Marin Software Q3 2023 Earnings Call Transcript

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November 2, 2023

There are 3 speakers on the call.

Operator

Greetings, and welcome to the Marin Software Third Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen only mode. As a reminder, this conference is being recorded. I would now like to turn the call over to Marr Software. Please go ahead.

Speaker 1

Thank you. Good afternoon, everyone, and welcome to Marin My name is Bob Burz. I'm Marin's CFO and joining me today is Chris Leen, Marin's CEO. By now, you should have received a copy of our earnings release, which crossed the wire a short time ago. The release can also be obtained on our website at investors.

Speaker 1

Marinsoftware.com. All participants are advised that the audio of this conference call is being recorded for playback purposes and that the 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, Our expectations for customer adoption and use of our MarinOne platform and other product offerings, Historical results that may suggest trends for our business, our expectations about our ability to improve customer retention and new business bookings And to grow our business, our ability to manage our expenses and cash resources, The impact of investments in product and technology, progress on product development efforts, product capabilities, Our relationships with publishers and other parties in the digital advertising market expectations for future economic and digital advertising spending expected restructuring costs and cost savings from our restructuring efforts and are expected Q4 and future financial results. We make these statements as of November 2, 2023 and disclaim any duty to update them.

Speaker 1

For more information regarding these and other risks and uncertainties that could cause 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 reports on Form 10Q and Form 10 ks as well as 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 also be different from similar calculations or measures used by other companies. A quantitative reconciliation of these non GAAP financial measures to the most directly comparable GAAP financial measures is available in our Q3 2023 earnings release. With that, let me turn the call over to Chris.

Speaker 2

Thank you, Bob. Good afternoon, everyone, and thank you for joining our call today. I'll share my observations on the quarter and provide an update on our initiatives to grow our business. Bob will then provide additional detail on our Q3 results for 2023 And our outlook for the Q4 of 2023. As we highlight each quarter, we are committed to our efforts to grow our business and to maximize shareholder value.

Speaker 2

Our plan to achieve this is focused on delivering a leading cross channel advertising management platform to enable brands and their agencies to maximize the return from their online advertising investments. As announced in today's earnings release, Q3 revenues came in at $4,400,000 Which was at the high end of our previously published guidance for Q3, but still down from Q3 in the prior year. I should highlight that Marin's revenues declined about 11% year over year, showing moderation in our revenue decline. Our Q3 non GAAP operating loss was slightly better than the high end of our guidance. Our total cash balance at the end of Q3 was 13,600,000 In July 2023, we commenced the implementation of a restructuring and reduction in force plan as well as other cost saving measures To reduce our operating costs, reducing our team size by approximately 40%.

Speaker 2

As we shared at the time of announcing these changes, The various actions are expected to generate estimated pre tax annualized cost savings of approximately $10,000,000 to $13,000,000 Our non GAAP operating loss was materially lower on a year over year basis, reflecting the initial benefits of the restructuring and reduction in force plan. As I've shared before, Marin seeks to be an ally in digital for the world's leading brands and their agencies. The online path to purchase traverses a range of channels, devices and publishers. Marketers need to engage at all points in this customer journey And the walled gardens of Google, Facebook, Amazon and the other publishers, including TikTok, Snap and LinkedIn do not play well together. Brands must connect the dots.

Speaker 2

Marin helps these advertisers to measure, manage and optimize their online advertising investments, Driving performance, time savings and better business insights. We do this by serving as a performance layer That complements the tools that each of the publishers provides to its customers. These publisher tools understandably are focused on the ad units of each publisher And encourage brands to spend more with that publisher. The publisher tools generally don't compare advertising performance across publishers, Don't highlight opportunities to reallocate spend across publishers to improve performance and don't provide a unified view of a customer's journey across Channels, Devices and Publishers. We supplement our MarinOne platform with support from our experienced team of digital marketing experts, who can help brands to navigate the complex, but rewarding world of digital advertising.

Speaker 2

We have been investing significantly over the past quarters To give brands and agencies a user friendly cross channel advertising management platform, enabling them to sell more with a platform that unifies the fragmented world At Performance Marketing. What we also have discovered in talking to our customers and prospects is that digital marketing needs vary We need to better tailor our product offering and associated marketing messages to better meet the needs of leading digital marketers. As part of these learnings and to better meet the varying needs of digital marketers, you will now see on our website at www.marinsoftware.com Three offerings from Marin, Connect, Ascend and MarinOne. Connect is a reporting focused solution for advertisers Looking to collect the performance marketing data from a variety of sources and send to data warehouses, BI tools and spreadsheets. Step 1 of understanding your digital advertising spending is to have reliable comprehensive reporting in a format that addresses your particular business needs.

Speaker 2

Marin provides marketers with revenue cost and ad performance data for the publishers that we support unified in Connect. Ascend builds on the data foundation provided by Connect. Marin's Ascend offering is our budget management pacing and forecasting solution That enables marketers to leverage Marin's AI based optimization methodologies to deliver budget compliance as well as to understand what if From increased or decreased advertising spend and to understand optimal spend allocation across campaigns, publishers and channels. Historically, these kinds of budgeting decisions have been done with spreadsheets in a highly manual and potentially error prone approach. Marin is able to provide marketers with a powerful UI to automate these budgeting decisions, while providing flexible budgeting controls And the ability to use a range of bidding approaches, including support for Google Smart Bidding.

Speaker 2

Ascend supports a range of publishers and channels, And just this quarter, we debuted enhanced support for LinkedIn, TikTok, Apple Search Ads and Tubula to include Marin's proprietary forecasts And budget models and simulations. I am pleased to report that initial customer results with Marin Ascend are encouraging for both financial lift and time savings, And we are looking forward to sharing more customer specific case studies and testimonials in the coming months as we continue to add to Ascend's functionality. Ascend already has played a role in various customer renewals as well as new business wins. Both Connect and Ascend are able to interoperate with other marketing offerings, allowing brands and agencies to use what they believe is the best approach to maximize their results. We also deepened our CRM integrations by adding HubSpot, enabling our customers to optimize against the entire customer journey, including downstream and offline conversions.

Speaker 2

We also seek to complement the publisher tools by enabling management at scale For large paid media programs driving time savings and financial lift. For search publishers this past quarter, Marin improves search ad preview to provide MarinOne and external users with transparent visual previews, including ad copy, logos and extensions. Marin added to our Google Performance Max support by adding asset group reporting Automated status changes based on preset criteria. Marketers can better manage volume across the portfolio of Google accounts and other publishers With consolidated automation, Marin also now enables import of Google labels into Marin to allow new customers to quickly adopt Marin dimensions, Adding a hierarchy to Google labels. As we have discussed on past calls, our activities to support brands and their agencies Take place against an active backdrop of governmental antitrust investigations of the businesses of leading publishers in the digital advertising market At the federal and state levels as well as in the EU.

Speaker 2

There also is the potential of federal legislation To regulate the conduct of the leading publishers that could benefit Marin's role as an independent ad management platform. Marin enjoys coopetition relationships with the leading publishers, and we do not expect significant changes in these relationships in the near term. I continue to believe that Marin has a tremendous opportunity ahead. We're seeing very early, but encouraging signs That our efforts are resonating more with customers and prospects. Marin can benefit as consumers spend increasing time online and ad dollars follow them, Creating more need for brands to measure, manage and optimize these investments to acquire customers and drive revenue outcomes.

Speaker 2

With the combined online advertising share of Google and Meta below 50% and the growing fragmentation of digital advertising, We're seeing increasing interest in brands taking a cross channel approach to their digital advertising investments, leveraging Marin's cross channel reporting, Management at Scale and Budget Optimization. Marin with our MarinOne platform and our team of digital advertising experts is well positioned to support leading brands and their agencies in these efforts. And now Bob will review our Q3 financial results And our outlook for the Q4 of 2023.

Speaker 1

Thank you, Chris. I'll provide an overview of our Q3 results and then share our forecast for the Q4 of 2023. I'll begin with a review of our income statement. For the Q3 of 2023, Marin generated $4,400,000 in revenue at the top end of our guidance. The 3rd quarter revenue was down approximately 11% compared to total revenue for the Q3 of 2022.

Speaker 1

The decrease in revenue year over year is primarily attributable to the fact that existing customer churn outpaced new bookings. Our geographic split for revenue was approximately 80% U. S. And 20% international for the Q3 of 2023. Moving on to our operating results.

Speaker 1

As a reminder, our financial statements and a reconciliation of our GAAP to non GAAP for the Q3 of 2023 as compared to a $4,500,000 loss for the Q3 of 2022. The $2,900,000 non GAAP operating loss in Q3 beat the high end of our guidance by approximately $300,000 The decrease in operating loss as compared to Q3 2022 is primarily attributable to realized savings from our restructuring plan implemented during the quarter, which were partially offset by lower revenue in the current period as compared to last year. Our non GAAP operating expenses in Q3 2023 of $5,300,000 represent a 23% decrease when compared to the year ago quarter. The decrease is attributable to the implementation of our restructuring plan, which was nearly complete as of the end of the third quarter. We ended the quarter with 116 total headcount globally versus 173 a year ago.

Speaker 1

The decrease in headcount year over year is due to the reduction in force that was commenced in July As part of our restructuring plan, about half of our remaining team is in technology roles, which we believe allows us to continue to deliver new products, As I have mentioned, we commenced The implementation of restructuring plan in July of 2023. The restructuring plan is expected to reduce our pre tax cost structure By approximately $10,000,000 to $13,000,000 on an annualized basis. Close to $10,000,000 of the estimated annualized cost savings is expected to come from the reduction in force, which will reduce our workforce globally by approximately 61 positions as well as approximately 15 full time equivalent contractor roles. The reduction in force was substantially complete by the end of the 3rd quarter And we expect the remaining reductions to be completed by the end of this year. We expect to incur approximately $1,800,000 in restructuring costs, substantially all of which relates to severance and other long time termination benefits.

Speaker 1

We began to realize the associated savings during the Q3 of 2023, And we expect to realize all of the estimated savings next year. This restructuring helps to bring our expense base more in line with our current revenues. In terms of our balance sheet, we ended the quarter with a total cash balance of $13,600,000 as compared to $19,000,000 at the end of the Quarter, we incurred approximately $1,700,000 of the total estimated $1,800,000 in one time restructuring costs during the Q3. Moving on to our outlook. For Q4 2023, we expect revenue to be in the range of $4,100,000 to $4,400,000 And our non GAAP operating loss is expected to be in the range of $2,300,000 to $2,000,000 This concludes our call for today.

Speaker 1

Thank you for your time and we look forward to updating you again during our Q4 2023 earnings call.

Operator

Thank you. You may now disconnect your lines. Thank you for your participation.

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