TechTarget (NASDAQ: TTGT) reported Q3 EPS of $0.30, $0.04 better than the analyst estimate of $0.26. Revenue for the quarter came in at $36.2 million versus the consensus estimate of $34.51 million.

Let’s unpack what we are seeing and what we’ve learned from the pandemic. First, IT spending is no longer a discretionary item for most companies. They see digital transformation as a necessary investment to remain competitive. This dynamic has benefitted our customers. Second, the migration of IT spending to a subscription model has built in significant resilience and predictability to most of our customer’s business models, which in turn has kept their spending levels on sales and marketing fairly stable as compared to more volatility in past downturns. Not surprisingly, we have seen some weakness in brand spending from large legacy IT vendors, but our revenue from the Global 10 cohort was sequentially higher in Q3 vs Q2 and is forecasted to return to growth in Q4. We will benefit from favorable comps with this customer group in 2021. Today, that customer segment only represents about 20% of our business as compared to over 40% 10 years ago. The other place we continue to see weakness is with smaller customers hesitant to commit to yearlong subscriptions to new products and services. As a result, Priority Engine revenues grew 4% in the quarter.

We are seeing a budget shift from face-to-face event sponsorships to online lead generation. We believe that much of this shift will become permanent as we do not believe the face-to-face business will return to its previous spend levels pre-COVID. This is showing up mostly in our International numbers as those markets had significantly more events as part of their budget mix than in North America. Today, most of those deals are short term, mirroring the event buy. The opportunity that we are focused on here is to migrate those budgets from face-to-face to intent-based lead generation and then graduate those customers to annual Priority Engine subscriptions. We believe this is achievable as the vast majority of our customers have a strategic initiative to use data to make their sales and marketing organizations more intelligent, efficient and effective.

We are singularly focused on helping our customers with this strategic transition. We introduced a major Priority Engine release in September that significantly enhances the sales use case. The main improvements include proprietary first party purchase intent data at the individual prospect level in addition to the account level data we had been previously providing and better integration with Salesforce.com. Initial results in the field are promising. We implemented approximately a double-digit price increase with this new functionality and early usage is encouraging. Page views within Priority Engine have increased by 80% since the beginning of the year and portal interactions by users that self-identify as salespeople are up over 40% since we released the new sales-friendly version.

GUIDANCE:

TechTarget sees Q4 2020 revenue of $42-43 million, versus the consensus of $36.6 million.

For earnings history and earnings-related data on TechTarget (TTGT) click here.