MARKETO INC SAN MATEO, Calif., Aug. 3, 2016 /PRNewswire/ -- Marketo, Inc. (NASDAQ: MKTO), the leading provider of engagement marketing software and solutions, today announced its second quarter 2016 financial results.
Highlights:
-- Second quarter revenue increased 30 percent year over year to $66.0
million
-- Deferred revenue increased 27 percent year over year to $102.8 million
-- Improved operating leverage year over year
-- Generated cash flow from operations of $5.2 million
"We delivered solid revenue growth, improved operating leverage and positive free cash flow in the second quarter," said Phil Fernandez, chairman and CEO of Marketo. "We continue to see strong demand for our existing and new marketing solutions from fast-growth companies and large enterprises in both business and consumer segments. We are excited to be joining Vista Equity Partners and continue in our journey to set the agenda for product innovation and thought leadership for the entire digital marketing industry."
Results for the second quarter of 2016:
-- Revenue: Revenue was $66.0 million, an increase of 30 percent over the
same period of the prior year.
-- Deferred Revenue: Deferred revenue at June 30, 2016 was $102.8 million,
compared to $91.7 million at March 31, 2016 and $80.6 million at June
30, 2015.
-- Calculated Billings: Calculated billings were $77.0 million, an increase
of 20 percent over $64.4 million in the same period of the prior year.
-- Net Loss: GAAP net loss attributable to Marketo was $20.8 million, and
net loss per common share, basic and diluted, was $(0.46). Non-GAAP net
loss was $0.1 million, and non-GAAP net loss per common share, basic and
diluted, was $(0.00).
-- Cash Flow: Cash provided by operating activities was $5.2 million as
compared to $10.0 million in the same period of the prior year. Free
cash flow generated was $2.5 million.
-- Total Cash and Cash Equivalents: As of June 30, 2016, total cash and
cash equivalents was $99.5 million.
Reconciliations of the non-GAAP financial measures included in this release to their nearest GAAP equivalents are provided at the end of this release.
Outlook
Given the announcement made on May 31, 2016 regarding Marketo's entry into an agreement and plan of merger with Vista, the company will not provide outlook for its third quarter 2016 financial results and is withdrawing its previously issued financial guidance for full year 2016.
Conference Call Information
Given the announcement made on May 31, 2016 regarding Marketo's entry into an agreement and plan of merger with Vista, the company will not be hosting a conference call to discuss its second quarter 2016 financial results.
Use of Non-GAAP Financial Information
Marketo provides financial statements that are prepared in accordance with generally accepted accounting principles (GAAP). To help understand Marketo's past financial performance and future results, Marketo has supplemented its financial results that it provides in accordance with GAAP with certain non-GAAP financial measures. The method Marketo uses to produce non-GAAP financial results may differ from the methods used by other companies. Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with the company's consolidated financial statements prepared in accordance with GAAP. Specifically, management is excluding the following items from its non-GAAP historical and estimated net loss and net loss per common share, basic and diluted:
-- Stock-Based Compensation Expenses: The company's compensation strategy
includes the use of stock-based compensation to attract and retain
employees and executives. It is principally aimed at aligning their
interests with those of our stockholders and at long-term employee
retention, rather than to motivate or reward operational performance for
any particular period. Thus, stock-based compensation expense varies for
reasons that are generally unrelated to operational decisions and
performance in any particular period.
-- Amortization of Acquired Intangible Assets: The company views
amortization of acquisition-related intangible assets, such as the
amortization of the cost associated with an acquired company's research
and development efforts, trade names, customer lists and customer
relationships, as items arising from pre-acquisition activities
determined at the time of an acquisition. While these intangible assets
are continually evaluated for impairment, amortization of the cost of
purchased intangibles is a static expense, one that is not typically
affected by operations during any particular period.
-- Acquisition-related expenses consist primarily of legal, banking and
other advisory costs related to the proposed merger and have been
excluded. The company believes that investors benefit from an
understanding of the company's operating results by excluding such
costs.
-- Adjustment to the value of redeemable non-controlling interest to the
redemption amount is excluded as the company believes it may not be
indicative of future operating results and that investors benefit from
an understanding of the company's operating results without giving
effect to this adjustment.
-- Additionally, the company believes the following supplemental non-GAAP
financial information is useful to investors and others in assessing its
operating performance. A calculation of the supplemental non-GAAP
financial information is provided in the table titled 'Non-GAAP
Supplemental financial information'.
-- Calculated billings is calculated as revenue plus the change in total
deferred revenue as presented on the balance sheet.
-- Free cash flow is calculated as cash flow provided by (used in)
operations less the purchase of property and equipment and capitalized
software development costs presented on the statement of cash flows.
Marketo believes calculated billings offers investors useful supplemental information regarding the performance of its business, and will help investors better understand the sales volumes and performance of its business. The free cash flow metric is useful as it provides investors an enhanced view of the company's operational performance and the cash available to fund on-going operations. The presentation of non-GAAP free cash flow is not meant to be considered in isolation or as an alternative to net income as an indicator of our performance, or as an alternative to cash flows from operating activities as a measure of liquidity.
The company encourages investors to carefully consider its results under GAAP, as well as its supplemental non-GAAP information and the related reconciliations, to more fully understand its business. Reconciliations of these GAAP and non-GAAP financial measures are presented in the tables at the end of this release.
"Safe harbor" statement under the Private Securities Litigation Reform Act of 1995
This press release contains forward-looking statements. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as "expects," "anticipates," "believes," "could," "seeks," "estimates," "intends," "may," "plans," "potential," "predicts," "projects," "should," "will," "would" or similar expressions and the negatives of those terms. Examples of forward-looking statements include, but are not limited to, statements about our opportunities for growth and future events. The achievement or success of the matters covered by such forward-looking statements involves risks, uncertainties and assumptions. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make.
The risks and uncertainties that could cause actual results to differ from the results predicted include, but are not limited to, risks associated with: possible fluctuations in our financial and operating results; our rate of growth and anticipated revenue run rate, including our ability to convert deferred revenue into revenue and, as appropriate, cash flow, and the continued growth and ability to maintain deferred revenue; errors, interruptions or delays in our services or Web hosting; breaches of our security measures; competition and competitive pressures, including discounting by our competitors; the nature of our business model; our ability to continue to release, and gain customer acceptance of, new and improved versions of our services; successful customer deployment and utilization of our existing and future services; changes in our sales cycle; the financial impact of any previous and future acquisitions; relationships with platform or service providers; various financial aspects of our subscription model; unexpected increases in attrition or decreases in new business; the emerging markets in which we operate; unique aspects of entering or expanding in international markets; our ability to hire, retain and motivate employees, to ramp our sales team, and to manage our growth; changes in our customer base; technological developments; regulatory developments; litigation related to intellectual property and other matters, and any related claims, negotiations and settlements; unanticipated changes in our effective tax rate; fluctuations in the number of shares we have outstanding and the price of such shares; foreign currency exchange rates; collection of receivables; interest rates; factors affecting our deferred tax assets and ability to value and utilize them; the risks and expenses associated with our real estate and office facilities space; general developments in the economy, financial markets, and credit markets; costs associated with our pending merger with Vista; a failure to complete the merger; and matters arising in connection with the parties' efforts to comply with and satisfy applicable regulatory approvals and closing conditions relating to the merger.
Further information about potential factors that could affect our financial results is included in public reports we file with the Securities and Exchange Commission, including, but not limited to, the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of our Forms 10-K and 10-Q, and the Forms 8-K and other documents we file from time to time.
Any forward-looking statement made by us in this press release speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We assume no obligation and do not intend to publicly update these forward-looking statements, whether as a result of new information, future developments, or otherwise, except as required by law.
About Marketo
Marketo (NASDAQ: MKTO) provides the leading engagement marketing software and solutions designed to help marketers develop long-term relationships with their customers - from acquisition to advocacy. Marketo is built for marketers, by marketers and is setting the innovation agenda for marketing technology. Marketo puts Marketing First. Headquartered in San Mateo, CA, with offices around the world, Marketo serves as a strategic partner to large enterprise and fast-growing small companies across a wide variety of industries. To learn more about Marketo's Engagement Marketing Platform, LaunchPoint(®) partner ecosystem, and the vast community that is the Marketo Marketing Nation(®), visit www.marketo.com.
Marketo, the Marketo logo, Marketing Nation and LaunchPoint are trademarks of Marketo, Inc. All other trademarks are the property of their respective owners.
MARKETO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
June 30, December 31,
2016 2015
---- ----
ASSETS
Current assets:
Cash and cash equivalents $99,504 $107,218
Accounts receivable, net 61,992 50,678
Prepaid expenses and other current
assets 8,502 9,073
----- -----
Total current assets 169,998 166,969
Property and equipment, net 24,795 21,323
Goodwill 29,201 29,201
Intangible assets, net 4,978 5,455
Other assets 2,960 2,130
Total assets $231,932 $225,078
======== ========
LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $7,318 $4,265
Accrued expenses and other current
liabilities 25,177 25,706
Deferred revenue 102,604 91,735
Current portion of credit facility 1,383 2,174
----- -----
Total current liabilities 136,482 123,880
Credit facility, net of current
portion - 478
Deferred revenue, long-term 156 230
Other liabilities 4,602 2,722
Total liabilities 141,240 127,310
------- -------
Redeemable non-controlling
interests 9,888 4,643
Stockholders' equity:
Common stock 5 4
Additional paid-in capital 365,158 344,727
Accumulated other comprehensive
loss 77 (274)
Accumulated deficit (284,436) (251,332)
-------- --------
Total stockholders' equity 80,804 93,125
Total liabilities, redeemable non-
controlling interests and
stockholders' equity $231,932 $225,078
======== ========
MARKETO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2016 2015 2016 2015
---- ---- ---- ----
Revenue:
Subscription and support $57,682 $43,757 $113,030 $83,857
Professional services and
other 8,313 6,923 15,181 12,823
Total revenue 65,995 50,680 128,211 96,680
------ ------ ------- ------
Cost of revenue (1):
Subscription and support 12,178 9,770 24,488 18,844
Professional services and
other 9,058 8,177 18,126 15,514
Total cost of revenue 21,236 17,947 42,614 34,358
------ ------ ------ ------
Gross profit:
Subscription and support 45,504 33,987 88,542 65,013
Professional services and
other (745) (1,254) (2,945) (2,691)
Total gross profit 44,759 32,733 85,597 62,322
------ ------ ------ ------
Operating expenses (1):
Research and development 10,178 9,168 21,179 18,863
Sales and marketing 35,096 32,055 72,209 62,087
General and administrative 14,445 8,960 25,317 17,742
Total operating expenses 59,719 50,183 118,705 98,692
------ ------ ------- ------
Loss from operations (14,960) (17,450) (33,108) (36,370)
Other income (expense), net 51 97 (86) 617
--- --- --- ---
Loss before provision for
income taxes (14,909) (17,353) (33,194) (35,753)
Provision for income taxes 405 100 807 312
--- --- --- ---
Net loss (15,314) (17,453) $(34,001) $(36,065)
Net loss and adjustment
attributable to redeemable
non-controlling interests (5,445) (497) (5,181) (43)
------ ---- ------ ---
Net loss attributable to
Marketo $(20,759) $(17,950) $(39,182) $(36,108)
======== ======== ======== ========
Net loss per share of
common stock, basic and
diluted $(0.46) $(0.43) $(0.88) $(0.86)
====== ====== ====== ======
Shares used in computing
net loss per share of
common stock, basic and
diluted 44,694 42,163 44,343 41,889
====== ====== ====== ======
(1) Amounts include stock-based compensation expense as follows:
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2016 2015 2016 2015
---- ---- ---- ----
Cost of subscription and
support revenue $789 $626 $1,551 $1,245
Cost of professional
services and other revenue 1,174 1,100 2,386 2,037
Research and development 1,859 1,639 3,664 3,955
Sales and marketing 3,217 3,404 6,291 6,206
General and administrative 3,099 2,957 6,246 5,564
Total stock-based
compensation expense $10,138 $9,726 $20,138 $19,007
======= ====== ======= =======
MARKETO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2016 2015 2016 2015
---- ---- ---- ----
Cash flows from operating activities:
Net loss:
Net loss attributable to
Marketo $(20,759) $(17,950) $(39,182) $(36,108)
Net loss and adjustment
attributable to redeemable
non-controlling interests 5,445 497 5,181 43
----- --- ----- ---
Net loss (15,314) (17,453) (34,001) (36,065)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation and
amortization 3,946 3,406 7,926 6,285
Stock-based compensation
expense 10,138 9,726 20,138 19,007
Deferred income taxes (220) 60 (136) 247
Provision for (reduction
of) allowance for doubtful
accounts 509 (12) 613 236
Loss on disposal of fixed
assets 9 - 9 -
Changes in operating assets and liabilities:
Accounts receivable (13,873) (5,451) (11,577) (8,478)
Prepaid expenses and other
current assets 7,072 2,151 1,531 (2,019)
Other assets 142 (217) 25 (861)
Accounts payable 1,759 1,160 1,600 2,188
Accrued expenses and other
current liabilities (133) 3,047 (1,682) 2,532
Deferred revenue 10,773 13,589 10,002 18,283
Other liabilities 407 (39) 787 77
Net cash provided by (used
in) operating activities 5,215 9,967 (4,765) 1,432
----- ----- ------ -----
Cash flows from investing activities:
Increase in restricted cash - - (735) (215)
Purchase of property and
equipment (2,183) (4,232) (6,770) (8,324)
Capitalized software
development (548) (251) (1,149) (772)
Net cash used in investing
activities (2,731) (4,483) (8,654) (9,311)
------ ------ ------ ------
Cash flows from financing activities:
Proceeds from issuance of
common stock upon exercise
of stock options 2,707 2,053 3,488 3,018
Proceeds from issuance of
common stock issued under
employee stock purchase
plan - - 2,716 2,885
Investment from redeemable
non-controlling interests - - - 1,678
Repurchase of unvested
common stock from
terminated employees - (32) - (32)
Withholding taxes remitted
for the net share
settlement of equity
awards (62) (71) (65) (74)
Repayment of debt (573) (676) (1,270) (1,346)
Net cash provided by
financing activities 2,072 1,274 4,869 6,129
----- ----- ----- -----
Effect of foreign exchange
rate changes on cash and
cash equivalents 245 (81) 836 (449)
--- --- --- ----
Net decrease in cash and
cash equivalents 4,801 6,677 (7,714) (2,199)
Cash and cash equivalents -
beginning of period 94,703 103,768 107,218 112,644
------ ------- ------- -------
Cash and cash equivalents -
end of period $99,504 $110,445 $99,504 $110,445
======= ======== ======= ========
MARKETO, INC.
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES
(In thousands, except per share data)
(Unaudited)
To supplement our condensed consolidated financial statements presented on a GAAP basis, Marketo uses non-GAAP measures of operating loss, net loss and net loss per share, which are adjusted to exclude certain costs, expenses, gains and losses we believe appropriate to enhance an overall understanding of our past financial performance and also our prospects for the future. These adjustments to our current period GAAP results are made with the intent of providing both management and investors a more complete understanding of Marketo's underlying operational results and trends and our marketplace performance. In addition, these adjusted non-GAAP results are among the information management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with generally accepted accounting principles in the United States of America.
Three Months Ended Three Months Ended Three Months Ended Six Months Ended Six Months Ended
March 31, 2016 June 30, 2016 June 30, 2015 June 30, 2016 June 30, 2015
Revenue:
Subscription and support $55,348 $57,682 $43,757 $113,030 $83,857
Professional services and other 6,868 8,313 6,923 15,181 12,823
Total Revenue $62,216 $65,995 $50,680 $128,211 $96,680
======= ======= ======= ======== =======
Cost of revenue reconciliation:
GAAP Subscription and support $12,310 $12,178 $9,770 $24,488 $18,844
Stock-based compensation (762) (789) (626) (1,551) (1,245)
Amortization of acquired intangible
assets (377) (377) (377) (754) (754)
-----
Non-GAAP subscription and support $11,171 $11,012 $8,767 $22,183 $16,845
=======
GAAP Professional services and other $9,068 $9,058 $8,177 $18,126 $15,514
Stock-based compensation (1,212) (1,174) (1,100) (2,386) (2,037)
Non-GAAP professional services and
other $7,856 $7,884 $7,077 $15,740 $13,477
======
Gross profit and gross margin
reconciliation:
Non-GAAP subscription and support
gross profit $44,177 $46,670 $34,990 $90,847 $67,012
Non-GAAP professional services and
other gross profit (988) 429 (154) (559) (654)
-----
Non-GAAP gross profit $43,189 $47,099 $34,836 $90,288 $66,358
=======
Non-GAAP subscription and support
gross margin 79.8% 80.9% 80.0% 80.4% 79.9%
Non-GAAP professional services and
other gross margin -14.4% 5.2% -2.2% -3.7% -5.1%
Non-GAAP gross margin 69.4% 71.4% 68.7% 70.4% 68.6%
Operating expenses
reconciliation:
GAAP Research and development $11,001 $10,178 $9,168 $21,179 $18,863
Stock-based compensation (1,805) (1,859) (1,639) (3,664) (3,955)
Amortization of acquired intangible
assets (37) (38) (37) (75) (74)
----
Non-GAAP research and development $9,159 $8,281 $7,492 $17,440 $14,834
======
As a % of total revenues, non-GAAP 14.7% 12.5% 14.8% 13.6% 15.3%
GAAP Sales and marketing $37,113 $35,096 $32,055 $72,209 $62,087
Stock-based compensation (3,074) (3,217) (3,404) (6,291) (6,206)
Amortization of acquired intangible
assets (137) (71) (137) (208) (274)
-----
Non-GAAP sales and marketing $33,902 $31,808 $28,514 $65,710 $55,607
=======
As a % of total revenues, non-GAAP 54.5% 48.2% 56.3% 51.3% 57.5%
GAAP General and administrative $10,872 $14,445 $8,960 $25,317 $17,742
Stock-based compensation (3,147) (3,099) (2,957) (6,246) (5,564)
Amortization of acquired intangible
assets (46) (46) (46) (92) (92)
Acquisition related costs - (4,070) - (4,070) -
Non-GAAP general and administrative $7,679 $7,230 $5,957 $14,909 $12,086
======
As a % of total revenues, non-GAAP 12.3% 11.0% 11.8% 11.6% 12.5%
Loss from operations
reconciliation:
GAAP loss from operations $(18,148) $(14,960) $(17,450) $(33,108) $(36,370)
Stock-based compensation 10,000 10,138 9,726 20,138 19,007
Amortization of acquired intangible
assets 597 532 597 1,129 1,194
Acquisition related costs - 4,070 - 4,070 -
Non-GAAP loss from operations $(7,551) $(220) $(7,127) $(7,771) $(16,169)
========
As a % of total revenues, non-GAAP -12.1% -0.3% -14.1%
Net loss reconciliation:
GAAP Net loss attributable to Marketo $(18,423) $(20,759) $(17,950) $(34,001) $(36,108)
Stock-based compensation 10,000 10,138 9,726 20,138 19,007
Amortization of acquired intangible
assets 597 532 597 1,129 1,194
Acquisition related costs - 4,070 - 4,070 -
Adjustment to redeemable non-
controlling interests 174 5,904 912 6,078 912
Non-GAAP Net loss attributable to
Marketo $(7,652) $(115) $(6,715) $(2,586) $(14,995)
========
Basic and diluted net loss per
share
GAAP $(0.42) $(0.46) $(0.43) $(0.88) $(0.86)
Non-GAAP $(0.17) $(0.00) $(0.16) $(0.06) $(0.36)
Shares used to compute basic and
diluted GAAP and Non-GAAP net
loss per share 43,992 44,694 42,163 44,343 41,889
MARKETO, INC.
NON-GAAP SUPPLEMENTAL FINANCIAL INFORMATION
(In thousands)
(Unaudited)
1) Calculated Billings
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2016 2015 2016 2015
---- ---- ---- ----
Total revenue $65,995 $50,680 $128,211 $96,680
Add increase in total
deferred revenue 11,047 13,736 10,795 17,675
Total calculated
billings $77,042 $64,416 $139,006 $114,355
======= ======= ======== ========
2) Reconciliation of GAAP Operating Cash Flow to Free Cash Flow
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2016 2015 2016 2015
---- ---- ---- ----
GAAP net cash used in
operating activities $5,215 $9,967 $(4,765) $1,432
Less purchases of
property plant and
equipment (2,183) (4,232) (6,770) (8,324)
Less capitalized
software development (548) (251) (1,149) (772)
Free cash flow $2,484 $5,484 $(12,684) $(7,664)
====== ====== ======== =======
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SOURCE Marketo, Inc.
