Document Contents

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

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.

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 April 30, 2020, the registrant had 27,528,786 shares of common stock, $0.001 par value per share, outstanding.

	March 31, 2020			December 31, 2019
Assets	(Unaudited)			(Unaudited)
Current assets:
Cash	$	40,279		$	52,487
Short-term investments		4,887			5,012
Accounts receivable, net of allowance for doubtful accounts of $2,031 and $1,899 respectively		23,554			27,102
Prepaid taxes		—			1,017
Prepaid expenses and other current assets		2,563			1,813
Total current assets		71,283			87,431
Property and equipment, net		12,639			12,371
Goodwill		96,992			93,639
Intangible assets, net		3,590			710
Operating lease assets with right-of-use		25,843			26,385
Deferred tax assets		244			136
Other assets		899			936
Total assets	$	211,490		$	221,608
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,691		$	2,036
Current operating lease liability		2,652			2,571
Current portion of term loan		1,397			1,241
Accrued expenses and other current liabilities		3,956			2,476
Accrued compensation expenses		846			3,679
Income taxes payable		264			65
Contract liabilities		4,548			4,335
Total current liabilities		15,354			16,403
Long-term liabilities:
Long-term portion of term loan		22,007			22,473
Non-current operating lease liability		27,419			28,170
Deferred tax liabilities		1,335			1,611
Total liabilities		66,115			68,657
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; 55,027,081 and 54,903,824 shares issued, respectively; 27,528,786 and 28,142,519 shares outstanding, respectively		55			55
Treasury stock, at cost; 27,498,295 and 26,761,305 shares, respectively		(199,796	)		(184,972	)
Additional paid-in capital		322,901			317,675
Accumulated other comprehensive loss		(504	)		(319	)
Retained earnings		22,719			20,512
Total stockholders’ equity		145,375			152,951
Total liabilities and stockholders’ equity	$	211,490		$	221,608

	For the Three Months Ended
	March 31,
	2020			2019
	(Unaudited)			(Unaudited)
Revenues	$	31,416		$	29,972
Cost of revenues⁽¹⁾		8,151			7,012
Gross profit		23,265			22,960
Operating expenses:
Selling and marketing⁽¹⁾		12,949			12,446
Product development⁽¹⁾		2,032			1,987
General and administrative⁽¹⁾		3,355			3,022
Depreciation and amortization, excluding depreciation of $171, $13, included in cost of revenues		1,345			1,130
Total operating expenses		19,681			18,585
Operating income		3,584			4,375
Interest and other expense, net		(469	)		(137	)
Income before provision for income taxes		3,115			4,238
Provision for income taxes		908			948
Net income	$	2,207		$	3,290
Other comprehensive (loss) income, net of tax:
Unrealized loss on investments (net of tax provision of $37, $0)	$	(132	)	$	—
Foreign currency translation (loss) gain		(53	)		41
Other comprehensive (loss) gain		(185	)		41
Comprehensive income	$	2,022		$	3,331
Net income per common share:
Basic	$	0.08		$	0.12
Diluted	$	0.08		$	0.12
Weighted average common shares outstanding:
Basic		28,004			27,805
Diluted		28,440			28,206

	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, 2019		54,903,824	$	55		26,761,305	$	(184,972	)	$	317,675		$	(319	)	$	20,512	$	152,951
Issuance of common stock from restricted stock awards		123,027		—		—		—			—			—			—		—
Purchase of common stock through stock buyback		—		—		736,760		(14,824	)		—			—			—		(14,824	)
Impact of net settlements		230		—		230		—			(68	)		—			—		(68	)
Stock-based compensation expense		—		—		—		—			5,294			—			—		5,294
Comprehensive income:
Unrealized loss on investments		—		—		—		—			—			(132	)		—		(132	)
Unrealized loss on foreign currency exchange		—		—		—		—			—			(53	)		—		(53	)
Net income		—		—		—		—			—			—			2,207		2,207
Balance, March 31, 2020		55,027,081	$	55		27,498,295	$	(199,796	)	$	322,901		$	(504	)	$	22,719	$	145,375

	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, 2018		54,117,325	$	54		26,326,280	$	(177,905	)	$	307,014		$	(215	)	$	3,637	$	132,585
Issuance of common stock from exercise of options		10,000		—		—		—			23			—			—		23
Issuance of common stock from restricted stock awards		112,545		—		—		—			—			—			—		—
Purchase of common stock through stock buyback		—		—		220,297		(3,125	)		—			—			—		(3,125	)
Impact of net settlements		6,391		—		6,391		—			(868	)		—			—		(868	)
Stock-based compensation expense		—		—		—		—			3,179			—			—		3,179
Comprehensive income:
Unrealized gain on foreign currency exchange		—		—		—		—			—			41			—		41
Net income		—		—		—		—			—			—			3,290		3,290
Balance, March 31, 2019		54,246,261	$	54		26,552,968	$	(181,030	)	$	309,348		$	(174	)	$	6,927	$	135,125

	Three Months Ended March 31,
	2020			2019
	(Unaudited)
Operating activities:
Net income	$	2,207		$	3,290
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,516			1,143
Provision for bad debt		139			210
Stock-based compensation		3,428			2,462
Amortization of debt issuance costs		2			2
Deferred tax provision		274			(362	)
Changes in operating assets and liabilities:
Accounts receivable		3,409			4,582
Prepaid expenses and other current assets		(752	)		(714	)
Other assets		14			(145	)
Accounts payable		(341	)		115
Income taxes payable		578			1,038
Accrued expenses and other current liabilities		41			(880	)
Operating lease right-of-use assets and ;liabilities, net		(82	)		(84	)
Accrued compensation expenses		(949	)		(874	)
Contract liabilities		213			22
Other liabilities		—			(1	)
Net cash provided by operating activities		9,697			9,804
Investing activities:
Purchases of property and equipment, and other capitalized assets		(1,636	)		(1,833	)
Purchases of investments and maturities of investments		(42	)		500
Acquisitions of businesses, net		(5,015	)		—
Net cash used in investing activities		(6,693	)		(1,333	)
Financing activities:
Tax withholdings related to net share settlements		(68	)		(868	)
Purchase of treasury shares and related costs		(14,824	)		(3,125	)
Proceeds from exercise of stock options		—			23
Term loan principal payment		(313	)		(313	)
Net cash used in financing activities		(15,205	)		(4,283	)
Effect of exchange rate changes on cash		(7	)		(10	)
Net (decrease) increase in cash		(12,208	)		4,178
Cash at beginning of period		52,487			34,673
Cash at end of period	$	40,279		$	38,851
Supplemental disclosure of cash flow information:
Cash paid for taxes, net	$	70		$	121

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

TechTarget, Inc. and its subsidiaries (the “Company”) is a leading provider of specialized online content for buyers of enterprise technology products and services, and a leading provider of purchase-intent marketing and sales services for business-to-business “B2B” technology companies. The Company’s service offerings enable enterprise B2B technology companies to better identify, reach, and influence corporate enterprise technology decision makers actively researching specific enterprise technology purchases. The Company improves B2B technology companies ability to impact these audiences for business growth using advanced targeting, analytics, and data services complemented with customized marketing programs that integrate demand generation and brand advertising techniques. The Company operates a network of over 140 websites, each of which focuses on a major enterprise technology sector such as storage, security, or networking. Enterprise technology and business professionals have become increasingly specialized, and they have come to rely on the Company’s sector-specific websites for purchasing decision support. The Company’s content platform enables 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. At critical stages of the purchase decision process, these content offerings, through different channels, meet enterprise technology and business professionals’ needs for expert, peer, and IT vendor information and provide a platform on which IT vendors can launch targeted marketing campaigns which generate measurable return on investment. Based upon the logical clustering of members’ respective job responsibilities and the marketing focus of the products being promoted by the Company’s customers, the Company categorizes its content offerings to address the key market opportunities and audience extensions across a portfolio of distinct market categories including: Security, Networking, Storage, Data Center and Virtualization Technologies, CIO/IT Strategy, Business Applications and Analytics, Application Architecture and Development, and ANCL Channel.

The accompanying consolidated financial statements reflect the application of certain significant accounting policies as described below and elsewhere in these Notes to Consolidated Financial Statements. The Company’s critical accounting policies are those that affect its more significant judgments used in the preparation of its 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, 2019, and in this note to the consolidated financial statements.

The accompanying Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries, TechTarget Securities Corporation (“TSC”), TechTarget Limited, TechTarget (HK) Limited (“TTGT HK”), TechTarget (Australia) Pty Ltd., TechTarget (Singapore) Pte Ltd., E-Magine Médias SAS (“LeMagIT”) and TechTarget Germany GmbH. 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.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted (Generally Accepted Accounting Principles or “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 accounting principles generally accepted in the U.S. 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 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 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 consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, including those related to revenues, long-lived assets, goodwill, the allowance for doubtful accounts, stock-based compensation, self-insurance accruals, 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.

The Company generates its revenues from the sale of targeted marketing and advertising campaigns, which it delivers via its network of websites and data analytics 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.

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 Consolidated Statements of 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.

For the three months ended March 31, 2020, the Company’s assessment considered business and market disruptions caused by COVID-19 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.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than twelve months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the Consolidated Statements of Income and Comprehensive Income. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees, capital and operating leases, existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company adopted ASU 2016-02 in the first quarter of 2019 using the modified retrospective approach, and elected the package of practical expedients permitted under the transition guidance. Results and disclosure requirements for reporting periods beginning after January 1, 2019 are presented under Topic 842.

The Company elected the package of practical expedients permitted under the transition guidance, which allowed us to carryforward our historical lease classification, our assessment on whether a contract was or contains a lease, and our initial direct costs for any leases that existed prior to January 1, 2019. We also elected to combine our lease and non-lease components and to keep leases with an initial term of 12 months or less off the balance sheet and recognize the associated lease payments in the consolidated statements of income on a straight-line basis over the lease term. The Company recorded operating lease assets with right-of-use of $27.5 million and $2.9 million current operating lease liability and $29.2 million non-current operating lease liability as of January 1, 2019, of which $4.9 million and $0.3 million were reclassified from deferred rent and prepaid rent, respectively (see Note 9).

In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment ("ASU 2017-04"). ASU 2017-04 eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge (step 2 of the goodwill impairment test) and instead requires only a one-step quantitative impairment test, performed by comparing the fair value of goodwill with its carrying amount. ASU 2017-04 is effective on a prospective basis effective for goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for goodwill impairment tests performed on testing dates after January 1, 2017. The Company adopted the new standard effective January 1, 2020. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract, which requires implementation costs incurred by customers in cloud computing arrangements (i.e., hosting arrangements) to be capitalized under the same premises of authoritative guidance for internal-use software, and deferred over the non-cancellable term of the cloud computing arrangements plus any optional renewal periods that are reasonably certain to be exercised by the customer or for which the exercise is controlled by the service provider. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. The Company adopted the new standard effective January 1, 2020. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments,” (ASU 2016-13) which amends ASC 326 “Financial Instruments—Credit Losses” which introduces a new methodology for accounting for credit losses on financial instruments. The guidance establishes a new forward looking "expected loss model" that requires entities to estimate current expected credit losses on accounts receivable and financial instruments by using all practical and relevant information. The Company adopted the new standard effective January 1, 2020. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In August 2018, the FASB issued Accounting Standard Update No. 2018-13, “Changes to Disclosure Requirements for Fair Value Measurements” (Topic 820) (ASU 2018-13), which improved the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements. The Company adopted the new standard effective January 1, 2020. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

In December 2019, the FASB issued Accounting Standard Update No. 2019-12, Income Taxes (Topic 740): “Simplifying the Accounting for Income Taxes” (ASU 2019-12), which simplifies the accounting for income taxes. This guidance will be effective for us in the first quarter of 2021 on a prospective basis, and early adoption is permitted. The Company is are currently evaluating the impact of the new guidance on our consolidated financial statements.

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.

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 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 amounts included in the contract liabilities on the accompanying Consolidated Balance Sheets were $2.4 at both March 31, 2020 and, December 31, 2019.

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. Additionally, the Company switched banks and the money market accounts are in bank deposits and are not quoted instruments. As such they are all considered cash. The fair value of these financial assets and liabilities for was determined based on three levels of input as follows:

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 Reporting Date Using
	For the three months ended		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Short-term investments(1)	$	4,887	$	—	$	4,887	$	—
Total assets	$	4,887	$	—	$	4,887	$	—
Liabilities:
Contingent consideration - current (2)	$	613	$	—	$	—	$	613
Contingent consideration - non-current (2)		366		—		—		366
Total liabilities	$	979	$	—	$	—	$	979

Cash is carried at cost, which approximates their fair market value. Cash consisted of the following:

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. The cumulative unrealized loss, net of taxes, was $169 as of March 31, 2020. There were no realized gains or losses as of December 31, 2019.

			March 31, 2020
	Estimated Useful Lives (Years)		Gross Carrying Amount		Accumulated Amortization			Net
Customer, affiliate and advertiser relationships	5-17		$	8,686	$	(6,268	)	$	2,418
Developed websites, technology and patents		10		1,979		(1,018	)		961
Trademark, trade name and domain name	5-8			1,796		(1,740	)		56
Proprietary user information database and internet traffic		5		1,092		(1,092	)		—
Non-Compete agreement		3		170		(15	)		155
Total intangible assets			$	13,723	$	(10,133	)	$	3,590

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)

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

Item		Page

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	4
	Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019	4
	Consolidated Statements of Income and Comprehensive Income for the three months ended March 31, 2020 and 2019	5
	Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2020 and 2019	6
	Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019	7
	Notes to Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 6.	Exhibits	35
	Signatures	36

	Contract Liabilities
Year-to-Date Activity
Balance at December 31, 2019	$	4,335
Deferral of revenue		2,178
Recognition of previously unearned revenue		(1,965	)
Balance at March 31, 2020	$	4,548

	March 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Short-term investments:
Bond funds	$	5,056	$	—	$	(169	)	$	4,887
Total short-term investments	$	5,056	$	—	$	(169	)	$	4,887

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

Cost of revenues	$	68	$	40
Selling and marketing		2,188		1,691
Product development		196		92
General and administrative		976		639

	For the three months ended March 31,
	2020		2019
North America	$	19,881	$	20,278
International		11,535		9,694
Total	$	31,416	$	29,972

	December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Short-term investments:
Bond funds	$	5,012	$	—	$	—	$	5,012
Total short-term investments	$	5,012	$	—	$	—	$	5,012

Section 1: 10-Q (10-Q)