UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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Securities registered pursuant to Section 12(b) of the Exchange Act:
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Securities registered pursuant to Section 12(g) of the Exchange Act:
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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.
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The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $
The registrant had
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement relating to TechTarget, Inc.’s 2023 Annual Meeting of Shareholders are incorporated by reference into Part III of this Form 10-K.
TABLE OF CONTENTS
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Item 1. |
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3 |
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Item 1A. |
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19 |
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Item 1B. |
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34 |
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Item 2. |
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34 |
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Item 3. |
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34 |
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Item 5. |
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Item 6. |
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Item 7. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 7A. |
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53 |
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Item 8. |
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54 |
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Item 9. |
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
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Item 9A. |
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Item 9B. |
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Item 9C. |
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Disclosure Regarding Foreign Jurisdictions that Prevent Inspections |
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Item 10. |
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85 |
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Item 11. |
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
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Item 13. |
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Certain Relationships and Related Transactions, and Director Independence |
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Item 14. |
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85 |
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Item 15. |
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86 |
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87 |
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Item 16. |
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89 |
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90 |
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Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K contains “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, 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 important 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 or future health pandemics and any related economic downturns on our business, operations, and the markets in which we and our customers operate; difficulties in integrating acquired businesses; changes in economic or regulatory conditions or other trends affecting the internet, internet advertising and information technology industries; data privacy laws, rules and regulations; the impact of foreign currency exchange rates; certain macroeconomic factors facing the global economy, including disruptions in the capital markets, economic sanctions and economic slowdowns or recessions, rising inflation and interest rates fluctuations on our results; and other matters included in our filings with the SEC, and those detailed under Part I, Item 1A, “Risk Factors” of this Annual Report on Form 10-K. 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. (the “Company”, “we”, “us” or “our”) is a global data, software and analytics leader for purchase intent-driven marketing and sales data which delivers business impact for business-to-business (“B2B”) companies. Our solutions are designed to enable B2B technology companies to identify, reach, and influence key enterprise technology decision makers faster and with higher efficacy. We offer products and services intended to 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 content creation, demand generation, brand marketing, and other advertising techniques.
Our goal is to 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 that 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 and users appreciate the ability to deepen their pre-purchase research by accessing the extensive vendor-supplied content we make available across our virtual events, webinar channels and website network (collectively, our “Network”). Likewise, these members and users can derive significant additional value from the ability to seamlessly interact with and contribute to information exchanges in a given field on our Network. To advance our ability to provide purchase intent-driven marketing and sales data, we have been acquisitive over the last three years. During 2021, we acquired Xtelligent Healthcare Media, LLC, a leading healthcare B2B media company focusing on healthcare-related technology. Similarly, during 2020, we acquired (i) BrightTALK Limited, a technology media company that provides customers with a platform to create, host and promote webinar and video content, (ii) The Enterprise Strategy Group, Inc., a leading provider of decision support content based on user research and market analysis for global enterprise companies, and (iii) Data Science Central, LLC, a digital publishing and media company focused on data science and business analytics.
We had approximately 30.2 million and 29.1 million registered members and users, which we refer to as our “audiences”, as of December 31, 2022 and 2021, respectively. While the size of our audiences does not provide direct insight into our customer numbers or our revenue, we believe the value of the services we sell 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
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designed to improve their marketing and sales efforts. The targeted nature of our audiences 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 2022, delivered marketing and sales services programs to over 3,400 customers.
Please refer to the section below titled “Our Strategy” regarding our longer-term growth plans.
Business Trends
Our proprietary purchase intent marketing and sales data-driven solutions, such as data-driven lead generation, 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. We believe modern organizations see the digital transformation as a necessary investment to remain competitive, a long-term dynamic that has benefitted our customers.
Our business has been and is likely to continue to be impacted by macro-economic conditions. Because our customers are B2B technology companies, the success of our business is intrinsically linked to the health and market conditions of the enterprise technology industry. We have observed the enterprise technology market materially worsen during 2022, with third party data indicating that over 1,000 technology companies, including many of our largest customers, have announced layoffs. The layoffs have resulted in a challenging selling environment where we have seen elongated sales cycles, budget cuts and freezes at many of our customers, which have impacted our near-term outlook. We are seeing our international markets perform worse than our domestic markets. Given the weak macroeconomic conditions, in December 2022, we announced a headcount reduction of approximately 5% of our workforce, which is expected to be completed in the first quarter of 2023 and result in approximately $7 million in annual savings.
While we continue to see the impacts of the current worsening of the technology market, we continue to believe there are multiple long-term trends in our market which will support the sustained growth of our business and the products and services we offer. The significant trends that we believe we have benefitted from over the past few years are still in place, including the modernization of the sales and marketing organization with automation and first party purchase intent data, growing sensitivity and regulation around internet privacy and the demographic transition of younger buyers who want to do more self-service due diligence and have less interactions with vendor sales representatives.
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:
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
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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 Technology Officer. 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 viable solutions 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 demand 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 and sale 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 create meaningful content 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 are designed to 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. We believe our solutions benefit from the following competitive advantages:
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Our Solutions
Our solutions consist of:
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Our solutions are designed to benefit enterprise technology and business professionals and B2B technology companies in the following ways:
Benefits to Enterprise Technology and Business Professionals
Benefits to B2B technology companies
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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 our customers to help meet their business growth objectives.
In order to achieve this goal, we intend to:
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Platform and Content
Our content platform consists of a network of specialized websites and webinar and video channels 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 are designed to meet the needs of enterprise technology and business professionals for expert, peer and B2B technology company information and provide a platform on which B2B technology companies can launch targeted marketing and sales 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 audiences’ respective job responsibilities and the marketing and sales focus of the products being promoted by our B2B technology 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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We also cover servers, application and desktop solutions deployed in distributed computing environments. 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, which covers server, storage and systems management, as well as the integration of on-premises Windows environments with the Microsoft Azure cloud; 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. TechTarget Enterprise Desktop focuses on the deployment and management of Windows, Linux and macOS end-user computing environments. This market has evolved to focus on digital workspace technology, in which IT professionals can manage end-user access to a variety of resources and workspaces. TechTarget Mobile Computing covers the enterprise technology management issues surrounding the deployment of tablets and smartphones in the workplace. Combined with our properties that focus on server virtualization, TechTarget Virtual Desktop focuses on desktop virtualization, giving us a comprehensive offering addressing the area of virtualization technologies. This site also covers the growing area of desktops as a service, as well as application streaming and other virtual and cloud-based delivery methods.
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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/sales 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/sales program, typically less than six months, and through integrated, contracts in excess of 270 days (“longer-term contracts”) covering various client needs. We have developed a broad customer base and delivered campaigns to over 3,400 customers in 2022. During 2022, 2021, and 2020, no single customer represented 10% or more of total revenues.
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 our sales force by the sector-specific market categories that we operate in 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 our 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, 2022, our sales and marketing staff consisted of approximately 500 people. The majority of our sales and marketing staff is located in our Newton, Massachusetts headquarters and our offices and remote workforces in California, London, England, New York, New York and Sydney, Australia.
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 our inception. Examples of our direct communications include selected e-mail updates on new
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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 seek to 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 and webinar channels 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 and users for our sites. Because our sites focus on specific sectors of the enterprise technology market, our content is highly targeted and we believe is an effective means for attracting search engine traffic and from this, growing our member and user base. We also make marketing expenditures designed to supplement our non-paid traffic and registered members and users including, 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 off-site data centers 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, users and customers.
Competition
The market for B2B technology companies marketing and sales 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 Ziff Davis, Inc., Madison Logic, Inc., and Foundry (formerly IDG Communications), an IDG, Inc. company. 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 Ziff Davis, Inc., and Foundry, an IDG, Inc. company. In the data-oriented businesses, we compete with providers of predictive analytics and internet-based analysis including companies like 6sense Insights, Inc., Infer, Inc., Bombora, Inc. and Aberdeen Group, LLC. 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 compete with a number of web-based meeting, webinar and virtual event providers and physical event providers, such as LogMeIn, Inc., Intrado Corporation and ON24, Inc. Many of these 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 from 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
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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, users 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, users 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 and users as well as potential website visitors and members and users. 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, users 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 and Privacy. 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 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 new and/or have implemented comprehensive privacy laws (such as the California Consumer Privacy Act) which may have an impact on how we can conduct our business. 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.
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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 and BrightTALK 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, 2022, we had approximately 1,000 full-time employees worldwide. None of our U.S employees are represented by a labor union and only a small number of our international employees in the United Kingdom and France are represented by workers’ councils and have the benefits of collective bargaining agreements at the national and/or sector level. We have not experienced interruptions of operations or work stoppages due to labor disagreements. TechTarget is an innovative company in a dynamic environment that fosters a collaborative culture among its energetic, driven 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 27% 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. 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.
In December 2022, we committed to a restructuring plan (the “Plan”) intended to generate operational efficiencies, strengthen our financial position through reducing costs, and better align our operations with our current strategic objectives. The Plan involved streamlining the operations of certain of our business units and included the elimination of approximately 60 positions, or approximately 5% of our then current workforce. We believe we continue to have good relations with our employees.
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 and sales 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.
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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.
Available Information
Our website address is www.techtarget.com, and our investor relations website is located at https://investor.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.
Investors and others should note that we announce material information to our investors using one or more of the following: SEC filings, press releases and our corporate website, including without limitation the “Investor Relations” section of our website. We use these channels, as well as social media channels such as Twitter and LinkedIn, in order to achieve broad, non-exclusionary distribution of information to the public and for complying with our disclosure obligations under Regulation FD. It is possible that the information we post on our corporate website or other social media could be deemed to be material information. Therefore, we encourage investors, the media, and others interested in our company to review the information we post on the “Investor Relations” section of our corporate website and on our social media channels.
References to our website and information found on our website should not be deemed incorporated by reference into this Annual Report on Form 10-K.
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Item 1A. Risk Factors
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 our 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:
General domestic and global economic, business or industry conditions, financial market instability, and geopolitical changes 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, inflation, volatile business and consumer confidence, unemployment, responses to public health crisis, including pandemics like COVID-19 and epidemics and geopolitical unrest, including from the impacts of the Russian invasion of Ukraine and its global ramifications. These and other macro‑economic conditions have contributed to unpredictable changes in the global economy and expectations of future global economic growth. Additionally, economic weakness in the U.S. and international markets has adversely affected our customers and their spending decisions, causing them to reduce or delay their purchases of our offerings, which has adversely affected and may continue to affect our business.
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 and customer confidence, inflation, unemployment, tariffs, declines in stock markets, or other factors affecting economic and geopolitical conditions generally. These macro-economic conditions may also result in increased expenses due to higher allowances for doubtful accounts and potential goodwill and asset impairment charges and may make it more difficult for us to make accurate forecasts of revenue, gross margin, cash flows and expenses. We recognize that these challenging macro-economic conditions have and may continue to negatively affect the sales of our offerings, both in the U.S. and internationally, and could increase exposure to losses from bad debts, increase the cost and decrease the availability of financing, or increase the risk of loss on investments. The impact in the future of these macro-economic conditions on our business, results of operations, financial condition and/or liquidity is uncertain and will depend on future developments that we may not be able to accurately predict.
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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. For example, recent macroeconomic headwinds have caused general anxiety, elongated sales cycles, budget cuts and freezes at many of our customers. 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 driven marketing and sales products. 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:
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. 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.
The majority of 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 ongoing efforts to enter into longer-term contracts with customers for our products and services may not continue to be successful, particularly in light of current macroeconomic conditions. 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.
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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:
If we are not successful in maintaining and growing our member and user 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 users, 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 and users to our websites and virtual event and webinar platform 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 and virtual event and webinar platform 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 and virtual event and webinar platform. 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.
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, 2022 approximately 36% 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.
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In addition to many of the same challenges we face domestically, there are additional risks and costs to doing business in international markets, including:
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 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 10% and 14% of our total revenues for the years ended December 31, 2022 and 2021, 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 Ziff Davis, Inc. (formerly J2 Global, Inc.), Madison Logic, Inc., and Foundry (formerly IDG Communications), providers of predictive analytics and internet-based analysis including companies like 6sense Insights, Inc., Infer, Inc., Bombora, Inc. and Aberdeen Group, LLC , contact providers such as ZoomInfo Technologies Inc., as well as webinar providers such as LogMeIn, Inc., Intrado Corporation and ON24, Inc. Customers may choose our competitors over us not only because they prefer our competitors’ online
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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.
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.
In December 2022, we committed to a restructuring plan intended to generate operational efficiencies, strengthen our financial position through reducing costs, and better align our operations with our current strategic objectives. The Plan involved streamlining the operations of certain of our business units and included the elimination of approximately 60 positions, or approximately 5% of our then current workforce. We may find it more difficult to hire and retain qualified personnel as a result of the Plan.
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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:
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 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:
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.
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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.
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
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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 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. In addition, there are new privacy laws that may impact our business operations. 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. 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. In addition, other states, including Virginia, Colorado, Connecticut and Utah, already have passed state privacy laws. 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. States also are reviewing other categories of privacy laws, addressing certain practices (such as marketing), collection of certain data (e.g., biometrics or children’s data) or otherwise addressing privacy concerns in various ways. These laws may impact our business activities, including our identification of research subjects, relationships with business partners and ultimately the marketing and distribution of our products. We may be required to devote substantial resources to implement and maintain compliance with the CCPA, and noncompliance with these laws could result in regulatory investigations and fines or private litigation.
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.
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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 or other contractual obligations including, but not limited to, indemnification and liability obligations, which may cause us to incur potential business disruption and expense. 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 February 23, 2021. 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. This CJEU decision and subsequent actions from Data Protection Agencies in the EU may lead to increased scrutiny on data transfers from the EU to the U.S. generally and increase our costs of compliance with data privacy legislation as well as our costs of negotiating appropriate privacy and security agreements with our vendors and business partners. 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. As with other issues related to Brexit, there are open questions about how personal data will be protected in the UK and whether personal information can transfer from the EU to the UK. Following the withdrawal of the U.K. from the EU, the U.K. Data Protection Act 2018 applies to the processing of personal data that takes place in the U.K. and includes parallel obligations to those set forth by GDPR. While the Data Protection Act of 2018 in the United
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Kingdom that “implements” and complements the European Union General Data Protection Regulation, or GDPR, has achieved Royal Assent on May 23, 2018 and is now effective in the United Kingdom, it is still unclear whether transfer of data from the European Economic Area, or EEA, to the United Kingdom will remain lawful under GDPR. The United Kingdom government has already determined that it considers all European Union and EEA member states to be adequate for the purposes of data protection, ensuring that data flows from the United Kingdom to the European Union/EEA remain unaffected. In addition, a recent decision from the European Commission appears to deem the UK as being “essentially adequate” for purposes of data transfer from the EU to the UK, although this decision may be re-evaluated in the future.
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 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.
The Federal Trade Commission and state Attorneys General all are aggressive in reviewing privacy and data security protections for consumers. New laws also are being considered at both the state and federal levels. Accordingly, failure to comply with federal and state laws (both those currently in effect and future legislation) regarding privacy and security of personal information could expose us to fines and penalties under such laws. There also is the threat of consumer class actions related to these laws and the overall protection of personal data. Even if we are not determined to have violated these laws, government investigations into these issues typically require the expenditure of significant resources and generate negative publicity, which could harm our reputation and our business.
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
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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.
The 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, 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.
If we were to experience a significant cybersecurity breach of our information systems or data, the costs associated with the investigation, remediation and potential notification of the breach to counterparties and data subjects could be material, in addition to potential costs related to regulatory investigations in the United States or other countries. In addition, our remediation efforts may not be successful. If we do not allocate and effectively manage the resources necessary to build and sustain the proper technology and cybersecurity infrastructure, we could suffer significant business disruption, including transaction errors, supply chain or manufacturing interruptions, processing inefficiencies, data loss or the loss of or damage to intellectual property or other proprietary information.
In addition to the foregoing, any breach of privacy laws or data security laws, particularly resulting in a significant security incident or breach involving the misappropriation, loss or other unauthorized use or disclosure of sensitive or confidential consumer information, could have a material adverse effect on our business, reputation and financial condition. There is no assurance that privacy and security-related safeguards we implement will protect us from all risks associated with the processing (by us or our service providers), storage
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and transmission of such information. In certain situations, both in the United States and in other countries, we also may be obligated as a result of a security breach to notify individuals and/or government entities about these breaches.
Our business, which is dependent on centrally located communications, computer hardware systems and cloud-based infrastructure providers, 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 which could result in a negative impact on our business.
Our operations are dependent on our communications systems, computer hardware and cloud-based infrastructure providers, 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, and hacking and our cloud-based infrastructure providers could take actions, such as establishing unfavorable pricing terms or limiting access to service and other similar events outside of our control, which would impact our ability to run our operations. 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.
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.
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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 $192.2 million of goodwill and $95.5 million of net intangible assets as of December 31, 2022. 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. 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, 2022. 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 is volatile and may decline substantially.
The trading price of our common stock is 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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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 and the accounting and tax implications of induced conversion transactions in the Notes(as defined below). 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.
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:
Our significant indebtedness could adversely affect our financial condition.
At December 31, 2022, we had $51 million in aggregate principal amount of 0.125% convertible senior notes due 2025 (the “2025 Notes”) and $414 million in aggregate principal of 0.0% convertible senior notes due 2026 (the “2026 Notes” and together with the 2025 Notes, the “Notes”) outstanding. We may also borrow up to $75 million under our loan and security agreement with Western Alliance Bank, as administrative agent and collateral agent for the lenders, and the banks and other financial institutions or entities from time-to-time party thereto as lenders (the “2021 Loan Agreement”). The significant amount of indebtedness we carry and may carry in the future could limit our ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements, stock repurchases or other purposes.
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Our outstanding indebtedness 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. Our ability to refinance or repay at maturity our indebtedness will depend on the capital markets and our financial condition at such time and we ultimately may not be able to do so on desirable terms or at all, which could result in a default on our debt obligations. Any or all of the above events and/or factors could have an adverse effect on our results of operations and financial condition.
Covenants in our loan agreement governing our revolving line of credit may restrict our operations, and our failure to comply with these covenants may adversely affect our business, results of operations and financial condition.
The 2021 Loan Agreement is secured by a security interest on substantially all of our assets and contains various restrictive covenants, including restrictions on our ability to dispose of our assets, merge with or acquire other entities, incur other indebtedness, make investments and engage in transactions with our affiliates. The 2021 Loan Agreement also contains certain financial covenants. Our ability to meet these restrictive and financial covenants can be affected by events beyond our control. The 2021 Loan Agreement provides that our breach or failure to satisfy certain covenants constitutes an event of default thereunder. Upon the occurrence of an event of default, the lender under the 2021 Loan Agreement could elect to declare any future amounts outstanding under the 2021 Loan Agreement to be immediately due and payable, exercise the remedies of a secured party in respect of the security interest on substantially all of our assets and terminate all commitments to extend further credit under that facility. If we are unable to repay those amounts, our financial condition could be adversely affected.
Taxing authorities may successfully assert that we should have collected, or in the future should collect, sales and use, value added, or similar taxes, and we could be subject to liability with respect to past or future sales, which could adversely affect our results of operations.
We do not collect sales and use, value added, or similar taxes in all jurisdictions in which we have sales, based on our understanding that such taxes are not applicable. Sales and use, value added, and similar tax laws and rates vary greatly by jurisdiction. Certain jurisdictions in which we do not collect such taxes may assert that such taxes are applicable, which could result in tax assessments, penalties, and interest, and we may be required to collect such taxes in the future. Such tax assessments, penalties, and interest, or future requirements, may adversely affect our results of operations.
Changes in applicable tax laws could result in adverse tax consequences to the Company.
Our tax positions could be adversely impacted by changes to tax laws, tax treaties, or tax regulations or the interpretation or enforcement thereof by any tax authority in which we file income tax returns, particularly in the U.S. and United Kingdom. We cannot predict the outcome of any specific legislative proposals.
Global taxing standards continue to evolve as a result of the Organization for Economic Co-Operation and Development (OECD) recommendations aimed at preventing perceived base erosion and profit shifting ("BEPS") by multinational corporations. While these recommendations do not change tax law, the countries where we operate may implement legislation or take unilateral actions which may result in adverse effects to our income tax provision and financial statements.
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 14.5 million shares of our common stock, which represents approximately 50% of our outstanding shares as of December 31, 2022. In addition, approximately 10.1 million shares of our common stock are reserved for issuance upon the exercise of stock options, the vesting of restricted stock, shares purchased through the TechTarget, Inc. 2022 Employee Stock Purchase Plan (the “ESPP”) 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 significantly influence the outcome of director elections and other matters requiring stockholder approval.
Our directors, executive officers and significant stockholders beneficially own approximately 50% of our outstanding common stock as of December 31, 2022. 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.
33
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
As of December 31, 2022, we are leasing approximately 68,000 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.
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.
34
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 24, 2023, according to our transfer agent’s records there were 60 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.
35
Stock Performance Graph
The following graph compares the cumulative total return to stockholders of our common stock for the period from December 31, 2017 to December 31, 2022, 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, 2017 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
|
|
12/17 |
|
|
12/18 |
|
|
12/19 |
|
|
12/20 |
|
|
12/21 |
|
|
12/22 |
|
||||||
TechTarget Inc. |
|
$ |
100.00 |
|
|
$ |
87.72 |
|
|
$ |
187.50 |
|
|
$ |
424.64 |
|
|
$ |
687.21 |
|
|
$ |
316.52 |
|
Russell 2000 |
|
$ |
100.00 |
|
|
$ |
88.99 |
|
|
$ |
111.70 |
|
|
$ |
134.00 |
|
|
$ |
153.85 |
|
|
$ |
122.41 |
|
S&P 500 Media Industry |
|
$ |
100.00 |
|
|
$ |
92.44 |
|
|
$ |
124.77 |
|
|
$ |
143.88 |
|
|
$ |
144.37 |
|
|
$ |
101.07 |
|
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.
36
Purchases of Equity Securities by the Issuer
The following table provides information about purchases by us during the three months ended December 31, 2022 of equity securities that are registered pursuant to Section 12 of the Exchange Act.
Period |
|
Total Number of |
|
|
Average Price |
|
|
Total Number of |
|
|
Approximate Dollar |
|
||||
October 1, 2022 – October 31, 2022 |
|
|
80,760 |
|
|
$ |
63.15 |
|
|
|
80,760 |
|
|
$ |
13,858,719 |
|
November 1, 2022 – November 30, 2022 |
|
|
298,138 |
|
|
$ |
53.04 |
|
|
|
298,138 |
|
|
$ |
198,038,506 |
|
December 1, 2022– December 31, 2022 |
|
|
297,848 |
|
|
$ |
43.39 |
|
|
|
297,848 |
|
|
$ |
185,108,809 |
|
Total |
|
|
676,746 |
|
|
$ |
50.00 |
|
|
|
676,746 |
|
|
$ |
185,108,809 |
|
(1) In May 2022, we announced that the Board of Directors approved a stock repurchase program (the “May 2022 Repurchase Program”), which authorized management to purchase up to $50.0 million shares of our common stock from time to time on the open market or in privately negotiated transactions with an expiration in May of 2024. The Company exhausted the May 2022 Repurchase Program in November of 2022.
(2) In November 2022, we announced that the Board of Directors approved a repurchase program (the “November 2022 Repurchase Program”), which authorized management to purchase up to $200.0 million shares of our common stock or convertible senior notes from time to time on the open market or in privately negotiated transactions with an expiration in November of 2024.
Item 6. [Reserved]
37
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. (the “Company”, “we”, “us” or “our”) is a global data, software and analytics leader 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 offer products and services intended to 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 content creation, demand generation, brand marketing, and other advertising techniques.
Our goal is to 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 and users appreciate the ability to deepen their pre-purchase research by accessing the extensive vendor-supplied content available across our virtual event and webinar channels and website network (collectively, our “Network”). Likewise, these members and users 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 over the last two years. During 2021, we acquired Xtelligent Healthcare Media, LLC, a leading healthcare B2B media company focusing on healthcare-related technology. Similarly, during 2020, we acquired (i) BrightTALK Limited, a technology media company that provides customers with a platform to create, host and promote webinar and video content, (ii) The Enterprise Strategy Group, Inc., a leading provider of decision support content based on user research and market analysis for global enterprise companies, and (iii) Data Science Central, LLC, a digital publishing and media company focused on data science and business analytics.
We had approximately 30.2 million and 29.1 million registered members and users, which we refer to as our “audiences”, as of December 31, 2022 and 2021, respectively. While the size of our audiences does not provide direct insight into our customer numbers or our revenue, we believe the value of the services we sell 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 audiences 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 2022, delivered marketing and sales services programs to over 3,400 customers.
Executive Summary
Revenue
Our total revenues for the year ended December 31, 2022 increased approximately $34.1 million, to $297.5 million, or 13% compared with the same period in 2021. We saw increased customer spend across our product suite and we were able to recognize revenues associated with the renewal of acquired customer contracts previously recorded as unearned revenue, as further highlighted in the table below (see “Adjusted Revenue”), each of which contributed to our growth for the year ended December 31, 2022. Revenues from our Priority Engine™ products increased 14% to $69.8 million in 2022, compared to 2021.
38
Adjusted Revenue
We define Adjusted Revenue as the sum of revenue and the impact of fair value adjustments to acquired unearned revenue related to services billed by an acquired company prior to its acquisition. Adjusted Revenue is a non-GAAP financial measure that management uses to evaluate growth of the business period over period, excluding the impact of adjustments due to purchase accounting. Adjusted Revenue should be considered in addition to Revenue, but should not be considered a substitute for, or superior to, Revenue. In addition, our definition of Adjusted Revenue may not be comparable to the definitions as reported by other companies. We believe that it is important to evaluate growth on this basis. We expect our Adjusted Revenue to converge over time with our GAAP revenue.
The following table presents a reconciliation of Adjusted Revenue:
|
|
Years Ended December 31, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Revenue |
|
$ |
297,488 |
|
|
$ |
263,427 |
|
Impact of fair value adjustment on acquired unearned revenue |
|
|
1,676 |
|
|
|
11,476 |
|
Adjusted revenue |
|
$ |
299,164 |
|
|
$ |
274,903 |
|
Revenue percentage change |
|
|
13 |
% |
|
|
|
|
Adjusted revenue percentage change |
|
|
9 |
% |
|
|
|
|
Longer-term contracts amounted to 41% of our revenue in 2022, which is up 1% from 40% in 2021. The amount of revenue that we derived from longer-term contracts in 2022 increased by approximately $18.6 million, an increase of 18% compared to the amount that we recognized in 2021.
Gross profit percentage was 74%, 73%, and 75% for the years ended December 31, 2022, 2021 and 2020, respectively. Gross profit increased by $26.8 million for fiscal 2022 as compared to fiscal 2021, mainly due to the increase in revenue compared to the same period a year ago.
Business Trends
The following discussion highlights key trends affecting our business.
39
Our key strategic initiatives include:
Sources of Revenues
Revenues for the twelve-month periods ended December 31, 2022, 2021 and 2020 by geo-target were as follows (in thousands):
|
|
Twelve Months Ended December 31, |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
2022 vs. |
|
|
|
|
|
2021 vs. |
|
|||||
|
|
|
|
|
|
|
|
2021 |
|
|
|
|
|
2020 |
|
|||||
|
|
2022 |
|
|
2021 |
|
|
% change |
|
|
2020 |
|
|
% change |
|
|||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
North America |
|
$ |
189,897 |
|
|
$ |
162,360 |
|
|
|
17 |
% |
|
$ |
90,919 |
|
|
|
79 |
% |
International |
|
|
107,591 |
|
|
|
101,067 |
|
|
|
6 |
% |
|
|
57,457 |
|
|
|
76 |
% |
Total Revenues |
|
$ |
297,488 |
|
|
$ |
263,427 |
|
|
|
13 |
% |
|
$ |
148,376 |
|
|
|
78 |
% |
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 the quarter ended December 31, 2022 approximately 40% of our revenues were from 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.
40
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 and entertainment-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 and data analytics framework, 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.
Restructuring Cost for Reduction in Force. Restructuring cost for reduction in force consists of costs related to our December, 2022 reduction in force, mainly labor, stock compensation, and related benefits.
41
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 ten years.
Amortization. Amortization expense consists of the amortization of intangible assets recorded in connection with our acquisitions, including changes in the value of contingent consideration in relation to certain of the 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 (offset in part by interest income), inducement expense 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 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 GAAP. 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, event channels and data analytics solutions (see “Product and Service Offerings” above). 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 judgment that considers multiple factors such as historical pricing trends and 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 a component of contract liabilities.
Changes in judgments 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
42
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 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, 2022, 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.
Employee Stock Purchase Plan
In April 2022, the Company’s board of directors adopted the TechTarget, Inc. 2022 Employee Stock Purchase Plan (the “ESPP”), which was approved by the stockholders of the Company at the 2022 Annual Meeting of Stockholders and became effective June 7, 2022. On June 7, 2022, 600,000 shares of the Company’s common stock were reserved for issuance under the ESPP. After the initial offering period of three months, which commenced September 1, 2022, eligible employees are offered shares of common stock over a twelve-month offering period, which consists of two consecutive six-month purchase periods. Employees may purchase a limited amount (up to $25,000) of shares of the Company’s common stock under the ESPP at a discount of up to 15% of the lesser of the market value of the common stock at either (a) the beginning of the six-month purchase period during which the shares of common stock are purchased or (b) the end of such six-month purchase period. As of December 31, 2022, 590,857 shares of common stock remain available for issuance under the ESPP.
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:
|
|
Years Ended December 31, |
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||
Expected volatility |
|
|
44 |
% |
|
|
44 |
% |
|
|
40 |
% |
Expected term |
|
6 years |
|
|
6 years |
|
|
6 years |
|
|||
Risk-free interest rate |
|
|
2.69 |
% |
|
|
0.82 |
% |
|
|
0.34 |
% |
Expected dividend yield |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
Weighted-average grant date fair value per share |
|
$ |
33.99 |
|
|
$ |
27.98 |
|
|
$ |
11.29 |
|
43
The expected volatility of options granted in 2022, 2021, and 2020 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 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, 2022, 2021 or 2020. We capitalized internal-use software and website development costs of $12.9 million, $11.5 million, and $6.1 million for the years ended December 31, 2022, 2021, and 2020, respectively.
Income Taxes
We are subject to income taxes in both U.S. and foreign jurisdictions, and we use estimates in determining our provision for income taxes. We recognize deferred tax assets and liabilities based on temporary differences between the financial reporting and income tax bases of assets and liabilities using statutory rates expected to be in effect when such differences are settled.
Our net deferred tax liabilities are comprised primarily of book to tax differences on stock-based compensation, intangible asset basis, net operating loss carryforwards, valuation allowance and timing of deductions for right-of-use assets and lease liabilities, accrued expenses, depreciation, and amortization.
44
Results of Operations
The following table sets forth our results of operations for the periods indicated:
|
|
Years Ended December 31, |
|
|||||||||||||||||||||
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||||||||||||||
|
|
($ in thousands) |
|
|||||||||||||||||||||
Revenues: |
|
$ |
297,488 |
|
|
|
100 |
% |
|
$ |
263,427 |
|
|
|
100 |
% |
|
$ |
148,376 |
|
|
|
100 |
% |
Total cost of revenues |
|
|
75,740 |
|
|
|
25 |
|
|
|
68,153 |
|
|
|
26 |
|
|
|
37,344 |
|
|
|
25 |
|
Amortization of acquired technology |
|
|
2,748 |
|
|
|
1 |
|
|
|
3,055 |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
Gross profit |
|
|
219,000 |
|
|
|
74 |
|
|
|
192,219 |
|
|
|
73 |
|
|
|
111,032 |
|
|
|
75 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Selling and marketing |
|
|
100,800 |
|
|
|
34 |
|
|
|
95,757 |
|
|
|
36 |
|
|
|
55,455 |
|
|
|
37 |
|
Product development |
|
|
12,348 |
|
|
|
4 |
|
|
|
11,639 |
|
|
|
4 |
|
|
|
7,827 |
|
|
|
5 |
|
General and administrative |
|
|
31,882 |
|
|
|
11 |
|
|
|
34,975 |
|
|
|
13 |
|
|
|
18,983 |
|
|
|
13 |
|
Restructuring cost for a reduction in force |
|
|
4,435 |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Depreciation |
|
|
7,218 |
|
|
|
2 |
|
|
|
5,634 |
|
|
|
2 |
|
|
|
4,809 |
|
|
|
3 |
|
Amortization |
|
|
5,624 |
|
|
|
2 |
|
|
|
9,860 |
|
|
|
4 |
|
|
|
1,137 |
|
|
|
1 |
|
Total operating expenses |
|
|
162,307 |
|
|
|
55 |
|
|
|
157,865 |
|
|
|
60 |
|
|
|
88,211 |
|
|
|
59 |
|
Operating income |
|
|
56,693 |
|
|
|
19 |
|
|
|
34,354 |
|
|
|
13 |
|
|
|
22,821 |
|
|
|
16 |
|
Interest and other (expense), net |
|
|
861 |
|
|
|
0 |
|
|
|
(23,275 |
) |
|
|
(9 |
) |
|
|
(317 |
) |
|
|
(0 |
) |
Income before provision for income taxes |
|
|
57,554 |
|
|
|
19 |
|
|
|
11,079 |
|
|
|
4 |
|
|
|
22,504 |
|
|
|
16 |
|
Provision for income taxes |
|
|
15,945 |
|
|
|
5 |
|
|
|
10,130 |
|
|
|
4 |
|
|
|
5,436 |
|
|
|
4 |
|
Net income |
|
$ |
41,609 |
|
|
|
14 |
% |
|
$ |
949 |
|
|
|
0 |
% |
|
$ |
17,068 |
|
|
|
12 |
% |
Comparison of Fiscal Years Ended December 31, 2022 and 2021
Revenues
|
|
Years Ended December 31, |
|
|||||||||||||
|
|
2022 |
|
|
2021 |
|
|
Increase |
|
|
Percent |
|
||||
|
|
($ in thousands) |
|
|||||||||||||
Total revenues |
|
$ |
297,488 |
|
|
$ |
263,427 |
|
|
$ |
34,061 |
|
|
|
13 |
% |
Revenues for the year ended December 31, 2022 (“fiscal 2022”) increased by $34.1 million, or 13%, over the year ended December 31, 2021 (“fiscal 2021”), primarily due to the following:
Cost of Revenues and Gross Profit
45
|
|
Years Ended December 31, |
|
|||||||||||||
|
|
2022 |
|
|
2021 |
|
|
Increase |
|
|
Percent |
|
||||
|
|
($ in thousands) |
|
|||||||||||||
Cost of revenues |
|
$ |
75,740 |
|
|
$ |
68,153 |
|
|
$ |
7,587 |
|
|
|
11 |
% |
Amortization of acquired technology |
|
|
2,748 |
|
|
|
3,055 |
|
|
|
(307 |
) |
|
|
(10 |
)% |
Total cost of revenues |
|
$ |
78,488 |
|
|
$ |
71,208 |
|
|
$ |
7,280 |
|
|
|
10 |
% |
Gross profit |
|
$ |
219,000 |
|
|
$ |
192,219 |
|
|
$ |
26,781 |
|
|
|
14 |
% |
Gross profit percentage |
|
|
74 |
% |
|
|
73 |
% |
|
|
|
|
|
|
||
Cost of Revenues. Cost of revenues for fiscal 2022 increased by $7.3 million, or 10%, as compared to fiscal 2021 primarily due to the following:
Gross Profit. Our gross profit is equal to the difference between our revenues and our cost of revenues for the period. Gross profit percentage was 74% for fiscal 2022 compared to 73% for fiscal 2021. The increase was primarily due to the increase in revenue over the prior year and the decrease in the amortization of acquired technology.
Operating Expenses and Other
|
|
Years Ended December 31, |
|
|||||||||||||
|
|
2022 |
|
|
2021 |
|
|
Increase |
|
|
Percent |
|
||||
|
|
($ in thousands) |
|
|||||||||||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling and marketing |
|
$ |
100,800 |
|
|
$ |
95,757 |
|
|
$ |
5,043 |
|
|
|
5 |
% |
Product development |
|
|
12,348 |
|
|
|
11,639 |
|
|
|
709 |
|
|
|
6 |
|
General and administrative |
|
|
31,882 |
|
|
|
34,975 |
|
|
|
(3,093 |
) |
|
|
(9 |
) |
Restructuring cost for a reduction in force |
|
|
4,435 |
|
|
|
— |
|
|
|
4,435 |
|
|
|
— |
|
Depreciation |
|
|
7,218 |
|
|
|
5,634 |
|
|
|
1,584 |
|
|
|
28 |
|
Amortization |
|
|
5,624 |
|
|
|
9,860 |
|
|
|
(4,236 |
) |
|
|
(43 |
) |
Total operating expenses |
|
$ |
162,307 |
|
|
$ |
157,865 |
|
|
$ |
4,442 |
|
|
|
3 |
% |
Interest and other expense (income), net |
|
$ |
(861 |
) |
|
$ |
23,275 |
|
|
$ |
(24,136 |
) |
|
|
(104 |
)% |
Provision for income taxes |
|
$ |
15,945 |
|
|
$ |
10,130 |
|
|
$ |
5,815 |
|
|
|
57 |
% |
Selling and Marketing. Sales and marketing costs increased by $5.0 million for fiscal 2022 as compared to fiscal 2021, primarily due to a $5.2 million increase in stock-based compensation expenses.
Product Development. Product development costs increased by $0.7 million in fiscal 2022 as compared to fiscal 2021, primarily due to higher contracted services and recruiting costs.
General and Administrative. General and administrative costs decreased by $3.1 million in fiscal 2022 as compared to fiscal 2021, primarily due to a $3.3 million decrease in stock-based compensation costs and a $1.3 million decrease in pay related expenses, offset by a $1.3 million increase in bad debt expense and increased other costs.
Restructuring cost for reduction in force. Restructuring cost for reduction in force consists of costs related to our December, 2022 reduction in force, mainly labor, stock compensation and related benefits.
Depreciation. Depreciation expense in fiscal 2022 increased by $1.6 million as compared to fiscal 2021, primarily due to increased capitalized software expenditures.
46
Amortization. Amortization expense in fiscal 2022 decreased by $4.2 million as compared to fiscal 2021, primarily due to a decrease in fair value of contingent consideration.
Interest and Other Expense (income), Net. Interest and other expense (income), net in fiscal 2022 decreased by $24.1 million as compared to fiscal 2021, primarily due to a $3.4 million increase in net interest income offset by a decrease in inducement expense of $21.2 million incurred in connection with the retirement of approximately $149.9 million aggregate principal amount of our 2025 Notes (the “Inducement Expense”).
Provision for Income Taxes. Our effective tax rate was 27.7% and 91.0% for the years ended December 31, 2022 and 2021, respectively. The lower rate in 2022 as compared to 2021 was primarily due to decrease in nondeductible inducement expense and UK tax rate change. The effective tax rate differs from the statutory rate primarily due to permanent differences of non-deductible expenses, excess tax deductions from stock-based compensation, state income taxes, and foreign income taxes.
Comparison of Fiscal Years Ended December 31, 2021 and 2020
Revenues
|
|
Years Ended December 31, |
|
|||||||||||||
|
|
2021 |
|
|
2020 |
|
|
Increase |
|
|
Percent |
|
||||
|
|
($ in thousands) |
|
|||||||||||||
Total revenues |
|
$ |
263,427 |
|
|
$ |
148,376 |
|
|
$ |
115,051 |
|
|
|
78 |
% |
Revenues for the year ended December 31, 2021 (“fiscal 2021”) increased by $115.1 million, or 78%, over the year ended December 31, 2020 (“fiscal 2020”), primarily due to the following:
Cost of Revenues and Gross Profit
|
|
Years Ended December 31, |
|
|||||||||||||
|
|
2021 |
|
|
2020 |
|
|
Increase |
|
|
Percent |
|
||||
|
|
($ in thousands) |
|
|||||||||||||
Cost of revenues |
|
$ |
68,153 |
|
|
$ |
37,344 |
|
|
$ |
30,809 |
|
|
|
83 |
% |
Amortization of acquired technology |
|
|
3,055 |
|
|
|
— |
|
|
|
3,055 |
|
|
|
— |
|
Total cost of revenues |
|
$ |
71,208 |
|
|
$ |
37,344 |
|
|
$ |
33,864 |
|
|
|
91 |
% |
Gross profit |
|
$ |
192,219 |
|
|
$ |
111,032 |
|
|
$ |
81,187 |
|
|
|
73 |
% |
Gross profit percentage |
|
|
73 |
% |
|
|
75 |
% |
|
|
|
|
|
|
||
Cost of Revenues. Cost of revenues for fiscal 2021 increased by $33.9 million, or 91%, as compared to fiscal 2020 primarily due to the following:
Gross Profit. Our gross profit is equal to the difference between our revenues and our cost of revenues for the period. Gross profit percentage was 73% for fiscal 2021 compared to 75% for fiscal 2020. The decrease was primarily due to lower gross profit from recently
47
acquired businesses resulting from purchase accounting adjustments to acquired deferred revenue. Had we recognized revenue based on the historical carrying value of the acquired unearned revenue, our gross profit would have been approximately 74%.
Operating Expenses and Other
|
|
Years Ended December 31, |
|
|||||||||||||
|
|
2021 |
|
|
2020 |
|
|
Increase |
|
|
Percent |
|
||||
|
|
($ in thousands) |
|
|||||||||||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling and marketing |
|
$ |
95,757 |
|
|
$ |
55,455 |
|
|
$ |
40,302 |
|
|
|
73 |
% |
Product development |
|
|
11,639 |
|
|
|
7,827 |
|
|
|
3,812 |
|
|
|
49 |
|
General and administrative |
|
|
34,975 |
|
|
|
18,983 |
|
|
|
15,992 |
|
|
|
84 |
|
Depreciation |
|
|
5,634 |
|
|
|
4,809 |
|
|
|
825 |
|
|
|
17 |
|
Amortization |
|
|
9,860 |
|
|
|
1,137 |
|
|
|
8,723 |
|
|
|
767 |
|
Total operating expenses |
|
$ |
157,865 |
|
|
$ |
88,211 |
|
|
$ |
69,654 |
|
|
|
79 |
% |
Interest and other expense, net |
|
$ |
23,275 |
|
|
$ |
317 |
|
|
$ |
22,958 |
|
|
|
7242 |
% |
Provision for income taxes |
|
$ |
10,130 |
|
|
$ |
5,436 |
|
|
$ |
4,694 |
|
|
|
86 |
% |
Selling and Marketing. Sales and marketing costs increased by $40.3 million for fiscal 2021 as compared to the fiscal 2020 primarily as a result of an increase in headcount and salaries, related to our acquisitions, and other related costs (including an increase in stock compensation of $8.0 million).
Product Development. Product development costs increased by $3.8 million in fiscal 2021 as compared to fiscal 2020. Pay and benefit costs increased by $1.3 million, primarily due to our increased headcount associated with our acquisitions. Additionally, the stock-based compensation costs increased by $1.2 million, primarily due to increase in stock price and the additional awards to new employees following our recent acquisitions.
General and Administrative. General and administrative costs increased by $16.0 million in fiscal 2021 as compared to fiscal 2020, primarily due to a $10.8 million increase in stock-based compensation and labor related expenses also increased $4.1 million.
Depreciation. Depreciation expense in fiscal 2021 increased by $0.8 million as compared to fiscal 2020, primarily due to increased capital expenditures.
Amortization. Amortization expense in fiscal 2021 increased by $8.7 million as compared to fiscal 2020, primarily due to intangible assets acquired in 2020 and 2021 and changes to contingent consideration from certain of our acquisitions.
Interest and Other Expense, Net. Interest and other expense, net in fiscal 2021 increased by $23.0 million as compared to fiscal 2020, primarily due to the increase in inducement expense of $21.2 million incurred in connection with the Inducement Expense.
Provision for Income Taxes. Our effective tax rate was 91.0% and 24.2% for the years ended December 31, 2021 and 2020, respectively. The higher rate in 2021 as compared to 2020 was primarily due to increases in non-deductible expenses, driven mainly by the non-deductible Inducement Expense, and offset, in part, by an 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.
Impact of Acquisitions
The comparability of our operating results for the years ended December 31, 2021 was impacted by our acquisitions, including the acquisition of BrightTALK Limited in December 2020.
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 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.
48
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
Our cash and investments at December 31, 2022 totaled $364.7 million, a $17.0 million decrease from December 31, 2021, primarily driven by cash utilized in investing and financing activities, primarily our purchase of treasury shares under stock buyback programs during 2022, offset in part by cash generated from our operations. We believe that our existing cash and investments, and our cash flow from operating activities will be sufficient to meet our anticipated cash needs for the next 12 months and beyond. 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 any expansion into complementary businesses. To the extent that our cash and investments and cash flow from operating activities are insufficient to fund our future activities, we may raise additional funds through additional bank credit arrangements or public or private equity or debt financings. We may also raise additional funds in the event we determine in the future to effect one or more additional acquisitions of businesses.
|
As of December 31, |
|
|||||||||
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||
Cash, cash equivalents and investments |
$ |
364,733 |
|
|
$ |
381,699 |
|
|
$ |
82,700 |
|
Accounts receivable, net |
$ |
60,359 |
|
|
$ |
51,095 |
|
|
$ |
40,183 |
|
Cash, Cash Equivalents and Investments
Our cash, cash equivalents and investments at December 31, 2022 were held for working capital purposes and were invested primarily in pooled bond funds. 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 76 days at December 31, 2022, 60 days at December 31, 2021 and 57 days at December 31, 2020. The net accounts receivable days for 2020 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
|
|
Years Ended December 31, |
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||
|
|
(in thousands) |
|
|||||||||
Net cash provided by operating activities |
|
$ |
90,702 |
|
|
$ |
81,699 |
|
|
$ |
52,453 |
|
Net cash used in investing activities |
|
$ |
(14,450 |
) |
|
$ |
(56,984 |
) |
|
$ |
(175,747 |
) |
Net cash provided by (used in) financing activities |
|
$ |
(92,958 |
) |
|
$ |
254,459 |
|
|
$ |
153,366 |
|
Operating Activities
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 2022 compared to fiscal 2021 was primarily the result of increases in net income of $40.7 million, increases in non-cash stock compensation of $5.0 million, a $2.1 million decrease in depreciation and amortization expense, a $21.2 million decrease in induced conversion expense and a decrease of $13.3 million due to changes in operating assets, liabilities, and non-cash expenses, primarily driven by a $17.1 million decrease in contract liabilities offset by a $9.3 million increase in accrued expenses and other current liabilities.
49
The increase in cash provided by operating activities in fiscal 2021 compared to fiscal 2020 was primarily the result of increases in non-cash stock compensation of $21.7 million, a $13.5 million increase in depreciation and amortization expense, a $21.2 million increase in induced conversion expense and changes in operating assets and liabilities, primarily driven by a $13.8 million decrease in accrued expenses and related liabilities.
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.
Investing Activities
Cash used in investing activities in the year ended December 31, 2022 was $14.5 million; which consisted of $14.0 million for the purchase of property and equipment and other capitalized assets, primarily made up of computer equipment and related software and internal-use development costs and $0.4 million for the acquisition of certain investment holdings.
Cash used in investing activities in the year ended December 31, 2021 was $57.0 million; which consisted of $12.6 million for the purchase of property and equipment and other capitalized assets, primarily made up of computer equipment and related software and internal-use development costs, $20 million for the acquisition of certain investment holdings, and $24.3 million for the purchase of Xtelligent Healthcare Media, LLC during July 2021.
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, primarily made up 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.
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 $14.0 million, $12.6 million, and $6.7 million for the years ended December 31, 2022, 2021, and 2020, respectively. A majority of our capital expenditures in 2022, 2021, and 2020 were internal-use software and website development costs and, to a lesser extent, computer equipment and related software.
We anticipate that we will spend approximately $15 million in capital expenditures in 2023, 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
We utilized $79 million, $0 million, and $14.8 million for repurchase of shares under our stock repurchase programs in 2022, 2021, and 2020, respectively, as well as $9.4 million, $0.4 million, and $3.5 million related to tax withholdings on net share settlements in 2022, 2021, and 2020, respectively. During 2022 and 2021, respectively, we paid earnout liabilities of $5.2 million and $1.1 million. No earnout liabilities were paid out in 2020.
During 2021, we received net proceeds from our 2026 Notes offering of approximately $414 million, offset by $147 million used for repurchase and conversion of a portion of the outstanding 2025 Notes.
Common Stock Repurchase Programs
On November 7, 2018, we announced a stock repurchase program (the “November 2018 Stock Repurchase Program”) whereby we were authorized to repurchase up to an aggregate amount of $25.0 million of the shares of our 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. We repurchased 736,760 shares at an aggregate purchase price of $14.8 million at an average share price of $20.10 during the year ended December 31, 2020, under the November 2018 Stock Repurchase Program. We terminated the November 2018 Stock Repurchase Program in May 2020.
In May 2020, we announced that our board of directors had authorized a $25.0 million stock repurchase program (the “May 2020 Repurchase Program”) whereby we were authorized to repurchase shares of our common stock from time to time on the open market or in privately negotiated transactions at prices and in the manner determined by management. We repurchased 206,114 shares at an aggregate purchase price of $14.2 million at an average share price of $68.82 under the May 2020 Repurchase Program during 2022.
50
No amounts were repurchased under this program during 2021. The May 2020 Repurchase Program expired on May 1, 2022, with $10.8 million in authorized remaining capacity.
In May 2022, we announced that our board of directors had authorized a stock repurchase program (the “May 2022 Repurchase Program”) whereby we were authorized to repurchase shares of our common stock having an aggregate purchase prices of up to $50.0 million from time to time on the open market or in privately negotiated transactions at prices and in the manner determined by management. During the year ended December 31, 2022, we repurchased 836,329 shares for an aggregate purchase price of $50.0 million at an average share price of $59.77 under the May 2022 Repurchase Program. As of December 31, 2022, no amounts remained available under the May 2022 Repurchase Program.
In November 2022, we announced that our board of directors had authorized a new repurchase program (the “November 2022 Repurchase Program”) whereby we are authorized to repurchase shares of our common stock and convertible senior notes having an aggregate purchase price of up to $200.0 million from time to time on the open market or in privately negotiated transactions at prices and in the manner determined by management over the next two years. During the year ended December 31, 2022, we repurchased 341,783 shares for an aggregate purchase price of $14.9 million at an average share price of $43.55 under the November 2022 Repurchase Program. We did not repurchase any convertible senior notes during the year ended December 31, 2022. As of December 31, 2022, $185.1 million remained available under the November 2022 Repurchase Program.
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 2021, we issued $414 million in aggregate principal amount of 0.00% convertible senior notes (“2026 Notes”) due December 15, 2026, unless earlier repurchased by us or converted by the holder pursuant to their terms. Special interest, if any, is payable semiannually in arrears on June 15 and December 15 of each year.
The 2026 Notes are governed by an indenture between us, as issuer, and U.S. Bank Trust Company, National Association, as trustee. The 2026 Notes are unsecured and rank senior in right of payment to our future indebtedness that is expressly subordinated in right of payment to the 2026 Notes and equal in right of payment to our unsecured indebtedness that is not so subordinated.
Upon conversion, we will pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of common stock, at our election.
The 2026 Notes have an initial conversion rate of 7.6043 shares of common stock per $1,000 principal amount of 2026 Notes. This represents an initial effective conversion price of approximately $131.50 per share of common stock and 3,148,180 shares issuable upon conversion. Throughout the term of the 2026 Notes, the conversion rate may be adjusted upon the occurrence of certain events. As of December 31, 2022, no such adjustment has occurred. Holders of the 2026 Notes will not receive any cash payment representing accrued and unpaid interest, if any, upon conversion of a 2026 Note.
Proceeds from the 2026 Notes were utilized to retire $149.9 million of the 2025 Notes and for general corporate purposes.
In December 2020, we issued $201.3 million in aggregate principal amount of 0.125% convertible senior notes (the “2025 Notes”) due December 15, 2025, unless earlier repurchased by us or converted by the holder pursuant to their terms. Interest is payable semiannually in arrears on June 15 and December 15 of each year, which commenced on June 15, 2021.
The 2025 Notes are governed by an indenture between us, as issuer, and U.S. Bank Trust Company, National Association, as trustee. The 2025 Notes are unsecured and rank senior in right of payment to our future indebtedness that is expressly subordinated in right of payment to the Notes and equal in right of payment to our unsecured indebtedness that is not so subordinated.
Upon conversion, we will pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of common stock, at our election.
The 2025 Notes have an initial conversion rate of 14.1977 shares of common stock per $1,000 principal amount of the 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 of the full aggregate principal amount of the 2025 Notes. Throughout the term of the 2025 Notes, the conversion rate may be adjusted upon the occurrence of certain events. As of December 31, 2022, no such adjustment has occurred. Holders of the 2025 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 our common stock or a combination of cash and shares of our common stock paid or delivered, as the case may be, to the holder upon conversion of the Notes.
51
After the induced conversion of $149.9 million aggregate principal amount of the 2025 Notes in December 2021, approximately $51 million of aggregate principal of 2025 Notes remain outstanding. As of December 31, 2022, 729,533 shares were issuable upon conversion of the full aggregate principal amounts of such remaining 2025 Notes.
As of December 31, 2022, 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.
See Note 9 to our Consolidated Financial Statements for further information on the Notes and Note 10 to our Consolidated Financial Statements for further information with respect to our operating leases.
Line of Credit
On October 29, 2021, we entered into the 2021 Loan Agreement with Western Alliance Bank. The 2021 Loan Agreement provides for a $75 million revolving credit facility with a $5 million letter-of-credit sublimit and a maturity date of October 29, 2023. The 2021 Loan Agreement is secured by substantially all of our assets. Borrowings under the 2021 Loan Agreement bear interest at a rate equal to one (1) month U.S. LIBOR, plus a spread based upon our leverage (as defined by 2021 Loan Agreement), which may vary between 2.00% and 2.75%. As of December 31, 2022, the interest rate was 7.14%. The 2021 Loan Agreement is subject to various leverage and non-financial covenants. No amounts were outstanding under the 2021 Loan Agreement as of December 31, 2022.
Recent Accounting Pronouncements
See Note 2 to our Consolidated Financial Statements for recent accounting pronouncements that could have an effect on us.
52
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 25% of our revenues for the year ended December 31, 2022 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, 2022. For the year ended December 31, 2022, we estimate that a 10% unfavorable movement in foreign currency exchange rates would have decreased operating income by less than $450 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, 2022, we had cash and investments totaling $364.7 million. The cash 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. Our 2025 Notes bear interest at a fixed rate. Our line of credit agreement, which we currently do not have any amounts outstanding, bears interest at LIBOR, or its replacement rate, plus 2.0% to 2.75%.
Inflation
Although we cannot accurately anticipate the future effect of inflation on our financial condition or results of operations, inflation historically has not had a material impact on our operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases for services. Our inability to do so could harm our business, financial condition or results of operations.
53
Item 8. Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
54
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of
TechTarget, Inc.
Newton, Massachusetts
Opinions on the Consolidated 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, 2022 and 2021, and the related consolidated statements of income and comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022, 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, 2022 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, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, 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, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
Basis for Opinion
As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for convertible notes as of January 1, 2020 due to the adoption of Financial Accounting Standards Board Accounting Standards Update 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40).
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 audits 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 consolidated financial statements. Our audits 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 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.
55
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) relates 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 Notes 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 and is susceptible to management override of control.
Given the accounting complexity and the management judgment necessary to identify performance obligations in the campaigns and determine the timing 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:
/s/
February 28, 2023
We have served as the Company’s auditor since 2019.
56
TechTarget, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)
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December 31, |
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2022 |
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2021 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term investments |
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Accounts receivable, net of allowance for doubtful accounts of $ |
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Prepaid taxes |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Goodwill |
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Intangible assets, net |
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Operating lease assets with right-of-use |
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Deferred tax assets |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Current operating lease liabilities |
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Accrued expenses and other current liabilities |
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Accrued compensation expenses |
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Income taxes payable |
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Contract liabilities |
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Total current liabilities |
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Non-current operating lease liabilities |
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Convertible senior notes |
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Other liabilities |
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Deferred tax liabilities |
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Total liabilities |
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Stockholders’ equity: |
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Preferred stock, $ |
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Common stock, $ |
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Treasury stock, at cost; |
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( |
) |
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( |
) |
Additional paid-in capital |
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Accumulated other comprehensive income (loss) |
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( |
) |
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Retained earnings |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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||
See accompanying Notes to Consolidated Financial Statements.
57
TechTarget, Inc.
Consolidated Statements of Income and Comprehensive Income (Loss)
(in thousands, except per share data)
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For the Years Ended December 31, |
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2022 |
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2021 |
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2020 |
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Revenues: |
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Total revenues |
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$ |
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$ |
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$ |
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|||
Cost of revenues: |
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Cost of revenues(1) |
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Amortization of acquired technology |
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Gross profit |
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Operating expenses: |
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Selling and marketing(1) |
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Product development(1) |
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General and administrative(1) |
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Restructuring cost for a reduction in force(1) |
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— |
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— |
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Depreciation, excluding depreciation of $ |
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Amortization |
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Total operating expenses |
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Operating income |
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Interest and other income (expense), net |
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( |
) |
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( |
) |
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Income before provision for income taxes |
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Provision for income taxes |
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Net income |
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$ |
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$ |
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$ |
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Other comprehensive income (loss), net of tax: |
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Unrealized loss on investments (net of tax provision effect of $ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
— |
|
Foreign currency translation gain (loss) |
|
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( |
) |
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( |
) |
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Other comprehensive income (loss) |
|
|
( |
) |
|
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( |
) |
|
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Comprehensive income (loss) |
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$ |
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$ |
( |
) |
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$ |
|
||
Net income per common share: |
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Basic |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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Weighted average common shares outstanding: |
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Basic |
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Diluted |
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Cost of revenues |
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$ |
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$ |
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$ |
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|||
Selling and marketing |
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Product development |
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General and administrative |
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Restructuring cost for a reduction in force |
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— |
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— |
|
See accompanying Notes to Consolidated Financial Statements.
58
TechTarget, Inc.
Consolidated Statements of Stockholders’ Equity
(in thousands, except share and per share data)
|
|
Common Stock |
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Treasury Stock |
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Additional |
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Accumulated |
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Total |
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Total |
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||||||||||||||
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Number of |
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$0.001 |
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Number of |
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Cost |
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Paid-In |
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Comprehensive |
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Retained |
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Stockholders’ |
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||||||||
Balance, December 31, 2019 |
|
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$ |
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$ |
( |
) |
|
$ |
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$ |
( |
) |
|
$ |
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$ |
|
||||||
Issuance of common stock from exercise of options |
|
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— |
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— |
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— |
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— |
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||||
Issuance of common stock from restricted stock awards |
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— |
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— |
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— |
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— |
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— |
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— |
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|
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— |
|
|
Purchase of common stock through stock buyback |
|
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— |
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— |
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|
|
|
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( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
Impact of net settlements |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
||
Deferred tax effect from Convertible Debt |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Stock-based compensation expense(1) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
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|
||
Equity component of convertible senior notes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
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|
|
— |
|
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|
||
Unrealized gain on foreign currency exchange |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
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|
||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Balance, December 31, 2020 |
|
|
|
|
$ |
|
|
|
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Reclassification due to the adoption of ASU 2020-06 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
( |
) |
|
Issuance of common stock from exercise of options |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Issuance of common stock from restricted stock awards |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Registration fees |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Impact of net settlements |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
||
Issuance of common stock in connection with repurchase, conversion and inducement of convertible senior notes |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||||
Deferred tax effect from Convertible Debt |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Stock-based compensation expense(1) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Unrealized loss on investments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Unrealized loss on foreign currency exchange |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Balance, December 31, 2021 |
|
|
|
|
$ |
|
|
|
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Issuance of common stock from exercise of options |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Issuance of common stock from restricted stock awards |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Issuance of common stock from employee stock purchase plan |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Purchase of common stock through stock buyback |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
Impact of net settlements |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
||
Stock-based compensation expense(1) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Unrealized loss on investments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Unrealized loss on foreign currency exchange |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Balance, December 31, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||||||
(1)
See accompanying Notes to Consolidated Financial Statements.
59
TechTarget, Inc.
Consolidated Statements of Cash Flows
(in thousands)
|
|
For the Years Ended December 31, |
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||
Operating Activities: |
|
|
|
|
|
|
|
|
|
|||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|||
Depreciation |
|
|
|
|
|
|
|
|
|
|||
Amortization |
|
|
|
|
|
|
|
|
|
|||
Provision for bad debt |
|
|
|
|
|
|
|
|
|
|||
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|||
Amortization of debt issuance costs |
|
|
|
|
|
|
|
|
|
|||
Deferred tax provision |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Induced conversion expenses |
|
|
— |
|
|
|
|
|
|
|||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|||
Accounts receivable |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Operating lease assets with right of use |
|
|
|
|
|
|
|
|
|
|||
Prepaid expenses and other current assets |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other assets |
|
|
|
|
|
|
|
|
|
|||
Accounts payable |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Income taxes payable |
|
|
|
|
|
|
|
|
|
|||
Accrued expenses and other current liabilities |
|
|
|
|
|
( |
) |
|
|
|
||
Accrued compensation expenses |
|
|
( |
) |
|
|
|
|
|
|
||
Operating lease liabilities with right of use |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
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 investing activities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|||
Financing activities: |
|
|
|
|
|
|
|
|
|
|||
Tax withholdings related to net share settlements |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Purchase of treasury shares and related costs |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Proceeds from exercise of stock options |
|
|
|
|
|
|
|
|
|
|||
Issuance of common stock from ESPP |
|
|
|
|
|
|
|
|
|
|||
Registration fees |
|
|
|
|
|
( |
) |
|
|
|||
Payment of earnout liabilities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Debt issuance costs |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Proceeds from the issuance of convertible senior notes |
|
|
|
|
|
|
|
|
|
|||
Payments for repurchase and conversion of convertible senior notes |
|
|
|
|
|
( |
) |
|
|
|||
Loan Agreement and Term loan principal payment |
|
|
|
|
|
|
|
|
( |
) |
||
Net cash provided by (used in) financing activities |
|
|
( |
) |
|
|
|
|
|
|
||
Effect of exchange rate changes on cash and cash equivalents |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Net increase (decrease) 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 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Schedule of non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|||
Right of use assets and operating lease liabilities |
|
$ |
|
|
$ |
|
|
$ |
|
|||
See accompanying Notes to Consolidated Financial Statements
60
TechTarget, Inc.
Notes to Consolidated Financial Statements
Years Ended December 31, 2022, 2021, and 2020
(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 (collectively, the “Company”) is a global data and analytics leader and software provider for buyers of purchase intent-driven marketing and sales data for enterprise technology vendors. The Company’s service offerings enable technology vendors to better identify, reach and influence corporate information technology (“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 by customized marketing programs that integrate demand generation, brand advertising techniques, and content curation and creation. The Company operates a network of approximately
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. 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.
Revenue Recognition under ASC 606, Revenue from Contacts with Customers (“ASC 606”)
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.
61
The Company’s offerings consist of:
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. Revenue from Priority Engine™ and the Bright TALK platform are recognized over 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.
62
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
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
63
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, 2022, 2021, and 2020.
|
|
Balance at |
|
|
Provision |
|
|
Write-offs, |
|
|
Balance at |
|
||||
Year ended December 31, 2020 |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Year ended December 31, 2021 |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Year ended December 31, 2022 |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Property and Equipment and Other Capitalized Assets
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.
|
|
Estimated Useful Life |
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:
|
|
As of December 31, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Furniture and fixtures |
|
$ |
|
|
$ |
|
||
Computer equipment and software |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Internal-use software and website development costs |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Less: accumulated depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
|
|
$ |
|
|
$ |
|
||
Depreciation expense was $
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 three 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
64
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 $
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, 2022, 2021 and 2020,
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
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).
65
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, |
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||
Numerator: |
|
|
|
|
|
|
|
|
|
|||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Denominator: |
|
|
|
|
|
|
|
|
|
|||
Basic: |
|
|
|
|
|
|
|
|
|
|||
Weighted average shares of common stock and vested, undelivered restricted stock units outstanding |
|
|
|
|
|
|
|
|
|
|||
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 |
|
|
|
|
|
|
|
|
|
|||
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(1) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Weighted average shares of stock outstanding |
|
|
|
|
|
|
|
|
|
|||
Net income per common share(2) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
66
Recent Accounting Pronouncements
Recently Adopted Accounting Guidance
In December 2022, the FASB issued No. ASU 2022-06, Reference Rate Reform (Topic 818): Deferral of the Sunset Date of Topic 848, which extends the period of time companies can utilize the reference rate reform relief guidance in Topic 848 to December 31, 2024. The guidance was effective upon issuance and had no material effect on the Company’s consolidated financial statements.
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 was effective for us in the first quarter of 2021 on a prospective basis, and early adoption is permitted. We
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
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
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
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
Accounting Guidance Not Yet Adopted
In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,” which requires entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination as if it had originated the contracts. The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. Early adoption is permitted. We will adopt this accounting standard update on January 1, 2023 and will apply the guidance prospectively for future acquisitions.
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.
|
|
Years Ended December 31, |
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||
North America |
|
$ |
|
|
$ |
|
|
$ |
|
|||
International |
|
|
|
|
|
|
|
|
|
|||
Total Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|||
67
|
|
Years Ended December 31, |
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||
Revenue under short-term contracts |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Revenue under longer-term contracts |
|
|
|
|
|
|
|
|
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|||
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 $
|
|
Contract Liabilities |
|
|
Year-to-Date Activity |
|
(in thousands) |
|
|
Balance at January 1, 2020 |
|
$ |
|
|
Billings |
|
|
|
|
Revenue Recognized |
|
|
( |
) |
Balance at December 31, 2020 |
|
|
|
|
Billings |
|
|
|
|
Revenue Recognized |
|
|
( |
) |
Balance at December 31, 2021 |
|
|
|
|
Billings |
|
|
|
|
Revenue Recognized |
|
|
( |
) |
Balance at December 31,2022 |
|
$ |
|
|
The Company elected to apply the following practical expedients:
4. Fair Value Measurements
The Company measures certain financial assets and liabilities at fair value on a recurring basis, including 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:
68
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:
|
|
|
|
|
Fair Value Measurements at |
|
||||||||||
|
|
December 31, 2022 |
|
|
Quoted Prices |
|
|
Significant |
|
|
Significant |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Short-term investments (1) |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
Total assets |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Contingent consideration - current (2) |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Contingent consideration - non-current (2) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total liabilities |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
|
|
|
|
|
Fair Value Measurements at |
|
||||||||||
|
|
December 31, 2021 |
|
|
Quoted Prices |
|
|
Significant |
|
|
Significant |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Short-term investments (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|||
Total assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Contingent consideration - current (2) |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Contingent consideration - non-current (2) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Total liabilities |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
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, 2022:
69
|
|
Fair Value |
|
|
Balance as of December 31, 2021 |
|
$ |
|
|
Liabilities resulting from acquisitions |
|
|
|
|
Payments on contingent liabilities |
|
|
( |
) |
Amortization of discount on contingent liabilities |
|
|
|
|
Remeasurement of contingent liabilities |
|
|
( |
) |
Balance as of December 31, 2022 |
|
$ |
|
|
|
|
|
|
|
Amounts included in accrued expenses and other current liabilities |
|
|
|
|
Amounts included in Other liabilities |
|
|
|
|
Total Contingent Consideration |
|
$ |
|
|
5. Acquisitions
2021 Acquisition
During July 2021, the Company acquired substantially all the assets of Xtelligent Healthcare Media, LLC, a leading healthcare B2B media company focusing on healthcare-related technology for consideration of $
2020 Acquisitions
BrightTALK Limited
On
Our consolidated financial statements have not been retroactively restated to include BrightTALK’s historical financial position or results of operations. The acquisition was accounted for as a business combination. In accordance with the purchase method of accounting, the purchase price paid has been allocated to the assets and liabilities acquired based upon their estimated fair values as of the acquisition date, with the excess of the purchase price over the net assets acquired recorded as goodwill. We completed our valuation processes of all of the assets and liabilities acquired in the acquisition, and made certain adjustments to the purchase price allocation.
The following table shows the preliminary purchase price allocation as of the date acquired, and adjustments to December 31, 2022 (in thousands):
70
|
|
December 23, 2020 |
|
|
Adjustments(1) |
|
|
December 31, 2021 |
|
|||
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 |
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
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. 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 initial purchase price was adjusted to account for changes to estimate of payment due to seller upon realization of certain tax benefits and changes to deferred tax estimates.
Other Acquisitions
During 2020, the Company acquired substantially all the assets of
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 $
71
Short-term and long-term investments consisted of the following:
|
|
December 31, 2022 |
|
|||||||||||||
|
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Estimated |
|
||||
Short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pooled bond funds |
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
Total short-term investments |
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
|
|
December 31, 2021 |
|
|||||||||||||
|
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Estimated |
|
||||
Short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pooled bond and money market funds |
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
Total short-term investments |
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
7. Goodwill
The changes in the carrying amount of goodwill are as follows:
|
|
As of December 31, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Balance as of beginning of year |
|
$ |
|
|
$ |
|
||
Effect of exchange rate changes |
|
|
( |
) |
|
|
( |
) |
Additions |
|
|
— |
|
|
|
|
|
Balance as of end of year |
|
$ |
|
|
$ |
|
||
72
8. Intangible Assets
The following table summarizes the Company’s intangible assets, net:
|
|
|
|
As of December 31, 2022 |
|
|||||||||
|
|
Estimated |
|
Gross |
|
|
Accumulated |
|
|
Net |
|
|||
Customer 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 |
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
|
|
|
|
As of December 31, 2021 |
|
|||||||||
|
|
Estimated |
|
Gross |
|
|
Accumulated |
|
|
Net |
|
|||
Customer 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 |
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Intangible assets are amortized over their estimated useful lives, which range from
The Company expects amortization expense of intangible assets to be as follows:
Years Ending December 31: |
|
Amortization |
|
|
2023 |
|
$ |
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
Thereafter |
|
|
|
|
|
|
$ |
|
|
73
9. Convertible Notes and Loan Agreement
Convertible Notes
In December 2020, the Company issued $
Issuance |
Maturity Date |
Interest Rate |
First Interest Payment Date |
Effective Interest Rate |
Semi-Annual Interest Payment Dates |
Initial Conversion Rate per $1,000 Principal |
Initial Conversion Price |
|
Number of Shares (in millions) |
|
2025 Notes |
$ |
|
||||||||
2026 Notes |
–– |
–– |
$ |
|
||||||
The 2025 Notes and the 2026 Notes (collectively, the “Notes”) are governed by indentures between the Company, as issuer, and U.S. Bank, National Association, as trustee (together, the “Indentures”). 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.
Terms of the Notes
Prior to the close of business on September 15, 2025 and September 14, 2026, the 2025 Notes and 2026 Notes, respectively, 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 (for the 2025 Notes) and September 14, 2026 (for the 2026 Notes), until the close of business on the second scheduled trading day immediately preceding the applicable 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 the day immediately preceding their respective free convertibility date described above, in multiples of the $
74
As of December 31, 2022, the 2026 Notes and 2025 Notes are not convertible.
Whether the 2026 Notes or the 2025 Notes will be convertible in the future prior to the applicable free convertibility date will depend on the satisfaction of conversion conditions contained within each series of Notes. Since the Company may elect to repay the 2026 Notes and the 2025 Notes in cash, shares of our common stock, or a combination of both, the Company has continued to classify the 2026 and the 2025 Notes as long-term debt on its consolidated balance sheet as of December 31, 2022.
The Notes consist of the following as of December 31:
|
2022 |
|
|
2021 |
|
||||||||||
Liability Component: |
2026 Notes |
|
|
2025 Notes |
|
|
2026 Notes |
|
|
2025 Notes |
|
||||
Principal |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Less: unamortized debt issuance costs |
|
|
|
|
|
|
|
|
|
|
|
||||
Net carrying amount |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following table sets forth total interest expense recognized related to the Notes:
|
Year Ended December 31, |
|
|||||
|
2022 |
|
|
2021 |
|
||
0.125% Coupon |
$ |
|
|
$ |
|
||
Amortization of debt discount and transaction costs |
|
|
|
|
|
||
Induced conversion expense |
|
|
|
|
|
||
|
$ |
|
|
$ |
|
||
T
|
December 31, 2022 |
|
|
December 31, 2021 |
|
||||||||||
|
Fair Value |
|
|
Carrying Value |
|
|
Fair Value |
|
|
Carrying Value |
|
||||
Convertible senior notes |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Based on the closing price of our common stock of $
Partial Repurchase and Conversion of the 2025 Notes
On December 15, 2021, the Company used a portion of the proceeds from the issuance of the 2026 Notes, together with
2025 Notes
Prior to the adoption of ASU 2020-06, based on market data available for publicly traded, senior, unsecured corporate bonds issued by companies in the same industry and with similar maturities, the Company estimated the implied market interest rate of its Notes to be approximately
75
would use in pricing the liability component of the 2025 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 2025 Notes, which resulted in a fair value of the liability component of $
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 $
Effective January 1, 2021, upon the adoption of ASU 2020-06, the Company reclassified the equity component into the debt component as more fully described above (See Note 2). The Company concluded, based upon its adoption of ASU 2020-06, the Notes will be accounted for as debt with no bifurcation of the embedded conversion features. Transaction costs were recorded as a direct reduction from the related debt liability in the consolidated balance sheet and are amortized to interest expense using the effective interest method over the term of the Notes.
2021 Loan Agreement
On October 29, 2021, the Company entered into a Loan and Security Agreement with Western Alliance Bank, as administrative agent and collateral agent for the lenders, and the banks and other financial institutions or entities from time to time party thereto as lenders (the “2021 Loan Agreement”). The 2021 Loan Agreement provides for a $
10. Leases and Contingencies
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 entered into a Third Amendment (the “Third Amendment”) to the lease agreement for office space in Newton, Massachusetts, dated as of August 4, 2009 (the “Newton Lease”). The Third Amendment extended the lease term to
In April 2021, the Company entered into a Fourth Amendment (the “Fourth Amendment”). The Fourth Amendment became effective during
Certain of the Company’s operating leases, including the Newton Lease, include lease incentives and escalating payment amounts and are renewable for varying periods. The Company recognizes 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.
The Company has various non-cancelable lease agreements for certain of its offices with original lease periods expiring between 2021 and 2029. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain it will exercise that option. Leases with renewal options allow the Company to extend the lease term typically between
76
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 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. The Company recognizes rent expense on a straight-line basis over the lease term.
As of December 31, 2022 and 2021, operating lease assets were $
|
|
|
|
|
|
|
Minimum Lease |
|
|
Years Ending December 31: |
|
Payments |
|
|
2023 |
|
$ |
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
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 |
|
$ |
|
|
For the years ended December 31, 2022 and 2021, the total lease cost is comprised of the following amounts (in thousands):
|
|
|
|
|
|
||
|
|
December 31, 2022 |
|
December 31, 2021 |
|
||
Operating lease expense |
|
$ |
|
$ |
|
||
Short-term lease expense |
|
|
|
|
|
||
Total lease expense |
|
$ |
|
$ |
|
||
The following summarizes additional information related to operating leases:
|
|
As of |
|
|
|
|
December 31, 2022 |
|
|
Weighted-average years remaining lease term — operating leases |
|
|
|
|
Weighted-average discount rate — operating leases |
|
|
% |
|
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.
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, 2022 and 2021, the Company did
77
11. Stock-Based Compensation
Stock Option and Incentive Plans
In April 2007, the Company’s board of directors 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 allowed the Company to grant incentive stock options (“ISOs”), non-qualified stock options (“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 vested over a - to
In March 2017, the Company’s board of directors 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
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:
|
|
Years Ended December 31, |
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||
Expected volatility |
|
|
% |
|
|
% |
|
|
% |
|||
Expected term |
|
|
|
|
|
|
||||||
Risk-free interest rate |
|
|
% |
|
|
% |
|
|
% |
|||
Expected dividend yield |
|
|
% |
|
|
% |
|
|
% |
|||
Weighted-average grant date fair value per share |
|
$ |
|
|
$ |
|
|
$ |
|
|||
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
78
A summary of the stock option activity under the Company’s stock option plans for the year ended December 31, 2022 is presented below:
|
|
Options |
|
|
Weighted- |
|
|
Weighted- |
|
|
Aggregate |
|
||||
Options outstanding at December 31, 2021 |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercised |
|
|
( |
) |
|
|
|
|
|
|
|
$ |
|
|||
Forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Canceled |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Options outstanding at December 31, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Options exercisable at December 31, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Options vested or expected to vest at December 31, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
During the years ended December 31, 2022, 2021, and 2020, 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 $
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, 2022 is presented below:
|
|
Shares |
|
|
Weighted- |
|
|
Aggregate |
|
|||
Nonvested outstanding at December 31, 2021 |
|
|
|
|
$ |
|
|
|
|
|||
Granted |
|
|
|
|
|
|
|
|
|
|||
Vested |
|
|
( |
) |
|
|
|
|
|
|
||
Forfeited |
|
|
( |
) |
|
|
|
|
|
|
||
Nonvested outstanding at December 31, 2022 |
|
|
|
|
$ |
|
|
$ |
|
|||
The total grant-date fair value of restricted stock unit awards that vested during the years ended December 31, 2022, 2021, and 2020 was $
As of December 31, 2022, there was $
Employee Stock Purchase Plan (“ESPP”)
In April 2022, the Company’s board of directors adopted the TechTarget, Inc. 2022 Employee Stock Purchase Plan (the “ESPP”), which was approved by the stockholders of the Company at the 2022 Annual Meeting of Stockholders and became effective June 7, 2022. On June 7, 2022,
79
purchased or (b) the end of such six-month purchase period. As of December 31, 2022,
The initial offering period under the ESPP began September 1, 2022 and ran through November 30, 2022.
|
|
December 31, 2022 |
|
|
Shares issued under the ESPP |
|
|
|
|
Proceeds from issuance of shares |
|
$ |
|
|
Valuation Assumptions
The valuation of ESPP purchase rights and the underlying weighted-average assumptions are summarized as follows:
|
|
December 31, 2022 |
|
|
ESPP: |
|
|
|
|
Expected term in years |
|
|
|
|
Risk-free interest rate |
|
|
% |
|
Expected volatility |
|
|
% |
|
Expected dividend yield |
|
|
% |
|
Weighted-average fair value per right granted |
|
$ |
|
|
12. Stockholders’ Equity
Common Stock Repurchase Programs
On November 7, 2018, we announced a stock repurchase program (the “November 2018 Stock Repurchase Program”) whereby we were authorized to repurchase up to an aggregate amount of $
In May 2020, we announced that our board of directors had authorized a $
In May 2022, we announced that our board of directors had authorized a stock repurchase program (the “May 2022 Repurchase Program”) whereby we were authorized to repurchase shares of our common stock having an aggregate purchase prices of up to $
In November 2022, we announced that our board of directors had authorized a new repurchase program (the “November 2022 Repurchase Program”) where we are authorized to repurchase shares of our common stock and convertible senior notes having an aggregate purchase price of up to $
Repurchased shares are recorded under the cost method and are reflected as treasury stock in the accompanying Consolidated Balance Sheets.
80
Reserved Common Stock
As of December 31, 2022, the Company has reserved (i)
13. Income Taxes
Income before provision for income taxes was as follows:
|
|
Years Ended December 31, |
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||
United States |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Foreign |
|
|
|
|
|
|
|
|
|
|||
Income before income taxes |
|
$ |
|
|
$ |
|
|
$ |
|
|||
The income tax provision consisted of the following:
|
|
Years Ended December 31, |
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||
Current: |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
$ |
|
|
$ |
|
|
$ |
|
|||
State |
|
|
|
|
|
|
|
|
|
|||
Foreign |
|
|
|
|
|
|
|
|
|
|||
Total current |
|
|
|
|
|
|
|
|
|
|||
Deferred: |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
State |
|
|
( |
) |
|
|
|
|
|
|
||
Foreign |
|
|
( |
) |
|
|
|
|
|
|
||
Total deferred |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
The income tax provision for the years ended December 31, 2022, 2021 and 2020 differs from the amounts computed by applying the statutory federal income tax rate to consolidated income before provision for income taxes as follows:
|
|
Years Ended December 31, |
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||
Provision computed at statutory rate |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Increase resulting from: |
|
|
|
|
|
|
|
|
|
|||
Difference in rates for foreign jurisdictions |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Stock-based compensation |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Nondeductible inducement expense |
|
|
|
|
|
|
|
|
||||
Other non-deductible expenses |
|
|
|
|
|
|
|
|
|
|||
Non-deductible officers compensation |
|
|
|
|
|
|
|
|
|
|||
State income tax provision |
|
|
|
|
|
|
|
|
|
|||
Subsidiary earnings taxed in the US |
|
|
|
|
|
|
|
|
( |
) |
||
Research and development credit |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Valuation allowance |
|
|
( |
) |
|
|
|
|
|
|
||
Change in tax rate |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Other |
|
|
|
|
|
( |
) |
|
|
|
||
Provision for income taxes |
|
$ |
|
|
$ |
|
|
$ |
|
|||
81
Significant components of the Company’s net deferred tax assets and liabilities are as follows:
|
|
As of December 31, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Deferred tax assets: |
|
|
|
|
|
|
||
Net operating loss carryforwards |
|
$ |
|
|
$ |
|
||
Right of use operating lease liability |
|
|
|
|
|
|
||
Accruals and allowances |
|
|
|
|
|
|
||
Stock-based compensation |
|
|
|
|
|
|
||
§163(j) interest expense carryover |
|
|
|
|
|
|
||
Contract liabilities |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Gross deferred tax assets |
|
|
|
|
|
|
||
Less valuation allowance |
|
|
( |
) |
|
|
( |
) |
Total deferred tax assets |
|
|
|
|
|
|
||
Deferred tax liabilities: |
|
|
|
|
|
|
||
Intangible asset |
|
|
( |
) |
|
|
( |
) |
Right of use operating lease asset |
|
|
( |
) |
|
|
( |
) |
Property and equipment |
|
|
( |
) |
|
|
( |
) |
Contract liabilities |
|
|
|
|
|
( |
) |
|
Total deferred tax liabilities |
|
|
( |
) |
|
|
( |
) |
Net deferred tax liabilities |
|
$ |
( |
) |
|
$ |
( |
) |
As reported: |
|
|
|
|
|
|
||
Non-current deferred tax assets |
|
$ |
|
|
$ |
|
||
Non-current deferred tax liabilities |
|
$ |
( |
) |
|
$ |
( |
) |
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 $
The Company had
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, and the United Kingdom. As of December 31, 2022, the Company also had U.S. federal and state NOL carryforwards of $
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 $
82
14. Segment Information
The Company views its operations and manages its business as
Geographic Data
Net sales by campaign target area were as follows (1):
|
|
Years Ended December 31, |
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||
North America |
|
$ |
|
|
$ |
|
|
$ |
|
|||
International |
|
|
|
|
|
|
|
|
|
|||
Total Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Net sales to unaffiliated customers by geographic area were as follows (2):
|
|
Years Ended December 31, |
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||
United States |
|
$ |
|
|
$ |
|
|
$ |
|
|||
United Kingdom |
|
|
|
|
|
|
|
|
|
|||
Other International |
|
|
|
|
|
|
|
|
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Long-lived assets by geographic area were as follows:
|
|
Years Ended December 31, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
United States |
|
$ |
|
|
$ |
|
||
International |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
15. 401(k) Plans
The Company maintains 401(k)-retirement savings plans (the “Plans”) whereby employees may elect to defer a portion of their salary and contribute the deferred portion to the Plans. The Company contributed $
83
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
We are 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 our 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, 2022, management, under the supervision of the Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), conducted an evaluation of our disclosure controls and procedures as of December 31, 2022. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
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 2022 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 our 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:
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.
Based on management’s evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2022, 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, 2022, which is included herein.
Item 9B. Other Information
None.
84
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
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 2023 Proxy Statement (the “Proxy Statement”).
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 under Item 5.05 of Form 8-K regarding an amendment to, or a waiver from, a provision of our Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions by posting such information on our 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.
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.
85
PART IV
Item 15. Exhibits, Financial Statement Schedules
86
EXHIBIT INDEX
|
|
|
|
|
|
Incorporated by Reference to |
||||
Exhibit Number |
|
Description |
|
Form or Schedule |
|
Exhibit No. |
|
Filing Date with SEC |
|
SEC File Number |
|
|
|
|
|
|
|
|
|
|
|
|
|
Articles of Incorporation and By-Laws |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1 |
|
Fourth Amended and Restated Certificate of Incorporation of the Registrant |
|
10-Q |
|
3.1 |
|
11/13/2007 |
|
001-33472 |
|
|
|
|
|
|
|
|
|
|
|
3.2 |
|
|
10-Q |
|
3.2 |
|
8/04/2021 |
|
001-33472 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Instruments Defining the Rights of Security Holders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.1 |
|
Specimen Stock Certificate for shares of the Registrant’s Common Stock |
|
S-1/A |
|
4.1 |
|
4/10/2007 |
|
333-140503 |
|
|
|
|
|
|
|
|
|
|
|
4.2 |
|
Description of Securities Registered Under Section 12 of the Exchange Act
|
|
10K |
|
4.2 |
|
3/16/2020 |
|
001-33472 |
4.3 |
|
|
8-K |
|
4.1 |
|
12/17/2020 |
|
001-33472 |
|
|
|
|
|
|
|
|
|
|
|
|
4.4 |
|
|
8-K |
|
4.1 |
|
12/14/2021 |
|
001-33472 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Material Contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.1 |
|
|
S-1 |
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10.1 |
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2/07/2007 |
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333-140503 |
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10.2 |
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8-K |
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10.1 |
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8/07/2019 |
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001-33472 |
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10.3# |
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S-1/A |
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10.3 |
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4/20/2007 |
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333-140503 |
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10.4# |
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Form of Non-Qualified Stock Option Agreement under the 2007 Stock Option and Incentive Plan |
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S-1/A |
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10.5 |
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4/20/2007 |
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333-140503 |
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10.5# |
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Form of Non-Qualified Stock Option Agreement for Non-Employee Directors |
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S-1/A |
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10.5.1 |
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4/27/2007 |
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333-140503 |
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10.6# |
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10-K |
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10.26 |
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3/31/2008 |
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001-33472 |
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10.7 |
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8-K |
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10.1 |
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8/7/2009 |
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001-33472 |
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10.8 |
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8-K |
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10.1 |
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11/22/2010 |
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001-33472 |
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10.9 |
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10-Q |
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10.1 |
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5/05/2021 |
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001-33472 |
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87
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Riverside Center, 275 Grove Street, Newton, Massachusetts, dated April 30, 2021. |
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10.10# |
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10-K |
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10.37 |
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3/15/2012 |
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001-33472 |
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10.11 |
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10-Q |
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10.1 |
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11/9/2015 |
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001-33472 |
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10.12# |
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Employment Agreement between the Registrant and Michael Cotoia (dated May 3, 2016) |
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8-K |
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10.2 |
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5/9/2016 |
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001-33472 |
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10.13# |
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Employment Agreement between the Registrant and Greg Strakosch (dated May 3, 2016) |
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8-K |
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10.3 |
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5/9/2016 |
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001-33472 |
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10.14# |
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Employment Agreement between the Registrant and Daniel T. Noreck (dated December 19, 2016) |
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8-K |
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10.1 |
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12/19/2016 |
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001-33472 |
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10.15# |
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TechTarget, Inc. 2017 Stock Option and Incentive Plan, as amended |
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8-K |
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99.1 |
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6/11/2021 |
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001-33472 |
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10.16# |
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10-Q |
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10.2 |
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8/9/2017 |
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001-33472 |
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10.17# |
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10-Q |
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10.3 |
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8/9/2017 |
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001-33472 |
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10.18 |
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8-K |
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10.1 |
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10/27/2017 |
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001-33472 |
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10.19# |
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8-K |
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10.1 |
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8/3/2018 |
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001-33472 |
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10.20 |
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10-Q |
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10.1 |
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11/03/2021 |
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001-33472 |
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*10.21# |
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10.22 |
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10-K |
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10.23 |
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02/28/2022 |
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001-33472 |
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10.23 |
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8-K |
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99.1 |
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06/09/2022 |
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001-33472 |
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16.1 |
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Changes in Registrant's Certifying Accountant, Letter from BDO USA, LLP dated June 17, 2019. |
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8-K |
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16.1 |
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6/17/2019 |
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001-33472 |
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*21.1 |
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*23.1 |
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*31.1 |
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88
*31.2 |
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*32.1 |
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101.INS |
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Inline XBRL Instance Document (1) |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document (1) |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document (1) |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document (1) |
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101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document (1) |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document (1) |
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104 |
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Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
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* 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.
Item 16. Form 10-K Summary
None.
89
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: February 28, 2023 |
||
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By: |
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/s/ Michael Cotoia |
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Michael Cotoia |
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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 |
|
Title |
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Date |
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/s/ Michael Cotoia |
|
Chief Executive Officer and Director |
|
February 28, 2023 |
Michael Cotoia |
|
(Principal executive officer) |
|
|
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|
|
|
|
/s/ Daniel Noreck |
|
Chief Financial Officer and Treasurer |
|
February 28, 2023 |
Daniel Noreck |
|
(Principal financial and accounting officer) |
|
|
|
|
|
|
|
/s/ Greg Strakosch |
|
Executive Chairman |
|
February 28, 2023 |
Greg Strakosch |
|
|
|
|
|
|
|
|
|
/s/ Robert D. Burke |
|
Director |
|
February 28, 2023 |
Robert D. Burke |
|
|
|
|
|
|
|
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|
/s/ Bruce Levenson |
|
Lead Independent Director |
|
February 28, 2023 |
Bruce Levenson |
|
|
|
|
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|
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/s/ Roger M. Marino |
|
Director |
|
February 28, 2023 |
Roger M. Marino |
|
|
|
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|
/s/ Perfecto Sanchez |
|
Director |
|
February 28, 2023 |
Perfecto Sanchez |
|
|
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|
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|
/s/ Christina Van Houten |
|
Director |
|
February 28, 2023 |
Christina Van Houten |
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|
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|
90
