Q2 2023 Marin Software Incorporated Earnings Call
Greetings and welcome to the Marin software second quarter 2023 financial results Conference call. At this time all participants are in a listen only mode. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded it is now my pleasure to introduce your host Bob Bertz.
Thank you Mr. Burton you may begin.
Thank you good afternoon, everyone and welcome to Marin software second quarter 2023 earnings Conference call.
My name is Bob Birch, and Marine CFO and joining me today is Chris lien <unk> 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 stop 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 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 marine one 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.
The impact of investments in product and technology.
Progress on product development efforts.
Capabilities, our relationships with publishers and other parties in the digital advertising market.
Expectations for future economic activity and digital advertising spending.
Expected restructuring costs and cost savings from our restructuring efforts and our expected Q3 and future financial results.
We make these statements as of August three 2023, 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 the section entitled Risk factors in our most recent reports on Form 10-Q, and Form 10-K, 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.
Quantitative reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is available in our second quarter 2023 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 share my observations on the quarter and provide an update on our Michigan to return Marin to growth.
Bob will then provide additional detail on our second quarter results for 2023, and our outlook for the third quarter of 2023.
We are committed to return Marin to growth and to maximize shareholder value. 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 returns from their online advertising investments we call this platform or in one.
As announced in today's earnings release Q2 revenues came in at $4 4 million, which was above the high end of our previously published guidance for Q2, but still down from Q2 in the prior year.
Should highlight that Marin revenues declined about 8% year over year, showing moderation in our revenue decline.
Our Q2 non-GAAP operating loss also was better than our guidance, even with our ongoing investment in Marin won in our team.
Our total cash balance at the end of Q2 with $19 million.
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 to versus a range of channels devices and publishers markers you need to engage at all points of this customer journey and the walled gardens of Google Facebook Amazon and the other publishers do not play well together.
Grandsons to connect the dots 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. He's 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 promote a unified view of a customer's journey across channels devices and publishers.
We supplement our marine one 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.
Our goal with marine one is to provide user friendly reporting and analytics capabilities to brands and agencies to enable a business our customer view of their advertising investments rather than a publisher centric one of the publishers and their tools as part of these efforts and as I have mentioned on our last call we launched Marin connect reporting.
Focused solution for advertisers looking to collect the performance marketing data from a variety of sources and sensor data warehouses be I tools and spreadsheets.
Where it has the ability to provide marketers with revenue cost and add performance data from the publishers that we support as well as supporting analytics to action whereby a marketer can review a report and then take action by clicking on the report versus having to log into a separate system to make any changes.
We also seek to complement the publisher tools by enabling management at scale for large paid media programs driving time savings and financial left.
For Google This past quarter, where an expanded our support for Google's performance Max functionality to include sinking in reporting for listing groups for more detailed reporting and optimization.
In the social category during the quarter Marine avid support for Facebooks dynamic Creatives, a Facebook AD format that allows users to combine multiple media and multiple add components, then dynamically mix and match them for the best performing ads.
We continue to invest to expand our support for Amazon ads based on Rins breadth and depth of support for Amazon at Marin holds Amazon adds advanced partner status and we've recently added Amazon organic revenue for shopping products a metric column that gives customers information about non paint sales, resulting from customers discovering them.
Purchasing products without direct advertising it.
It includes sales from organic search results browsing recommendations and customer reviews and enables users to calculate the total advertising cost of sales.
A meaningful focus of our product development efforts at this time, it's rents investment and optimization capabilities for digital advertisers and agencies known as saddened Marine offers the ability to set and then pace of budget across the group of publishers and associated campaigns, while managing to our business performance target such as return.
On ad spend or ROE as or cost per lead.
These budget management capabilities sit on top of the in channel bidding capabilities of each of the publishers and also offer the ability to forecast results from potential AD investments using why do your functionality.
Marine continues to appeal to be to be marketers with our cross publisher support including Linkedin.
I've highlighted on past calls Marino was recognized as a strong performer in the Forrester wave B to B advertising solutions Q3, 2020 to report cited as best in class for BTB search and social advertising based on a thorough evaluation by Forrester of our marine one platform.
Forrester is a highly respected third party technology advisory firm and in this role is able to access and review the leading providers in a given market space.
Forrester is validation of our cross channel strategy for BTB marketers is a sign of the importance of coordinating our brand's messaging across channels to reach prospects, we expect more PDP marketers to consider marine one for their marketing needs. As a result of this recognition renders the Linkedin tier one partner their highest designation and is now the owner.
The campaign optimization tool in this top tier reflecting rent commitment to this important growing b to b publisher.
As we have discussed on past calls our activities to support brands and their agencies take place against an active backdrop of governmental antitrust investigation of the businesses of leading publishers in the digital advertising market at the federal and state levels as well as in the EU.
They're also has the potential of federal legislation to regulate the conduct of the leading publishers that could benefit Marines role as an independent AD management platform.
Marine enjoys co-opetition 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 RIN can benefit as consumers spend increasing time online and add dollars follow them, creating more need for brands to measure manage and optimize these investments to acquire customers and drive revenue outcomes.
With the combined online advertising share of Google and met up below 50% and the growing fragmentation of digital advertising, we are seeing increasing interest in brands, taking a cross channel approach to their digital advertising investments leveraging Marines Cross channel reporting management at scale and budget optimization.
We're in with our Marine one platform and our team of digital advertising experts is well positioned to support leading brands and their agencies in these efforts.
Before I turn the call over to Bob I want to comment on the restructuring and reduction enforce plan that we commenced implementing at the end of July that reduced our team by approximately 78 team members across the company 64, full time employees and 14 contractors, which will reduce our full time workforce by approximately 40.
That resulting in a team of approximately 117 employees and contractors.
We undertook these changes to bring our operating costs more in line with our revenues, while preserving our ability to support our customers and to deliver on our vision for more than one.
We believe these changes are the right ones for us to make given Marines current circumstances, we believe in our cross channel strategy for brands and agencies mirroring the customers path to purchase but the results from these efforts are taking longer to achieve.
We made the difficult decision to reduce our team size and expenses to extend Marines financial resources, while we work to improve marines revenue through better retention and new customer bookings.
As we've highlighted we estimate that these changes will yield pretax annualized cost savings of approximately $10 million to $13 million, which we will begin to realize in the third quarter.
These are difficult steps to take and we parted ways with many talented team members, but we believe these actions will improve her an opportunity to deliver better results in the coming quarters.
And now Bob will review, our second quarter financial results and our outlook for the third quarter of 2023.
Thank you Chris I'll provide an overview of our second quarter results and then share our forecast for the third quarter of 2023, I'll begin with a review of our income statement.
For the second quarter of 2023, Marin generated $4.4 million in revenue, which beat the high end of our guidance by approximately zero point $1 million.
Second quarter revenue was down approximately 8% when compared to total revenue for the second quarter of 2022.
The decrease in revenue year over year is primarily attributable to the fact that existing customer churn has outpaced new bookings.
Our geographic split for revenue was approximately 80% U S and 20% international for the second quarter of 2023.
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 $4 $8 million for the second quarter of 2023 as compared to a $4 $6 million loss for the second quarter of 2022.
The $4 $8 million non-GAAP operating loss in Q2 beat the high end of our guidance by approximately zero point $5 million.
The increase in operating loss as compared to Q2 of 2022 is primarily attributable to lower revenue in the current period as compared to last year.
Our non-GAAP operating expenses in Q2, 2023 were essentially flat when compared to the year ago quarter as slight increases in sales and marketing expenses were offset by lower general and administrative expenses.
We ended the quarter with 172 total head count globally.
165, a year ago.
About half of our team and technology roles, reflecting the significant investment we have made in delivering products to drive results for leading brands and their agencies.
As Chris mentioned earlier, we commenced the implementation of our restructuring plan in July of 2023. It is expected to reduce our pre tax cost structure by approximately $10 million to $13 million on an annualized basis.
Approximately $9 million to $10 million for the estimated annualized cost savings is expected to come from a reduction in force, which will reduce our workforce globally by approximately 64 positions as well as approximately 14 fulltime equivalent contractor roles.
We expect to incur $1 million to $1.5 million in restructuring cost substantially all of which relate to severance and other onetime termination benefits.
We anticipate that the reduction in force will be substantially completed and that we will begin to realize the associated cost savings during the third quarter of 2023.
This restructuring is intended 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 $19 million as compared to $23 $7 million at the end of the previous quarter.
Moving onto our outlook.
For Q3, 2023, we expect revenue to be in the range of $4 million to $4.4 million and our non-GAAP operating loss is expected to be in the range of $3.3 million to $3 million.
This concludes our call for today. Thank you for your time and we look forward to updating you again during our Q3 2023 earnings call.
This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.
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