Marin Software Incorporated’s (MRIN) CEO Chris Lien on Q2 2022 Results – Earnings Call Transcript

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Marin Software Incorporated (NASDAQ:MRIN) Q2 2022 Earnings Conference Call August 4, 2022 5:00 PM ET

Company Participants

Chris Lien – Chief Executive Officer

Bob Bertz – Chief Financial Officer

Conference Call Participants

Operator

Good afternoon, girls and gents, and welcome to the Marin Software Second Quarter 2022 Financial Results Conference Call. During the presentation, all contributors can be in a listen-only mode. [Operator Instructions] As a reminder, this convention is being recorded.

I’d now like to show the decision over to Bob Bertz, CFO. Please go forward.

Bob Bertz

Thank you. Good afternoon, everybody, and welcome to Marin Software’s second quarter 2022 earnings convention name. My identify is Bob Bertz. I’m Marin’s CFO. And becoming a member of me at the moment is Chris Lien, Marin’s CEO. By now, it is best to have obtained a replica of our earnings launch, which crossed the wire a short while in the past. The launch can be obtained on our web site at buyers.marinsoftware.com. All contributors are suggested that the audio of this convention name is being recorded for playback functions, and that the recording can be made out there on the Investor Relations part of our web site inside just a few hours.

Before we start, I’d like to notice that our dialogue at the moment will embrace forward-looking statements inside the that means of the Securities Act of 1933 and the Securities Exchange Act of 1934. These forward-looking statements embrace statements about our Business outlook and technique, our expectations for buyer adoption and use to our MarinOne platform, historic outcomes which will counsel traits for our Business, our expectations about our potential to enhance buyer retention and new Business bookings and to return to development, our potential to handle our bills and money assets, the impression of investments in product and expertise, progress on product improvement efforts, product capabilities, {our relationships} with publishers and different events within the Digital promoting market, expectations for future financial exercise and Digital promoting spending, and our anticipated Q3 and future monetary outcomes.

We make these statements as of August 4, 2022, and disclaim any obligation to replace them. For extra data concerning these and different dangers and uncertainties that might trigger precise outcomes to vary materially from these expressed or implied in these forward-looking statements, in addition to dangers regarding our Business basically, we refer you to the part entitled Risk Factors in our most up-to-date experiences on Form 10-Q and Form 10-Ok, in addition to our different SEC filings.

This presentation accommodates sure monetary efficiency measures which might be completely different from the monetary measures calculated in accordance with GAAP and may be completely different from related calculations or measures utilized by different corporations. A quantitative reconciliation of those non-GAAP monetary measures to probably the most instantly comparable GAAP monetary measures is offered in our second quarter 2022 earnings launch.

With that, let me flip the decision over to Chris.

Chris Lien

Thank you, Bob. Good afternoon, everybody, and thanks for becoming a member of our name at the moment. I’ll share my observations on the quarter and supply an replace on our initiatives to return Marin to development. Bob will then present extra element on our second quarter outcomes for 2022 and our outlook for the third quarter of 2022. As I spotlight every name, we stay dedicated to return Marin to development and to maximise shareholder worth.

Our plan to realize that is targeted on delivering a number one cross-channel promoting administration platform to allow manufacturers and their businesses to maximise the returns from their Online promoting investments. We name this platform MarinOne. Our efforts are targeted on Marin’s return to development, and we proceed to imagine that our technique is sound as we report a moderation in our income decline on a year-over-year foundation.

This previous quarter, we noticed an enchancment in buyer retention and good new Business exercise. And I’m happy to share that given the encouraging buyer suggestions that now we have obtained, we’re growing our funding in Marketing actions throughout the remainder of this 12 months to carry MarinOne to the eye of extra manufacturers and their businesses.

As introduced in at the moment’s earnings launch, Q2 revenues got here in at $4.7 million which was in the course of our beforehand printed steerage for Q2, however nonetheless down from Q2 within the prior 12 months. A key consider our income outcomes for the second quarter was a decline that now we have noticed in current buyer Digital promoting spending, which we imagine is because of present financial headwinds.

In earlier financial downturns, we noticed transitory pullbacks in Digital promoting spending because the spending might be [indiscernible] diminished comparatively rapidly when in comparison with different investments or bills which have contractual commitments or longer lead occasions for adjustment.

In 2008, for instance, we noticed a multi-month pullback in Digital promoting spending as companies evaluated the financial downturn, after which we noticed a resumption in advert spend given the extremely trackable and measurable outcomes of those channels. We don’t have a crystal ball at Marin, so we don’t know for the way lengthy the spending pullback from current clients will final. But our view is that on a relative foundation, manufacturers will return to Digital promoting and the channels that may be managed by way of our MarinOne platform, given the performance-oriented nature of the spending to drive income and buyer acquisition.

Our steerage for Q3 accounts for this advert spend pullback that we’re observing throughout our clients. Our Q2 working loss was on the low finish of our steerage because of our decrease income for the quarter at the same time as we proceed to spend money on MarinOne and our crew. Our whole money steadiness on the finish of Q2 was $37.5 million, offering Marin with important assets to pursue our technique and to Support our clients.

At the top of the second quarter, our world headcount was roughly 165. About half of our crew is in expertise roles, reflecting our important funding in delivering merchandise to drive outcomes for main manufacturers and their businesses. As has been our follow, we’ll proceed to watch our money use intently, balancing investments with price administration.

As I’ve mentioned on previous calls, Marin seeks to be an ally in Digital for the world’s main manufacturers and their businesses. Customers and prospects traverse a spread of channels, gadgets and publishers Online on their path of buy. Marketers want a cross-channel platform to have interaction in any respect factors of this buyer journey. And as now we have highlighted, the walled gardens of Google, Facebook, Amazon and the opposite publishers don’t play properly collectively, leaving manufacturers to attach the dots.

Marin helps these advertisers to measure, handle and optimize their Online promoting investments, driving efficiency, time financial savings and higher Business insights.

Our MarinOne platform is a efficiency layer to allow manufacturers to drive larger returns from their Online promoting investments throughout search, social and e-commerce channels, together with the quickly rising retail Media channel. By efficiency layer, I’m referring to MarinOne as a complement to the sturdy instruments that every of the publishers supplies to its clients. These writer instruments understandably are targeted on the advert models of every writer and encourage manufacturers to spend extra with that writer. The writer instruments typically don’t examine promoting efficiency throughout publishers, don’t spotlight alternatives to reallocate spend throughout publishers to enhance efficiency and don’t promote a unified view of a buyer’s journey throughout channels, gadgets and publishers.

We complement our MarinOne platform with Support from our skilled crew of Digital Marketing consultants who may also help manufacturers to navigate the advanced however rewarding world of Digital promoting. We proceed to broaden and improve MarinOne’s performance to optimistic buyer suggestions. In Q2, we accomplished the rollout of MarinOne Bidding, unlocking higher efficiency and improved accuracy with dynamic clustering and improved intraday optimizations for all clients.

We additionally launched MarinOne Support for advert scheduling or dayparting by a multi-edit, permitting advertisers to enhance the efficiency of their advertisements by adjusting when they’re and are usually not proven. We additionally considerably improved our dimensions aggregation instruments. These are person configurable metadata tags by introducing campaign-level roll-up views, view dimension over time and the power to section dimension information by system, match sort and writer. These adjustments additional cut back the necessity for off-line information evaluation and allow manufacturers to view their promoting packages in a versatile manner that matches their Business wants and never the predefined views of the publishers.

In addition, we launched two new insights, together with RSA protection, which determine teams with none responsive search advertisements or RSAs and first-page minimal bid, which identifies objects performing under the bid technique effectivity objective and whose bids are artificially raised to writer first-page minimal bids. We additionally streamlined the onboarding of latest customers, permitting advertisers to get new hires up and working on MarinYet one more rapidly and effectively, and we launched chat performance instantly in MarinOne. So it’s attainable for purchasers to achieve our buyer Support crew and ask for assist with out ever having to navigate away from their very own account.

All of those enhancements enhance the power of MarinOne to drive higher promoting program efficiency and effectivity in addition to bettering usability when in comparison with the publishers’ instruments and different aggressive choices.

For social publishers, we launched the Social Rules Engine to assist automate key workflows. With the Rules Engines, customers can set triggers primarily based on any facet of marketing campaign efficiency that may alter bid, standing, messaging and extra, and we made it simpler to amplify natural posts by including the power to duplicate message booster guidelines.

As a cross-channel platform, we proceed to speculate to broaden our Support for Amazon advertisements. We have an Amazon webinar deliberate for later this quarter to spotlight the potential of Amazon advertisements for manufacturers and their businesses and Marin’s sturdy functionality supporting this quick rising e-commerce writer. Marin additionally was not too long ago given verified accomplice standing, acknowledging Marin’s breadth and depth of Support for Amazon advertisements. As an official Apple search advertisements accomplice, we proceed to speculate to Support our clients who use apps to have interaction with their clients.

We held an Apple webinar in Q2, which gave us a possibility to spotlight the good thing about Apple search advertisements as a part of the entrepreneurs cross-channel marketing campaign for app downloads and buyer acquisition. Apple not too long ago introduced extra advert placements within the App Store that Marin will Support as soon as these placements go stay in Apple’s advertisements API, which is anticipated earlier than the vacation season later this 12 months.

Apple’s App Store presently gives two slots to advertisers, one on the shop search tab and one within the search outcomes. Now two new App Store advertisements will carry extra slots, one to the app shops at the moment homepage and one on particular person app pages. These extra advert placements will present extra app discovery alternatives for manufacturers and their prospects.

As we talked about in final quarter’s name, Marin additionally was not too long ago made an advertisements accomplice for TikTok, the fast-growing world social writer. Analysts estimate that manufacturers will spend some $12 billion on TikTok advertisements in 2022 with robust development forecast for the approaching years. There is a chat within the Digital promoting trade that advert budgets are shifting from one or one other Digital channels resembling TikTok, however we aren’t seeing this habits in our restricted information.

In basic, Digital advert budgets traditionally have pulled {dollars} from non-Digital channels which might be much less trackable and measurable. Our integration with TikTok’s Ad Manager provides manufacturers higher insights and improves the efficiency of their TikTok campaigns via machine studying and automation. With 1 billion month-to-month energetic customers globally, TikTok supplies manufacturers the chance to attach authentically with extremely engaged and passionate customers via the ability of shared expertise.

I’m happy to share the information that Marin was not too long ago acknowledged as a powerful performer within the Forrester Wave B2B Advertising Solutions Q3 2022 and cited as best-in-class for B2B search and social promoting primarily based on a radical analysis by Forrester of our MarinOne platform. Forrester is a extremely revered third-party expertise advisory agency, and on this position is ready to entry and evaluate the main suppliers in a given market area. Forrester’s validation of our cross-channel technique for B2B entrepreneurs is an indication of the significance of coordinating a model’s messaging throughout channels to achieve prospects. We anticipate extra B2B entrepreneurs to contemplate MarinOne for his or her Marketing wants on account of this recognition.

As I discussed on our final name, we proceed to see robust curiosity in Marin’s managed companies capabilities whereby Marin supplies companies to clients to Support their Media shopping for actions. Advertisers typically have an interim want for employees, particularly throughout this tight labor market which is now mixed with some degree of financial uncertainty and Marin’s skilled Digital entrepreneurs are in a position to assist them to satisfy their Business wants on a versatile foundation.

Our actions to Support manufacturers and their businesses happen in opposition to an energetic backdrop of presidency antitrust investigations on the federal and state ranges in addition to within the EU of the companies of main publishers within the Digital promoting market. There is also the potential of federal laws to manage the conduct of the main publishers that might profit Marin’s position as an unbiased advert administration platform.

Marin enjoys coopetition relationships with the main publishers, and we don’t anticipate important adjustments in these relationships within the close to time period. Although we aren’t a celebration to any lawsuits or goal in these investigations, Marin spent roughly $100,000 in Q2 on authorized charges along side responding to official requests that Marin has obtained associated to those numerous investigations.

I proceed to imagine that Marin has an amazing alternative forward. Marin advantages as client spend growing time Online and advert {dollars} comply with them, creating extra want for manufacturers to measure, handle and optimize these investments to accumulate clients and drive income outcomes.

We’re seeing growing curiosity in manufacturers taking a cross-channel strategy to their Digital promoting investments and Marin with our MarinOne platform and our crew of Digital promoting consultants is properly positioned to Support main manufacturers and their businesses in these efforts.

And now Bob will evaluate our second quarter monetary outcomes and our outlook for the third quarter of 2022.

Bob Bertz

Thank you, Chris. I’ll present an outline of our second quarter outcomes after which share our forecast for the third quarter of 2022. I’ll start with a evaluate of our revenue assertion. For the second quarter of 2022, Marin generated $4.7 million in income, close to the midpoint of our steerage. Second quarter income was down 23% when in comparison with whole income for the second quarter of 2021. As now we have beforehand mentioned, we renewed our income share settlement with Google for a brand new three-year time period commencing on October 1, 2021. The quarterly quantity of income acknowledged below the brand new settlement is anticipated to be roughly $1.8 million versus roughly $2.3 million per quarter below the expired settlement.

Adjusting for the change in income below the brand new Google income share settlement, our Q2 2022 income was down roughly 16% when in comparison with Q2 2021. As Chris beforehand talked about, we noticed lower-than-expected spend from some current clients in the course of the second quarter of 2022, which we attribute to present macroeconomic components, together with fears of a recession.

Our income was additionally negatively affected by international alternate charges as a result of strengthening of the U.S. greenback in opposition to the euro and the British pound. We have no idea for the way lengthy the present financial uncertainty will impression advertiser spending exercise. Our geographic cut up for income was roughly 79% U.S. and 21% worldwide for the second quarter of 2022.

Moving on to our working outcomes. As a reminder, our monetary statements and a reconciliation of our GAAP to non-GAAP monetary measures might be present in our earnings launch issued earlier at the moment. Our non-GAAP working loss was $4.6 million for the second quarter of 2022 as in comparison with a $2.8 million loss for the second quarter of 2021. The $4.6 million non-GAAP working loss in Q2 was on the decrease finish of our steerage. The improve in working losses in comparison with Q2 2021 is attributable to a mix of decrease income and a rise in working bills as we make investments in our gross sales and Marketing and product improvement efforts.

Our non-GAAP working bills elevated roughly 8% as in comparison with the second quarter of 2021, primarily on account of strategic investments that we’re making in our gross sales and Marketing and product improvement actions, together with barely greater skilled charges. We ended the quarter with 165 whole headcount versus 153 a 12 months in the past. We anticipate our headcount to proceed to extend within the close to time period as we make extra investments in our gross sales and Marketing and engineering groups.

In phrases of our steadiness sheet, we ended the quarter with a complete money steadiness of $37.5 million as in comparison with $41.8 million on the finish of the earlier quarter. We will proceed to fastidiously monitor our money ranges as we make investments in our product improvement and gross sales and Marketing efforts.

Moving on to our outlook for the third quarter. For Q3 2022, we anticipate income to be within the vary of $4.5 million to $5 million, and our non-GAAP working loss is anticipated to be within the vary of $4.9 million to $4.5 million.

Our income steerage displays our greatest estimate of the continued impression on promoting spend by our clients as a result of unsure financial setting, and our non-GAAP working loss steerage contains the associated fee impression of anticipated investments in our engineering and gross sales and Marketing groups.

This concludes our name for at the moment. Thank you in your time, and we stay up for updating you once more throughout our Q3 2022 earnings name.

Operator

Ladies and gents, this concludes at the moment’s teleconference. You might disconnect your strains presently. Thank you in your participation and have a beautiful day.

Question-and-Answer Session

Operator

Q –

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