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© Copyright 2016. Marketo, Inc. All rights reserved.
Marketo Investor Update May 2016
© Copyright 2016. Marketo, Inc. All rights reserved. 2
Safe Harbor This presentation contains forward-looking statements. These forward-looking statements include general statements about our opportunities for growth, our achievement of long-term objectives and specific statements about our GAAP and non-GAAP financial targets. The achievement or success of the matters covered by such forward-looking statements involves risks, uncertainties and assumptions. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, the company’s results could differ materially from the results expressed or implied by the forward-looking statements we make. The risks and uncertainties that could cause actual results to differ from the results predicted include, but are not limited to, risks associated with: possible fluctuations in the company’s financial and operating results; the company’s rate of growth and anticipated revenue run rate, including the company’s ability to convert deferred revenue and unbilled deferred revenue into revenue and, as appropriate, cash flow, and the continued growth and ability to maintain deferred revenue and unbilled deferred revenue; errors, interruptions or delays in the company’s service or the company’s Web hosting; the company’s ability to maintain and expand its customer base; breaches of the company’s security measures; privacy concerns of the company’s customers; the financial impact of any previous and future acquisitions; the nature of the company’s business model; the company’s ability to continue to release, and gain customer acceptance of, new and improved versions of the company’s service; successful customer deployment and utilization of the company’s existing and future services; changes in the company’s sales cycle; competition; relationships with platform and service providers; various financial aspects of the company’s subscription model; unexpected increases in attrition or decreases in new business; the markets in which the company operates, including emerging and other international markets; unique aspects of entering or expanding in international markets, the company’s ability to hire, retain, train and motivate employees, to ramp our sales team and to manage the company’s growth; changes in the company’s customer base; technological developments; regulatory developments; litigation related to intellectual property and other matters, and any related claims, negotiations and settlements; unanticipated changes in the company’s effective tax rate; fluctuations in the number of shares we have outstanding and the price of such shares; foreign currency exchange rates; collection of receivables; interest rates; factors affecting our deferred tax assets and ability to value and utilize them; the risks and expenses associated with the company’s real estate and office facilities space; and general developments in the economy, financial markets, and credit markets. Further information about factors that could affect the company’s financial results is included in the reports on Forms 10-K, 10-Q and 8-K and in other filings the company makes with the Securities and Exchange Commission from time to time.
Marketo assumes no obligation and does not intend to update these forward-looking statements, except as required by law.
$150M 56% YoY
$32.3 $36.0
$39.3 $42.3
$19.7
$22.5
$25.5
$28.2
$95.9M 64% YoY
$12.2
$13.9 $15.4
$16.8
$58.4M 80% YoY
Rapid Growth and Momentum
2013 2012 2014 2015
Rev
enu
e (M
illio
ns)
$50.7
$46.0
$210M 40% YoY
$54.9
$58.3
35% YoY
(YTD) $62.2
2016
4,615 Customers (As of 3/31/2016)
Marketo Engagement Marketing Solution
Marketing First
Most Complete Ecosystem
Most Innovative Platform
Deepest Expertise
Unique mix of speed and sophistication
Convergence of B2C & B2B best
practices Hundreds of partners across 20+ categories
CUSTOMER
Engage people in a meaningful, enduring and personalized way across channels
Measure and maximize impact of marketing investments
Generate awareness and ensure potential customers can find you
Plan, manage and coordinate marketing activities across your teams
Marketing Calendar
• Unified planning & execution
• Specialized views for team members
• Real-time campaign coordination
• Content Marketing • SEO / SEM • Social Campaigns • Landing Pages
• Nurturing and Scoring • Email Marketing • Marketing Automation • Event Marketing • Productive Prospecting
• Return on Marketing Investment • Cross-campaign Allocation • Opportunity Analysis • Revenue Attribution
Marketo Engagement Marketing Solution
Engagement Marketing Platform & Applications Applications
Audience Hub customer interaction system of record
Applications 12 categories including LaunchPoint
© Copyright 2016. Marketo, Inc. All rights reserved.
Email Marketing
Lead Management
Consumer Marketing
Customer Base Marketing
Mobile Marketing
Engagement Marketing Solutions
Email Marketing: Build long term customer relationships with meaningful conversations at scale.
Lead Management: Attract the right buyers, nurture them, and deliver win-ready leads to sales.
Consumer Marketing: Grow lifetime value by engaging consumers seamlessly across channels.
Customer Base Marketing: Create engagement across channels to deepen customer relationships over time.
Mobile Marketing: Weave mobile experiences into campaigns for deeper customer relationships.
7
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Multiple Growth Opportunities
Scale direct sales
Expand agency & OEM partners
Broaden referral network
Expand geographies
New Customer Velocity
Grow Existing Customers
Expand usage rights
Cross-sell new applications
Division to enterprise expansion
Enter New Markets
Additional CRM ecosystems
Vertical industries
Pursue selective acquisitions
Broad B2C markets
Marketo’s Customers Across Industries Life Sciences & Healthcare
Manufacturing & Energy Software & Cloud Business Services
Financial Services Communications & Infrastructure Media & Consumer Education
© Copyright 2016. Marketo, Inc. All rights reserved. 10
Phil Fernandez Chairman & CEO
An Experienced Team Built for Scale
Sanjay Dholakia Chief Marketing Officer
Frederick Ball EVP, Chief Administrative Officer
Jason Holmes EVP, Chief Operating Officer
Nick Bonfiglio SVP, Product Development
Margo Smith SVP, Legal Affairs & General Counsel
Steve Winter EVP, Worldwide Field Operations
Brian Kinion Chief Financial Officer
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Predictable SaaS Subscription Model
Average Contract Length: > 1 year (Ranges from one year to three years)
Billing Frequency (Quarterly and annual)
Subscription and Support Pricing (Usage based: names in database, number of seats)
High Subscription Dollar Retention Rate (Averages 105% for the last year)
Professional Services (Expert services to educate and assist in implementation)
© Copyright 2016. Marketo, Inc. All rights reserved.
Revenue Measures
SMB / Enterprise Subscription Mix International Contribution
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
$0
$10
$20
$30
$40
$50
$60
In M
illio
ns
SMB Enterprise
© Copyright 2016. Marketo, Inc. All rights reserved.
Investing for Growth
% of Revenue
Note: Financials are non-GAAP and exclude stock-based compensation and amortization of acquired intangible assets. See Appendix for GAAP to Non-GAAP reconciliation of historical Operating Expenses.
% of Revenue % of Revenue
$0
$10
$20
$30
2012 2013 2014 2015 Q1 '16
R&D
0%
20%
40%
60%
80%
100%
2012 2013 2014 2015 Q1 '16
R&D
$0
$50
$100
$150
2012 2013 2014 2015 Q1 '16
S&M
0%
20%
40%
60%
80%
100%
2012 2013 2014 2015 Q1 '16
S&M
$0
$10
$20
$30
2012 2013 2014 2015 Q1 '16
G&A
0%
20%
40%
60%
80%
100%
2012 2013 2014 2015 Q1 '16
G&A
© Copyright 2016. Marketo, Inc. All rights reserved. 14
Long Term Model ACTUAL
TARGET MODEL 2013 2014 2015 Q1 2016
Gross Margin 62% 70% 70% 69% 75% - 80%
% of revenue
R&D 22% 17% 15% 15% 12% - 15%
S&M 63% 60% 55% 54% 35% - 40%
G&A 15% 12% 12% 12% 7% - 10%
Income (Loss) from Operations
(38)% (19)% (13%) (12%) 20%
Note: Financials are non-GAAP and exclude stock-based compensation, amortization of acquired intangible assets, litigation settlement and integration costs. See Appendix for GAAP to Non-GAAP reconciliations of historical financial results. Targets reflect long-term goals.
© Copyright 2016. Marketo, Inc. All rights reserved.
Marketo Investor Update Appendix
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GAAP To Non-GAAP Reconciliation
$ '000's
% of
Revenues $ '000's
% of
Revenues $ '000's
% of
Revenues $ '000's
% of
Revenues $ '000's
% of
Revenues
Cost of revenue:
GAAP Subscription and support 16,216 28% 24,681 26% 28,742 19% 40,632 19% 12,310 20%
Stock-based compensation (216) 0% (496) -1% (1,626) -1% (2,691) -1% (762) -1%
Amortization of acquired intangible assets - 0% (267) 0% (1,156) -1% (1,508) -1% (377) -1%
Non-GAAP subscription and support 16,000 27% 23,918 25% 25,960 17% 36,433 17% 11,171 18%
GAAP Professional services and other 8,442 14% 13,298 14% 22,059 15% 31,484 15% 9,068 15%
Stock-based compensation (169) 0% (690) -1% (2,363) -2% (4,320) -2% (1,212) -2%
Amortization of acquired intangible assets - 0% - 0% - 0% - 0% - 0%
Non-GAAP professional services and other 8,273 14% 12,608 13% 19,696 13% 27,164 13% 7,856 13%
Operating expenses reconciliation:
GAAP Research and development 18,799 32% 23,321 24% 30,337 20% 39,077 19% 11,001 18%
Stock-based compensation (575) -1% (2,084) -2% (5,353) -4% (7,637) -4% (1,805) -3%
Amortization of acquired intangible assets (205) 0% - 0% (6) 0% (150) 0% (37) 0%
Non-GAAP research and development 18,019 31% 21,237 22% 24,978 17% 31,290 15% 9,159 15%
GAAP Sales and marketing 37,776 65% 62,769 65% 98,843 66% 129,072 62% 37,113 60%
Stock-based compensation (966) -2% (2,293) -2% (8,860) -6% (12,655) -6% (3,074) -5%
Amortization of acquired intangible assets (121) 0% (181) 0% (566) 0% (547) 0% (137) 0%
Non-GAAP sales and marketing 36,689 63% 60,295 63% 89,417 60% 115,870 55% 33,902 54%
GAAP General and administrative 11,388 19% 18,655 19% 25,583 17% 38,056 18% 10,872 17%
Stock-based compensation (1,046) -2% (2,512) -3% (6,918) -5% (11,879) -6% (3,147) -5%
Amortization of acquired intangible assets (71) 0% (103) 0% (184) 0% (183) 0% (46) 0%
Litigation settlement - 0% (950) -1% - 0% - 0% - 0%
Acquistion related costs - 0% (734) -1% (185) 0% - 0% - 0%
Non-GAAP general and administrative 10,271 18% 14,356 15% 18,296 12% 25,994 12% 7,679 12%
Q1 20162014
Year Ended December 31,
2012 2013 2015