Q2 2021 Marin Software Inc Earnings Call

Conference is being recorded it is now my pleasure to introduce your host Bob Bert. Thank you Bob you may begin.

Thank you good afternoon, everyone and welcome to Marin software second quarter 2021 earnings Conference call.

My name is Bob Bertz, I'm, <unk> CFO and joining me today is Chris lien.

Lien or and 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 Dot Marin software Dot com.

Call 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 $19.33, and the Securities Exchange Act of 1934.

These forward looking statements include statements about our business outlook and strategy.

<unk> and the potential lingering effects of the COVID-19 global pandemic.

Our expectation for migrating our customers to our Marin 1 platform historical.

Historical results that may suggest trends for our business our expectations about.

Our ability to improve customer retention and new business bookings and to return to growth.

Our ability to manage our expenses and cash resources.

The impact of investments and product and technology and any head count increases.

Progress on product development efforts product capabilities our relationships.

<unk> with publishers and other parties and the digital advertising market expectations for future economic activity and digital AD spending and our expected Q3 and future financial results.

And we make these statements as of July 32021, and disclaim any duty to update them.

For more information.

And regarding these and other risks and uncertainties that could cause actual results to differ materially from those expressed or implied and these forward looking statements as well as risks relating to our business in general we refer you to the section entitled Risk factors and our most recent reports on form 10-Q and form.

10-K, as well as our other SEC filings and.

Any comments on our recent trading activity and our stock are not predictive of any potential future trading activity.

This presentation contains certain financial performance measures that are different from the financial measures calculated in accordance with GAAP and may.

And also be different from similar calculations or measures used by other companies.

Quantitative reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is available and our second quarter 2021 earnings release.

With that let me turn the call over to Chris.

Thank.

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 return Marin to growth.

Bob will then provide additional detail on our second quarter and recent events and our outlook for the third quarter.

As always we remain committed to.

And return Marin to growth and to maximize shareholder value.

Our plan to achieve this we're focused on 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 Marin 1.

As Ive discussed on past calls.

Our efforts to return Marin to growth have taken longer than any of us would have preferred and our revenues remain 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.

In addition, there are some encouraging signs present, even if not yet sufficient to return Marin.

And to growth.

With the positive feedback that we're receiving on marine 1 we believe that we are on the right track after many quarters of investment to develop and launch our new platform.

As announced in today's earnings release Q2 revenues came in at $6.1 million, which was above the high end of our previously published guidance for.

Q2, but still down from Q2 and the prior year.

I should note that the decline in revenue with moderated quite a bit from prior levels of year over year decline, which we believe is an early sign of business improvement.

And our Q$2.2.8 million non-GAAP operating loss also was better than the high end of our guidance.

Recent weeks have been some of the most unusual and Marin history as a public company. Beginning June 23, 2021 for reasons that we still can't fully explain Marin stock began to increase and price and trading volume.

On that day, Miranda and announced support for advertising and instant cart the popular delivery service, but the trading activity on that day.

It was probably attributable to more than just that announcement.

We also note that there are various pending antitrust and competition lawsuits and the U S U K and the EU that involved the major publishers that Marin interconnects with including Google Facebook Amazon and Apple.

Depending on how each of these matters and is resolved oriented.

Oriented benefit if there are restrictions put on how publishers are able to support their advertising placements and publisher tools.

Google also recently announced the delay per year of its blocking of third party advertising tracking and chrome the world's most popular browser, which may have led to increased investor interest and advertising technology related company.

Company, even though Marin is not dependent on third party cookie based tracking and as I highlighted just earlier, we are receiving encouraging feedback on our marine 1 platform from prospects and customers and you.

And 1 of these items are a combination of them and other reasons, maybe behind the trading activity and Marin stock <unk>.

Activity also.

So maybe and outgrowth, but what has happened and the path with companies such as Gamestop, and AMC due to investor activity and read it forums and other investor website.

We do not know with certainty what has been driving activity and our stock in recent weeks, but we do welcome the increased interest and marine strategy and our product.

As a result of.

This increased stock trading activity Marin was able to raise additional equity capital I'm pleased to share that we now have more than $50 million and cash as we supplemented our ending second quarter cash balance of $14.4 million with net proceeds of $38.8 million from aftermarket operating activities and the past few weeks.

Bob will provide additional detail in his section after my comments.

With more than $50 million of cash rent now has more financial resources than at any time in the past several years to pursue our strategy and to support our customers.

At the end of the second quarter, our global head Count was just over 150 team members.

Reflecting the team reduction that we implemented last summer about half of our team and technology roles, reflecting our significant investment and delivering products to drive results for leading brands and their agencies and theirs.

And our practice, we will continue to monitor uses of cash closely balancing investments with cost management, but we do expect head count to grow.

As we increased investments and area supporting our return to growth, including sales and marketing and technology.

As we've discussed before we're and seeks to be an ally and 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 at 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 the rise of retail media, including newer entrants such as instant cart <unk> retail media and citrus ads.

Adds further fragment the advertising landscape, increasing the value of a third party platform.

Marin helps these advertisers to measure manage and optimize their online advertising investments driving performance time savings and better business insights.

And also from the publishers understandably focus on how to enable a given advertiser to.

To spend more money on ads from that particular publisher for and seek a view of their online advertising investments focus on customers and revenues not the individual publisher silos Marin serves as a performance layer to supplement the publisher capabilities and to provide an objective independent measurement of advertising performance.

Our focus is.

To add value for brands to maximize the returns from their online advertising investments across search social and E. Commerce channels Keto are doing this is Marin 1 our next generation Cross channel platform.

We continue to upgrade more of our customers and revenue to our new platform as of today I'm pleased to share.

And then 100% of our revenue is running on Marin 1 up from 70% last quarter.

We continue to gather feedback on marine 1 as part of its rollout and adoption across Marin customer base and a further 2 and the user experience feedback continues to be encouraging, but we also faced and expected challenge of change management.

And as long time users need to adopt the new platform with its enhanced functionality.

Even when something is better there is a nursery around change and our account management teams are engaging with those customers to help them to make the transition to Marin 1 and to unlock its benefits for their advertising programs.

Continuing and early trend that we.

Fall and the prior quarter, we're seeing an upturn and both retention and new business activity due to Marin won.

This is taking place across a range of industry verticals for B to C and b to b advertisers and agencies.

The balance of this year, we will be investing more and marines marketing activities to bring more and want to more brands and agencies.

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We're in 1 serves as the foundation on which all Marin innovation is based as we continue to add to its functionality and to bring marketers more tools to enjoy financial performance gains and management at scale.

CT and Marine 1 is Marin, 1 analytics, which gives our customers powerful and flexible analysis capabilities using.

And the intraday data fractional conversions and device level segmentation.

We also provide cross client and cross publisher reporting to enable brands to take a business centric or customer centric approach to their advertising versus the public share centric approach of the publisher tools.

This functionality also enables.

<unk> <unk> and 1 customers to easily compare performance across publishers as they evaluate current and future advertising investments.

I mentioned on our last call that as part of Marine and <unk> rollout. We also launched Marin 1 bidding rins newest machine learning powered optimization algorithms designed to deliver better performance or improved.

Accuracy and.

Advanced clustering algorithms simplify bidding setup and faster bid calculations are benchmarking has shown an average of 10% to 20% improved performance versus Marines prior bidding, which already was industry leading this.

And this technology also enables faster bid processing for intra day bids and larger account.

And recent head to head bid trials versus Google's <unk> hundred 60 bidding marinas delivered better results reinforcing <unk> positioning for performance driven advertisers.

This quarter, we integrated organic search data from Google search console to enable advertisers to adjust their paid search bidding based on organic results.

Leading to better program efficiency.

Marin 1 bidding also supports Google smart bidding to provide more choices for our customers and for those advertisers wanting to leverage google's AI and ml optimization capabilities marine.

Marine customers are able to set targets CPA and target return on advertising spend.

And the Marin 1 UI as well as the upload third party revenue to Google.

Marines overlay functionality supporting Google Smart fitting this past quarter, we added support for Google's dynamic search AD targets enables advertisers and their agencies to leverage these capabilities at scale versus the native offerings from Google.

Google as part of our focus on cross channel capabilities to mirror the online customer journey, we added support for instant card ads to help brands connect with customers at the point of purchase and 1 of the largest delivery services offerings and the U S.

We also were made and official Apple search ads partner with a specialization and campaign management.

This is important for those brands, who also have and app offering.

We continue to invest and linked and marketing solutions and <unk> display advertising, including bidding both management and reporting and we also are expanding our support for <unk> retail media, a leading network of retail partners.

All of these publishers.

Provide advertisers and agencies with more opportunities to find prospects and customers across the internet.

As part of our investment in Marin won but continue to add to our social capabilities to complement the robust functionality that Facebook provides and it's tools 1 area of focus is providing advertisers with enhanced budgeting.

And <unk> functionality to complement the bidding capabilities and Facebook ads business manager and this quarter. We added performance based budget rules to drive adjustments using daily and lifetime spend ratios. We also introduce volte support for Facebook AD sense to enable better management at scale.

And our recently.

<unk> debuted E Commerce module Marin has dedicated space for brands to manage e-commerce and marketplace advertising programs for and enhanced our support for Amazon sponsored brand video ads, including attributes such as image price title and the rating.

We also added additional Amazon advertising insights leveraging <unk> investment and AI.

AI and machine learning and we also debuted keyword expansion and negative keywords to enhanced program performance.

As I mentioned on our last call Apple deployed its iOS 14, 5 update which asked consumers to opt into tracking versus opt out a change that is significantly curtailed app based tracking.

We're and continues to lead and our efforts to support advertisers and a world where privacy and cookie based tracking are in flux and particular Marines own Marin tracker enables server to server tracking with it which is both privacy compliant and also was able to accurately measure conversions on the Apple Safari browser, which is a growing challenge for.

Leading brands using cookie based tracking approaches.

I also note that Google announced a 1 year delay on its blocking and chrome or third party cookie based tracking Marin.

And when you use this first party tracking and is not impacted by this change, but these changes do bring additional burdens to digital advertisers and their agencies.

Despite our challenges I continue to believe that Marin has a tremendous opportunity ahead and our view Covid has served as an accelerator of existing digital advertising trends over the past few months, we have seen ongoing recovery and AD spend across most industry verticals as more of the population is vaccinated, we expect absent and all verticals to.

To continue to recover, especially and tourism and travel and other and person activities.

We believe the balance of 2021, and we'll see an uptick and overall economic activity with digital advertising investment, earning its fair share as businesses seek to engage with customers and prospects across search social and e-commerce channels.

I do note that the Delta variant along with slowing vaccine uptake put pressure on this recovery, but we still expect an increase in quarterly economic activity and digital advertising investment.

Marin with its marine 1 platform deployed should benefit from these expected trends. We also were and are encouraged with our greater cash.

Sources that Marin can and basket better support our customers and now Bob will review, our second quarter financial results and our outlook for the third quarter of 2021.

Thank you Chris I'll provide an overview of our second quarter results and then share our forecast for the third quarter of 2021.

I'll begin.

Cash review of our income statement.

For the second quarter of 2021, Marin generated $6.1 million and revenue, beating the high end of our guidance for the quarter by approximately zero point $1 million, primarily due to higher search revenue as a result of improved retention.

Second quarter revenue was down 16.

And with every percent when compared to total revenue for the second quarter of 2020.

While we continue to see a lingering impact of COVID-19 on our revenue customer spend has largely returned to pre COVID-19 levels in most segments.

Our geographic split for revenue and the second quarter was approximately 77.

<unk> U S and 23% international.

Moving onto our operating results.

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 earlier today.

Our non-GAAP operating loss was $2.8.

Percentage for the second quarter of 2021, as compared to a $3.6 million loss for the second quarter of 2020.

The $2.8 million non-GAAP operating loss in Q2 beat the high end of our guidance by approximately zero point $1 million.

Our non-GAAP operating loss excludes 500.

Million and savings.

From an employee retention credit under the cares Act that we recorded and the current quarter.

We expect to record a credit or a similar amount and the third quarter as well.

Our non-GAAP operating expenses were down, 14% and Q2 on a year over year basis.

We ended the quarter with.

153, total head count versus 211, a year ago, we will continue to carefully monitor our operating expense base.

In terms of our balance sheet.

We ended the quarter with a total cash balance of $14.4 million.

Representing a net decrease in cash of $800000 from.

And 1 balance.

And July of 'twenty, and 'twenty, 1 we registered a new $40 million at the market securities offering facility.

Using this facility we have sold $4.3 million shares of our common stock and July <unk>.

Resulting in an approximately $15.5 million shares currently outstanding and we generated pro.

Our Q to $38.8 million net of offering costs.

We now have a cash balance in excess of $50 million, which strengthens our balance sheet and enables us to make targeted investments and our product and sales and marketing teams and to execute on our return to growth strategy.

Moving onto our outlook.

<unk> third quarter.

For Q3, 2021, we expect revenues to be and the range of 5.5% to $6 million and our non-GAAP operating loss is expected to be and the range of $3.3 to $2.8 million.

And our guidance excludes the estimated $500000 and savings from the employee retention credit expected for the third quarter.

Look for this concludes our call for today. Thank you for your time and we look forward to updating you again during our Q3.2021 earnings call.

This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.