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8-K - 8-K - Marketo, Inc.a14-11000_18k.htm

Exhibit 99.1

 

Marketo Announces Revenue Growth of 64% for First Quarter 2014

 

SAN MATEO, Calif. — April 24, 2014 — Marketo (NASDAQ: MKTO), the leading provider of marketing software, today announced its first quarter 2014 financial results.

 

Highlights:

 

·                  Revenue increased 64% year over year to $32.3 million

·                  Deferred revenue increased 86% year over year to $45.6 million

·                  Customer count increased to 3,215

·                  Expanded globally to Japan in Joint Venture with Dentsu eMarketing One and Sunbridge Corporation

·                  Continued innovation with release of groundbreaking Real-Time Personalization application

 

“The first quarter was a great start to 2014 as we saw strong growth across the business, successfully integrated a strategic acquisition and established our presence in Japan,” said Phil Fernandez, Chairman and CEO of Marketo.  “We built on this momentum in early April with the introduction of our customer engagement platform, which completely changes the game for marketers everywhere.  Through our software, marketers for the first time have a single technology platform that enables them to plan, orchestrate, personalize and execute their entire marketing strategy. When paired with the more than 250 solutions now in our LaunchPoint ecosystem and a new strategic alliance with Acxiom, Marketo is continuing to set the agenda with the most innovative offering in the market.”

 

Results for the first quarter of 2014:

 

·                  Revenue: Revenue was $32.3 million, an increase of 64% over the prior year period and an increase of 15% from the quarter ended December 31, 2013.

·                  Deferred Revenue:  Deferred revenue at March 31, 2014 was $45.6 million, up 86% year over year from $24.5 million at March 31, 2013, and up 10% compared to the $41.4 million at December 31, 2013.

·                  Net Loss: GAAP net loss was $12.5 million, and GAAP net loss per common share, basic and diluted, was $(0.32). Non-GAAP net loss was $7.0 million, and non-GAAP net loss per common share, basic and diluted, was $(0.18). Non-GAAP net loss and non-GAAP net loss per share amounts exclude approximately $5.0 million in stock-based compensation expense and $484,000 of amortization of acquired intangible assets.  GAAP and non-GAAP net loss per common share calculations are based on 39.4 million weighted average common shares outstanding.

·                  Total Cash and Cash Equivalents: As of March 31, 2014, total cash and cash equivalents was $119.6 million.

 



 

Outlook

 

As of April 24, 2014, Marketo is initiating revenue and EPS guidance for its second quarter of 2014 and updating full year 2014 guidance.

 

For the second quarter of 2014, Marketo expects to report:

 

·                  Revenue in the range of $33 to $34 million

·                  GAAP net loss per share in the range of $(0.46) to $(0.48)

·                  Non-GAAP net loss per share in the range of $(0.30) to $(0.32), excluding stock-based compensation expenses of approximately $6.2 million, $471,000 of amortization of acquired intangible assets and assuming approximately 40.7 million weighted average common shares outstanding

 

For the full year 2014, Marketo expects to report:

 

·                  Revenue in the range of $138 to $141 million

·                  GAAP net loss per share in the range of $(1.65) to $(1.71)

·                  Non-GAAP net loss per share in the range of $(1.00) to $(1.06), excluding stock-based compensation expenses of approximately $24.7 million, $1.9 million of amortization of acquired intangible assets and assuming approximately 41.0 million weighted average common shares outstanding

 

Conference Call Information

 

Marketo will host a conference call and live webcast to discuss the financial results at 2:00 p.m. Pacific Time, 5:00 p.m. Eastern Time, today, Thursday, April 24, 2014. The conference call can be accessed by dialing 1-877-941-8416-, or 1-480-629-9808 (outside the U.S. and Canada).  A live webcast will be available on the Investor Relations page of the Marketo corporate website at www.marketo.com and via replay beginning approximately two hours after the completion of the call for 90 days.  An audio replay of the call will also be available by dialing 1-800-406-7325 or 1-303-590-3030 (outside the U.S. and Canada) and entering passcode 4677816#.

 

Use of Non-GAAP Financial Information

 

Marketo provides financial statements that are prepared in accordance with generally accepted accounting principles (GAAP). To help understand Marketo’s past financial performance and future results, Marketo has supplemented its financial results that it provides in accordance with GAAP with certain non-GAAP financial measures. The method Marketo uses to produce non-GAAP financial results is not computed according to GAAP and may differ from the methods used by other companies. Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with the company’s consolidated financial statements prepared in accordance with GAAP.  Specifically, management is excluding the following items from its non-GAAP historic and estimated net loss and net loss per common share, basic and diluted:

 

· Stock-Based Compensation Expenses: The company’s compensation strategy includes the use of stock-based compensation to attract and retain employees and executives. It is principally aimed at aligning their interests with those of our stockholders and at long-

 



 

term employee retention, rather than to motivate or reward operational performance for any particular period. Thus, stock-based compensation expense varies for reasons that are generally unrelated to operational decisions and performance in any particular period.

 

· Amortization of Acquired Intangible Assets: The company views amortization of acquisition-related intangible assets, such as the amortization of the cost associated with an acquired company’s research and development efforts, trade names, customer lists and customer relationships, as items arising from pre-acquisition activities determined at the time of an acquisition. While these intangible assets are continually evaluated for impairment, amortization of the cost of purchased intangibles is a static expense, one that is not typically affected by operations during any particular period.

 

“Safe harbor” statement under the Private Securities Litigation Reform Act of 1995

 

This press release contains forward-looking statements. These forward-looking statements include general statements about our opportunities for growth and specific statements about our expected GAAP and non-GAAP financial results for the second quarter and the full year of 2014, including revenue, net loss, EPS, stock-based compensation expenses and amortization of acquired intangible assets. The achievement or success of the matters covered by such forward-looking statements involves risks, uncertainties and assumptions. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, the company’s results could differ materially from the results expressed or implied by the forward-looking statements we make.

 

The risks and uncertainties that could cause actual results to differ from the results predicted include, but are not limited to, risks associated with: possible fluctuations in the company’s financial and operating results; the company’s rate of growth and anticipated revenue run rate, including the company’s ability to convert deferred revenue and unbilled deferred revenue into revenue and, as appropriate, cash flow, and the continued growth and ability to maintain deferred revenue and unbilled deferred revenue; errors, interruptions or delays in the company’s service or the company’s Web hosting; breaches of the company’s security measures; the financial impact of any previous and future acquisitions; the nature of the company’s business model; the company’s ability to continue to release, and gain customer acceptance of, new and improved versions of the company’s service; successful customer deployment and utilization of the company’s existing and future services; changes in the company’s sales cycle; competition; relationships with platform providers; various financial aspects of the company’s subscription model; unexpected increases in attrition or decreases in new business; the emerging markets in which the company operates; unique aspects of entering or expanding in international markets; the company’s ability to hire, retain and motivate employees and manage the company’s growth; changes in the company’s customer base; technological developments; regulatory developments; litigation related to intellectual property and other matters, and any related claims, negotiations and settlements; unanticipated changes in the company’s effective tax rate; fluctuations in the number of shares we have outstanding and the price of such shares; foreign currency exchange rates; collection of receivables; interest rates; factors affecting our deferred tax assets and ability to value and utilize them; the risks and expenses associated with the company’s

 



 

real estate and office facilities space; and general developments in the economy, financial markets, and credit markets.

 

Further information about factors that could affect the company’s financial results is included in the reports on Forms 10-K, 10-Q and 8-K and in other filings the Company makes with the Securities and Exchange Commission from time to time.

 

Marketo assumes no obligation and does not intend to update these forward-looking statements, except as required by law.

 

About Marketo: Marketing Software. Easy, Powerful, Complete.

 

Marketo (NASDAQ: MKTO) provides the leading marketing software for companies of all sizes to build and sustain engaging customer relationships. Spanning today’s digital, social, mobile and offline channels, Marketo’s® customer engagement platform powers a set of breakthrough applications to help marketers tackle all aspects of digital marketing from the planning and orchestration of marketing activities to the delivery of personalized interactions that can be optimized in real-time. Marketo’s applications are known for their ease-of-use, and are complemented by the Marketing Nation™, a thriving network of more than 250 third-party solutions through our LaunchPoint™ ecosystem and over 40,000 marketers who share and learn from each other to grow their collective marketing expertise. The result for modern marketers is unprecedented agility and superior results. Headquartered in San Mateo, CA with offices in Europe, Australia and a joint-venture in Japan, Marketo serves as a strategic marketing partner to more than 3,000 large enterprises and fast-growing small companies across a wide variety of industries. For more information, visit www.marketo.com.

 

Marketo, the Marketo logo, Marketing Nation and LaunchPoint are trademarks of Marketo, Inc. All other trademarks are the property of their respective owners.

 

IR Contact:

 

Erica Abrams
The Blueshirt Group for Marketo
415.217.5864
Erica@blueshirtgroup.com

 

PR Contact:

 

Stephanie Barnes
Marketo
415.722.0883
sbarnes@marketo.com

 

Source Marketo

 

###

 



 

MARKETO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 

 

 

March 31,

 

December 31,

 

 

 

2014

 

2013

 

 

 

(unaudited)

 

 

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

119,572

 

$

128,299

 

Accounts receivable, net

 

25,240

 

26,946

 

Prepaid expenses and other current assets

 

6,874

 

3,218

 

Total current assets

 

151,686

 

158,463

 

Property and equipment, net

 

15,567

 

13,856

 

Goodwill

 

26,045

 

25,941

 

Intangible assets, net

 

6,768

 

7,095

 

Other assets

 

945

 

484

 

Total assets

 

$

201,011

 

$

205,839

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

3,964

 

$

3,527

 

Accrued expenses and other current liabilities

 

13,488

 

23,055

 

Deferred revenue

 

45,606

 

41,356

 

Current portion of credit facility

 

2,564

 

2,187

 

Total current liabilities

 

65,622

 

70,125

 

Credit facility, net of current portion

 

4,702

 

5,372

 

Other long-term liabilities

 

1,812

 

1,900

 

Total liabilities

 

72,136

 

77,397

 

 

 

 

 

 

 

Redeemable non-controlling interests

 

1,572

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Common stock

 

4

 

4

 

Additional paid-in capital

 

269,219

 

257,801

 

Accumulated other comprehensive income

 

150

 

198

 

Accumulated deficit

 

(142,070

)

(129,561

)

Total stockholders’ equity

 

127,303

 

128,442

 

Total liabilities, redeemable non-controlling interests and stockholders’ equity

 

$

201,011

 

$

205,839

 

 



 

MARKETO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months
Ended March 31,

 

 

 

2014

 

2013

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

Subscription and support

 

$

28,611

 

$

17,555

 

Professional services and other

 

3,681

 

2,181

 

Total revenue

 

32,292

 

19,736

 

Cost of revenue (1):

 

 

 

 

 

Subscription and support

 

6,235

 

5,820

 

Professional services and other

 

4,841

 

2,618

 

Total cost of revenue

 

11,076

 

8,438

 

Gross profit:

 

 

 

 

 

Subscription and support

 

22,376

 

11,735

 

Professional services and other

 

(1,160

)

(437

)

Total gross profit

 

21,216

 

11,298

 

Operating expenses (1):

 

 

 

 

 

Research and development

 

7,131

 

4,996

 

Sales and marketing

 

20,368

 

12,318

 

General and administrative

 

6,192

 

3,427

 

Total operating expenses

 

33,691

 

20,741

 

Loss from operations

 

(12,475

)

(9,443

)

Other income (expense), net

 

(59

)

(61

)

Loss before provision for income taxes

 

(12,534

)

(9,504

)

Provision for income taxes

 

(14

)

20

 

Net loss

 

(12,520

)

(9,524

)

Net loss attributable to redeemable non-controlling interests

 

11

 

 

Net loss attributable to Marketo

 

$

(12,509

)

$

(9,524

)

 

 

 

 

 

 

Net loss per share of common stock, basic and diluted

 

$

(0.32

)

$

(2.99

)

Shares used in computing net loss per share of common stock, basic and diluted

 

39,379

 

3,181

 

 


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

 

 

 

Three Months
Ended March 31,

 

 

 

2014

 

2013

 

 

 

 

 

 

 

Cost of subscription and support revenue

 

$

384

 

$

63

 

Cost of professional services and other revenue

 

447

 

93

 

Research and development

 

1,079

 

210

 

Sales and marketing

 

1,779

 

230

 

General and administrative

 

1,318

 

405

 

Total stock-based compensation expense

 

$

5,007

 

$

1,001

 

 



 

MARKETO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Three Months Ended
March 31,

 

 

 

2014

 

2013

 

Cash flows from operating activities:

 

 

 

 

 

Net loss

 

$

(12,520

)

$

(9,524

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

Depreciation and amortization

 

2,131

 

806

 

Stock-based compensation expense

 

5,007

 

1,001

 

Deferred income taxes

 

(74

)

 

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable, net

 

1,709

 

(109

)

Prepaid expenses and other current assets

 

(3,724

)

(1,848

)

Other assets

 

(393

)

164

 

Accounts payable

 

44

 

1,924

 

Accrued expenses and other current liabilities

 

(9,628

)

(1,296

)

Deferred revenue

 

4,251

 

3,906

 

Other liabilities

 

(14

)

71

 

Net cash used in operating activities

 

(13,211

)

(4,905

)

Cash flows from investing activities:

 

 

 

 

 

Purchase of property and equipment

 

(2,579

)

(2,877

)

Capitalized software development

 

(179

)

 

Net cash used in investing activities

 

(2,758

)

(2,877

)

Cash flows from financing activities:

 

 

 

 

 

Proceeds from issuance of common stock upon exercise of stock options

 

2,518

 

490

 

Proceeds from issuance of common stock issued under employee stock purchase plan

 

3,384

 

 

Investment from redeemable non-controlling interests

 

1,953

 

 

Repurchase of unvested common stock from terminated employees

 

(23

)

(2

)

Withholding taxes remitted for the net share settlement of an equity award

 

(15

)

 

Repayment of debt

 

(293

)

 

Payment incurred for common stock registration related to acquisition

 

(155

)

 

Payment of deferred initial public offering and follow-on offering costs

 

(104

)

(794

)

Net cash provided by (used in) financing activities

 

7,265

 

(306

)

Effect of foreign exchange rate changes on cash and cash equivalents

 

(23

)

17

 

Net decrease in cash and cash equivalents

 

(8,727

)

(8,071

)

Cash and cash equivalents — beginning of period

 

128,299

 

44,247

 

Cash and cash equivalents —end of period

 

$

119,572

 

$

36,176

 

 



 

MARKETO, INC.

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

(In thousands, except per share data)

(Unaudited)

 

To supplement our condensed consolidated financial statements presented on a GAAP basis, Marketo uses non-GAAP measures of operating loss, net loss and net loss per share, which are adjusted to exclude certain costs, expenses, gains and losses we believe appropriate to enhance an overall understanding of our past financial performance and also our prospects for the future. These adjustments to our current period GAAP results are made with the intent of providing both management and investors a more complete understanding of Marketo’s underlying operational results and trends and our marketplace performance. In addition, these adjusted non-GAAP results are among the information management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with generally accepted accounting principles in the United States of America.

 

 

 

Three Months Ended

 

Three Months Ended

 

Three Months Ended

 

 

 

December 31, 2013

 

March 31, 2014

 

March 31, 2013

 

Revenue:

 

 

 

 

 

 

 

Subscription and support

 

$

25,153

 

$

28,611

 

$

17,555

 

Professional services and other

 

3,018

 

3,681

 

2,181

 

Total Revenue

 

$

28,171

 

$

32,292

 

$

19,736

 

 

 

 

 

 

 

 

 

Cost of revenue reconciliation:

 

 

 

 

 

 

 

GAAP Subscription and support

 

$

6,295

 

$

6,235

 

$

5,820

 

Stock-based compensation

 

(179

)

(384

)

(63

)

Amortization of acquired intangible assets

 

(95

)

(285

)

(57

)

Non-GAAP subscription and support

 

$

6,021

 

$

5,566

 

$

5,700

 

 

 

 

 

 

 

 

 

GAAP Professional services and other

 

$

3,991

 

$

4,841

 

$

2,618

 

Stock-based compensation

 

(245

)

(447

)

(93

)

Amortization of acquired intangible assets

 

 

 

 

Non-GAAP professional services and other

 

$

3,746

 

$

4,394

 

$

2,525

 

 

 

 

 

 

 

 

 

Gross profit and gross margin reconciliation:

 

 

 

 

 

 

 

Non-GAAP subscription and support gross profit

 

$

19,132

 

$

23,045

 

$

11,855

 

Non-GAAP professional services and other gross profit

 

(728

)

(713

)

(344

)

Non-GAAP gross profit

 

$

18,404

 

$

22,332

 

$

11,511

 

Non-GAAP subscription and support gross margin

 

76.1

%

80.5

%

67.5

%

Non-GAAP professional services and other gross margin

 

-24.1

%

-19.4

%

-15.8

%

Non-GAAP gross margin

 

65.3

%

69.2

%

58.3

%

 

 

 

 

 

 

 

 

Operating expenses reconciliation:

 

 

 

 

 

 

 

GAAP Research and development

 

$

6,402

 

$

7,131

 

$

4,996

 

Stock-based compensation

 

(479

)

(1,079

)

(210

)

Amortization of acquired intangible assets

 

 

 

 

Non-GAAP research and development

 

$

5,923

 

$

6,052

 

$

4,786

 

As a % of total revenues, non-GAAP

 

21.0

%

18.7

%

24.3

%

 

 

 

 

 

 

 

 

GAAP Sales and marketing

 

$

19,719

 

$

20,368

 

$

12,318

 

Stock-based compensation

 

(647

)

(1,779

)

(230

)

Amortization of acquired intangible assets

 

(52

)

(153

)

(43

)

Non-GAAP sales and marketing

 

$

19,020

 

$

18,436

 

$

12,045

 

As a % of total revenues, non-GAAP

 

67.5

%

57.1

%

61.0

%

 

 

 

 

 

 

 

 

GAAP General and administrative

 

$

6,996

 

$

6,192

 

$

3,427

 

Stock-based compensation

 

(885

)

(1,318

)

(405

)

Amortization of acquired intangible assets

 

(29

)

(46

)

(25

)

Litigation settlement

 

(950

)

 

 

Acquisition related costs

 

(734

)

 

 

Non-GAAP general and administrative

 

$

4,398

 

$

4,828

 

$

2,997

 

As a % of total revenues, non-GAAP

 

15.6

%

15.0

%

15.2

%

 

 

 

 

 

 

 

 

Loss from operations reconciliation:

 

 

 

 

 

 

 

GAAP loss from operations

 

$

(15,232

)

$

(12,475

)

$

(9,443

)

Stock-based compensation

 

2,435

 

5,007

 

1,001

 

Amortization of acquired intangible assets

 

176

 

484

 

125

 

Litigation settlement

 

950

 

 

 

Acquisition related costs

 

734

 

 

 

Non-GAAP loss from operations

 

$

(10,937

)

$

(6,984

)

$

(8,317

)

 

 

 

 

 

 

 

 

Net loss reconciliation:

 

 

 

 

 

 

 

GAAP Net loss attributable to Marketo

 

$

(15,495

)

$

(12,509

)

$

(9,524

)

Stock-based compensation

 

2,435

 

5,007

 

1,001

 

Amortization of acquired intangible assets

 

176

 

484

 

125

 

Litigation settlement

 

950

 

 

 

Acquisition related costs

 

734

 

 

 

Non-GAAP Net loss attributable to Marketo

 

$

(11,200

)

$

(7,018

)

$

(8,398

)

 

 

 

 

 

 

 

 

Basic and diluted net loss per share

 

 

 

 

 

 

 

GAAP

 

$

(0.41

)

$

(0.32

)

$

(2.99

)

Non-GAAP

 

$

(0.29

)

$

(0.18

)

$

(2.64

)

 

 

 

 

 

 

 

 

Shares used to compute basic and diluted GAAP and Non-GAAP net loss per share

 

38,257

 

39,379

 

3,181