This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk00: Greetings, and welcome to the Marin Software First Quarter 2022 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. I would now like to turn the conference over to your host, Bob Burtz, Marin Software's Chief Financial Officer. Thank you, Mr. Burtz. You may begin.
spk01: Thank you. Good afternoon, everyone, and welcome to Marin Software's first quarter 2022 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. 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 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 Q2 and future financial results. We make these statements as of May 5, 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 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 10Q and Form 10K, 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 first quarter 2022 earnings release. With that, I'll 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 provide an update on our initiatives to return Marinda growth. Bob will then provide additional detail on our first quarter results for 2022 and our outlook for the second quarter of 2022. As I highlight each call, we remain committed to return Marinda 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 MarinOne. 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. Our efforts are focused on Marin's return to growth, and we continue to believe that our strategy is sound as we report a moderation in our revenue decline on a year-over-year basis. I'm encouraged by our new business activity and the progress that we are making to improve customer retention. As announced in today's earnings release, Q1 revenues came in at $5.2 million, which was just below the high end of our previously published guidance for Q1, but still down from Q1 in the prior year. Our Q1 operating loss also was slightly below the high end of our guidance due to our slightly lower revenue for the quarter, even as we continue to invest in MarinOne and our team. Our total cash balance at the end of Q1 was $41.8 million, providing Marin with significant resources to pursue our strategy and to support our customers. At the end of the first quarter, our global headcount was approximately 164. About half of our team is in technology roles, reflecting our significant investments and delivering products to drive results for leading brands and their agencies. As has been our practice, we will continue to monitor our cash use closely, balancing investments with cost management. As I've discussed on past calls, 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. In Q1, we expanded MarinOne's support of Google Shopping products, which are very popular with both brands and retailers. As I've highlighted from time to time on these calls, 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 MarinOne interface. We also added to our budget management capabilities, which support a range of bidding approaches, including Smart Bidding and Marin's own MarinOne 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. 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. 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. As we mentioned last quarter, 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. This quarter, we enabled functionality so that e-commerce retailers can see all of their products side by side across organic and sponsored listings in Marin One's shopping products grid. Marin has been a longtime partner of Yahoo, and this past quarter, we added support for display advertising campaigns, Yahoo DSP, to help advertisers understand and reach their audiences. across multiple placements on different devices. As an official Apple Search Ads partner, we continue to invest to support our customers who use apps to engage with their customers. We have an Apple webinar planned for Q2, which will give us an opportunity to highlight the benefit of Apple Search Ads as part of a marketer's cross-channel campaign for app downloads and customer acquisition. As we highlight in today's quarterly press release, 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, and we now appear on their official partners page. We debuted functionality to make linking and managing campaigns easier and to enable improved conversion tracking. In Q1, we delivered a joint webinar with the team from LinkedIn that had very high engagement, and we expect these leads to add to our B2B new business results in the coming quarters. I also would highlight from Q1 that we are seeing an increased interest in Marin's managed services capabilities, whereby Marin provides services to customers to support their media buying activity. Advertisers often have an interim need for staff, especially during this tight labor market, and Marin's experienced digital marketers are able to help them to meet their business needs on a flexible basis. 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. Although we are not a party to any of the lawsuits or a target in these investigations, Marin spent approximately $100,000 in Q1 on legal fees in conjunction with responding to official requests that Marin has received related to these investigations. I continue to believe that Marin has a tremendous opportunity ahead. Marin benefits as consumers spend increasing time online and ad dollars 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 first quarter financial results and our outlook for the second quarter of 2022. Thank you, Chris.
spk01: I'll provide an overview of our first quarter results and then share our forecast for the second quarter of 2022. I'll begin with a review of our income statement. For the first quarter of 2022, Marin generated $5.2 million in revenue, near the high end of our guidance. first quarter revenue was down 18% when compared to total revenue for the first quarter of 2021. As we have previously discussed, we renewed our revenue share agreement 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 Revenue Share Agreement, our Q1 2022 revenue was down approximately 11% when compared to Q1 2021. Our geographic split for revenue was approximately 77% U.S. and 23% international for the first quarter of 2022. 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 $4.3 million for the first quarter of 2022, as compared to a $2.3 million loss for the first quarter of 2021. The $4.3 million non-GAAP operating loss in Q1 was near the high end of our guidance. The increase in operating loss as compared to Q1 2021 is attributable to a combination of lower revenue and an increase in operating expense as we ramp up our sales and marketing and product development efforts. Our non-GAAP operating expenses increased approximately 13% as compared to the first quarter of 2021, primarily as a result of strategic investments that we are making in our sales and marketing and product development efforts. We ended the quarter with 164 total headcount versus 157 a year ago. We expect our headcount to continue to grow in the near term as we make investments in our sales and marketing and engineering teams. In terms of our balance sheet, we ended the quarter with a total cash balance of $41.8 million as compared to 47.1 million at the end of 2021. We will continue to carefully monitor our cash levels as we make investments in our return to growth strategy. During 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 on the loan. The $3.1 million forgiveness of the loan is included in other income in our first quarter 2022 GAAP financial statements. Moving on to our outlook for the second quarter. For Q2 of 2022, we expect revenue to be in the range of $4.5 to $5 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. This concludes our call for today. Thank you for your time, and we look forward to updating you again during our Q2 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.
Disclaimer