Q4 2019 Earnings Call

Thank you for standing by this is the conference operator, welcome to the Marine software fourth quarter 2019 financial results Conference call.

As a reminder, all participants are in listen only mode and the conference is being recorded.

I'd now like to turn the conference over to Mr., Bob Burke Chief Financial Officer. Please go ahead Sir.

Thank you good afternoon, everyone and welcome to Marin Softwares fourth quarter 2019 earnings Conference call. My name is Bob birds eye Morons, CFO and joining me today, it's Chris Lean Marine CEO.

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 and investors got Moran software Dot Com call participants are advice to the audio at 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.

And 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 backed up 1933, and the Securities Exchange Act of 1934. These forward looking statements include statements about our business outlook in strategy historical results that may suggest trends for our business alright.

Patients about our ability to improve customer attention in new business bookings and returned to growth.

Our ability to manage our expenses in cash resources, the impact it investments and product and technology progress on product development efforts product capabilities and future financial results.

We make these statements as of February 27, 2020, and disclaim any duty to update them 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 this.

Section entitled Risk factors and our most recent reports on form 10-Q, and form 10-K as well as her other SEC filings.

This presentation contains certain financial performance metrics that are different from the financial measures calculated in accordance with gap and May also be different from similar calculations are 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 fourth quarter 2019 earnings release with that let me turn the call over to Chris.

Thank you Bob 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 more rental growth.

I will then provide additional detail on our fourth quarter and full year results and our outlook for the first quarter.

As we've discussed before we remain focused on returning more into growth and maximizing shareholder value we.

We intend to achieve this by delivering a leading cross channel advertising management platform to enable brands in their agencies to growing optimize returns from their online advertising investments.

We call this platform or in one.

Our efforts to return more into growth are taking longer than any of us would've preferred and our revenues continued 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 precedent, even if not yet sufficient to return to growth.

Our view is that as we deliver a more compelling product where market and good results will follow as such we continue to invest a substantial amount and product development to better meet the needs of the digital marketer.

As announced in today's earnings release Q4 revenues came in at 11.4 million, which was 1 million above the high end of our guidance, but still down from the prior year. We also did better on a forecasted operating loss our cash balance at the end of Q4 was 12.1 million, reflecting the proceeds from the sale of our perfect audience business.

And our ongoing commitment to manage costs.

We will continue to monitor our cash use closely balancing investments and cost savings and we're committed to making sure that marinas adequately funded.

When she used to be an ally in digital for the world's leading brands in their agencies customers and prospects traverse a range of channels devices and publishers online on their path to purchase marketers need to cross channel platform to engage at all points of this customer journey and as we've highlighted the walled gardens of Google Facebook and Amazon do not play well.

Together, leaving brands to connect the dots on their own. We're in helps these advertisers to measure management optimize their online advertising investments to maximize their results to acquire customers and to drive revenue.

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

As we have highlighted in previous discussions can you imagine a publisher tool set and forming an advertiser that his or her marginal dollar should be invested on a competitor's platform.

Brent is uniquely positioned to meet this growing demand, but as we've shared before our vision remains ahead of many brands and agencies were not yet ready to make this change overtime. We believe Marines approach will become the new standard and were in will be rewarded Fritz leadership as the online advertising management category evolves to this new state.

As we invest in product innovation, we're creating more compelling reasons for brands in their agencies to select Moran.

We continue to invest in the development and adoption of Moran one our next generation Cross channel advertising platform.

Having made marine one available to all customers last year in Q4, we released improvements so that advertisers can spend more of each day on our new platform. These include better consistency for users navigating between marine search and were in one and the addition of cross client reports that save users time by allowing them to analyze performance across.

Multiple clients, reducing the need for external aggregation or analysis.

Improve both management tools further save time by enabling advertisers to make changes across publishers and channels with a single upload.

Reporting in Marine one it's now pork powerful.

Users can easily add it saved reports and aggregate performance by dimension or Medidata tags on the devices tap migrating. These widely used features are workflow efficiencies from or in search interim or in one will enable us to start driving the adoption of marine one as the primary tool for our advertisers.

We're in continues to invest in marine one bidding as a key area, where marine can add value to compliment publisher functionality.

In 2019, Google switch from providing average position to impression shared data for keywords. These new metrics also known as prominence metrics allow advertisers to focus on driving awareness with their search campaigns.

We released our awareness targeting bidding strategy in Q3 and follow this in Q4 with added support for Googles prominence metrics in marine one.

We give advertisers are broader view of their branding initiatives by automatically rolling up performance by key word keyword grid group grid and campaign grid.

This gives our customers a faster way to aggregate the data and gain a true understanding of where their ads appear on the search engine results page or served.

Continuing on the bidding theme the bid strategy side panel was enhanced in Q4, allowing users expanded options for setting up there been strategies offering a level of control and transparency not found a native publisher tools.

We continue to invest in our support for Amazon advertising and this past quarter, we've improved our campaign management for Amazon sponsored product gets this works in conjunction with our bidding algorithm report building and dimension support, giving more and more end to end functionality than the native Amazon advertising tool.

As I mentioned last quarter run continues to work with participants in the Amazon attribution beta which provides advertisers with insights into how their marketing investments outside of Amazon contribute to shopping activity on Amazon.

Brands advertising on Google Facebook in other channels can see how many conversions occurred on Amazon, giving them a more accurate understanding of the ROI on those investments.

Providing advertisers access to new AD types is an ongoing mission for us and one of the new types. We added this quarter was Microsoft local inventory adds placement, giving advertisers extended reach in the being echo system.

These location aware ads or an increasingly important part of an omni channel marketing strategy for retailers.

As we discussed last time, we believe brand should leverage both the publisher auction signals as well as their own first party data rooms open flexible architecture supplemented by our highly experienced field teams enables advertisers to unlock the stated to drive incremental performance.

[noise] publisher solutions generally are designed for the money and did 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.

Our work with very short second largest home alarm provider in the World is a great example of how we connect customer data with the brands advertising investments to deliver results.

The first shore and Marine partnership started when Perisher was looking for a flexible advertising platform that would increase their volumes decreased cost per lead and save time relative to using facebooks power editor alone.

As the majority of very sure sales happen offline the digital marketing team had little visibility into the true impact of Facebook campaign performance.

They chose Marin softwares the partner to measure very short offline event data so that the team could easily connect the company's CRM system in tumor in social and close the loop between digitally captured leads and non digital or offline conversions.

Our targeting higher in 10 users with Facebook lead ads and improving campaigns structure very short reduced its cost per lead or CPL by 33%.

Leveraging rins budgeting tools, they were able to achieve a further 7% decrease in CPL.

In order to measure some of these efficiencies the team performed a split test with the budget allocation tool, which showed the campaigns using this feature delivered a 16% lower cost per lead.

Our work with intertwined interactive. It's another example of how we help advertisers achieve success with the ecommerce advertising efforts.

The agency was working with a retail client to increased our investment in Amazon advertising with a multi tiered approach. This included sponsored brands to compete for valuable top of search results page placement for key brand terms as well as both automatic and manually targeted sponsored products.

These sponsored product campaigns, including a roster of product specific keywords, which for manual targeting required granular bid optimization per key word.

Intertwined connected there Amazon advertising campaigns to Moran in order to leverage its best in class reporting suite and patented bid algorithm to drive results for their clients.

The team set up automated bidding for their sponsored products campaigns to collectively bed programmatically to hit their advertising cost of sale or a cost and volume targets.

We're in bidding quickly provided the growth the team was looking for since activating overall, Amazon advertising investment grew 236% compared to previous levels without murren bidding.

The team also saw a 75% increase in average weekly conversion volume and has continued to scale and build on the early successes by expanding the program.

Corresponding attribution sales increased 191% alongside the weekly conversion volume growth.

As weren't continues to invest in the ecommerce category I also would add that we now have completed development of our initial support for Walmart advertising using their apiay functionality.

And we expect to become an approved partner in the coming months.

Marins ability to support Walmart ads will offer customers access to another leading publisher to drive more revenue, while saving time versus solid management of this channel.

In the coming quarters, we expect to showcase more examples of performance in cross channel success from customer adoption of Marine one.

Despite our current challenges I continue to believe that Moran has a tremendous opportunity and that our best days lie ahead.

And now Bob will review, our fourth quarter financial results and our outlook for the first quarter of 2020.

Thank you Chris I'll provide an overview of our results and then share our forecast for the upcoming quarter.

Even with a review of our income statement.

For the fourth quarter of 2019 brand generated $11.4 million some revenue, beating the high end of our guidance for the quarter by $1 million, but down 28% compared to Q4 of 2018, our revenue during Q4 benefited from better than forecasted spend levels from our continuing customers, particularly over the holidays.

As well as our strategic partnership with Google and lower churn as compared to the first half of the year. These positives were partially offset by slower new bookings in the quarter.

For the full year 2019 revenues totaled $49 million a year over year decrease of 16% as compared to 58.6 million in 2018.

Our geographic split for both fourth quarter and full year revenue was approximately 75% U.S. and 25% international.

Moving onto our operating results in the balance sheet as a reminder, our financial statements and a reconciliation of our GAAP to non-GAAP financial measures can be found in our earnings release issued today.

For the fourth quarter, our non-GAAP operating loss was 2.1 million as compared to a loss of 700000 for the fourth quarter of 2018.

The 2.1 million dollar operating loss was 1.3 million better than the high end of our guidance during the quarter, we continue to take meaningful steps to reduce our overall cost structure.

We ended the year with 229 total head count down 22% from 292, a year ago.

Our overall non-GAAP operating expenses were down 18% on a year over year basis, we will continue to align our cost with revenue in 2020, as we seek to operate at breakeven.

In terms of our balance sheet. We ended 2019 with a total cash balance of $12.1 million, representing a net increase in cash of 2 million over the Q3 ending cash balance.

The increase in cash includes approximately 4.3 million in net proceeds from the sale of our perfect audience business, which was partially offset by our operating loss and capital expenditures.

Moving on to our outlook.

For Q1, 2020, we expect revenues to be in the range of $8.3 million to $8.8 million and our non-GAAP operating loss is expected to be in the range of $4.2 million to $3.7 million.

This concludes our call for today. Thank you for your time and we look forward to updating you again during our Q1 2020 earnings call.

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