EX-99.1 2 a16-9338_1ex99d1.htm EX-99.1

Exhibit 99.1

 

 

Marketo Announces First Quarter 2016 Results

 

SAN MATEO, Calif. — April 26, 2016 — Marketo, Inc. (NASDAQ: MKTO), the leading provider of engagement marketing software and solutions, today announced its first quarter 2016 financial results.

 

Highlights:

 

·      First quarter revenue increased 35 percent year over year to $62.2 million

·      Deferred revenue increased 37 percent year over year to $91.7 million

·      Improved operating leverage year over year

·      Launched new solutions to address expanded range of customer demand

 

Our first quarter performance marks a solid start to 2016 as we saw strong revenue growth and improved operating leverage.” said Phil Fernandez, chairman and CEO of Marketo. “Marketing automation has expanded beyond just the marketing department and is becoming a strategic weapon among CMOs as well as CIOs and the entire C-suite.  Marketo is well positioned to capitalize on the broader market opportunity in 2016 as companies expand their digital transformation agendas.”

 

Results for the first quarter of 2016:

 

·                  Revenue: Revenue was $62.2 million, an increase of 35 percent over the same period of the prior year.

·                  Deferred Revenue:  Deferred revenue at March 31, 2016 was $91.7 million, compared to $92.0 million at December 31, 2015 and $66.9 million at March 31, 2015.

·                  Calculated Billings: Calculated billings were $62.0 million, an increase of 24 percent over $49.9 million in the same period of the prior year.

·                  Net Loss: GAAP net loss attributable to Marketo was $18.4 million, and net loss per common share, basic and diluted, was $(0.42). Non-GAAP net loss was $7.7 million, and non-GAAP net loss per common share, basic and diluted, was $(0.17).

·                  Cash Flow:  Cash used in operating activities was $10.0 million as compared to cash used in operating activities of $8.5 million in the same period of the prior year.

·                  Total Cash and Cash Equivalents: As of March 31, 2016, total cash and cash equivalents was $94.7 million.

 

Outlook

 

As of April 26, 2016, Marketo is initiating revenue and EPS guidance for its second quarter and updating full year 2016 guidance.

 

For the second quarter of 2016, Marketo expects to report:

 

·                  Revenue in the range of $65 to $66 million

 



 

·                  GAAP net loss per share in the range of $(0.41) to $(0.43)

·                  Non-GAAP net loss per share in the range of $(0.12) to $(0.14)

 

For the full year 2016, Marketo expects to report:

 

·                  Revenue in the range of $269 to $275 million

·                  GAAP net loss per share in the range of $(1.56) to $(1.60)

·                  Non-GAAP net loss per share in the range of $(0.46) to $(0.50)

 

Reconciliations of the non-GAAP financial measures included in this release to their nearest GAAP equivalents are provided at the end of this release.

 

Conference Call Information

 

Marketo will host a conference call and live webcast to discuss financial results at 5:00 p.m. ET/2:00 p.m. PT, today, Tuesday, April 26, 2016.  The conference call can be accessed by dialing (888) 572-7033, or +1 (719) 325-2376 (outside the U.S. and Canada).  A live webcast will be available at http://investors.marketo.com.  An audio replay of the call will also be available by dialing (888) 203-1112 or +1(719) 457-0820 (outside the U.S. and Canada) and entering passcode 9155433#.

 

Use of Non-GAAP Financial Information

 

Marketo provides financial statements that are prepared in accordance with generally accepted accounting principles (GAAP). To help understand Marketo’s past financial performance and future results, Marketo has supplemented its financial results that it provides in accordance with GAAP with certain non-GAAP financial measures. The method Marketo uses to produce non-GAAP financial results may differ from the methods used by other companies. Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with the company’s consolidated financial statements prepared in accordance with GAAP.  Specifically, management is excluding the following items from its non-GAAP historical and estimated net loss and net loss per common share, basic and diluted:

 

· Stock-Based Compensation Expenses: The company’s compensation strategy includes the use of stock-based compensation to attract and retain employees and executives. It is principally aimed at aligning their interests with those of our stockholders and at long-term employee retention, rather than to motivate or reward operational performance for any particular period. Thus, stock-based compensation expense varies for reasons that are generally unrelated to operational decisions and performance in any particular period.

 

· Amortization of Acquired Intangible Assets: The company views amortization of acquisition-related intangible assets, such as the amortization of the cost associated with an acquired company’s research and development efforts, trade names, customer lists and customer relationships, as items arising from pre-acquisition activities determined at the time of an acquisition. While these intangible assets are continually evaluated for impairment, amortization of the cost of purchased intangibles is a static expense, one that is not typically affected by operations during any particular period.

 



 

· Adjustment to the value of redeemable non-controlling interest to the redemption amount is excluded as the company believes it may not be indicative of future operating results and that investors benefit from an understanding of the company’s operating results without giving effect to this adjustment.

 

Additionally, the company believes the following supplemental non-GAAP financial information is useful to investors and others in assessing its operating performance. A calculation of the supplemental non-GAAP financial information is provided in the table titled ‘Non-GAAP Supplemental financial information’.

 

· Calculated billings is calculated as revenue plus the change in total deferred revenue as presented on the balance sheet.

 

· Free cash flow is calculated as cash flow provided by (used in) operations less the purchase of property and equipment and capitalized software development costs presented on the statement of cash flows.

 

Marketo believes calculated billings offers investors useful supplemental information regarding the performance of its business, and will help investors better understand the sales volumes and performance of its business. The free cash flow metric is useful as it provides investors an enhanced view of the company’s operational performance and the cash available to fund on-going operations. The presentation of non-GAAP free cash flow is not meant to be considered in isolation or as an alternative to net income as an indicator of our performance, or as an alternative to cash flows from operating activities as a measure of liquidity.

 

The company encourages investors to carefully consider its results under GAAP, as well as its supplemental non-GAAP information and the related reconciliations, to more fully understand its business. Reconciliations of these GAAP and non-GAAP financial measures are presented in the tables at the end of this release.

 

“Safe harbor” statement under the Private Securities Litigation Reform Act of 1995

 

This press release contains forward-looking statements. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “expects,” “anticipates,” “believes,” “could,” “seeks,” “estimates,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions and the negatives of those terms. Examples of forward-looking statements include, but are not limited to, statements about our opportunities for growth and our GAAP and non-GAAP financial guidance for the second quarter and the full year of 2016, including revenue, net loss, EPS, stock-based compensation expenses, amortization of acquired intangible assets and adjustments to the value of redeemable non-controlling interest to the redemption amount. The achievement or success of the matters covered by such forward-looking statements involves risks, uncertainties and assumptions. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make.

 



 

The risks and uncertainties that could cause actual results to differ from the results predicted include, but are not limited to, risks associated with: possible fluctuations in our financial and operating results; our rate of growth and anticipated revenue run rate, including our ability to convert deferred revenue into revenue and, as appropriate, cash flow, and the continued growth and ability to maintain deferred revenue; errors, interruptions or delays in our services or Web hosting; breaches of our security measures; competition and competitive pressures, including discounting by our competitors; the nature of our business model; our ability to continue to release, and gain customer acceptance of, new and improved versions of our services; successful customer deployment and utilization of our existing and future services; changes in our sales cycle; the financial impact of any previous and future acquisitions; relationships with platform or service providers; various financial aspects of our subscription model; unexpected increases in attrition or decreases in new business; the emerging markets in which we operate; unique aspects of entering or expanding in international markets; our ability to hire, retain and motivate employees, to ramp our sales team, and to manage our growth; changes in our customer base; technological developments; regulatory developments; litigation related to intellectual property and other matters, and any related claims, negotiations and settlements; unanticipated changes in our effective tax rate; fluctuations in the number of shares we have outstanding and the price of such shares; foreign currency exchange rates; collection of receivables; interest rates; factors affecting our deferred tax assets and ability to value and utilize them; the risks and expenses associated with our real estate and office facilities space; and general developments in the economy, financial markets, and credit markets.

 

Further information about potential factors that could affect our financial results is included in public reports we file with the Securities and Exchange Commission, including, but not limited to, the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of our Forms 10-K and 10-Q, and the Forms 8-K and other documents we file from time to time.

 

Any forward-looking statement made by us in this press release speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We assume no obligation and do not intend to publicly update these forward-looking statements, whether as a result of new information, future developments, or otherwise, except as required by law.

 

About Marketo

 

Marketo (NASDAQ: MKTO) provides the leading engagement marketing software and solutions designed to help marketers develop long-term relationships with their customers - from acquisition to advocacy. Marketo is built for marketers, by marketers and is setting the innovation agenda for marketing technology. Marketo puts Marketing First. Headquartered in San Mateo, CA, with offices around the world, Marketo serves as a strategic partner to large enterprise and fast-growing small companies across a wide variety of industries. To learn more about Marketo’s Engagement Marketing Platform, LaunchPoint® partner ecosystem, and the vast community that is the Marketo Marketing Nation®, visit www.marketo.com.

 



 

Marketo, the Marketo logo, Marketing Nation and LaunchPoint are trademarks of Marketo, Inc. All other trademarks are the property of their respective owners.

 

IR Contact:

 

Anne Marie McCauley
Marketo
650-727-6845
amccauley@marketo.com

 

PR Contact:

 

Stefanie Gordish
 Marketo
415-590-9722
sgordish@marketo.com

 

###

 



 

MARKETO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

 

 

March 31,

 

December 31,

 

 

 

2016

 

2015

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

94,703

 

$

107,218

 

Accounts receivable, net

 

48,505

 

50,678

 

Prepaid expenses and other current assets

 

15,029

 

9,073

 

Total current assets

 

158,237

 

166,969

 

Property and equipment, net

 

24,273

 

21,323

 

Goodwill

 

29,201

 

29,201

 

Intangible assets, net

 

5,204

 

5,455

 

Other assets

 

3,052

 

2,130

 

Total assets

 

$

219,967

 

$

225,078

 

 

 

 

 

 

 

LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

5,058

 

$

4,265

 

Accrued expenses and other current liabilities

 

24,445

 

25,706

 

Deferred revenue

 

91,520

 

91,735

 

Current portion of credit facility

 

1,873

 

2,174

 

Total current liabilities

 

122,896

 

123,880

 

Credit facility, net of current portion

 

83

 

478

 

Deferred revenue, long-term

 

193

 

230

 

Other liabilities

 

3,818

 

2,722

 

Total liabilities

 

126,990

 

127,310

 

 

 

 

 

 

 

Redeemable non-controlling interests

 

4,425

 

4,643

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Common stock

 

4

 

4

 

Additional paid-in capital

 

358,175

 

344,727

 

Accumulated other comprehensive loss

 

(46

)

(274

)

Accumulated deficit

 

(269,581

)

(251,332

)

Total stockholders’ equity

 

88,552

 

93,125

 

Total liabilities, redeemable non-controlling interests and stockholders’ equity

 

$

219,967

 

$

225,078

 

 



 

MARKETO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended
March 31,

 

 

 

2016

 

2015

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

Subscription and support

 

$

55,348

 

$

40,100

 

Professional services and other

 

6,868

 

5,900

 

Total revenue

 

62,216

 

46,000

 

Cost of revenue (1):

 

 

 

 

 

Subscription and support

 

12,310

 

9,074

 

Professional services and other

 

9,068

 

7,337

 

Total cost of revenue

 

21,378

 

16,411

 

Gross profit:

 

 

 

 

 

Subscription and support

 

43,038

 

31,026

 

Professional services and other

 

(2,200

)

(1,437

)

Total gross profit

 

40,838

 

29,589

 

Operating expenses (1):

 

 

 

 

 

Research and development

 

11,001

 

9,695

 

Sales and marketing

 

37,113

 

30,032

 

General and administrative

 

10,872

 

8,782

 

Total operating expenses

 

58,986

 

48,509

 

Loss from operations

 

(18,148

)

(18,920

)

Other income (expense), net

 

(137

)

520

 

Loss before provision for income taxes

 

(18,285

)

(18,400

)

Provision for income taxes

 

402

 

212

 

Net loss

 

(18,687

)

(18,612

)

Net loss and adjustment attributable to redeemable non-controlling interests

 

264

 

454

 

Net loss attributable to Marketo

 

$

(18,423

)

$

(18,158

)

 

 

 

 

 

 

Net loss per share of common stock, basic and diluted

 

$

(0.42

)

$

(0.44

)

Shares used in computing net loss per share of common stock, basic and diluted

 

43,992

 

41,613

 

 


(1) Amounts include stock-based compensation expense as follows:

 

 

 

Three Months Ended
March 31,

 

 

 

2016

 

2015

 

 

 

 

 

 

 

Cost of subscription and support revenue

 

$

762

 

$

619

 

Cost of professional services and other revenue

 

1,212

 

937

 

Research and development

 

1,805

 

2,316

 

Sales and marketing

 

3,074

 

2,802

 

General and administrative

 

3,147

 

2,607

 

Total stock-based compensation expense

 

$

10,000

 

$

9,281

 

 



 

MARKETO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Three Months Ended
March 31,

 

 

 

2016

 

2015

 

Cash flows from operating activities:

 

 

 

 

 

Net loss:

 

 

 

 

 

Net loss attributable to Marketo

 

$

(18,423

)

$

(18,158

)

Net loss and adjustment attributable to redeemable non-controlling interests

 

(264

)

(454

)

Net loss

 

(18,687

)

(18,612

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

Depreciation and amortization

 

3,980

 

2,879

 

Stock-based compensation expense

 

10,000

 

9,281

 

Deferred income taxes

 

84

 

10

 

Provision for allowance for doubtful accounts

 

104

 

248

 

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable

 

2,296

 

(3,027

)

Prepaid expenses and other current assets

 

(5,541

)

(4,170

)

Other assets

 

(117

)

(644

)

Accounts payable

 

(159

)

1,028

 

Accrued expenses and other current liabilities

 

(1,549

)

(338

)

Deferred revenue

 

(771

)

4,694

 

Other liabilities

 

380

 

116

 

Net cash used in operating activities

 

(9,980

)

(8,535

)

Cash flows from investing activities:

 

 

 

 

 

Increase in restricted cash

 

(735

)

(215

)

Purchase of property and equipment

 

(4,587

)

(4,092

)

Capitalized software development

 

(601

)

(521

)

Net cash used in investing activities

 

(5,923

)

(4,828

)

Cash flows from financing activities:

 

 

 

 

 

Proceeds from issuance of common stock upon exercise of stock options

 

781

 

965

 

Proceeds from issuance of common stock issued under employee stock purchase plan

 

2,716

 

2,885

 

Investment from redeemable non-controlling interests

 

 

1,678

 

Withholding taxes remitted for the net share settlement of equity awards

 

(3

)

(3

)

Repayment of debt

 

(697

)

(670

)

Net cash provided by financing activities

 

2,797

 

4,855

 

Effect of foreign exchange rate changes on cash and cash equivalents

 

591

 

(368

)

Net decrease in cash and cash equivalents

 

(12,515

)

(8,876

)

Cash and cash equivalents — beginning of period

 

107,218

 

112,644

 

Cash and cash equivalents — end of period

 

$

94,703

 

$

103,768

 

 



 

MARKETO, INC.

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

(In thousands, except per share data)

(Unaudited)

 

To supplement our condensed consolidated financial statements presented on a GAAP basis, Marketo uses non-GAAP measures of operating loss, net loss and net loss per share, which are adjusted to exclude certain costs, expenses, gains and losses we believe appropriate to enhance an overall understanding of our past financial performance and also our prospects for the future. These adjustments to our current period GAAP results are made with the intent of providing both management and investors a more complete understanding of Marketo’s underlying operational results and trends and our marketplace performance. In addition, these adjusted non-GAAP results are among the information management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with generally accepted accounting principles in the United States of America.

 

 

 

Three Months Ended
December 31, 2015

 

Three Months Ended
March 31, 2016

 

Three Months Ended
March 31, 2015

 

Revenue:

 

 

 

 

 

 

 

Subscription and support

 

$

51,711

 

$

55,348

 

$

40,100

 

Professional services and other

 

6,556

 

6,868

 

5,900

 

Total Revenue

 

$

58,267

 

$

62,216

 

$

46,000

 

 

 

 

 

 

 

 

 

Cost of revenue reconciliation:

 

 

 

 

 

 

 

GAAP Subscription and support

 

$

11,284

 

$

12,310

 

$

9,074

 

Stock-based compensation

 

(740

)

(762

)

(619

)

Amortization of acquired intangible assets

 

(377

)

(377

)

(377

)

Non-GAAP subscription and support

 

$

10,167

 

$

11,171

 

$

8,078

 

 

 

 

 

 

 

 

 

GAAP Professional services and other

 

$

7,813

 

$

9,068

 

$

7,337

 

Stock-based compensation

 

(1,105

)

(1,212

)

(937

)

Non-GAAP professional services and other

 

$

6,708

 

$

7,856

 

$

6,400

 

 

 

 

 

 

 

 

 

Gross profit and gross margin reconciliation:

 

 

 

 

 

 

 

Non-GAAP subscription and support gross profit

 

$

41,544

 

$

44,177

 

$

32,022

 

Non-GAAP professional services and other gross profit

 

(152

)

(988

)

(500

)

Non-GAAP gross profit

 

$

41,392

 

$

43,189

 

$

31,522

 

Non-GAAP subscription and support gross margin

 

80.3

%

79.8

%

79.9

%

Non-GAAP professional services and other gross margin

 

-2.3

%

-14.4

%

-8.5

%

Non-GAAP gross margin

 

71.0

%

69.4

%

68.5

%

 

 

 

 

 

 

 

 

Operating expenses reconciliation:

 

 

 

 

 

 

 

GAAP Research and development

 

$

10,476

 

$

11,001

 

$

9,695

 

Stock-based compensation

 

(1,716

)

(1,805

)

(2,316

)

Amortization of acquired intangible assets

 

(38

)

(37

)

(37

)

Non-GAAP research and development

 

$

8,722

 

$

9,159

 

$

7,342

 

As a % of total revenues, non-GAAP

 

15.0

%

14.7

%

16.0

%

 

 

 

 

 

 

 

 

GAAP Sales and marketing

 

$

33,723

 

$

37,113

 

$

30,032

 

Stock-based compensation

 

(2,724

)

(3,074

)

(2,802

)

Amortization of acquired intangible assets

 

(137

)

(137

)

(137

)

Non-GAAP sales and marketing

 

$

30,862

 

$

33,902

 

$

27,093

 

As a % of total revenues, non-GAAP

 

53.0

%

54.5

%

58.9

%

 

 

 

 

 

 

 

 

GAAP General and administrative

 

$

10,588

 

$

10,872

 

$

8,782

 

Stock-based compensation

 

(3,223

)

(3,147

)

(2,607

)

Amortization of acquired intangible assets

 

(45

)

(46

)

(46

)

Non-GAAP general and administrative

 

$

7,320

 

$

7,679

 

$

6,129

 

As a % of total revenues, non-GAAP

 

12.6

%

12.3

%

13.3

%

 

 

 

 

 

 

 

 

Loss from operations reconciliation:

 

 

 

 

 

 

 

GAAP loss from operations

 

$

(15,617

)

$

(18,148

)

$

(18,920

)

Stock-based compensation

 

9,508

 

10,000

 

9,281

 

Amortization of acquired intangible assets

 

597

 

597

 

597

 

Non-GAAP loss from operations

 

$

(5,512

)

$

(7,551

)

$

(9,042

)

As a % of total revenues, non-GAAP

 

-9.5

%

-12.1

%

-19.7

%

 

 

 

 

 

 

 

 

Net loss reconciliation:

 

 

 

 

 

 

 

GAAP Net loss attributable to Marketo

 

$

(17,151

)

$

(18,423

)

$

(18,158

)

Stock-based compensation

 

9,508

 

10,000

 

9,281

 

Amortization of acquired intangible assets

 

597

 

597

 

597

 

Adjustment to redeemable non-controlling interests

 

1,521

 

174

 

 

Non-GAAP Net loss attributable to Marketo

 

$

(5,525

)

$

(7,652

)

$

(8,280

)

 

 

 

 

 

 

 

 

Basic and diluted net loss per share

 

 

 

 

 

 

 

GAAP

 

$

(0.40

)

$

(0.42

)

$

(0.44

)

Non-GAAP

 

$

(0.13

)

$

(0.17

)

$

(0.20

)

 

 

 

 

 

 

 

 

Shares used to compute basic and diluted GAAP and Non-GAAP net loss per share

 

43,383

 

43,992

 

41,613

 

 



 

MARKETO, INC.

NON-GAAP SUPPLEMENTAL FINANCIAL INFORMATION

(In thousands)

(Unaudited)

 

1) Calculated Billings

 

 

 

Three Months Ended
March 31,

 

 

 

2016

 

2015

 

Total revenue

 

$

62,216

 

$

46,000

 

Add increase (decrease) in total deferred revenue

 

(252

)

3,939

 

Total calculated billings

 

$

61,964

 

$

49,939

 

 

2) Reconciliation of GAAP Operating Cash Flow to Free Cash Flow

 

 

 

Three Months Ended
March 31,

 

 

 

2016

 

2015

 

GAAP net cash used in operating activities

 

$

(9,980

)

$

(8,535

)

Less purchases of property plant and equipment

 

(4,587

)

(4,092

)

Less capitalized software development

 

(601

)

(521

)

Free cash flow

 

$

(15,168

)

$

(13,148

)

 



 

MARKETO, INC.

RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET LOSS PER SHARE TARGETS

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ending

 

Twelve Months Ending

 

 

 

June 30, 2016

 

December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net loss per diluted share range

 

$

(0.41

)

-

 

$

(0.43

)

$

(1.56

)

-

 

$

(1.60

)

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

0.24

 

 

 

0.24

 

0.95

 

 

 

0.95

 

Amortization of acquired intangibles per share

 

0.01

 

 

 

0.01

 

0.05

 

 

 

0.05

 

NCI adjustment to redemption value

 

0.04

 

 

 

0.04

 

0.10

 

 

 

0.10

 

Non-GAAP net loss per diluted share range

 

$

(0.12

)

-

 

$

(0.14

)

$

(0.46

)

-

 

$

(0.50

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Shares Outstanding

 

44,528

 

 

 

44,528

 

44,713

 

 

 

44,713

 

 

The GAAP and non-GAAP net income per share targets provided below and elsewhere in this press release are estimates. Marketo’s future performance involves risks and uncertainties and the Company’s actual results could differ materially from such estimates. Some of the factors that could affect the Company’s operating results are set forth under the caption “ ‘Safe harbor’ statement under the Private Securities Litigation Reform Act of 1995” in this release.