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Edited Transcript of MRIN earnings conference call or presentation 7-Nov-19 10:00pm GMT

Q3 2019 Marin Software Inc Earnings Call

San Francisco Nov 11, 2019 (Thomson StreetEvents) -- Edited Transcript of Marin Software Inc earnings conference call or presentation Thursday, November 7, 2019 at 10:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Brad Kinnish

Marin Software Incorporated - CFO

* Christopher A. Lien

Marin Software Incorporated - Founder, Chairman & CEO

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Presentation

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Operator [1]

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Thank you for standing by. This is the conference operator. Welcome to the Marin Software's Third Quarter 2019 Earnings Conference Call. (Operator Instructions)

I would now like to turn the conference over to Mr. Brad Kinnish. Please go ahead.

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Brad Kinnish, Marin Software Incorporated - CFO [2]

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Thank you. Good afternoon, everyone, and welcome to Marin Software's Third Quarter 2019 Earnings Conference Call. My name is Brad Kinnish, Marin's CFO. Joining me today is Chris Lien, Marin's CEO.

By now, you should have received a copy of our earnings release, which crossed the wire a short time ago. If you need a copy of the release, please go to investors.marinsoftware.com to find an electronic version. Call participants are advised that the audio of this conference call is being recorded for playback purposes and that this recording will be made available on the Investor Relations section of our website within a few hours.

Before we begin, I'd like to note that our discussion today will include forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. These forward-looking statements include statements about our business outlook and strategy; historical results that may suggest trends for our business; our expectations about our ability to improve customer retention and new bookings and return to growth; our ability to manage our expenses and cash resources; impact of investments in product and technology; progress on product development efforts; product capabilities; and future financial results.

We make these statements as of November 7, 2019, and disclaim any duty to update them. For more information regarding these and other risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in these forward-looking statements as well as risks relating to our business in general, we refer you to the section entitled Risk Factors in our most recent report on Form 10-Q and our other SEC filings.

This presentation contains certain financial performance measures that are different from the financial measures calculated in accordance with GAAP and may be different from similar calculations or measures used by other companies. The quantitative reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is available in our third quarter 2019 earnings release.

With that, let me turn the call over to Chris.

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Christopher A. Lien, Marin Software Incorporated - Founder, Chairman & CEO [3]

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Thank you, Brad. Good afternoon, everyone, and thank you for joining our call today. I'll review the quarter and provide an update on our initiatives to return Marin to growth. Brad will then provide additional detail on our third quarter results and our outlook for Q4.

As we've discussed before, we remain focused on returning Marin to growth and maximizing shareholder value. We intend to achieve this by delivering a leading cross-channel advertising management platform to enable brands and their agencies to grow and optimize returns from their online advertising investments. We call this platform MarinOne.

Our efforts to return Marin to growth are taking longer than any of us would have preferred, and our revenues continue to be under pressure. At the same time, we continue to believe that our strategy is sound and that our initiatives will show results in the coming quarters.

Additionally, there are some green shoots present even if not yet sufficient to return Marin to growth. Our view is that as we deliver a more compelling product to our market, then good results will follow. As such, we continue to invest a substantial amount in product development to better meet the needs of the digital marketer.

As announced in today's earnings release, Q3 revenues came in at $11.7 million, which was above the high end of our guidance but still down from the prior year. We also outperformed on our forecast operating loss. Our cash balance at the end of Q3 was $10.1 million, reflecting a modest use of cash of $700,000, reflecting our ongoing commitment to manage costs.

We will continue to monitor our cash use closely, balancing investments and cost savings, and we are committed to making sure that Marin is adequately funded.

Marin seeks to be an ally in digital for the world's leading brands and their agencies. Customers and prospects traverse a range of channels, devices and publishers online on their path to purchase.

Marketers need a cross-channel platform to engage in all points of this customer journey. And as we have highlighted, the walled gardens of Google, Facebook and Amazon do not play well together, leaving brands to connect the dots on their own. Marin helps these advertisers to measure, manage and optimize their online advertising investments to maximize their results, to acquire customers and to drive revenue.

Today, Tools from the publishers understandably focus on how to enable a given advertiser to spend more money on ads from that particular publisher. Marin serves as a performance layer to supplement their capabilities and to provide an objective independent measurement of advertising performance.

As we've highlighted in previous discussions, can you imagine a publisher tool set informing an advertiser that his or her marginal dollar should be invested on a competitor's platform. Marin is uniquely positioned to meet this growing demand. But as we have shared before, our vision remains ahead of many brands and agencies who are not yet ready to make this change.

Over time, we believe Marin's approach will become the new standard, and Marin will be rewarded for its leadership as the online advertising management category evolves to this new state. As we invest in product innovation, we are creating more compelling reasons for brands and their agencies to select Marin.

As we have discussed in the past, we have been investing in the development and adoption of MarinOne, our next-generation cross-channel platform. Having made MarinOne available to all customers in recent quarters, we are now focused on delivering differentiated functionality to brands to enable them to enjoy greater performance and efficiency from their online advertising investment. As part of this effort, Marin continues to invest in MarinOne bidding as a key area where Marin can add value to complement publisher functionality. For example, Google has begun sunsetting the Average Position Metric, which many advertisers use for position-based bidding, moving to impression share metric.

Marin has debut support for impression share-based reporting and bidding, including algorithmically driven awareness targeting bid strategies. Marin's customers have begun using this new bidding approach, with early results showing a smooth transition and incremental performance improvement.

MarinOne's bidding for awareness targeting provides greater visibility and control than Google's own tools offer. Within the MarinOne, we also launched what we refer to as full funnel optimization, so that advertisers with longer sales cycles can optimize to upper funnel leads, while factoring in the downstream sale and lifetime customer value. This is a differentiated offering from Marin that is more sophisticated than publisher offerings and enables marketers to drive incremental performance from their ad investments.

Our goal with MarinOne is to enable brands to measure, manage and optimize their online advertising investments across the leading publishers in search, social and e-commerce. As part of these efforts, you'll recall that Marin now provides algorithmic bidding support for Apple search ads, which provides our customers with leading optimization capabilities in this emerging channel.

Businesses that have an app offering are drawn to this advertising channel to drive more app downloads and installs. With our recent support for LinkedIn advertising reporting, we now are seeing promising early adoption from B2B advertisers. And I would add that Marin also supports reporting for Pinterest ads, which is another emerging channel for brands.

We continue to invest in our support for Amazon advertising. In this quarter, we have added Buy Box metrics, including dayparting, to enable advertisers to adjust their campaigns based on whether they are the default purchase option, which generally corresponds with higher conversion rates.

Amazon continues to be Marin's fastest-growing publisher, albeit off of a smaller base, and brands are looking for tools that enable them to scale up their programs. Marin is investing to support their needs.

Marin also is working with participants in the Amazon Attribution program beta, which provides advertisers with insights into how their marketing investments outside of Amazon contribute to shopping activity on Amazon. This program is in its early stages and remains invite-only at this time, but is another cross-channel use case that Marin supports for leading brands.

Marin also continues to invest in our support of social advertising. And we debut support for Facebook automatic placement, giving advertisers the ability to optimize their ads across the entire Facebook family of apps and services to provide the broadest reach possible versus having to manually select the placement. This functionality both saves time and drives better performance as social marketers adjust their ad targeting to maximize performance.

As we discussed last time, we believe brands should leverage both the publisher auction signals as well as their own first-party data, which includes new versus existing, active versus lapsed, lifetime versus transaction value, off-line conversion and other advertiser-specific data.

Marin's open flexible architecture supplemented by our highly experienced field teams enables advertisers to unlock this data to drive incremental performance. Publisher solutions generally are designed for the many and do not support this bespoke integration with advertisers forced to fit into standard optimization approaches that may not be best suited to their specific business situations.

As customers engage with the MarinOne platform, we are able to highlight their success with this new offering. An example of a customer seeing cross-channel performance from MarinOne is our recent case study with World First, a fast-growing foreign exchange platform for individuals and international businesses based out of the U.K. Founded in 2004, they have over 400,000 global customers and over 150,000 global businesses using them for international transactions.

Using MarinOne, World First was able to leverage 2 additional tools to improve social performance, helping the team to see value that social campaigns were bringing to their overall strategy. MarinOne Budget Optimizer is Marin's budget management solution, making it easier for marketers to forecast, monitor and automatically reallocate budgets across their most efficient marketing channels with ease.

With Budget Optimizer, the World First team created budget plans in advance and leverage Marin's algorithms to pace the budget across search and social to achieve the best results, all based on historical performance. In addition, the World First team incorporated search intent audiences into their campaign strategy to automatically create and update Facebook custom audiences based on intent demonstrated through search engine activity.

This means that marketers are able to show ads to consumers who search for specific keywords while using Facebook's targeting capabilities to find more customers like them. This strategy helped align their search engine marketing and social advertising, mixing the power of intent with repeated brand exposure on a high-growth channel.

In the coming quarters, we expect to showcase more examples of performance and cross-channel success from customer adoption of MarinOne. Despite our current challenges, I continue to believe that Marin has tremendous opportunity and that our best days lie ahead.

And now Brad will review our third quarter financial results and our outlook for the fourth quarter of 2019.

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Brad Kinnish, Marin Software Incorporated - CFO [4]

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Thank you, Chris. I'll provide an overview of our results and then share our forecast for the upcoming quarter. I'll begin with the review of our income statement.

Let me start with revenue. For the third quarter of 2019, Marin generated $11.7 million in revenue, beating the high end of our guidance for the quarter by $400,000.

Q3 '19 revenues were down 11% compared with Q3 '18. Our revenue during Q3 was aided by our strategic partnership with Google and lower churn as compared to the first half of the year.

We also benefited from better-than-forecast spend levels from our continuing customers. Those positives were offset by slow bookings in the quarter. Our geographic split for the third quarter revenue was 75% U.S. and 25% international.

Now let me move on to the operating results and our balance sheet. As a reminder, our financial statements and reconciliation of our GAAP to non-GAAP financial measures can be found in our earnings release. For the third quarter, our non-GAAP operating loss was $2.9 million as compared to a loss of $4.8 million for the third quarter of 2018.

The $2.9 million operating loss was $100,000 better than the high end of our guidance for the quarter. During the quarter, we continued to take meaningful steps to reduce our overall cost structure. Our total headcount ended the quarter at 257, down from 292 at year-end. Similarly, our overall non-GAAP operating expenses were down 19% on a year-over-year basis.

During the remainder of 2019, we will continue to align our cost with revenue as we seek to operate at breakeven. In terms of our balance sheet, our cash ended the quarter at $10.1 million, representing a cash decline of $700,000 over the previous quarter. Our cash balance has benefited from strong collections of accounts receivable and effective working capital management during the quarter, which helped offset our net loss. During the quarter, we did not sell any shares via our at-the-market equity distribution agreement.

Now moving on to our outlook. For Q4, we expect revenues to be in the range of $10.4 million to $10.9 million and non-GAAP operating loss is expected to be in the range of $3.2 million to $3.7 million.

That concludes our call for today. We want to thank you for your time, and we look forward to updating you again at the end of Q4 2019.

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Operator [5]

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This concludes today's conference call. You may now disconnect your lines. Thank you for participating, and have a great day.