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8-K - FORM 8-K - MARIN SOFTWARE INCmrin20180724_8k.htm

Exhibit 99.1

 

Marin Software Announces Second Quarter 2018 Financial Results

 

San Francisco, CA (August 9, 2018) – Marin Software Incorporated (NASDAQ: MRIN), a leading provider of cross-channel, cross-device, enterprise marketing software for advertisers and agencies, today announced financial results for the second quarter ended June 30, 2018.

 

“As we execute on our open, independent, cross-channel strategy, I am pleased to announce that Marin's support for Amazon Ads is gaining traction in the market with Amazon proving to be our fastest growing publisher in Q2 2018,” said Chris Lien, Chief Executive Officer of Marin Software. "Our MarinOne platform will help advertisers thrive in a world where Amazon joins Google and Facebook as the dominant pillars of digital advertising."

 

Second Quarter 2018 Business and Product Release Highlights:

 

Debuted Bidding for Amazon Sponsored Product Ads helping advertisers drive performance on this emerging ad platform.

 

Released enhanced support for Facebook Ad Studies streaming process for advertisers to test performance of their social ads.

 

Launched support for Yahoo Japan's Responsive Display Ads, offering advertisers a flexible ad unit that automatically works across a variety of devices and placements.

 

Added Impression Share as an optimization target for Google Shopping campaigns to help advertisers ensure their products achieve a desired share of voice on key queries and products.

 

Enabled Auto Segmentation of Google Shopping campaigns to identify and optimize top performing products.

 

Added support for Google Parallel tracking, enabling faster page loads for a mobile-first world.

 

Improved cross-channel Creative Asset Hub to sync with third-party platforms, such as Google Drive, offering better collaboration between media and creative teams.

 

Second Quarter 2018 Financial Updates:

 

Net revenues totaled $14.3 million, a year-over-year decrease of 24% when compared to $18.7 million in the second quarter of 2017.

 

GAAP loss from operations was ($8.4) million, resulting in a GAAP operating margin of (59%), compared to a GAAP loss from operations of ($9.6) million and a GAAP operating margin of (51%) for the second quarter of 2017. Non-GAAP loss from operations was ($6.2) million, resulting in a non-GAAP operating margin of (43%), as compared to a non-GAAP loss from operations of ($4.7) million and a non-GAAP operating margin of (25%) for the second quarter of 2017.

 

Cash, cash equivalents and restricted cash totaled $17.2 million as of June 30, 2018, as compared to $28.8 million as of December 31, 2017.

 

Reconciliations of GAAP to non-GAAP financial measures have been provided in the financial statement tables included in this press release. An explanation of these measures is also included below, under the heading "Non-GAAP Financial Measures."

 

Financial Outlook:

 

Marin is providing guidance for its third quarter of 2018 as follows:

 

Forward-Looking Guidance

In millions

 

 

 

 

 

 

 

 

 

 

 

 

Range of Estimate

 

 

 

 

From

 

 

To

 

 

Three Months Ending September 30, 2018

 

 

 

 

 

 

 

 

 

Revenues, net

 

$

12.3

 

 

$

12.8

 

 

Non-GAAP loss from operations

 

 

(6.7

)

 

 

(6.2

)

 

 

Non-GAAP loss from operations excludes the effects of stock-based compensation, amortization of internally developed software, intangible assets and deferred costs to obtain and fulfill contracts, impairment of goodwill and long-lived assets, capitalization of internally developed software, deferral of costs to obtain and fulfill contracts and non-recurring costs associated with restructurings.

 

Additionally, the Company does not reconcile its forward-looking non-GAAP loss from operations, due to variability between revenues and non-cash items such as stock-based compensation. The GAAP loss from operations includes stock-based compensation expense, which is affected by hiring and retention needs, as well as the future price of Marin’s stock. As a result, a reconciliation of the forward-looking non-GAAP financial measures to the corresponding GAAP measures cannot be made without unreasonable effort.

 

Quarterly Results Conference Call

 

Marin Software will host a conference call today at 2:00 PM Pacific Time (5:00 PM Eastern Time) to review the Company’s financial results for the quarter ended June 30, 2018, and its outlook for the future. To access the call, please dial (877) 705-6003 in the United States or (201) 493-6725 internationally with reference to the company name and conference title. A live webcast of the conference call will be accessible at http://public.viavid.com/index.php?id=130614. Following the completion of the call through 11:59 p.m. Eastern Time on August 16, 2018, a recorded replay will be available for replay on the Company’s website at: http://investor.marinsoftware.com/ and a telephone replay will be available by dialing (844) 512-2921 in the United States or (412) 317-6671 internationally with the recording access code 13681773.

 

About Marin Software

 

Marin Software Incorporated’s (NASDAQ: MRIN) mission is to give advertisers the power to drive higher efficiency and transparency in their paid marketing programs that run on the world’s largest publishers. Marin provides enterprise marketing software for advertisers and agencies to integrate, align, and amplify their digital advertising spend across the web and mobile devices. Offering a unified SaaS advertising management platform for search, social, display and eCommerce advertising, Marin helps digital marketers convert precise audiences, improve financial performance, and make better decisions. Headquartered in San Francisco, with offices worldwide, Marin’s technology powers marketing campaigns around the globe. For more information about Marin Software, please visit: http://www.marinsoftware.com.

 

Non-GAAP Financial Measures

 

Marin uses certain non-GAAP financial measures in this release. Marin uses these non-GAAP financial measures internally in analyzing its financial results and believes they are useful to investors, as a supplement to GAAP measures, in evaluating its ongoing operational performance. Marin believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial results with other companies in our industry, many of which present similar non-GAAP financial measures to investors. Non-GAAP financial measures that Marin uses may differ from measures that other companies may use.

 

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. A reconciliation of the non-GAAP financial measures to their most directly comparable GAAP measures has been provided in the financial statement tables included below in this press release. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.

 

Non-GAAP expenses, measures and net loss per share. Marin defines non-GAAP sales and marketing, non-GAAP research and development, non-GAAP general and administrative, non-GAAP gross profit, non-GAAP operating loss and non-GAAP net loss as the respective GAAP balances, adjusted for stock-based compensation, amortization of internally developed software, intangible assets and deferred costs to obtain and fulfill contracts, impairment of goodwill and long-lived assets, non-cash expenses related to debt agreements, capitalization of internally developed software, deferral of costs to obtain and fulfill contracts and non-recurring costs associated with restructurings. Non-GAAP net loss per share is calculated as non-GAAP net loss divided by the weighted average shares outstanding.

 

Adjusted EBITDA. Marin defines Adjusted EBITDA as net loss, adjusted for stock-based compensation expense, depreciation, amortization of internally developed software, intangible assets and deferred costs to obtain and fulfill contracts, capitalization of internally developed software, deferral of costs to obtain and fulfill contracts, impairment of goodwill and long-lived assets, provision for income taxes, other income or expenses, net and non-recurring costs associated with restructurings. These amounts are often excluded by other companies to help investors understand the operational performance of their business. The Company uses Adjusted EBITDA as a measurement of its operating performance because it assists in comparing the operating performance on a consistent basis by removing the impact of certain non-cash and non-operating items. Adjusted EBITDA reflects an additional way of viewing aspects of the operations that Marin believes, when viewed with the GAAP results and the accompanying reconciliations to corresponding GAAP financial measures, provide a more complete understanding of factors and trends affecting its business.

 

Forward-Looking Statements

 

This press release contains forward-looking statements including, among other things, statements regarding Marin’s business, expectations about our ability to return to growth, impact of investments in product and technology on future operating results, progress on product development efforts, product capabilities and future financial results, including its outlook for the third quarter of 2018. These forward-looking statements are subject to the safe harbor provisions created by the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors, including but not limited to our ability to grow sales to new and existing customers; our ability to expand our sales and marketing capabilities; our ability to retain and attract qualified management and technical personnel; delays in the release of updates to our product platform or new features; competitive factors, including but not limited to pricing pressures, entry of new competitors and new applications; quarterly fluctuations in our operating results due to a number of factors; inability to adequately forecast our future revenues, expenses, Adjusted EBITDA, cash flows or other financial metrics; delays, reductions or slower growth in the amount spent on online and mobile advertising and the development of the market for cloud-based software; progress in our efforts to update our software platform; adverse changes in our relationships with and access to publishers and advertising agencies; level of usage and advertising spend managed on our platform; our ability to expand sales of our solutions in channels other than search advertising; any slow-down in the search advertising market generally; shift in customer digital advertising budgets from search to segments in which we are not as deeply penetrated; the development of the market for digital advertising; acceptance and continued usage of our platform and services by customers and our ability to provide high-quality technical support to our customers; material defects in our platform including those resulting from any updates we introduce to our platform, service interruptions at our single third-party data center or breaches in our security measures; our ability to develop enhancements to our platform; our ability to protect our intellectual property; our ability to manage risks associated with international operations; the impact of fluctuations in currency exchange rates, particularly an increase in the value of the dollar; near term changes in sales of our software services or spend under management may not be immediately reflected in our results due to our subscription business model; adverse changes in general economic or market conditions; and the ability to acquire and integrate other businesses. These forward-looking statements are based on current expectations and are subject to uncertainties and changes in condition, significance, value and effect as well as other risks detailed in documents filed with the Securities and Exchange Commission, including our most recent report on Form 10-K, recent reports on Form 10-Q and current reports on Form 8-K which we may file from time to time, all of which are available free of charge at the SEC’s website at www.sec.gov. Any of these risks could cause actual results to differ materially from expectations set forth in the forward-looking statements. All forward-looking statements in this press release reflect Marin’s expectations as of August 9, 2018. Marin assumes no obligation to, and expressly disclaims any obligation to update any such forward-looking statements after the date of this release.

 

Investor Relations Contact:

 

Investor Relations, Marin Software

ir@marinsoftware.com

 

Media Contact:

 

Wesley MacLaggan

Marketing, Marin Software

(415) 399-2586

press@marinsoftware.com

 

 

 

Marin Software Inc.

               

Condensed Consolidated Balance Sheets

               

(On a GAAP basis)

               
                 
   

June 30,

   

December 31,

 

(Unaudited; in thousands, except par value)

 

2018

   

2017

 

Assets

               

Current assets

               

Cash and cash equivalents

  $ 15,927     $ 27,544  

Restricted cash

    1,293       1,293  

Accounts receivable, net

    9,768       12,237  

Prepaid expenses and other current assets

    5,787       3,989  

Total current assets

    32,775       45,063  

Property and equipment, net

    13,832       15,559  

Goodwill

    16,720       16,768  

Intangible assets, net

    3,134       4,475  

Other non-current assets

    2,401       1,504  

Total assets

  $ 68,862     $ 83,369  

Liabilities and Stockholders' Equity

               

Current liabilities

               

Accounts payable

  $ 1,918     $ 2,826  

Accrued expenses and other current liabilities

    9,001       10,474  

Capital lease obligations

    1,445       1,416  

Total current liabilities

    12,364       14,716  

Capital lease obligations, non-current

    1,002       1,687  

Other long-term liabilities

    3,885       4,183  

Total liabilities

    17,251       20,586  

Stockholders’ equity

               

Common stock, $0.001 par value

    6       6  

Additional paid-in capital

    293,278       291,163  

Accumulated deficit

    (240,857 )     (227,704 )

Accumulated other comprehensive loss

    (816 )     (682 )

Total stockholders’ equity

    51,611       62,783  

Total liabilities and stockholders’ equity

  $ 68,862     $ 83,369  

 

 

 

 

 

Marin Software Inc.

                               

Condensed Consolidated Statements of Operations

                               

(On a GAAP basis)

                               
                                 
   

Three Months Ended June 30,

   

Six Months Ended June 30,

 

(Unaudited; in thousands, except per share data)

 

2018

   

2017

   

2018

   

2017

 

Revenues, net

  $ 14,251     $ 18,742     $ 29,653     $ 39,075  

Cost of revenues

    6,963       8,207       14,535       16,531  

Gross profit

    7,288       10,535       15,118       22,544  

Operating expenses

                               

Sales and marketing

    6,154       6,710       13,535       13,386  

Research and development

    5,817       6,646       11,972       13,784  

General and administrative

    3,766       3,945       7,143       8,122  

Impairment of goodwill

          2,797             2,797  

Total operating expenses

    15,737       20,098       32,650       38,089  

Loss from operations

    (8,449 )     (9,563 )     (17,532 )     (15,545 )

Other income (expenses), net

    377       (563 )     672       (301 )

Loss before provision for income taxes

    (8,072 )     (10,126 )     (16,860 )     (15,846 )

Provision for income taxes

    (204 )     (419 )     (528 )     (825 )

Net loss

  $ (8,276 )   $ (10,545 )   $ (17,388 )   $ (16,671 )

Net loss per common share, basic and diluted

  $ (1.44 )   $ (1.87 )   $ (3.02 )   $ (2.99 )

Weighted-average shares outstanding, basic and diluted

    5,767       5,640       5,751       5,572  

 

 

 

 

Marin Software Inc.

               

Condensed Consolidated Statements of Cash Flows

               

(On a GAAP basis)

               
                 
   

Six Months Ended June 30,

 

(Unaudited; in thousands)

 

2018

   

2017

 

Operating activities

               

Net loss

  $ (17,388 )   $ (16,671 )

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

               

Impairment of goodwill

          2,797  

Depreciation

    1,557       2,599  

Amortization of internally developed software

    1,943       1,655  

Amortization of intangible assets

    1,341       1,451  

Amortization of deferred costs to obtain and fulfill contracts

    1,145        

Unrealized foreign currency (gains) losses

    (25 )     512  

Non-cash interest expense related to debt agreements

          13  

Stock-based compensation related to equity awards and restricted stock

    2,058       2,760  

Provision for bad debts

    35       785  

Changes in operating assets and liabilities

               

Accounts receivable

    2,438       4,846  

Prepaid expenses and other assets

    (1,199 )     (1,168 )

Accounts payable

    (877 )     (459 )

Accrued expenses and other current liabilities

    (425 )     (374 )

Net cash used in operating activities

    (9,397 )     (1,254 )

Investing activities

               

Purchases of property and equipment

    (200 )     (259 )

Capitalization of internally developed software

    (1,295 )     (956 )

Net cash used in investing activities

    (1,495 )     (1,215 )

Financing activities

               

Repayments of capital lease obligations

    (656 )     (523 )

Employee taxes paid for withheld shares upon equity award settlement

    (110 )     (171 )

Proceeds from employee stock purchase plan, net

    165       111  

Net cash used in financing activities

    (601 )     (583 )

Effect of foreign exchange rate changes on cash and cash equivalents and restricted cash

    (124 )     1,161  

Net decrease in cash and cash equivalents and restricted cash

    (11,617 )     (1,891 )

Cash and cash equivalents and restricted cash

               

Beginning of period

    28,837       35,713  

End of period

  $ 17,220     $ 33,822  

 

 

 

 

Marin Software Inc.

                                                       

Reconciliation of GAAP to Non-GAAP Expenses

                                                       
                                                         
   

Three Months Ended

   

Year Ended

   

Three Months Ended

 
   

March 31,

   

June 30,

   

September 30,

   

December 31,

   

December 31,

   

March 31,

   

June 30,

 

(Unaudited; in thousands)

 

2017

   

2017

   

2017

   

2017

   

2017

   

2018

   

2018

 

Sales and Marketing (GAAP)

  $ 6,676     $ 6,710     $ 6,630     $ 6,920     $ 26,936     $ 7,381     $ 6,154  

Less Stock-based compensation

    (212 )     (200 )     (197 )     (218 )     (827 )     (240 )     (271 )

Less Amortization of intangible assets

    (223 )     (222 )     (216 )     (216 )     (877 )     (213 )     (184 )

Less Amortization of deferred costs to obtain contracts

                                  (432 )     (384 )

Less Restructuring related expenses

                                  (497 )     (48 )

Plus Deferral of costs to obtain contracts

                                  257       335  

Sales and Marketing (Non-GAAP)

  $ 6,241     $ 6,288     $ 6,217     $ 6,486     $ 25,232     $ 6,256     $ 5,602  

Research and Development (GAAP)

  $ 7,138     $ 6,646     $ 6,672     $ 6,108     $ 26,564     $ 6,155     $ 5,817  

Less Stock-based compensation

    (996 )     (318 )     (326 )     (356 )     (1,996 )     (339 )     (314 )

Less Amortization of intangible assets

    (247 )     (244 )     (239 )     (239 )     (969 )     (237 )     (234 )

Less Restructuring related expenses

                                  (115 )      

Plus Capitalization of internally developed software

    543       413       442       670       2,068       693       602  

Research and Development (Non-GAAP)

  $ 6,438     $ 6,497     $ 6,549     $ 6,183     $ 25,667     $ 6,157     $ 5,871  

General and Administrative (GAAP)

  $ 4,177     $ 3,945     $ 3,920     $ 4,402     $ 16,444     $ 3,377     $ 3,766  

Less Stock-based compensation

    (323 )     (248 )     (234 )     (254 )     (1,059 )     (245 )     (273 )

Less Amortization of intangible assets

    (13 )     (10 )     (5 )     (5 )     (33 )     (3 )      

Less Restructuring related expenses

                                  (111 )     (36 )

General and Administrative (Non-GAAP)

  $ 3,841     $ 3,687     $ 3,681     $ 4,143     $ 15,352     $ 3,018     $ 3,457  
                                                         

 

 

 

 

 

Marin Software Inc.

                                                       

Reconciliation of GAAP to Non-GAAP Measures

                                                       
                                                         
   

Three Months Ended

   

Year Ended

   

Three Months Ended

 
   

March 31,

   

June 30,

   

September 30,

   

December 31,

   

December 31,

   

March 31,

   

June 30,

 

(Unaudited; in thousands)

 

2017

   

2017

   

2017

   

2017

   

2017

   

2018

   

2018

 

Gross Profit (GAAP)

  $ 12,009     $ 10,535     $ 9,968     $ 9,959     $ 42,471     $ 7,830     $ 7,288  

Plus Stock-based compensation

    311       152       166       193       822       204       172  

Plus Amortization of internally developed software

    788       867       1,016       998       3,669       957       986  

Plus Amortization of intangible assets

    247       245       240       239       971       237       233  

Plus Amortization of deferred costs to fulfill contracts

                                  173       156  

Plus Restructuring related expenses

                                  139        

Less Deferral of costs to fulfill contracts

                                  (115 )     (81 )

Gross Profit (Non-GAAP)

  $ 13,355     $ 11,799     $ 11,390     $ 11,389     $ 47,933     $ 9,425     $ 8,754  

Operating Loss (GAAP)

  $ (5,982 )   $ (9,563 )   $ (7,254 )   $ (7,471 )   $ (30,270 )   $ (9,083 )   $ (8,449 )

Plus Impairment of goodwill

          2,797                   2,797              

Plus Stock-based compensation

    1,842       918       923       1,021       4,704       1,028       1,030  

Plus Amortization of internally developed software

    788       867       1,016       998       3,669       957       986  

Plus Amortization of intangible assets

    730       721       700       699       2,850       690       651  

Plus Amortization of deferred costs to fulfill contracts

                                  173       156  

Plus Amortization of deferred costs to obtain contracts

                                  432       384  

Plus Restructuring related expenses

                                  862       84  

Less Capitalization of internally developed software

    (543 )     (413 )     (442 )     (670 )     (2,068 )     (693 )     (602 )

Less Deferral of costs to fulfill contracts

                                  (115 )     (81 )

Less Deferral of costs to obtain contracts

                                  (257 )     (335 )

Operating Loss (Non-GAAP)

  $ (3,165 )   $ (4,673 )   $ (5,057 )   $ (5,423 )   $ (18,318 )   $ (6,006 )   $ (6,176 )

Net Loss (GAAP)

  $ (6,126 )   $ (10,545 )   $ (7,549 )   $ (7,271 )   $ (31,491 )   $ (9,112 )   $ (8,276 )

Plus Impairment of goodwill

          2,797                   2,797              

Plus Stock-based compensation

    1,842       918       923       1,021       4,704       1,028       1,030  

Plus Amortization of internally developed software

    788       867       1,016       998       3,669       957       986  

Plus Amortization of intangible assets

    730       721       700       699       2,850       690       651  

Plus Amortization of deferred costs to fulfill contracts

                                  173       156  

Plus Amortization of deferred costs to obtain contracts

                                  432       384  

Plus Non-cash expenses related to debt agreements

    6       7       2             15              

Plus Restructuring related expenses

                                  862       84  

Less Capitalization of internally developed software

    (543 )     (413 )     (442 )     (670 )     (2,068 )     (693 )     (602 )

Less Deferral of costs to fulfill contracts

                                  (115 )     (81 )

Less Deferral of costs to obtain contracts

                                  (257 )     (335 )

Net Loss (Non-GAAP)

  $ (3,303 )   $ (5,648 )   $ (5,350 )   $ (5,223 )   $ (19,524 )   $ (6,035 )   $ (6,003 )
                                                         

 

 

 

 

Marin Software Inc.

                                                       

Calculation of Non-GAAP Earnings Per Share

                                                       
                                                         
   

Three Months Ended

   

Year Ended

   

Three Months Ended

 
   

March 31,

   

June 30,

   

September 30,

   

December 31,

   

December 31,

   

March 31,

   

June 30,

 

(Unaudited; in thousands, except per share data)

 

2017

   

2017

   

2017

   

2017

   

2017

   

2018

   

2018

 

Net Loss (Non-GAAP)

  $ (3,303 )   $ (5,648 )   $ (5,350 )   $ (5,223 )   $ (19,524 )   $ (6,035 )   $ (6,003 )

Weighted-average shares outstanding, basic and diluted

    5,583       5,640       5,651       5,677       5,638       5,736       5,767  

Non-GAAP net loss per common share, basic and diluted

  $ (0.59 )   $ (1.00 )   $ (0.95 )   $ (0.92 )   $ (3.46 )   $ (1.05 )   $ (1.04 )
                                                         

 

Marin Software Inc.

                                                       

Reconciliation of Net Loss to Adjusted EBITDA

                                                       
                                                         
   

Three Months Ended

   

Year Ended

   

Three Months Ended

 
   

March 31,

   

June 30,

   

September 30,

   

December 31,

   

December 31,

   

March 31,

   

June 30,

 

(Unaudited; in thousands)

 

2017

   

2017

   

2017

   

2017

   

2017

   

2018

   

2018

 

Net Loss

  $ (6,126 )   $ (10,545 )   $ (7,549 )   $ (7,271 )   $ (31,491 )   $ (9,112 )   $ (8,276 )

Depreciation

    1,336       1,263       1,149       1,010       4,758       798       759  

Amortization of internally developed software

    788       867       1,016       998       3,669       957       986  

Amortization of intangible assets

    730       721       700       699       2,850       690       651  

Amortization of deferred costs to obtain and fulfill contracts

                                  605       540  

Provision for income taxes

    406       419       151       31       1,007       324       204  

Impairment of goodwill

          2,797                   2,797              

Stock-based compensation

    1,842       918       923       1,021       4,704       1,028       1,030  

Capitalization of internally developed software

    (543 )     (413 )     (442 )     (670 )     (2,068 )     (693 )     (602 )

Deferral of costs to obtain and fulfill contracts

                                  (372 )     (416 )

Restructuring related expenses

                                  862       84  

Other (income) expenses, net

    (262 )     563       144       (231 )     214       (295 )     (377 )

Adjusted EBITDA

  $ (1,829 )   $ (3,410 )   $ (3,908 )   $ (4,413 )   $ (13,560 )   $ (5,208 )   $ (5,417 )