Marketo, Inc. (MKTO)

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Marketo Inc. (MKTO)

Q3 2013 Earnings Call

October 24, 2013 5:00 PM ET


Erica Abrams - The Blueshirt Group

Phillip Fernandez - Chairman and CEO

Frederick Ball - SVP and CFO


Greg Dunham - Goldman Sachs

Sitikantha Panigrahi - Credit Suisse

Terry Tillman - Raymond James

Richard Davis - Canaccord

Peter Lowry - JMP Securities

John Byun - UBS

Jason Maynard - Wells Fargo



Good afternoon ladies and gentlemen, thank you for standing by. Welcome to Marketo’s Third Quarter 2013 Financial Results Conference Call. During today’s presentation, all participants will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator Instructions). This conference is being recorded today, Thursday, October 24, 2013.

At this time, I would like to turn the conference over to Erica Abrams of the Blueshirt Group. Please go ahead ma’am.

Erica Abrams

Thank you, Ben. Thank you all for joining us today for Marketo’s third quarter of fiscal 2013 financial results conference call. Joining me on the call today are Phil Fernandez, CEO; and Fred Ball, CFO of Marketo.

Before we get started today I would like to remind you that this call is being webcast and recorded. The webcast can be accessed live on the Investor Relations section of our website and via replay on our website shortly after the conclusion of the call. The website can be accessed at

On this call today, we will provide you with details about our performance in Q3 of fiscal year 2013. Some of our comments may include forward-looking statements such as statements regarding our outlook for the fourth quarter and fiscal year 2013. These forward-looking statements are based on certain assumptions and are subject to a number of risks and uncertainties. Actual results may vary materially.

Please refer to the section entitled forward-looking statements in our earnings release and read the risk factors included in our filings with the SEC; most recently, our S-1/A as filed on September 9, 2013. I would also like to point out that the results reported today include certain non-GAAP financial measures and that the numbers discussed on this call will be non-GAAP, unless stated otherwise. We provide non-GAAP financial measures because we believe that they are the most relevant, valuable way to review our core operating results.

We have provided a reconciliation of non-GAAP measures to their comparable GAAP measures in our earnings release, which is available on our website and is also included on the Form 8-K we filed with the SEC today. The forward-looking statements and risks stated in this conference call are based on current expectations as of today and Marketo assumes no obligation to update or revise them, whether as a result new developments or otherwise.

Now, I will turn the call over to Phil Fernandez for his remarks. Phil?

Phillip Fernandez

Thank you, Erica. Hello and thank you all for joining us today, as we report financial results for the third quarter of 2013. We are delighted to again report a very strong quarter. Revenue increased 65% year-over-year and 13% sequentially, to $25.5 million, and other key metrics were also well in line with our operating goals.

Historically, Q3 has been our seasonally softest quarter. Yet this year, I was very pleased to see strong and consistent performance across all elements of our business. I believe this clearly validates the size and growth of the overall market opportunity, and confirms how well we are executing on our plans.

As a reminder, our business strategy is built around being the sustained thought leader and technology innovator in the dynamic enterprise software category of solutions for the modern marketing department. Our recipe for growth is to focus first on new customer acquisition, in this rapidly expanding category, while also working to increase average revenue per customer across our growing installed base. Further, we will grow by pursuing complementary adjacent markets for our vision and technology, to let us capture additional revenue streams.

We sold at all aspects of our strategy in the quarter. We continue to innovate. For example, we announced an important product collaboration with Google, to improve conversion analytics and AdWords. We also saw great strength to cross sell of our application family, and are pushing to, what is perhaps the most important adjacent market, which is selling to B2C industries, really pick up steam in Q3.

More broadly, (inaudible) how vibrant the marketing software category continues to be, as it emerges into the mainstream of technology buying, and I see clear signs that the market is moving in our favor.

Just a year or two ago, our category was often defined or talked about, as an appendage to the CRM or Salesforce automation market. But now, every day, I see more and more marketing leaders stepping forward to take charge of their own destiny. They are selecting and investing in technology and solutions that they need to do their unique and important jobs. I call this a Marketing First World, and I believe it really plays to our strengths, given our singular focus at Marketo, on creating great products for marketing professionals.

Let me turn now to some specific highlights for the quarter. As I just mentioned, a key growth factor for our business, is to extend beyond our roots in B2B marketing, to serve an increasingly large number of consumers, or B2C marketers, and we certainly supercharged that initiative in Q3.

In the B2C category, we added customers like National American University, to help them offer a broader range of online education opportunities. The Portland Trailblazers, to help them sell basketball tickets; and JetSuite, to help them expand their program of innovative private jet memberships. For you dog lovers, we added American Kennel Club, supporting their new Wookieepedia initiative, to revitalize their brand with a younger demographic. And in fact, our largest transaction in the quarter was in the B2C category, where we were in business with a well known family brand. I believe that these and other B2C wins in the quarter, clearly demonstrate the growth opportunity that this category presents to Marketo.

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