UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No. 1)
For the fiscal year ended
OR
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
(Address of principal executive offices)
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Securities registered pursuant to section 12(g) of the Act:
Not applicable
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of Act. Yes ☐
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No
Based on the closing price of the registrant’s Common Stock on The Nasdaq Global Market of $0.59 on the last business day of the registrant’s most recently completed second fiscal quarter, which was June 30, 2023, the aggregate market value of its shares held by non-affiliates was approximately $
As of February 15, 2024, there were approximately
EXPLANATORY NOTE
This Form 10-K/A consists solely of the cover page, this explanatory note, Part II. Item 8. “Financial Statements and Supplementary Data” in its entirety, Part IV. Item 15. “Exhibits and Financial Statement Schedules” in its entirety, the signature page, and the new certifications from the Company’s Principal Executive Officer and Principal Financial Officer.
This Form 10-K/A speaks as of the date of the Original Filing and does not reflect events that may have occurred after the date of the Original Filing. This Form 10-K/A does not modify or update in any way the disclosures made in the Original Filing, except as described above, and should be read in conjunction with the Original Filing and with the Company’s subsequent filings with the SEC.
2
MARIN SOFTWARE INCORPORATED
TABLE OF CONTENTS
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PART II. |
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4 |
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Item 8. |
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4 |
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5 |
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Item 15. |
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5 |
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28 |
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PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information in response to this item is included in our consolidated financial statements, together with the report thereon of Grant Thornton LLP, in Item 15 of this Form 10-K/A under the heading “Exhibits, Financial Statement Schedules,” and in Item 7 of the Original Filing under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
4
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(1) Financial Statements
The following financial statements are presented in response to Part II, Item 8, under the heading “Financial Statements and Supplementary Data”:
Report of Grant Thornton LLP, Independent Registered Public Accounting Firm (PCAOB ID Number
Consolidated Statements of Comprehensive Loss
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
The supplementary financial information required by Item 8 is included in Part II, Item 7 of the Original Filing under the heading “Quarterly Results of Operations Data,” which is incorporated herein by reference.
(2) Financial Statement Schedules
All schedules are omitted because they are not applicable, not required or the information is included in the accompanying consolidated financial statements or notes thereto.
(3) Exhibits
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Incorporated by Reference |
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Exhibit |
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Description of Document |
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Form |
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File No. |
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Exhibit |
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Filing Date |
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Filed Herewith |
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1.1 |
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8-K |
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001-35838 |
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1.3 |
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8/3/2021 |
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2.1 |
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Asset Purchase Agreement by and among the Registrant and SharpSpring, Inc. dated November 21, 2019. |
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8-K |
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001-35838 |
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99.1 |
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11/21/2019 |
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3.1 |
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10-Q |
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001-35838 |
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3.1 |
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5/9/2013 |
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3.2 |
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8-K |
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001-35838 |
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3.1 |
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3/22/2022 |
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3.3 |
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8-K |
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001-35838 |
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3.1 |
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10/5/201717 |
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4.1 |
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S-1/A |
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333-186669 |
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4.1 |
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3/15/2013 |
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4.2 |
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Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934. |
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10-K |
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001-35838 |
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4.2 |
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3/23/2020 |
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10.1 |
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10-K |
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001-35838 |
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10.1 |
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3/1/2019 |
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10.2# |
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2006 Equity Incentive Plan and forms of stock option agreement and stock option exercise agreement. |
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S-1 |
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333-186669 |
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10.2 |
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2/13/2013 |
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10.3# |
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S-1/A |
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333-186669 |
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10.3 |
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3/4/2013 |
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10.4# |
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2013 Employee Stock Purchase Plan and form of subscription agreement. |
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S-1/A |
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333-186669 |
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10.4 |
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3/4/2013 |
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10.5# |
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S-1/A |
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333-186669 |
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10.9 |
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3/11/2013 |
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10.6# |
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10-K |
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001-35838 |
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10.11 |
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2/20/2015 |
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10.7# |
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10-K |
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001-35838 |
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10.9 |
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2/24/2022 |
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10.8# |
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10-Q |
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001-35838 |
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10.4 |
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11/5/2015 |
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10.9# |
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Offer Letter, dated as of August 23, 2016, by and between the Registrant and Christopher A. Lien. |
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10-Q |
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001-35838 |
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10.1 |
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11/9/2016 |
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10.10† |
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Revenue Share Agreement, dated December 11, 2019, by and between the Registrant and Google LLC. |
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10-K |
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001-35838 |
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10.16 |
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3/14/2019 |
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10.11# |
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Offer Letter, dated August 23, 2016, by and between the Registrant and Wister Walcott. |
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10-K |
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001-35838 |
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10.17 |
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3/14/2019 |
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10.12# |
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Offer Letter, dated December 5, 2019, by and between the Registrant and Robert Bertz. |
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10-K |
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001-35838 |
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10.18 |
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3/23/2020 |
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10.13# |
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10-K |
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001-35838 |
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10.17 |
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2/26/2021 |
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10.14 |
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10-K |
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001-35838 |
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10.20 |
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3/23/2020 |
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10.15# |
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Form of Waiver under Change in Control and Severance Agreement |
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8-K |
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001-35838 |
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99.1 |
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5/21/2020 |
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10.16† |
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10-Q |
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001-35838 |
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10.21 |
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11/4/2021 |
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10.17# |
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10-Q |
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001-35838 |
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10.1 |
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5/4/2023 |
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10.18# |
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S-8 |
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333-273818 |
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4.6 |
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8/8/2023 |
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10.19# |
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Amended and Restated 2013 Employee Stock Purchase Plan and form of subscription agreement. |
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10-Q |
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001-35838 |
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10.2 |
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5/4/2023 |
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10.20# |
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S-8 |
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333-273818 |
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4.8 |
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8/8/2023 |
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10.21# |
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10-Q |
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001-35838 |
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10.3 |
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5/4/2023 |
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21.1 |
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10-K |
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001-35838 |
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21.1 |
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2/23/2024 |
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23.1 |
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Consent of Grant Thornton LLP, independent registered public accounting firm. |
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10-K |
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001-35838 |
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23.1 |
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2/23/2024 |
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31.1 |
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X |
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31.2 |
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X |
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32.1* |
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X |
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32.2* |
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X |
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101.INS |
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Inline XBRL Instance Document |
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10-K |
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001-35838 |
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101.INS |
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2/23/2024 |
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101.SCH |
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Inline XBRL Taxonomy Schema Linkbase Document |
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10-K |
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001-35838 |
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101.SCH |
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2/23/2024 |
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101.CAL |
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Inline XBRL Taxonomy Calculation Linkbase Document |
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10-K |
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001-35838 |
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101.CAL |
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2/23/2024 |
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101.DEF |
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Inline XBRL Taxonomy Definition Linkbase Document |
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10-K |
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001-35838 |
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101.DEF |
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2/23/2024 |
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101.LAB |
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Inline XBRL Taxonomy Labels Linkbase Document |
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10-K |
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001-35838 |
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101.LAB |
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2/23/2024 |
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101.PRE |
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Inline XBRL Taxonomy Presentation Linkbase Document |
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10-K |
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001-35838 |
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101.PRE |
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2/23/2024 |
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104 |
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Cover Page Interactive Date File (formatted as Inline XBRL) |
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X |
* As contemplated by SEC Release No. 33-8212, these exhibits are furnished with this Form 10-K/A and are not deemed filed with the Securities and Exchange Commission and are not incorporated by reference in any filing of the Registrant under the Securities Act of 1933 or the Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in such filings.
# Represents a management contract or compensatory plan.
† Confidential treatment has been granted for portions of this exhibit pursuant to Rule 24b-2 promulgated under the Exchange Act. These portions have been omitted and submitted separately to the Securities and Exchange Commission.
6
Report of Independent Registered Public Accounting Firm
Board of Directors and Shareholders
Marin Software Incorporated
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Marin Software Incorporated (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of comprehensive loss, changes in stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Going concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company incurred a net loss of $22 million during the year ended December 31, 2023, and as of that date, the Company had an accumulated deficit of approximately $344 million and negative operating cash flows. These conditions, along with other matters as set forth in Note 1, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical audit matters
The critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/
We have served as the Company’s auditor since 2018.
February 23, 2024
7
Marin Software Incorporated
Consolidated Balance Sheets
(in thousands, except per share data)
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December 31, |
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2023 |
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2022 |
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Assets: |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Right-of-use assets, operating leases |
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Other non-current assets |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders' Equity: |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Operating lease liabilities |
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Total current liabilities |
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Operating lease liabilities, non-current |
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Other long-term liabilities |
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Total liabilities |
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Stockholders' equity: |
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Convertible preferred stock, $ |
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— |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Accumulated other comprehensive loss |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
8
Marin Software Incorporated
Consolidated Statements of Comprehensive Loss
(in thousands, except per share data)
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Years Ended December 31, |
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2023 |
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2022 |
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Revenues, net |
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$ |
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$ |
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Cost of revenues |
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Gross profit |
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Operating expenses: |
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Sales and marketing |
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Research and development |
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General and administrative |
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Impairment loss on long-lived assets |
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Total operating expenses |
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Loss from operations |
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Other income, net |
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Loss before benefit from income taxes |
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( |
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Income tax expense (benefit), net |
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Net loss |
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( |
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Foreign currency translation adjustments |
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Comprehensive loss |
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$ |
( |
) |
|
$ |
( |
) |
Net loss per share available to common stockholders, basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
Weighted-average shares used to compute net loss per share available to common stockholders, basic and diluted |
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
9
Marin Software Incorporated
Consolidated Statements of Stockholders’ Equity
(in thousands)
|
|
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|
|
|
Accumulated |
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||||||
|
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Additional |
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|
Other |
|
|
Total |
|
||||||
|
|
Common Stock |
|
|
Paid-In |
|
|
Accumulated |
|
|
Comprehensive |
|
|
Stockholders' |
|
|||||||||
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Loss |
|
|
Equity |
|
||||||
Balances at December 31, 2021 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Issuance of common stock through at-the-market offering, net of offering costs of $ |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||||
Issuance of common stock from vesting of restricted stock units (Note 3) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Tax withholding related to vesting of restricted stock units |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Issuance of common stock under employee stock purchase plan |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||||
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Foreign currency translation adjustments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Balances at December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||||
Issuance of common stock from vesting of restricted stock units (Note 3) |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Tax withholding related to vesting of restricted stock units |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Issuance of common stock under employee stock purchase plan |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Foreign currency translation adjustments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balances at December 31, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
The accompanying notes are an integral part of these consolidated financial statements.
10
Marin Software Incorporated
Consolidated Statements of Cash Flows
(in thousands)
|
|
Years Ended December 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Operating activities: |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash used in operating activities |
|
|
|
|
|
|
||
Depreciation |
|
|
|
|
|
|
||
Amortization of internally developed software |
|
|
|
|
|
|
||
Amortization of right-of-use assets |
|
|
|
|
|
|
||
Amortization of deferred costs to obtain and fulfill contracts |
|
|
|
|
|
|
||
Forgiveness of Paycheck Protection Program loan |
|
|
|
|
|
( |
) |
|
Impairment on long-lived assets |
|
|
|
|
|
— |
|
|
Loss on disposals of property and equipment and right-of-use assets |
|
|
|
|
|
|
||
Unrealized foreign currency losses |
|
|
|
|
|
|
||
Stock-based compensation related to equity awards |
|
|
|
|
|
|
||
Provision for bad debts |
|
|
( |
) |
|
|
|
|
Deferred income tax benefits |
|
|
( |
) |
|
|
|
|
Changes in operating assets and liabilities |
|
|
|
|
|
|
||
Accounts receivable |
|
|
|
|
|
|
||
Prepaid expenses and other assets |
|
|
|
|
|
( |
) |
|
Accounts payable |
|
|
( |
) |
|
|
|
|
Accrued expenses and other liabilities |
|
|
( |
) |
|
|
( |
) |
Operating lease liabilities |
|
|
( |
) |
|
|
( |
) |
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
Investing activities: |
|
|
|
|
|
|
||
Purchases of property and equipment |
|
|
|
|
|
( |
) |
|
Capitalization of internally developed software |
|
|
( |
) |
|
|
( |
) |
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Financing activities: |
|
|
|
|
|
|
||
Proceeds from issuance of common shares through at-the-market offering, net of offering costs |
|
|
|
|
|
|
||
Repayment of Paycheck Protection Program loan |
|
|
|
|
|
( |
) |
|
Employee taxes paid for withheld shares upon equity award settlement |
|
|
( |
) |
|
|
( |
) |
Proceeds from employee stock purchase plan, net |
|
|
( |
) |
|
|
|
|
Net cash (used in)/provided by financing activities |
|
|
( |
) |
|
|
|
|
Effect of foreign exchange rate changes on cash and cash equivalents |
|
|
|
|
|
|
||
Net decrease in cash and cash equivalents |
|
|
( |
) |
|
|
( |
) |
Cash and cash equivalents: |
|
|
|
|
|
|
||
Beginning of year |
|
|
|
|
|
|
||
End of year |
|
$ |
|
|
$ |
|
||
Supplemental disclosures of other cash flow information: |
|
|
|
|
|
|
||
Cash paid for (received from) income taxes |
|
|
|
|
$ |
|
||
Supplemental disclosures of non-cash investing and financing activities: |
|
|
|
|
|
|
||
Forgiveness of Paycheck Protection Program loan |
|
|
|
|
$ |
|
||
Issuance of common stock under employee stock purchase plan |
|
$ |
|
|
$ |
|
The accompanying notes are an integral part of these consolidated financial statements.
11
Marin Software Incorporated
Notes to Consolidated Financial Statements
(dollars and share numbers in thousands, except per share data)
1. Organization and Summary of Significant Accounting Policies
Organization
Marin Software Incorporated ("Marin", "Marin Software", or the “Company”) was incorporated in Delaware in March 2006. The Company provides enterprise marketing software for advertisers and agencies to integrate, align and amplify their digital advertising spend across the web and mobile devices. Offered as a unified software-as-a-service (“SaaS”) advertising management solution for search, social and eCommerce advertising, the Company’s platform helps digital marketers convert precise audiences, improve financial performance and make better decisions.
References to “2023” and “2022” shall mean the years ended December 31, 2023 and 2022, respectively. All amounts presented in these notes to the consolidated financial statements are in thousands, except where noted.
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated upon consolidation.
Reclassifications
Certain prior fiscal year balances have been reclassified to conform to the current fiscal year presentation.
Accounting Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company is subject to uncertainties such as the impact of future events, economic and political factors and changes in the Company’s business environment; therefore, actual results could differ from these estimates. Accordingly, the accounting estimates used in the preparation of the Company’s financial statements will change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. Changes in estimates are made when circumstances warrant. Such changes in estimates and refinements in estimation methodologies are reflected in reported results of operations and if material, the effects of changes in estimates are disclosed in the notes to the consolidated financial statements. Significant estimates and assumptions by management affect the allowances for doubtful accounts and customer revenue credits, and the accounting for income taxes.
Liquidity and Going Concern
The Company has incurred significant losses in each fiscal year since its incorporation in 2006, and management expects such losses to continue in the future. The Company incurred net losses of $
In July 2023, the Company commenced a restructuring plan that included a global reduction-in-force and other cost saving actions to reduce its expenses (the "2023 Restructuring Plan").
The Company’s ability to achieve its business objectives, and to continue to meet its obligations, is dependent upon maintaining a certain level of liquidity, which is impacted by several factors, such as its ability to manage its cash flows, including the effectiveness of cost saving measures that the Company has implemented in the second half of 2023, its ability to maintain its strategic partnerships, its ability to increase new bookings, the extent of customer acceptance, retention and use of its MarinOne platform, and general macroeconomic conditions such as inflation or the extent and duration of any recession. Although the Company has pursued, and may 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. Failure to manage its cash flows, improve customer retention rates, or raise additional capital would have a material adverse effect on the Company’s ability to achieve its intended business objectives.
12
Based on the funds the Company has available as of the date of the filing of this Form 10-K/A and its history of recurring losses and negative operating cash flows, there is substantial doubt raised about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is substantially dependent upon its ability to achieve its intended business objectives. If the Company is unable to achieve its intended business objectives, it is probable that the Company may be required to initiate further cost savings activities, extend payment terms with suppliers, liquidate assets where possible, or wind-up operations. These actions could materially impact the Company’s business, results of operations and future prospects. Therefore, there is substantial doubt about the Company’s ability to continue as a going concern for one year after the filing date of the accompanying consolidated financial statements.
The accompanying consolidated financial statements have been prepared assuming the Company will continue to operate as a going concern and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the Company’s uncertainty related to its ability to continue as a going concern. These adjustments could materially impact the Company’s accompanying consolidated financial statements.
In August 2021, the Company filed a new shelf registration statement on Form S-3 with the SEC, which was declared effective by the SEC on August 19, 2021 and provides that the Company may offer its common stock, preferred stock, debt securities, warrants, subscription rights and units having an aggregate offering price of up to $
The Company is not aware of any specific event or circumstance that would require it to update its estimates, judgments or revise the carrying value of its assets or liabilities. These estimates may change, as new events occur and additional information is obtained, and are recognized in the consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to the Company’s accompanying consolidated financial statements.
Revenue Recognition
The Company generates revenues principally from subscriptions either directly with advertisers or with advertising agencies to its platform for the management of search, social and eCommerce advertising. The Company also generates revenues from strategic agreements with certain leading publishers. Under these strategic agreements, the Company receives consideration based on a percentage of the search advertising spend that customers manage on its platform. Revenues are recognized when control of these services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. Refer to Note 2 for further discussion on the Company's revenues.
Cost of Revenues
Cost of revenues primarily consists of costs related to hosting the Company’s cloud-based platform, providing implementation and ongoing customer support, data communications expenses, salaries and benefits of operations and support personnel, software license fees, costs associated with website development activities, indirect overhead, amortization expense associated with capitalized internally developed software and property and equipment depreciation.
Stock-Based Compensation Expense
Stock-based compensation expense is measured at grant date based on the fair value of the award and is expensed on a straight-line basis over the requisite service period. Restricted stock units (“RSUs”) are measured based on the fair market values of the underlying common stock on the dates of grant. Shares of common stock are issued on the vesting dates. Fair values of stock option awards are determined on the date of grant using the Black-Scholes option-pricing model. In applying this option-pricing model, the Company’s determination of the fair value of the stock option award on the date of grant is affected by the Company’s fair value of its common stock, as well as assumptions regarding a number of subjective variables. These variables include, but are not limited to, the Company’s expected stock price volatility, actual and projected stock option exercise behaviors and risk-free interest rate.
For stock option and RSU awards with time-based vesting, the Company recognizes stock-based compensation expense over the requisite service period using the straight-line method, based on awards ultimately expected to vest. The Company recognizes forfeitures on stock options and RSU awards as they occur. Refer to Note 3 for further information.
13
Impairment of Long-Lived Assets
The Company evaluates long-lived assets for potential impairment whenever adverse events or changes in circumstances or business climate indicate that expected undiscounted future cash flows related to such long-lived assets may not be sufficient to support the net book value of such assets. An impairment loss is recognized only if the carrying value of the long-lived asset, or asset group, is not recoverable and exceeds its fair value. The carrying value of the long-lived asset, or asset group, is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the long-lived asset, or asset group. Refer to Note 7 for further information.
Research and Development
Research and development costs are expensed as incurred, except for certain internal software development costs, which may be capitalized as noted above. Research and development costs consist of personnel costs, including salaries, stock-based compensation expense, benefits and bonuses, as well as non-personnel costs such as professional fees payable to third-party development resources, amortization of intangible assets and allocated overhead costs.
Advertising and Promotion
Advertising and promotional costs are expensed as incurred and included in sales and marketing expense in the accompanying consolidated statements of comprehensive loss. Advertising and promotion expense totaled $
Employee Benefit Plans
The Company sponsors a 401(k) defined contribution plan (the "401(k) Plan") covering all employees in the United States and a statutorily required defined contribution pension plan (the "DCP Plan") covering all employees in the United Kingdom. The Company made contributions of $
Sales Taxes
Sales and other taxes collected from customers and remitted to governmental authorities are presented on a net basis and thus excluded from revenues.
Foreign Currency
For international subsidiaries whose functional currency is not the U.S. Dollar, the Company re-measures the monetary assets and liabilities of these subsidiaries to U.S. Dollars using rates of exchange in effect at the balance sheet date. Nonmonetary assets and liabilities are re-measured to U.S. Dollars using historical exchange rates, and other accounts are re-measured using average exchange rates in effect during each period presented. The effects of foreign currency translation adjustments are included in stockholders’ equity as a component of accumulated other comprehensive loss on the accompanying consolidated balance sheets, and related periodic movements are summarized as a line item in the consolidated statements of comprehensive loss.
The Company records net gains and losses resulting from foreign exchange transactions as a component of other income, net. Aggregate foreign currency gains (losses) included in determining net loss were $(
Income Taxes
The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between the financial statement and tax basis of assets and liabilities and net operating loss and credit carryforwards using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.
The Company accounts for uncertain tax positions using a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. The Company establishes a liability for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. The Company records an income tax liability, if any, for the difference between the benefit recognized and measured and the tax position taken or expected to be taken on the Company’s tax returns. To the extent that the assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. The liability is adjusted in light of changing facts and circumstances, such as the outcome of a tax audit. The Company recognizes interest and penalties related to uncertain tax positions as income tax expense, though such amounts were
14
Segment Reporting
The Company defines the term “chief operating decision maker” to be the Company's Chief Executive Officer. The Company's Chief Executive Officer reviews the financial information presented on a consolidated basis for purposes of allocating resources and evaluating of financial performance. Accordingly, the Company has determined that it operates as a single reporting and operating segment.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original or remaining maturity from the Company’s date of purchase of 90 days or less to be cash equivalents. Deposits held with financial institutions are likely to exceed the amount of insurance on these deposits. Cash equivalents consist of money market funds which are readily convertible into cash and have original maturity dates of less than three months from the date of their respective purchases. Cash equivalents were $
Allowance for Credit Losses
The allowance for credit losses reflects the Company’s best estimate of probable losses inherent in the Company’s receivables portfolio determined by a forward-looking current expected credit loss model. The Company performs a regular review of its customers’ payment histories and associated credit risks and it generally does not require collateral from its customers. Certain contracts with advertising agencies contain sequential liability provisions, whereby the agency does not have an obligation to pay the Company until payment is received from the agency’s customers. In these circumstances, the Company evaluates the credit worthiness of the agency’s customers, in addition to the agency itself. The Company maintains an allowance for credit losses which reflects its best estimate of potentially uncollectible trade receivables and is based on both specific and general reserves. General reserves are maintained on a collective basis by considering factors such as historical experience, the age of the receivable balances, current economic conditions and a reasonable and supportable forecast of future economic conditions. The allowance for credit losses charges are included as a component of general and administrative expenses.
|
|
Years Ended December 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Balances at beginning of year |
|
$ |
|
|
$ |
|
||
Addition to (reduction in) expense |
|
|
|
|
|
|
||
Write-offs and other deductions |
|
|
( |
) |
|
|
( |
) |
Balances at end of year |
|
$ |
|
|
$ |
|
Revenue Credits
From time to time, the Company provides revenue credits to customers. These typically relate to customer disputes and billing adjustments and are recorded as a reduction of revenues, net. Reserves for these revenue credits are accounted for as variable consideration under authoritative revenue recognition guidance and are estimated based on historical credit activity. As of December 31, 2023 and 2022, the Company recorded an allowance for potential customer revenue credits in the amount of $
Fair Value of Financial Instruments
The Company’s financial instruments, including accounts receivable, accounts payable and accrued expenses are carried at cost, which approximates fair value because of the short-term nature of those instruments. Based on borrowing rates available to the Company and the Company’s credit risk profile, the carrying value of outstanding lease liabilities approximates fair value as well. The Company measures and reports certain financial assets at fair value on a recurring basis, including its investments in money market funds.
The fair value hierarchy prioritizes the inputs into three broad levels, which are:
Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities
Level 2 - Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, or substantially the full term of the financial instrument
Level 3 - Inputs are unobservable inputs based on the Company's assumptions
15
A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.
|
|
December 31, |
|
|||||||||||||||||||||
|
|
2023 |
|
|
2022 |
|
||||||||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Money market funds |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
The Company’s cash equivalents balance as of December 31, 2023 and 2022 consisted of money market funds that are classified as Level 1 financial instruments as they have active markets. The fair value of the Company’s money market funds approximated amortized cost and, as such, there were
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash, cash equivalents and accounts receivable. The Company’s cash and cash equivalents are placed with high-credit-quality financial institutions and issuers, and at times exceed federally insured limits. The Company has not experienced any loss relating to cash and cash equivalents in these accounts. The Company performs periodic credit evaluations of its customers and generally does not require collateral.
As of December 31, 2023 and 2022, accounts receivable from one long-term strategic agreement with Google, as described in Note 2, accounted for
Property and Equipment
Property and equipment are stated at historical cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the related assets. Upon retirement or sale, the cost and related accumulated depreciation are removed from the balance sheet and the resulting gain or loss is reflected in operations. Major additions and improvements are capitalized while repairs and maintenance that do not extend the life of the asset are charged to operations as incurred. Depreciation and amortization expense is allocated to both cost of revenues and operating expenses.
Internally Developed Software
Costs incurred in the development phase are capitalized and amortized over the product’s estimated useful life, which is
Leases
The Company has operating leases for space at a data center and for office space worldwide. New contractual arrangements are evaluated at inception to determine if the contract is or contains a lease. For any contracts that are or contain a lease, the Company determines the appropriate classification of each identified lease as operating or finance. For all identified leases, the Company records the related lease liabilities and right-of-use ("ROU") assets based on the future minimum lease payments over the lease term, which only includes options to renew the lease if it is reasonably certain that the Company will exercise that option. For leases with original terms of 12 months or less, the Company recognizes the lease expense as incurred and does not recognize lease liabilities and ROU assets.
Lease liabilities are measured based on the future minimum lease payments discounted over the lease term. The Company uses the discount rate implicit in the lease whenever that rate is readily determinable. For leases where no such rate is determinable, the Company uses its incremental borrowing rate, or the rate of interest that Company would have to pay to borrow an amount equal to the lease payments, on a collateralized basis over a similar term and in a similar economic environment. Current and non-current operating lease liabilities are presented on the consolidated balance sheet, while current finance lease liabilities are included in accrued expenses and other current liabilities, and non-current finance lease liabilities are included in other long-term liabilities on the consolidated balance sheets.
ROU assets are measured based on the associated lease liabilities, adjusted for any lease incentives such as tenant improvement allowances. ROU assets for operating leases are presented as non-current assets on the consolidated balance sheet, while ROU assets for finance leases are included within property and equipment, net. For operating leases, the Company recognizes the expense for lease payments on straight-line basis over the lease term. Refer to Note 8 for further discussion on the Company’s leases.
16
Borrowings
The Company accounted for its Paycheck Protection Program ("PPP") Loan as debt under the guidance in Accounting Standards Codification 470, Debt. As such, the outstanding amount was reflected as a note payable in the Company’s consolidated balance sheets, the proceeds were reflected under financing activities in the Company’s consolidated statement of cash flows and interest expense was accrued and recognized in the Company’s statement of operations. An aggregate principal amount of $
Recently Adopted Accounting Pronouncements
On January 1, 2023, the Company adopted Accounting Standards Update ("ASU") 2016-13, Financial Instruments – Credit Losses – Measurement of Credit Losses on Financial Instruments (Topic 326), using the modified retrospective transition method. Upon adoption, the Company changed its impairment model to utilize a forward-looking current expected credit losses model in place of the incurred loss methodology for financial instruments measured at amortized cost, primarily the Company’s accounts receivable. The cumulative effect from adoption was immaterial to the Company’s consolidated financial statements.
Recent Accounting Pronouncements Not Yet Effective
In November 2023, the Financial Standards Accounting Board ("FASB") issued ASU 2023-07, Segment Reporting – Improvements to Reportable Segment Disclosures (Topic 280) ("ASU 2023-07"). ASU 2023-07 expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for our annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted. The Company is evaluating the impact of this guidance on its consolidated financial statements and related disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes – Improvements to Income Tax Disclosures (Topic 740) ("ASU 2023-09"). ASU 2023-09 requires enhanced annual disclosures regarding the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 and may be adopted on a prospective or retrospective basis. Early adoption is permitted. The Company is evaluating the impact of this guidance on its consolidated financial statements and related disclosures.
2
Revenue Recognition
The Company determines revenue recognition through the following steps:
Subscriptions
The Company's subscription contracts provide advertisers with access to the Company's advertising management platform. Advertisers do not have the right to take possession of the software supporting the services at any time. These contracts are generally
17
The Company’s subscription services comprise a single stand-ready performance obligation satisfied over time as the advertiser simultaneously receives and consumes the benefit from the Company’s performance. This performance obligation constitutes a series of services that are substantially the same in nature and are provided over time using the same measure of progress. Revenues derived from these arrangements are recognized over time using an output method based upon the passage of time as this provides a faithful depiction of the pattern of transfer of control. Fixed minimum monthly platform fees are recognized ratably over the contract term as the single performance obligation is satisfied. Variable fees are allocated to the distinct month of the series in which they are earned because the terms of the variable payments relate specifically to the outcome from transferring the distinct time increment (month) of service and because such amounts reflect the fees to which the Company expects to be entitled for providing access to the advertising management platform for that period, consistent with the allocation objective of authoritative revenue guidance under ASC 606.
Expected future revenues for subscription services related to performance obligations that are unsatisfied (or partially unsatisfied) as of December 31, 2023 were as follows:
|
|
Subscription Services Revenues |
|
|
|
$ |
|
||
|
|
|
||
Total |
|
$ |
|
The Company applies the optional exemption under ASC 606 and does not disclose the value of unsatisfied performance obligations on subscription contracts with an original term of
Strategic Agreements
The Company has entered into long-term strategic agreements with certain leading search publishers. Under these strategic agreements, the Company receives consideration based on a percentage of the search advertising spend that its customers manage on its platform. These strategic agreements are generally billed on a quarterly basis.
The majority of the Company’s strategic agreement revenue is concentrated in one revenue share agreement executed with Google. The first Google agreement was executed in December 2018, with an effective date of October 1, 2018 and expired in September 2021 (the “Original Google Revenue Share Agreement”). Under the Original Google Revenue Share Agreement, which constituted a single performance obligation, the Company was eligible to receive both fixed and variable revenue share payments based on a percentage of the search advertising spend that is managed through the Company’s platform. The Original Google Revenue Share Agreement required the Company to reinvest a specified percentage of these revenue share payments in its search technology platform to drive innovation. The performance obligation was expected to be satisfied ratably over the two-year contractual term using the output method based upon the passage of time, as Google simultaneously receives and consumes the benefit from the Company’s performance, which provides a faithful depiction of the pattern of transfer of control.
In September 2021, the Company entered into a New Revenue Share Agreement with Google, which agreement has a scheduled three-year term beginning on October 1, 2021 (the "New Google Revenue Share Agreement") and continuing through September 30, 2024. This agreement is similar to the Original Google Revenue Share Agreement in that the Company is eligible to receive fixed and variable revenue share payments based on a percentage of the search advertising spend that is managed through the Company’s platform and in that the Company is required to reinvest a specified percentage of these revenue share payments in its search technology platform to drive innovation. The Company expects to recognize revenues totaling approximately $
The Company evaluates the total amount of variable revenue share payments expected to be earned from the New Google Revenue Share Agreement by using the most likely method, as it believes this method represents the most appropriate estimate for this consideration, based on historical service trends, the individual contract considerations and the Company's best judgment. The Company includes estimates of variable consideration in revenues only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. For the years ended December 31, 2023 and 2022, the Company recognized $
18
Disaggregation of Revenues, net
Revenues, net by geographic area, based on the billing location of the customer, were as follows for the periods presented:
|
|
Years Ended December 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
United States of America |
|
$ |
|
|
$ |
|
||
United Kingdom |
|
|
|
|
|
|
||
Other (1) |
|
|
|
|
|
|
||
Total revenues, net |
|
$ |
|
|
$ |
|
Revenues, net by nature of services performed were as follows for the periods presented:
|
|
Years Ended December 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Subscriptions |
|
$ |
|
|
$ |
|
||
Strategic agreements |
|
|
|
|
|
|
||
Total revenues, net |
|
$ |
|
|
$ |
|
Advertisers from outside of the United States represented
Contract Balances
Accounts receivable, net
The timing of revenue recognition may differ from the timing of invoicing to customers. Accounts receivable are recorded at the invoice amount, net of any allowances for doubtful accounts and revenue credits. A receivable is recognized in the period the Company provides the underlying services or when the right to consideration is unconditional. Included in the balance of accounts receivable, net as of December 31, 2022 was $
Customer advances
In certain situations, the Company receives cash payments from customers in advance of its performance of the underlying services. These advances from customers are included within accrued expenses and other current liabilities on the accompanying consolidated balance sheets.
Costs to Obtain and Fulfill Contracts
The Company capitalizes certain contract acquisition costs, consisting primarily of commissions and related payroll taxes, when customer contracts are signed. The Company also capitalizes certain contract fulfillment costs, consisting primarily of the portion of the payroll and fringe benefits of the Company’s professional services team that relates directly to performing on-boarding and integration services for new and existing customers (collectively, “deferred costs to obtain and fulfill contracts”).
The deferred costs to obtain and fulfill contracts are amortized over the expected period of benefit, which the Company has determined to be approximately
The Company classifies deferred costs to obtain and fulfill contracts as current or non-current based on the timing of when the related amortization expense is expected to be recognized. The current portion of these deferred costs is included in prepaid expenses and other current assets, while the non-current portion is included in other non-current assets on the accompanying consolidated balance sheets.
|
|
Deferred Costs to Obtain Contracts |
|
|
Deferred Costs to Fulfill Contracts |
|
||
Balances at December 31, 2022 |
|
$ |
|
|
$ |
|
||
Costs deferred |
|
|
|
|
|
|
||
Amortization |
|
|
( |
) |
|
|
( |
) |
Balances at December 31, 2023 |
|
$ |
|
|
$ |
|
19
3. Stock-based Compensation
Stock-based Compensation Expense
Stock-based compensation expense was allocated as follows:
|
|
Years Ended December 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
|
|
(in thousands) |
|
|||||
Cost of revenues |
|
$ |
|
|
$ |
|
||
Sales and marketing |
|
|
|
|
|
|
||
Research and development |
|
|
|
|
|
|
||
General and administrative |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
For stock-based awards granted by the Company, stock-based compensation cost is measured as of the grant date based on the fair value of the award and is subsequently expensed over the requisite service period. Stock-based compensation capitalized as internally developed software was $
Equity Award Plans
The Company may grant, or has granted, stock options, restricted stock awards, stock appreciation rights, RSUs, performance awards and stock bonuses under the following equity incentive plans:
2006 Plan
In April 2006, the Company’s Board of Directors (the “Board”) adopted and the stockholders approved the 2006 Stock Option Plan (“2006 Plan”), which provided for the grant of incentive and non-statutory stock options.
2013 Plan
In February 2013 the Board adopted and the stockholders approved the 2013 Equity Incentive Plan (“2013 Plan”), which became effective on March 21, 2013. At that time, the Company ceased to grant equity awards under the 2006 Plan. Under the 2013 Plan,
Amended and Restated Plan
On March 24, 2023, the Board approved the Amended and Restated 2013 Equity Incentive Plan ("Amended and Restated Plan") under which incentive and non-statutory stock options, restricted stock awards, stock appreciation rights, RSUs, performance awards and stock bonuses may be awarded to the Company’s employees, directors, consultants, independent contractors and advisors. Under the Amended and Restated Plan,
Stock Options
Under the 2006 Plan, the 2013 Plan and the Amended and Restated Plan, the term of options granted may not exceed ten years. Unless the terms of an optionee's stock option agreement provide otherwise, if an optionee's service relationship with the Company, or any of its affiliates, ceases for any reason other than disability or death, the optionee may exercise the vested portion of any options for three months after the date of such termination. If an optionee's service relationship with the Company, or any of its affiliates, ceases due to disability or death (or an optionee dies within a certain period following cessation of service), the optionee or a beneficiary may exercise any vested options for a period of 12 months. In no event, however, may an option be exercised beyond the expiration of its term.
20
A summary of stock option activity under the 2006 Plan and the 2013 Plan is as follows:
|
|
Options Outstanding |
|
|||||||||||||
|
|
Number of Shares |
|
|
Weighted Average Exercise Price Per Share |
|
|
Weighted Average Remaining Contract Term (in Years) |
|
|
Aggregate Intrinsic Value |
|
||||
Balance at December 31, 2021 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Options forfeited and cancelled |
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
|
||
Balance at December 31, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Options forfeited and cancelled |
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
|
||
Balance at December 31, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Options exercisable as of December 31, 2023 |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Options vested as of December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Options vested and expected to vest as of December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
There were no grants or exercises of stock options in 2023 or 2022. As of December 31, 2023, there was
RSUs
A summary of RSU activity under the 2013 Plan and Amended and Restated Plan is as follows:
|
|
RSUs Outstanding |
|
|||||
|
|
Number of Shares |
|
|
Weighted Average Grant Date Fair Value Per Unit |
|
||
Granted and unvested at December 31, 2021 |
|
|
|
|
$ |
|
||
RSUs granted |
|
|
|
|
|
|
||
RSUs vested |
|
|
( |
) |
|
|
|
|
RSUs cancelled and withheld to cover taxes |
|
|
( |
) |
|
|
|
|
Granted and unvested at December 31, 2022 |
|
|
|
|
$ |
|
||
RSUs granted |
|
|
|
|
|
|
||
RSUs vested |
|
|
( |
) |
|
|
|
|
RSUs cancelled and withheld to cover taxes |
|
|
( |
) |
|
|
|
|
Granted and unvested at December 31, 2023 |
|
|
|
|
$ |
|
As of December 31, 2023, there was $
Employee Stock Purchase Plan
In February 2013, the Board and stockholders approved the 2013 Employee Stock Purchase Plan (“2013 ESPP”), under which
The Company estimates the fair value of purchase rights under the 2013 ESPP and Amended and Restated ESPP using the Black-Scholes valuation model. The fair value of each purchase right under the 2013 ESPP and Amended and Restated ESPP is estimated on the date of grant using the Black-Scholes option valuation model and the straight-line attribution approach with assumptions substantially similar to those used for the valuation of stock option awards, with the exception of the expected life. The expected life is estimated to be six months, which is consistent with the purchase periods under the 2013 ESPP and Amended and Restated ESPP.
21
4
2023 Restructuring Plan
In the third quarter of 2023, the Company commenced the 2023 Restructuring Plan, which included a global reduction-in-force and other cost saving actions to reduce its operating costs, resulting in the reduction of the Company’s global employees by approximately
During the year ended December 31, 2023, the Company recorded $
2020 Restructuring Plan
In the third quarter of 2020, the Company commenced the implementation of a restructuring and reduction-in-force plan to reduce the Company’s operating costs and address the impact of the COVID-19 pandemic, which ultimately resulted in the reduction of the Company’s global workforce by approximately
For the year ended December 31, 2022, the Company recorded $
5. Net Loss Per Share Available to Common Stockholders
Basic net loss per share of common stock is calculated by dividing the net loss available to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted net loss per share of common stock is computed by dividing the net loss using the weighted-average number of shares of common stock, excluding common stock subject to repurchase, and, if dilutive, potential shares of common stock outstanding during the period. Basic and diluted net loss per share was the same for all periods presented, as the impact of all potentially dilutive securities outstanding was anti-dilutive.
The following table presents the calculation of basic and diluted net loss per share:
|
|
Years Ended December 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Net loss available to common stockholders |
|
$ |
( |
) |
|
$ |
( |
) |
Weighted average number of shares, basic and diluted |
|
|
|
|
|
|
||
Basic and diluted net loss per common share available to common stockholders |
|
$ |
( |
) |
|
$ |
( |
) |
The following table presents the potential shares of common stock outstanding that were excluded from the computation of diluted net loss per share available to common stockholders for the periods presented because including them would have been anti-dilutive:
|
|
Years Ended December 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Options to purchase common stock |
|
|
|
|
|
|
||
Unvested RSUs |
|
|
|
|
|
|
||
Total |
|
|
|
|
|
|
6
The components of the Company’s loss before provision for (benefit from) income taxes are as follows:
|
|
Years Ended December 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
United States of America |
|
$ |
( |
) |
|
$ |
( |
) |
International |
|
|
( |
) |
|
|
|
|
Loss before provision for (benefit from) income taxes |
|
$ |
( |
) |
|
$ |
( |
) |
22
The components of the provision for (benefit from) income taxes were as follows:
|
|
Years Ended December 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Current income tax provision: |
|
|
|
|
|
|
||
State |
|
$ |
|
|
$ |
|
||
Foreign |
|
|
( |
) |
|
|
|
|
Total current income tax provision |
|
|
( |
) |
|
|
|
|
Deferred income tax benefit: |
|
|
|
|
|
|
||
Foreign |
|
|
( |
) |
|
|
|
|
Total deferred income tax benefit |
|
|
( |
) |
|
|
|
|
Provision for (benefit from) income taxes |
|
$ |
( |
) |
|
$ |
|
The differences in the total provision for (benefit from) income taxes that would result from applying the
|
|
Years Ended December 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Tax benefit at U.S. statutory rate |
|
$ |
( |
) |
|
$ |
( |
) |
Change in valuation allowance |
|
|
|
|
|
|
||
Stock-based compensation |
|
|
|
|
|
( |
) |
|
Uncertain tax positions |
|
|
( |
) |
|
|
( |
) |
State income taxes, net of federal benefit |
|
|
( |
) |
|
|
( |
) |
Foreign income and withholding taxes |
|
|
|
|
|
|
||
Other permanent differences |
|
|
|
|
|
|
||
Expired other credits |
|
|
|
|
|
|
||
PPP loan forgiveness |
|
|
|
|
|
( |
) |
|
Provision to return adjustments |
|
|
( |
) |
|
|
( |
) |
Provision for (benefit from) income taxes |
|
$ |
( |
) |
|
$ |
|
Major components of the Company’s deferred tax assets and liabilities as of December 31, 2023 and 2022 were as follows:
|
|
December 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Non-current deferred tax assets: |
|
|
|
|
|
|
||
Net operating loss |
|
$ |
|
|
$ |
|
||
Research and development credits |
|
|
|
|
|
|
||
Other credits |
|
|
|
|
|
|
||
Operating lease liabilities |
|
|
|
|
|
|
||
Stock-based compensation |
|
|
|
|
|
|
||
Property and equipment and intangible assets |
|
|
|
|
|
|
||
Capitalized research and development |
|
|
|
|
|
|
||
Accruals and reserves |
|
|
|
|
|
|
||
Gross non-current deferred tax assets |
|
|
|
|
|
|
||
Right-of-use assets, operating leases |
|
|
( |
) |
|
|
( |
) |
Property and equipment and intangible assets |
|
|
|
|
|
( |
) |
|
Total non-current deferred tax liabilities |
|
|
( |
) |
|
|
( |
) |
Total deferred tax assets |
|
|
|
|
|
|
||
Valuation allowance |
|
|
( |
) |
|
|
( |
) |
Net deferred tax assets (liabilities) |
|
$ |
|
|
$ |
|
23
The Tax Reform Act of 1986, as amended, imposes restrictions on the utilization of net operating losses and tax credit carryforwards in certain situations where changes occur in the stock ownership of a corporation. Utilization of a domestic net operation loss or tax credit carryforward may be subject to a substantial limitation due to ownership changes that may have occurred or that could occur in the future, as required by Internal Revenue Code Section 382 ("IRC Section 382"), as well as similar state provisions. Accordingly, a company’s ability to use net operating losses may be limited as prescribed under IRC Section 382. Events which may cause limitations in the amount of the net operating losses that the Company may use in any one year include, but are not limited to, a cumulative ownership change of more than
As of December 31, 2023, the Company had federal and state net operating loss carryforwards of approximately $
The Company has recorded a full valuation allowance against its otherwise recognizable deferred income tax assets as of December 31, 2022 and 2021 (except for the deferred income tax assets associated with certain of the Company’s foreign subsidiaries). The Company has determined, after evaluating all positive and negative historical and prospective evidence, that it is more likely than not that the deferred income tax assets will not be realized (except for those associated with certain of the Company's foreign subsidiaries). The valuation allowance increased by $
The Company files federal, state and foreign income tax returns in jurisdictions with varying statutes of limitations. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world. These audits include questioning the timing and amount of deduction, the nexus of income among various tax jurisdictions and compliance with state, local and foreign tax laws. The Company is not currently under any examination by any federal, state or foreign tax authorities. Because of net operating loss and credit carryforwards, all of the Company’s tax years dating to inception in 2006 remain open to examination.
Uncertain Tax Positions
As of December 31, 2023 and 2022, the Company had uncertain tax positions of $
Ending balance as of December 31, 2021 |
|
$ |
|
|
Decrease in balances related to lapses in statutes of limitations |
|
|
( |
) |
Ending balance as of December 31, 2022 |
|
|
|
|
Increase in balances related to tax positions taken during the prior period |
|
|
|
|
Decrease in balances related to lapses in statutes of limitations |
|
|
( |
) |
Ending balance as of December 31, 2023 |
|
$ |
|
7
The following table shows the components of property and equipment as of the dates presented:
|
|
|
|
December 31, |
|
|||||
|
|
Estimated Useful Life |
|
2023 |
|
|
2022 |
|
||
Software, including internally developed software |
|
|
$ |
|
|
$ |
|
|||
Computer equipment |
|
|
|
|
|
|
|
|||
Leasehold improvements |
|
Shorter of useful life or lease term |
|
|
|
|
|
|
||
Office equipment, furniture and fixtures |
|
|
|
|
|
|
|
|||
Total property and equipment |
|
|
|
|
|
|
|
|
||
Less: Accumulated depreciation and amortization |
|
|
|
|
( |
) |
|
|
( |
) |
Less: Accumulated impairment losses |
|
|
|
|
( |
) |
|
|
|
|
Property and equipment, net |
|
|
|
$ |
|
|
$ |
|
24
Depreciation and amortization of internally developed software for the year ended December 31, 2023 and 2022 was $
During the fourth quarter of 2023, the Company concluded that indictors of impairment were present with respect to its sole asset group, which was determined by the Company to be the consolidated entity, due to the current economic environment and the Company’s history of recurring losses and negative operating cash flows. As a result, the Company compared the sum of undiscounted future cash flows of the asset group to its respective carrying amount and recorded an impairment loss on long-lived assets of $
The following table shows the components of accrued expenses and other current liabilities as of the dates presented:
|
|
December 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Accrued salary and payroll-related expenses |
|
$ |
|
|
$ |
|
||
Accrued liabilities |
|
|
|
|
|
|
||
Income taxes payable |
|
|
|
|
|
|
||
Advanced billings and customer credits (1) |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total accrued expenses and other current liabilities |
|
$ |
|
|
$ |
|
(1) During the year ended December 31, 2023 the Company wrote off customer credit balances of $
8
Operating and Finance Leases
The Company's primary operating lease is for space at a data center which was renewed in April 2022 and expires in 2025. In April 2023, the Company finalized exercising an option to decrease the space at the data center under the operating lease. As a result, the Company remeasured its lease liability and adjusted its ROU assets by $
The Company evaluates new contractual arrangements at inception to determine if the contract is or contains a lease. For any contracts that are or contain a lease, the Company determines the appropriate classification of each identified lease as operating or finance. For all identified leases, the Company records the related lease liabilities and ROU assets based on the future minimum lease payments over the lease term, which only includes options to renew the lease if it is reasonably certain that the Company will exercise that option. For leases with original terms of twelve months or less, the Company recognizes the lease expense as incurred and does not recognize lease liabilities and ROU assets.
Lease liabilities are measured based on the future minimum lease payments discounted over the lease term. The Company uses the discount rate implicit in the lease whenever that rate is readily determinable. For leases where no such rate is determinable, the Company uses its incremental borrowing rate, or the rate of interest that Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term and in a similar economic environment. As of December 31, 2023, the weighted-average rate used in discounting the lease liabilities for ROU operating leases was
Operating lease costs, consisting primarily of rental expense, were approximately $
The maturities of operating lease liabilities as of December 31, 2023 are as follows:
|
|
Operating Leases |
|
|
2024 |
|
$ |
|
|
2025 |
|
|
|
|
Total lease payments |
|
|
|
|
Less: Amount representing imputed interest |
|
|
( |
) |
Present value of lease liabilities |
|
|
|
|
Less: Current portion of lease liabilities |
|
|
( |
) |
Non-current portion of lease liabilities |
|
$ |
|
25
Supplemental cash flow information related to operating leases was as follows:
|
|
Years Ended December 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
||
Operating cash flows from operating leases |
|
$ |
|
|
$ |
|
||
ROU assets obtained in exchange for lease liabilities: |
|
$ |
|
|
$ |
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Subleases
The Company sublet portions of its San Francisco office space under an agreement that expired in July 2022. Income from this sublease agreement was included in other income, net, on the accompanying consolidated statements of comprehensive loss. Sublease income for the year ended December 31, 2022 was $
9. Borrowings
In April 2020, the Company entered into an original loan agreement with Harvest Small Business Finance, LLC as the lender (“Lender”) for a loan in an aggregate principal amount of $
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On March 14, 2019, the Company filed a shelf registration statement on Form S-3 with the SEC, which was declared effective by the SEC on May 10, 2019 and enables the Company to offer its common stock, preferred stock, debt securities, warrants, subscription rights and units having an aggregate offering price of up to $
For the year ended December 31, 2020, the Company sold
On July 15, 2021, the Company increased the size of the remaining $
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On August 3, 2021, the Company filed a new shelf registration statement on Form S-3 with the SEC (the “2021 Registration Statement”), which was declared effective by the SEC on August 19, 2021 and provides that the Company may offer its common stock, preferred stock, debt securities, warrants, subscription rights and units having an aggregate offering price of up to $
11. Commitments and Contingencies
Legal Matters
From time to time, the Company may be involved in lawsuits, claims, investigations and proceedings, consisting of intellectual property, commercial, employment and other matters, which arise in the ordinary course of business. In accordance with GAAP, the Company records a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impact of negotiations, settlements, ruling, advice of legal counsel and other information and events pertaining to a particular case. Litigation is inherently unpredictable. If any unfavorable ruling was to occur in any specific period or if a loss becomes probable and estimable, there exists the possibility of a material adverse impact on the Company’s results of operations, financial position or cash flows. As of December 31, 2023, no material amounts are recorded related to legal proceedings on the consolidated balance sheet.
Indemnification
The Company enters into standard indemnification agreements in the ordinary course of business. Pursuant to the agreements, each party may indemnify, defend and hold the other party harmless with respect to such claim, suit or proceeding brought against it by a third party alleging that the indemnifying party’s intellectual property infringes upon the intellectual property of the third party, or results from a breach of the indemnifying party’s representations and warranties or covenants, or that results from any acts of negligence or willful misconduct. The term of these indemnification agreements is generally perpetual any time after execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. Historically, the Company has not been obligated to make significant payments for these obligations and no liabilities have been recorded for these obligations on the consolidated balance sheets as of December 31, 2023 and 2022.
The Company also indemnifies its officers and directors for certain events or occurrences, subject to certain limits, while the officer or director is or was serving at the Company’s request in such capacity. The maximum amount of potential future indemnification is unlimited; however, the Company has a directors’ and officers’ insurance policy that enables the Company to recover a portion of any future amounts paid. Historically, the Company has not been obligated to make any payments for these obligations and no liabilities have been recorded for these obligations on the consolidated balance sheets as of December 31, 2023 and 2022.
Other Contingencies
The Company is subject to claims and assessments from time to time in the ordinary course of business. The Company’s management does not believe that any such matters, individually or in the aggregate, will have a material adverse effect on the Company’s financial position, results of operations or cash flows.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 6, 2024.
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MARIN SOFTWARE INCORPORATED |
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By: |
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/s/ Robert Bertz |
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Robert Bertz |
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Chief Financial Officer |
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