Marin Software(MRIN) - 2023 Q4 - Annual Report

FORM 10-K Form 10-K Filing Information Details Marin Software's Form 10-K filing information: registration, trading symbol, exchange, and filer status - Marin Software Incorporated filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2023[2] - The company's common stock trades under the symbol 'MRIN' on The Nasdaq Capital Market[3] - Marin Software is classified as a Non-accelerated filer and a Smaller reporting company[4] Key Company Information | Metric | Value | | :----- | :---- | | State of Incorporation | Delaware | | Commission File Number | 001-35838 | | Trading Symbol | MRIN | | Exchange | The Nasdaq Capital Market | | Filer Status | Non-accelerated filer, Smaller reporting company | | Market Value of Non-Affiliate Shares (June 30, 2023) | ~$9.1 million | | Common Stock Outstanding (February 15, 2024) | ~18,067,139 shares | Table of Contents Forward-Looking Statements Disclaimer Regarding Forward-Looking Statements Report contains forward-looking statements, subject to risks and uncertainties, with actual results potentially differing materially - The report contains forward-looking statements about future events, business, technology, product capabilities, and financial results[11] - These statements are subject to risks, uncertainties, and assumptions, including those detailed in the 'Risk Factors' section[11] - The company operates in a competitive and rapidly changing environment, with new risks emerging, such as economic risks from inflation or recession[11] - The company undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law[11] PART I Item 1. Business Marin Software offers a SaaS digital marketing platform, navigating competitive markets, publisher reliance, and data privacy regulations - Marin Software is a leading provider of digital marketing software (SaaS) for search, social, and eCommerce advertising channels[15] - The platform offers analytics, workflow, and optimization solutions, helping customers measure, manage, and optimize digital advertising campaigns[15][20] - The company has a strategic revenue share agreement with Google, effective until September 30, 2024, which is material to its operations[24] - The digital advertising cloud market is highly competitive, with competition from large established companies (e.g., Adobe, Google, Meta) and smaller specialized platforms[26][76] - The company is subject to extensive and evolving government regulations, particularly data privacy laws such as CCPA, CPRA, GDPR, and UK GDPR[35][36][37][38] Company Overview & Solutions Marin Software provides a unified SaaS advertising management platform for performance-driven advertisers and agencies - Marin Software provides a unified software-as-a-service (SaaS) advertising management platform for performance-driven advertisers and agencies[15] - The platform integrates with leading publishers like Amazon, Apple, Baidu, Bing, Meta, Google, and others, along with web analytics and ad-serving solutions[15] - Key capabilities include optimization tools for budget and bid management, reporting and analytics for cross-channel performance, automation for campaign execution, and Connect tools for data capture from various sources[20][21] Technology and Strategic Agreements The company's cloud-based platform is continuously upgraded, with a material Google revenue share agreement expiring in September 2024 - The cloud-based platform is designed for scalability, 24x7 availability, and security, utilizing Java, Linux, and industry-standard hardware[22][29] - The company continuously upgrades its software platform to enhance scalability, speed, resiliency, and add new features[22] - A new revenue share agreement with Google, effective October 1, 2021, runs for a three-year term until September 30, 2024, providing fixed and variable payments based on search advertising spend[24] - Termination or amendment of the Google agreement, or failure to comply with its terms, would have a material adverse effect on results of operations[24] Customers and Competition Marin Software serves advertisers and agencies in a highly competitive digital advertising market with diverse competitors - Marin Software sells its solutions directly to advertisers and through advertising agencies, serving enterprise and mid-market businesses[19][25] - Advertisers served through agencies generally represent one-third to one-quarter of overall revenues[25] - The digital advertising cloud market is highly competitive, fragmented, and subject to rapid technological and behavioral changes[26] - Key competitors include large companies (Adobe, Meta, Google SA360), smaller pay-per-click platforms (AdZooma, Optmyzr), in-house tools, and channel-specific solutions (Salesforce, Smartly.io)[26][27] - Competitive factors include solution quality, breadth, stability, flexibility, functionality, customer satisfaction, innovation, and ability to respond to publisher API changes[28][30] Sales and Marketing The company sells solutions globally through direct sales and marketing efforts focused on awareness and demand generation - The company sells solutions directly to advertisers and agencies globally through its sales team, with sales cycles typically ranging from three to nine months[32] - The marketing team focuses on driving awareness and demand generation through thought leadership (white papers, reports, industry conferences) and creating field enablement assets[33] Research and Development The R&D team is responsible for platform design, development, and maintenance, focusing on iterative and incremental cycles - The research and development team is responsible for the design, development, and maintenance of the platform, emphasizing frequent, iterative, and incremental development cycles[34] - Project teams within R&D focus on platform and feature development for advertising cloud solutions, comprising engineers, quality engineers, and product managers[34] Government Regulation The company is subject to evolving laws and regulations, particularly data privacy laws like GDPR and CCPA, and potential antitrust impacts - The company is subject to evolving laws and regulations affecting advertising and SaaS industries, including privacy, advertising, taxation, and intellectual property[35] - Key privacy laws include CCPA, CPRA, Nevada Online Privacy Law, Virginia Consumer Data Protection Act, Colorado Privacy Act, Connecticut Consumer Privacy Act, and Utah Consumer Privacy Act, all providing consumers with rights over personal data[36] - The GDPR (EU) and UK GDPR impose strict data protection requirements, with maximum fines of €20 million (or 4% of global turnover) and £17.5 million (or 4% of global turnover), respectively[37][38] - Government investigations against Google and Meta regarding anticompetitive practices in digital advertising could indirectly affect the company's business[35] Human Capital Resources As of December 31, 2023, the company had 108 employees globally, with a significant portion in R&D, promoting diversity and inclusion - The company had 108 employees as of December 31, 2023, a decrease from 177 in 2022 and 156 in 2021[40] - As of December 31, 2023, approximately 48% of employees were in the United States, 26% in Europe, and 26% in Asia[40] - Approximately 39% of employees were on engineering and research and development teams[40] - Compensation practices include base pay, bonuses, and equity grants, complemented by comprehensive health and wealth insurance and an Employee Assistance Program[41] - The company promotes diversity, equity, and inclusion as integral to business success[43] Intellectual Property The company protects its proprietary rights through patents, trademarks, copyrights, trade secrets, and confidentiality procedures - The company relies on a combination of patent, trademark, copyright, unfair competition, and trade secret laws, along with confidentiality procedures, to protect its proprietary rights[44] - As of December 31, 2023, Marin Software had five issued patents and one patent application pending in the United States[45] - The company owns and uses trademarks, including two registered in multiple international jurisdictions and one in South Korea and Singapore[45] Available Information The company's SEC filings and other material information are available on its Investor Center website and the SEC's website - The company's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K are available free of charge on its Investor Center website and the SEC's website (www.sec.gov)[46](index=46&type=chunk) - The Investor Relations website is used for disclosing material non-public information and complying with Regulation FD[47] Item 1A. Risk Factors Marin Software faces substantial risks including recurring losses, going concern doubts, intense competition, publisher reliance, operational challenges, evolving data privacy laws, and stock ownership risks - The company has a history of recurring losses and negative operating cash flows, raising substantial doubt about its ability to continue as a going concern[57][58][59] - Reliance on strategic agreements with publishers, particularly Google, poses a significant risk, as any adverse change or non-renewal could materially affect operations[72] - The digital advertising market is highly competitive, and the company must continuously innovate to maintain its competitive position[26][70][76] - The company identified a material weakness in internal controls over financial reporting related to long-lived asset impairment analysis[140][274] - The company received a deficiency notice from Nasdaq for failing to meet the minimum $1.00 minimum bid price requirement, risking Nasdaq delisting[147][148] Summary of Risk Factors Key risks include financial instability, market competition, operational challenges, regulatory compliance, and common stock ownership concerns - Key financial risks include recurring losses, negative operating cash flows, and the need for additional capital[52] - Business and market risks involve a potential slowdown in digital advertising, intense competition, and dependence on publisher relationships[52] - Operational risks encompass personnel turnover, software defects, security breaches, and reliance on third-party data centers[52][56] - Regulatory and compliance risks are driven by expansive data privacy laws and potential sales tax obligations[54][56] - Risks related to common stock ownership include Nasdaq delisting, stock price volatility, and potential dilution[56] Risks Related to our Financial Condition and Future Operating Results The company's recurring losses and negative cash flows raise substantial doubt about its going concern ability, requiring potential additional capital - The company's history of recurring losses and negative operating cash flows, including a net loss of $21.9 million in 2023 and an accumulated deficit of $344.3 million, raises substantial doubt about its ability to continue as a going concern[57][225][324] - Revenues have decreased over the last several years, from $30.0 million in 2020 to $17.7 million in 2023[57] - The company may require additional capital, which might not be available on acceptable terms, potentially leading to significant dilution for existing stockholders[61][62] - The usage-based pricing model makes revenue forecasting difficult due to fluctuations in customer advertising spend, influenced by macroeconomic conditions[64] - Quarterly operating results are subject to fluctuations from various factors, including market volatility, macroeconomic conditions, advertising spend levels, and strategic agreement rates[65][67] Risks Related to our Business and Market Business risks include digital advertising market slowdowns, intense competition, and critical dependence on major publisher relationships - A slowdown or decline in the digital advertising market, particularly due to adverse market conditions like inflation or recession, would negatively affect the company's business and growth prospects[68] - The company operates in a rapidly evolving industry and must continuously develop and introduce enhancements and new features to remain competitive[69][70] - Dependence on relationships and API access with major publishers (e.g., Google, Meta) means any disruption or adverse change in terms could harm the business, especially with the Google Revenue Share Agreement expiring in September 2024[71][72] - The market for advertising cloud solutions is highly competitive, with significant competition from large established companies and channel-specific offerings, potentially leading to reduced pricing or market share[76][77] - The company's business relies on customers' continued willingness to manage advertising spend on its platform, and customer usage may decline or fluctuate due to various factors[80] Operational Risks Operational risks include personnel retention challenges, unrecouped customer onboarding costs, data collection restrictions, security breaches, and IP protection issues - The company's success depends on retaining qualified personnel; a significant reduction-in-force in July 2023 (approximately 41% workforce reduction) could lead to operational inefficiencies[83][226][325] - Upfront costs associated with onboarding new advertisers may not be recouped if customer relationships are not maintained or usage levels are insufficient[87] - Revenue generation is dependent on collecting significant amounts of data from various sources, and restrictions (e.g., Apple's IDFA changes) could adversely affect operations[91][92][96] - Security breaches or unauthorized access to customer data could harm the company's reputation, lead to customer loss, and incur significant liabilities and costs[98][101] - Reliance on a single third-party data center for a significant portion of services means any disruption could lead to lengthy service interruptions and harm the business[103][104] - The company's ability to generate anticipated revenues depends on maintaining effective sales and marketing capabilities, which were impacted by a restructuring in 2023[112] - Failure to protect intellectual property rights or incurring substantial costs from infringement claims could adversely affect the business[115][119][120] - International operations expose the company to risks such as compliance with diverse laws, currency fluctuations, and difficulties in managing a global workforce[122][124][126] Regulatory and Compliance Risks The company faces risks from expansive data privacy regulations, potential non-compliance, and a material weakness in internal controls over financial reporting - Expansive, evolving, and often ill-defined domestic and foreign government regulations on user privacy and data security (e.g., GDPR, CCPA) could directly restrict business or indirectly affect customers' use of the platform[131][132][133][137] - Failure by the company or its customers to abide by applicable privacy laws or obtain adequate consent from end-users could lead to litigation, enforcement actions, or reduced demand for services[135] - The company identified a material weakness in its internal controls over financial reporting as of December 31, 2023, related to the review of long-lived asset impairment analysis[140][274] - The company may not be able to utilize a significant portion of its federal and state net operating loss (NOL) or research tax credit carryforwards, which could adversely affect profitability[144][145] Net Operating Loss and Research Tax Credit Carryforwards (as of Dec 31, 2023) | Type | Amount (in thousands) | Expiration | | :-------------------------- | :-------------------- | :--------- | | Federal NOL Carryforwards | $163,439 | Begin 2027 | | State NOL Carryforwards | $144,131 | Begin 2025 | | Federal R&D Credits | $6,123 | Begin 2026 | | State R&D Credits | $6,451 | No expiration | | State Enterprise Zone Credits | $1,123 | Begin 2024 | Risks Related to the Ownership of Our Common Stock Risks include potential Nasdaq delisting due to minimum bid price, stock price volatility, lack of dividends, and future dilution - The company received a deficiency notice from Nasdaq for failing to meet the $1.00 minimum bid price requirement and has until April 22, 2024, to regain compliance, with a risk of delisting[147][148] - To regain Nasdaq compliance, the company intends to seek stockholder approval for a reverse stock split, but there is no assurance of a sustained price increase[149] - Delisting from Nasdaq could lead to reduced liquidity, trading volume, market price, and ability to raise additional financing[150] - The market price of the common stock has been highly volatile, ranging from $0.28 to $1.33 in 2023, and may continue to fluctuate due to various factors[151] - The company does not intend to pay dividends for the foreseeable future, meaning stockholders must rely on stock price appreciation for gains[155] - Future sales of common stock or convertible securities, including through existing at-the-market offering facilities, could dilute the percentage ownership of current stockholders[156][158][159] - Delaware law and provisions in the company's charter and bylaws could make a merger, tender offer, or proxy contest difficult, potentially depressing the trading price of common stock[160][161] General Risk Factor Reported financial results may be adversely affected by changes in GAAP or their interpretations - The company's reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States (GAAP) or their interpretations[162] Item 1B. Unresolved Staff Comments Marin Software Incorporated has no unresolved staff comments from the Securities and Exchange Commission - There are no unresolved staff comments[165] Item 1C. Cybersecurity Marin Software prioritizes cybersecurity, integrating policies and practices into its risk management, with Audit Committee oversight - Marin Software considers the security of its information systems and data important to its business and reputation[166] - The company has designed and implemented processes to assess, identify, and manage material cybersecurity risks, integrating them into overall risk management programs[166] - Measures include physical access controls at a secure third-party data center, logical and technical access controls, information security policies, and annual employee training[167] - Third-party testing of information systems is conducted periodically to identify potential vulnerabilities[167] - The Audit Committee of the Board of Directors is responsible for the oversight of cybersecurity risks, with management providing periodic updates[171] Item 2. Properties Marin Software's corporate headquarters is in San Francisco, with additional leased offices globally and a third-party data center - The corporate headquarters is in San Francisco, California, operating under a short-term lease[173] - Additional leased office spaces are maintained in China and various European countries for sales, marketing, research and development, administration, and customer support[173] - A data center is operated at a third-party facility located in the United States[173] - The company believes its facilities are in good condition and adequate for current and foreseeable needs[174] Item 3. Legal Proceedings Marin Software is not involved in any legal proceedings that would materially adversely affect its business or financial condition - The company is not a party to any legal proceedings that would have a material adverse effect on its business, operating results, financial condition, or cash flows[175] Item 4. Mine Safety Disclosures This item is not applicable to Marin Software Incorporated - Not applicable[176] PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Marin Software's common stock trades on Nasdaq under 'MRIN', with 42 stockholders of record, no planned dividends, and no equity purchases in 2023 - The company's common stock is listed on The Nasdaq Capital Market under the symbol 'MRIN'[179] - As of February 15, 2024, there were 42 stockholders of record[179] - The company currently intends to retain any future earnings and does not expect to pay any cash dividends on its common stock for the foreseeable future[180] - No sales of unregistered securities or issuer purchases of equity securities were made during the quarter and year ended December 31, 2023[182][183] Item 6. [Reserved] This item is reserved and contains no information - This item is reserved[184] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Reviews Marin Software's financial condition, operations, and cash flows, focusing on its SaaS platform, macroeconomic impacts, and liquidity - Marin Software is a leading provider of digital marketing solutions for search, social, and eCommerce advertising, utilizing its MarinOne SaaS platform[186] - The company incurred a net loss of $21.9 million in 2023 and $18.2 million in 2022, with an accumulated deficit of $344.3 million as of December 31, 2023[225][311] - Substantial doubt exists about the company's ability to continue as a going concern due to recurring losses and negative operating cash flows[228][327] - A restructuring plan in July 2023 reduced the global workforce by approximately 41% to cut expenses[226][325] - A $3.3 million impairment loss on internally developed software was recognized in the fourth quarter of 2023[212][253] Overview Marin Software provides its MarinOne SaaS platform for digital advertising management, impacted by macroeconomic conditions and remote work - Marin Software provides a unified SaaS advertising management platform (MarinOne) for search, social, and eCommerce channels[186] - The platform helps advertisers measure, manage, and optimize digital advertising spend across various publishers like Amazon, Google, and Meta[186] - Macroeconomic conditions, such as inflation or recession, have adversely impacted customer spending on digital advertising and the company's financial results[189] - Most employees work remotely, a trend expected to continue for the foreseeable future[190] Components of Results of Operations This section details revenue sources, cost of revenues, operating expenses, impairment losses, other income, and income tax components - Revenues are primarily generated from subscription contracts (usage-based or fixed monthly fees) and long-term strategic agreements with leading search publishers, notably Google[191][192] - Cost of revenues includes personnel costs for cloud infrastructure and customer service, third-party data center fees, depreciation, and amortization of internally developed software[194] - Sales and marketing expenses cover personnel costs (salaries, commissions, stock-based compensation), marketing events, and lead generation activities[195] - Research and development expenses are mainly personnel costs for product development and engineering, focused on enhancing software architecture and new features[196] - General and administrative expenses include personnel costs for administrative, legal, HR, finance, and accounting, along with professional fees and corporate expenses[197] - Impairment loss on long-lived assets consists of charges to internally developed software assets[198] - Other income, net, primarily includes sublease income, foreign currency transaction gains/losses, and interest income[199] - Income tax benefit, net, includes federal, state, and foreign income taxes, with a valuation allowance against U.S. deferred tax assets due to recent losses[200] Results of Operations Revenues decreased by $2.3 million (11%) in 2023, gross margin declined to 34%, and a $3.3 million impairment loss was recognized Consolidated Statements of Operations (2023 vs 2022) | Metric | 2023 (in thousands) | 2022 (in thousands) | Change ($) | Change (%) | | :-------------------------- | :------------------ | :------------------ | :--------- | :--------- | | Revenues, net | $17,731 | $20,019 | $(2,288) | (11)% | | Cost of revenues | $11,635 | $12,795 | $(1,160) | (9)% | | Gross profit | $6,096 | $7,224 | $(1,128) | (16)% | | Gross margin | 34% | 36% | - | - | | Sales and marketing | $6,520 | $6,997 | $(477) | (7)% | | Research and development | $10,235 | $11,832 | $(1,597) | (13)% | | General and administrative | $8,871 | $10,396 | $(1,525) | (15)% | | Impairment loss on long-lived assets | $3,276 | $0 | $3,276 | N/A | | Total operating expenses | $28,902 | $29,225 | $(323) | (1)% | | Loss from operations | $(22,806) | $(22,001) | $(805) | (4)% | | Other income, net | $739 | $4,079 | $(3,340) | (82)% | | Net loss | $(21,917) | $(18,227) | $(3,690) | (20)% | - Revenues, net, decreased by $2.3 million (11%) in 2023 compared to 2022, primarily due to ongoing customer turnover partially offset by new bookings[206] - The Google Revenue Share Agreement accounted for 40% of total revenues in 2023, up from 36% in 2022[207] - Cost of revenues decreased by $1.2 million (9%) due to lower allocated facilities/IT costs and compensation from headcount reduction, partially offset by restructuring expenses[208] - Gross margin decreased to 34% in 2023 from 36% in 2022, mainly due to lower revenue[208] - A $3.3 million impairment loss on internally developed software was recognized in 2023, with no comparable loss in 2022[212] - Other income, net, decreased significantly by $3.3 million (82%) primarily because a $3.1 million gain from PPP loan forgiveness in 2022 did not recur in 2023[213] Quarterly Results of Operations Unaudited quarterly results show fluctuating revenues and net losses, with a $3.276 million impairment loss in Q4 2023 Unaudited Quarterly Consolidated Statements of Operations Data (in thousands) | Metric | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | | :-------------------------- | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Revenues, net | $4,350 | $4,438 | $4,360 | $4,583 | $5,161 | $4,977 | $4,720 | $5,161 | | Cost of revenues | $2,134 | $3,087 | $3,174 | $3,240 | $3,083 | $3,181 | $3,203 | $3,328 | | Gross profit | $2,216 | $1,351 | $1,186 | $1,343 | $2,078 | $1,796 | $1,517 | $1,833 | | Total operating expenses | $7,964 | $6,461 | $7,174 | $7,303 | $7,322 | $7,617 | $7,113 | $7,173 | | Loss from operations | $(5,748) | $(5,110) | $(5,988) | $(5,960) | $(5,244) | $(5,821) | $(5,596) | $(5,340) | | Other income, net | $141 | $158 | $215 | $225 | $190 | $190 | $297 | $3,402 | | Net loss | $(5,263) | $(4,954) | $(5,917) | $(5,783) | $(5,118) | $(5,736) | $(5,374) | $(1,999) | - Net loss per share (basic and diluted) for Q4 2023 was $(0.29), compared to $(0.31) for Q4 2022[216] - A significant impairment loss on long-lived assets of $3.276 million was recorded in Q4 2023[216] - Other income, net, in Q1 2022 included a $3.402 million gain, primarily from PPP loan forgiveness[216] Liquidity and Capital Resources Cash and cash equivalents decreased to $11.4 million in 2023, with an accumulated deficit of $344.3 million, raising going concern doubt - As of December 31, 2023, the company had cash and cash equivalents of $11.4 million, a decrease from $28.0 million in 2022[219][308] - The company has an accumulated deficit of $344.3 million as of December 31, 2023, and expects to incur additional losses and negative operating cash flows[225][308] - A restructuring plan initiated in July 2023 reduced the global workforce by approximately 41% to decrease expenses[226][325] - Substantial doubt is raised about the company's ability to continue as a going concern for one year after the filing date due to recurring losses and negative operating cash flows[228][327] - The company has a $100 million shelf registration statement (effective August 2021) for various securities, with approximately $22.8 million remaining under an 'at-the-market' offering facility[223][329][418] Summary of Cash Flows (in thousands) | Activity | 2023 | 2022 | | :----------------------------- | :------- | :------- | | Net cash used in operating activities | $(14,583) | $(18,137) | | Net cash used in investing activities | $(1,807) | $(1,764) | | Net cash (used in)/provided by financing activities | $(209) | $740 | | Net decrease in cash and cash equivalents | $(16,594) | $(19,100) | - Cash used in operating activities in 2023 was $14.6 million, primarily due to net loss, partially offset by non-cash expenses and working capital changes[232] - Cash used in investing activities in 2023 was $1.8 million, mainly for capitalized internally developed software costs[234] - Principal cash requirements include operating leases for data center space and capital expenditures for internally developed software, along with $1.0 million in uncertain tax positions[237] Off-Balance Sheet Arrangements The company has no off-balance sheet arrangements other than operating leases - The company does not have relationships with unconsolidated entities or financial partnerships for off-balance sheet arrangements[239] - As of December 31, 2023, there are no obligations that meet the definition of an off-balance sheet arrangement, other than operating leases[240] Critical Accounting Policies, Estimates and Significant Judgments Significant accounting estimates are made for doubtful accounts, revenue credits, income taxes, and long-lived asset impairment - Significant accounting estimates and judgments are made for allowances for doubtful accounts and customer revenue credits, income taxes, and impairment loss on long-lived assets[243][323] - Revenue from subscription contracts and strategic agreements is recognized over time as a single stand-ready performance obligation, using an output method based on the passage of time[244][246][247][365] - Long-lived assets are evaluated for impairment when circumstances indicate the carrying amount may not be recoverable, comparing it to estimated future undiscounted cash flows and fair value[249][250][335] - Income taxes are accounted for using the asset and liability method, with deferred tax assets and liabilities determined by differences between financial statement and tax bases, and valuation allowances established as needed[254][342] - Allowance for credit losses is based on a forward-looking current expected credit loss model, and reserves for revenue credits are estimated using the expected value method based on historical activity[256][346][347] Recently Adopted Accounting Pronouncements The company adopted ASU 2016-13 (Credit Losses) on January 1, 2023, with an immaterial cumulative effect on financial statements - On January 1, 2023, the company adopted ASU 2016-13 (Credit Losses) using the modified retrospective transition method, changing its impairment model to a forward-looking current expected credit losses model[361] - The cumulative effect from the adoption of ASU 2016-13 was immaterial to the company's consolidated financial statements[361] Recent Accounting Pronouncements Not Yet Effective The company is evaluating ASU 2023-07 (Segment Reporting) and ASU 2023-09 (Income Taxes), effective in 2024 and 2025 - ASU 2023-07 (Segment Reporting) is effective for annual periods beginning January 1, 2024, and interim periods beginning January 1, 2025, expanding disclosure requirements for reportable segments[362] - ASU 2023-09 (Income Taxes) is effective for annual periods beginning after December 15, 2024, requiring enhanced annual disclosures regarding rate reconciliation and income taxes paid[363] - The company is currently evaluating the impact of ASU 2023-07 and ASU 2023-09 on its consolidated financial statements and related disclosures[362][363] Item 7A. Quantitative and Qualitative Disclosures About Market Risk Marin Software is exposed to interest rate, foreign exchange, and inflation risks, managing investments in highly liquid instruments without hedging - The company is exposed to market risks primarily related to interest rates, foreign exchange, and inflation[258] - Investment strategy focuses on highly liquid financial instruments, primarily money market funds with maturities within three months, to preserve capital and meet liquidity needs[258][259] - As of December 31, 2023, unrestricted cash and cash equivalents totaled $11.4 million[259] - Foreign currency risks arise from revenues and operating expenses denominated in currencies other than the U.S. Dollar (e.g., Euro, British Pound Sterling, Japanese Yen)[262] - Revenues from outside the United States constituted 20% of consolidated revenues in 2023 and 21% in 2022[262] - The company has not entered into any foreign currency hedging contracts and does not plan to in the near future[263] - Inflation has not had a material effect on the company's business, financial condition, or results of operations[264] Item 8. Financial Statements and Supplementary Data This item refers to consolidated financial statements in Item 15 and supplementary data in Item 7 - The consolidated financial statements and the report of Grant Thornton LLP are included in Item 15[265] - Supplementary financial information is provided in Item 7 under the heading 'Quarterly Results of Operations Data'[265] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There have been no changes in or disagreements with accountants on accounting and financial disclosure matters - There have been no changes in or disagreements with accountants on accounting and financial disclosure[265] Item 9A. Controls and Procedures Management concluded disclosure controls were ineffective due to a material weakness in long-lived asset impairment analysis, with remediation underway - As of December 31, 2023, the company's disclosure controls and procedures were not effective at a reasonable assurance level[269] - A material weakness was identified in internal control over financial reporting related to the review of the long-lived asset impairment analysis, specifically an outlier in an assumption for internally developed software fair value[274] - This material weakness resulted in a material corrected misstatement to the financial statements regarding the full impairment of internally developed software[274] - Remediation efforts include incorporating a review step to ensure all outliers identified through the long-lived asset impairment analysis are appropriately evaluated[275] - The material weakness will not be considered remediated until the control operates effectively for a sufficient period and is tested[276] Evaluation of Disclosure Controls and Procedures Management concluded disclosure controls and procedures were ineffective as of December 31, 2023, due to a material weakness - Management, with the participation of the Principal Executive Officer and Principal Financial Officer, concluded that disclosure controls and procedures were not effective as of December 31, 2023[268][269] - The ineffectiveness was due to a material weakness in internal control over financial reporting[269] - Disclosure controls and procedures, no matter how well designed, can only provide reasonable, not absolute, assurance and can be circumvented[267] Management's Annual Report on Internal Control over Financial Reporting Management concluded internal controls over financial reporting were ineffective due to a material weakness in long-lived asset impairment analysis - Management concluded that internal controls over financial reporting were not effective as of December 31, 2023[272] - A material weakness was identified in management's review of the long-lived asset impairment analysis (ASC 360), specifically failing to identify and evaluate an outlier in an assumption for internally developed software fair value[274] - This material weakness led to a material corrected misstatement related to the full impairment of internally developed software[274] Remediation Efforts to Address the Material Weakness in Internal Control Over Financial Reporting Remediation involves enhancing review steps for long-lived asset impairment analysis, with the material weakness remaining until controls operate effectively - Remediation action involves incorporating a review step to ensure all outliers identified through the long-lived asset impairment analysis are appropriately evaluated[275] - Management will continue to review, optimize, and enhance its financial reporting controls and procedures[276] - The material weakness will not be considered remediated until the applicable control operates for a sufficient period and is deemed effective through further testing[276] Changes in Internal Control Over Financial Reporting No material changes in internal control over financial reporting occurred during the quarter and year ended December 31, 2023 - Other than the identified material weakness, there were no changes in internal control over financial reporting during the quarter and year ended December 31, 2023, that materially affected or are reasonably likely to materially affect it[278] Inherent Limitations on Effectiveness of Controls Control systems inherently provide only reasonable assurance due to limitations like faulty judgments, errors, collusion, or management override - Control systems, regardless of design, can only provide reasonable assurance due to inherent limitations such as faulty judgments, simple errors, collusion, or management override[279] - The design of any control system is based on assumptions about future events, and controls may become inadequate over time due to changing conditions or deteriorating compliance[279] Item 9B. Other Information No other information is disclosed in this item - None[280] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to Marin Software Incorporated - Not applicable[281] PART III Item 10. Directors, Executive Officers and Corporate Governance Information on directors, executive officers, Section 16 compliance, and corporate governance is incorporated by reference from the 2024 Proxy Statement - Information concerning directors, executive officers, Section 16 compliance, and corporate governance is incorporated by reference from the 2024 Proxy Statement[284] Item 11. Executive Compensation Information regarding executive compensation is incorporated by reference from the 2024 Proxy Statement - Information regarding executive compensation is incorporated by reference from the 2024 Proxy Statement[285] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on security ownership of beneficial owners and management is incorporated by reference from the Proxy Statement - Information regarding security ownership of certain beneficial owners and management and related stockholder matters is incorporated by reference from the Proxy Statement[286] Item 13. Certain Relationships and Related Transactions, and Director Independence Information on related party transactions and director independence is incorporated by reference from the Proxy Statement - Information regarding related party transactions and director independence is incorporated by reference from the Proxy Statement[287] Item 14. Principal Accountant Fees and Services Information on principal accountant fees and services is incorporated by reference from the Proxy Statement - Information regarding principal accountant fees and services is incorporated by reference from the Proxy Statement[288] PART IV Item 15. Exhibits, Financial Statement Schedules This item details the financial statements, schedules, and exhibits included in the Annual Report on Form 10-K - The financial statements presented include the Report of Grant Thornton LLP, Consolidated Balance Sheets, Statements of Comprehensive Loss, Stockholders' Equity, and Cash Flows, along with related notes[291] - Supplementary financial information required by Item 8 is incorporated by reference from Item 7 under 'Quarterly Results of Operations Data'[291] - All financial statement schedules are omitted as they are not applicable, not required, or the information is included in the consolidated financial statements or notes[292] - A comprehensive list of exhibits, including equity distribution agreements, corporate governance documents, equity incentive plans, and certifications, is provided[293][294][295] Financial Statements The financial statements include the auditor's report, consolidated balance sheets, statements of comprehensive loss, stockholders' equity, cash flows, and notes - The financial statements include the Report of Grant Thornton LLP, Consolidated Balance Sheets, Consolidated Statements of Comprehensive Loss, Consolidated Statements of Stockholders' Equity, Consolidated Statements of Cash Flows, and Notes to Consolidated Financial Statements[291] - Supplementary financial information is incorporated by reference from Item 7 under 'Quarterly Results of Operations Data'[291] Financial Statement Schedules All financial statement schedules are omitted as they are not applicable or the information is included elsewhere - All financial statement schedules are omitted because they are not applicable, not required, or the information is included in the accompanying consolidated financial statements or notes thereto[292] Exhibits A comprehensive list of exhibits, including various agreements, corporate governance documents, equity plans, and certifications, is provided - The exhibits include various agreements such as Equity Distribution Agreements, Asset Purchase Agreements, and Revenue Share Agreements[293][295] - Corporate governance documents like the Restated Certificate of Incorporation and Restated Bylaws are listed[293] - Equity compensation plans, including the 2006 Equity Incentive Plan, 2013 Equity Incentive Plan, and Employee Stock Purchase Plan, are included[293][295] - Certifications from the Principal Executive Officer and Principal Financial Officer pursuant to the Sarbanes-Oxley Act are provided[295] Item 16. Form 10-K Summary No summary is provided within the Form 10-K for this section - This item is marked as 'None', indicating no summary is provided within the Form 10-K[297] Signatures Signatures and Power of Attorney This section contains the required signatures for the Annual Report on Form 10-K, including officers and directors, along with a power of attorney - The report is signed by Robert Bertz, Chief Financial Officer, on behalf of Marin Software Incorporated[426] - Signatures also include Christopher A. Lien (CEO and Director), and other directors (Brian Kinion, L. Gordon Crovitz, Donald Hutchison, Daina Middleton, Diena Lee Mann)[429] - A power of attorney is granted to Christopher A. Lien and Robert Bertz to sign any amendments to the report and file them with the SEC[428]