Marin Software Announces Third Quarter 2013 Financial Results

Record Third Quarter Net Revenues of $20.1 Million, up 30% Year-Over-Year; 18th Consecutive Quarter of Sequential Quarterly Revenue Growth

Marketwired

SAN FRANCISCO, CA--(Marketwired - Nov 6, 2013) - Marin Software Incorporated (NYSE: MRIN), provider of a leading Revenue Acquisition Management platform for advertisers and agencies, today announced financial results for the third quarter ended September 30, 2013.

"We were pleased to record another quarter of strong growth, producing results above our guidance on both the top and bottom line," said Chris Lien, Founder and Chief Executive Officer of Marin. "We continue to innovate on behalf of advertisers and agencies worldwide to address their digital marketing challenges, enabling them to better measure, manage, and optimize their online advertising campaigns across search, display, social, and mobile channels."

Third Quarter 2013 Financial Highlights:

  • Net Revenues: Net revenues totaled $20.1 million, a year-over-year increase of 30% when compared to $15.5 million in the prior year period.

  • Gross profit: GAAP gross profit was $12.2 million, resulting in gross margin of 61%, compared to GAAP gross margin of 58% during the third quarter of 2012. Non-GAAP gross profit was $12.7 million, resulting in non-GAAP gross margin of 63%, compared to non-GAAP gross margin of 60% during the third quarter of 2012.

  • Loss from operations: GAAP loss from operations was ($7.9) million, compared to ($6.4) million for the third quarter of 2012. GAAP operating margin was (39%), compared to (41%) during the third quarter of 2012. Non-GAAP loss from operations was ($7.2) million, compared to ($5.9) million for the third quarter of 2012. Non-GAAP operating margin was (36%), compared to (38%) during the third quarter of 2012.

  • Net loss: Net loss was ($8.2) million or ($0.25) per share based on 32.5 million weighted average shares outstanding. This compares to a net loss of ($6.6) million or ($1.51) per share based upon 4.4 million weighted average shares outstanding for the third quarter of 2012.

  • Non-GAAP net loss: Non-GAAP net loss was ($7.4) million or ($0.23) per share based upon 32.5 million weighted average shares outstanding. This compares to ($6.1) million or ($0.28) per share based on 21.7 million weighted average shares outstanding during the third quarter of 2012, which assumes our convertible preferred stock was converted to common stock for the full quarter.

  • Adjusted EBITDA: Adjusted EBITDA was a loss of ($5.9) million, as compared to a loss of ($5.2) million for the third quarter of 2012.

  • Balance Sheet: As of September 30, 2013, cash and cash equivalents totaled $111.7 million, compared to $31.5 million as of December 31, 2012. Marin received $109.4 million in proceeds, net of issuance costs paid, from its initial public offering, including exercise of the over-allotment option, during the nine months ended September 30, 2013.

A reconciliation of GAAP to non-GAAP financial measures has 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."

Third Quarter 2013 Business Highlights

  • Achieved $5 billion in annualized spend under management, becoming the first provider within our industry to do so. For the first time, greater than 25% was targeted to mobile devices (tablets and smartphones). Customers used the Marin platform to manage over 6 billion ad units around the globe.

  • Expanded the capability and flexibility of its platform with the release of Marin Channel Connect. Through Channel Connect, advertisers can incorporate data from multiple publishers, including new and smaller publisher networks as well as search engine optimization into the Marin platform. Marketers gain a single source from which to measure performance, track revenue, and optimize bidding.

  • Augmented support for Google Enhanced Campaigns, adding additional reporting and bidding capabilities for mobile campaigns. Through Marin, customers are able to generate group- and keyword-level reports by type of device, improving campaign visibility and allowing advertisers to optimize accordingly. To further maximize mobile marketers' return on investment, Marin now provides bid recommendations for mobile ads based on specific end-user conversion events, such as a store location or product detail view. Marin supports new Enhanced Campaign ad extensions, including Locations and Calls. Marin also developed further support for Yahoo! Japan Unified Campaigns. Expanded its Facebook offering, adding additional ad types to the Marin Campaign Wizard, enabling marketers to create thousands of ads and target audience combinations in minutes with a variety of bidding options.

  • Increased the number of active advertisers leveraging the Marin platform. During the third quarter, 610 active advertisers utilized the Marin platform, compared to 502 during the third quarter of 2012. Marin defines active advertisers as an advertiser from whom Marin recognized revenues in excess of $2,000 in at least one month during the quarter.

Financial Outlook:

As of November 6th, 2013, Marin is updating guidance for its fourth quarter and the full year 2013 as follows:

   
Forward-Looking Guidance  
In millions, except per share data  
    Range of Estimate  
    From     To  
Three Months Ending December 31, 2013                
                 
Revenues, net   $ 21.0     $ 21.4  
Non-GAAP loss from operations   $ (7.4 )   $ (7.0 )
Non-GAAP net loss per share   $ (0.24 )   $ (0.22 )
Weighted average shares outstanding     33.0          
                 
Year Ending December 31, 2013                
                 
Revenues, net   $ 76.5     $ 76.9  
Non-GAAP loss from operations   $ (31.6 )   $ (31.2 )
Non-GAAP net loss per share   $ (1.08 )   $ (1.06 )
Weighted average shares outstanding     30.6          
                 
                 

Non-GAAP loss from operations and non-GAAP net loss per share excludes the effects of stock-based compensation, amortization of internally developed software, noncash expenses related to warrants and capitalization of internally developed software. Additionally, the weighted average shares outstanding for the twelve months ending December 31, 2013 gives effect to the conversion of convertible preferred stock as of the beginning of the period.

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 September 30, 2013 and its outlook for the future. To access the call, please dial (877) 705-6003 in the U.S. or (201) 493-6725 internationally. Passcode is 411944. A live webcast of the conference will be accessible from Marin Software's website at: http://investor.marinsoftware.com/. A recording will be available for replay at: http://investor.marinsoftware.com/.

About Marin Software
Marin Software Incorporated (NYSE: MRIN) provides a leading Revenue Acquisition Management platform used by advertisers and agencies to measure, manage and optimize more than $5 billion in annualized ad spend. Offering an integrated platform for search, social, display, and mobile advertising, Marin helps advertisers and agencies improve financial performance, save time, and make better decisions. Headquartered in San Francisco, with offices worldwide, Marin's technology powers marketing campaigns in more than 160 countries. For more information about Marin's products, please visit: http://www.marinsoftware.com/solutions/overview.

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.

Marin defines non-GAAP gross profit, non-GAAP operating loss and non-GAAP net loss as the respective GAAP balances, adjusted for stock-based compensation expense, the capitalization of internally developed software, noncash expenses related to the issuance of warrants, and the amortization of internally developed software. Non-GAAP net loss per share is calculated as non-GAAP net loss divided by the weighted average shares outstanding that are adjusted to assume the conversion of outstanding preferred shares to common shares as of the beginning of the period.

Marin defines Adjusted EBITDA as net loss, adjusted for stock-based compensation expense, depreciation, the amortization of internally developed software, the capitalization of internally developed software, interest expense, net, provision for income taxes and other income (expenses), net. 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 reflect 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, growth, momentum, and future financial results, including its outlook for the fourth quarter of 2013 and fiscal year 2013. 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 (i) adverse changes in general economic or market conditions, including the recent U.S. federal government shut-down, concerns over future U.S. budgetary negotiations; (ii) delays, reductions or slower growth in the amount spent on online and mobile advertising and the development of the market for cloud-based software; (iii) competitive factors, including but not limited to pricing pressures, entry of new competitors and new applications; (iv) adverse changes in our relationships with and access to publishers and advertising agencies; (v) level of usage and advertising spend managed on our platform; (vi) our ability to expand sales of our solutions in channels other than search advertising; (vii) our ability to expand our sales and marketing capabilities and manage our growth effectively; (viii) the development of the market for digital advertising or revenue acquisition management; (ix) acceptance and continued usage of our platform and services by customers and our ability to provide high-quality technical support to our customers; (x) material defects in our platform, service interruptions at our single third-party data center or breaches in our security measures; (xi) our ability to develop enhancements to our platform; (xii) our ability to protect our intellectual property; (xiii) our ability to manage risks associated with international operations; (xiv) 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; (xv) our ability to retain and attract qualified management and technical personnel; and (xvi) 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-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 November 6, 2013. Marin assumes no obligation to, and expressly disclaims any obligation to update any such forward-looking statements after the date of this release.

         
Condensed Consolidated Balance Sheets        
(On a GAAP basis)        
(Unaudited; in thousands, except par value)   September 30,     December 31,  
    2013     2012  
                 
Assets                
Current assets                
  Cash and cash equivalents   $ 111,695     $ 31,540  
  Accounts receivable, net     13,886       13,133  
  Prepaid expenses and other current assets     3,505       1,814  
    Total current assets     129,086       46,487  
Property and equipment, net     14,270       9,224  
Other noncurrent assets     447       1,513  
    Total assets   $ 143,803     $ 57,224  
Liabilities, Preferred Stock and Stockholders' Equity (Deficit)                
Current liabilities                
  Accounts payable   $ 1,148     $ 1,268  
  Accrued expenses     11,013       9,661  
  Deferred revenue     2,884       618  
  Current portion of long-term debt     3,373       1,572  
    Total current liabilities     18,418       13,119  
Long-term debt, less current portion     3,673       9,243  
Other long term liabilities     1,338       1,858  
    Total liabilities     23,429       24,220  
Convertible preferred stock, $0.001 par value     -       105,710  
Stockholders' equity (deficit)                
  Common stock, $0.001 par value     33       5  
  Additional paid-in capital     225,481       4,638  
  Accumulated deficit     (105,140 )     (77,349 )
    Total stockholders' equity (deficit)     120,374       (72,706 )
    Total liabilities, preferred stock and stockholders' equity (deficit)   $ 143,803     $ 57,224  
                     
                     
             
Condensed Consolidated Statements of Operations   Three Months Ended     Nine Months Ended  
(On a GAAP basis)   September 30,     September 30,  
(Unaudited; in thousands, except per share data)   2013     2012     2013     2012  
                                 
Revenues, net   $ 20,113     $ 15,501     $ 55,486     $ 42,507  
Cost of revenues (1)     7,944       6,485       23,012       17,728  
    Gross profit     12,169       9,016       32,474       24,779  
Operating expenses (1)                                
Sales and marketing     10,281       8,742       31,090       23,615  
Research and development     5,072       3,606       15,055       9,651  
General and administrative     4,681       3,091       12,755       10,001  
    Total operating expenses     20,034       15,439       58,900       43,267  
    Loss from operations     (7,865 )     (6,423 )     (26,426 )     (18,488 )
Interest expense, net     (82 )     (137 )     (375 )     (349 )
Other expenses, net     (16 )     (25 )     (505 )     (222 )
    Loss before provision for income taxes     (7,963 )     (6,585 )     (27,306 )     (19,059 )
Provision for income taxes     (230 )     (63 )     (485 )     (167 )
    Net loss   $ (8,193 )   $ (6,648 )   $ (27,791 )   $ (19,226 )
                                 
Net loss per common share, basic and diluted   $ (0.25 )   $ (1.51 )   $ (1.15 )   $ (4.46 )
Weighted-average shares outstanding, basic and diluted     32,522       4,404       24,136       4,312  
                                 
(1) Includes stock-based compensation as follows:                                
  Cost of revenues   $ 239     $ 121     $ 689     $ 292  
  Sales and marketing     349       261       1,003       817  
  Research and development     379       152       990       648  
  General and administrative     451       295       1,270       2,490  
    $ 1,418     $ 829     $ 3,952     $ 4,247  
                                 
                                 
       
Condensed Consolidated Statements of Cash Flows   Nine Months Ended  
(On a GAAP basis)   September 30,  
(Unaudited; in thousands)   2013     2012  
                 
Operating activities                
Net loss   $ (27,791 )   $ (19,226 )
Adjustments to reconcile net loss to net cash used in operating activities                
  Depreciation     3,428       1,802  
  Amortization of internally developed software     786       346  
  Noncash expenses related to warrants     436       334  
  Stock-based compensation     3,952       4,247  
  Provision for bad debt     288       274  
  Other noncash expenses     -       315  
  Excess tax benefits from stock-based award activities     (41 )     -  
  Changes in operating assets and liabilities                
    Accounts receivable     (1,041 )     (2,894 )
    Prepaid expenses and other current assets     (1,691 )     (831 )
    Other assets     (34 )     (26 )
    Accounts payable     212       430  
    Deferred revenue     2,266       129  
    Accrued expenses and other liabilities     1,135       1,322  
      Net cash used in operating activities     (18,095 )     (13,778 )
Investing activities                
Purchases of property and equipment     (3,859 )     (4,697 )
Capitalization of internally developed software     (2,566 )     (1,274 )
      Net cash used in investing activities     (6,425 )     (5,971 )
Financing activities                
Proceeds from issuance of common stock in initial public offering, net of issuance costs     109,414       -  
Proceeds from issuance of note payable, net of issuance costs     1,666       7,314  
Repayment of note payable     (8,775 )     (4,011 )
Redemption of common stock and unvested shares subject to repurchase     (69 )     (4,528 )
Proceeds from issuance of convertible, preferred stock, net of issuance costs     -       34,294  
Proceeds from common stock purchase agreements and option exercises     1,193       1,951  
Proceeds from employee stock purchase plan     1,205       -  
Excess tax benefits from stock-based award activities     41       -  
      Net cash provided by financing activities     104,675       35,020  
      Net increase in cash and cash equivalents     80,155       15,271  
Cash and cash equivalents                
Beginning of period     31,540       1,719  
End of period   $ 111,695     $ 16,990  
                 
                 
                                                 
Reconciliation of GAAP to Non-GAAP Measures                                     
(Unaudited; in thousands)   Three Months Ended     Year Ended     Three Months Ended  
    March 31,     June 30,     September 30,     December 31,     December 31,     March 31,     June 30,     September 30,  
    2012     2012     2012     2012     2012     2013     2013     2013  
                                                                 
Gross Profit (GAAP)   $ 7,720     $ 8,043     $ 9,016     $ 10,015     $ 34,794     $ 9,783     $ 10,522     $ 12,169  
  Plus Stock-based compensation     56       115       121       147       439       205       245       239  
  Plus Amortization of internally developed software     96       114       136       179       525       227       256       303  
  Less Capitalization of internally developed software     -       -       (23 )     (15 )     (38 )     -       -       -  
Gross Profit (Non-GAAP)   $ 7,872     $ 8,272     $ 9,250     $ 10,326     $ 35,720     $ 10,215     $ 11,023     $ 12,711  
                                                                 
Operating loss (GAAP)   $ (6,492 )   $ (5,573 )   $ (6,423 )   $ (6,797 )   $ (25,285 )   $ (9,803 )   $ (8,758 )   $ (7,865 )
  Plus Stock-based compensation     2,891       527       829       701       4,948       1,225       1,309       1,418  
  Plus Amortization of internally developed software     96       114       136       179       525       227       256       303  
  Plus Noncash expenses related to warrants     60       -       -       -       60       -       -       -  
  Less Capitalization of internally developed software     (303 )     (531 )     (440 )     (469 )     (1,743 )     (632 )     (916 )     (1,018 )
Operating loss (Non-GAAP)   $ (3,748 )   $ (5,463 )   $ (5,898 )   $ (6,386 )   $ (21,495 )   $ (8,983 )   $ (8,109 )   $ (7,162 )
                                                                 
Net Loss (GAAP)   $ (6,754 )   $ (5,824 )   $ (6,648 )   $ (7,256 )   $ (26,482 )   $ (10,501 )   $ (9,097 )   $ (8,193 )
  Plus Stock-based compensation     2,891       527       829       701       4,948       1,225       1,309       1,418  
  Plus Amortization of internally developed software     96       114       136       179       525       227       256       303  
  Plus Noncash expenses related to warrants     223       50       61       247       581       310       73       53  
  Less Capitalization of internally developed software     (303 )     (531 )     (440 )     (469 )     (1,743 )     (632 )     (916 )     (1,018 )
Net Loss (Non-GAAP)   $ (3,847 )   $ (5,664 )   $ (6,062 )   $ (6,598 )   $ (22,171 )   $ (9,371 )   $ (8,375 )   $ (7,437 )
                                                                 
                                                                 
                                                 
Calculation of Non-GAAP Earnings Per Share                                     
(Unaudited; in thousands, except per share data)   Three Months Ended     Year Ended     Three Months Ended  
    March 31,     June 30,     September 30,     December 31,     December 31,     March 31,     June 30,     September 30,  
    2012     2012     2012     2012     2012     2013     2013     2013  
Net Loss (Non-GAAP)   $ (3,847 )   $ (5,664 )   $ (6,062 )   $ (6,598 )   $ (22,171 )   $ (9,371 )   $ (8,375 )   $ (7,437 )
                                                                 
Weighted-average shares outstanding, basic and diluted     4,254       4,261       4,404       4,559       4,417       7,365       32,237       32,522  
  Additional weighted average shares giving effect toconversion of convertible preferred stock at thebeginning of the period    

17,275
     

17,275
     

17,275
     

18,753
     

18,753
     

16,877
     

-
     

-
 
Shares used in computing non-GAAP net loss per share, basic and diluted     21,529       21,536       21,679       23,312       23,170       24,242       32,237       32,522  
Non-GAAP net loss per common share, basic and diluted   $ (0.18 )   $ (0.26 )   $ (0.28 )   $ (0.28 )   $ (0.96 )   $ (0.39 )   $ (0.26 )   $ (0.23 )
                                                                 
                                                                 
                                                                 
Reconciliation of Net Loss to Adjusted EBITDA                                        
(Unaudited; in thousands)   Three Months Ended     Year Ended     Three Months Ended  
    March 31,     June 30,     September 30,     December 31,     December 31,     March 31,     June 30,     September 30,  
    2012     2012     2012     2012     2012     2013     2013     2013  
Net loss   $ (6,754 )   $ (6,648 )   $ (6,648 )   $ (7,256 )   $ (26,482 )   $ (10,501 )   $ (9,097 )   $ (8,193 )
  Depreciation     488       614       700       840       2,642       1,008       1,121       1,299  
  Amortization of internally developed software     96       114       136       179       525       227       256       303  
  Interest expense, net     110       102       137       171       520       184       109       82  
  Provision for income taxes     49       55       63       54       221       106       149       230  
EBITDA     (6,011 )     (5,763 )     (5,612 )     (6,012 )     (22,574 )     (8,976 )     (7,462 )     (6,279 )
  Stock-based compensation     2,891       527       829       701       4,948       1,225       1,309       1,418  
  Capitalization of internally developed software     (303 )     (531 )     (440 )     (469 )     (1,743 )     (632 )     (916 )     (1,018 )
  Other (income) expenses, net     103       94       25       234       456       408       81       16  
Adjusted EBITDA   $ (3,320 )   $ (5,673 )   $ (5,198 )   $ (5,546 )   $ (18,913 )   $ (7,975 )   $ (6,988 )   $ (5,863 )
                                                                 
                                                                 
Contact:
Investor Relations

Greg Kleiner
ICR for Marin Software
415-762-0327
ir@marinsoftware.com

Media

Greg Kunkel
Corporate Communications
Marin Software
415-857-7663
press@marinsoftware.com
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