enables IT and business professionals to navigate the complex and rapidly changing IT landscape where purchasing decisions can have significant financial and operational
consequences. At critical stages of the purchase decision process, these content offerings through different channels meet IT and business professionals’ needs for expert, peer and IT
vendor information and provide a platform on which B2B technology companies can launch targeted marketing campaigns which generate measurable return on investment. Based
upon the logical clustering of members’ respective job responsibilities and the marketing focus of the products being promoted by the Company’s customers, the Company
categorizes its content offerings to address the key market opportunities and audience extensions across a portfolio of distinct market categories: Security; Networking; Storage; Data
Center and Virtualization Technologies; CIO/IT Strategy; Business Applications and Analytics; Application Architecture and Development; and ANCL Channel.
2. Summary of Significant Accounting Policies
The accompanying consolidated financial statements reflect the application of certain significant accounting policies as described below and elsewhere in these Notes to
Consolidated Financial Statements.
Principles of Consolidation
The accompanying Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries, TechTarget Securities Corporation (“TSC”),
TechTarget Limited, TechTarget (HK) Limited (“TTGT HK”), TechTarget (Australia) Pty Ltd., TechTarget (Singapore) Pte Ltd., E-Magine Médias SAS (“LeMagIT”), TechTarget
Germany GmbH and as of December 23, 2020, BrightTALK Limited and its wholly owned subsidiary, BrightTALK, Inc. (“BrightTALK”). TSC is a Massachusetts corporation.
TechTarget Limited is a subsidiary doing business principally in the United Kingdom. TTGT HK is a subsidiary incorporated in Hong Kong in order to facilitate the Company’s
activities in the Asia-Pacific region. In 2018, TechTarget modified its PRC operations consolidating its activities with other TechTarget locations. TechTarget (Beijing) Information
Technology Consulting Co. Ltd. (“TTGT Consulting”) and Keji Wangtuo Information Technology Co., Ltd., (“KWIT”), which were incorporated under the laws of the People’s
Republic of China (“PRC”), were closed during 2018. TechTarget (Australia) Pty Ltd. and TechTarget (Singapore) Pte Ltd. are the entities through which the Company does
business in Australia and Singapore, respectively; LeMagIT and TechTarget Germany GmbH, both wholly-owned subsidiaries of TechTarget Limited, are entities through which the
Company does business in France and Germany, respectively. BrightTALK are entities which the Company does business for the BrightTALK webinar and virtual event platform.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during
the reporting period. On an ongoing basis, the Company evaluates its estimates, including those related to revenues, long-lived assets, goodwill, the allowance for doubtful accounts,
stock-based compensation, earnouts, self-insurance accruals, the allocation of purchase price to intangibles and goodwill, and income taxes. Estimates of the carrying value of certain
assets and liabilities are based on historical experience and on various other assumptions that the Company believes to be reasonable. Actual results could differ from those
estimates.
58
Revenue Recognition under ASC 606, Revenue from Contacts with Customers (“ASC 606”)
On January 1, 2018, we adopted Topic 606 using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. The
Company’s adoption of ASC 606 reduced the Company’s accounts receivable and deferred revenue by $3.5 million as of January 1, 2018.
The Company generates its revenues from the sale of targeted marketing and advertising campaigns, which it delivers via its data analytic solutions. Revenue is recognized
when performance obligations are satisfied by transferring promised goods or services to customers, as determined by applying a five-step process consisting of: a) identifying the
contract, or contracts, with a customer, b) identifying the performance obligations in the contract, c) determining the transaction price, d) allocating the transaction price to the
performance obligations in the contract, and e) recognizing revenue when, or as, performance obligations are satisfied.
The Company’s offerings consist of:
•
•
•
•
•
IT Deal AlertTM. A suite of data and services for B2B technology companies that leverages the detailed purchase intent data that we collect on enterprise technology
organizations and professionals researching IT purchases on our network of websites. Through proprietary scoring methodologies, we use this insight to help our
customers identify and prioritize accounts and contacts whose content consumption around specific enterprise technology topics indicates that they are “in-market”
for a particular product or service. The suite of products and services include Priority Engine™, Qualified Sales Opportunities™, and Deal Data™. Priority Engine™
is a subscription service powered by our Activity Intelligence™ platform, which integrates with customer relationship management and marketing automation
platforms from salesforce.com, Marketo, Eloqua, Pardot, and Integrate. The service delivers lead generation workflow solutions that enable marketers and sales
forces to identify and understand accounts and individuals actively researching new technology purchases and then to engage those active prospects. Qualified Sales
Opportunities™ is a product that profiles specific in-progress purchase projects, including information on scope and purchase considerations. Deal Data™ is a
customized solution aimed at sales intelligence and data scientist functions within our customer organizations. It renders our Activity Intelligence™ data into one-
time offerings directly consumable by the customer’s internal applications. For Priority Engine as well as other duration based solutions, which are discussed below,
revenue is recognized ratably over the contract period using the same time-based measure of progress for each of the distinct performance obligations. Determining
whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant
judgment. Revenue from Qualified Sales Opportunities™, Deal Data™ and Research is recognized at the point in time when control is transferred to the customer,
which occurs when the related reports are provided to the customer.
Channel Offerings. Our offering allows our customers to deliver unlimited live webinars and videos to an unlimited audience.
Demand Solutions. Our offerings enable our customers to reach and influence prospective buyers through content marketing programs, such as white papers,
webcasts, podcasts, videocasts, virtual trade shows, and content sponsorships, designed to generate demand for their solutions, and through display advertising and
other brand programs that influence consideration by prospective buyers. We believe this allows B2B technology companies to maximize return on investment
(“ROI”) on marketing and sales expenditures by capturing sales leads from the distribution and promotion of content to our audience of enterprise technology and
business professionals.
Brand Solutions. Our suite of brand solutions offerings provides B2B technology companies with direct exposure to targeted audiences of enterprise technology and
business professionals actively researching information related to their products and services. We leverage our Activity Intelligence™ platform to enable significant
segmentation and targeting of specific audiences that can be accessed through these programs. Components of brand programs may include on-network branding,
off-network branding, and microsites and related formats.
Custom Content Creation. We also at times create white papers, case studies, webcasts or videos to our customers’ specifications. These customized content assets
are then promoted to our audience within both demand solutions and brand solutions programs.
Revenue from demand and brand solutions is primarily recognized when the transfer of control occurs. Certain of the contracts within demand and brand solutions are
duration-based campaigns which, in the event of customer cancellation, provide the Company with an enforceable right to a proportional payment for the portion of the campaign
based on services provided. Accordingly, revenue from duration-based campaigns is recognized using a time-based measure of progress, which the Company believes best depicts
how it satisfies its performance obligations in these arrangements as control is continuously transferred throughout the contract period. Revenue from custom content creation is
recognized over the expected period of performance using a single measure of progress, typically based on hours incurred.
59
To determine standalone selling price for the individual performance obligations in the arrangement, the Company uses an estimate of the observable selling prices in
separate transactions. The Company establishes best estimates considering multiple factors including, but not limited to, class of client, size of transaction, available inventory,
pricing strategies and market conditions. The Company uses a range of amounts to estimate stand-alone selling price when it sells the goods and services separately and needs to
determine whether a discount is to be allocated based upon the relative stand-alone selling price to the various goods and services. Judgment is required to determine the standalone
selling price for each distinct performance obligation.
Fair Value of Financial Instruments
Financial instruments consist of cash and cash equivalents, short-term and long-term investments, accounts receivable, accounts payable, long-term debt and contingent
consideration. Due to their short-term nature and liquidity, the carrying value of these instruments, with the exception of contingent consideration and long-term debt, approximates
their estimated fair values. See Note 4 for further information on the fair value of the Company’s investments. The Company classifies all of its short-term and long-term
investments as available-for-sale. The fair value of contingent consideration was estimated using a discounted cash flow method.
Business Combinations
The Company uses its best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. The
Company’s estimates are inherently uncertain and subject to refinement.
During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the fair value of these tangible and
intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill. In addition, uncertain tax positions and tax-related valuation allowances are initially
recorded in connection with a business combination as of the acquisition date. The Company continues to collect information and reevaluates these estimates and assumptions
quarterly and records any adjustments to the Company’s preliminary estimates to goodwill provided that the Company is within the measurement period. Upon the conclusion of the
measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the
Company’s consolidated statement of operations.
Long-Lived Assets, Goodwill and Indefinite-lived Intangible Assets
Long-lived assets consist primarily of property and equipment, capitalized software, goodwill and other intangible assets. The Company reviews long-lived assets, including
property and equipment and finite intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be
recoverable. Conditions that would trigger an impairment assessment include, but are not limited to, a significant adverse change in legal factors or business climate that could affect
the value of an asset or an adverse action or a significant decrease in the market price. A specifically identified intangible asset must be recorded as a separate asset from goodwill if
either of the following two criteria is met: (1) the intangible asset acquired arises from contractual or other legal rights; or (2) the intangible asset is separable. Accordingly,
intangible assets consist of specifically identified intangible assets. Goodwill is the excess of any purchase price over the estimated fair value of net tangible and intangible assets
acquired.
Goodwill and indefinite-lived intangible assets are not amortized but are reviewed annually for impairment or more frequently if impairment indicators arise. Separable
intangible assets that are not deemed to have an indefinite life are amortized over their estimated useful lives, which range from eighteen months to nineteen years, using methods of
amortization that are expected to reflect the estimated pattern of economic use, and are reviewed for impairment when events or changes in circumstances suggest that the assets may
not be recoverable. Consistent with the Company’s determination that it has a single reporting segment, it has been determined that there is a single reporting unit and goodwill is
therefore tested for impairment at the entity level. The Company performs its annual test of impairment of goodwill as of December 31st of each year and whenever events or
changes in circumstances suggest that the carrying amount may not be recoverable using the two-step process required by ASC 350, Intangibles – Goodwill and Other (“ASC 350”).
The first step of the impairment test is to identify potential impairment by comparing the reporting unit’s fair value with its net book value (or carrying amount), including goodwill.
The fair value is estimated based on a market value approach. If the fair value of the reporting unit exceeds its carrying amount, the reporting unit’s goodwill is not considered to be
impaired and the second step of the impairment test is not performed. Whenever indicators of impairment become present, the Company would perform the second step and compare
the implied fair value of the reporting unit’s goodwill, as defined by ASC 350, to it carrying value to determine the amount of the impairment loss, if any. As of December 31, 2020,
there were no indications of impairment based on the step one analysis, and the Company’s estimated fair value exceeded its goodwill carrying value by a significant margin.
Based on the aforementioned evaluation, the Company believes that, as of the balance sheet date presented, none of the Company’s goodwill or other long-lived assets were
impaired. The Company did not have any intangible assets, other than goodwill, with indefinite lives as of December 31, 2020 or 2019.
60
Allowance for Doubtful Accounts
The Company reduces gross trade accounts receivable for an allowance for doubtful accounts. The allowance for doubtful accounts is the Company’s best estimate of the
amount of probable credit losses in its existing accounts receivable. The allowance for doubtful accounts is reviewed on a regular basis, and all past due balances are reviewed
individually for collectability. Account balances are charged against the allowance after all means of collection have been exhausted and the potential for recovery is considered
remote. Provisions for doubtful accounts are recorded in general and administrative expense.
Below is a summary of the changes in the Company’s allowance for doubtful accounts for the years ended December 31, 2020, 2019, and 2018.
Year ended December 31, 2018
Year ended December 31, 2019
Year ended December 31, 2020
Property and Equipment and Other Capitalized Assets
Balance at
Beginning
of Year
Provision
Write-offs,
Net of
Recoveries
Balance at
End of
Year
$
$
$
1,783 $
2,099 $
1,899 $
986 $
339 $
218 $
(670) $
(539) $
(363) $
2,099
1,899
1,754
Property and equipment and other capitalized assets are stated at cost. Property and equipment acquired through acquisitions of businesses are initially recorded at fair value.
Depreciation is calculated on the straight-line method based on the month the asset is placed in service over the following estimated useful lives:
Furniture and fixtures
Computer equipment and software
Internal-use software and website development costs
Leasehold improvements
Property and equipment and other capitalized assets consist of the following:
Furniture and fixtures
Computer equipment and software
Leasehold improvements
Internal-use software and website development costs
Less: accumulated depreciation and amortization
Estimated Useful Life
3 - 10 years
3 years
3 - 5 years
Shorter of useful life or remaining duration of lease
As of December 31,
2020
2019
1,339 $
5,122
33,943
3,790
44,194
(30,533)
13,661 $
1,267
4,461
3,779
28,546
38,053
(25,682)
12,371
$
$
Depreciation expense was $5.8 million, $4.9 million, and $4.4 million for the years ended December 31, 2020, 2019, and 2018, respectively. Repairs and maintenance
charges that do not increase the useful life of the assets are charged to operations as incurred. The Company wrote off approximately $1.0 million, $7.3 million, and $1.5 million of
fully depreciated assets that were no longer in service during 2020, 2019, and 2018, respectively. Depreciation expense is classified as a component of operating expense in the
Company’s results of operations with the exception of certain depreciation expense which is classified as a component of cost of goods sold.
Internal-Use Software and Website Development Costs
The Company capitalizes costs incurred during the development of its website applications and infrastructure as well as certain costs relating to internal-use software. The
Company begins to capitalize costs to develop software and website applications when planning stage efforts are successfully completed, management has authorized and committed
project funding, and it is probable that the project will be completed, and the software will be used as intended. Judgment is required in determining the point at which various
projects enter the state at which costs may be capitalized, in assessing the ongoing value of the capitalized costs and in determining the estimated useful lives over which the costs
are amortized, which is generally four years. To the extent that the Company changes the manner in which it develops and tests new features and functionalities related to its
websites, assesses the ongoing value of capitalized assets, or determines the estimated useful lives over which the costs are amortized, the amount of website development costs it
capitalizes
61
and amortizes in future periods would be impacted. The estimated useful life of costs capitalized is evaluated for each specific project. Capitalized internal-use software and website
development costs are reviewed for recoverability whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. An
impairment loss would be recognized only if the carrying amount of the asset is not recoverable and exceeds its fair value. The Company capitalized internal-use software and
website development costs of $6.1 million, $5.1 million, and $3.0 million for the years ended December 31, 2020, 2019, and 2018, respectively.
Debt Issuance Costs
Costs incurred with the issuance of the Company’s convertible debt are deferred and amortized as interest expense over the term of the related convertible instrument
using the effective interest method. To the extent the convertible debt is outstanding, these amounts are reflected in the consolidated balance sheets as a deduction of the convertible
debt.
Concentrations of Credit Risk and Off-Balance Sheet Risk
Financial instruments that potentially expose the Company to concentrations of credit risk consist mainly of cash and cash equivalents, investments and accounts receivable.
The Company maintains its cash and cash equivalents and investments principally in accredited financial institutions of high credit standing. The Company routinely assesses the
credit worthiness of its customers. The Company generally has not experienced any significant losses related to individual customers or groups of customers in any particular
industry or area. The Company does not require collateral. Due to these factors, no additional credit risk beyond amounts provided for collection losses is believed by management to
be probable in the Company’s accounts receivable.
At December 31, 2020, 2019 and 2018, no customer represented 10% of total accounts receivable. No single customer accounted for 10% or more of total revenues in the
years ended December 31, 2020, 2019, or 2018.
Income Taxes
The Company’s deferred tax assets and liabilities are recognized based on temporary differences between the financial reporting and income tax bases of assets and liabilities
using statutory rates. A valuation allowance is established against net deferred tax assets if, based upon the weight of available evidence, it is more likely than not that some or all of
the deferred tax assets will not be realized. The Company records a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax
return using a “more likely than not” threshold as required by the provisions of ASC 740-10, Accounting for Uncertainty in Income Taxes (“ASC 740”).
The Company recognizes interest and penalties related to unrecognized tax benefits, if any, in income tax expense.
Stock-Based Compensation
The Company has stock-based employee compensation plans which are more fully described in Note 11. Stock-based compensation cost is measured at the grant date based
on the fair value of the award and is recognized in the Consolidated Statement of Income and Comprehensive Income using the straight-line method over the vesting period of the
award. The Company uses the Black-Scholes option-pricing model to determine the fair value of stock option awards.
Comprehensive Income
Comprehensive income includes all changes in equity during a period, except those resulting from investments by stockholders and distributions to stockholders. The
Company's comprehensive income includes changes in the fair value of the Company’s unrealized gains on available for sale securities and foreign currency translation adjustments.
There were no reclassifications out of accumulated other comprehensive income in the periods ended December 31, 2020, 2019, or 2018.
Foreign Currency
The functional currency for each of the Company’s subsidiaries is the local currency of the country in which it is incorporated. All assets and liabilities are translated into
U.S. dollar equivalents at the exchange rate in effect on the balance sheet date or at a historical rate. Revenues and expenses are translated at average exchange rates. Translation
gains or losses are recorded in stockholders’ equity as an element of accumulated other comprehensive income (loss).
62
Net Income Per Share
Basic earnings per share is computed based on the weighted average number of common shares and vested restricted stock units outstanding during the period. Because the
holders of unvested restricted stock units do not have non-forfeitable rights to dividends or dividend equivalents, the Company does not consider these restricted stock units to be
participating securities that should be included in its computation of earnings per share under the two-class method. Diluted earnings per share is computed using the weighted
average number of common shares and vested, undelivered restricted stock units outstanding during the period, plus the dilutive effect of potential future issuances of common stock
relating to stock option and restricted stock unit programs using the treasury stock method. In calculating diluted earnings per share, the dilutive effect of stock options and restricted
stock units is computed using the average market price for the respective period. In addition, the assumed proceeds under the treasury stock method include the average unrecognized
compensation expense of stock options and restricted stock units that are in-the-money. This results in the “assumed” buyback of additional shares, thereby reducing the dilutive
impact of stock options and restricted stock units.
A reconciliation of the numerator and denominator used in the calculation of basic and diluted net income per share is as follows:
For the Years Ended December 31,
2019
2018
2020
Numerator:
Net income
Denominator:
Basic:
$
17,068 $
16,875 $
12,955
Weighted average shares of common stock and vested, undelivered restricted
stock units outstanding
27,855,888
27,873,745
27,738,178
Diluted:
Weighted average shares of common stock and vested, undelivered restricted
stock units outstanding
Effect of potentially dilutive shares
Total weighted average shares of common stock and vested, undelivered restricted
stock units outstanding and potentially dilutive shares
27,855,888
818,659
27,873,745
437,942
27,678,959
973,855
28,674,547
28,311,687
28,652,814
Calculation of Net Income Per Common Share:
Basic:
Net income applicable to common stockholders
Weighted average shares of stock outstanding
Net income per common share
Diluted:
Net income applicable to common stockholders
Weighted average shares of stock outstanding
Net income per common share(1)
$
$
$
$
17,068 $
16,875 $
27,855,888
27,873,745
12,955
27,738,178
0.61 $
0.61 $
0.47
17,423 $
16,875 $
28,674,547
28,311,687
12,955
28,652,814
0.61 $
0.60 $
0.45
(1)
In calculating diluted earnings per share, 0 million, 0.3 million, and 0.5 million shares related to outstanding stock options and unvested, undelivered restricted stock units
which were excluded for the years ended December 31, 2020, 2019, and 2018, respectively, because they were anti-dilutive. Additionally, we excluded the impact of the
amortization into interest expense the amounts relating to our convertible notes to recalculate the net income utilized in diluted earnings per share.
63
Recent Accounting Pronouncements
Recently Adopted Accounting Guidance
In January 2017, the FASB issued Accounting Standards Update (“ASU”) No. 2017-04, Intangibles-Goodwill and Other (Topic 350), Simplifying the Test for Goodwill
Impairment (ASU 2017-04). ASU 2017-04 eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge (step 2 of the
goodwill impairment test) and instead requires only a one-step quantitative impairment test, performed by comparing the fair value of goodwill with its carrying amount. ASU 2017-
04 is effective on a prospective basis effective for goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for goodwill impairment
tests performed on testing dates after January 1, 2017. We adopted the new standard effective January 1, 2020 and the guidance did not have a material impact on our consolidated
financial statements.
In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation
Costs Incurred in a Cloud Computing Arrangement that is a Service Contract (ASU 2018-15), which requires implementation costs incurred by customers in cloud computing
arrangements (i.e., hosting arrangements) to be capitalized under the same premises of authoritative guidance for internal-use software, and deferred over the non-cancellable term of
the cloud computing arrangements plus any optional renewal periods that are reasonably certain to be exercised by the customer or for which the exercise is controlled by the service
provider. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. We adopted the
new standard effective January 1, 2020 and the guidance did not have a material impact on our consolidated financial statements.
In June 2016, the FASB issued ASU 2016-03, “Measurement of Credit Losses on Financial Instruments,” (ASU 2016-03) which amends ASC 326 “Financial Instruments—
Credit Losses” which introduces a new methodology for accounting for credit losses on financial instruments. The guidance establishes a new forward looking "expected loss model"
that requires entities to estimate current expected credit losses on accounts receivable and financial instruments by using all practical and relevant information. We adopted the new
standard effective January 1, 2020 and the guidance did not have a material impact on our consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, “Changes to Disclosure Requirements for Fair Value Measurements” (Topic 820) (ASU 2018-13), which improved the
effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements. We
adopted the new standard effective January 1, 2020 and the guidance did not have a material impact on our consolidated financial statements.
Accounting Guidance Not Yet Adopted
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): “Simplifying the Accounting for Income Taxes” (ASU 2019-12), which simplifies the
accounting for income taxes. This guidance will be effective for us in the first quarter of 2021 on a prospective basis, and early adoption is permitted. We are currently evaluating the
impact of the new guidance on our consolidated financial statements, however, based upon our evaluation to date we do not expect the guidance to have a material impact on our
consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20and Derivatives and Hedging – Contracts in Entity’s own
Equity (Subtopic 815-40), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible debt instruments and
contracts on an entity’s own equity. Among other things, the standard removes certain accounting models which require bifurcation from the host contract of certain features of
convertible debt instruments, unless the feature qualifies as a derivative under ASC 815. Additionally, companies are required to use the if-converted method for convertible
instruments in their calculations of diluted earnings per share. Early adoption is permitted but no earlier than the fiscal year beginning after December 15, 2020. Upon adoption, the
Company expects a decrease to additional paid in capital, an increase in the carrying value of its convertible note and an increase to retained earnings. The Company is continuing to
evaluate the effect that the adoption of this standard will have on its financial statements.
3. Revenue
Disaggregation of Revenue
The following table depicts the disaggregation of revenue according to categories consistent with how the Company evaluates its financial performance and economic risk.
International revenue consists of international geo-targeted campaigns, which are campaigns targeted at an audience of members outside of North America.
North America
International
Total Revenue
2020
Years Ended December 31,
2019
2018
$
$
90,919 $
57,457
148,376 $
89,582 $
44,375
133,957 $
82,660
38,673
121,333
64
Contract liabilities
Timing may differ between the satisfaction of performance obligations and the invoicing and collection of amounts related to the Company’s contracts with customers.
Liabilities are recorded for amounts that are collected in advance of the satisfaction of performance obligations. Contract liabilities on the accompanying Consolidated Balance
Sheets were $15.7 million, including approximately $9.7 million of deferred revenue acquired and $4.3 million at December 31, 2020 and December 31, 2019, respectively.
Additionally, certain customers may receive credits, which are accounted for as a material right. The Company estimates these amounts based on the expected amount of future
services to be provided to customers and allocates a portion of the transaction price to these material rights. The Company recognizes these material rights as the material rights are
exercised. The resulting amounts included in contract liabilities on the accompanying Consolidated Balance Sheets were $2.2 million and $2.4 million at December 31, 2020 and
December 31, 2019, respectively.
Year-to-Date Activity
Balance at January 1, 2018
Deferral of revenue
Recognition of previously unearned revenue
Balance at December 31, 2018
Deferral of revenue
Recognition of previously unearned revenue
Balance at December 31, 2019
Deferral of revenue
Recognition of previously unearned revenue
Balance at December 31,2020
Contract Liabilities
(in thousands)
4,088
5,573
(4,088)
5,573
7,666
(8,904)
4,335
19,769
(8,415)
15,689
$
$
$
$
The Company elected to apply the following practical expedients:
•
•
•
Existence of a Significant Financing Component in a Contract. As a practical expedient, the Company has not assessed whether a contract has a significant
financing component because the Company expects at contract inception that the period between payment by the customer and the transfer of promised goods or
services by the Company to the customer will be one year or less. Payment terms and conditions vary by contract type, although terms generally include requirement
of payment within 30 to 90 days. In addition, the Company has determined that the payment terms that the Company provides to its customers are structured
primarily for reasons other than the provision of financing to the customer.
Costs to Obtain a Contract. The Company’s revenues are primarily generated from customer contracts that are for one year or less. Costs primarily consist of
incentive compensation paid based on the achievements of sales targets in a given period for related revenue streams and are recognized in the month when the
revenue is earned. As a practical expedient, for amortization periods which are determined to be one year or less, the Company expenses any incremental costs of
obtaining the contract with a customer when incurred. For those customer contracts greater than one year, the Company capitalizes and amortizes the expenses over
the period of benefit.
Revenues Invoiced. The Company has applied the practical expedient for certain revenue streams to exclude the value of remaining performance obligations for (i)
contracts with an original expected term of one year or less or (ii) contracts for which the Company recognizes revenue in proportion to the amount it has the right to
invoice for services performed.
4. Fair Value Measurements
The Company measures certain financial assets and liabilities at fair value on a recurring basis, including cash equivalents, short-term and long-term investments and
contingent consideration. The fair value of these financial assets and liabilities was determined based on three levels of input as follows:
•
•
•
Level 1. Quoted prices in active markets for identical assets and liabilities;
Level 2. Observable inputs other than quoted prices in active markets; and
Level 3. Unobservable inputs.
65
The fair value hierarchy of the Company’s financial assets and liabilities carried at fair value and measured on a recurring basis is as follows:
Assets:
Short-term investments (1)
Total assets
Liabilities:
Contingent consideration - current (2)
Contingent consideration - non-current (2)
Total liabilities
December 31,
2020
$
$
$
$
84 $
84 $
1,027 $
1,751
2,778 $
December 31,
2019
Fair Value Measurements at
Reporting Date Using
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
— $
— $
— $
—
— $
84 $
84 $
— $
—
— $
—
—
1,027
1,751
2,778
Fair Value Measurements at
Reporting Date Using
Significant
Other
Observable
Inputs
(Level 2)
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Unobservable
Inputs
(Level 3)
Assets:
Short-term investments (1)
Total assets
$
$
5,012 $
5,012 $
— $
— $
5,012 $
5,012 $
—
—
(1)
(2)
Short-term investments consist of municipal bonds, corporate bonds, bond funds, U.S. Treasury securities, and government agency bonds; their fair value is calculated
using an interest rate yield curve for similar instruments.
Contingent consideration liabilities are measured using the income approach and discounted to present value based on an assessment of the probability that the Company
would be required to make such future payments. The contingent consideration liabilities are measured at fair value using significant level 3 (unobservable) inputs, such
as discount rates and probability measures. Remeasurement of the contingent consideration to fair value is expensed through the income statement in the period
remeasured.
The following table provides a roll-forward of the fair value of the contingent consideration categorized as Level 3 for the year ended December 31, 2020:
Balance as of December 31, 2019
Liabilities resulting from acquisitions
Amortization of discount on contingent liabilities
Remeasurement of contingent liabilities
Balance as of December 31, 2020
Amounts included in accrued expenses and other current liabilities
Amounts included in Other liabilities
Total Contingent Consideration
66
Fair Value
—
2,187
208
383
2,778
1,027
1,751
2,778
$
$
$
$
5. Acquisitions
2020
BrightTALK Limited
On December 23, 2020, the Company acquired all outstanding stock of BrightTALK Limited and its wholly owned subsidiary BrightTALK, Inc., which is a leading
marketing platform for webinars and virtual events that enables marketers to create original webinar and video content. The Company has included the financial results of
BrightTALK in the consolidated financial statements from the date of acquisition. The transaction costs associated with the acquisition were approximately $5.0 million and were
recorded in general and administrative expense. The acquisition date fair value of the consideration transferred for BrightTALK was approximately $151.0 million in cash.
The acquisition has been accounted for using the acquisition method of accounting, which requires the total purchase consideration to be allocated to the assets acquired and
liabilities assumed based on estimates of fair value at the date of acquisition. The following table summarizes the preliminary fair values of assets acquired and liabilities assumed as
of the date of acquisition:
Cash
Accounts receivable
Operating lease right-of-use assets
Other assets
Goodwill
Intangible assets
Accounts payable, accrued expenses and other liabilities
Unearned revenue
Operating lease liabilities
Deferred tax liabilities and income tax payable
Net Assets acquired
Fair Value
1,997
11,810
1,986
2,948
71,846
90,370
(9,194)
(6,980)
(2,446)
(11,490)
150,847
$
$
The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill, which is primarily attributed to
the assembled workforce and expanded market opportunities, for which there is no basis for U.S. income tax purposes. The fair values assigned to tangible assets acquired and
liabilities assumed are based on management’s estimates and assumptions. The provisional measurements of fair value for income taxes payable and deferred taxes set forth above
may be subject to change as additional information is received and certain tax returns are finalized. Certain tax attributes that will benefit the Company, for which the calculations are
not yet complete, are payable to the seller upon the Company’s realization of those benefits. Estimated fair value measurements relating to the acquisition are made using Level 3
inputs including discounted cash flow techniques. Fair value is estimated using inputs primarily from the income approach, which include the use of both the multiple period excess
earnings method and the relief from royalties method. The significant assumptions used in estimating fair value include (i) the estimated life the asset will contribute to cash flows,
such as attrition rate of customers or remaining contractual terms, (ii) profitability and (iii) the estimated discount rate that reflect the level of risk associated with receiving future
cash flows. The Company valued the customer relationship asset using an income approach; specifically, the multi-period excess earnings method. The significant assumptions used
to value customer relationships included, among others, attrition rates, revenue growth rate, and discount rate. The Company expects to finalize the valuation as soon as practicable,
but not later than one year from the acquisition date.
The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition:
Developed technology
Customer relationships
Other purchased intangible assets
Total intangible assets subject to amortization
$
$
Fair Value
Useful Life
19 years
10 years
10 years
29,840
55,950
4,580
90,370
Developed technology represents the estimated fair value of BrightTALK’s platform. Customer relationships represent the estimated fair values of the underlying
relationships with BrightTALK customers.
67
The amounts of revenue and earnings of BrightTALK included in the Company’s consolidated statement of operations from the acquisition date to December 31, 2020 are
as follows:
Total revenues
Pretax income
$
$
1,253
48
The following unaudited pro forma financial information summarizes the combined results of operations for the Company and BrightTALK, as though the companies were
combined as of January 1, 2019.
The unaudited pro forma financial information was as follows:
Total revenues
Net income (loss)
$
$
198,196
17,757
As of December 31,
2020
2019
$ 172,499
(8,175)
$
The pro forma financial information for all periods presented above has been calculated after adjusting the results of BrightTALK to reflect the business combination
accounting effects resulting from this acquisition, including acquisition-related costs, amortization expense from acquired intangible assets, and interest and amortization expense
relating to the Company’s convertible notes offering assumed as though the acquisition occurred as of the January 1, 2019. The historical consolidated financial information has been
adjusted in the pro forma combined financial results to give effect to pro forma events that are directly attributable to the business combination and factually supportable. The pro
forma financial information is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the
beginning of the Company’s fiscal 2019.
The pro forma financial information for 2020 and 2019 combines the historical results of the Company for 2020 and 2019, the adjusted historical results of BrightTALK for
2020 and 2019, and the effects of the pro forma adjustments noted above.
Other Acquisitions
During 2020, the Company acquired substantially all the assets of two other companies for an aggregate of $25.0 million in cash and $2.2 of contingent consideration and
has included the financial results of these companies in its consolidated financial statements from the dates of acquisition. The transactions were not material to the Company and the
costs associated with the acquisitions were not material. The Company accounted for the transactions as business combinations. In allocating the purchase consideration based on
estimated fair values, the Company recorded $17.1 million of intangible assets (offset by the value of assumed liabilities under of the agreements of $3.5 million), and $12.7 million
of goodwill. The majority of the goodwill balance associated with these business combinations is deductible for U.S. income tax purposes.
2018
The Company made a small, non-material acquisition on August 1, 2018 acquiring substantially all of the operating assets of a company for $0.6 million in cash.
6. Investments
The Company’s short-term investments are accounted for as available for sale securities. These investments are recorded at fair value with the related unrealized gains and
losses included in accumulated other comprehensive loss, a component of stockholders’ equity, net of tax. The cumulative unrealized loss, net of taxes, was $0, $0 and $15 as of
December 31, 2020, 2019, and 2018, respectively. Realized gains and losses on the sale of these investments are determined using the specific identification method. During 2020,
we realized a loss of $42 thousand. There were no realized gains or losses in 2019 or 2018.
68
Short-term and long-term investments consisted of the following:
Short-term investments:
Bond funds
Total short-term investments
Short-term investments:
Bond funds
Total short-term investments
Amortized
Cost
December 31, 2020
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
$
$
84
84
$
$
—
—
$
$
—
—
$
$
84
84
Amortized
Cost
December 31, 2019
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
$
$
5,012 $
5,012 $
— $
— $
— $
— $
5,012
5,012
The Company had no securities in an unrealized loss position at December 31, 2020 and December 31, 2019.
7. Goodwill
The changes in the carrying amount of goodwill are as follows:
Balance as of beginning of year
Effect of exchange rate changes
Additions
Balance as of end of year
8. Intangible Assets
The following table summarizes the Company’s intangible assets, net:
As of December 31,
2020
2019
$
$
93,639 $
979
84,500
179,118 $
93,687
(48)
—
93,639
Customer, affiliate and advertiser relationships
Developed websites, technology and patents
Trademark, trade name and domain name
Proprietary user information database and internet traffic
Non-Compete agreement
Total intangible assets
Customer, affiliate and advertiser relationships
Developed websites, technology and patents
Trademark, trade name and domain name
Proprietary user information database and internet traffic
Non-Compete agreement
Total intangible assets
Estimated
Useful Lives
(Years)
5-19
10
5-16
5
1.5-3
Estimated
Useful Lives
(Years)
5-17
10
5-8
5
1.5
$
$
$
$
As of December 31, 2020
Gross
Carrying
Amount
Accumulated
Amortization
78,283 $
32,535
7,619
1,149
230
119,816 $
(6,595) $
(1,315)
(1,831)
(1,149)
(54)
(10,944) $
Net
71,688
31,220
5,788
—
176
108,872
As of December 31, 2019
Gross
Carrying
Amount
Accumulated
Amortization
Net
6,520 $
1,476
1,792
1,122
10
10,920 $
(6,290) $
(1,026)
(1,763)
(1,122)
(9)
(10,210) $
230
450
29
—
1
710
69
Intangible assets are amortized over their estimated useful lives, which range from eighteen months to nineteen years, using methods of amortization that are expected to
reflect the estimated pattern of economic use. The remaining amortization expense will be recognized over a weighted average period of approximately 7.5 years. Amortization
expense was $0.5 million, $0.1 million and $0.1 million for the years ended December 31, 2020, 2019, and 2018, respectively. Amortization expense is recorded within operating
expenses as the intangible assets consist of customer-related assets and website traffic that the Company considers to be in support of selling and marketing activities. The Company
did not write-off any intangible assets in 2020 or 2019.
The Company expects amortization expense of intangible assets to be as follows:
Years Ending December 31:
2021
2022
2023
2024
2025
Thereafter
Amortization
Expense
$
$
8,634
8,204
8,029
7,999
7,999
68,007
108,872
9. Convertible Debt, Loan Agreement and Prior Term Loan Agreement
Convertible Debt
In December 2020, the Company issued $201.3 million in aggregate principal amount of 0.125% convertible senior notes (“Notes”) due December 15, 2025, unless earlier
repurchased by the Company or converted by the holder pursuant to their terms. Interest is payable semiannually in arrears on June 15 and December 15 of each year, commencing
on June 15, 2021.
The Notes are governed by an Indenture between the Company, as issuer, and U.S. Bank, National Association, as trustee. The Notes are unsecured and rank senior in right
of payment to the Company’s future indebtedness that is expressly subordinated in right of payment to the Notes and equal in right of payment to the Company’s unsecured
indebtedness that is not so subordinated.
Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of common stock,
at the Company’s election.
The Notes have an initial conversion rate of 14.1977 shares of common stock per $1,000 principal amount of Notes. This represents an initial effective conversion price of
approximately $70.43 per share of common stock and 2,857,447 shares issuable upon conversion. Throughout the term of the Notes, the conversion rate may be adjusted upon the
occurrence of certain events. Holders of the Notes will not receive any cash payment representing accrued and unpaid interest, if any, upon conversion of a Note, except in limited
circumstances. Accrued but unpaid interest will be deemed to be paid by cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s
common stock paid or delivered, as the case may be, to the holder upon conversion of Notes.
Prior to the close of business on September 15, 2025, the Notes will be convertible at the option of holders during certain periods, only upon satisfaction of certain conditions
set forth below. On or after September 15, 2025, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or
any portion of their Notes at the conversion price at any time regardless of whether the conditions set forth below have been met.
Holders may convert all or a portion of their Notes prior to the close of business on September 14, 2025, in multiples of the $1,000 principal amount, only under the
following circumstances:
•
•
during any calendar quarter commencing after the calendar quarter ending on March 31, 2021 (and only during such calendar quarter), if the last reported sales price of
the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day
of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;
during the five business day period after any five consecutive trading day period, or the Notes measurement period, in which the “trading price” (as defined in the
Indenture) per $1,000 principal amount of Notes for each trading day of the Notes
70
measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day;
•
•
if the Company calls any or all of the Notes for redemption, at any time prior to the close of business on September 14, 2025; or
upon the occurrence of specified corporate events.
As of December 31, 2020, the Notes are not yet convertible.
Based on market data available for publicly traded, senior, unsecured corporate bonds issued by companies in the same industry and with similar maturity, the Company
estimated the implied market interest rate of its Notes to be approximately 5%, assuming no conversion option. Assumptions used in the estimate represent what market participants
would use in pricing the liability component of the Notes, including market interest rates, credit standing, and yield curves, all of which are defined as Level 2 observable inputs. The
estimated implied interest rate was applied to the Notes, which resulted in a fair value of the liability component of $158.8 million upon issuance, calculated as the present value of
future contractual payments based on the $201.3 million of aggregate principal amount. The excess of the principal amount of the liability component over its carrying amount, or
the debt discount, is amortized to interest expense over the term of the Notes. The $42.5 million difference between the gross proceeds received from issuance of the Notes of $201.3
million and the estimated fair value of the liability component represents the equity component of the Notes and was recorded in additional paid-in capital. The equity component is
not remeasured as long as it continues to meet the conditions for equity classification.
In accounting for the transaction costs related to the issuance of the Notes, the Company allocated the total amount incurred to the liability and equity components in
proportion to the allocation of proceeds. Transaction costs attributable to the liability component, totaling $5.25 million, are being amortized to expense over the term of the Notes,
and transaction costs attributable to the equity component, totaling $1.4 million, and were included with the equity component in shareholders’ equity.
The Notes consist of the following as of December 31:
Liability Component:
Principal
Less: debt discount, net of amortization
Net carrying amount
Equity component (a)
2020
2019
$
$
$
201,250 $
47,368
153,882 $
41,059 $
(a)
The following table sets forth total interest expense recognized related to the Notes:
Recorded in the consolidated balance sheet within additional paid-in capital, net of $1,404 transaction costs in equity
0.125% Coupon
Amortization of debt discount and transaction costs
Year Ended December 31,
2020
2019
$
$
10 $
346
356 $
—
—
—
—
—
—
—
As of December 31, 2020, the fair value of the Notes, which was determined based on inputs that are observable in the market or that could be derived from, or corroborated
with, observable market data, quoted price of the Notes in an over-the-counter market (Level 2), and carrying value of debt instruments (carrying value excludes the equity
component of the Company’s convertible notes classified in equity) were as follows:
71
Convertible senior notes
$
December 31, 2020
December 31, 2019
Fair Value
Carrying Value Fair Value
153,882 $
Carrying Value
—
— $
218,940 $
Based on the closing price of our common stock of $59.11 on December 31, 2020, the if-converted value of the Notes was less than their respective principal amounts.
Loan Agreement
On December 24, 2018, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Western Alliance Bank as the lender. The Loan Agreement
provides for a $25 million term loan facility with a maturity date of December 10, 2023. The Loan Agreement was paid in full in December 2020 and all liens related to the Loan
Agreement released.
Borrowings under the Loan Agreement bore interest, on the outstanding daily balance thereof, at a floating per annum rate equal to one and three-eighths percent (1.375%)
above the greater of (a) the one (1) month U.S. LIBOR rate reported in The Wall Street Journal as of such date or (b) two percent (2.00%).
Interest expense under the Loan Agreement was $0.8 million and $0.9 million in 2020 and 2019, respectively, and under a prior Term Loan Agreement was $1.4 million in
2018, which includes non-cash interest expense of $9 thousand and $0.3 million in 2019 and 2018, respectively, related to the amortization of deferred issuance costs. During 2019,
the Company made principal payments totaling $1.3 million on the Loan Agreement.
10. Leases and Contingencies
Leases
On January 1, 2019, the Company adopted Topic 842 using the modified retrospective approach. The Company recorded operating lease assets (right-of-use assets) of $27.5
million and operating lease liabilities of $32.1 million. There was no impact to retained earnings upon adoption of Topic 842.
Operating Leases
The Company conducts its operations in leased office facilities under various noncancelable operating lease agreements that expire through December 2029.
On October 26, 2017, the Company and Hines Global REIT Riverside Center, LLC (“Hines”) entered into a Third Amendment (the “Third Amendment”) to the lease
agreement for office space in Newton, Massachusetts, dated as of August 4, 2009, by and between the Company and MA-Riverside Project, L.L.C. (predecessor-in-interest to Hines)
as amended (the “Newton Lease”). The Third Amendment extends the lease term to December 31, 2029 and preserves the Company’s option to extend the term for an additional
five-year period subject to certain terms and conditions set forth in the Newton Lease. The Third Amendment reduces the rentable space from approximately 110,000 square feet to
approximately 74,000 square feet effective January 1, 2018 and provides the Company with a one-time cash allowance of up to $3.3 million, which may be used by the Company for
any purpose. Beginning on January 1, 2018, base monthly rent under the Third Amendment will be $0.3 million. The base rent will increase biennially at a rate averaging
approximately 1% per year, beginning on January 1, 2020. The Company remains responsible for certain other costs under the Third Amendment, including operating expense and
taxes.
The Newton Lease contains rent concessions, which the Company is receiving over the life of the Newton Lease. Certain of the Company’s operating leases include lease
incentives and escalating payment amounts and are renewable for varying periods. The Company is recognizing the related rent expense on a straight-line basis over the term of each
lease, taking into account the lease incentives and escalating lease payments. Total rent expense under the Company’s leases was approximately $4 million, for each year ended
December 31, 2020, 2019 and 2018, respectively.
We have various non-cancelable lease agreements for certain of our offices with original lease periods expiring between 2019 and 2029. Our lease terms may include options
to extend or terminate the lease when it is reasonably certain we will exercise that option. Leases with renewal option allow the Company to extend the lease term typically between
1 and 5 years. When determining the lease term, renewal options reasonably certain of being exercised are included in the lease term. When determining if a renewal option is
reasonably certain of being exercised, the Company considers several economic factors, including but not limited to, the significance of leasehold improvements incurred on the
property, whether the asset is difficult to replace, underlying contractual obligations, or specific characteristics unique to that particular lease that would make it reasonably certain
that the Company would exercise such option. Renewal and termination options were generally not included in the lease term for the Company's existing operating leases. Certain of
72
the arrangements have discounted rent periods or escalating rent payment provisions. Leases with an initial term of twelve months or less are not recorded on the consolidated
balance sheets. We recognize rent expense on a straight-line basis over the lease term.
As of December 31, 2020, operating lease assets were $26 million and operating lease liabilities were $30.6 million. The maturity of the Company’s operating lease
liabilities as of December 31, 2020 were as follows (in thousands):
Years Ending December 31:
2021
2022
2023
2024
2025
Thereafter
Total future minimum lease payments
Less imputed interest
Total operating lease liabilities
Included in the condensed consolidated balance sheet:
Current operating lease liabilities
Non-current operating lease liabilities
Total operating lease liabilities
Minimum Lease
Payments
4,723
4,610
4,258
4,253
3,464
14,296
35,604
5,050
30,554
3,611
26,943
30,554
$
$
$
$
$
For the years ended December 31, 2020 and 2019, the total lease cost is comprised of the following amounts (in thousands):
Operating lease expense
Short-term lease expense
Total lease expense
The following summarizes additional information related to operating leases:
Weighted-average years remaining lease term — operating leases
Weighted-average discount rate — operating leases
December 31, 2020
December 31, 2019
$
$
3,888 $
73
3,961 $
3,865
117
3,982
4.7
3.7%
As of
December 31, 2020
If the rate implicit in the lease is not readily determinable, the Company uses its incremental borrowing rate as the discount rate. The Company uses its best judgment when
determining the incremental borrowing rate, which is the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term to the lease
payments in a similar currency.
73
Litigation
From time to time and in the ordinary course of business, the Company may be subject to various claims, charges, and litigation. At December 31, 2020 and 2019, the
Company did not have any pending claims, charges, or litigation that it expects would have a material adverse effect on its consolidated financial position, results of operations, or
cash flows.
11. Stock-Based Compensation
Stock Option and Incentive Plans
In April 2007, the Board approved the 2007 Stock Option and Incentive Plan (the “2007 Plan”), which was approved by the stockholders of the Company and became
effective upon the consummation of the Company’s IPO in May 2007. The 2007 Plan allows the Company to grant ISOs, NSOs, stock appreciation rights, deferred stock awards,
restricted stock units and other awards. Under the 2007 Plan, stock options could not be granted at less than fair market value on the date of grant and grants generally vest over a
three to four-year period. Stock options granted under the 2007 Plan expire no later than ten years after the grant date. Additionally, beginning with awards made in August 2015, the
Company had the option to direct a net issuance of shares for satisfaction of tax liability with respect to vesting of awards and delivery of shares. Prior to August 2015, this choice of
settlement method was solely at the discretion of the award recipient.
At the inception of the plan, the Company reserved for issuance an aggregate of 2,911,667 shares of common stock under the 2007 Plan, which expired in May 2017. The
2007 Plan was subject to an automatic annual increase of shares on January 1 of each year, beginning on January 1, 2008, equal to the lesser of (a) 2% of the outstanding number of
shares of common stock (on a fully-diluted basis) on the immediately preceding December 31 and (b) such lower number of shares as may be determined by the compensation
committee of the Board. The number of shares available for issuance under the 2007 Plan was subject to adjustment in the event of a stock split, stock dividend or other change in
capitalization. No new awards may be granted under the 2007 Plan; however, the shares of common stock remaining in the 2007 Plan are available for issuance in connection with
previously awarded grants under the 2007 Plan. There are 40,000 shares of common stock, including vested and outstanding restricted stock unit awards that are remaining under the
2007 Plan as of December 31, 2020.
In March 2017, the Board approved the 2017 Stock Option and Incentive Plan (the “2017 Plan”), which was approved by the stockholders of the Company at the 2017
Annual Meeting and became effective June 16, 2017. The 2017 Plan replaces the Company’s 2007 Plan. On that date 3,000,000 shares of Common Stock were reserved for issuance
under the 2017 Plan and, generally, shares that are forfeited or canceled from awards under the 2017 Plan also will be available for future awards. Under the 2017 Plan, the Company
may grant restricted stock and restricted stock units, non-qualified stock options, stock appreciation rights, performance awards, and other stock-based and cash-based awards.
Grants generally vest in equal tranches over a three-year period. Stock options granted under the 2017 Plan expire no later than ten years after the grant date. Shares of stock issued
pursuant to restricted stock awards are restricted in that they are not transferable until they vest. Stock underlying awards of restricted stock units are not issued until the units vest.
Non-qualified stock options cannot be exercised until they vest. Under the 2017 Plan, all stock options and stock appreciation rights must be granted with an exercise price that is at
least equal to the fair market value of the stock on the date of grant. The 2017 Plan broadly prohibits the repricing of options and stock appreciation rights without stockholder
approval and requires that no dividends or dividend equivalents be paid with respect to options or stock appreciation rights. The 2017 Plan further provides that, in the event any
dividends or dividend equivalents are declared with respect to restricted stock, restricted stock units, other stock-based awards and performance awards (referred to as “full-value
awards”), they would be subject to the same vesting and forfeiture provisions as the underlying award. There are 1,550,500 shares of common stock that are subject to outstanding
stock grants under the 2017 Plan as of December 31, 2020.
Accounting for Stock-Based Compensation
The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of an award. The Company calculated the fair values of the options granted
using the following estimated weighted-average assumptions:
Expected volatility
Expected term
Risk-free interest rate
Expected dividend yield
Weighted-average grant date fair value per share
Years Ended December 31,
2019
2018
2020
40%
6 years
0.34%
—%
$
11.29
$
39%
6 years
2.15%
—%
8.08
$
39%
6 years
2.82%
—%
11.94
The expected volatility of options granted has been determined using a weighted average of the historical volatility of the Company’s stock for a period equal to the expected
life of the option. The expected life of options has been determined utilizing the “simplified” method. The risk-free interest rate is based on a zero-coupon U.S. treasury instrument
whose term is consistent with the expected life of the stock options. The Company has not paid and does not anticipate paying cash dividends on its shares of common stock;
therefore, the expected dividend yield is assumed to be zero. The Company applied an estimated annual forfeiture rate based on historical averages in determining the expense
recorded in each period.
74
A summary of the stock option activity under the Company’s stock option plans for the year ended December 31, 2020 is presented below:
Options outstanding at December 31, 2019
Granted
Exercised
Forfeited
Canceled
Options outstanding at December 31, 2020
Options exercisable at December 31, 2020
Options vested or expected to vest at December 31, 2020
Weighted-
Average
Exercise
Price Per
Share
Weighted-
Average
Remaining
Contractual
Term
in Years
Aggregate
Intrinsic
Value
13.14
29.64
11.01
29.64
7.20
17.34
14.53
17.25
$
1,644
6.62 $
5.98 $
6.60 $
4,490
3,901
4,468
Options
Outstanding
140,000 $
25,000
(50,000)
(5,000)
(2,500)
107,500 $
87,500 $
106,728 $
During the years ended December 31, 2020, 2019, and 2018, the total intrinsic value of options exercised (i.e. the difference between the market price of the underlying stock
at exercise and the price paid by the employee to exercise the options) was $1.6 million, $1.3 million, and $2.7 million, respectively, and the total amount of cash received by the
Company from exercise of these options was $0.6 million, $0.4 million, and $1.0 million, respectively.
Restricted Stock Unit Awards
Restricted stock unit awards are valued at the market price of a share of the Company’s common stock on the date of the grant. A summary of the restricted stock unit award
activity under the Company’s plans for the year ended December 31, 2020 is presented below:
Nonvested outstanding at December 31, 2019
Granted
Vested
Forfeited
Nonvested outstanding at December 31, 2020
Weighted-
Average
Grant Date
Fair Value
Per Share
Aggregate
Intrinsic
Value
21.82
35.67
57.12
25.61
31.33 $
87,660
Shares
1,301,130 $
927,261
(732,891)
(17,500)
1,478,000 $
The total grant-date fair value of restricted stock unit awards that vested during the years ended December 31, 2020, 2019, and 2018 was $14.7 million, $11.4 million, and
$7.0 million, respectively.
As of December 31, 2020, there was $38.6 million of total unrecognized compensation expense related to stock options and restricted stock units, which is expected to be
recognized over a weighted average period of 2 years.
12. Stockholders’ Equity
Common Stock Repurchase Programs
On November 7, 2018 the Company announced a program (the “November 2018 Stock Repurchase Program”) to repurchase shares up to an aggregate amount of $25.0
million whereby the Company was authorized to repurchase the Company’s common stock from time to time on the open market or in privately negotiated transactions at prices and
in a manner that may be determined by management. The Company repurchased 736,760, 411,849 and 243,425 shares at an aggregate purchase price of $14.8 million, $7.1 million
and $3.1 million and an average share price of $20.10, $17.14 and $12.82 during the years ended December 31, 2020, 2019, and 2018, respectively, under the November 2018 Stock
Repurchase Program. We terminated this repurchase program in May 2020.
In May 2020, we announced that our Board had authorized a $25.0 million stock repurchase program (the “May 2020 Repurchase Program”) whereby we are authorized to
repurchase our common stock from time to time on the open market or in privately negotiated
75
transactions at prices and in the manner that may be determined by management. No amounts were repurchased under this plan during 2020.
In June 2016, the Company announced that the Board had authorized a $20.0 million stock repurchase program (the “June 2016 Repurchase Program”). Pursuant to the June
2016 Repurchase Program, the Company repurchased 211,729 shares of common stock for an aggregate purchase price of $3.9 million in 2018. In August 2018, the June 2016
Common Stock Repurchase plan expired.
Repurchased shares are recorded under the cost method and are reflected as treasury stock in the accompanying Consolidated Balance Sheets.
Reserved Common Stock
As of December 31, 2020, the Company has reserved 1,775,441 shares of common stock for use in settling outstanding options and unvested restricted stock units that have
not been issued, as well as future awards available for grant under the 2007 and 2017 Plans and 4,000,186 shares for the if converted amount of the Convertible Senior Notes.
13. Income Taxes
Income before provision for income taxes was as follows:
United States
Foreign
Income before income taxes
The income tax provision consisted of the following:
Current:
Federal
State
Foreign
Total current
Deferred:
Federal
State
Foreign
Total deferred
Years Ended December 31,
2019
2018
2020
20,271
2,233
22,504
$
$
20,709
1,339
22,048
$
$
11,917
2,926
14,843
Years Ended December 31,
2019
2018
2020
4,073 $
1,230
243
5,546
(122)
2
10
(110)
5,436 $
3,415 $
538
347
4,300
742
242
(111)
873
5,173 $
1,540
540
(55)
2,025
(65)
(53)
(19)
(137)
1,888
$
$
$
$
76
The income tax provision for the years ended December 31, 2020, 2019 and 2018 differs from the amounts computed by applying the statutory federal income tax rate to
consolidated income before provision for income taxes as follows:
Provision computed at statutory rate
Increase resulting from:
Difference in rates for foreign jurisdictions
Stock-based compensation
Other non-deductible expenses
Non-deductible officers compensation
State income tax provision
Losses not benefitted
Subsidiary earnings taxed in the US
Research and development credit
Cancellation of Foreign Subsidiary Debt
Valuation allowance
Other
Provision for income taxes
$
Significant components of the Company’s net deferred tax assets and liabilities are as follows:
Deferred tax assets:
Net operating loss carryforwards
Right of use operating lease liability
Accruals and allowances
Stock-based compensation
Other
Gross deferred tax assets
Less valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Intangible asset amortization
Right of use operating lease asset
Convertible debt basis difference
Depreciation
Total deferred tax liabilities
Net deferred tax liabilities
As reported:
Non-current deferred tax assets
Non-current deferred tax liabilities
Years Ended December 31,
2019
2018
2020
$
4,726 $
4,630 $
3,116
17
(1,314)
548
899
974
—
(40)
(466)
—
71
21
5,436 $
18
(425)
243
482
615
—
(11)
(387)
—
—
8
5,173 $
93
(1,708)
252
198
396
23
(104)
(279)
(127)
—
28
1,888
As of December 31,
2020
2019
7,533 $
7,219
2,287
1,796
4
18,839
(304)
18,535
(22,504)
(6,186)
(10,841)
(2,636)
(42,167)
(23,632) $
216 $
(23,848) $
99
7,769
1,452
1,397
4
10,721
(33)
10,688
(3,204)
(6,650)
—
(2,309)
(12,163)
(1,475)
136
(1,611)
$
$
$
$
In evaluating the ability to realize the net deferred tax asset, the Company considers all available evidence, both positive and negative, including past operating results, the
existence of cumulative losses in the most recent fiscal years, tax planning strategies that are prudent and feasible, and forecasts of future taxable income. In considering sources of
future taxable income, the Company makes certain assumptions and judgments which are based on the plans and estimates used to manage the underlying business of the Company.
Changes in the Company’s assumptions and estimates, as well as changes in tax rates, may materially impact income tax expense for the period.
The valuation allowances were $304 thousand and $33 thousand at December 31, 2020 and 2019 respectively. The increase of $271 thousand valuation allowance relates to
the acquisition of BrightTALK, Inc. As of December 31, 2020, the Company believes that $271 thousand net U.S. deferred tax assets acquired from Bright Talk, Inc. will not be
realized, therefore a full valuation allowance has been recorded against the net deferred tax asset balance. The Company uses its best estimates and assumptions to assign fair value
to the tangible and intangible assets acquired and liabilities assumed at the acquisition date and to evaluate acquired tax attributes and temporary differences. The Company’s
estimates are inherently uncertain and subject to refinement. Accordingly, the provisional measurements of fair value of the income taxes payable and deferred taxes set forth above
are subject to change. The Company expects to finalize the purchase accounting as soon as practicable, but not later than one year from the acquisition date.
77
The Company had no unrecognized tax benefits at December 31, 2020. It is not expected that the amount of unrecognized tax benefits will change significantly within the
next twelve months.
The Company files income tax returns in the U.S. and in foreign jurisdictions. Generally, the Company is no longer subject to U.S., state, local and foreign income tax
examinations by tax authorities in its major jurisdictions for years before 2017, except to the extent of NOL and tax credit carryforwards from those years. Major taxing jurisdictions
include the U.S., both federal and state. As of December 31, 2020, the Company also had also had U.S. federal and state NOL carryforwards of $27.2 million, of which $6.7 million
will begin to expire in 2036 and the remaining amount may be carried forward indefinitely. The Company also has foreign NOL carryforwards of $2.5 million, which may be carried
forward indefinitely. The deferred tax assets related to the domestic NOL carryforwards have been partially offset by valuation allowance related to BrightTALK, Inc. and the
deferred tax assets related to the foreign NOL carryforwards have been partially offset by a $0.2 million valuation allowance related to Hong Kong.
Under the provisions of the Internal Revenue Code, NOL carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the
ownership interest of significant stockholders over a three-year period in excess of 50 percent, as defined under Sections 382 and 383 of the Internal Revenue Code, respectively, as
well as similar state provisions. The Company’s U.S. NOL acquired from BrightTALK, Inc. may be subject to such annual limitation based on the acquisition and any subsequent
change in ownership of the Company.
The Company considers the excess of its financial reporting over its tax basis in investments in foreign subsidiaries essentially permanent in duration and as such has not
recognized deferred tax liability related to this difference. Undistributed earnings of the Company’s foreign subsidiaries amounted to approximately $10.1 million as of
December 31, 2020. The Company has not provided any additional federal or state income taxes or foreign withholding taxes on the undistributed earnings as such earnings have
been indefinitely reinvested in the business. Due to the various methods by which such earnings could be repatriated in the future, the amount of taxes attributable to the
undistributed earnings is not practicably determinable.
14. Segment Information
The Company views its operations and manages its business as one operating segment based on factors such as how the Company manages its operations and how its
executive management team reviews results and makes decisions on how to allocate resources and assess performance.
Geographic Data
Net sales by campaign target area were as follows (1):
North America
International
Total Revenue
2020
Years Ended December 31,
2019
2018
$
$
90,919 $
57,457
148,376 $
89,582 $
44,375
133,957 $
82,660
38,673
121,333
(1)
Net sales to customers by campaign target area is based on the geo-targeted (target audience) location of the campaign.
Net sales to unaffiliated customers by geographic area were as follows (2):
United States
United Kingdom
Other International
Total
2020
Years Ended December 31,
2019
2018
$
$
103,797 $
18,405
26,174
148,376 $
99,669 $
14,104
20,184
133,957 $
89,340
14,391
17,602
121,333
(2)
Net sales to unaffiliated customers by geographic area is based on the customers’ current billing addresses and does not consider the geo-targeted (target audience) location
of the campaign.
78
Long-lived assets by geographic area were as follows:
United States
International
Total
Years Ended December 31,
2020
2019
$
$
195,424 $
106,227
301,651 $
102,572
4,148
106,720
Long-lived assets are comprised of property and equipment, net; goodwill; and intangible assets, net. No single country outside of the U.S. and the United Kingdom
accounted for 10% or more of the Company’s long-lived assets during either of these periods.
15. 401(k) Plan
The Company maintains a 401(k)-retirement savings plan (the “Plan”) whereby employees may elect to defer a portion of their salary and contribute the deferred portion to
the Plan. The Company contributes an amount equal to 50% of the employee’s contribution to the Plan, up to an annual limit of $3 thousand in 2020, 2019 and 2018. The Company
contributed $1.2 million, $1.2 million and $1.1 million to the Plan for each of the years ended December 31, 2020, 2019, and 2018 respectively. Employee contributions and the
Company’s matching contributions are invested in one or more collective investment funds at the participant’s direction. The Company’s matching contributions vest 25% annually
and are 100% vested after four consecutive years of service.
79
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A.
Controls and Procedures
Disclosure Controls and Procedures
The Company is required to maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in its reports under the
Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange
Commission’s (the “SEC’s”) rules and forms, and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer and
Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure.
In connection with the preparation of the Annual Report on Form 10-K for the period ended December 31, 2020, management, under the supervision of the Chief Executive
Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), conducted an evaluation the Company’s disclosure controls and procedures as of
December 31, 2020. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were
effective at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
As previously discussed, we completed our acquisition of BrightTALK Limited during the fourth quarter of 2020 (see Note 5 to the consolidated financial statements). We
are in the process of integrating certain controls and related procedures for BrightTALK with those of TechTarget. Other than integrating such controls, there were no changes in our
internal control over financial reporting, identified in connection with the evaluation of such internal control, that occurred during the fourth quarter of 2020 that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule
13a-15(f) and 15d-15(f) promulgated under the Exchange Act, as a process designed by, or under the supervision of, a company’s principal executive and principal financial officers
and effected by the company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting
includes those policies and procedures that:
•
•
•
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and
directors of the Company; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a
material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria for effective control over financial reporting
described in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In accordance with SEC rules, management elected to exclude BrightTALK Limited, acquired on December 23, 2020, from its assessment of the effectiveness of the
Company’s internal control over financial reporting as of December 31, 2020. BrightTALK represents approximately 10% of the Company’s consolidated total assets, excluding the
preliminary value of goodwill and purchased intangible assets as of December 31, 2020 and 1% of the Company’s consolidated sales and operating income, respectively, for the year
ended December 31, 2020. Based on management’s evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2020, our internal
control over financial reporting was effective. Management has reviewed its assessment with the Audit Committee.
The independent registered public accounting firm, Stowe and Degon LLC, has audited our consolidated financial statements and has issued an attestation report on our
internal control over financial reporting as of December 31, 2020, which is included herein.
80
Item 9B.
Other Information
None.
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
The information required by this item concerning directors and executive officers is incorporated herein by reference under the headings to be titled “Election of Class II
Directors” and “Information About Corporate Governance” in our definitive proxy statement to be filed with the Securities and Exchange Commission in connection with the
Company’s 2021 Proxy Statement (the “Proxy Statement”). The Proxy Statement is expected to be filed no later than 120 days after the end of our fiscal year ended December 31,
2020 in connection with the solicitation of proxies for the Company’s 2021 annual meeting of stockholders.
Code of Ethics
The Company has a Code of Business Conduct and Ethics that applies to all of our employees, officers (including our principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar functions) as well as the members of the Board of Directors of the Company. The code is available at
https://investor.techtarget.com/govdocs. We will make any required disclosure of future changes to the code, or waivers of such provisions, on the same website.
Item 11.
Executive Compensation
The information required by this item will be set forth under the headings to be titled “Director Compensation,” “Executive Compensation,” and “Compensation Committee
Report” in our Proxy Statement and is incorporated herein by reference.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item will be set forth under the headings to be titled “Security Ownership of Certain Beneficial Owners and Management” and “Equity
Compensation Plan Information” in our Proxy Statement and is incorporated herein by reference.
Item 13.
Certain Relationships and Related Transactions, and Director Independence
The information required by this item will be set forth under the headings to be titled “Information about Corporate Governance” and “Certain Relationships and Related
Party Transactions” in our Proxy Statement and is incorporated herein by reference.
Item 14.
Principal Accountant Fees and Services
The information required by this item will be set forth under the heading to be titled “Independent Registered Public Accounting Firm” in our Proxy Statement and is
incorporated herein by reference.
81
PART IV
Item 15.
Exhibits, Financial Statement Schedules
(a)
Documents filed as part of this report:
(1)
Financial Statements are filed as part of this Annual Report on Form 10-K. The following consolidated financial statements are included in Item 8:
•
•
•
•
•
Consolidated Balance Sheets as of December 31, 2020 and 2019
Consolidated Statements of Income and Comprehensive Income for the Years Ended December 31, 2020, 2019, and 2018
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2020, 2019, and 2018
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019, and 2018
Notes to Consolidated Financial Statements
(2)
Financial statement schedules have been omitted because they are not required or because the required information is given in the Consolidated Financial
Statements or Notes thereto.
(3)
Exhibit Index.
82
EXHIBIT INDEX
Exhibit
Number
Description
3.1
3.2
4.1
*4.2
4.3
10.1
Articles of Incorporation and By-Laws
Fourth Amended and Restated Certificate of Incorporation of the Registrant
Amended and Restated Bylaws of the Registrant
Instruments Defining the Rights of Security Holders
Incorporated by Reference to
Form or
Schedule
Exhibit
No.
Filing
Date
with SEC
SEC File
Number
10-Q
S-1/A
3.1
3.3
11/13/2007
001-33472
3/20/2007
333-140503
Specimen Stock Certificate for shares of the Registrant’s Common Stock
S-1/A
4.1
4/10/2007
333-140503
Description of Securities Registered Under Section 12 of the Exchange Act
Indenture (including form of Notes) with respect to TechTarget’s 0.125% Convertible Senior
Notes due 2025, dated as of December 17, 2020, between TechTarget and U.S. Bank National
Association, as trustee.
8-K
4.1
12/17/2020
001-33472
Material Contracts
Second Amended and Restated Investors’ Rights Agreement by and among the Registrant, the
Investors named therein and SG Cowen Securities Corporation, dated as of December 17,
2004
S-1
10.1
2/07/2007
333-140503
10.2
Form of Indemnification Agreement between the Registrant and its Directors and Officers
S-1/A
10.2
5/15/2007
333-140503
10.3#
2007 Stock Option and Incentive Plan
S-1/A
10.3
4/20/2007
333-140503
10.4#
Form of Incentive Stock Option Agreement under the 2007 Stock Option and Incentive Plan
S-1/A
10.4
4/20/2007
333-140503
10.5#
Form of Non-Qualified Stock Option Agreement under the 2007 Stock Option and Incentive
S-1/A
10.5
4/20/2007
333-140503
Plan
10.6#
Form of Non-Qualified Stock Option Agreement for Non-Employee Directors
S-1/A
10.5.1
4/27/2007
333-140503
10.7#
Form of Restricted Stock Agreement under the 2007 Stock Option and Incentive Plan
S-1/A
10.6
4/20/2007
333-140503
10.8#
Form of Restricted Stock Unit Agreement under the 2007 Stock Option and Incentive Plan
10-K
10.8
3/31/2008
001-33472
10.09#
Restricted Stock Unit Agreement, dated December 18, 2007, by and between the Registrant
10-K
10.10
3/31/2008
001-33472
and Don Hawk
10.10#
Restricted Stock Unit Agreement, dated December 18, 2007, by and between the Registrant
10-K
10.13
3/31/2008
001-33472
and Greg Strakosch
10.11#
Form of Incentive Stock Option Grant Agreement under the 1999 Stock Option Plan (for
S-1
10.9
2/07/2007
333-140503
grants prior to September 27, 2006)
83
Exhibit
Number
Description
Incorporated by Reference to
Form or
Schedule
Exhibit
No.
Filing
Date
with SEC
SEC File
Number
10.12#
Form of Incentive Stock Option Grant Agreement under the 1999 Stock Option Plan (for
S-1
10.10
2/07/2007
333-140503
grants on or after September 27, 2006)
10.13#
Form of Incentive Stock Option Grant Agreement under the 1999 Stock Option Plan (for
S-1/A
10.10.1
5/01/2007
333-140503
grants to executives)
10.14#
Form of Nonqualified Stock Option Grant Agreement under the 1999 Stock Option Plan
S-1
10.11
2/07/2007
333-140503
10.15#
Amended and Restated Employment Agreement, dated January 17, 2008, by and between the
10-K
10.25
3/31/2008
001-33472
Registrant and Greg Strakosch
10.16#
Amended and Restated Employment Agreement, dated January 17, 2008, by and between the
10-K
10.26
3/31/2008
001-33472
Registrant and Don Hawk
10.17#
Lease Agreement by and between MA-Riverside Project L.L.C., as landlord and TechTarget,
8-K
10.1
8/7/2009
001-33472
Inc., as tenant
10.18
First Amendment to Lease Agreement, by and between the Registrant and MA-Riverside
Project L.L.C. for the premises located at One Riverside Center, 275 Grove Street, Newton,
Massachusetts, dated November 18, 2010
8-K
10.1
11/22/2010
001-33472
10.19
Amended and Restated Restricted Stock Unit Agreement, dated August 10, 2009, by and
10-K
10.33
3/16/2011
001-33472
between the Registrant and Michael Cotoia
10.20#
Employment Agreement dated as of January 1, 2012 between the Registrant and Michael
8-K
10.1
1/10/2012
001-33472
Cotoia
10.21#
Amendment and Waiver to Amended and Restated Employment Agreement between the
10-K
10.37
3/15/2012
001-33472
Registrant and Don Hawk (dated January 10, 2012)
10.22#
Second Amendment to Lease Agreement by and between Hines Global REIT Riverside
Center, LLC, as landlord and successor in interest to MA-Riverside Project, LLC and
TechTarget, Inc., as tenant dated July 23, 2015
10-Q
10.1
11/9/2015
001-33472
10.23
Employment Agreement between the Registrant and Michael Cotoia (dated May 3, 2016)
8-K
10.2
5/9/2016
001-33472
10.24
Employment Agreement between the Registrant and Greg Strakosch (dated May 3, 2016)
8-K
10.3
5/9/2016
001-33472
10.25#
Employment Agreement between the Registrant and Daniel T. Noreck (dated December 19,
8-K
10.1
12/19/2016
001-33472
2016)
10.26
2017 Stock Option and Incentive Plan
8-K
10.1
6/20/2017
001-33472
10.27#
Form of Restricted Stock Unit Agreement
10-Q
10.2
8/9/2017
001-33472
10.28#
Form of Stock Option Agreement
10-Q
10.3
8/9/2017
001-33472
10.29#
Third Amendment to Lease Agreement by and between Hines Global REIT Riverside Center,
LLC, as landlord and successor in interest to MA-Riverside Project, LLC and TechTarget,
Inc., as tenant dated October 26, 2017
8-K
10.1
10/27/2017
001-33472
84
Exhibit
Number
Description
Incorporated by Reference to
Form or
Schedule
Exhibit
No.
Filing
Date
with SEC
SEC File
Number
10.30
Form of Restricted Stock Unit Agreement
8-K
10.1
8/3/2018
001-33472
*10.31#
2021 Executive Incentive Bonus Plan
10.32
Indemnification Agreement
8-K
10.1
08/17/2019
001-33472
16.1
Changes in Registrant's Certifying Accountant, Letter from BDO USA, LLP dated June 17,
8-K
16.1
6/17/2019
001-33472
2019.
*21.1#
List of Subsidiaries
*23.1
*23.2
*31.1
*31.2
Consent of Stowe & Degon, LLC
Consent of BDO USA, LLP
Certification of Chief Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(A)
And 15d-14(A), As Adopted Pursuant To Section 302 of the Sarbanes-Oxley Act Of 2002
Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-
14(A) And 15d-14(A), As Adopted Pursuant To Section 302 of the Sarbanes-Oxley Act Of
2002
*32.1
Certification by Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS
XBRL Instance Document (1)
101.SCH
XBRL Taxonomy Extension Schema Document (1)
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document (1)
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document (1)
101.LAB
XBRL Taxonomy Extension Label Linkbase Document (1)
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document (1)
*
#
(1)
Filed herewith.
Management contract or compensatory plan or arrangement filed as an Exhibit to this report pursuant to 15(a) and 15(c) of Form 10-K.
Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets as of
December 31, 2020 and December 31, 2019, (ii) Consolidated Statements of Comprehensive Income for the Years ended December 31, 2020, December 31, 2019 and
December 31, 2018, (iii) Consolidated Statements of Stockholders’ Equity for the Years ended December 31, 2020, December 31, 2019 and December 31, 2018, (iv)
Consolidated Statements of Cash Flows for the Years ended December 31, 2020, December 31, 2019 and December 31, 2018, and (v) Notes to Consolidated Financial
Statements.
Item 16.
Form 10-K Summary
None.
85
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TECHTARGET, INC.
Date: March 1, 2021
By:
/s/ Michael Cotoia
Michael Cotoia
Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Signature
/s/ Michael Cotoia
Michael Cotoia
/s/ Daniel Noreck
Daniel Noreck
/s/ Greg Strakosch
Greg Strakosch
/s/ Robert D. Burke
Robert D. Burke
/s/ Bruce Levenson
Bruce Levenson
/s/ Roger M. Marino
Roger M. Marino
/s/ Christina Van Houten
Christina Van Houten
Title
Chief Executive Officer and Director
(Principal executive officer)
Chief Financial Officer and Treasurer
(Principal financial and accounting officer)
Date
March 1, 2021
March 1, 2021
Executive Chairman
March 1, 2021
Director
Director
Director
Director
86
March 1, 2021
March 1, 2021
March 1, 2021
March 1, 2021
DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES
EXCHANGE ACT OF 1934
Exhibit 4.2
TechTarget, Inc. (“TechTarget,” the “Company,” “we,” “our,” or “us”) has one class of securities registered under Section 12 of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”): our Common Stock, par value $0.001 per share (the “Common Stock”). Our Fourth Amended and Restated Certificate of Incorporation
(“Certificate of Incorporation”) authorizes the issuance of up to 100,000,000 shares of Common Stock and 5,000,000 shares of undesignated preferred stock, par value $0.001 per
share (the “Preferred Stock”).
The general terms and provisions of our Common Stock are summarized below. This description may not contain all the information that is important to you and is
qualified in its entirety by reference to our Certificate of Incorporation and our Amended and Restated By-Laws, as amended (the “By-Laws”). For additional information, you
should refer to the provisions of our Certificate of Incorporation and our By-Laws, which are included as exhibits to the Annual Report on Form 10-K to which this description is an
exhibit. Please also refer to the applicable provisions of the Delaware General Corporation Law (the “DGCL”) for additional information.
Dividends
Holders of Common Stock are entitled to receive proportionately any dividends as may be declared by our board of directors (the “Board”) or any authorized
committee of the Board, subject to any preferential dividend rights of any outstanding shares of Preferred Stock. These dividends are non-cumulative.
Voting Rights
Holders of Common Stock are entitled to one vote per share with respect to each matter presented to our stockholders on which the holders of Common Stock are
entitled to vote and do not have cumulative voting rights. Subject to any rights, powers and preferences of outstanding shares of Preferred Stock, and except as provided by law,
holders of our Common Stock have the exclusive right to vote for the election of directors of the Company and on all other matters requiring stockholder action. An uncontested
election of directors at a meeting of stockholders is determined by a majority of the votes cast by the shares present in person or represented by proxy at the meeting and entitled to
vote on the election. A contested election of directors at a meeting of stockholders is determined by a plurality of the votes cast by the stockholders entitled to vote on the election.
Liquidation
In the event of our liquidation or dissolution, holders of Common Stock are entitled to receive ratably all assets available for distribution to stockholders after the
payment of all debts and other liabilities and subject to the prior rights of any outstanding shares of Preferred Stock.
Other Rights and Preferences
Holders of Common Stock have no preemptive, subscription, redemption or conversion rights. Additionally, there are no sinking fund provisions applicable to the
Common Stock. Outstanding shares of Common Stock are non-assessable.
Preferred Stock
Our Board, or any authorized committee thereof, has the authority under our Certificate of Incorporation to issue Preferred Stock in one or more series and to establish
or change from time to time the number of shares of each such series and fix the designations, powers, including voting powers (full or limited, or no voting powers), preferences and
the relative, participating, optional or other special rights of the shares of each series and any qualifications, limitations and restrictions thereof. The rights, powers and preferences of
holders of Common Stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of Preferred Stock which we may designate and issue. In
addition, the issuance of Preferred Stock could impede the completion of a merger, tender offer or other takeover attempt.
Certain Provisions of our Certificate of Incorporation and By-Laws and the DGCL
Our Certificate of Incorporation and By-laws and the DGCL contain provisions that could have the effect of delaying, deferring or discouraging another party from
acquiring control of us. These provisions, which are summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are
also designed to encourage persons seeking to acquire control of us to first negotiate with our Board.
Number of Directors
Subject to the rights of holders of any series of Preferred Stock to elect directors, our Board establishes the number of directors that constitutes our Board.
Staggered Board; Removal of Directors
Our Certificate of Incorporation divides our directors into three classes with staggered three-year terms. Our directors may be removed from office only for cause and
only by the affirmative vote of holders of our capital stock representing at least 75% of the voting power of all outstanding stock entitled to vote. Any vacancy on our Board,
including a vacancy resulting from an enlargement of our Board, may be filled only by the affirmative vote of a majority of our directors then in office, even if less than a quorum of
the Board. The classification of our Board of directors and the limitations on the removal of directors and filling of vacancies could make it more difficult for a third party to acquire,
or discourage a third party from seeking to acquire, control of us.
Stockholder Action by Written Consent; Special Meetings
Our Certificate of Incorporation and our By-laws provide that any action required or permitted to be taken by our stockholders must be effected at a duly called annual
or special meeting of such stockholders and may not be effected by any consent in writing by such stockholders. Our Certificate of Incorporation and our By-laws also provide that,
except as otherwise required by law, special meetings of our stockholders can only be called by our Board.
Advance Notice Requirements
Our By-laws contain an advance notice procedure for stockholder proposals to be brought before an annual meeting of stockholders, including proposed nominations of
persons for election to the board of directors. Stockholders at an annual meeting may only consider proposals or nominations specified in the notice of meeting or brought before the
meeting by or at the direction of the Board or by a stockholder of record on the record date for the meeting, who is entitled to vote at the meeting and who has delivered timely
written notice in proper form to our secretary of the stockholder’s intention to bring such business before the meeting. These provisions could have the effect of delaying until the
next stockholder meeting stockholder actions that are favored by the holders of a majority of our outstanding voting securities.
Delaware Business Combination Statute
We are subject to Section 203 of the DGCL. Subject to certain exceptions, Section 203 prevents a publicly held Delaware corporation from engaging in a “business
combination” with any “interested stockholder” for three years following the date that the person became an interested stockholder, unless the interested stockholder attained such
status with the approval of our Board or unless the business combination is approved in a prescribed manner. Under Delaware law, a “business combination” includes, among other
things, a merger or consolidation involving us and the “interested stockholder” and the sale of more than 10% of our assets. In general, an “interested stockholder” is any entity or
person beneficially owning 15% or more of our outstanding voting stock and any entity or person affiliated with or controlling or controlled by such entity or person.
Super-Majority Voting
The DGCL provides generally that the affirmative vote of a majority of the shares entitled to vote on any matter is required to amend a corporation’s certificate of
incorporation or by-laws, unless a corporation’s certificate of incorporation or by-laws, as the case may be, requires a greater percentage. The affirmative vote of holders of our
capital stock representing at least 75% of the voting power of all outstanding stock entitled to vote is required to amend or repeal the provisions of our Certificate of Incorporation
described in this section entitled “Certain Provisions of our Certificate of Incorporation and By-Laws and the DGCL”. The affirmative vote of either a majority of the directors then
in office or holders of our capital stock representing at least 75% of the voting power of all outstanding stock entitled to vote is required to amend or repeal our By-laws.
2021 Executive Incentive Bonus Plan
1.
Purpose
Exhibit 10.31
This 2021 Executive Incentive Bonus Plan (the “Plan”) is intended to provide an incentive for superior work and to motivate eligible
executives of TechTarget, Inc. (the “Company”) toward even higher achievement and business results, to tie their goals and interests to those of the
Company and its stockholders and to enable the Company to attract and retain highly qualified executives. The Plan is for the benefit of Covered
Executives (as defined below).
2.
Covered Executives
From time to time, the Compensation Committee of the Board of Directors of the Company (the “Committee”) may select certain key executives
(the “Covered Executives”) to be eligible to receive bonuses hereunder.
3.
Administration
The Committee shall have the sole discretion and authority to administer and interpret the Plan. The specific goals and targets under of the
Plan for each performance period shall be determined by the Committee and, once approved, filed with the minutes of the Committee.
4.
Bonus Determinations
(a) A Covered Executive may receive a bonus payment under the Plan based upon the attainment of performance targets which are
established by the Committee and relate to financial and operational metrics with respect to the Company or any of its subsidiaries (the “Performance
Goals”), including the following: earnings per share, revenues, EBITDA, Adjusted EBITDA (defined as EBITDA further adjusted for stock-based
compensation expense), percentage of revenue under longer-term contract, or such other metrics as the Committee may determine. For 2021, payment
of a bonus pursuant to the Plan will be based 1/3 on attainment of a Revenue, Adjusted EBITDA, and Percentage of Revenue under Longer-Term
Contract (“Longer-Term Contracts Goal”) target, respectively, as defined and approved by the Committee.
(b) Except as otherwise set forth in this Section 4(b): (i) any bonuses paid to Covered Executives under the Plan shall be based upon
objectively determinable bonus formulas that tie such bonuses to one or more performance targets relating to the Performance Goals, (ii) bonus formulas
for Covered Executives shall be adopted in each performance period by the Committee and communicated to each Covered Executive at the beginning
of each bonus period and (iii) no bonuses shall be paid to Covered Executives unless and until the Committee makes a determination with respect to the
attainment of the performance objectives. Notwithstanding the foregoing, the Company may adjust bonuses payable under the Plan based on
achievement of individual performance goals or pay bonuses (including, without limitation, discretionary bonuses) to Covered Executives under the Plan
based upon such other terms and conditions as the Committee may in its discretion determine.
2021 Executive Incentive Bonus Plan
1
Exhibit 10.31
(c) Each Covered Executive shall have a targeted bonus opportunity for each performance period. The maximum bonus payable to a
Covered Executive under the Plan shall be established by the Committee for the applicable performance period.
(d) The payment of a bonus to a Covered Executive with respect to a performance period shall be conditioned upon the Covered Executive’s
employment by the Company on the last day of the performance period; provided, however, that the Committee may make exceptions to this
requirement, in its sole discretion, including, without limitation, in the case of a Covered Executive’s termination of employment, retirement, death or
disability and as required under the terms of any applicable agreement with a Covered Executive.
(e) In order for the Covered Executives to earn a bonus with respect to the Revenue or Adjusted EBITDA targets, the minimum threshold of
90% of the Adjusted EBITDA and/or Revenue bonus target for the subject quarter must be achieved. If the applicable 90% threshold is achieved, the
Covered Executives will earn 50% of the targeted bonus amount at 90% of the threshold with respect to each metric. The Covered Executives will earn
an additional 5% of that metric’s allocation for their targeted bonus amount for each additional 1% of the Adjusted EBITDA and Revenue bonus target
achieved over 90% until 100% of the Adjusted EBITDA and Revenue bonus target is achieved. In the event that Adjusted EBITDA for the full fiscal year
2021 is greater than 100% of the aggregate amount of the Covered Executive’s target bonus amount, then that portion of the bonus payable in excess of
the targeted bonus amount will be payable in common stock of the Company.
(f) In order for the Covered Executives to earn a bonus with respect to the Longer-Term Contracts Goal, the Covered Executives must
increase the Longer-Term Contracts Goal base (as determined by the Committee). For each increase of the difference between the Longer-Term
Contracts Goal base and the Longer-Term Contracts Goal, Covered Executives will earn 5% of that metric’s allocation for their targeted bonus amount
until 100% of the Longer-Term Contracts Goal is achieved. In the event that the Longer-Term Contracts Goal is exceeded, as measured as of the fourth
quarter of fiscal year 2021, then for each tenth of 1% above the Longer-Term Contracts Goal each Covered Executive will earn an additional 5% to their
target bonus amount for the Longer-Term Contracts Goal. The portion of the bonus payable in excess of the targeted bonus amount will be payable in
common stock of the Company.
5.
Timing of Payment
The Performance Goals will be measured at the end of each fiscal year after the Company’s financial reports have been published. If the
Performance Goals are met, payments will be made within 60 days thereafter, but not later than March 15.
6.
Amendment and Termination
The Company reserves the right to amend or terminate the Plan at any time in its sole discretion.
2021 Executive Incentive Bonus Plan
2
TechTarget, Inc.
List of Subsidiaries
Subsidiary Legal Name
TechTarget Securities Corporation
TechTarget Limited
TechTarget (HK) Limited
TechTarget (Beijing) Information Technology Consulting Company, Limited *
TechTarget (Australia) Pty Ltd.
TechTarget (Singapore) PTE. Ltd.
E-Magine Médias SAS
TechTarget Germany GmbH
BrightTALK, Inc.
BrightTALK Limited
* Effective December 26, 2018, the entity was no longer a subsidiary.
Exhibit 21.1
State/Country
Incorporated
MA
United Kingdom
Hong Kong
China
Australia
Singapore
France
Germany
DE
United Kingdom
Employer
ID Number
20-1921630
NA
NA
NA
NA
NA
NA
NA
NA
NA
% Owned
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Exhibit 23.1
TechTarget, Inc.
Newton, Massachusetts
We hereby consent to the incorporation by reference the Registration Statements on From S-3 (No. 333-181187 and 333-200080) and Form S-8 (No. 333-145785, 333-202051 and
333-219351) of TechTarget, Inc. of our reports dated March 1, 2021, relating to the consolidated financial statements and effectiveness of TechTarget’s internal control over
financial reporting for the year ended December 31, 2020 which appears in this 10-K.
/s/ Stowe & Degon, LLC
Westborough, MA
March 1, 2021
Consent of Independent Registered Public Accounting Firm
Exhibit 23.2
TechTarget, Inc.
Newton, Massachusetts
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-181187 and 333-200080) and Form S-8 (No. 333-
145785, 333-202051 and 333-219351) of TechTarget, Inc. of our report dated March 12, 2019, relating to the consolidated financial statements for the year
ended December 31, 2018, which appears in this Form 10-K.
/s/ BDO USA, LLP
Boston, Massachusetts
March 1, 2021
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.1
I, Michael Cotoia, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of TechTarget, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-
15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and
the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely
affect the registrant’s ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting.
Date: March 1, 2021
/s/ Michael Cotoia
Michael Cotoia
Chief Executive Officer
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.2
I, Daniel Noreck, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of TechTarget, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-
15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and
the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely
affect the registrant’s ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting.
Date: March 1, 2021
/s/ Daniel Noreck
Daniel Noreck
Chief Financial Officer and Treasurer
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND
PRINCIPAL FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
Each of Michael Cotoia and Daniel Noreck hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in
his/her capacity as Chief Executive Officer and Chief Financial Officer and Treasurer, respectively of TechTarget, Inc. (the Company), that, to his knowledge, the Annual Report of
the Company on Form 10-K for the period ended December 31, 2020 as filed with the Securities and Exchange Commission (the Report) fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
Date: March 1, 2021
Date: March 1, 2021
By:
By:
/s/ Michael Cotoia
Michael Cotoia
Chief Executive Officer
/s/ Daniel Noreck
Daniel Noreck
Chief Financial Officer and Treasurer