Marin Software Inc (MRIN) 2014 Q1 法說會逐字稿

Greetings, and welcome to the Marin Software First Quarter 2014 Financial Results conference call.

(Operator Instructions)

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Mr. Greg Kleiner, Investor Relations at Marin Software. Thank you. You may begin.

Thank you. Good afternoon, everyone, and welcome to Marin Software's 2014 first quarter earnings conference call. Joining me today are Chris Lien, Marin's Founder and Executive Chairman, Dave Yovanno, Marin's Chief Executive Officer, and John Kaelle, Marin's EVP and Chief Financial Officer.

By now, you should have received a copy of our earnings release which crossed the wire a short time ago. If you need a copy of this release, please go to Investor.MarinSoftware.com to find an electronic version. Call participants are advised that the audio of this conference call is being recorded for playback purposes, and that a recording of this call will be made available on the Investor Relations section of our website within a few hours.

Before we begin, I'd like to note that our discussions today will include forward-looking statements within the meaning of the Securities Act of 1933, and the Securities Exchange Act of 1934. These forward-looking statements include statements about our business outlook and strategy, and statements about historical results that may suggest trends for our business. We make these statements of May 7, 2014, and disclaim any duty to update them.

For more information regarding these and other risks and uncertainties that could cause actual results to differ materially from these expressed or implied in our forward-looking statements, as well as risks relating to our business in general, we refer you to the sections entitled Risk Factors in our most recent report on Form 10-K, and our other filings with the SEC.

This presentation contains certain financial performance measures that are different from the financial measures calculated in accordance with GAAP, and may be different from calculations or measures made by other companies. A quantitative reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures is available on our first quarter 2014 earnings press release.

And with that, let me turn the call over to Chris.

Thank you. Good afternoon, and welcome to everyone on the call today.

Before I cover the highlights from our first quarter results, I wanted to address the announcement we made earlier today with regard to the addition of David A. Yovanno as CEO, and my transition to Executive Chairman. It's humbling for me to think about Marin's evolution. From what started as an idea, to be the Bloomberg Terminal of Online Media Management in 2006 to better serve digital marketers around the world to what we've built over the years since then, which is the world's leading revenue acquisition management platform.

And even with Marin's success to date, we remain in the early innings of a rapidly expanding multi-billion dollar digital advertising market opportunity. As we partner with our customers to enable them to maximize their business results in an ever more fragmented, complex, and larger online advertising environment.

A few months ago, I began discussions with our Board about bringing in a business partner who could build on Marin's success, and help us scale to the next level. This person ideally would have digital advertising expertise, strong operating and executive experience, and be passionate about scaling a global public software company. I'm very pleased to report, that Dave embodies each of these attributes, and I am excited to have him join our team as Marin's new CEO to help us deliver even more on Marin's cross channel revenue acquisition management vision.

David joined the Company officially today, and has assumed the role of CEO. In my new role as the Executive Chairman, I look forward to working closely with Dave and the entire team to extend Marin's leadership position in revenue acquisition management as we seek to serve more advertisers and agencies world wide.

So with that, let me hand the call over to Dave for his initial comments.

Thanks, Chris. This is my first day at Marin, so I won't be outlining anything specific about my plans as CEO just yet, but what I can tell you is that I couldn't be more thrilled to be here in this role. As a veteran of the digital advertising industry, I've watched what Chris and his team built from afar for many years, and I've always been impressed with what they've been able to accomplish.

The opportunity to help build on Marin's leadership position and to scale the Company to higher levels was very attractive to me, from both a personal and professional standpoint. I look forward to working with the Marin team, and helping to lead them into the future, as well as spending time with our analysts and investors over the weeks and months to come. We have a tremendous opportunity in front of us, and I'm confident that we can further extend our position in this multi-billion dollar digital advertising market.

Thanks, Dave, and welcome aboard. I'm looking to working with you, and to help take Marin to even achievements. With that, let me transition back to the highlights from the quarter.

We were pleased to report strong results in Q1, as revenue growth accelerated to its highest rate since Q4 of 2012. Revenue for the quarter was $22.8 million, up 33% year-over-year. We saw a broad based pick up from our clients worldwide, as both existing and recently acquired customers increased their spending through our platform, offsetting the seasonal pattern we had previously expected.

This success is a strong testament to the value we are delivering through our leading revenue acquisition management platform, and the business results we are driving on behalf of our customers.

One of the contributors to our results was the continued growth in spending through the mobile channel. According to a study we released in March based on customer discussions and the spending through our platform, we currently estimate that mobile devices will account for 50% of Google paid search clicks by the end of 2015. Our mobile revenues, as a percentage of total revenues, now in the mid to high 20% range, increased each quarter throughout 2013. And again in the first quarter of 2014, as consumers are choosing to access internet more and more via SmartPhones and tablets.

In social, our customer's spend went down on a sequential basis, as a few of our customers had launched some programs in Q4 that were particularly targeted at the holiday season. This is an area that we remain excited about, and we will continue to advance our functionality to serve this growing segment.

Let me highlight some of the customer wins we had during the quarter, through both our direct sales force and agency partners. Through our agency customer ROI DNA, we added cloud based file sharing and storage company drop box. Dropbox leverages the Marin tracker solution to track different conversion events, such as free trial sign ups and enterprise sales leads to understand and optimize toward customer lifetime value.

Dropbox is able to assign a unique revenue value to each of these conversion events, and automates bids based on customer lifetime value. Additionally, the flexibility of the Marin platform allows call tracking data to be integrated in our platform with Dropbox's digital marketing data, which enable Dropbox to see the effectiveness of their online marketing, and driving valuable phone inquiries.

Lift is a high profile transportation company that lets people request a ride from a network of drivers by our mobile app. After an evaluation of competing platforms, Lift chose Marin to manage its paid search programs, due in large part to our ability to integrate with other data sources. Lift is now able to connect reporting and insights across media, by easily integrating data from other publishers and channels. The increase in campaign visibility, coupled with our powerful bidding tools, resulted in a dramatic decline in cost per lead and more effective ad spend.

We also added flash memory manufacture and innovator Kingston Technology Corporation as a customer. The ability to manage, optimize, and report across channels and regions in a single interface attracted Kingston to the Marin platform. Kingston serves an international network of distributors, resellers, retailers, and OEM customers on six continents.

Given Kingston's international footprint, they were attracted to Marin's global presence, scale, and expertise. And Marin's supported major publishers, Yahoo Japan and Yandex in Russia, was an important contributor as well.

On the product front, our development team continued to extend the value of our platform by launching new innovative solutions, while also enhancing the day-to-day value of the Marin platform. One new feature we're excited about is Context Connect. This industry first capability allows advertisers to incorporate contextual data such as weather, product inventory, sports scores, and stock market returns into their digital marketing campaigns.

For example, a retailer could set parameters based on inventory levels that would automatically boost or decrease key word bids based on whether or not certain products are out of stock or soon to be out of stock. This new capability will enable performance marketers to execute smarter optimization strategies, and capitalize on external environmental changes.

Continuing our efforts in data integration, we made some enhancements to our Channel Connect product, which allows marketers to integrate data from different publishers into the Marin platform. In Q1, we added support for cost and performance data at a creative level to better support display and social channel use cases.

This is in addition to our support for key word level data. Incorporating both creative and key word level data gives advertisers even greater visibility and control of campaign performance across publishers, allowing for simpler cross publisher optimization.

We also developed additional support for new ad publisher features, including full support for Facebook's new campaign structure, and latest mobile ad offerings. Through the Marin platform, Facebook advertisers will be able to take full advantage of the social network's mobile success. Likewise, we extended our bidding algorithm to support mobile ads on Yahoo Japan, and enhanced our API support for the leading Chinese search engine [by deal], enhancing our global presence.

Marin has always been an advocate of open stack architecture, as we believe this approach enhances the value of our platform by allowing advertisers the ability to bring in data to Marin from the tools and services they prefer to use. As part of our open stack architecture, we initiated a beta API program in Q1.

The program allows partners and advertisers to build a direct connection to the Marin platform. In turn, Marin's software's API will provide advertisers a greater level of access to their own data, enabling our growing ecosystem of advertising partners to maximize their success on the Marin platform.

In addition, we expanded our partner ecosystem by announcing two new key relationships in the quarter. In February, we finalized the integration between our platform and ad creative optimization firm Boost Media.

Through this partnership, Marin customers will be able to seamlessly access Boost Media's network of expert copywriters and testing technology directly in our application, to enhance both search and social campaigns. This will enable advertisers to improve campaign optimization of work flow, along with business results.

A few weeks ago, we announced a partnership with Visual IQ, a leading cross channel marketing attribution software provider. Visual IQ is now a Marin Connect certified partner. As we've discussed in previous calls, Marin Connect is the data on ramp layer, and a key foundational layer of our product, enabling our customers to easily incorporate a wide variety of data sources into our platform to help drive better results for their advertising programs. This new partnership with Visual IQ expands on our efforts here, and our customers are now able to glean insight across both online and offline channels through a direct feed to their IQ deployed product.

Overall, we were pleased with our results in the quarter as we exceeded our guidance on both the top and bottom line. At a high level, digital advertising is gaining share within overall advertising budgets. However, these dollars are now being spent across an increasingly and complex and fragmented array of channels, publishers, and devices, driving the need for advertisers to utilize platforms such as ours to help drive superior business results.

As we've mentioned in the past, the ability to seamlessly measure, manage, and optimize digital advertising spend at scale across a wide variety of channels, publishers, and devices is one of our primary differentiators. We are proud to serve a wide variety of leading advertisers across the globe, and we will continue to expand the functionality of our platform to help address their ever changing needs.

So with that, let me turn the call over to John to discuss the financials in more detail.

Thanks, Chris, and good afternoon, everyone.

As Chris mentioned, Q1 was a great quarter for us, with strength across all of our key metrics. Revenue for the quarter came in at $22.8 million, up 33% year-over-year, and 5% sequentially. This revenue performance was $1 million above the top end of our guidance of $21.8 million.

Throughout the quarter, we saw strong spend across many of our advertisers, particularly in the travel and leisure vertical. In years past, we have typically seen a sequential decline in spend from the seasonally high Q4. But this Q1, we saw an aggregate spend on par with the Q4 2013 level. In addition, we did see a slight increase in the quarter's effective rate, as is typical in the first quarter, which also contributed to the revenue growth.

Overall, we saw strength from both our direct and agency customers, with the mix this quarter coming in at 52% from our direct clients, and 48% from our agency clients, respectively. Our geographic mix of revenue in the quarter was 65% domestic, and 35% international, as growth in both regions improved over Q4.

In the quarter, we served 704 active advertisers on the platform, up 31 sequentially from the fourth quarter of 2013, and 162 or 30% from the first quarter of 2013. Consistent with Q1 of last year, the increase in this metric was hampered slightly by a number of advertisers moving below the $2,000 revenue threshold, inherent in our active advertiser metric definition. But this was more an offset by a healthy set of advertiser ads.

As we've discussed in the past, there will always be a certain amount of variability from quarter to quarter caused by advertisers that are still active, but moving above and below the $2,000 mark. As a result, the long term trend in this metric is a better indicator of the growth of our business and customer base.

Contract link in the quarter for all active enterprise contracts was roughly consistent with Q4, averaging approximately 14 months in duration. For the quarter, we are pleased that our revenue retention metric increased back above 100%, driven by the strength in spend and related revenues from the advertisers. As a reminder, revenue retention tracks revenue from all advertisers in the corresponding prior-year period that remained advertisers in the current period, and includes growth in spend from [retained] advertisers net of churn.

Before moving on to the profit and loss items, I'd like to point out that I will be discussing non-GAAP results going forward, unless otherwise stated. Which for the first quarter of 2014 excludes a total of $1.5 million in stock-based compensation, $46,000 of non-cash expense from the issuance of warrants, and $445,000 of amortization of capitalized research and development costs, while adding back $617,000 of capitalized R&D costs. A detailed reconciliation of our GAAP results to the non-GAAP results can be found in our earnings release.

In the first quarter, gross profit margins increased to 66%, up from 60% in the first quarter of last year, and consistent with the strong margin performance in the fourth quarter of last year. We had expected to see a sequential decline in the margin for Q1, but we are continuing to see leverage from our prior investments in the service and support infrastructure. In particular, we've made specific changes around driving customer success that have yielded positive results.

As a result, we now expect to report gross profit margins in the 66% to 67% range for the full year, an increase from our prior expectations of 65% to 66%. This would be a 400 to 500 basis-point improvement from 2013's 62% gross profit margin.

Sales and marketing expenses were $11.6 million for Q1, up from $10.2 million in the year-ago period. The year-over-year increase here was driven largely by increased sales activity, offset by some IPO related marketing spend in Q1 of last year.

Research and development expenses came in at $6.3 million in the quarter, compared to $5.4 million in Q1 of last year. As we have indicated in the past, we plan to continue investing aggressively in R&D, as we look to further expand the functionality of our platform. G&A expenses were $4.0 million for Q1, compared to $3.6 million for the year-ago period.

Operating losses came in at $6.7 million, compared to a loss of $9.0 million in the year-ago period. This was better than our guidance of a loss of $8.9 million to $8.5 million. The upside was driven by higher revenue in the efficiencies I mentioned earlier, along with the slower pace of hiring in the beginning of the year that we expect to make further progress on throughout Q2 and Q3.

Net loss for the quarter was $6.9 million, compared to a loss of $9.4 million in Q1 of last year. Based upon a weighted average share count of 33.1 million, this produced a net loss per share of $0.21, improved from our guidance of a loss of $0.28 to $0.26. This compares to a loss per share of $0.39 in Q1 of last year, though last year was based on a weighted average share count of 24.2 million.

Our adjusted EBITDA for Q1 was a loss of $5.4 million, compared to $8.0 million in the year-ago period. On the balance sheet, we ended Q1 with $96.1 million in cash and cash equivalents, down from $104.4 million at the end of 2013. As we have indicated in the past, we believe we have more than sufficient cash to fund us through our adjusted EBITDA break even goal in the back half of 2015.

Our deferred revenue balance at the end of the quarter was $2.1 million, compared to $2.6 million at the end of the previous quarter. Given that a majority of our customers still pay us one month in arrears based on their spend in the platform, this figure will be volatile on a quarterly basis, and not indicative of the overall health of our business in any given period.

Now, moving on to guidance. We are initiating guidance for the second quarter, and raising our guidance for the full year 2014. For the quarter ending June 30th, we expect revenues to range from $22.9 million to $23.3 million, and non-GAAP loss from operations should range from a loss of $8.7 million to a loss of $8.3 million. This should lead to a non-GAAP net loss per share in the range of $0.28 to $0.26, based upon a weighted average share count of 33.4 million.

For the 2014 calendar year, we are improving our guidance, and expect revenues to now range from $96.8 million to $98 million, and non-GAAP loss from operations to range from a loss of $29.2 million to a loss of $28 million. This should lead to a non-GAAP net loss per share in the range of $0.90 to $0.87, based upon a weighted average share count of 33.5 million.

So in summary, we are very pleased with the strong Q1, highlighted by revenue well above by the top end of our guidance, and the strength across our key margins and metrics. We remain focussed on serving the ever changing digital marketing needs of advertisers worldwide. And, we will continue to invest in growth to further penetrate what we believe is a large and growing opportunity in the revenue acquisition management market.

With that, I want to thank you for your time, and I'll turn it back over to the operator to open it up for questions.

Thank you.

(Operator instructions)

Greg Dunham with Goldman-Sachs.

Congratulations, Chris, on the promotion and getting a seasoned executive to join and help with the business.

Thanks, Greg.

And I guess I want to start there with Dave, maybe I know it's your first day, but you clearly have been in the industry a while, and you know the space, and you did your due diligence. So first question for you is, what about Marin got you excited? What about this asset is something unique, difficult to replicate, and made you want to join the firm?

I think the most significant, for me, was the leadership position and search. It's a very hard position to achieve, in my opinion. There's very few companies who can get there, and get to the position that Marin has gotten to, and will continue to maintain and grow.

And then how that position can be leveraged to potentially power other channels down the road, I think there's a significant amount of resources to draw upon. It's an amazing team, the folks that I've met here at Marin so far.

Clearly, there is resources available to the Company in going public last year. I think there's just a lot of good things happening at the Company right now. There's tremendous momentum, you see that in the Q1 results. There's just a lot of potential.

I personally feel the stock is somewhat undervalued, and just thought that I can draw on my experience to help the Company continue to hit those top-line revenue goals, and try and improve the margin profile over time, and help the Company diversify over time. But, all that stuff we'll be talking more about I'm sure as the years progress. But when I look further down the road, the 10-year plan for Marin, it certainly has a lot of runway with the (inaudible) that's already been created.

Okay, great. And let me switch back to Chris. Strong quarter. It sounds like the volume of search then was consistent with Q4, which I'd like to get your perspective on why you think you saw that happen, as opposed to more of a sequential decline that you saw last year with retail. And then can you give us a little bit underneath the covers and why the take rate actually increased, and why would it increase in Q1? And that's it for me. Thanks.

Sure, Greg. So we shared with you, we were pleased with the quarter over quarter trends from Q4 to Q1. The retail remains our largest vertical, but clearly the spending both in retail and in the other verticals it stayed strong in Q1.

Obviously, it would have picked up in other verticals in Q1 to offset some of the pull-back in retail. So, I think it just speaks to the diversity of the verticals that we serve with the platform.

On the take rate there, we do 11 releases a year. And we believe that we have differentiated functionality, and we do seek to command a price premium when we're selling new business or renewing business.

And I think you're starting to see some of that creep into our overall take rate. And then also, there is an element where we're commanding slightly higher rates for social.

But, again, the improvement in take rate is a modest one. I think you'll see a trend over time where that moves up, and I don't want to read too much into any one quarter in terms of that trend.

Okay. Thanks, guys.

Nandan Amladi with Deutsche Bank.

Hello, thanks for taking my question. So, Chris, this quarter's outperformance, how much of that would you attribute to just overall industry spending going up, versus your own performance, versus the slight improvement in take rates you just mentioned?

Yes, so, if you look more broadly to the trends in search, our overall year-over-year revenue growth rate was at almost the double the growth rate of the overall industry. So I would say that a big portion of the outperformance is driven by the functionality in our platform, and the value that we're able to offer the advertisers, as opposed to just a rising tide, if you will, lifts all boats.

Thank you. And your OpEx approach for this year, how do you plan to balance sales and marketing versus -- I know this is probably more a question for Dave and John, balancing sales and marketing investments, versus R&D investments?

Absolutely, Nandan, so we're obviously keeping a line on that. We continue to make progress, and are having an eye on that stated goal of driving towards adjusted EBITDA break even in the back half of 2015. So we're looking for continued progress.

I think if you look at the results of this quarter, you've seen a trend of just the gradual improvement since we've been public on all of those lines. In particular, on the gross profit margin, we're very pleased, and this quarter was even a stronger performance or improvement than we had contemplated. If you'll recall, we'd given some commentary on the year-end call, where we thought in the front half of this year that the GP margin would be in the 63% to 64% range.

So, it is a balancing act, obviously, and we do want to continue to push R&D and push sales and marketing to continue to push that revenue growth rate. But we're mindful of driving towards the adjusted EBITDA target.

Thank you.

Brent Thill with UBS.

Dave, welcome to the team. Just from your perspective as an outsider coming in now, I'm curious if you could just share with us what you think the biggest opportunities are when you size this up?

On [CU], you have a pretty distinguished record, and you were also the CIO of the Navy, and looking at a lot of different opportunities. Can you just give us your sense of what you think the biggest opportunity is? And I had a quick follow-up for John.

So maybe just adding on to my previous comments, I would say that my view of the market is that I see some clear trends more and more to technology over services. To me, that is a big clear trend. There's more demands for transparency on where your media search and display and visual is running, how much you're paying for it.

So in today's market, I'm a big believer in the core technology platform SaaS business model. I think most major brands and agencies will be consolidating on to a common stack. My investment thesis is, if you're controlling 50% of the total online ad spend which is search, and you're sitting on top of the most valuable data set there is, being [10 day] search-based data, it would just make sense that that same platform also be used to drive some other channels.

And so, whether a brand is managing it themselves or a brand is working through an agency, I think they're going to make some tough choices on their platform of record for their online marketing. Search is a big category, like I said, it was 50% of the spend. So there as a great opportunity for Marin to continue grow there, and search overall is growing.

As we get into other channels down the road, I don't want to look too far ahead, but I think it's reasonable to expect that a platform like Marin will diversify over time to try and power these other channels. I think it's in a sweet spot of where the market is going.

I think the market is going to be less dependent on intermediaries to decide on how their marketing should run. It's not to say that they won't work with agencies, they absolutely do. But they want to choose a platform of record of manage that spend. I don't know if that helps, but that's the way I view it from a very high level.

Okay. I know everyone looks forward to hearing more from you.

And, John, when you think about some of the existing contract renewals, your model has been unique relative to some of the other SaaS companies that we all cover. But from a perspective of signing up contract minimums rather than going off of ad spend, is there any change in terms of how you're structuring these contracts with and some of the renewals around customers that believe in the platform or are committing bigger dollars to you? Are you seeing any structure change, or is it the same business model in terms of the pricing that we've seen over the last couple years?

Yes, I think we've talked about this for a couple of quarters now just in terms of when contracts come up for renewal, the things that we're looking for. We've been pushing to extend out those contracts to go for longer term contracts, and you've seen that over the past few quarters. That average contract links pick up. And in this quarter like last quarter was around 14 months.

So early days, we had much shorter contracts. And now we're standardizing, at least on the year, if not longer, in many cases. So that, I'd put up there as an important thing for us.

As it relates to the minimum fees, we are looking to push those up a bit. Historically, we've gone out and tried to anchor that minimum fee around 50% of what we think that that average monthly invoice will be. And more recently, we've been pushing that towards the 70% plus mark, and are seeing some progress on that.

Our renewals, as well, that conversation is a little bit easier, because everyone has seen what they've been spending on the platform. So getting them to agree, at least there's a basis for that, because we've seen 12 months of invoice history. So we push on that.

And then the final thing on renewals we're looking for, is obviously to continue to increase the effective rate, Chris touched on that a bit. We've got 11 releases throughout the year. We continue to enhance the platform.

But I'd say of the three items there, that's the thing that is prioritized least right now. Because it's our belief that as spend continues to grow on the platform, our invoices are growing with advertisers. So the effective rate is the third in terms of the order of things that we ask for. That said, we did see it tick up slightly in this quarter when compared to the fourth quarter in the year-ago period.

Great. Thank you.

Tom Roderick with Stifel.

Hello, guys, good afternoon. Dave, welcome aboard, and, Chris, congratulations on the new role here for you. So, to the next step, I guess.

The question I wanted to ask was a little bit around the commentary on mobile. It sounds like you're seeing really strong spend, and anticipating even stronger spend coming through the mobile channel. I want to understand how much of that spend, as you see it from both direct customers and agency partners, how much of that cannibalizes existing to the desktop search, versus as pure additive new spend? And how are they treating pricing relative to a traditional spend on desktop? Thanks.

Sure. So, Tom, a couple of questions in there. So, good for you.

A couple comments. Obviously, more and more of us are using mobile as the primary access device for the internet. The share of mobile in our media at this point is in the mid-[20%]s to the high [20%]s. And as we pointed out in the script, has continued to grow quarter over quarter, and we see that continuing.

That's partly driven by the adoption of mobile in the paid search channel, and then also powered by the adoption of mobile in both display and social. I would highlight that for social, mobile access is over 50% at this point, as highlighted by Facebook. So we see with the adoption of both mobile search and mobile social and mobile display, that mobile will continue to grow with an overall percentage of our mix.

The pricing, either on a CPC basis or a CPM basis, for mobile continues to move up generally quarter over quarter. That's what we've been observing, particularly with CPC pricing.

But I would also highlight and you paint it as a cannibalization. The desktop search continues to grow, albeit at slower rates, and then mobile is growing at much higher rates because of a small base.

So overall, there continues to be more internet searching or more internet engagement from audiences, and therefore, more overall internet advertising. And a lot of it is being channeled through mobile, but I don't have a view for you as to how much mobile is cannibalizing desktop, because we're still seeing growth in both of those channels. And I would also highlight that we're seeing improving in pricing in mobile CPCs, as well.

Great. Let me shift to social.

I think the commentary this quarter was that it was down sequentially after you had a couple big launches in Q4, which probably is to be expected. But more broadly speaking, around social, how are you thinking about the opportunity within the agency community versus direct? In other words, are agencies really jumping at this opportunity at this point, or is that going to be a little bit more of a slow burn and the opportunities is on the direct side?

I would say the opportunity for social is in both channels. We're seeing, yes, we saw a sequential decline, due to some retail-oriented fourth quarter spending. But there's a broad adoption of social in both direct advertiser use cases, and then agency use cases.

And so, we continue to pursue both. And over the coming quarters, we'll anecdotally convey to you as we continue to make more progress in the share of our overall business that is derived from social ad spending.

Great. Last quick one from me. It's a question around the path to profitability. You're seeing some really nice leverage on the gross margin side. And so I guess the two-part question there is, is where can gross margins ultimately go to, and how are you thinking about the time line to profitability at this point?

Yes, I could say that I would stick to the comments that I had in the script. We've given guidance on the full year. We increased that guidance. We're pleased with the progress that we're making, and we started out the year and thought that the annual GP margin would be 65% to 66%, and we just took it up to 66% to 67%.

We believe that we can continue to make progress there, but I wouldn't necessarily give a time line or amount on that. And then the other margins, we just continue to push, and we are aiming towards that adjusted EBITDA the break-even point in the back half of next year.

Got it. That's perfect. Thanks, guys.

Karen Russillo with Wells Fargo.

Hello, thank you for taking my question. I just wanted to see if you guys could talk a little bit about if you've seen any behavioral changes from the competition in the last quarter on both the core business, and also on some of the newer areas like social, just changes in behavior, pricing, anything along those lines?

Yes, it's really been steady as we go with regard to competition. We continue to face -- our priority competitors are the Adobe offering, the double click offering from Google, and then [ten shoe] in terms of broad platforms. Our win rates against each of those parties, we win more than we lose, and we're very pleased with those rates.

With regard to the social players, we see various in the markets. There's a offering from Salesforce. There's the Adobe offering, and there's several more specialty offerings. And again, we compete with those in different business opportunities.

But I can't say that we've seen any change in the competition. If anything, our win rates have increased against various of the larger platform players, and so we're pleased with the progress of the business, and we are pleased with where we sit in the competitive set.

Ladies and gentlemen, at this time, there are no further questions. I would like to turn the floor back to our management team for any closing remarks.

Okay. Again, I want to thank everyone for dialing in for this first quarter results call. I want to welcome Dave as Marin's new CEO. I'm very excited that he joined us, and we look forward to meeting you in the coming weeks out on the road, introducing you to Dave, and then giving you more insight into the progress of the business and our outlook for the rest of the year. So again, thank you, everyone.

Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you very much for your participation.