Marin Software has held a special place in the landscape of PPC software since their IPO on March 22, 2013. To the best of my knowledge Marin is the only public company focused on offering PPC software services. As a public company they are required to deliver quarterly reports on performance. Digging into these reports not only sheds light on the health of the company. As a former PPC analyst and current co-founder of a PPC software platform, I also was really interested to see data about Marin's 'active advertiser' counts.
The data and quotes from executives that accompany the quarterly reports show a company at a very important time in their journey. Marin is trying to make the difficult shift from generating net losses to generating net profits. This transition is being made difficult by a leveling off of revenue and customers, combined with a dropping stock price.
The most visible metric for a public company is the stock price. Marin was able to raise over $100 million with their initial offering of 7.5 million shares at $14 pre-IPO in 2013. The stock price finished its first day on the NYSE at $16, reaching a high that day of over $19. This is the highest the stock price has ever been following a downward trend since.
Marin (MRIN) Stock Price since IPO in March of 2013
A dropping stock price can happen for a lot of reasons. In Q3 of 2015 Marin reported a loss of $9.5 million. Since IPO, Marin has reported losses every quarter resulting in the diminishing of another metric given in public quarterly reports, Cash and Cash Equivalents. This metric can be generally thought of as the amount of cash the company has in the bank. Often public companies plan and actually have that built into their strategy losses. Strategic losses commonly result from hyper focusing on growth through building large sales teams and up front investment into a product. This seems to be the path Marin has taken. This has caused a steady decrease in cash and cash equivalents.
Marin (MRIN) Cash and Cash Equivalents (in $ millions)
I am definitely an outsider looking in and not a financial expert but this has probably been a concerning trend for investors on Wall Street and Marin executives. Quotes from Marin's CEO, David A. Yovanno, that accompanied their Q3 2015 earnings report indicated they are taking steps to change this trend.
It will be interesting to look at the Q4 2015 report early next year to see if they were able to accomplish this goal. There are no public indications that Marin plans layoffs, a common first lever executives use to 'streamline' operations. A look at the trend net revenues have taken shows it could be a difficult transition without some major organizational changes. Net revenue peaked in Q4 of 2014 at $27 million and hasn't shown the growth in 2015 as was seen in past years. This had to be surprising to Marin executives.
Marin (MRIN) Net Revenues (in $ millions)
Wall Street investors are highly focused on growth. Even Twitter has been taking a lot of heat from investors lately because it seems that their active user base has stalled out at around 320 million.
Marin's version of active user is active advertisers and is defined as customers that have paid Marin at least $2,000 in at least one of the months of the quarter. This metric for growth has also stalled with no significant gains since Q3 2014.
Marin (MRIN) Active Advertisers
As a former PPC analyst this was very interesting to me because it shows how large Marin's average customer is and the budgets they have.
This does fall in line with what I saw as a PPC department manager vetting Marin as a solution for our team, the price was just too high for us and how we worked. I could have hired 5-10 analysts with what we would have been paying out to Marin every month. Marin seems to have maybe reached a plateau in terms of the types of PPC departments that can support their pricing model.
A leveling off of active advertisers and revenue means they will be making some tough decisions to generate profits and reverse the losses trend.
2016 will be a very interesting year to track the company at a crossroads, see how they navigate these challenges and if investors begin to change the view on their future.
Curious to do some analyses of your own? Here are the links to Marin's quarterly breakdowns that I used.