ThZeal - The Zeal

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-33472

TECHTARGET, INC.

(Exact name of registrant as specified in its charter)


Delaware	04-3483216
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

275 Grove Street Newton, Massachusetts	02466
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (617) 431-9200

Former name, former address and formal fiscal year, if changed since last report: Not applicable

Securities registered or to be registered pursuant to Section 12(b) of the Act.


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 Par Value	TTGT	Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 4, 2023, the registrant had 27,820,748 shares of common stock, $0.001 par value per share, outstanding.

TABLE OF CONTENTS


Item		Page

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	3
	Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022	3
	Condensed Consolidated Statements of Income and Comprehensive Income for the three and six months ended June 30, 2023 and 2022	4
	Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2023 and 2022	5
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	37

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 5.	Other Information	39
Item 6.	Exhibits	40
	Signatures	41

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

TechTarget, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)


	June 30, 2023			December 31, 2022
Assets	(Unaudited)			(Unaudited)
Current assets:
Cash and cash equivalents	$	238,022		$	344,523
Short-term investments		96,279			20,210
Accounts receivable, net of allowance for doubtful accounts of $5,082 and $4,494 respectively		50,988			60,359
Prepaid expenses and other current assets		6,118			5,745
Total current assets		391,407			430,837
Property and equipment, net		24,062			22,507
Goodwill		193,774			192,227
Intangible assets, net		93,220			95,517
Operating lease assets with right-of-use		18,654			20,039
Deferred tax assets		8,831			2,945
Other assets		669			645
Total assets	$	730,617		$	764,717
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	3,329		$	3,298
Current operating lease liabilities		3,968			4,099
Accrued expenses and other current liabilities		6,182			10,935
Accrued compensation expenses		1,385			4,643
Income taxes payable		4,324			7,827
Contract liabilities		20,577			27,086
Total current liabilities		39,765			57,888
Non-current operating lease liabilities		18,530			20,371
Convertible senior notes		456,949			455,694
Deferred tax liabilities		13,076			13,290
Total liabilities		528,320			547,243
Leases and contingencies (see Note 9)
Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued or outstanding		—			—
Common stock, $0.001 par value; 100,000,000 shares authorized; 58,036,732 and 57,919,501 shares issued, respectively; 27,820,748 and 29,023,093 shares outstanding, respectively		58			58
Treasury stock, at cost; 30,215,984 and 28,896,408 shares, respectively		(328,876	)		(278,876	)
Additional paid-in capital		452,353			425,458
Accumulated other comprehensive loss		(5,929	)		(9,537	)
Retained earnings		84,691			80,371
Total stockholders’ equity		202,297			217,474
Total liabilities and stockholders’ equity	$	730,617		$	764,717

See accompanying Notes to Condensed Consolidated Financial Statements.

TechTarget, Inc.

Condensed Consolidated Statements of Income and Comprehensive Income

(in thousands, except per share data)


	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Revenue	$	58,429		$	78,876		$	115,543		$	147,041
Cost of revenue(1)		18,406			19,751			35,756			37,597
Amortization of acquired technology		694			698			1,367			1,443
Gross profit		39,329			58,427			78,420			108,001
Operating expenses:
Selling and marketing(1)		24,915			24,798			49,671			49,053
Product development(1)		2,457			3,081			5,066			6,199
General and administrative(1)		7,706			7,689			15,624			15,531
Depreciation, excluding depreciation of $919, $654, $1,764 and $1,276, respectively, included in cost of revenue		2,095			1,767			4,095			3,432
Amortization		1,506			1,977			2,999			3,989
Total operating expenses		38,679			39,312			77,455			78,204
Operating income		650			19,115			965			29,797
Interest and other income (expense), net		2,915			(984	)		5,672			(1,544	)
Income before provision for income taxes		3,565			18,131			6,637			28,253
Provision for income taxes		890			5,716			2,317			8,674
Net income	$	2,675		$	12,415		$	4,320		$	19,579
Other comprehensive income (loss), net of tax:
Unrealized loss on investments (net of tax provision effect of $(40), $(39), $(22) and $(59), respectively)	$	(142	)	$	(138	)		(79	)	$	(207	)
Foreign currency translation gain (loss)		1,658			(7,037	)		3,687			(9,732	)
Other comprehensive income (loss)		1,516			(7,175	)		3,608			(9,939	)
Comprehensive income	$	4,191		$	5,240		$	7,928		$	9,640
Net income per common share:
Basic	$	0.10		$	0.42		$	0.15		$	0.66
Diluted	$	0.10		$	0.38		$	0.15		$	0.61
Weighted average common shares outstanding:
Basic		28,055			29,574			28,406			29,641
Diluted		32,162			34,265			28,616			34,344

(1)

Amounts include stock-based compensation expense as follows:


Cost of revenue	$	831	$	770	$	1,652	$	1,409
Selling and marketing		7,844		5,529		15,381		10,596
Product development		429		351		889		831
General and administrative		3,580		2,485		7,038		5,954

See accompanying Notes to Condensed Consolidated Financial Statements.

TechTarget, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share and per share data)

(Unaudited)


	Common Stock				Treasury Stock
	Number of Shares		$0.001 Par Value		Number of Shares		Cost			Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Total Stockholders’ Equity
Balance, December 31, 2022		57,919,501	$	58		28,896,408	$	(278,876	)	$	425,458		$	(9,537	)	$	80,371	$	217,474
Issuance of common stock from exercise of options		2,500		—		—		—			18			—			—		18
Issuance of common stock from restricted stock awards		91,152		—		—		—			—			—			—		—
Purchase of common stock through stock buyback		—		—		581,295		(25,000	)		—			—			—		(25,000	)
Impact of net settlements		912		—		912		—			(177	)		—			—		(177	)
Excise Tax on repurchased shares		—		—		—		—			(206	)		—			—		(206	)
Stock-based compensation expense(1)		—		—		—		—			14,176			—			—		14,176
Comprehensive income:
Unrealized gain on investments		—		—		—		—			—			63			—		63
Unrealized gain on foreign currency exchange		—		—		—		—			—			2,029			—		2,029
Net income		—		—		—		—			—			—			1,645		1,645
Balance, March 31, 2023		58,014,065	$	58		29,478,615	$	(303,876	)	$	439,269		$	(7,445	)	$	82,016	$	210,022
Issuance of common stock from employee stock purchase plan		22,017		—		—		—			650			—			—		650
Issuance of common stock from restricted stock awards		650		—		—		—			—			—			—		—
Purchase of common stock through stock buyback		—		—		737,369		(25,000	)		—			—			—		(25,000	)
Excise Tax on repurchased shares		—		—		—		—			(250	)		—			—		(250	)
Stock-based compensation expense		—		—		—		—			12,684			—			—		12,684
Comprehensive income:
Unrealized loss on investments		—		—		—		—			—			(142	)		—		(142	)
Unrealized gain on foreign currency exchange		—		—		—		—			—			1,658			—		1,658
Net income		—		—		—		—			—			—			2,675		2,675
Balance, June 30, 2023		58,036,732	$	58		30,215,984	$	(328,876	)	$	452,353		$	(5,929	)	$	84,691	$	202,297

TechTarget, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share and per share data)

(Unaudited)


	Common Stock				Treasury Stock
	Number of Shares		$0.001 Par Value		Number of Shares		Cost			Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Total Stockholders’ Equity
Balance, December 31, 2021		57,144,740	$	57		27,510,842	$	(199,796	)	$	383,436		$	298		$	38,762	$	222,757
Issuance of common stock from restricted stock awards		122,571		—		—		—			—			—			—		—
Purchase of common stock through stock buyback		—		—		4,614		(323	)		—			—			—		(323	)
Impact of net settlements		1,340		—		1,340		—			(4,382	)		—			—		(4,382	)
Stock-based compensation expense(1)		—		—		—		—			18,744			—			—		18,744
Comprehensive income:
Unrealized loss on investments		—		—		—		—			—			(69	)		—		(69	)
Unrealized loss on foreign currency exchange		—		—		—		—			—			(2,695	)		—		(2,695	)
Net income		—		—		—		—			—			—			7,164		7,164
Balance, March 31, 2022		57,268,651	$	57		27,516,796	$	(200,119	)	$	397,798		$	(2,466	)	$	45,926	$	241,196
Issuance of common stock from restricted stock awards		8,000		—		—		—			—			—			—		—
Purchase of common stock through stock buyback		—		—		252,493		(17,169	)		—			—			—		(17,169	)
Stock-based compensation expense		—		—		—		—			9,135			—			—		9,135
Comprehensive income:
Unrealized loss on investments		—		—		—		—			—			(138	)		—		(138	)
Unrealized loss on foreign currency exchange		—		—		—		—			—			(7,037	)		—		(7,037	)
Net income		—		—		—		—			—			—			12,415		12,415
Balance, June 30, 2022		57,276,651	$	57		27,769,289	$	(217,288	)	$	406,933		$	(9,641	)	$	58,341	$	238,402

(1)

Includes $1.9 and $9.1 million of accrued compensation expense expensed in previous year for the six months ended June 30, 2023 and 2022, respectively.

See accompanying Notes to Condensed Consolidated Financial Statements.

TechTarget, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)


	For the Six Months Ended
	June 30,
	2023			2022
	(Unaudited)
Operating activities:
Net income	$	4,320		$	19,579
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		5,859			4,708
Amortization		4,366			5,432
Provision for bad debt		1,405			907
Stock-based compensation		24,960			18,790
Amortization of debt issuance costs		1,255			1,248
Deferred tax benefit		(6,574	)		(3,348	)
Changes in operating assets and liabilities:
Accounts receivable		8,079			(10,310	)
Operating lease assets with right of use		1,104			1,440
Prepaid expenses and other current assets		(355	)		(907	)
Other assets		(25	)		245
Accounts payable		23			3,937
Income taxes payable		(3,444	)		4,600
Accrued expenses and other current liabilities		(3,141	)		2,137
Accrued compensation expenses		(1,386	)		(2,541	)
Operating lease liabilities with right of use		(1,769	)		(1,922	)
Contract liabilities		(6,703	)		7,222
Other liabilities		—			(2,778	)
Net cash provided by operating activities		27,974			48,439
Investing activities:
Purchases of property and equipment, and other capitalized assets, net		(7,291	)		(7,163	)
Purchases of investments		(76,171	)		(96	)
Acquisitions of businesses, net		—			175
Net cash used in investing activities		(83,462	)		(7,084	)
Financing activities:
Tax withholdings related to net share settlements		(177	)		(4,382	)
Purchase of treasury shares and related costs		(50,000	)		(17,492	)
Proceeds from stock option exercises		18			—
Issuance of common stock from ESPP		650			—
Payment of earnout liabilities		(2,267	)		(5,206	)
Net cash used in financing activities		(51,776	)		(27,080	)
Effect of exchange rate changes on cash and cash equivalents		763			(1,754	)
Net increase (decrease) in cash and cash equivalents		(106,501	)		12,521
Cash and cash equivalents at beginning of period		344,523			361,623
Cash and cash equivalents at end of period	$	238,022		$	374,144
Supplemental disclosure of cash flow information:
Cash paid for taxes, net	$	12,433		$	7,407
Schedule of non-cash investing and financing activities:
Right of use assets and lease liabilities	$	314		$	—

See accompanying Notes to Condensed Consolidated Financial Statements.

TechTarget, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands, except share and per share data, where otherwise noted, or instances where expressed in millions)

1. Organization and Operations

TechTarget, Inc. (collectively with its subsidiaries, 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 are designed to enable technology vendors to better identify, reach and influence corporate information technology (“IT”) decision-makers actively researching specific IT purchases. The Company offers products and services intended to improve IT 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 150 websites and 1,000 webinars and virtual event channels, which each focus on a specific IT sector such as storage, security or networking. IT and business professionals have become increasingly specialized, and they have come to rely on the Company’s sector-specific websites and webinars and virtual event channels for purchasing decision support. The Company’s content platforms are designed to enable IT and business professionals to navigate the complex and rapidly changing IT landscape where purchasing decisions can have significant financial and operational consequences. At critical stages of the purchase decision process, these content offerings through different channels are intended to meet IT and business professionals’ needs for expert, peer and IT vendor information and provide platforms on which business-to-business technology companies can launch targeted marketing campaigns which generate measurable return on investment. Based upon the logical clustering of members and users’ respective job responsibilities and the marketing focus of the products being promoted by the Company’s customers, the Company categorizes its content offerings to address the key market opportunities and audience extensions across a portfolio of distinct market categories: Security; Networking; Storage; Data Center and Virtualization Technologies; CIO/IT Strategy; Business Applications and Analytics; Application Architecture and Development; and ANCL Channel.

2. Summary of Significant Accounting Policies

The accompanying condensed consolidated financial statements reflect the application of certain significant accounting policies as described below and elsewhere in these notes to condensed consolidated financial statements. The Company’s critical accounting policies are those that affect its more significant judgments used in the preparation of its condensed consolidated financial statements. A description of the Company’s critical accounting policies and estimates is contained in its Annual Report on Form 10-K for the fiscal year ended December 31, 2022, and in this note to the condensed consolidated financial statements.

Principles of Consolidation

The accompanying condensed 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 BrightTALK Limited and its wholly owned subsidiary, BrightTALK, Inc. (together “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 the entities through which the Company conducts business related to its BrightTALK webinar and virtual event platform.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted (Generally Accepted Accounting Principles or “U.S. GAAP”) in the United States (“U.S.”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. All adjustments, which, in the opinion of management, are considered necessary for a fair presentation of the results of operations for the periods shown, are of a normal, recurring nature and have been reflected in the condensed consolidated financial statements. The results of operations for the periods presented are not necessarily indicative of results to be expected for any other interim periods or for the full year. The information included in these condensed consolidated financial statements should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in this report and the condensed consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Foreign Currency Translation

The functional currency of the Company’s major foreign subsidiaries is generally the local currency. Adjustments resulting from translating foreign functional currency financial statements into U.S. dollars are recorded as a separate component on the Condensed Consolidated Statement of Comprehensive Income as an element of accumulated other comprehensive income (loss). Foreign currency transaction gains and losses are included in interest and other income (expense), net in the Condensed Consolidated Statement of Income. All assets and liabilities denominated in foreign currency are translated into U.S. dollars at the exchange rate on the balance sheet date. Revenue and expenses are translated at the average exchange rate during the period.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. 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 condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, including those related to revenue, 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. The Company reduces its accounts receivable for an allowance for doubtful accounts based on its best estimate of the amount of probable credit losses. 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

The Company generates its revenue from the sale of targeted marketing and advertising campaigns, which it delivers via its network of websites, webinar and virtual events channels, and our data analytic services and 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.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original or remaining maturities of three months or less on the purchase date to be cash equivalents. Cash and cash equivalents carrying value approximate fair value and consist primarily of bank deposits and government backed money market funds.

Accounts Receivable

We maintain an allowance for credit losses for expected uncollectible accounts receivable, which is recorded as an offset to accounts receivable and changes in such are classified as general and administrative expense in the Condensed Consolidated Statements of Income and Comprehensive Income. We assess collectability by reviewing accounts receivable on an individual basis when we identify specific customers with known disputes, overdue amounts or collectability issues and also reserve for losses on all accounts based on historical information, current market conditions and reasonable and supportable forecasts of future economic conditions to

inform adjustments to historical loss data. In determining the amount of the allowance for credit losses, we consider historical collectability based on past due status and make judgments about the creditworthiness of customers based on ongoing credit evaluations.

At June 30, 2023, the Company’s collectability assessment includes the business and market disruptions caused by macro-economic uncertainty currently being experienced in the technology sector and estimates of expected emerging credit and collectability trends. The continued volatility in market conditions and evolving shifts in credit trends are difficult to predict, causing variability and volatility that may have a material impact on our allowance for credit losses in future periods.

Fair Value of Financial Instruments

Financial instruments consist of cash and cash equivalents, short-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. The Company classifies all of its short-term and long-term investments in debt securities as available-for-sale. The fair value of contingent consideration was estimated using a discounted cash flow method.

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 Condensed Consolidated Statement of Income and Comprehensive Income.

Recent Accounting Pronouncements

Recently Adopted Accounting Guidance

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 adopted the new standard effective January 1, 2023 and the guidance did not have a material impact on our consolidated financial statements.

3. Revenue

Disaggregation of Revenue

The following table depicts the disaggregation of revenue according to categories consistent with how the Company evaluates its financial performance and economic risk.


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2023		2022		2023		2022
North America	$	38,978	$	50,170	$	76,738	$	93,757
International		19,451		28,706		38,805		53,284
Total	$	58,429	$	78,876	$	115,543	$	147,041


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2023		2022		2023		2022
Revenue under short-term contracts	$	34,840	$	46,085	$	68,730	$	85,590
Revenue under longer-term contracts		23,589		32,791		46,813		61,451
Total	$	58,429	$	78,876	$	115,543	$	147,041

Contract Liabilities

Timing may differ between the satisfaction of performance obligations and the invoicing and collections 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. Additionally, certain customers may receive credits, which are accounted for as a material right. The Company estimates these amounts based on the expected amount of future services to be provided to the customer and allocates a portion of the transaction price to these material rights. The Company recognizes these material rights as the material rights are exercised. The resulting material rights amounts included in the contract liabilities on the accompanying Condensed Consolidated Balance Sheets was $2.1 million and $1.9 million at June 30, 2023, and December 31, 2022, respectively.


	Contract Liabilities
Year-to-Date Activity
Balance at December 31, 2022	$	27,086
Billings		52,378
Revenue Recognized		(57,114	)
Balance at March 31, 2023	$	22,350
Billings		56,656
Revenue Recognized		(58,429	)
Balance at June 30, 2023	$	20,577

The Company elected to apply the following practical expedients:

•

Existence of a Significant Financing Component in a Contract. As a practical expedient, the Company has not assessed whether a contract has a significant financing component because the Company expects at contract inception that the period between payment by the customer and the transfer of promised goods or services by the Company to the customer will be one year or less. Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 90 days. In addition, the Company has determined that the payment terms that the Company provides to its customers are structured primarily for reasons other than the provision of financing to the customer.

•

Costs to Fulfill a Contract. The Company’s revenue is primarily generated from customer contracts that are for one year or less. Costs primarily consist of incentive compensation paid based on the achievement of sales targets. As a practical expedient, for amortization periods that are determined to be one year or less, the Company expenses any incremental costs of obtaining the contract with a customer when incurred. For those customer contracts greater than one year, the Company capitalizes and amortizes the expenses over the period of benefit.

•

Revenue Invoiced. The Company has applied the practical expedient for certain revenue streams to exclude the value of remaining performance obligations for (i) contracts with an original expected term of one year or less or (ii) contracts for which the Company recognizes revenue in proportion to the amount it has the right to invoice for services performed.

4. Fair Value Measurements

The Company measures certain financial assets and liabilities at fair value on a recurring basis, including short-term and long-term investments and contingent consideration. The Company’s bank and money market accounts are in bank deposits and are not quoted instruments. As such, the Company’s bank and money market accounts are all considered cash. The fair value of these financial assets and liabilities was determined based on three levels of input as follows:

•

Level 1. Quoted prices in active markets for identical assets and liabilities;

•

Level 2. Observable inputs other than quoted prices in active markets; and

•

Level 3. Unobservable inputs.

The fair value hierarchy of the Company’s financial assets carried at fair value and measured on a recurring basis is as follows:


			Fair Value Measurements at June 30, 2023
	June 30, 2023		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Time deposits (1)	$	25,245	$	—	$	25,245	$	—
Pooled bond funds		71,034		—		71,034		—
Total short-term investments	$	96,279	$	—	$	96,279	$	—


			Fair Value Measurements at December 31, 2022
	December 31, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Pooled bond funds	$	20,210	$	—	$	20,210	$	—
Total short-term investments	$	20,210	$	—	$	20,210	$	—
Liabilities:
Contingent consideration - current (2)	$	2,259	$	—	$	—	$	2,259
Total liabilities	$	2,259	$	—	$	—	$	2,259

(1)

The Company's time deposits consist of domestic deposits which mature within nine months (Level 2). Level 2 investments are priced using observable inputs, such as quoted prices in markets that are not active and yield curves.

(2)

Contingent consideration liabilities are measured using the income approach and discounted to present value based on an assessment of the probability that the Company would be required to make such future payments. The contingent consideration liabilities are measured at fair value using significant Level 3 (unobservable) inputs, such as discount rates and probability measures. Remeasurement of the contingent consideration to fair value is expensed through the income statement in the period remeasured. Contingent consideration–current is included in accrued expenses and other current liabilities on the balance sheet.

The following table provides a roll-forward of the fair value of the contingent consideration for the six months ended June 30, 2023:


	Fair Value
Year-to-Date Activity
Balance at December 31, 2022	$	2,259
Payments on contingent liabilities		(2,267	)
Amortization of discount on contingent liabilities		8
Balance at March 31, 2023	$	—

As of June 30, 2023, the Company has no contingent consideration amounts remaining.

5. Cash, Cash Equivalents and Investments

Cash and cash equivalents are carried at cost, which approximates fair market value. As of June 30, 2023 and December 31, 2022, cash and cash equivalents totaled $238.0 million and $344.5 million respectively.

Investments are recorded at fair value with the related unrealized gains and losses included in accumulated other comprehensive income, a component of stockholders’ equity, net of tax. Realized gains and losses on the sale of these investments are determined using the specific identification method. There were no realized gains or losses as of June 30, 2023 or December 31, 2022.

Short-term investments consisted of the following:


	June 30, 2023
	Adjusted Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Short-term investments:
Time deposits	$	25,245	$	—	$	—		$	25,245
Pooled bond funds		71,438		—		(404	)		71,034
Total short-term investments	$	96,683	$	—	$	(404	)	$	96,279


	December 31, 2022
	Adjusted Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Short-term investments:
Pooled bond funds	$	20,512	$	—	$	(302	)	$	20,210
Total short-term investments	$	20,512	$	—	$	(302	)	$	20,210

6. Goodwill and Intangible Assets

Goodwill and indefinite-lived intangible assets are not amortized but are reviewed annually for impairment or more frequently if impairment indicators arise. The Company did not have any intangible assets with indefinite lives other than goodwill as of June 30, 2023 or December 31, 2022. There were no indications of impairment as of June 30, 2023, and the Company believes that, as of the balance sheet dates presented, none of the Company’s goodwill or intangible assets were impaired.

The following table summarizes the Company’s intangible assets, net:


		June 30, 2023
	Estimated Useful Lives (Years)	Gross Carrying Amount		Accumulated Amortization			Net
Customer relationships	5-19	$	83,740	$	(19,059	)	$	64,681
Developed websites, technology and patents	10		32,965		(9,131	)		23,834
Trademark, trade name and domain name	5-16		7,588		(3,086	)		4,502
Proprietary user information database and internet traffic	5		1,101		(1,101	)		—
Non-compete agreements	1.5-3		600		(397	)		203
Total intangible assets		$	125,994	$	(32,774	)	$	93,220


		December 31, 2022
	Estimated Useful Lives (Years)	Gross Carrying Amount		Accumulated Amortization			Net
Customer relationships	5-19	$	82,558	$	(16,404	)	$	66,154
Developed websites, technology and patents	10		31,768		(7,294	)		24,474
Trademark, trade name and domain name	5-16		7,391		(2,770	)		4,621
Proprietary user information database and internet traffic	5		1,083		(1,083	)		—
Non-compete agreements	1.5-3		600		(332	)		268
Total intangible assets		$	123,400	$	(27,883	)	$	95,517

Intangible assets are amortized over their estimated useful lives, which range from eighteen months to nineteen years, using methods of amortization that are expected to reflect the estimated pattern of economic use. The remaining amortization expense will be recognized over a weighted-average period of approximately 6.6 years. Amortization expense was $4.4 million and $4.6 million for the six months ended June 30, 2023 and 2022, respectively. Amortization expense relating to developed websites, technology and patents is recorded within costs of revenues. All other amortization is recorded within operating expenses as the remaining intangible assets consist of customer-related assets which generate website traffic that the Company considers to be in support of selling and marketing activities. The Company did not write off any fully amortized intangible assets in the first six months of 2023.

The Company expects amortization expense of intangible assets to be as follows:


Years Ending December 31:	Amortization Expense
2023 (July 1 – December 31)	$	4,409
2024		8,795
2025		8,756
2026		8,702
2027		8,698
Thereafter		53,860
Total	$	93,220

7. Net Income Per Common Share

A reconciliation of the numerator and denominator used in the calculation of basic and diluted net income per common share is as follows:


	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Numerator:
Net income	$	2,675	$	12,415	$	4,320	$	19,579
Denominator:
Basic:
Weighted average shares of common stock and vested, undelivered restricted stock units outstanding		28,055,201		29,573,994		28,406,230		29,641,113
Diluted:
Weighted average shares of common stock and vested, undelivered restricted stock units outstanding		28,055,201		29,573,994		28,406,230		29,641,113
Effect of potentially dilutive shares (1)		4,106,877		4,691,438		210,038		4,702,789
Total weighted average shares of common stock and vested, undelivered restricted stock units outstanding and potentially dilutive shares		32,162,078		34,265,432		28,616,268		34,343,902
Net Income Per Common Share:
Basic:
Net income applicable to common stockholders	$	2,675	$	12,415	$	4,320	$	19,579
Weighted average shares of stock outstanding		28,055,201		29,573,994		28,406,230		29,641,113
Basic net income per common share	$	0.10	$	0.42	$	0.15	$	0.66
Diluted:
Net income applicable to common stockholders	$	3,319	$	13,055	$	4,320	$	20,859
Weighted average shares of stock outstanding		32,162,078		34,265,432		28,616,268		34,343,902
Diluted net income per common share (1)	$	0.10	$	0.38	$	0.15	$	0.61

(1)

In calculating diluted net income per share, 1.6 million shares and 1.5 million shares related to outstanding stock options and unvested, undelivered restricted stock units were excluded for the three and six months ended June 30, 2023, respectively; 84 thousand shares and 81 thousand shares related to outstanding stock options and unvested, undelivered restricted stock units were excluded for the three and six months ended June 30, 2022, respectively. Additionally, in calculating diluted net income per share, we excluded the impact of interest expense and amortization of note costs relating to the shares issuable upon conversion of our outstanding convertible notes from net income and included the weighted average of 3.9 million common shares under the if-converted method for each of the three and six months ended June 30, 2023 and for each of the three and six months ended June 30, 2022, respectively. The interest expense including amortization of note issuance costs, related to convertible notes was $0.6 million for each of the three months ended June 30, 2023 and June 30 2022, and $1.3 million for the six months ended June 30, 2022. For the six months ended June 30, 2023, the interest expense and amortization of note costs relating to the shares issuable upon conversion of our outstanding convertible notes were excluded from the calculation as they would have been anti-dilutive.

8. Convertible Notes and Loan Agreement

Convertible Notes

In December 2020, the Company issued $201.3 million in aggregate principal amount of 0.125% convertible senior notes due December 15, 2025 (the “2025 Notes”) and in December 2021, the Company issued $414 million in aggregate principal amount of 0.0% convertible senior notes due December 15, 2026 (the “2026 Notes”). At the time of the issuance of the 2026 Notes, a portion of the outstanding 2025 Notes were exchanged for shares of common stock and cash. As of June 30, 2023, approximately $51 million aggregate principal amount of the 2025 Notes remain outstanding. Further details are included below:


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	December 15, 2025	0.125%	June 15, 2021	0.8%	June 15, and December 15	14.1977	$	70.43	1.0
2026 Notes	December 15, 2026	0.0%	––	0.0%	––	7.6043	$	131.50	4.3

Each of the 2025 Notes and the 2026 Notes (collectively, the “Notes”) is governed by an indenture between the Company, as issuer, and U.S. Bank, National Association, as trustee (together the “Indentures”, and each such indenture, an “Indenture”). 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 applicable 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 $1,000 principal amount, only under the following circumstances:

•

during any calendar quarter commencing after the calendar quarter ending on March 31, 2021 for the 2025 Notes and March 31, 2022 for the 2026 Notes (and only during such calendar quarter), if the last reported sales price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the applicable conversion price on each applicable trading day;

•

during the five business day period after any five consecutive trading day period, or the Notes measurement period, in which the “trading price” (as defined in each Indenture) per $1,000 principal amount of Notes for each trading day of the Notes measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day;

•

if the Company calls any or all of the Notes for redemption, at any time prior to the close of business on September 14, 2025 for the 2025 Notes or September 14, 2026 for the 2026 Notes; or

•

upon the occurrence of specified corporate events as set forth in the Indentures.

As of June 30, 2023, 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 the trading price condition or another conversion condition specified in the Indentures. 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 June 30, 2023.

The Notes consist of the following:


	June 30, 2023				December 31, 2022
Liability Component:	2026 Notes		2025 Notes		2026 Notes		2025 Notes
Principal	$	414,000	$	51,381	$	414,000	$	51,381
Less: unamortized debt issuance costs		7,588		844		8,673		1,014
Net carrying amount	$	406,412	$	50,537	$	405,327	$	50,367

The following table sets forth total interest expense recognized related to the Notes:


	June 30, 2023		June 30, 2022
0.125% Coupon on 2025 Notes	$	32	$	32
Amortization of debt discount and transaction costs		1,255		1,248
	$	1,287	$	1,280

The fair value of the Notes, which was determined based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, quoted prices of the Notes in an over-the-counter market (Level 2), and carrying value of debt instruments (carrying value excludes the equity component of the Company’s convertible notes classified in equity) were as follows:


	June 30, 2023				December 31, 2022
	Fair Value		Carrying Value		Fair Value		Carrying Value
Convertible senior notes	$	367,594	$	456,949	$	361,658	$	455,694

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 $75 million revolving credit facility with a $5 million letter-of-credit sublimit and matures on October 29, 2023. The 2021 Loan Agreement is secured by substantially all of the Company’s assets. Borrowings under the 2021 Loan Agreement bear interest based on a formula using certain market rates. As of June 30, 2023, the interest rate was 7.91%. The 2021 Loan Agreement is subject to various leverage and non-financial covenants. No amounts were outstanding under the 2021 Loan Agreement as of June 30, 2023.

9. 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 December 31, 2029 and preserves the Company’s option to extend the term for an additional five-year period subject to certain terms and conditions set forth in the Newton Lease. The Third Amendment reduced the rentable space from approximately 110,000 square feet to approximately 74,000 square feet effective January 1, 2018. As of January 1, 2018, base monthly rent under the Third Amendment is $0.3 million. The base rent increases biennially at a rate averaging approximately 1% per year, as of January 1, 2022. The Company remains responsible for certain other costs under the Third Amendment, including operating expense and taxes.

In April 2021, the Company entered into a Fourth Amendment (the “Fourth Amendment”). The Fourth Amendment became effective during May 2021. The Fourth Amendment reduced the rentable space from approximately 74,000 square feet to approximately 68,000 square feet and provided the Company with a one-time payment of approximately $0.6 million. As of May 1, 2021, base monthly rent is approximately $0.3 million per month. All other terms and conditions are substantially similar to those terms in the Third Amendment.

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 2024 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 1 and 5 years. When determining the lease term, renewal options reasonably certain of being exercised are included in the lease term. When determining if a renewal option is reasonably certain of being exercised, the Company considers several economic factors, including but not limited to, the significance of leasehold improvements incurred on the property, whether the asset is difficult to replace, underlying contractual

obligations, or specific characteristics unique to that particular lease that would make it reasonably certain that the Company would exercise such option. Renewal and termination options were generally not included in the lease term for the Company's existing operating leases. Certain of 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 condensed consolidated balance sheets. The Company recognizes rent expense on a straight-line basis over the lease term.

As of June 30, 2023, operating lease assets were $18.7 million and operating lease liabilities were $22.5 million. The maturities of the Company’s operating lease liabilities as of June 30, 2023 were as follows:


	Minimum Lease
Years Ending December 31:	Payments
2023 (July 1 – December 31)	$	2,450
2024		4,989
2025		4,071
2026		3,904
2027		3,348
Thereafter		6,735
Total future minimum lease payments		25,497
Less imputed interest		2,999
Total operating lease liabilities	$	22,498


Included in the Consolidated Balance Sheet:
Current operating lease liability	$	3,968
Non-current operating lease liability		18,530
Total operating lease liabilities	$	22,498

For the three and six months ended June 30, 2023 and 2022, the total lease cost was comprised of the following amounts:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Operating lease expense	$	1,048	$	712	$	2,104	$	1,853
Short-term lease expense		5		2		9		11
Total lease expense	$	1,053	$	714	$	2,113	$	1,864

The following summarizes additional information related to operating leases as of June 30, 2023:


	As of
	June 30, 2023
Weighted-average remaining lease term — operating leases		3.5
Weighted-average discount rate — operating leases		3.4	%

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 June 30, 2023 and December 31, 2022, the Company did not have any pending or threatened claims, charges, or litigation that it expects would have a material adverse effect on its condensed consolidated financial position, results of operations, or cash flows.

10. 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 three- to four-year period. Stock options granted under the 2007 Plan expire no later than ten years after the grant date. Additionally, beginning with awards made in August 2015, the Company had the option to direct a net issuance of shares for satisfaction of tax liability with respect to vesting of awards and delivery of shares. Prior to August 2015, this choice of settlement method was solely at the discretion of the award recipient. The 2007 Plan expired in May 2017.

No new awards may be granted under the 2007 Plan; however, the shares of common stock remaining in the 2007 Plan are available for issuance in connection with previously awarded grants under the 2007 Plan. There are 22,500 shares of common stock that remain subject to outstanding stock grants under the 2007 Plan as of June 30, 2023.

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 June 16, 2017. The 2017 Plan replaces the Company’s 2007 Plan. On June 16, 2017, 3,000,000 shares of the Company’s common stock were reserved for issuance under the 2017 Plan and, generally, shares that are forfeited or canceled from awards under the 2017 Plan also will be available for future awards. In April 2021, the stockholders of the Company authorized the issuance of up to an additional 3,800,000 shares of the Company’s common stock under the 2017 Plan. Under the 2017 Plan, the Company may grant restricted stock and restricted stock units, non-qualified stock options, stock appreciation rights, performance awards, and other stock-based and cash-based awards. Grants generally vest in equal tranches over a three-year period. Stock options granted under the 2017 Plan expire no later than ten years after the grant date. Shares of stock issued pursuant to restricted stock awards are restricted in that they are not transferable until they vest. Shares of stock underlying awards of restricted stock units are not issued until the units vest. Non-qualified stock options cannot be exercised until they vest. Under the 2017 Plan, all stock options and stock appreciation rights must be granted with an exercise price that is at least equal to the fair market value of the common stock on the date of grant. The 2017 Plan broadly prohibits the repricing of options and stock appreciation rights without stockholder approval and requires that no dividends or dividend equivalents be paid with respect to options or stock appreciation rights. The 2017 Plan further provides that, in the event any dividends or dividend equivalents are declared with respect to restricted stock, restricted stock units, other stock-based awards and performance awards (referred to as “full-value awards”), such dividends or dividend equivalents would be subject to the same vesting and forfeiture provisions as the underlying award. There are a total of 1,878,398 shares of common stock that remain subject to outstanding stock-based grants under the 2017 Plan as of June 30, 2023. A total of 2,113,315 shares of common stock remain available for issuance under the 2017 Plan as of June 30, 2023.

Employee Stock Purchase Plan

In April 2022, the Company’s board of directors approved 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, commencing September 1, 2022, eligible employees were 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 June 30, 2023, 568,840 shares of common stock remain available for issuance under the ESPP.

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 expected volatility of options granted has been determined using a weighted average of the historical volatility of the Company’s common stock for a period equal to the expected life of the option. The expected life of options has been determined utilizing

the “simplified” method. The risk-free interest rate is based on a zero coupon U.S. treasury instrument whose term is consistent with the expected life of the stock options. The Company has not paid and does not anticipate paying cash dividends on its shares of common stock; therefore, the expected dividend yield is assumed to be zero. The Company applied an estimated annual forfeiture rate based on historical averages in determining the expense recorded in each period.

A summary of the stock option activity under the Company’s plans for the six months ended June 30, 2023 is presented below:


Six Month Activity	Options Outstanding			Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term in Years		Aggregate Intrinsic Value(1)
Options outstanding at December 31, 2022		120,000		$	37.29		—		—
Granted		25,000		$	36.46		—		—
Exercised		(2,500	)	$	7.03		—	$	81
Forfeited		—			—		—		—
Cancelled		—			—		—		—
Options outstanding at June 30, 2023		142,500		$	37.68		6.74	$	897
Options exercisable at June 30, 2023		117,500		$	37.94		6.06	$	897
Options vested or expected to vest at June 30, 2023		140,605		$	37.69		6.69	$	897

(1) The aggregate intrinsic value was calculated based on the positive difference between the fair value of the Company’s common stock on June 30, 2023 of $31.13 per share and the exercise price of the underlying options. The total intrinsic value of options exercised was $81 thousand and $0 during the six months ended June 30, 2023 and June 30, 2022, respectively.

The total amount of cash received from exercise of these options was approximately $18 thousand during the six months ended June 30, 2023. There were no options exercised during the six months ended, June 30, 2022.

Restricted Stock Units

Restricted stock units 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 activity under the Company’s plans for the six months ended June 30, 2023 is presented below:


Year-to-Date Activity	Shares			Weighted- Average Grant Date Fair Value Per Share		Aggregate Intrinsic Value
Nonvested outstanding at December 31, 2022		1,642,799		$	62.40		—
Granted		197,856			42.93		—
Vested		(69,007	)		62.95		—
Forfeited		(13,250	)		66.59		—
Nonvested outstanding at June 30, 2023		1,758,398		$	60.13	$	54,739

There were 69,007 restricted stock units with a total grant-date fair value of $4.4 million that vested during the six months ended June 30, 2023. There were 154,933 restricted stock units with a total grant-date fair value of $11.4 million that vested during the six months ended June 30, 2022.

As of June 30, 2023, there was $65.6 million of total unrecognized compensation expense related to stock options and restricted stock units, which is expected to be recognized over a weighted average period of 1.6 years.

ESPP Valuation Assumptions

The valuation of ESPP purchase rights and the underlying weighted-average assumptions are summarized as follows:


	June 30, 2023
ESPP:
Expected term in years		0.50
Risk-free interest rate		5.27	%
Expected volatility		43	%
Expected dividend yield		—	%
Weighted-average fair value per right granted	$	9.55

11. Stockholders’ Equity

Common Stock Repurchase Programs

In May 2020, the Company announced that its board of directors had authorized a $25.0 million stock repurchase program (the “May 2020 Repurchase Program”) whereby the Company was authorized to repurchase shares of the Company’s common stock from time to time on the open market or in privately negotiated transactions at prices and in the manner determined by management. The Company repurchased 206,114 shares at an aggregate purchase price of $14.2 million at an average share price of $68.82 under this plan for the six months ended June 30, 2022. The May 2020 Repurchase Program expired on May 1, 2022, with $10.8 million in authorized remaining capacity.

In May 2022, the Company announced that its board of directors had authorized a stock repurchase program (the “May 2022 Repurchase Program”) whereby the Company was authorized to repurchase shares of the Company’s 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 six months ended June 30, 2022, the Company repurchased 50,993 shares for an aggregate purchase price of $3.3 million at an average share price of $64.76 under the May 2022 Repurchase Program. As of June 30, 2023, no amounts remained available under the May 2022 Repurchase Program.

In November 2022, the Company announced that its board of directors had authorized a repurchase program (the “November 2022 Repurchase Program”) whereby the Company was authorized to repurchase shares of the Company’s common stock and 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 six month period ended June 30, 2023, the Company repurchased 1,318,664 shares for an aggregate purchase price of $50.0 million at an average share price of $37.90 under the November 2022 Repurchase Program. As of June 30, 2023, $135.1 million remained available under the November 2022 Repurchase Program.

Repurchased shares are recorded under the cost method and are reflected as treasury stock in the accompanying Condensed Consolidated Balance Sheets.

Reserved Common Stock

As of June 30, 2023, the Company has reserved (i) 4,014,213 shares of common stock for settlement of outstanding and unexercised options, issuance following vesting of outstanding restricted stock units, and future awards available for grant under the 2007 Plan and 2017 Plan, (ii) 568,840 shares of common stock for use in settling purchases under the ESPP and (iii) 5,349,987 shares of common stock which may be issuable upon conversion of the Notes.

12. Income Taxes

The Company measures its interim period tax expense using an estimated annual effective tax rate and adjustments for discrete taxable events that occur during the interim period. The estimated annual effective income tax rate is based upon the Company’s estimations of annual pre-tax income, the geographic mix of pre-tax income, and its interpretations of tax laws. The Company updates the estimate of its annual effective tax rate at the end of each quarterly period. The Company recorded income tax expense of $0.9 million and $2.3 million for the three and six months ended June 30, 2023, respectively. The tax expense for the three months ended June 30, 2023 decreased by approximately $4.8 million, as compared to the same period in 2022, primarily due to a decrease in pretax income. The tax expense for the six months ended June 30, 2023 decreased by approximately $6.4 million primarily due to a decrease in pretax income that resulted in a $7.1 million decrease in tax expense based on the Company's projected effective tax rate offset by an increase of $0.7 million in tax from discrete items related to stock based compensation awards. The Company recorded income tax expense of $5.7 million and $8.7 million for the three and six months ended June 30, 2022, respectively.

13. Segment Information

The Company views its operations and manages its business as one operating segment which is the business of providing purchase intent marketing and sales services. The Company aggregated its operating segment based upon the similar economic and operating characteristics of its operations.

Geographic Data

Net sales by campaign target area were as follows (1):


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2023		2022		2023		2022
North America	$	38,978	$	50,170	$	76,738	$	93,757
International		19,451		28,706		38,805		53,284
Total	$	58,429	$	78,876	$	115,543	$	147,041

(1)

Net sales to customers by campaign target area is based on the geo-targeted (target audience) location of the campaign.

Net sales to unaffiliated customers by geographic area were as follows (2):


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2023		2022		2023		2022
United States	$	44,244	$	59,736	$	87,918	$	110,475
United Kingdom		6,022		7,908		12,090		15,571
Other international		8,163		11,232		15,535		20,995
Total	$	58,429	$	78,876	$	115,543	$	147,041

(2)

Net sales to unaffiliated customers by geographic area is based on the customers’ current billing addresses and does not consider the geo-targeted (target audience) location of the campaign.

Long-lived assets by geographic area were as follows:


	June 30, 2023		December 31, 2022
United States	$	222,345	$	222,488
International		88,711		87,763
Total	$	311,056	$	310,251

Long-lived assets are comprised of property and equipment, net; goodwill; and intangible assets, net. The United Kingdom accounted for 28% of the Company’s long-lived assets for the six months ended June 30, 2023 and no single country outside of the U.S. or United Kingdom accounted for 1% or more of the Company’s long-lived assets during either of these periods.

Item 2. 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 condensed consolidated financial statements and accompanying notes included elsewhere in this Quarterly Report on Form 10-Q. 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 in this Quarterly Report on Form 10-Q, in our Annual Report on Form 10-K for the year ended December 31, 2022 under Part I, Item 1A, “Risk Factors,” and in the other documents we file with the Securities and Exchange Commission. Please refer to our cautionary note regarding “Forward-Looking Statements” section on page 35 of this Quarterly Report on Form 10-Q.

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 31.1 million and 29.6 million registered members and users, which we refer to as our “audiences”, as of June 30, 2023 and 2022, 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 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 2023 expect to deliver marketing and sales services programs to over 3,000 customers.

Executive Summary

Financial Results For the Six Months Ended June 30, 2023

Our revenue for the six months ended June 30, 2023 decreased by $31.5 million, or 21%, to $115.5 million, compared with $147.0 million, during the same period in 2022. We saw decreased customer spend across our product suite. The amount of revenue that we derived from longer-term contracts, which we define as contracts with a term in excess of 270 days, in the second quarter of 2023 decreased 28%, compared to the second quarter of 2022.

Our international geo-targeted revenue, where our target audience is outside North America (“International”), decreased approximately 27% for the six months ended June 30, 2023, compared with the prior year period driven by the items noted above.

Gross profit percentage was 68% and 73% for the six months ended June 30, 2023 and 2022, respectively. Gross profit decreased by $29.6 million, mainly due to the decrease in revenue compared to the same period a year ago.

Business Trends

The following discussion highlights key trends affecting our business.

•

Macro-economic Conditions. Because most of our customers are B2B technology companies, the success of our business is intrinsically linked to the health, and subject to the market conditions, of the IT industry. Despite the current uncertainty in the economy (i.e. inflation risks, rising interest rates, and Russia’s invasion of the Ukraine), there are several factors indicating positive IT spending over the next few years is likely. We believe there are several IT catalysts such as AI, security, data analytics, and cloud migrations, to name a few. Our growth continues to be driven in large part by the return on the investments we made in our data analytics suite of products, which continues to drive market share gains for us. While we will continue to invest in this growth area, management will also continue to carefully control discretionary spending such as travel and entertainment, and the filling of new and replacement positions, in an effort to maintain profit margins and cash flows.

•

Industry Trends. Our business has been and is likely to continue to be impacted by macro-economic conditions. We have observed the enterprise technology market materially worsen during the second half of 2022 and the first half of 2023, 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 has 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 result in approximately $7 million in annual savings.

•

Customer Demographics. In the three and six months ended June 30, 2023, revenue from our legacy global customers (a static cohort comprised of our 10 historically largest on premises hardware technology companies), decreased by approximately 22% and 21%, respectively, compared to the same period in the prior year. The metric measures the year-over-year increase in GAAP revenue from this cohort of customers and is calculated by dividing the GAAP revenue from this cohort of customers for the current year by the GAAP revenue from this cohort of customers for the prior year. We use this information to monitor customer concentration trends within the Company, which we deem an important metric for evaluating revenue diversification. Revenue from our other customers, excluding the legacy global customers described above, decreased by approximately 27% and 23%, respectively, compared to the same three and six month periods in the prior year.

Our key strategic initiatives include:

•

Geographic. During the three and six months ended June 30, 2023, approximately 33% and 34% of our revenue was derived from internationally targeted campaigns, respectively. We continue to explore initiatives to grow our international presence.

•

Product. Purchase intent data continues to drive our product road strategy. During 2023, we intend to improve upon our sales use case by revamping our sales alerts and ROI dashboard features among other strategic objectives (including expanding our saleforce.com connecter functionality).

Our revenue was down 21% for the six months ended June 30, 2023 compared to the same period in the prior year, which was primarily driven by the factors noted above.

Sources of revenues

Revenue changes for the three and six month periods ended June 30, 2023, as compared to the same periods in 2022, are shown in the table below. See the discussion above and Notes 3 and 13 to our condensed consolidated financial statements for additional information on our revenues.


	For the Three Months Ended June 30,					For the Six Months Ended June 30,
(dollars in thousands)	2023		2022			2023		2022
North America	$	38,978	$	50,170	-22%	$	76,738	$	93,757	-18%
International		19,451		28,706	-32%		38,805		53,284	-27%
Total	$	58,429	$	78,876	-26%	$	115,543	$	147,041	-21%


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(dollars in thousands)	2023		2022		2023		2022
Revenue under short-term contracts	$	34,840	$	46,085	$	68,730	$	85,590
Revenue under longer-term contracts		23,589		32,791		46,813		61,451
Total	$	58,429	$	78,876	$	115,543	$	147,041

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 June 30, 2023 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™ . A suite of data, software and services for B2B technology companies that leverages the detailed purchase intent data we collect on enterprise technology organizations and professionals researching IT purchases via our network of websites and our webinar community platform. Through our proprietary data-capture and scoring methodologies, we use this insight to help our customers identify and prioritize accounts and contacts whose content consumption and online research activities around specific enterprise technology topics indicate that they are “in-market” for a particular B2B technology product or service. The suite of products and services includes Priority Engine™ and Qualified Sales Opportunities™. Priority Engine™ is a subscription service powered by our Activity Intelligence™ platform, which integrates with customer relationship management (“CRM”) and marketing automation platforms (“MAPs”) including Salesforce.com, Marketo, Hubspot, Eloqua, Pardot, and Integrate. The service delivers lead generation workflow solutions designed to enable marketers and sales forces to identify and prioritize accounts and individuals actively researching new technology purchases or upgrades, and then to engage those active prospects. Qualified Sales Opportunities™ is a product that profiles specific in-progress purchase projects via surveys and interviews with business technology professionals whose research activity and content consumption is indicative of a pending technology purchase. Qualified Sales Opportunities™ includes information on project scope, purchase criteria and vendors considered.

•

Demand Solutions. Our offerings enable our customers to reach and influence prospective buyers through content marketing programs, such as white papers, webcasts, podcasts, videocasts, virtual trade shows, and content sponsorships, designed to generate demand for their solutions, and through display advertising and other brand programs that influence consideration by prospective buyers. We believe this allows B2B technology companies to maximize ROI on marketing and sales

expenditures by capturing sales leads from the distribution and promotion of content to our audience of enterprise technology and business professionals.

•

Brand Solutions. Our suite of brand solutions provide B2B technology companies with direct exposure to targeted audiences of enterprise technology and business professionals that are actively researching information related to their products and services. We leverage our Activity Intelligence™ platform to enable significant segmentation and behavioral targeting of audiences to improve the relevancy of digital ads to the researcher’s needs. Branding solutions include on-network banner advertising and digital sponsorships, off-network banner targeting, and microsites and other related formats.

•

Custom Content Creation. We deliver market insights and guidance to B2B technology companies through our Enterprise Strategy Group annual research and advisory subscription programs, custom market research services, and consulting engagements. In addition, our Enterprise Strategy Group experts author custom content products including technical and economic validations, white papers, infographics, videos and webinars. This content can be leveraged by B2B technology marketers to support product launches, enable demand-generation campaigns, and establish overall thought leadership. We also create white papers, case studies, webcasts or videos to our customers’ specifications. These customized content assets are then promoted to our audience within both demand solutions and brand solutions programs. Additionally, we offer off-the-shelf editorial sponsorship products on topics aligned to customer markets, enabling them to engage and generate demand via packaged content created by our editorial staff to educate technology researchers on new technology trends and feature options.

•

BrightTALK platform. Allows our customers to create, host and promote webinars, virtual events and video content. Customers create their own hosted Channels on the platform where they schedule both live and on-demand webinars for promotion to BrightTALK’s community of in-market accounts and individuals. The BrightTALK Channel also enables customers to self-administer lead generation campaigns, set up workflow integrations between the Channel and their CRM and MAP systems, and access reporting detailing the size and growth of their community of subscribers over time. Customers may also create an off-network embedded Channel page on their own corporate website featuring content in their BrightTALK Channel, as well as an embedded BrightTALK registration form that captures and converts interested individuals to marketing leads.

Cost of Revenue, Operating Expenses, and Other

Expenses consist of cost of revenue, selling and marketing, product development, general and administrative, depreciation and amortization, and interest and other expense, net. Personnel-related costs are a significant component of each of these expense categories except for depreciation and amortization and interest and other expense, net.

Cost of Revenue. Cost of revenue consists primarily of salaries and related personnel costs; member acquisition expenses (primarily keyword purchases from leading internet search sites); lead generation expenses; freelance writer expenses; website hosting costs; vendor expenses associated with the delivery of webcast, podcast, videocast and similar content and other offerings; stock-based compensation expenses; facility expenses and other related overhead.

Selling and Marketing. Selling and marketing expenses consist primarily of: salaries and related personnel costs; sales commissions; travel-related expenses; stock-based compensation expenses; facility expenses and other related overhead. Sales commissions are recorded as expense when earned by the employee.

Product Development. Product development includes the creation and maintenance of our network of websites, advertiser offerings and technical infrastructure. Product development expense consists primarily of salaries and related personnel costs; stock-based compensation expenses; facility expenses, and other related overhead.

General and Administrative. General and administrative expenses consist primarily of salaries and related personnel costs; facility expenses and related overhead; accounting, legal and other professional fees; and stock-based compensation expenses.

Depreciation. Depreciation expense consists of the depreciation of our property and equipment and other capitalized assets. Depreciation is calculated using the straight-line method over their estimated useful lives, ranging from three to 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 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, net consists primarily of non-operating gains or losses, primarily related to realized and unrealized foreign currency gains and losses on trade assets and liabilities.

Non-GAAP Financial Measure

We use Adjusted Revenue, a non-GAAP financial measure to assist us in evaluating our operating performance to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, for short- and long-term operating plans, and to evaluate our financial performance. We believe that non-GAAP Adjusted Revenue reflects our ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in our business. We also believe that this non-GAAP measure provides useful information to investors and others in understanding and evaluating our operating results and prospects in the same manner as management and in comparing financial results across accounting periods. Regulation S-K Item 10(e), “Use of non-GAAP financial measures in Commission filings,” defines and prescribes the conditions for use of non-GAAP financial information.

A limitation of our non-GAAP financial measure of Adjusted Revenue is that it does not have a uniform definition. Our definition will likely differ from the definitions used by other companies, and therefore comparability may be limited.

We compensate for these limitations by reconciling the non-GAAP financial measure to GAAP revenue, the most comparable GAAP financial measure. Adjusted Revenue should be considered in addition to, not as a substitute for or in isolation from, GAAP revenue. We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure, and to view our non-GAAP financial measure in conjunction with the most comparable GAAP financial measure.

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. Management uses this measure to evaluate growth of the business period over period, excluding the impact of adjustments due to purchase accounting. 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 Revenue to Adjusted Revenue:


	Three Months Ended June 30,					Six Months Ended June 30,
(dollars in thousands)	2023			2022		2023			2022
Revenue	$	58,429		$	78,876	$	115,543		$	147,041
Impact of fair value adjustment on acquired unearned revenue		—			501		—			1,676
Adjusted Revenue	$	58,429		$	79,377	$	115,543		$	148,717
Revenue percentage change		-26	%				-21	%
Adjusted revenue percentage change		-26	%				-22	%

Application of Critical Accounting Policies and Use of Estimates

The discussion of our financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amount of assets, liabilities, revenue 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, allowance for doubtful accounts, 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.

Our critical accounting policies are those that affect our more significant judgments used in the preparation of our condensed consolidated financial statements. A description of our critical accounting policies and estimates is contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. Other than those noted in Note 2 to our condensed consolidated financial statements, there were no material changes to our critical accounting policies and estimates during the first six months of 2023.

Income Taxes

We are subject to income taxes in both the 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, research and development expenditures, accrued expenses, depreciation, and amortization.

Results of Operations

The following table sets forth our results of operations for the periods indicated, including percentage of total revenue:


	Three Months Ended June 30,									Six Months Ended June 30,
(dollars in thousands)	2023				2022					2023				2022
Revenue	$	58,429	100	%	$	78,876		100	%	$	115,543	100	%	$	147,041		100	%
Cost of revenue		18,406	32	%		19,751		25	%		35,756	31	%		37,597		26	%
Amortization of acquired technology		694	1	%		698		1	%		1,367	1	%		1,443		1	%
Gross profit		39,329	67	%		58,427		74	%		78,420	68	%		108,001		73	%
Operating expenses:
Selling and marketing		24,915	43	%		24,798		31	%		49,671	43	%		49,053		33	%
Product development		2,457	4	%		3,081		4	%		5,066	4	%		6,199		4	%
General and administrative		7,706	13	%		7,689		10	%		15,624	14	%		15,531		11	%
Depreciation		2,095	4	%		1,767		2	%		4,095	4	%		3,432		2	%
Amortization		1,506	3	%		1,977		3	%		2,999	3	%		3,989		3	%
Total operating expenses		38,679	66	%		39,312		50	%		77,455	67	%		78,204		53	%
Operating income		650	1	%		19,115		24	%		965	1	%		29,797		20	%
Interest and other income (expense), net		2,915	5	%		(984	)	-1	%		5,672	5	%		(1,544	)	-1	%
Income before provision for income taxes		3,565	6	%		18,131		23	%		6,637	6	%		28,253		19	%
Provision for income taxes		890	2	%		5,716		7	%		2,317	2	%		8,674		6	%
Net income	$	2,675	5	%	$	12,415		16	%	$	4,320	4	%	$	19,579		13	%

Comparison of Three Months Ended June 30, 2023 and June 30, 2022

Revenue


	Three Months Ended June 30,
(dollars in thousands)	2023		2022		Decrease			Percent Change
Revenue	$	58,429	$	78,876	$	(20,447	)		-26	%

Revenue decreased by $20.4 million for the three months ended June 30, 2023, as compared to the same period in 2022, primarily due to the following:

•

491 new customers during the second quarter of 2023 compared to the second quarter of 2022 resulted in increased revenues of approximately $8.3 million.

•

Our existing customers decreased their spend by approximately $29.2 million.

•

Revenues increased by $0.5 million due to the renewal of acquired customer contracts previously recorded as unearned revenue.

Cost of Revenue and Gross Profit


	Three Months Ended June 30,
(dollars in thousands)	2023			2022			Decrease			Percent Change
Cost of revenue	$	18,406		$	19,751		$	(1,345	)		-7	%
Amortization of acquired technology		694			698			(4	)		-1	%
Total cost of revenue	$	19,100		$	20,449		$	(1,349	)		-7	%
Gross profit	$	39,329		$	58,427		$	(19,098	)		-33	%
Gross profit percentage		67	%		74	%

Costs of Revenues. Costs of Revenues for the three months ended June 30, 2023 decreased by $1.3 million as compared to the three months ended June 30, 2022 primarily due to the following:

•

$0.9 million decrease in variable costs attributable to contracted costs related to fulfilling campaigns;

•

$0.6 million decrease in labor and related costs; and

•

$0.3 million increase in depreciation expense.

Gross Profit. Our gross profit is equal to the difference between our revenue and our cost of revenue for the period. Gross profit percentage was 67% and 74% for the three months ended June 30, 2023 and 2022, respectively. Gross profit decreased by $19.1 million in the three months ended June 30, 2023 compared to the same period in 2022, primarily due to decreased revenue compared to the same period a year ago. Because the majority of our costs are labor-related, we expect our gross profit to fluctuate from period to period depending on the total revenue for the period.

Operating Expenses and Other


	Three Months Ended June 30,
(dollars in thousands)	2023		2022			Increase (Decrease)			Percent Change
Operating expenses:
Selling and marketing	$	24,915	$	24,798		$	117			0	%
Product development		2,457		3,081			(624	)		-20	%
General and administrative		7,706		7,689			17			0	%
Depreciation		2,095		1,767			328			19	%
Amortization		1,506		1,977			(471	)		-24	%
Total operating expenses	$	38,679	$	39,312		$	(633	)		-2	%
Interest and other income (expense), net	$	2,915	$	(984	)	$	3,899			396	%
Provision for income taxes	$	890	$	5,716		$	(4,826	)		-84	%

Selling and Marketing. Selling and marketing expenses increased for the three months ended June 30, 2023, as compared to the same period in 2022, primarily due to a $2.3 million increase in stock-based compensation expense offset by a $2.1 million decrease in pay related expenses.

Product Development. Product development expenses decreased for the three months ended June 30, 2023, as compared to the same period in 2022, primarily due to a $0.5 million decrease in pay related expenses and other costs.

General and Administrative. General and administrative expenses for the three months ended June 30, 2023 were approximately the same, as compared to the same period in 2022. Stock based compensation costs increased by $1.1 million offset by a $0.3 million decrease in pay related expenses, a $0.3 million decrease in professional service expenses, and a $0.3 million decrease in software subscription costs.

Depreciation. Depreciation expense increased for the three months ended June 30, 2023, as compared to the same period in 2022, primarily due to increased capitalized software expenses.

Amortization. Amortization expense decreased for the three months ended June 30, 2023, as compared to the same period in 2022, primarily due to a decrease in fair value of contingent consideration.

Interest and other income (expense). Interest and other income (expense) increased for the three months ended June 30, 2023, as compared to the same period in 2022, primarily due to a $3.4 million increase in interest income and a $0.5 million decrease in unrealized/realized foreign currency exchange losses.

Provision for income taxes. Our effective income tax rate was 25% and 32% for the three months ended June 30, 2023 and 2022, respectively. The tax expense for the three months ended June 30, 2023 decreased by approximately $4.8 million primarily due to a decrease in pretax income.

Comparison of Six Months Ended June 30, 2023 and June 30, 2022

Revenue


	Six Months Ended June 30,
(dollars in thousands)	2023		2022		Decrease			Percent Change
Revenues	$	115,543	$	147,041	$	(31,498	)		-21	%

Revenues for the six months ended June 30, 2023 decreased by $31.5 million, or 21%, over the six months ended June 30, 2022, primarily due to the following:

•

1,251 new customers during the first half of 2023 compared to the first half of 2022 resulted in increased revenues of approximately $18.2 million.

•

Our existing customers decreased their spend by approximately $51.3 million.

•

Revenues increased by $1.7 million due to the renewal of acquired customer contracts previously recorded as unearned revenue.

Cost of Revenue and Gross Profit


	Six Months Ended June 30,
(dollars in thousands)	2023			2022			Increase (Decrease)			Percent Change
Cost of revenue	$	35,756		$	37,597		$	(1,841	)		-5	%
Amortization of acquired technology		1,367			1,443			(76	)		-5	%
Total cost of revenue	$	37,123		$	39,040		$	(1,917	)		-5	%
Gross profit	$	78,420		$	108,001		$	(29,581	)		-27	%
Gross profit percentage		68	%		73	%

Costs of Revenues. Costs of Revenues for the six months ended June 30, 2023 decreased by $1.9 million as compared to the six months ended June 30, 2022 primarily due to the following:

•

$1.3 million decrease in variable costs attributable to contracted costs related to fulfilling campaigns;

•

$1.1 million decrease in labor and related costs; and

•

$0.5 million increase in depreciation expense.

Gross Profit. Our gross profit is equal to the difference between our revenue and our cost of revenue for the period. Gross profit percentage was 68% and 73% for the six months ended June 30, 2023 and 2022, respectively. Gross profit decreased by $29.6 million in the six months ended June 30, 2023 compared to the same period in 2022, primarily due to decreased revenue compared to the same period a year ago. Because the majority of our costs are labor-related, we expect our gross profit to fluctuate from period to period depending on the total revenue for the period.

Operating Expenses and Other


	Six Months Ended June 30,
(dollars in thousands)	2023		2022			Increase (Decrease)			Percent Change
Operating expenses:
Selling and marketing	$	49,671	$	49,053		$	618			1	%
Product development		5,066		6,199			(1,133	)		-18	%
General and administrative		15,624		15,531			93			1	%
Depreciation		4,095		3,432			663			19	%
Amortization		2,999		3,989			(990	)		-25	%
Total operating expenses	$	77,455	$	78,204		$	(749	)		-1	%
Interest and other income (expense), net	$	5,672	$	(1,544	)	$	7,216			467	%
Provision for income taxes	$	2,317	$	8,674		$	(6,357	)		-73	%

Selling and Marketing. Selling and marketing expenses increased for the six months ended June 30, 2023, as compared to the same period in 2022, primarily due to a $4.8 million increase in stock-based compensation expense offset by a $3.8 million decrease in pay related expenses and other costs.

Product Development. Product development expenses decreased for the six months ended June 30, 2023, as compared to the same period in 2022, primarily due to a $1.0 million decrease in pay related expenses and other costs.

General and Administrative. General and administrative expenses for the six months ended June 30, 2023 were approximately the same, as compared to the same period in 2022. Stock based compensation increased by $1.1 million offset by a $0.5 million decrease in pay related expenses and a $0.5 million decrease in software subscription costs.

Depreciation. Depreciation expense increased for the six months ended June 30, 2023, as compared to the same period in 2022, primarily due to increased capitalized software expenses.

Amortization. Amortization expense decreased for the six months ended June 30, 2023, as compared to the same period in 2022, primarily due to a decrease in fair value of contingent consideration.

Interest and other income (expense). Interest and other income (expense) increased for the six months ended June 30, 2023, as compared to the same period in 2022, primarily due to a $6.6 million increase in interest income and a $0.7 million decrease in unrealized/realized foreign currency exchange losses.

Provision for income taxes. Our effective income tax rate was 35% and 31% for the six months ended June 30, 2023 and 2022, respectively. The tax expense for the six months ended June 30, 2023 decreased by approximately $6.4 million primarily due to a decrease in pretax income that resulted in a $7.1 million decrease in tax expense based on our projected effective tax rate and offset by an increase of $0.7 million in tax from discrete items related to stock based compensation awards.

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 our cost of revenues, selling and marketing, product development, and general and administrative expenses as a percentage of revenues in each calendar quarter during the year.

The majority of our expenses are personnel-related and include salaries, stock-based compensation, benefits and incentive-based compensation plan expenses. As a result, we have not experienced significant seasonal fluctuations in the timing of our expenses period to period.

Liquidity and Capital Resources

Resources

Our cash, cash equivalents and investments at June 30, 2023 totaled $334.3 million, a $30.4 million decrease from December 31, 2022, primarily driven by repurchases under stock buyback programs of $50.0 million and capital expenditures of $7.3 million offset by the cash generated from our operating activities of $28.0 million. We believe that our existing cash, cash equivalents and investments, our cash flow from operating activities and available borrowings 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”) will be sufficient to meet our anticipated cash needs for at least the next twelve months. Our future working capital requirements will depend on many factors, including the operations of our existing business, our potential strategic expansion internationally, future acquisitions we might undertake and any expansion into complementary businesses. To the extent that our cash, cash equivalents 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.


(dollars in thousands)	June 30, 2023		December 31, 2022
Cash, cash equivalents and investments	$	334,301	$	364,733
Accounts receivable, net	$	50,988	$	60,359

Cash, Cash Equivalents and Investments

Our cash, cash equivalents and investments at June 30, 2023 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 with which we meet our performance obligations and on the timing of our cash collections, as well as on changes to our allowance for doubtful accounts. We use days sales outstanding (“DSO”) as a measurement of the quality and status of our receivables since lower DSO is generally correlated with higher collection rates. We define DSO as net accounts receivable at quarter end divided by total revenue for the applicable period, multiplied by the number of days in the applicable period. DSO was 79 days and 76 days at June 30, 2023 and December 31, 2022, respectively.

Cash Flows


	Six Months Ended June 30,
(dollars in thousands)	2023			2022
Net cash provided by operating activities	$	27,974		$	48,439
Net cash used in investing activities	$	(83,462	)	$	(7,084	)
Net cash used in financing activities	$	(51,776	)	$	(27,080	)

Operating Activities

Cash provided by operating activities primarily consists of net income adjusted for certain non-cash items including depreciation and amortization, provisions for bad debt, stock-based compensation, deferred income taxes, and the effect of changes in working capital and other activities. Cash provided by operating activities for the six months ended June 30, 2023 was $28.0 million compared to cash provided by operating activities of $48.4 million for the six months ended June 30, 2022.

The decrease in cash provided by operating activities was primarily the result of decrease in revenue, changes in working capital and stock-based compensation charged to earnings.

Investing Activities

Cash used in investing activities in the six months ended 2023 and 2022 was $83.5 million and $7.1 million respectively and was driven by the purchases of investments and the purchase of property and equipment, primarily for internal-use software, and to a lesser extent, computer equipment. We capitalized internal-use software and website development costs of $7.0 million and $6.4 million for the six months ended June 30, 2023 and 2022, respectively.

Financing Activities

In the first six months of 2023, we used $51.8 million for financing activities, consisting primarily of $2.3 million for the payment of contingent consideration related to our 2021 acquisitions, $0.2 million for tax withholdings related to net share settlements and $50.0 million for the repurchase of TechTarget shares. In the first six months of 2022, we used $27.1 million for financing activities, consisting primarily of $5.2 million for the payment of contingent consideration related to our 2020 and 2021 acquisitions, $4.4 million for tax withholdings related to net share settlements and $17.5 million for the repurchase of TechTarget shares.

Common Stock Repurchase Programs

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 this plan for the six months ended June 30, 2022. 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 six months ended June 30, 2022, we repurchased 50,993 shares for an aggregate purchase price of $3.3 million at an average share price of $64.76 under the May 2022 Repurchase Program. As of June 30, 2023, 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 were 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 six month period ended June 30, 2023, we repurchased 1,318,664 shares for an aggregate purchase price of $50.0 million at an average share price of $37.90 under the November 2022 Repurchase Program. As of June 30, 2023, $135.1 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 condensed consolidated Balance Sheets. All repurchased shares were funded with cash on hand.

Convertible Senior Notes and Term Loan and Credit Facility Borrowings

Convertible Senior Notes

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 June 30, 2023, 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 June 30, 2023, 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.

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 June 30, 2023, 729,533 shares were issuable upon conversion of the full aggregate principal amounts of such remaining 2025 Notes.

2021 Loan Agreement

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 based on a formula using certain market rates. As of June 30, 2023, the interest rate was 7.91%. The 2021 Loan Agreement is subject to various leverage and non-financial covenants. No amounts were outstanding under the 2021 Loan Agreement as of June 30, 2023.

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 $7.3 million and $7.2 million for the six-month periods ended June 30, 2023 and 2022, respectively. A majority of our capital expenditures in the first six months of 2023 were for internal-use software and website development costs and, to a lesser extent, computer equipment and related software. We capitalized internal-use software and website development costs of $7.0 million and $6.4 million for the six months ended June 30, 2023 and 2022, respectively. We are not currently party to any purchase contracts related to future capital expenditures.

Contractual Obligations

There were no material changes to our contractual obligations and commitments described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included or referenced in this Quarterly Report that address activities, events or developments which we expect will or may occur in the future are forward-looking statements, including statements regarding our intent, beliefs or current expectations and those of our management team. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “going to,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, priorities, plans, or intentions. Such statements may include those regarding our future financial results and other projections or measures of our future operating performance, including the drivers of such growth, profitability, and performance (including, in each case, any potential impact of product and service development efforts, GDPR or other similar laws, potential changes to customer relationships, and other operational decisions); expectations concerning market opportunities and our ability to capitalize on them; the amount and timing of the benefits expected from acquisitions, new strategies, products or services and other potential sources of additional revenue; and the behavior of our members, partners, and customers. These statements speak only as of the date of this Quarterly Report on Form 10-Q and are based on our current plans and expectations. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties that could cause actual future events or results to be different than those described in or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, those relating to: market acceptance of our products and services, including continued increased sales of our IT Deal Alert™ offerings and continued increased international growth; relationships with customers, strategic partners and employees; the duration and extent of the 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; our ability to develop new products or technologies, to integrate our products with new technologies (e.g., artificial intelligence), or to compete with new products or technologies offered by new or existing competitors; 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 macro-economic factors facing the global economy including disruptions in the capital or banking markets, economic sanctions and economic slowdowns or recessions, rising inflation and interest rates, and other matters included in our SEC filings, including in our Annual Report on Form 10-K for the year ended December 31, 2022. Actual results may differ materially from those contemplated by the forward-looking statements. We undertake no obligation to update our forward-looking statements to reflect future events or circumstances.

Item 3. 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 24% of our revenue for the six months ended June 30, 2023 was derived from customers with billing addresses outside of the United States and our foreign exchange gains/losses were not significant. 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. We also maintain receivables and cash accounts denominated in currencies other than the local currency, which exposes us to foreign exchange rate movements.

In addition, our foreign subsidiaries have certain amounts of Goodwill and Intangibles which expose us to foreign currency exchange rate fluctuations. These exchange rate fluctuations are included as a component of other comprehensive (loss) income.

Interest Rate Risk

At June 30, 2023, we had cash, cash equivalents and investments of $334.3 million. The investments were held in bond funds and time deposits. The cash, cash equivalents and investments were held for working capital purposes. We have not entered 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 as a result of increases in interest rates. Declines in interest rates, however, would reduce future investment income. Additionally, our 2021 Loan Agreement provides for a $75 million revolving credit facility with a $5 million letter-of-credit sublimit. Borrowings under the 2021 Loan Agreement bear interest based on a formula using certain market rates. No amounts were outstanding under the 2021 Loan Agreement as of June 30, 2023. Should interest rates rise, it would cost us more to borrow under the 2021 Loan Agreement.

Inflation Risk

Inflation generally affects us by increasing our cost of labor and certain services. We do not believe that inflation had a material effect on our financial statements included elsewhere in this Quarterly Report on Form 10-Q. However, the United States has recently experienced historically high levels of inflation. If the inflation rate continues to increase it may affect our expenses, such as increases in the costs of labor and supplies. Additionally, the United States is experiencing a workforce shortage, which in turn has created a competitive wage environment that may increase our operating costs in the future.

Item 4. 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 our reports under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer) as appropriate, to allow timely decisions regarding required disclosure.

In connection with the preparation of this Quarterly Report on Form 10-Q for the period ended June 30, 2023, management, under the supervision of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of our disclosure controls and procedures as of June 30, 2023. Based on that evaluation, our 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 controls that occurred during the second quarter of 2023 that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

From time to time and in the ordinary course of business, the Company may be subject to various claims, charges, and litigation. 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 we believe could have a material adverse effect on our business, operating results or financial condition. Information regarding legal proceedings is available in Note 9, Leases and Contingencies, to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

Our business is subject to a number of risks that could have a material effect on our business, results of operations, financial condition and/or liquidity and that could cause our operating results to vary significantly from period to period. In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors we have previously disclosed in Item 1A – “Risk Factors” of our 2022 Annual Report on Form 10-K and the additional risk factor below. We may disclose changes to any risk factors presented or disclose additional factors from time to time in our future filings with the Securities and Exchange Commission.

We may face risks associated with our use of certain artificial intelligence, machine learning, and large language models.

Our business uses artificial intelligence and machine learning (“AI/ML”) technologies, including those offered by third parties, to enhance our content, audience engagement, and overall service offerings and to drive innovation and organizational efficiencies. We are also exploring, developing, and introducing new AI/ML capabilities and large language models, including generative AI features, into our service offerings and platforms to offer enhanced application functionality, updated product offerings, and improved customer experiences. As with many new and emerging technologies, the use of AI/ML presents risks and challenges that could affect their adoption, and therefore our business. If we enable or offer AI/ML features and solutions that draw controversy due to their perceived or actual impact on human rights, privacy, employment, or in other social, economic, or political contexts, we may experience brand or reputational harm, competitive harm, or legal liability. Additionally, the use of AI/ML technologies may result in inaccurate outputs, contain biased information, or expose us to other risks, which could result in incidents that cause harm to our business, our customers, and to individuals. These deficiencies and other failures of AI/ML technologies could subject us to regulatory action, legal liability, including under new and proposed state, federal, and international rules and laws regulating AI/ML, as well as new applications or interpretations of existing data protection, privacy, intellectual property, and other laws.

Issues around the implementation and use of AI/ML technologies are complex and the regulatory landscape continues to evolve. It is likely that new laws and regulations will be adopted, or that existing laws and regulations may be interpreted in new ways that would affect our business and the ways in which we use, or contemplate the use of, AI/ML technology, our financial condition, and our results of operations, including as a result of the cost to comply with such laws or regulations. Further, potential government regulation related to AI/ML use and ethics may also increase the burden and cost of compliance and utilization of AI/ML, and failure to properly remediate AI/ML usage or ethics issues may cause public confidence in AI/ML to be undermined, which could slow their adoption in our offerings and services. In addition, market acceptance of AI/ML is uncertain, and we may be unsuccessful in our service and product development efforts. Any of these factors could adversely affect our business, financial condition, and results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Our repurchases under our repurchase programs are made from time to time at management’s discretion in accordance with applicable federal securities laws. All repurchases of our common stock have been recorded as treasury stock. The following table summarizes information relating to purchases made by or on our behalf of shares of our common stock during the quarter ended June 30, 2023.


Period	Total Number of Shares Purchased(1)(2)		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Program(1)		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in thousands)(3)
April 1, 2023 - April 30, 2023		368,045	$	35.24		368,045	$	147,156
May 1, 2023 - May 31, 2023		369,324	$	32.53		369,324	$	135,142
June 1, 2023 - June 30, 2023		—	$	—		—	$	135,142
Total		737,369	$	33.88		737,369	$	135,142

(1) In November 2022, we announced that the Board of Directors approved a repurchase program (the “November 2022 Repurchase Program”), which authorized management to purchase shares of our common stock or 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 with an expiration in November of 2024.

(2) We purchased an aggregate of 737,369 shares of our common stock in the open market pursuant to our November 2022 Repurchase Program. No shares were transferred to us from employees in satisfaction of minimum tax withholding obligations associated with the vesting of restricted stock rights during the period.

(3) From the November 2022 Repurchase Program's inception through June 30, 2023, we purchased 1,660,447 shares at an average price of $39.06 per share for a total of $64.9 million.

Item 5. Other Information

There were no Rule 10b5-1 plans or non-Rule 10b5-1 trading arrangements (as defined in Item 408(c) of Regulation S-K) adopted, modified, or terminated by any directors or officers (as defined in Rule 16a-1(f)) of the Company during the quarterly period covered by this report.

Item 6. Exhibits

The exhibits listed below are filed as part of this Quarterly Report on Form 10-Q.


			Incorporated by Reference to
Exhibit No.	Description of Exhibit	Form or Schedule	Exhibit No.	Filing Date with SEC	SEC File Number

3.1	Fourth Amended and Restated Certificate of Incorporation of the Registrant.	10-Q	3.1	11/13/2007	001-33472

3.2	Amended and Restated Bylaws of TechTarget, Inc.	10-Q	3.2	08/04/2021	001-33472

31.1*	Certification of Michael Cotoia, Chief Executive Officer of TechTarget, Inc., pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Daniel Noreck, Chief Financial Officer and Treasurer of TechTarget, Inc., pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*	Certifications of Michael Cotoia, Chief Executive Officer of TechTarget, Inc. and Daniel Noreck, Chief Financial Officer and Treasurer of TechTarget, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS	Inline XBRL Instance Document* The instance document does not appear in the Interactive Data File because its XBRL tags are
	Embedded within the Inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document*

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document*

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document*

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document*

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document*

104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exbibit 101)

* Filed herewith.

SIGNATURES

Pursuant to the requirements 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.
	(Registrant)

Date: August 8, 2023	By:	/s/ MICHAEL COTOIA
		Michael Cotoia, Chief Executive Officer and Director (Principal Executive Officer)

Date: August 8, 2023	By:	/s/ DANIEL NORECK
		Daniel Noreck, Chief Financial Officer and Treasurer (Principal Accounting and Financial Officer)