Q4 2023 Marin Software Inc Earnings Call

Greetings and welcome to the Marin software first 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.

Operator: Greetings and welcome to the Marin Software fourth quarter 2023 financial results conference call. At this time, all participants are in a listen only mode.

Operator: 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 Burt. Thank you; you may begin. Thank you.

As a reminder, this conference is being recorded its now my pleasure to introduce your host Bob Birch. Thank you you may begin.

Bob Burtz: Good afternoon, everyone, and welcome to Marin Software's fourth quarter 2023 earnings conference. My name is Bob Burtz, I'm Marin's CFO, and joining me today is Chris Lien, 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.marinsoftware.com.

Bob Burtz: 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 the 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 services, and historical results that may suggest trends for our business. Our expectations of our ability to improve customer retention and new business bookings and to grow or sustain our business; our expectations about our expenses and cash resources, the impact of investments in products and technology, and progress on product development efforts.

Alright expectations, and <unk> to improve customer retention, and new business bookings and to grow or sustain our business.

Our expectations about our expenses and cash resources.

The impact of investments and product and technology progress on product development efforts.

Bob Burtz: Product Capabilities, and Smith, our relationships with publishers and other parties in the digital advertising market, Expectations for Future Economic Activity in Digital Advertising Spend, expected restructuring costs and cost savings from a restructuring effort, and our expected Q1 2024 and future financial results. We make these statements as of February 22nd, 2024, 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-K and Form 10-Q as well as our other SEC filings. This presentation contains 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. The quantitative reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is available in our fourth quarter 2023 training session. With that, let me turn the call over to Chris. Thank you, Bob.

Product capabilities in Memphis, Ah relationships with publishers and other parties and the digital advertising market.

Expectations for future economic activity and digital advertising spending.

Expected restructuring costs and cost savings from our restructuring efforts and are expected Q1, 2024 and sure financial results.

We make these statements as of February 22nd 2024, and displaying 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 risk relating to our business in general we refer you to the section entitled Risk factors in our most recent reports on Form 10-K for.

10-Q, as well as our other S E C filings.

This presentation contains financial performance measures that are different.

Financial measures calculated in accordance with cap 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 fourth 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 a call today.

Christopher A. Lien: Good afternoon, everyone, and thank you for joining our call today. I'll share my observations on the quarter and full year and provide an update on our initiatives to grow our business. Bob will then provide additional detail on our fourth quarter and full year results for 2023 and our outlook for the first quarter of 2023. As I discuss on each call, we remain committed to returning Marinda growth and maximizing 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. Our efforts are focused on growing our business, and we continue to believe that our strategy is sound as we report ongoing moderation in our revenue decline on a year-over-year basis. And, as I did on our last call, I'm pleased to share that we continue to receive encouraging customer feedback on our new offerings from brands and agencies.

Sure My observations on the quarter and full year and provide an update on our initiatives to grow our business.

Bobble, then provide additional detail on a fourth quarter install your results for 2023 and the outlook for the first quarter of 2024.

I'd like to stop on each call, we remain committed to returning Miranda growth and maximizing shareholder value a plan to achieve this is focused on delivering a leading <unk> channel advertising management platform to enable brands and their agencies to maximize the returns from the online advertising investments.

Our efforts are focused on growing our business and we continue to believe that our strategy is sound as we report ongoing moderation in our revenue decline on a year over year basis.

And if I did on our last call I'm pleased to share that we continue to receive encouraging customer feet on our new offerings from brands and agencies.

As announced in today's earnings release Q for revenues came in at 4.4 million, which was in line with the high end of previously published guidance for Q4, but still down from Q4 in the prior year.

Christopher A. Lien: As announced in today's earnings release, Q4 revenues came in at $4.4 million, which was in line with the high end of our previously published guidance for Q4, but still down from Q4 in the prior year. On a sequential basis, Marin's revenues were down just slightly from Q3. Our Q4 non-gap operating loss was also above the high end of our guidance despite our lower revenue for the quarter and continued investment in MarinOne and our team. Our total cash balance at the end of Q4 was $11.4 million, providing Marin with resources to pursue our strategy and to support her. At year-end, our global headcount was approximately 108.

On a sequential basis <unk> revenues were down just slightly from two three.

R. Q for non-GAAP operating loss was also above the high end of our guidance. Despite our lower revenue for the quarter and continued investment in marine one in our team or.

Total cash balance at the end of Q4 was 11.4 million, providing marine with resources to pursue our strategy and to support our customers.

At your end our global headcount was approximately 108, how about half of our team is in technology rolls, reflecting are significant investment in delivering products to drive results for leading brands and their agencies as it's been in practice, we will continue to balance investments with cost management.

Christopher A. Lien: About half of our team is in technology roles, reflecting our significant investment in delivering products to drive results for leading brands in their agencies. As has been our practice, we will continue to balance investments with cost management. We've 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 the platform that unifies the fragmented world of performance marketing. In talking to our customers and prospects, we also discovered that digital marketing needs vary, and we need to better tailor our product offering and associated marketing messaging 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.

We've been investing significantly over the past quarters to give branch and agencies user friendly cross channel advertising management platform, enabling them to sell more with the platform that unifies the fragmented world of performance marketing.

And talking to our customers and prospects. We also have discovered the digital marketing needs vary and we need to better tailor, our product offering and associated marketing messaging to better meet the needs of bleeding digital marketers as part of these learning centre better meet the very needs a digital marketers you will now see on our website at dub dub dub Marine software dotcom.

Three offerings from <unk> connect S and and marine one.

Christopher A. Lien: Connect is a reporting-focused solution for advertisers looking to collect their performance marketing data from a variety of sources and send it to data warehouses, BI tools, and spreadsheets. Step one of understanding your digital advertising spending is to have reliable, comprehensive reporting in a format that addresses your particular business needs. Ascend, built on the data foundation provided by Kinect, helps advertisers maximize the return on their marketing investments, Ascend uses AI-based optimization methodologies to support budget compliance at scale for agencies. It also allows brands to estimate the impact of increased or decreased advertising spend and to understand optimal spend allocation across campaigns, publishers, and channels. Historically, these budgeting decisions have been made with spreadsheets and a highly manual and potentially error-prone approach.

Connected to reporting focus solution for advertisers looking to collect a performance marketing data from a variety of sources and send to data warehouses, B I tools and spreadsheets step one of understanding your digital advertising spending is that reliable comprehensive reporting in a format that addresses your particular business needs.

A sudden built on the data foundation provided by connect helping advertisers maximize the return on their marketing investments.

<unk> AI based optimization methodologies support budget compliance at scale for agencies. It also allows brands to estimate the impact of increased or decreased advertising spend and to understand optimal spend allocation across campaigns publishers and channels.

Historically these budgeting decisions have been done with spreadsheets and highly manual and potentially error prone approach marine provides marketers with a powerful you lie to automate these budgeting decisions, while providing flexible budget and controls.

Christopher A. Lien: Marin provides marketers with a powerful UI to automate these budgeting decisions while providing flexible budgeting control. These tools are compatible with various bidding approaches, including support for Google Smart. Ascend supports a range of publishers and channels, and just this quarter, we enhanced our support for LinkedIn, TikTok, Apple Search Ads, and Taboola to include Marin's proprietary forecasts and budget models and simulations. This functionality uses machine learning combined with customizable rules to help advertisers maximize the return on their marketing investment. Marin will continue to advance and expand our budget optimization functionality as we see this as an enduring area for an independent ad management platform to add value. It is impractical and not feasible for a publisher to provide forecasting and pacing for other publishers, creating what we believe is a compelling opportunity for Marin's optimization office.

These tools are compatible with various spitting approaches, including support for Google Smart <unk>.

Sn supports a range of publishers and channels and just this quarter, we enhanced our support for Linkedin tick Tock, Apple search ads and tabbouleh to include Marines proprietary forecast in budget models and simulations dysfunctionality.

Dysfunctionality uses machine learning combined with customizable rules to help advertisers maximize the return on their marketing investment.

<unk> will continue to advance and expand our budget optimization functionality as we see this as an enduring area for an independent AD management platform to add value.

It is impractical and not feasible for a publisher to provide forecasting and pacing for other publishers.

What we believe is a compelling opportunity for marines optimization offering.

Christopher A. Lien: I'm pleased to report that initial customer results with Marin Ascend are encouraging for both financial lift and time saving. Using our SEND functionality, Marin's platform saved time and increased revenue for an agency customer by 20% with intelligent budget pacing with dynamic allocation, and in Q4, Marin doubled lead volumes for alumni ventures and reduced cost per lead by 33% with our budgeting optimization functionality. We're 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 has already played a role in various customer renewals, as well as new business wins.

I'm pleased to report that initial customers volts with Marina send are encouraging for both financial lift and time savings.

Using our son functionality branch platform save time and increased revenue for an agency customer by 20% with intelligence budget patient with dynamic allocation.

Q for marine doubled meat volume for alumni ventures, and reduced cost per lead by 33 per cent with our budgeting optimization functionality.

We are looking forward to sharing more customer specific case studies and testimonials in the coming months as we continue to add a sense functionality Ah send already has played a role in various customer renewals as well as a new business wins.

We also seek to complement the publisher tools by enabling management upscale for large paid media programs driving time savings and financial left <unk>.

Christopher A. Lien: We also seek to complement the publisher tools by enabling management at scale for large paid media programs, driving time savings and financial lift. Customer examples in the past quarter include increased revenue for Yodel by 323% using Marin's Google-to-Microsoft sync, and Internet Brands increased revenue 30% by uniting customer lifecycle data with Marin's Revenue Hub. In the past quarter, Marin continued to expand our support for Amazon ads. Our team enhanced in-app e-commerce data to include Amazon shopping product level cost and revenue across both paid and organic sales for greater transparency and more comprehensive revenue reporting. We also enabled support for Amazon Store Spotlight and Sponsored Brand Video, critical ad types to drive brand awareness and deliver more comprehensive campaign management on Amazon's platform.

Customer examples in the past quarter include increased revenue for yodel by 323% using Marines, Google The Microsoft thing and Internet brands increased revenue 30 per cent by uniting customer lifecycle data with Marines revenue hub.

In the past quarter <unk> continued to expand our support for Amazon at our team enhanced Inapt E. Commerce data to include Amazon shopping product level cost and revenue across both paid an organic sales for greater transparency and more comprehensive revenue reporting.

We also enabled support for Amazon stores spotlight and sponsored brand video critical add pipes to <unk> to drive brand awareness to deliver more comprehensive campaign management on Amazon's platform.

With many companies facing uncertain business outlooks, and reducing the shopping levels Bryn stands ready to provide managed services capabilities flexibly to supplement our self service sass platform.

Christopher A. Lien: With many companies facing uncertain business outlooks and reducing their staffing levels, Marin stands ready to provide managed services capabilities flexibly to supplement our self-service fast platform. As new publishers become more important and full-time staffing levels come under increased pressure, Marin's ability to supplement in-house teams at brands and agencies with Marin's experienced digital marketers is resonating in the marketplace. Our activities to support brands and their agencies continue to take place against an active backdrop of governmental antitrust investigations at the federal, state, and EU levels into the businesses of leading publishers in the digital advertising market. There is also the potential for federal legislation to regulate certain conduct by leading publishers, which could benefit Marin's role as an independent ad management platform. Marin enjoys cooperative relationships with the leading publishers, and we do not expect significant changes in these relationships in the near term.

As new publishers become more important and fulltime staffing levels come under increased pressure <unk> ability supplement in house teams that branch and agencies with Marines experienced digital marketers is resonating in the marketplace.

Our activities to support brands and their agencies continue to take place against an active backdrop of governmental antitrust investigations at the federal and state levels and in the E U of the businesses of leading publishers and the digital advertising market.

There is also the potential of federal legislation to regulate certain conduct of losing publishers, which could benefit <unk> as an independent AD management platform.

Murnane, Joyce coopetition relationships with the leading publishers and we do not expect significant changes in these relationships in the near term.

Christopher A. Lien: Although we are not a party to any lawsuits or targeted by these investigations, Marin spent less than $100,000 in Q4 on legal fees in conjunction with responding to official requests that Marin has received related to these various investigations. We expect to spend at similar levels in the coming quarter based on the legal activity that we are seeing, which is primarily providing information in response to various subpoenas. As I've shared in prior calls, I believe Marin has a tremendous opportunity. However, our MarinOne development efforts have taken longer and required more investment than originally projected.

Although we are not a party to any lawsuits are targeting these investigations.

<unk> spent less than $100000 and two four and legal fees in conjunction with responding to official request that miranda's received related to these various investigations.

We expect to spend at similar levels in the coming quarter based on the legal activity that we are seeing which is primarily providing information in response to various subpoenas.

As I've shared in prior calls I believe marine has a tremendous opportunity a marine one development efforts have taken longer than required more investment sent originally projected renton benefit as consumer spend increasing time online and add dollars followed them, creating more need for brands to measure manage and optimize due to investments.

Christopher A. Lien: Marin can benefit as consumers spend more time online and add dollars to follow them, creating more need for brands to measure, manage, and optimize these investments to acquire customers and drive revenue outcomes in an increasingly fragmented online advertising landscape. We're seeing growing interest in brands taking a cross-channel approach to their digital advertising investments, including early interest in Marin's budget optimization functionality, which we call Marin SM. 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. Now, Bob will review our fourth quarter and full year financial results and our outlook for the first quarter of 2020. Thank you, Chris.

To acquire customers and drive revenue outcomes and an increasingly fragmented online advertising landscape.

We are seeing growing interest in branch, taking a cross channel approach to their digital advertising investments, including early interest and Marines budget optimization functionality, which we call <unk>.

<unk> with our marine one platform and our team of digital advertising experts as well positioned to support leading brands and their agencies and these efforts.

And now Bob will review, our fourth quarter and full year financial results on our outlook for the first quarter of 2024.

Thank you, Chris I'll provide an overview of our fourth quarter and full year results and then share a forecast for the first quarter of 2024 I'll.

Bob Burtz: I'll provide an overview of our fourth quarter and full year results and then share our forecast for the first quarter of 2024. I will begin with a review of our income. For the fourth quarter of 2023, Marin generated $4.4 million in revenue, which was at the high end of our guide. However, revenue was down approximately 16% when compared to total revenue for the fourth quarter of 2022. For the full year 2020, revenue totaled $17.7 million, which is a year-over-year decrease of 11% as compared to $20 million in 2022. Our geographic split for revenue was approximately 80% U.S. and 20% international for both Q4 and the full year of 2023.

I'll begin with a review of our income statement.

For the fourth quarter of 2023 marine generated $4.4 million of revenue, which was at the high end of our guidance.

Revenue was down approximately 16% when compared to total revenue for the fourth quarter of 2022.

For the full year, 2020th fee revenue totaled $17.7 billion, which is a year over year decrease of 11% as compared to $20 million and 2022.

Our geographic split for revenue was approximately 80% U S and 20 per cent international for both Q4 and the full year of 2023.

Moving onto our operating results as a reminder, our financial statements and a reconciliation of our gap two now I've got financial measures can be found at our earnings release issued earlier today.

Bob Burtz: Moving on to 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. As I've discussed on previous calls, we commenced the implementation of a restructuring plan in July of 2023. The restructuring plan is expected to reduce our pre-tax cost structure by approximately $10 to $13 million on an annualized basis. Close to $10 million of the estimated annualized cost savings is expected to come from the reduction in force, which reduced our workforce globally by 65 positions, as well as approximately 15 full-time equivalent contractor roles. The reduction in force was complete as of the end of the year.

F I've discussed on previous calls we convinced the implementation of a restructuring plan July of 2023 restart.

Restructuring plan is expected to reduce our pretax cost structure by approximately $10 million to $13 million the annualized basis.

Close to $10 million of the estimated Annualised cost savings is expected to come from the reduction in force, which reduced our workforce globally by 65 physicians as well as approximately 15 full time equivalent contractor rolls.

The reduction in force with complete as of the end of the year.

Bob Burtz: We incurred approximately $1.8 million in restructuring costs, substantially all of which relate to severance and other one-time termination benefits. We began to realize the associated savings during the third quarter of 2023, and we expect to fully realize the estimated savings in 2024. This restructuring helps to bring our expense base more in line with our current revenue. Our non-GAAP operating loss was $1.9 million for the fourth quarter of 2023 as compared to a $4.2 million loss for the fourth quarter of 2022. The $1.9 million non-gap operating loss in Q4 beat the high end of our guidance by approximately $100,000. The decrease in operating loss as compared to Q4 2022 is attributable to the implementation of our restructuring plan, which was partially offset by lower revenue.

We incurred approximately $1.8 million a restructuring costs, so essentially all of which relate to severance and other one time termination benefits.

We began to realize the associated savings during the third quarter of 2023, and we expect to fully realize the estimated savings in 2024.

This restructuring helps to bring our expense base more in line with our current revenues.

non-GAAP operating loss with $1.9 million for the fourth of 2023 as compared to a 4.2 million dollar loss for the fourth quarter of 2022.

The 1.9 million dollar non-GAAP operating loss in queue for a beat the high end of our guidance by approximately $100000.

The decrease in operating loss as compared to Q4 2022 is it a truthful to the implementation of a restructuring plan.

Which was partially offset by lower revenue.

Our full year 2023, non-GAAP operating lost $14.6 million as compared to a 17.7 million dollar loss in 2022.

Bob Burtz: Our full-year 2023 non-GAAP operating loss is $14.6 million, as compared to a $17.7 million loss in 2022. The decrease in loss year over year is attributable to expense savings in the second half of the year as a result of the restructuring, which was also partially offset by lower revenue. Our Q4 NetGap operating expenses were $4.6 million, which represents a 33% decrease when compared to the fourth quarter of 2022. The decrease is attributable to the restructuring plan we commenced in the third quarter of 2023. For the full year, our non-GAAP operating expenses were $23.4 million, which represents a decrease of approximately 14% as compared to 2022, again, primarily due to the implementation of our restructuring plan in the third quarter.

The decrease in last year over year is attributable to expense savings in the second half of the year as a result of the restructuring which was also partially offset by lower revenue.

R. Q for operating expenses were $4.6 million, which represents a 33 per cent decrease when compared to the fourth quarter of 2022.

The decrease is attributable to the restructuring plan, we convinced in the third quarter of 2023.

For the full year or non-GAAP operating expenses were $23.4 million, which represents a decrease of approximately 14% as compared to 2022.

Again, primarily due to the implementation of a restructuring plan in the third quarter.

We ended the year with 108 total headcount versus 177, a year ago.

Bob Burtz: We ended the year with 108 total headcount versus 177 a year ago. In terms of our balance sheet, we ended the quarter with a total cash balance of $11.4 million, as compared to a $13.6 million balance at the end of the previous year. We will continue to carefully monitor our cash level. Moving on to our outlook for the first quarter of 2024. For Q1 2024, we expect revenue to be in the range of $4 to $4.3 million, and our non-GAAP operating loss is expected to be in the range of $2.2 to $1.9 million. Our revenue guidance reflects our estimate of the continued impact of the uncertain economic environment on advertising spend by both existing and prospective customers.

In terms of our balance sheet, we ended the quarter with a total cash balance of $11.4 million.

As compared to a 13.6 million dollar balance at the end of the previous quarter.

We will continue to carefully monitor our cash levels.

Moving to Antara outlook for the first quarter of 2024.

Four Q1, 2024, we expect revenue to be in the range of $4 million to $4.3 million.

<unk> are pretty loss is expected to be in the range of $2.2 million to $1.9 million.

Ah revenue guidance reflects our estimated to continue to impact of the uncertain economic environment on advertising spend by both existing and prospective customers.

This concludes our call for today. Thank you for your time and we look forward to updating you again during or Q1 2024 earnings call.

Bob Burtz: This concludes our call for today. Thank you for your time, and we look forward to updating you again during our Q1 2024. Thank you. You may now disconnect your lines. Thank you for your participation, www.marinsoftware.com www.BradKinnish.com www.marinsoftware.com

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

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