Marin Software Announces First Quarter 2018 Financial Results

SAN FRANCISCO, May 10, 2018 /PRNewswire/ — Marin Software Incorporated (NYSE: MRIN), a leading provider of cross-channel, cross-device, enterprise marketing software for advertisers and agencies, today announced financial results for the first quarter ended March 31, 2018.

“Our growth in cross-channel revenue during Q1 demonstrates the appeal for an open, independent approach to digital advertising,” said Chris Lien, Chief Executive Officer of Marin Software. “Our new platform, which launches this summer, will help advertisers drive performance in a world where Google, Facebook and increasingly Amazon, dominate.”

First Quarter 2018 Business and Product Release Highlights:

  • Onboarded first customers advertising on Amazon, including a multinational pharmaceutical corporation and a leading consumer electronics and technology company.
  • Upgraded Marin Bidding to automatically calculate audience bid multipliers based on campaign performance, driving greater ad spend efficiency for advertisers.
  • Developed a tool to automatically create a video slideshow ad from top-performing products, helping to drive increased engagement on social advertising.
  • Expanded offerings for social travel advertisers by supporting trip consideration and broad audiences for Facebook’s Dynamic Ads for Travel.
  • Debuted customizable cross-channel dashboards, providing advertisers with access to all key search and social campaign metrics in a single view.
  • Launched Unified Reporting, allowing advertisers to see all campaigns in a single grid across search and social publishers for better cross-channel alignment.
  • Added support for Twitter Website Video Cards, providing advertisers another outlet for delivering engaging video content.
  • Added support for Facebook offer ads where advertisers can create and track promotions. Marin’s proprietary Offer Library makes it easier to launch and reuse offers at scale.

First Quarter 2018 Financial Updates:

  • Net revenues totaled $15.4 million, a year-over-year decrease of 24%, when compared to $20.3 million in the first quarter of 2017.
  • GAAP loss from operations was ($9.1) million, resulting in a GAAP operating margin of (59%), compared to a GAAP loss from operations of ($6.0) million and a GAAP operating margin of (29%) for the first quarter of 2017. Non-GAAP loss from operations was ($6.0) million, resulting in a non-GAAP operating margin of (39%), as compared to a non-GAAP loss from operations of ($3.2) million and a non-GAAP operating margin of (16%) for the first quarter of 2017.
  • Cash, cash equivalents and restricted cash totaled $23.3 million as of March 31, 2018, as compared to $28.8 million as of December 31, 2017.
  • During January 2018, initiated an organizational restructuring plan designed to reduce operating expenses and better align the Company’s efforts to return to growth. This restructuring plan is expected to result in annualized cost savings of $6.0 million to $7.0 million going forward. In connection, the Company incurred $0.9 million in restructuring related expenses during the first quarter of 2018, consisting primarily of employee severance costs.

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 second quarter of 2018 as follows:

Forward-Looking Guidance

In millions

Range of Estimate

From

To

Three Months Ending June 30, 2018

Revenues, net

$

13.5

$

14.0

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, non-recurring costs associated with restructurings, capitalization of internally developed software and deferral of costs to obtain and fulfill contracts.

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 March 31, 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=129324. Following the completion of the call through 11:59 PM Eastern Time on May 17, 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 13678855.

About Marin Software
Marin Software Incorporated’s (NYSE:  MRIN) mission is to give advertisers the power to drive higher efficiency, effectiveness, and transparency in their paid marketing programs that run on the world’s largest publishers. Marin provides industry leading enterprise marketing software for advertisers and agencies to measure, manage, and optimize billions of dollars in annualized ad spend across the web and mobile devices. Offering a SaaS advertising management platform for search, social, and display advertising, Marin helps digital marketers improve financial performance, save time, and make better decisions. Advertisers use Marin to create, target, and convert precise audiences based on recent buying signals from users’ search, social, and display interactions. Headquartered in San Francisco, with offices in eight countries, 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, non-recurring costs associated with restructurings, capitalization of internally developed software and deferral of costs to obtain and fulfill contracts. 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 second 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 May 10, 2018. Marin assumes no obligation to, and expressly disclaims any obligation to update any such forward-looking statements after the date of this release.

Marin Software Inc.

Condensed Consolidated Balance Sheets

(On a GAAP basis)

March 31,

December 31,

(Unaudited; in thousands, except par value)

2018

2017

Assets

Current assets

Cash and cash equivalents

$

21,983

$

27,544

Restricted cash

1,293

1,293

Accounts receivable, net

11,000

12,237

Prepaid expenses and other current assets

5,652

3,989

Total current assets

39,928

45,063

Property and equipment, net

14,579

15,559

Goodwill

16,816

16,768

Intangible assets, net

3,785

4,475

Other non-current assets

2,357

1,504

Total assets

$

77,465

$

83,369

Liabilities and Stockholders’ Equity

Current liabilities

Accounts payable

$

2,762

$

2,826

Accrued expenses and other current liabilities

8,474

10,474

Capital lease obligations

1,438

1,416

Total current liabilities

12,674

14,716

Capital lease obligations, non-current

1,347

1,687

Other long-term liabilities

4,158

4,183

Total liabilities

18,179

20,586

Stockholders’ equity

Common stock, $0.001 par value

6

6

Additional paid-in capital

292,099

291,163

Accumulated deficit

(232,581)

(227,704)

Accumulated other comprehensive loss

(238)

(682)

Total stockholders’ equity

59,286

62,783

Total liabilities and stockholders’ equity

$

77,465

$

83,369

Marin Software Inc.

Condensed Consolidated Statements of Operations

(On a GAAP basis)

Three Months Ended March 31,

(Unaudited; in thousands, except per share data)

2018

2017

Revenues, net

$

15,402

$

20,333

Cost of revenues

7,572

8,324

Gross profit

7,830

12,009

Operating expenses

Sales and marketing

7,381

6,676

Research and development

6,155

7,138

General and administrative

3,377

4,177

Total operating expenses

16,913

17,991

Loss from operations

(9,083)

(5,982)

Other income, net

295

262

Loss before provision for income taxes

(8,788)

(5,720)

Provision for income taxes

(324)

(406)

Net loss

$

(9,112)

$

(6,126)

Net loss per common share, basic and diluted

$

(1.59)

$

(1.10)

Weighted-average shares outstanding, basic and diluted

5,736

5,583

Marin Software Inc.

Condensed Consolidated Statements of Cash Flows

(On a GAAP basis)

Three Months Ended March 31,

(Unaudited; in thousands)

2018

2017

Operating activities

Net loss

$

(9,112)

$

(6,126)

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

Depreciation

798

1,336

Amortization of internally developed software

957

788

Amortization of intangible assets

690

730

Amortization of deferred costs to obtain and fulfill contracts

605

Unrealized foreign currency losses (gains)

24

(12)

Non-cash interest expense related to debt agreements

6

Stock-based compensation related to equity awards and restricted stock

1,028

1,842

(Recovery from) provision for bad debts

(214)

416

Changes in operating assets and liabilities

Accounts receivable

1,451

2,439

Prepaid expenses and other assets

(482)

(1,417)

Accounts payable

(48)

(49)

Accrued expenses and other current liabilities

(620)

(574)

Net cash used in operating activities

(4,923)

(621)

Investing activities

Purchases of property and equipment

(98)

(169)

Capitalization of internally developed software

(693)

(543)

Net cash used in investing activities

(791)

(712)

Financing activities

Repayments of capital lease obligations

(318)

(249)

Employee taxes paid for withheld shares upon equity award settlement

(26)

(156)

Proceeds from employee stock purchase plan, net

78

136

Net cash used in financing activities

(266)

(269)

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

419

181

Net decrease in cash and cash equivalents and restricted cash

(5,561)

(1,421)

Cash and cash equivalents and restricted cash

Beginning of period

28,837

35,713

End of period

$

23,276

$

34,292

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,

(Unaudited; in thousands)

2017

2017

2017

2017

2017

2018

Sales and Marketing (GAAP)

$

6,676

$

6,710

$

6,630

$

6,920

$

26,936

$

7,381

Less Stock-based compensation

(212)

(200)

(197)

(218)

(827)

(240)

Less Amortization of intangible assets

(223)

(222)

(216)

(216)

(877)

(213)

Less Amortization of deferred costs to obtain contracts

(432)

Less Restructuring related expenses

(497)

Plus Deferral of costs to obtain contracts

257

Sales and Marketing (Non-GAAP)

$

6,241

$

6,288

$

6,217

$

6,486

$

25,232

$

6,256

Research and Development (GAAP)

$

7,138

$

6,646

$

6,672

$

6,108

$

26,564

$

6,155

Less Stock-based compensation

(996)

(318)

(326)

(356)

(1,996)

(339)

Less Amortization of intangible assets

(247)

(244)

(239)

(239)

(969)

(237)

Less Restructuring related expenses

(115)

Plus Capitalization of internally developed software

543

413

442

670

2,068

693

Research and Development (Non-GAAP)

$

6,438

$

6,497

$

6,549

$

6,183

$

25,667

$

6,157

General and Administrative (GAAP)

$

4,177

$

3,945

$

3,920

$

4,402

$

16,444

$

3,377

Less Stock-based compensation

(323)

(248)

(234)

(254)

(1,059)

(245)

Less Amortization of intangible assets

(13)

(10)

(5)

(5)

(33)

(3)

Less Restructuring related expenses

(111)

General and Administrative (Non-GAAP)

$

3,841

$

3,687

$

3,681

$

4,143

$

15,352

$

3,018

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,

(Unaudited; in thousands)

2017

2017

2017

2017

2017

2018

Gross Profit (GAAP)

$

12,009

$

10,535

$

9,968

$

9,959

$

42,471

$

7,830

Plus Stock-based compensation

311

152

166

193

822

204

Plus Amortization of internally developed software

788

867

1,016

998

3,669

957

Plus Amortization of intangible assets

247

245

240

239

971

237

Plus Amortization of deferred costs to fulfill contracts

173

Plus Restructuring related expenses

139

Less Deferral of costs to fulfill contracts

(115)

Gross Profit (Non-GAAP)

$

13,355

$

11,799

$

11,390

$

11,389

$

47,933

$

9,425

Operating Loss (GAAP)

$

(5,982)

$

(9,563)

$

(7,254)

$

(7,471)

$

(30,270)

$

(9,083)

Plus Impairment of goodwill

2,797

2,797

Plus Stock-based compensation

1,842

918

923

1,021

4,704

1,028

Plus Amortization of internally developed software

788

867

1,016

998

3,669

957

Plus Amortization of intangible assets

730

721

700

699

2,850

690

Plus Amortization of deferred costs to fulfill contracts

173

Plus Amortization of deferred costs to obtain contracts

432

Plus Restructuring related expenses

862

Less Capitalization of internally developed software

(543)

(413)

(442)

(670)

(2,068)

(693)

Less Deferral of costs to fulfill contracts

(115)

Less Deferral of costs to obtain contracts

(257)

Operating Loss (Non-GAAP)

$

(3,165)

$

(4,673)

$

(5,057)

$

(5,423)

$

(18,318)

$

(6,006)

Net Loss (GAAP)

$

(6,126)

$

(10,545)

$

(7,549)

$

(7,271)

$

(31,491)

$

(9,112)

Plus Impairment of goodwill

2,797

2,797

Plus Stock-based compensation

1,842

918

923

1,021

4,704

1,028

Plus Amortization of internally developed software

788

867

1,016

998

3,669

957

Plus Amortization of intangible assets

730

721

700

699

2,850

690

Plus Amortization of deferred costs to fulfill contracts

173

Plus Amortization of deferred costs to obtain contracts

432

Plus Non-cash expenses related to debt agreements

6

7

2

15

Plus Restructuring related expenses

862

Less Capitalization of internally developed software

(543)

(413)

(442)

(670)

(2,068)

(693)

Less Deferral of costs to fulfill contracts

(115)

Less Deferral of costs to obtain contracts

(257)

Net Loss (Non-GAAP)

$

(3,303)

$

(5,648)

$

(5,350)

$

(5,223)

$

(19,524)

$

(6,035)

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,

(Unaudited; in thousands, except per share data)

2017

2017

2017

2017

2017

2018

Net Loss (Non-GAAP)

$

(3,303)

$

(5,648)

$

(5,350)

$

(5,223)

$

(19,524)

$

(6,035)

Weighted-average shares outstanding, basic and diluted

5,583

5,640

5,651

5,677

5,638

5,736

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

$

(0.59)

$

(1.00)

$

(0.95)

$

(0.92)

$

(3.46)

$

(1.05)

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,

(Unaudited; in thousands)

2017

2017

2017

2017

2017

2018

Net Loss

$

(6,126)

$

(10,545)

$

(7,549)

$

(7,271)

$

(31,491)

$

(9,112)

Depreciation

1,336

1,263

1,149

1,010

4,758

798

Amortization of internally developed software

788

867

1,016

998

3,669

957

Amortization of intangible assets

730

721

700

699

2,850

690

Amortization of deferred costs to obtain and fulfill contracts

605

Provision for (benefit from) income taxes

406

419

151

31

1,007

324

Impairment of goodwill

2,797

2,797

Stock-based compensation

1,842

918

923

1,021

4,704

1,028

Capitalization of internally developed software

(543)

(413)

(442)

(670)

(2,068)

(693)

Deferral of costs to obtain and fulfill contracts

(372)

Restructuring related expenses

862

Other (income) expenses, net

(262)

563

144

(231)

214

(295)

Adjusted EBITDA

$

(1,829)

$

(3,410)

$

(3,908)

$

(4,413)

$

(13,560)

$

(5,208)

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SOURCE Marin Software

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