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

Business Wire

SAN FRANCISCO, Calif.--(BUSINESS WIRE)--

Marin Software Incorporated (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 (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 to
conversion of convertible preferred stock at the
beginning 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 Contact:
ICR for Marin Software
Greg Kleiner, 415-762-0327
ir@marinsoftware.com
or
Media Contact:
Marin Software
Greg Kunkel, 415-857-7663
Corporate Communications
press@marinsoftware.com

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