10-Q 1 ttgt-20240331.htm 10-Q 10-Q
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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 March 31, 2024

OR

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

 

img110894849_0.jpg 

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 May 6, 2024 the registrant had 28,548,634 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 March 31, 2024 and December 31, 2023

 

3

 

 

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months ended March 31, 2024 and 2023

 

4

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2024 and 2023

 

5

 

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023

 

6

 

 

Notes to Condensed Consolidated Financial Statements

 

7

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

22

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

35

Item 4.

 

Controls and Procedures

 

36

 

 

 

 

 

PART II.

 

OTHER INFORMATION

 

 

Item 1.

 

Legal Proceedings

 

37

Item 1A.

 

Risk Factors

 

37

Item 5.

 

Other Information

 

38

Item 6.

 

Exhibits

 

39

 

 

Signatures

 

41

 

 

 

2


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

TechTarget, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

 

 

March 31,
2024

 

 

December 31,
2023

 

Assets

 

(Unaudited)

 

 

(Unaudited)

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

230,436

 

 

$

226,668

 

Short-term investments

 

 

100,749

 

 

 

99,601

 

Accounts receivable, net of allowance for doubtful accounts of $3,825 and $5,028 respectively

 

 

36,880

 

 

 

39,239

 

Prepaid taxes

 

 

 

 

 

1,634

 

Prepaid expenses and other current assets

 

 

6,384

 

 

 

4,331

 

Total current assets

 

 

374,449

 

 

 

371,473

 

Property and equipment, net

 

 

25,561

 

 

 

24,917

 

Goodwill

 

 

193,737

 

 

 

194,074

 

Intangible assets, net

 

 

86,575

 

 

 

89,163

 

Operating lease assets with right-of-use

 

 

16,319

 

 

 

17,166

 

Deferred tax assets

 

 

8,687

 

 

 

2,445

 

Other assets

 

 

829

 

 

 

650

 

Total assets

 

$

706,157

 

 

$

699,888

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

4,357

 

 

$

5,312

 

Current operating lease liabilities

 

 

4,161

 

 

 

4,049

 

Accrued expenses and other current liabilities

 

 

7,638

 

 

 

9,041

 

Accrued compensation expenses

 

 

1,544

 

 

 

1,345

 

Income taxes payable

 

 

8,477

 

 

 

2,522

 

Contract liabilities

 

 

17,375

 

 

 

14,721

 

Total current liabilities

 

 

43,552

 

 

 

36,990

 

Non-current operating lease liabilities

 

 

15,658

 

 

 

16,615

 

Convertible senior notes

 

 

411,051

 

 

 

410,500

 

Deferred tax liabilities

 

 

12,402

 

 

 

12,856

 

Total liabilities

 

 

482,663

 

 

 

476,961

 

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; 58,792,845 and 58,659,065 shares issued, respectively; 28,548,634 and 28,415,144 shares outstanding, respectively

 

 

59

 

 

 

59

 

Treasury stock, at cost; 30,244,211 and 30,243,921 shares, respectively

 

 

(329,118

)

 

 

(329,118

)

Additional paid-in capital

 

 

483,016

 

 

 

471,696

 

Accumulated other comprehensive loss

 

 

(5,207

)

 

 

(4,542

)

Retained earnings

 

 

74,744

 

 

 

84,832

 

Total stockholders’ equity

 

 

223,494

 

 

 

222,927

 

Total liabilities and stockholders’ equity

 

$

706,157

 

 

$

699,888

 

See accompanying Notes to Condensed Consolidated Financial Statements.

3


 

TechTarget, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(in thousands, except per share data)

 

 

For the Three Months Ended

 

 

 

March 31,

 

 

2024

 

 

2023

 

 

 

(Unaudited)

 

 

(Unaudited)

 

Revenue

 

$

51,636

 

 

$

57,114

 

Cost of revenue(1)

 

 

19,158

 

 

 

17,350

 

Amortization of acquired technology

 

 

702

 

 

 

673

 

Gross profit

 

 

31,776

 

 

 

39,091

 

Operating expenses:

 

 

 

 

 

 

Selling and marketing(1)

 

 

22,963

 

 

 

24,756

 

Product development(1)

 

 

2,753

 

 

 

2,609

 

General and administrative(1)

 

 

6,695

 

 

 

7,918

 

Transaction and related expenses

 

 

6,526

 

 

 

-

 

Depreciation, excluding depreciation of $1,175 and $845, respectively, included in cost of revenue

 

 

2,311

 

 

 

2,000

 

Amortization

 

 

1,498

 

 

 

1,493

 

Total operating expenses

 

 

42,746

 

 

 

38,776

 

Operating income (loss)

 

 

(10,970

)

 

 

315

 

Interest and other income, net

 

 

3,072

 

 

 

2,757

 

Income (loss) before provision for income taxes

 

 

(7,898

)

 

 

3,072

 

Provision for income taxes

 

 

2,190

 

 

 

1,427

 

Net income (loss)

 

$

(10,088

)

 

$

1,645

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

Unrealized gain (loss) on investments (net of tax provision effect of $(7) and $18, respectively)

 

$

(23

)

 

$

63

 

Foreign currency translation gain (loss)

 

 

(642

)

 

 

2,029

 

Other comprehensive income (loss)

 

 

(665

)

 

 

2,092

 

Comprehensive income (loss)

 

$

(10,753

)

 

$

3,737

 

Net income (loss) per common share:

 

 

 

 

 

 

Basic

 

$

(0.35

)

 

$

0.06

 

Diluted

 

$

(0.35

)

 

$

0.06

 

Weighted average common shares outstanding:

 

 

 

 

 

 

Basic

 

 

28,510

 

 

 

28,757

 

Diluted

 

 

28,510

 

 

 

28,953

 

 

(1)
Amounts include stock-based compensation expense as follows:

Cost of revenue

 

$

734

 

 

$

821

 

Selling and marketing

 

 

6,424

 

 

 

7,537

 

Product development

 

 

478

 

 

 

460

 

General and administrative

 

 

3,823

 

 

 

3,458

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

4


 

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
Loss

 

 

Retained
Earnings

 

 

Total
Stockholders’
Equity

 

Balance, December 31, 2023

 

 

58,659,065

 

 

$

59

 

 

 

30,243,921

 

 

$

(329,118

)

 

$

471,696

 

 

$

(4,542

)

 

$

84,832

 

 

$

222,927

 

Issuance of common stock from restricted stock awards

 

 

133,490

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impact of net settlements

 

 

290

 

 

 

 

 

 

290

 

 

 

 

 

 

(139

)

 

 

 

 

 

 

 

 

(139

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,459

 

 

 

 

 

 

 

 

 

11,459

 

Unrealized loss on investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(23

)

 

 

 

 

 

(23

)

Unrealized loss on foreign currency exchange

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(642

)

 

 

 

 

 

(642

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,088

)

 

 

(10,088

)

Balance, March 31, 2024

 

 

58,792,845

 

 

$

59

 

 

 

30,244,211

 

 

$

(329,118

)

 

$

483,016

 

 

$

(5,207

)

 

$

74,744

 

 

$

223,494

 

 

 

 

 

Common Stock

 

 

Treasury Stock

 

 

 

 

 

 

 

 

 

 

 

 

 


 

 

Number of
Shares

 

 

$0.001
Par Value

 

 

Number of
Shares

 

 

Cost

 

 

Additional
Paid-In
Capital

 

 

Accumulated
Other
Comprehensive
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

 

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

 

 

(1)Includes $1.9 million of accrued compensation expense recognized in the previous year for the three months ended March 31, 2023.

See accompanying Notes to Condensed Consolidated Financial Statements.

5


 

TechTarget, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

 

 

For the Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

 

 

(Unaudited)

 

Operating activities:

 

 

 

 

 

 

Net income (loss)

 

$

(10,088

)

 

$

1,645

 

Adjustments to reconcile net income (loss) to net cash provided by operating
   activities:

 

 

 

 

 

 

Depreciation

 

 

3,486

 

 

 

2,845

 

Amortization

 

 

2,200

 

 

 

2,166

 

Provision for bad debt

 

 

(569

)

 

 

758

 

Stock-based compensation

 

 

11,459

 

 

 

12,276

 

Amortization of debt issuance costs

 

 

550

 

 

 

627

 

Deferred tax benefit

 

 

(6,603

)

 

 

(1,298

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

2,912

 

 

 

8,294

 

Operating lease assets with right of use

 

 

695

 

 

 

390

 

Prepaid expenses and other current assets

 

 

(423

)

 

 

(2,033

)

Other assets

 

 

(182

)

 

 

(4

)

Accounts payable

 

 

(952

)

 

 

(250

)

Income taxes payable

 

 

5,979

 

 

 

2,173

 

Accrued expenses and other current liabilities

 

 

(1,388

)

 

 

(2,445

)

Accrued compensation expenses

 

 

205

 

 

 

(1,209

)

Operating lease liabilities with right of use

 

 

(660

)

 

 

(874

)

Contract liabilities

 

 

2,673

 

 

 

(4,843

)

Net cash provided by operating activities

 

 

9,294

 

 

 

18,218

 

Investing activities:

 

 

 

 

 

 

Purchases of property and equipment, and other capitalized assets, net

 

 

(4,154

)

 

 

(3,548

)

Purchases of investments

 

 

(1,156

)

 

 

(25,299

)

Net cash used in investing activities

 

 

(5,310

)

 

 

(28,847

)

Financing activities:

 

 

 

 

 

 

Tax withholdings related to net share settlements

 

 

(139

)

 

 

(177

)

Purchase of treasury shares and related costs

 

 

 

 

 

(25,000

)

Proceeds from stock option exercises

 

 

 

 

 

18

 

Payment of earnout liabilities

 

 

 

 

 

(2,267

)

Net cash used in financing activities

 

 

(139

)

 

 

(27,426

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(77

)

 

 

621

 

Net increase (decrease) in cash and cash equivalents

 

 

3,768

 

 

 

(37,434

)

Cash and cash equivalents at beginning of period

 

 

226,668

 

 

 

344,523

 

Cash and cash equivalents at end of period

 

$

230,436

 

 

$

307,089

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid for taxes, net

 

$

1,181

 

 

$

598

 

Schedule of non-cash investing and financing activities:

 

 

 

 

 

 

Right of use assets and lease liabilities

 

$

4

 

 

$

314

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

6


 

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 800 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.

On January 10, 2024, we entered into an Agreement and Plan of Merger (the “Transaction Agreement”) with Informa PLC ("Informa") and certain of our and their subsidiaries. Pursuant to the Transaction Agreement, we and Informa, among other things, agreed to combine our businesses with the business of Informa Intrepid Holdings Inc. (“Informa Tech”), a wholly owned subsidiary of Informa which will own and operate Informa’s digital businesses (Industry Dive, Omdia (including Canalys)), NetLine and certain of its digital media brands (e.g. Information Week, Light Reading, and AI Business), under a new publicly traded holding company (“New TechTarget”). Upon closing, among other things, Informa and its subsidiaries will collectively own 57% of the outstanding common stock of New TechTarget (on a fully diluted basis) and our former stockholders will own the remaining outstanding common stock of New TechTarget. Our former stockholders will also receive a pro rata share of an amount in cash equal to $350 million plus the amount of any EBITDA adjustment (as defined in the Transaction Agreement), which is estimated as of the date of the Transaction Agreement to be approximately $11.79 per share of our common stock. The various transactions set forth in the Transaction Agreement (the “proposed transaction”) are expected to close in the second half of 2024, subject to satisfaction or waiver of certain customary conditions.

We will be required to pay Informa a termination fee between $30.0 and $40.0 million if the Transaction Agreement is terminated under certain specified circumstances, including termination by us in connection with our entry into an agreement with respect to a Toro Superior Proposal (as defined in the Transaction Agreement) prior to us receiving stockholder approval of the proposed transaction, or termination by Informa upon a Toro Change in Recommendation (as defined in the Transaction Agreement).

 

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 year ended December 31, 2023, and in this note to the condensed consolidated financial statements.

7


 

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, 2023.

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.

8


 

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 March 31, 2024, 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, 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. See Note 4 for further information on the fair value of the Company’s investments. The Company classifies all of its short-term investments 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 December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2023-09.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose information about their reportable segments’ significant expenses and other

9


 

segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2023-07.

3. Revenue

Disaggregation of Revenue

The following table depicts the disaggregation of revenue according to categories consistent with how the Company evaluates its financial performance and economic risk. International revenue consists of international geo-targeted campaigns, which are campaigns targeted at an audience of members outside of North America.

 

 

For the Three Months Ended
March 31,

 

 

2024

 

 

2023

 

North America

$

35,230

 

 

$

37,760

 

International

 

16,406

 

 

 

19,354

 

Total

$

51,636

 

 

$

57,114

 

 

 

For the Three Months Ended
March 31,

 

 

2024

 

 

2023

 

Revenue under short-term contracts

$

33,940

 

 

$

33,889

 

Revenue under longer-term contracts

 

17,696

 

 

 

23,225

 

Total

$

51,636

 

 

$

57,114

 

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 $1.7 million and $1.9 million at March 31, 2024, and December 31, 2023, respectively.

 

 

Contract Liabilities

 

Year-to-Date Activity

 

 

 

Balance at December 31, 2023

 

$

14,721

 

Billings

 

 

54,290

 

Revenue Recognized

 

 

(51,636

)

Balance at March 31, 2024

 

$

17,375

 

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.

10


 

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 investments. 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
 March 31, 2024

 

 

 

March 31, 2024

 

 

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)

 

$

26,204

 

 

$

 

 

$

26,204

 

 

$

 

Pooled bond funds

 

 

74,545

 

 

 

 

 

 

74,545

 

 

 

 

Total short-term investments

 

$

100,749

 

 

$

 

 

$

100,749

 

 

$

 

 

 

 

 

 

 

 

Fair Value Measurements at
December 31, 2023

 

 

 

December 31, 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)

 

$

25,877

 

 

$

 

 

$

25,877

 

 

$

 

Pooled bond funds

 

 

73,724

 

 

 

 

 

 

73,724

 

 

 

 

Total short-term investments

 

$

99,601

 

 

$

 

 

$

99,601

 

 

$

 

 

(1)
The Company's time deposits consist of domestic deposits which mature within six months (Level 2). All level 2 investments are priced using observable inputs, such as quoted prices in markets that are not active and yield curves.

11


 

5. Cash, Cash Equivalents and Short-Term Investments

Cash and cash equivalents are carried at cost, which approximates fair market value. As of March 31, 2024 and December 31, 2023, cash and cash equivalents totaled $230.4 million and $226.7 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 March 31, 2024 or December 31, 2023.

Short-term investments consisted of the following:

 

 

March 31, 2024

 



 

 

Adjusted
Cost

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Estimated
Fair Value

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

Time deposits

 

$

26,204

 

 

$

 

 

$

 

 

$

26,204

 

Pooled bond funds

 

 

73,851

 

 

 

694

 

 

 

 

 

 

74,545

 

Total short-term investments

 

$

100,055

 

 

$

694

 

 

$

 

 

$

100,749

 

 

 

 

December 31, 2023

 



 

 

Adjusted
Cost

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Estimated
Fair Value

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

Time deposits

 

$

25,877

 

 

$

 

 

$

 

 

$

25,877

 

Pooled bond funds

 

 

73,021

 

 

 

703

 

 

 

 

 

 

73,724

 

Total short-term investments

 

$

98,898

 

 

$

703

 

 

$

 

 

$

99,601

 

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 March 31, 2024 or December 31, 2023. There were no indications of impairment as of March 31, 2024, 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:

 

 

 

 

 

March 31, 2024

 

 

 

Estimated
Useful Lives
(Years)

 

Gross
Carrying
Amount

 

 

Accumulated
Amortization

 

 

Net

 

Customer relationships

 

5-19

 

$

83,716

 

 

$

(22,810

)

 

$

60,906

 

Developed websites, technology and patents

 

10

 

 

32,935

 

 

 

(11,493

)

 

 

21,442

 

Trademark, trade name and domain name

 

5-16

 

 

7,583

 

 

 

(3,479

)

 

 

4,104

 

Proprietary user information database and internet traffic

 

5

 

 

1,100

 

 

 

(1,100

)

 

 

 

Non-compete agreements

 

1.5-3

 

 

600

 

 

 

(477

)

 

 

123

 

Total intangible assets

 

 

 

$

125,934

 

 

$

(39,359

)

 

$

86,575

 

 

12


 

 

 

 

 

December 31, 2023

 

 

 

Estimated
Useful Lives
(Years)

 

Gross
Carrying
Amount

 

 

Accumulated
Amortization

 

 

Net

 

Customer relationships

 

5-19

 

$

83,959

 

 

$

(21,604

)

 

$

62,355

 

Developed websites, technology and patents

 

10

 

 

33,202

 

 

 

(10,802

)

 

 

22,400

 

Trademark, trade name and domain name

 

5-16

 

 

7,627

 

 

 

(3,365

)

 

 

4,262

 

Proprietary user information database and internet traffic

 

5

 

 

1,106

 

 

 

(1,106

)

 

 

 

Non-compete agreements

 

1.5-3

 

 

600

 

 

 

(454

)

 

 

146

 

Total intangible assets

 

 

 

$

126,494

 

 

$

(37,331

)

 

$

89,163

 

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 6.3 years. Amortization expense was $2.2 million both the three months ended March 31, 2024 and 2023, 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 three months of 2024 or 2023.

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

Years Ending December 31:

 

Amortization
Expense

 

2024 (April 1 – December 31)

 

$

6,593

 

2025

 

 

8,752

 

2026

 

 

8,698

 

2027

 

 

8,694

 

2028

 

 

8,694

 

Thereafter

 

 

45,144

 

Total

 

$

86,575

 

13


 

7. Net Income (Loss) Per Common Share

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

 

 

 

For the Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Numerator:

 

 

 

 

 

 

Net income (loss)

 

$

(10,088

)

 

$

1,645

 

Denominator:

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

Weighted average shares of common stock and vested, undelivered restricted stock units outstanding

 

 

28,510,395

 

 

 

28,757,259

 

Diluted:

 

 

 

 

 

 

Weighted average shares of common stock and vested, undelivered restricted stock units outstanding

 

 

28,510,395

 

 

 

28,757,259

 

     Effect of potentially dilutive shares (1)

 

 

-

 

 

 

195,847

 

Total weighted average shares of common stock and vested, undelivered restricted stock units outstanding and potentially dilutive shares

 

 

28,510,395

 

 

 

28,953,106

 

Net Income Per Common Share:

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

Net income (loss) applicable to common stockholders

 

$

(10,088

)

 

$

1,645

 

Weighted average shares of stock outstanding

 

 

28,510,395

 

 

 

28,757,259