TechTarget, Inc. (NASDAQ: TTGT, $90.39): “Amazon and Google’s Best Marketer”
By: George
Wong, AIM Student at Marquette University
Summary
- TechTarget,
Inc. (NASDAQ: TTGT) provides data-driven marketing analytics and
sales-enablement solutions to a diversified customer base that includes Amazon,
Google, and Microsoft. The company focuses on working with B2B technology
companies.
- TTGT is a market leader for purchase intent data, and the company believes its extremely large total addressable market (TAM) is underpenetrated. The company has grown its revenue at a CAGR of 26% since 2017.
- The acquisition of BrightTALK in FY’20, a company that provides professional webinar hosting, has expanded TTGT’s subscription revenue/customer base. In Q2 FY’21, the company announced it had acquired Xtelligent Healthcare Media, which operates in a relatively untapped market (Healthcare) for TTGT.
- Management has stated that the growing importance of privacy favors TTGT and their privacy-first approach.
- TTGT has a strong balance sheet that had over $100MM in cash at the end of Q2 FY’21.
Key
points: TechTarget is the provider of marketing analytics and
solutions to some of the largest technology companies in the world. The
long-term relationships TTGT has developed with its diversified and worldwide
customer base has provided the company strong recurring revenue and overall operational
stability. According to their 10-K, no customer accounts for more than 10% of
total revenue. Overall, at the of FY’20, the company had over 1,500 customers.
TTGT’s products and services enable
its B2B customers the ability to identify, reach, and influence key decision
makers. Overall, the goal of TTGT’s offerings are for customers to utilize
their detailed purchase intent data that is collected from enterprise technology
organizations. Additionally, the company complements its analytics services by offering
customized marketing programs. TTGT’s proprietary content has been built over
the past twenty years, and it is difficult to replicate.
More recently, the company has
focused on increasing its subscription revenue. Since 2016, the company has
grown this type of revenue at a CAGR of 42%. Its subscription revenue as a
percentage of total revenue has also seen considerable growth over the past four
years (CAGR of 31%). Overall, the company’s subscription revenue accounted for
35% of total revenue at the of FY’20. Management expects this type of revenue
to make up over 50% of total revenue in the next few years.
Through the acquisitions of
BrightTALK and Xtelligent, TTGT has expanded its TAM and potential revenue opportunities.
BrightTALK was acquired at the end of FY’20 and has benefited significantly
from the increased demand for online events. The webinar and video content
platform engages with over 200,000 unique users monthly. According to TTGT’s
management team, Xtelligent is expected to “offer customers new opportunities
to reach and engage highly targeted healthcare technology decision-makers.” As
mentioned, the company has cash on-hand in case another attractive acquisition
target emerges.
What
has the stock done lately?
TTGT’s Q2 FY’21 earnings were
released in the beginning of August, and the stock has been up 11% since. The
company surpassed revenue and earnings estimates for the most recent quarter and
has done that for the past four quarters. As mentioned, in the most recent
quarter, TTGT acquired the largest marketing services company in B2B Healthcare
Technology, Xtelligent Healthcare Media.
Past
Year Performance: TTGT is up nearly 130% over the past year, but the
stock still has room to grow. As mentioned, the customer base for TTGT is
continuously growing, and the company has made strong acquisitions in markets where
Management believes TTGT is underrepresented. Additionally, the company has
outperformed the S&P 500 over the past year.
My
Takeaway
TTGT is a market leader in an
industry that is destined to grow. The need for data will not go away, and TTGT
will continue to provide analytics and solutions to the largest companies in
the world. The company’s management team is confident in its ability to expand
its already leading market share as its TAM increases considerably over the
next several years. Through acquisitions and product innovations, TTGT will
remain businesses’ first choice for marketing analytics. Given these factors,
TTGT should remain in the AIM Equity Fund.
