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MarketScreener Homepage  >  Equities  >  Nasdaq  >  Marin Software Incorporated    MRIN

MARIN SOFTWARE INCORPORATED

(MRIN)
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Marin Software Incorporated : INC Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

11/06/2020 | 09:18am EST
The following discussion and analysis of our financial condition, results of
operations and cash flows should be read in conjunction with the (1) unaudited
condensed consolidated financial statements and the related notes thereto
included elsewhere in this Quarterly Report on Form 10-Q for the quarter ended
September 30, 2020, and (2) the audited consolidated financial statements and
notes thereto and management's discussion and analysis of financial condition
and results of operations for the fiscal year ended December 31, 2019, included
in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019,
filed with the Securities and Exchange Commission (the "SEC"), on March 23,
2020. This Quarterly Report on Form 10-Q contains "forward-looking statements"
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, or the Exchange Act. These statements are often identified by the use
of words such as "believe," "may," "potentially," "will," "estimate,"
"continue," "anticipate," "intend," "could," "should," "would," "project,"
"plan," "predict," "expect," "seek" and similar expressions or variations. Such
forward-looking statements are subject to risks, uncertainties and other factors
that could cause actual results and the timing of certain events to differ
materially from future results expressed or implied by such forward-looking
statements. Factors that could cause or contribute to such differences include,
but are not limited to, those identified herein, and those discussed in the
section titled "Risk Factors", set forth in Part II, Item 1A of this Form 10-Q.
Except as required by law, we disclaim any obligation to update any
forward-looking statements to reflect events or circumstances after the date of
such statements.

Overview

We are a leading provider of digital marketing solutions for search, social, and
eCommerce advertising channels, offered as a unified software-as-a-service, or
SaaS, advertising management platform for performance-driven advertisers and
agencies. Our platform is an analytics, workflow and optimization solution for
marketing professionals, enabling them to effectively manage their digital
advertising spend. We market and sell our solutions to advertisers directly and
through leading advertising agencies, and our customers collectively manage
billions of dollars in advertising spend on our platform globally across a wide
range of industries. We believe this makes us one of the largest providers of
independent advertising cloud solutions. Our software solution is designed to
help our customers:

• measure the effectiveness of their advertising campaigns through our

proprietary reporting and analytics capabilities;



    •   manage and execute campaigns through our intuitive user interface and
        underlying technology that streamlines and automates key functions, such
        as advertisement creation and bidding, across multiple publishers and
        channels; and

• optimize campaigns across multiple publishers and channels based on market

and business data to achieve desired revenue outcomes using our predictive

bid management technology.

Our current product lineup consists of MarinOne and our two legacy products, Marin Search and Marin Social.

• MarinOne. Our next-generation solution brings search, social and eCommerce

advertising into a single-platform that helps advertisers maximize a

customer journey that spans Google, Facebook and Amazon by combining the

power of Marin Search and Marin Social with new channels like Amazon,

Apple Search Ads and YouTube.

• Marin Search. Our original solution for large advertisers and agencies,

Marin Search is designed to provide search advertisers with the power,

        scale and flexibility required to manage large-scale advertising
        campaigns.

• Marin Social. Helps advertisers manage their Facebook, Instagram and

Twitter advertising spend at scale.



Advertisers use our platform to create, target and convert precise audiences
based on recent buying signals from users' search, social and eCommerce
interactions. Our platform is integrated with leading publishers such as Amazon,
Apple, Baidu, Bing, Facebook, Google, Instagram, Pinterest, Twitter, Verizon
Media, Yahoo! Japan and Yandex. Additionally, we have integrations with more
than 50 leading web analytics and advertisement-serving solutions and key
enterprise applications, enabling our customers to more accurately measure the
return on investment of their marketing programs.

Our software platform serves as an integration point for advertising
performance, sales and revenue data, allowing advertisers to connect the dots
between advertising spend and revenue outcomes. Through an intuitive interface,
we enable our customers to simultaneously run large-scale digital advertising
campaigns across multiple publishers and channels, making it easy for marketers
to create, publish, modify and optimize campaigns.

Our predictive bid management and optimization technology also allows
advertisers to forecast outcomes and optimize campaigns across multiple
publishers and channels to achieve their business goals. Our optimization
technology can help advertisers increase advertisement spend on those campaigns,
publishers and channels that are performing well while reducing investment in
those that are not. This category of solutions, which we refer to as
cross-channel bid and campaign optimization, helps businesses intelligently and
efficiently measure, manage, and optimize their digital advertising spend to
achieve desired business results.

                                       21

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In December 2019, the novel coronavirus causing the disease COVID-19 was
reported in China and in March 2020 the World Health Organization declared it a
pandemic. We believe that the COVID-19 pandemic has had and continues to have an
adverse impact on many of our customers and their businesses and their spending
on digital advertising and has had an adverse impact on our recent results of
operations and is likely to continue to affect our future results of operations.
The extent of the impact of the COVID-19 pandemic on our operational and
financial performance will depend on certain developments, including the
duration and spread of the pandemic, impact on our customers and our sales
cycles, and impact on our employees, all of which are uncertain and cannot be
predicted. At this time, the extent to which the COVID-19 pandemic may impact
our financial condition or results of operations is uncertain. Since mid-March
2020, some of our customers have reduced the amount of digital advertising spend
that they manage using our product which has had an adverse effect on our
results of operations and some of our customers have requested extended payment
terms, reduced fees or fee waivers, early contract terminations and other forms
of contract relief. Also, since mid-March 2020 most of our employees have not
been able to work from our offices and have been working from home, which could
cause some disruptions or delays in our business activities, including our
product development efforts.

Components of Results of Operations

Revenues


We generate revenues principally from subscription contracts under which we
provide advertisers with access to our search, social and eCommerce advertising
management platform, either directly or through the advertiser's relationship
with an agency with whom we have a contract. Our subscription contracts are
generally one year or less in length. Under subscription contracts with most of
our direct advertisers and some independent agencies, we generally charge fees
based on the amount of advertising spend that these customers manage through our
platform or a contractual minimum monthly platform fee, whichever is greater.
Certain of these customers are charged only a fixed monthly platform fee. Most
of our subscription contracts with our network agency customers do not include a
committed minimum monthly platform fee, and we charge fees based upon the amount
of advertising spend that these customers manage through our platform. Due to
the nature of the platform and the services performed under the subscription
agreements, revenues are typically recognized in the amount billable to the
advertiser.

Our long-term strategic agreements have historically included multiple-year
terms and are invoiced quarterly. Our largest agreement with Google was entered
into in December 2018 with an effective date of October 1, 2018 (the "Google
Revenue Share Agreement") and includes both a fixed baseline amount and a
variable portion based on a percentage of relevant advertising search spend
above the baseline threshold that runs through our technology platform. The
Google Revenue Share Agreement has a three-year term; however, until March 2020,
we and Google executed the first amendment to the original agreement (the "First
Amendment"), Google could terminate the Google Revenue Share Agreement after two
years, with no penalty if we did not meet certain financial metrics.
Accordingly, the Company accounted for the Google Revenue Share Agreement as a
two-year agreement with one optional renewal year. The revenue impact of the
third year is being accounted for prospectively from the date of the First
Amendment. Our other long-term strategic agreements are generally variable in
nature, based on a percentage of relevant search advertising spend that runs
through our technology platform.

Refer to Note 2 of the accompanying condensed consolidated financial statements for further discussion of our revenue recognition considerations.


The majority of our revenues are derived from advertisers based in the United
States. Advertisers from outside the United States represented 26% and 25% of
total revenues for the three months ended September 30, 2020 and 2019,
respectively, and 25% for the nine months ended September 30, 2020 and 2019.

Cost of Revenues


Cost of revenues primarily includes personnel costs, consisting of salaries,
benefits, bonuses and stock-based compensation expense for employees associated
with our cloud infrastructure and global services for implementation and ongoing
customer service. Other costs of revenues include fees paid to contractors who
supplement our support and data center personnel, expenses related to
third-party data centers, depreciation of data center equipment, amortization of
internally developed software, amortization of intangible assets and allocated
overhead. Incremental cost of revenues associated with our long-term strategic
agreements, including our largest agreement with Google, are generally not
significant.

Sales and Marketing


Sales and marketing expenses consist primarily of personnel costs, including
salaries, benefits, stock-based compensation expense and bonuses, as well as
sales commissions and other costs including travel and entertainment, marketing
and promotional events, lead generation activities, public relations, marketing
activities, professional fees, amortization of intangible assets and allocated
overhead. All of these costs are expensed as incurred, except sales commissions
and the related payroll taxes, which are capitalized and amortized over the
expected period of benefit in accordance with the relevant authoritative
accounting guidance (refer to Note 2 of the accompanying condensed consolidated
financial statements). Our commission plans provide that commission payments to
our sales representatives are paid based on the key components of the applicable
customer contract, including the minimum or fixed monthly platform fee during
the initial contract term.

                                       22
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Research and Development


Research and development expenses consist primarily of personnel costs for our
product development and engineering employees and executives, including
salaries, benefits, stock-based compensation expense and bonuses. Also included
are non-personnel costs such as professional fees payable to third-party
development resources, amortization of intangible assets and allocated overhead.
Our research and development efforts are focused on enhancing our software
architecture, adding new features and functionality to our platform and
improving the efficiency with which we deliver these services to our customers,
including the development of MarinOne.

General and Administrative


General and administrative expenses consist primarily of personnel costs,
including salaries, benefits, stock-based compensation expense and bonuses for
our administrative, legal, human resources, finance and accounting employees and
executives. Also included are non-personnel costs, such as audit fees, tax
services and legal fees, as well as professional fees, insurance and other
corporate expenses, including allocated overhead.

                             Results of Operations

The following table is a summary of our unaudited condensed consolidated
statements of operations for the specified periods and results of operations as
a percentage of our revenues for those periods. The period-to-period comparisons
of results are not necessarily indicative of results for future periods.
Percentage of revenues figures are rounded and therefore may not subtotal
exactly.



                                     Three Months Ended September 30,                          Nine Months Ended September 30,
                                  2020                          2019                         2020                          2019
                                         % of                         % of                          % of                          % of
                          Amount       Revenues         Amount      Revenues         Amount       Revenues         Amount       Revenues
                                                                        (dollars in thousands)
Revenues, net            $   6,796           100   %   $ 11,728           100   %   $  22,731           100   %   $  37,652           100   %
Cost of revenues (1)
(2) (3)                      4,323            64          5,567            47          14,253            63          17,307            46
Gross profit                 2,473            36          6,161            53           8,478            37          20,345            54
Operating expenses
Sales and marketing
(1) (2) (3)                  1,491            22          3,732            32           5,683            25          12,453            33
Research and
development (1) (2)
(3)                          3,106            46          3,872            33           9,881            43          13,427            36
General and
administrative (1) (3)       2,131            31          2,631            22           6,123            27           8,129            22
Total operating
expenses                     6,728            99         10,235            87          21,687            95          34,009            90
Loss from operations        (4,255 )         (63 )       (4,074 )         (35 )       (13,209 )         (58 )       (13,664 )         (36 )
Other income, net              111             2            640             5           1,117             5           1,712             5
Loss before benefit
from income taxes           (4,144 )         (61 )       (3,434 )         (29 )       (12,092 )         (53 )       (11,952 )         (32 )
Benefit from income
taxes                          (72 )          (1 )         (161 )          (1 )          (568 )          (2 )           (70 )           -
Net loss                 $  (4,072 )         (60 ) %   $ (3,273 )         (28 ) %   $ (11,524 )         (51 ) %   $ (11,882 )         (32 ) %



(1) Stock-based compensation expense included in the unaudited condensed

    consolidated statements of operations data above was as follows:




                                           Three Months Ended September 30,               Nine Months Ended September 30,
                                            2020                      2019                2020                      2019
                                                                           (in thousands)
Cost of revenues                       $           (19 )         $           127     $           204           $           394
Sales and marketing                                 24                       155                 283                       540
Research and development                           123                       266                 507                       816
General and administrative                          67                       105                 214                       350




                                       23
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(2) Amortization of intangible assets included in the unaudited condensed

    consolidated statements of operations data above was as follows:




                                           Three Months Ended September 30,             Nine Months Ended September 30,
                                           2020                     2019                2020                      2019
                                                                          (in thousands)
Cost of revenues                       $          -           $             234     $          47           $            702
Sales and marketing                               -                           -                 -                         64
Research and development                          -                         234                48                        702



(3) Restructuring related expenses included in the unaudited condensed

    consolidated statements of operations data above were as follows:




                                           Three Months Ended September 30,              Nine Months Ended September 30,
                                             2020                      2019              2020                      2019
                                                                           (in thousands)
Cost of revenues                       $             529           $          -     $           522           $             6
Sales and marketing                                  214                      -                 264                       223
Research and development                             185                      -                 185                         -
General and administrative                           123                      -                 123                         -




Adjusted EBITDA

Adjusted EBITDA is a financial measure not calculated in accordance with
generally accepted accounting principles in the United States ("GAAP"). We
define Adjusted EBITDA as net loss, adjusted for stock-based compensation
expense, depreciation, the amortization of internally developed software,
intangible assets, the capitalization of internally developed software, the
impairment of goodwill and long-lived assets, interest expense, net, the benefit
from or provision for income taxes, other income or expenses, net and the
non-recurring costs or gains associated with acquisitions, divestitures and
restructurings. Adjusted EBITDA for prior periods has been adjusted to conform
to current period presentation. Adjusted EBITDA should not be considered as an
alternative to net loss, operating loss or any other measure of financial
performance calculated and presented in accordance with GAAP. We prepare
Adjusted EBITDA to eliminate the impact of items that we do not consider
indicative of our core operating performance. Investors are encouraged to
evaluate these adjustments and the reasons we consider them appropriate.

We believe Adjusted EBITDA is useful to investors in evaluating our operating performance for the following reasons:

• Adjusted EBITDA is widely used by investors and securities analysts to

measure a company's operating performance without regard to items such as

stock-based compensation expense, depreciation and amortization,

capitalized software development costs, interest expense, net, benefit

        from or provision for income taxes, other income or expenses, net and
        costs or gains associated with acquisitions, divestitures and
        restructurings, that can vary substantially from company to company

depending upon their financing, capital structures and the method by which

assets were acquired;

• Our management uses Adjusted EBITDA in conjunction with GAAP financial

measures for planning purposes, including the preparation of our annual

        operating budget, as a measure of operating performance and the
        effectiveness of our business strategies and in communications with our
        Board of Directors concerning our financial performance; and

• Adjusted EBITDA provides consistency and comparability with our past

financial performance, facilitates period-to-period comparisons of

operations and also facilitates comparisons with other peer companies,

        many of which use similar non-GAAP financial measures to supplement their
        GAAP results.


We understand that although Adjusted EBITDA is widely used by investors and
securities analysts in their evaluations of companies, it has limitations as an
analytical tool, and investors should not consider it in isolation or as a
substitute for analysis of our results of operations as reported under GAAP.
These limitations include:

• Depreciation and amortization are non-cash charges, and the assets being

depreciated or amortized will often have to be replaced in the future;

        however, Adjusted EBITDA does not reflect any cash requirements for these
        replacements;

• Adjusted EBITDA does not reflect changes in, or cash requirements for, our

working capital needs or contractual commitments;

• Adjusted EBITDA does not reflect cash requirements for income taxes and

the cash impact of other income or expense; and



    •   Other companies may calculate Adjusted EBITDA differently than we do,
        limiting its usefulness as a comparative measure.


                                       24
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The following table presents a reconciliation of net loss, the most comparable GAAP measure, to Adjusted EBITDA for each of the periods indicated:




                                          Three Months Ended September 30,            Nine Months Ended September 30,
                                             2020                  2019                 2020                   2019
                                                                         (in thousands)
Net loss                                $        (4,072 )$        (3,273 )$        (11,524 )$        (11,882 )
Depreciation                                        366                   494                1,661                  1,475
Amortization of internally developed
software                                            648                 1,057                2,330                  2,762
Amortization of intangible assets                     -                   468                   95                  1,468
Benefit from income taxes                           (72 )                (161 )               (568 )                  (70 )
Stock-based compensation expense                    195                   653                1,208                  2,100
Capitalization of internally
developed software                                 (484 )              (1,004 )             (1,442 )               (1,874 )
Restructuring related expenses                    1,051                     -                1,094                    229
Other income, net                                  (111 )                (640 )             (1,117 )               (1,712 )
Adjusted EBITDA                         $        (2,479 )$        (2,406 )   $         (8,263 )     $         (7,504 )




   Comparison of the Three and Nine Months Ended September 30, 2020 and 2019

Revenues, net



                            Three Months Ended September 30,                 Change                 Nine Months Ended September 30,                  Change
                             2020                    2019                $            %               2020                    2019                $            %
                                                                                   (dollars in thousands)
Revenues, net            $       6,796$        11,728$ (4,932 )       (42 ) %   $       22,731$       37,652$ (14,921 )       (40 ) %




Revenues, net, for the three and nine months ended September 30, 2020 decreased
$4.9 million and $14.9 million, or 42% and 40%, respectively, as compared to the
corresponding period in 2019. During the preceding 12 months, we experienced
ongoing customer turnover that was not fully offset by new customer bookings.
Since mid-March 2020, some of our customers have reduced the amount of digital
advertising spend that they manage using our product due to the impact of the
COVID-19 pandemic. Additionally, in November 2019, we divested our Perfect
Audience business which contributed $0.7 million and $2.2 million of revenues,
net for the three months and nine months ended September 30, 2019, respectively.
Revenues, net are inclusive of $2.3 million and $3.0 million for the three
months ended September 30, 2020 and 2019, respectively, and $6.8 million and
$9.0 million for the nine months ended September 30, 2020 and 2019,
respectively, from the Google Revenue Share Agreement as described in Note 2 to
the condensed consolidated financial statements.

Revenues, net from our customers located in the United States represented 74%
and 75% of total revenues, net for the three months ended September 30, 2020 and
2019, respectively and 75% for the nine months ended September 30, 2020 and
2019. Revenues, net from the Google Revenue Share Agreement accounted for 34%
and 26% of total revenues, net for the three months ended September 30, 2020 and
2019, respectively and 30% and 24% of total revenues, net for the nine months
ended September 30, 2020 and 2019, respectively. There were no other customers
that accounted for 10% or greater of our revenues, net for the three and nine
months ended September 30, 2020 and 2019.

Cost of Revenues and Gross Margin



                                Three Months Ended September 30,                    Change                 Nine Months Ended September 30,                  Change
                                2020                        2019                $            %               2020                    2019                $            %
                                                                                         (dollars in thousands)
Cost of revenues           $         4,323             $         5,567       $ (1,244 )       (22 ) %   $       14,253$       17,307$  (3,054 )       (18 ) %
Gross profit                         2,473                       6,161         (3,688 )       (60 )              8,478                  20,345         (11,867 )       (58 )
Gross profit percentage                 36     %                    53   %                                          37    %                 54   %




Cost of revenues for the three and nine months ended September 30, 2020
decreased $1.2 million and $3.1 million, respectively, or 22% and 18%,
respectively, as compared to the corresponding periods in 2019. These decreases
were primarily driven by a reduction in the number of global services and cloud
infrastructure personnel, which for the three and nine months ended September
30, 2020 led to a decrease of $0.6 and $1.3 million, respectively, in
compensation and benefits expense, including stock-based compensation expense,
as compared to the same period in 2019. This reduction in headcount also
contributed to decreases in allocated facilities and information technology
costs of $0.1 million and $0.3 million for the three and nine months ended
September 30, 2020, respectively. We also experienced decreases of $0.2 million
and $0.8 million in hosting costs during the three and nine months ended
September 30, 2020, respectively, due to a decline in the usage of our hosted
platform from the corresponding periods in 2019. Our amortization of intangible
assets declined $0.2 million and $0.7 million for the

                                       25

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three and nine months ended September 30, 2020, respectively, from the
corresponding periods in 2019, as certain intangible assets became fully
amortized in in the three months ended March 31, 2020. Additionally, for the
three months ended September 30, 2020, depreciation and amortization of
internally developed software costs decreased by $0.5 million, due primarily to
the timing of the capitalization of certain internal projects, as compared to
the corresponding period in 2019. For the nine months ended September 30, 2020,
amortization of internally developed software costs decreased by $0.4 million,
due primarily to the timing of the capitalization of certain internal projects,
as compared to the corresponding period in 2019. Partially offsetting these
decreases were costs related to our 2020 Restructuring Plan of $0.5 million for
the three and nine months ended September 30, 2020 and, for the nine months
ended September 30, 2020, an increase of $0.3 million in depreciation due to a
non-recurring depreciation adjustment in the three months ended March 31, 2020.

We expect cost of revenues to decrease year-over-year in absolute dollars as savings from the 2020 Restructuring Plan are realized and we continue our efforts to realign our cost structure with our revenues.


Our gross margin decreased to 36% and 37% for the three and nine months ended
September 30, 2020, respectively, as compared to 53% and 54% for the
corresponding periods in 2019. This was primarily due to our revenues, net,
declining at a faster rate than the corresponding decrease in costs, in part due
to the timing of revenue recognition from the Google Revenue Share Agreement.

Sales and Marketing



                                Three Months Ended September 30,                    Change              Nine Months Ended September 30,               Change
                                2020                        2019                $            %              2020                 2019             $            %
                                                                                      (dollars in thousands)
Sales and marketing        $         1,491             $         3,732       $ (2,241 )       (60 ) %   $       5,683$  12,453$ (6,770 )       (54 ) %
Percent of revenues, net                22     %                    32   %                                         25    %            33   %




Sales and marketing expenses for the three and nine months ended September 30,
2020 decreased $2.2 million and $6.8 million, respectively, or 60% and 54%,
respectively, as compared to the corresponding periods in 2019. These decreases
were primarily due to a reduction in global sales support and marketing
headcount, contributing to net decreases for the three and nine months ended
September 30, 2020 of $1.7 million and $4.3 million, respectively, in
personnel-related costs and $0.4 million and $1.1 million, respectively, in
equipment and allocated facilities and information technology costs. The
decreases are also a result of reduced marketing costs during the three and nine
months ended September 30, 2020 of $0.2 million and $0.9 million, respectively,
as we eliminated or shifted the timing of certain of our marketing activities.
Partially offsetting these decreases was $0.2 million in costs related to our
2020 Restructuring Plan in the three months ended September 30, 2020.

We expect sales and marketing expenses to decrease year-over-year in absolute
dollars as savings from the 2020 Restructuring Plan are realized and we continue
our efforts to realign our cost structure with our revenues.

Research and Development



                                Three Months Ended September 30,                   Change              Nine Months Ended September 30,               Change
                                2020                        2019                $           %              2020                 2019             $            %
                                                                                     (dollars in thousands)
Research and development   $         3,106             $         3,872       $  (766 )       (20 ) %   $       9,881$  13,427$ (3,546 )       (26 ) %
Percent of revenues, net                46     %                    33   %                                        43    %            36   %




Research and development expenses for the three and nine months ended September
30, 2020 decreased $0.8 million and $3.5 million, respectively, or 20% and 26%,
respectively, as compared to the corresponding periods in 2019. The decreases
were primarily due to a reduction in the number of full-time research and
development personnel, resulting in decreases of $1.1 million and $2.9 million,
respectively, in compensation expense and $0.1 million and $0.4 million,
respectively, in allocated facilities and information technology costs as
compared to the corresponding periods in 2019. Additionally, amortization
expense related to our intangible assets declined $0.2 million and $0.7 million,
respectively, as our intangible assets became fully amortized during the three
months ended March 31, 2020. Partially offsetting these changes was a reduction
in the amount capitalized to internally developed software of $0.5 million and
$0.4 million for the three and nine months ended September 30, 2020,
respectively, and $0.2 million in costs related to our 2020 Restructuring Plan
for the three and nine months ended September 30, 2020.

                                       26

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We expect research and development expenses to decrease year-over-year in absolute dollars as savings from the 2020 Restructuring Plan are realized and we continue our efforts to realign our cost structure with our revenues.


General and Administrative



                                  Three Months Ended September 30,                   Change                 Nine Months Ended September 30,                  Change
                                  2020                        2019                $           %               2020                      2019             $            %
                                                                                          (dollars in thousands)
General and administrative   $         2,131             $         2,631       $  (500 )       (19 ) %   $         6,123             $    8,129$ (2,006 )       (25 ) %
Percent of revenues, net                  31     %                    22   %                                          27     %               22   %




General and administrative expenses for the three and nine months ended
September 30, 2020 decreased $0.5 million and $2.0 million, respectively, or 19%
and 25%, respectively, as compared to the corresponding periods in 2020.
Compensation and benefits expense for the three and nine months ended September
30, 2020 decreased by $0.5 million and $1.6 million, respectively, as compared
to the corresponding periods in 2019, primarily due to a reduction in headcount.
Bad debt expense also decreased by $0.2 million for the three and nine months
ended September 30, 2020, and, for the nine months ended September 30, 2020, our
professional services fees decreased $0.4 million as we reduced the number of
contractors and the scope of our activities with consultants and other advisors.

We expect our general and administrative expenses to decrease year-over-year in
absolute dollars as savings from the 2020 Restructuring Plan are realized and we
continue our efforts to realign our cost structure with our revenues.

Other Income, Net



                          Three Months Ended September 30,                Change             Nine Months Ended September 30,             Change
                           2020                      2019              $          %            2020                  2019             $           %
                                                                             (dollars in thousands)
Other income, net      $         111             $         640       $ (529 )      (83 ) %   $   1,117$   1,712$  (595 )       (35 ) %




Other income, net, primarily consists of sublease income recorded under
agreements for portions of our San Francisco and our Portland office spaces,
with terms through July 2022 and May 2020, respectively, as well as foreign
currency transaction gains and losses and interest income and expense. For the
three months ended September 30, 2020 and 2019, we earned sublease income of
$0.2 million and $0.6 million, respectively. For the nine months ended September
30, 2020 and 2019, we earned sublease income of $1.3 million and $1.7 million,
respectively. Foreign currency transaction gains and losses and interest income
and expense were not material for the three and nine months ended September 30,
2020 and 2019.

Benefit from Income Taxes



                                Three Months Ended September 30,                Change              Nine Months Ended September 30,              Change
                                2020                      2019               $          %            2020                    2019             $          %
                                                                                   (dollars in thousands)
Benefit from income taxes   $        (72 )           $          (161 )     $   89        (55 ) %   $    (568 )$        (70 )$ (498 )      711   %




The benefit from income taxes totaled $0.1 million and $0.6 million for the
three and nine months ended September 30, 2020, respectively, primarily due to a
partial release of foreign uncertain tax positions and profits earned by our
wholly owned foreign subsidiaries.

                        Liquidity and Capital Resources

Since our incorporation in March 2006, we have relied primarily on sales of our
capital stock to fund our operating activities. From incorporation until our
initial public offering ("IPO") we raised $105.7 million, net of related
issuance costs, in funding through private placements of our preferred stock. In
March and April 2013, we raised net proceeds of $109.3 million in our IPO. From
time to time, we have also utilized equipment lines and entered into finance
lease arrangements to fund capital purchases. As of September 30, 2020, our
principal source of liquidity was our unrestricted cash and cash equivalents of
$8.0 million. Our primary operating cash requirements include the payment of
compensation and related expenses, as well as costs for our facilities and
information technology infrastructure.

We maintain a $0.9 million irrevocable letter of credit to secure the
non-cancelable lease for our corporate headquarters in San Francisco and a $0.1
million irrevocable letter of credit to secure the non-cancelable lease for our
office in Paris. These balances are reflected as restricted cash on the
consolidated balance sheets of the accompanying condensed consolidated financial
statements.

                                       27
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We maintain cash balances in our foreign subsidiaries. As of September 30, 2020,
we had $8.0 million of unrestricted cash and cash equivalents in aggregate, of
which $1.4 million was held by our foreign subsidiaries. On December 22, 2017,
the United States enacted the Tax Cuts and Jobs Act, or the TCJA, which
instituted fundamental changes to the taxation of multinational corporations.
Among these changes is a mandatory one-time transition tax on the deemed
repatriation of the accumulated earnings of certain of our foreign subsidiaries,
and a tax on earnings of foreign subsidiaries in excess of a specified return on
the subsidiaries' tangible assets, known as the Global Intangible Low-Taxed
Income, or GILTI. We completed our analysis of the accounting for the transition
tax in the fourth quarter of 2018 and there was no tax due as a result of
significant accumulated losses in our foreign subsidiaries. We also determined
that no GILTI inclusion would be required in the fourth quarter of 2019, as our
foreign subsidiaries have accumulated significant losses. If funds held by our
foreign subsidiaries were needed for our U.S. operations, we would be required
to accrue U.S. tax liabilities associated with the repatriation of these funds.
However, given the amount of our net operating loss carryovers in the United
States, such repatriation will most likely not result in material U.S. cash tax
payments within the next year. Additionally, we do not believe that foreign
withholding taxes associated with repatriating these funds would be material.

On March 14, 2019, we filed a shelf registration statement on Form S-3 with the
SEC, which was declared effective by the SEC on May 10, 2019, under which we may
offer our common stock, preferred stock, debt securities, warrants, subscription
rights and units having an aggregate offering price of up to $50.0 million. As
part of the shelf registration statement, we entered into an equity distribution
agreement with JMP Securities LLC, or JMP Securities, under which we may offer
and sell shares of our common stock having an aggregate offering price of up to
$13.0 million through an at-the-market offering program administered by JMP
Securities. We are not required to sell any of our stock under this program. JMP
Securities is entitled to compensation of up to 5.0% of the gross proceeds from
sales of our common stock pursuant to the equity distribution agreement. We
intend to use any net proceeds from the sale of securities under the equity
distribution agreement primarily for working capital and general corporate
purposes. During the three months ended September 30, 2020, we sold 134 thousand
shares of our common stock under the equity distribution agreement, and received
proceeds of $0.2 million, net of offering costs of $9 thousand, at a weighted
average sales price of $1.41 per share. For the year ended December 31, 2019, we
sold 658 thousand shares of our common stock under the equity distribution
agreement, and received proceeds of $1.6 million, net of offering costs of $0.2
million, at a weighted average sales price of $2.82 per share. The total amount
of cash that may be generated under this equity distribution agreement is
uncertain and depends on a variety of factors, including market conditions and
the price and trading volume of our common stock. As of September 30, 2020, we
had common stock with an aggregate offering price of up to $10.9 million
available for issuance under the equity distribution agreement. Since September
30, 2020 through October 29, 2020, we sold 1,900 shares of our common stock
under this equity distribution agreement and received proceeds of $5,994, net of
offering costs of $260 at a weighted average sales price of $3.30 per share.

We have incurred significant losses in each fiscal year since our incorporation
in 2006, and we expect to continue to incur losses and negative cash flows over
the next several years. Based on our current and anticipated level of
operations, including our internal forecasts and projections, we believe that
our existing cash, cash equivalents and restricted cash will be sufficient to
fund our operations for at least the next 12 months. Our ability to achieve our
business objectives and to continue to meet our obligations is dependent upon
maintaining a certain level of liquidity, which could be impacted by several
factors, including market conditions and the effect of the COVID-19 pandemic.
The COVID-19 pandemic has disrupted and continues to disrupt economic markets
and the full economic impact, duration and spread of COVID-19 is uncertain at
this time and difficult to predict considering the rapidly evolving landscape.
Since mid-March 2020, some of our customers have reduced the amount of digital
advertising spend that they manage using our products, which has had an adverse
effect on our results of operations, and some of our customers have requested
extended payment terms, reduced fees or fee waivers, early contract terminations
and other forms of contract relief. Although we have pursued and expect to
continue to pursue additional sources of liquidity, including additional equity
and debt financing, there is no assurance that any additional financing will be
available on acceptable terms, or at all. During the three months ended
September 30, 2020, we commenced a restructuring plan that included a global
reduction-in-force and other cost saving actions to reduce our operating
expenses and address the impact of the COVID-19 pandemic on our business (the
"2020 Restructuring Plan"). The 2020 Restructuring Plan is expected to result in
the reduction of our global workforce by approximately 60 employees,
approximately half of which are located outside of the United States. We
completed the majority of the workforce reductions during the three months ended
September 30, 2020 and recognized $1.1 million in restructuring charges. Our
ability to continue as a going concern is dependent upon our ability to manage
our cash flows, improve customer retention rates, increase new bookings and
reduce our expenses.

In May 2020, we entered into a loan agreement with a lender for the loan in an
aggregate principal amount of $3.3 million (the "Loan") pursuant to the Paycheck
Protection Program (the "PPP") under the Coronavirus Aid, Relief, and Economic
Security (CARES) Act. We received the Loan proceeds on May 12, 2020. We expect
to apply to the Lender for forgiveness of approximately $2.8 million due under
the Loan, but no assurances can be provided as to the amount or timing of any
potential Loan forgiveness.

                                       28

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