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spk00: Greetings, and welcome to the Marin Software fourth quarter 2021 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 Burtz, Marin Software CFO. Thank you, Mr. Burtz. You may begin.
spk01: Thank you. Good afternoon, everyone, and welcome to Marin Software's fourth quarter 2021 earnings conference call. My name is Bob Burtz. I'm Marin's CFO, and joining me today is Chris Lean, 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. 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, including the potential lingering effects of the COVID-19 global pandemic, our expectations for customer adoption and use of our MarinOne platform, 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 in product and technology, Progress on product development efforts, product capabilities, our relationships with publishers and other parties in the digital advertising market, expectations for future economic activity and digital ad spending, and our expected Q1 and future financial results. We make these statements as of February 24, 2022, 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 the 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. A quantitative reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is available in our fourth quarter 2021 earnings release. With that, let me turn the call over to Chris.
spk02: Thank you, Bob. 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 return Marin to growth. Bob will then provide additional detail on our fourth quarter and full year results for 2021 and our outlook for the first quarter of 2022. 2021 by any measure was an unusual year and I'm proud of how Marin's team navigated its many challenges to advance our products and to support our customers. Our team has shown creativity, resourcefulness, and resilience as we have operated remotely worldwide to be an ally in digital to leading brands and their agencies. We remain 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 return from their online advertising investments. We call this platform Marin One. During 2021, we successfully migrated our customers to this next generation offering that delivers performance, time savings, and better business insights. We also made significant advances in our MarinOne platform, expanding its functionality, usability, and breadth of publishers. MarinOne is a performance layer to enable brands to drive greater returns from their digital advertising investments across search, social, and e-commerce channels, including the rapidly growing retail media channel. As those of you who follow Marin know, our efforts to return Marin to growth have taken longer than any of us would have preferred, and our revenues continue to be under pressure. However, we continue to believe that our strategy is sound as we report a moderation in our revenue decline on a year-over-year basis. And consistent with last quarter's update, we have seen an upturn in new business activity and improvements in retention, which we see as early indicators that we are on the right track. As announced in today's earnings release, Q4 revenues came in at 5.9 million, which was just below the high end of our previously published guidance for Q4, but still down from Q4 in the prior year. Our Q4 operating loss was better than the high end of our guidance, even as we continue to invest in Marin 1 and our team. Our total cash balance at the end of Q4 was 47.1 million, providing Marin with significant resources to pursue our strategy and to support our customers. At the end of the fourth quarter, Our global headcount was approximately 160. About half of our team is in technology roles, reflecting our significant investment in delivering products to drive results for leading brands and their agencies. As has been our practice, we will continue to monitor our cast's use closely, balancing investments with cost management. During our quarterly report to investors, I like to use the opportunity to remind listeners about Marin's purpose. Marin seeks to be an ally in 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. Marin helps these advertisers to measure, manage, and optimize their online advertising investments. driving performance, time savings, and better business insights. Tools from the publishers understandably focus on how to enable a given advertiser to spend more money on ads from that particular publisher. Brands seek a view of their online advertising investments focused 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. We supplement our MarinOne 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. During the quarter and ongoing into 2022, we continue to expand and enhance MarinOne's functionality to positive customer feedback. Examples of added capabilities in MarinOne include powerful forecasting features now available at the bid strategy level in addition to the existing account level option. This enables advertisers to forecast performance for subsets of their account, for example, at the geography or line of business. We also rolled out ad extension management functionality to MarinOne, so site links, call extensions, call out extensions, and mobile app extensions can now be managed in a single location, freeing marketers time for other activities. The team redesigned our insights feature with ease of use in mind, introducing shortcuts and color-coded cards, so users can quickly jump to the insights they need most. We also introduced a new insight, recently ended campaigns, which allows users to confirm which campaigns should no longer be running and make the necessary updates. We debuted activity log alerts, which highlight when changes have been made and need to be synced with publisher accounts. We also added several new multi-edit options to enable better management at scale, which is of particular importance to larger advertisers with more complex programs. Marin's roots are in performance marketing, and we continue to invest to enable brands to drive better performance from their digital advertising programs. Marin expanded our support for Google Smart Bidding to allow management of these campaigns from the Marin One interface, and we also added to our budget management capabilities, which support a range of bidding options, including Smart Bidding and Marin's own Marin One Bidding. Marin's open philosophy lets Marin partner with our customers to find the bidding approach that delivers the best performance for their specific programs versus a blanket method that doesn't reflect the particular business nuances of a given advertiser. As part of budget management, Marin also supports forecasting and pacing. Using forecasting, advertisers can examine a range of investment scenarios to see what incremental business results flow from increased ad spend. Importantly, Marin can forecast what the efficiency, usually expressed as return on ad spend or ROAS, or cost per lead or acquisition, referred to as CPL or CPA, respectively, is from the spending increase. This forecasting functionality, which is more robust than what is provided by the publishers, enables marketers to better plan their acquisition activities to invest in those campaigns with the highest marginal returns and to secure additional budget dollars. Marin's investment in budget management pacing functionality allows for the spending of a given budget amount over a set period of time while seeking to achieve a specific level of business performance, for example, a target ROAS, CPL, or CPA level. This more sophisticated approach to budget management versus just spending a set amount over a given period without regard for performance has been well received by Marin's customers, and we see this as an excellent example where Marin can serve as a performance layer to the publishers. Marin's sophisticated budget management capabilities give advertisers compelling reasons to use Marin with the publisher tools to maximize their advertising results. As a cross-channel platform, we continue to invest to expand our support for Amazon ads. We added functionality for Amazon DSP, allowing customers to amplify their entire Amazon advertising portfolio. We also introduced Amazon Inventory, also known as Amazon Shopping Products, to allow users to link Amazon Seller Central accounts. This gives users a more holistic view of their e-commerce efforts, spanning both organic and sponsored listings. In retail media, we added support for advertising on Citrus Ads, a leading retail media platform. As an official Apple Search Ads partner, we added a number of Apple Search Ads improvements, such as the ability to increase campaign budget by an amount or a percentage, and the ability to use scheduled actions. As part of our investments in MarinOne, We continue to add to our social capabilities to compliment the robust functionality that Facebook provides in its tools. We expanded our message booster functionality to Instagram, enabling automatic boosting of high-performance organic posts. Marin also was recently made an ads partner for TikTok, the fast-growing global social publisher. The integration with TikTok's ad manager gives brands better insights and improves the performance of their TikTok campaigns through machine learning and automation. With 1 billion monthly active users globally, TikTok provides brands the opportunity to connect authentically with highly engaged and passionate consumers through the power of shared experience. For B2B advertisers, Marin was named an official measurement partner for LinkedIn Marketing Solutions by LinkedIn, giving advertisers better insights and improving the performance of their LinkedIn campaigns, also through machine learning and automation. Our activities to support brands and their agencies take place against an active backdrop of governmental antitrust investigations at the federal and state levels, as well as in the EU, of the businesses of leading publishers in the digital advertising market. Marin enjoys coopetition relationships with the leading publishers, and we do not expect significant changes in these relationships in the near term. Of note, in Q4, Marin spent in the low six figures on legal counsel to respond to official requests that Marin has received in support of these various investigations. and we may have to spend additional amounts from time to time in the future. I continue to believe that Marin has a tremendous opportunity ahead. Marin benefits as consumers spend increasing time online and add dollars flow to follow them, creating more need for brands to measure, manage, and optimize these investments to acquire customers and drive revenue outcomes. Marin with our MarinOne platform and our team of digital advertising experts is well positioned to support leading brands in these efforts. And now Bob will review our fourth quarter and full year financial results and our outlook for the first quarter of 2022. Thank you, Chris.
spk01: I'll provide an overview of our fourth quarter results and then share our forecast for the first quarter of 2022. I'll begin with a review of our income statement. For the fourth quarter of 2021, Marin generated $5.9 million in revenue near the high end of our guidance. Fourth quarter revenue was down 19% when compared to total revenue for the fourth quarter of 2020. As we discussed in our Q3 2021 earnings call, we renewed our strategic partnership with Google for a new three-year term commencing on October 1st of 2021. The quarterly amount of revenue recognized under the new agreement is expected to be approximately $1.8 million versus approximately $2.3 million per quarter under the expired agreement. Adjusting for the change in revenue under the new Google Strategic Partnership Agreement, our Q4 2021 revenue was down approximately 13% when compared to Q4 2020. For the full year 2021, revenue totaled $24.4 million, a year-over-year decrease of 19% as compared to $30 million in 2020. or a decline of approximately 17% when adjusted for the revenue impact of the new strategic partnership agreement with Google. Our geographic split for revenue was approximately 77% US and 23% international for both Q4 and the full year 2021. 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. Our non-GAAP operating loss was $3.8 million for the fourth quarter of 2021 as compared to a $2.5 million loss for the fourth quarter of 2020. The $3.8 million non-GAAP operating loss in Q4 beat the high end of our guidance by approximately $200,000. The increase in operating losses compared to Q4 2020 is attributable to lower revenue in the current quarter. Our full year 2021 non-GAAP operating expenses were down 10% as compared to 2020, and were relatively flat when comparing Q4 2021 to the prior year quarter. We ended the year with 156 total headcount versus 162 a year ago. We expect our headcount to grow in the near term as we make investments in our engineering and sales and marketing team. In terms of our balance sheet, we ended the year with a total cash balance of $47.1 million as compared to a $14.8 million balance at the end of 2020 and $50.2 million at the end of last quarter. During 2021, we raised net proceeds of $41.6 million by issuing shares of our common stock under our at-the-market offering programs. The capital we raised in 2021 enables us to make investments in our product development efforts and our sales and marketing teams. We believe these investments will help us execute on our return to growth initiatives. In the first quarter of 2022, the SBA forgave $3.1 million of our $3.3 million PPP loan, and we repaid the remaining $200,000 balance of the loan. The forgiveness of the $3.1 million loan will be accounted for in our 2022 GAAP financial statements. Moving on to our outlook for the first quarter. For Q1 2022, we expect revenue to be in the range of $4.8 to $5.3 million. And our non-GAAP operating loss is expected to be in the range of $4.6 to $4.1 million. Our non-GAAP operating loss guidance includes the impact of expected investments in our engineering and sales and marketing teams and excludes any impact from the forgiveness of our PPP loan. This concludes our call for today. Thank you for your time, and we look forward to updating you again during our Q1 2022 earnings call.
spk00: 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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