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


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

Overview

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

    •   measure the effectiveness of their advertising campaigns through our
        proprietary reporting and analytics capabilities;


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


    •   optimize campaigns across multiple publishers and channels based on market
        and business data to achieve desired revenue outcomes using our predictive
        bid management technology.

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

    •   MarinOne. Our next-generation solution brings search, social and eCommerce
        advertising into a single-platform that helps advertisers maximize a
        customer journey that spans Google, Facebook and Amazon by combining the
        power of Marin Search and Marin Social with new channels like Amazon,
        Apple Search Ads and YouTube.


    •   Marin Search. Our original solution for large advertisers and agencies,
        Marin Search is designed to provide search advertisers with the power,
        scale and flexibility required to manage large-scale advertising
        campaigns.


    •   Marin Social. Helps advertisers manage their Facebook, Instagram and
        Twitter advertising spend at scale.

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

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

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


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

Components of Results of Operations

Revenues

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

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

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

The majority of our revenues are derived from advertisers based in the United
States
. Advertisers from outside the United States represented 24% and 25% of
total revenues for the three months ended March 31, 2020 and 2019.

Cost of Revenues

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

In the near term, we expect cost of revenues to continue to decrease
year-over-year in absolute dollars as we realign our cost structure with our
revenues.

Sales and Marketing

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


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In the near term, we expect sales and marketing expenses to decrease
year-over-year in absolute dollars as we realign our cost structure with our
revenues.

Research and Development

Research and development expenses consist primarily of personnel costs for our
product development and engineering employees and executives, including
salaries, benefits, stock-based compensation expense and bonuses. Also included
are non-personnel costs such as professional fees payable to third-party
development resources, amortization of intangible assets and allocated overhead.

Our research and development efforts are focused on enhancing our software
architecture, adding new features and functionality to our platform and
improving the efficiency with which we deliver these services to our customers,
including the development of MarinOne. In the near term, we expect research and
development expenses to decrease year-over-year in absolute dollars as we
realign our cost structure with our revenues.

General and Administrative

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

In the near term, we expect our general and administrative expenses to decrease
year-over-year in absolute dollars as we realign our cost structure with our
revenues.


                             Results of Operations

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



                                                       Three Months Ended March 31,
                                                   2020                         2019
                                                         % of                         % of
                                           Amount      Revenues         Amount      Revenues
                                                          (dollars in thousands)
 Revenues, net                            $  8,660           100   %   $ 13,448           100   %
 Cost of revenues (1) (2) (3)                5,345            62          5,811            43
 Gross profit                                3,315            38          7,637            57

Operating expenses

 Sales and marketing (1) (2) (3)             2,312            27          4,634            34
 Research and development (1) (2) (3)        3,437            40          4,895            36
 General and administrative (1) (2) (3)      1,981            23          3,221            24
 Total operating expenses                    7,730            89         12,750            95
 Loss from operations                       (4,415 )         (51 )       (5,113 )         (38 )
 Other income, net                             469             5            540             4

Loss before provision for income taxes (3,946 ) (46 ) (4,573 ) (34 )

 Provision for income taxes                     25             -             33             -
 Net loss                                 $ (3,971 )         (46 ) %   $ (4,606 )         (34 ) %



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

    consolidated statements of operations data above was as follows:




                                           Three Months Ended March 31,
                                            2020                  2019
                                                  (in thousands)
           Cost of revenues             $          94         $         125
           Sales and marketing                    110                   180
           Research and development               167                   281
           General and administrative              75                    99




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

    consolidated statements of operations data above was as follows:




                                           Three Months Ended March 31,
                                          2020                    2019
                                                  (in thousands)
         Cost of revenues             $         47           $           234
         Sales and marketing                     -                        64
         Research and development               48                       234
         General and administrative              -                         -



(3) Restructuring related expenses included in the unaudited condensed

    consolidated statements of operations data above was as follows:




                                           Three Months Ended March 31,
                                          2020                    2019
                                                  (in thousands)
         Cost of revenues             $         (7 )         $             6
         Sales and marketing                    50                       157
         Research and development                -                         -
         General and administrative              -                         -




Adjusted EBITDA

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

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

    •   Adjusted EBITDA is widely used by investors and securities analysts to
        measure a company's operating performance without regard to items such as
        stock-based compensation expense, depreciation and amortization,
        capitalized software development costs, interest expense, net, benefit
        from or provision for income taxes, other income or expenses, net and
        costs or gains associated with acquisitions, divestitures and
        restructurings, that can vary substantially from company to company
        depending upon their financing, capital structures and the method by which
        assets were acquired;


    •   Our management uses Adjusted EBITDA in conjunction with GAAP financial
        measures for planning purposes, including the preparation of our annual
        operating budget, as a measure of operating performance and the
        effectiveness of our business strategies and in communications with our
        Board of Directors concerning our financial performance; and


    •   Adjusted EBITDA provides consistency and comparability with our past
        financial performance, facilitates period-to-period comparisons of
        operations and also facilitates comparisons with other peer companies,
        many of which use similar non-GAAP financial measures to supplement their
        GAAP results.

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

    •   Depreciation and amortization are non-cash charges, and the assets being
        depreciated or amortized will often have to be replaced in the future;
        however, Adjusted EBITDA does not reflect any cash requirements for these
        replacements;


    •   Adjusted EBITDA does not reflect changes in, or cash requirements for, our
        working capital needs or contractual commitments;


    •   Adjusted EBITDA does not reflect cash requirements for income taxes and
        the cash impact of other income or expense; and


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


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



                                                     Three Months Ended March 31,
                                                       2020                 2019
                                                            (in thousands)
Net loss                                          $       (3,971 )$       (4,606 )
Depreciation                                                 893                  499
Amortization of internally developed software                864                  750
Amortization of intangible assets                             95                  532
Provision for income taxes                                    25                   33
Stock-based compensation expense                             446                  685
Capitalization of internally developed software             (540 )               (482 )
Restructuring related expenses                                43                  163
Other income, net                                           (469 )               (540 )
Adjusted EBITDA                                   $       (2,614 )$       (2,966 )




          Comparison of the Three Months Ended March 31, 2020 and 2019

Revenues, net



                             Three Months Ended March 31,                 Change
                             2020                   2019               $           %
                                              (dollars in thousands)
         Revenues, net   $      8,660$       13,448$ (4,788 )     (36 ) %



Revenues, net, for the three months ended March 31, 2020 decreased $4.8 million,
or 36% as compared to the corresponding period in 2019. During the preceding 12
months, we experienced ongoing customer turnover that was not fully offset by
new customer bookings. Additionally, in November 2019, we divested our Perfect
Audience business which contributed $0.9 million of revenues, net for the three
months ended March 31, 2019. Revenues, net for the three months ended March 31,
2020
and 2019 are inclusive of $2.3 million and $2.9 million, respectively, from
the Google Revenue Share Agreement as described in Note 2 to the condensed
consolidated financial statements.

For the three months ended March 31, 2020 and 2019, revenues, net from our
customers located in the United States represented 76% and 75%, respectively, of
total revenues, net. Revenues, net from the Google Revenue Share Agreement
accounted for 26% and 22%, respectively, of total revenues, net for the three
months ended March 31, 2020 and 2019. There were no other customers that
accounted for 10% or greater of our revenues, net for the three months ended
March 31, 2020 and 2019.

Cost of Revenues and Gross Margin



                                  Three Months Ended March 31,                 Change
                                  2020                   2019               $           %
                                                   (dollars in thousands)
    Cost of revenues          $       5,345$       5,811$   (466 )      (8 ) %
    Gross profit                      3,315                  7,637         (4,322 )     (57 )
    Gross profit percentage              38    %                57   %



Cost of revenues for the three months ended March 31, 2020 decreased $0.5
million
, or 8%, as compared to the corresponding period in 2019. The decrease
was primarily driven by a reduction in the number of global services and cloud
infrastructure personnel, which for the three months ended March 31, 2020 led to
a decrease of $0.3 million in compensation and benefits expense, including
stock-based compensation expense, as compared to the same period in 2019. This
reduction in headcount also contributed to a decrease in allocated facilities
and information technology costs of $0.1 million for the three months ended
March 31, 2020. We also experienced a decrease of $0.3 million in hosting costs
during the three months ended March 31, 2020, due to a decline in the usage of
our hosted platform from the corresponding period in 2019. Our amortization of
intangible assets declined $0.2 million, as certain intangible assets became
fully amortized in Q1 2020. These decreases were partially offset by an increase
of $0.4 million due to a non-recurring depreciation adjustment and an increase
of $0.1 million in the amortization of internally developed software costs, due
to the timing of the capitalization of certain internal projects.


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Our gross margin decreased to 38% for the three months ended March 31, 2020 as
compared to 57% for the corresponding period in 2019. This was primarily due to
our revenues, net declining at a faster rate than the corresponding decrease in
costs, in part due to the timing of revenue recognition from the Google Revenue
Share Agreement.


Sales and Marketing



                                  Three Months Ended March 31,                 Change
                                  2020                   2019               $           %
                                                 (dollars in thousands)
   Sales and marketing        $       2,312$       4,634$ (2,322 )     (50 ) %
   Percent of revenues, net              27    %                34   %



Sales and marketing expenses for the three months ended March 31, 2020 decreased
$2.3 million, or 50%, as compared to the corresponding period in 2019. This
decrease is primarily due to a reduction in global sales support and marketing
headcount, contributing to net decreases of $1.3 million in personnel-related
costs and $0.3 million in allocated facilities and information technology costs
for the three months ended March 31, 2020. The decrease was also a result of
reduced marketing costs of $0.4 million as we eliminated or shifted the timing
of certain of our marketing activities. As the majority of our restructuring
activities were completed in 2019, we incurred $0.1 million less in
restructuring costs for the three months ended March 31, 2020, as compared to
the corresponding period in the prior year. Finally, we reduced our travel
expense $0.1 million as a result of both the reduction in global sales support
and marketing headcount and the travel advisories resulting from COVID-19.

Research and Development



                                  Three Months Ended March 31,                 Change
                                  2020                   2019               $           %
                                                   (dollars in thousands)
   Research and development   $       3,437$       4,895$ (1,458 )     (30 ) %
   Percent of revenues, net              40    %                36   %



Research and development expenses for the three months ended March 31, 2020
decreased $1.5 million, or 30%, as compared to the corresponding period in 2019.
The decrease was primarily due to a reduction in the number of full-time
research and development personnel, resulting in a decrease of $0.9 million in
compensation expense and $0.2 million in allocated facilities and information
technology costs as compared to the corresponding period in 2019. Additionally,
amortization expense related to our intangible assets declined $0.2 million, as
our intangible assets became fully amortized during the three months ended March
31, 2020
. Finally, the decrease was further driven by reduced professional fees
of $0.1 million as we reduced the number of research and development contractors
as compared to the corresponding period in 2019.

General and Administrative



                                   Three Months Ended March 31,                 Change
                                   2020                   2019               $           %
                                                    (dollars in thousands)
  General and administrative   $       1,981$       3,221$ (1,240 )     (38 ) %
  Percent of revenues, net                23    %                24   %



General and administrative expenses for the three months ended March 31, 2020
decreased $1.2 million, or 38%, as compared to the corresponding period in 2020.
Compensation and benefits expense for the three months ended March 31, 2020
decreased by $0.3 million as compared to the corresponding period in 2020,
primarily due to a reduction in headcount. The decrease was also a result of
reduced professional services fees of $0.4 million as we reduced the number of
contractors and the scope of our activities with consultants and other advisors.
The decrease was further driven by a reduction in our provision for bad debts of
$0.3 million. For the three months ended March 31, 2020 we recorded a recovery
from bad debts of $0.1 million whereas for the three months ended March 31, 2019
we recorded $0.2 million of additions to the allowance for doubtful accounts.

Other Income, Net



                                Three Months Ended March 31,                Change
                                2020                     2019             $         %
                                                (dollars in thousands)
        Other income, net   $        469$        540$ (71 )     (13 ) %




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Other income, net, primarily consists of sublease income recorded under
agreements for portions of our San Francisco and our Portland office spaces,
with terms through July 2022 and May 2020, respectively, as well as foreign
currency transaction gains and losses and interest income and expense. For the
three months ended March 31, 2020 and 2019, we earned sublease income of $0.6
million
and $0.6 million, respectively. Foreign currency transaction gains and
losses and interest income and expense were not material for the three months
ended March 31, 2020 and 2019.


Provision for Income Taxes



                                     Three Months Ended March 31,               Change
                                      2020                     2019          $         %
                                                     (dollars in thousands)
     Provision for income taxes   $         25                $    33$ (8 )     (24 ) %



The provision for income taxes totaled less than $0.1 million for the three
months ended March 31, 2020 and 2019. This is primarily due to income tax
expense from profits earned by our wholly owned foreign subsidiaries.


                        Liquidity and Capital Resources

Since our incorporation in March 2006, we have relied primarily on sales of our
capital stock to fund our operating activities. From incorporation until our
initial public offering (“IPO”) we raised $105.7 million, net of related
issuance costs, in funding through private placements of our preferred stock. In
March and April 2013, we raised net proceeds of $109.3 million in our IPO. From
time to time, we have also utilized equipment lines and entered into finance
lease arrangements to fund capital purchases. As of March 31, 2020, our
principal source of liquidity was our unrestricted cash and cash equivalents of
$8.6 million. Our primary operating cash requirements include the payment of
compensation and related expenses, as well as costs for our facilities and
information technology infrastructure.

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

We maintain cash balances in our foreign subsidiaries. As of March 31, 2020, we
had $8.6 million of unrestricted cash and cash equivalents in aggregate, of
which $1.3 million was held by our foreign subsidiaries. On December 22, 2017,
the United States enacted the Tax Cuts and Jobs Act, or the TCJA, which
instituted fundamental changes to the taxation of multinational corporations.
Among these changes is a mandatory one-time transition tax on the deemed
repatriation of the accumulated earnings of certain of our foreign subsidiaries,
and a tax on earnings of foreign subsidiaries in excess of a specified return on
the subsidiaries’ tangible assets, known as the Global Intangible Low-Taxed
Income, or GILTI. We completed our analysis of the accounting for the transition
tax in the fourth quarter of 2018 and there was no tax due as a result of
significant accumulated losses in our foreign subsidiaries. We also determined
that no GILTI inclusion would be required in the fourth quarter of 2019, as our
foreign subsidiaries have accumulated significant losses. If funds held by our
foreign subsidiaries were needed for our U.S. operations, we would be required
to accrue U.S. tax liabilities associated with the repatriation of these funds.
However, given the amount of our net operating loss carryovers in the United
States
, such repatriation will most likely not result in material U.S. cash tax
payments within the next year. Additionally, we do not believe that foreign
withholding taxes associated with repatriating these funds would be material.

On March 14, 2019, we filed a shelf registration statement on Form S-3 with the
SEC, which was declared effective by the SEC on May 10, 2019, under which we may
offer our common stock, preferred stock, debt securities, warrants, subscription
rights and units having an aggregate offering price of up to $50.0 million. As
part of the shelf registration statement, we entered into an equity distribution
agreement with JMP Securities LLC, or JMP Securities, under which we may offer
and sell shares of our common stock having an aggregate offering price of up to
$13.0 million through an at-the-market offering program administered by JMP
Securities
. We are not required to sell any of our stock under this program. JMP
Securities
is entitled to compensation of up to 5.0% of the gross proceeds from
sales of our common stock pursuant to the equity distribution agreement. We
intend to use any net proceeds from the sale of securities under the equity
distribution agreement primarily for working capital and general corporate
purposes. For the three months ended March 31, 2020 and 2019, no shares were
sold under the equity distribution agreement. For the year ended December 31,
2019
, we sold 658 shares of our common stock under the equity distribution
agreement, and received proceeds of $1.6 million, net of offering costs of $0.2
million
, at a weighted average sales price of $2.82 per share. The total amount
of cash that may be generated under this equity distribution agreement is
uncertain and depends on a variety of factors, including market conditions and
the price of our common stock. As of March 31, 2020, we had common stock with an
aggregate offering price of up to $11.1 million available for issuance under the
equity distribution agreement.

We have incurred significant losses in each fiscal year since our incorporation
in 2006, and we expect to continue to incur losses and negative cash flows over
the next several years. Based on our current and anticipated level of
operations, including our internal forecasts and projections, we believe that
our existing cash, cash equivalents and restricted cash will be sufficient to
fund our operations for at least the next 12 months. Our ability to achieve our
business objectives and to continue to meet our obligations is dependent upon
maintaining a certain level of liquidity, which could be impacted by several
factors, including market conditions and the potential effect of the COVID-19
pandemic. The recent global outbreak of COVID-19 has disrupted economic markets
and the full economic impact, duration and spread of COVID-19 is


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uncertain at this time and difficult to predict considering the rapidly evolving
landscape. Since mid-March 2020, some of our customers have reduced the amount
of digital advertising spend that they manage using our products, which has had
an adverse effect on our results of operations, and some of our customers have
requested extended payment terms, reduced fees or fee waivers, early contract
terminations and other forms of contract relief. Although we are pursuing
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. Accordingly, we plan to reduce our expenses in 2020
by approximately 30%, which will be achieved through operating and other cost
savings including a reduction in personnel costs. Our ability to continue as a
going concern is dependent upon our ability to successfully implement the plans
described above.

In May 2020, we entered into a loan agreement with Harvest Small Business
Finance, LLC
as the lender for a loan in an aggregate principal amount of $3,320
(the “Loan”) pursuant to the Paycheck Protection Program under the Coronavirus
Aid, Relief, and Economic Security (CARES) Act. We received the loan proceeds on
May 12, 2020. We intend to use the funds provided by the Loan to cover payroll
costs and other permitted use of proceeds during this time of particular
uncertainty, allowing us to defer certain personnel reductions.

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