Market Overview

Marchex Announces Second Quarter 2018 Results

Share:

Marchex,
Inc
. (NASDAQ:MCHX), a leading provider of call analytics that drive,
measure, and convert callers into customers, today announced its
financial results for the second quarter ended June 30, 2018.

Q2 2018 Financial Highlights

  • Revenue was $20.2 million for the second quarter of 2018, compared to
    $22.0 million for the second quarter of 2017.
  • Net loss was $0.7 million for the second quarter of 2018 or $0.02 per
    diluted share. For the second quarter of 2017, net loss was $1.3
    million or $0.03 per diluted share.
    Q2 2017     Q2 2018
Revenue $22.0 million $20.2 million
Net cash provided by (used in) operating activities $0.3 million ($1.3) million
Cash Balance $102 million $77 million
 
Non-GAAP Results1:
Adjusted EBITDA $0.4 million $0.2 million
 
  • Adjusted non-GAAP income (loss) per share1 for the second
    quarter of 2018 was ($0.00), compared to ($0.01) for the second
    quarter of 2017.
  • During the second quarter of 2018, Marchex repurchased 2.3 million
    shares or approximately 6% of its outstanding Class B common stock for
    a total price of $5.7 million.

1

   

Reconciliations of non-GAAP measures are included in the
financial tables attached to this press release and we encourage
investors to examine the reconciling adjustments between the GAAP
and non-GAAP measures.

 

Strategic Priorities Update

Grow New and Existing Enterprise Client Relationships. During the
second quarter, Marchex added more than 8 new clients in multiple
verticals including Auto, Health, and Home Services.

Growth in Call Volume. June 2018 was a record month for Marchex
with more than 20 million calls across its analytics platform. Continued
progress with our analytics products, including our speech analytics
product, is building momentum among new and existing customers. Based on
this progress, the company believes call volumes can continue to grow
into 2019.

Accelerate Product Innovation. The Marchex Institute
recently released two new studies focused on a couple of Marchex's core
verticals: Auto and Hospitality. Using the Marchex script tracking tool,
which helps companies understand what transpires on a call between
agents and customers, the Marchex Institute analyzed over 1.8 million
calls placed by consumers to nearly 5,000 stores of auto service
providers across the country. The script tracking tool was able to
measure 50 phrases that implied a negative response. The
study revealed
that saying "no" to a customer could result in lost
annual revenue of $110 million to the auto service industry.

Leveraging Marchex's Call DNA®, which provides a visual of what happens
on calls using automated scoring technology, the Marchex Institute analyzed
over 5.8 million calls
to 13 hotel brands and four cruise lines. The
Marchex Institute was able to identify key call handling challenges the
industries are facing, resulting in lost sales opportunities and
negative customer experiences.

"In the second quarter, we continued to add to our new customer pipeline
while seeing volume increases with several of our early analytics
customer relationships. We believe we will continue to make progress
with our analytics customers and grow volume levels across our analytics
platform into 2019," said Mike Arends, Chief Financial Officer.
"Meanwhile, we continued to work through more limited media marketplace
budget allocations from a few of our customers. That said, we are
encouraged by the building pipeline of new customer relationships across
both product areas and are working to scale these relationships to
capitalize on our product momentum. We are excited by the interest and
uptake of new products that are powered by our Speech technology and
continue to believe we are building a foundation to return Marchex to
growth over time."

Business Outlook

The following forward-looking statements reflect Marchex's expectations
as of August 1, 2018.

Financial Guidance for the Third Quarter ending
September 30, 2018

Revenue     $19.5 million to $21 million
Income (loss) from operations loss of $2 million or better
Adjusted OIBA1,2 loss of $1 million or better
Adjusted EBITDA1,2 breakeven or better
 

2

   

Third quarter GAAP income (loss) from operations is expected to
be ($2) million or better, assuming stock-based compensation
between $0.9 and $1.1 million for the quarter. Third quarter
Adjusted EBITDA includes estimated addbacks of $1 million related
to depreciation and amortization.

 

Conference Call and Webcast Information

Management will hold a conference call, starting at 5:00 p.m. ET on
Wednesday, August 1, 2018, to discuss its second quarter ended June 30,
2018 financial results and other company updates. Access to the live
webcast of the conference call will be available online from the
Investors section of Marchex's website at www.marchex.com.
An archived version of the webcast will also be available at the same
location two hours after completion of the call.

About Marchex

Marchex
understands the best customers are those who call your company - they
convert faster, buy more, and churn less. Marchex provides solutions
that help companies drive more calls, understand what happens on those
calls, and convert more of those callers into customers. Our actionable
intelligence strengthens the connection between companies and their
customers, bridging the physical and digital world, to help brands
maximize their marketing investments and operating efficiencies to
acquire the best customers.

Please visit http://www.marchex.comwww.marchex.com/blog or @marchex
on Twitter (Twitter.com/Marchex), where Marchex discloses material
information from time to time about the company, its financial
information, and its business.

Forward-Looking Statements:

This press release contains forward-looking statements that involve
substantial risks and uncertainties. All statements, other than
statements of historical facts, included in this press release regarding
our strategy, future operations, future financial position, future
revenues, other financial guidance, acquisitions, dispositions,
projected costs, prospects, plans and objectives of management are
forward-looking statements. We may not actually achieve the plans,
intentions, or expectations disclosed in our forward-looking statements
and you should not place undue reliance on our forward-looking
statements. Actual results or events could differ materially from the
plans, intentions and expectations disclosed in the forward-looking
statements we make. There are a number of important factors that could
cause Marchex's actual results to differ materially from those indicated
by such forward-looking statements including but not limited to product
demand, order cancellations and delays, competition and general economic
conditions. These factors are described in greater detail in the "Risk
Factors" section of our most recent periodic report and registration
statement filed with the SEC. All of the information provided in this
release is as of August 1, 2018 and Marchex undertakes no duty to update
the information provided herein.

In the event the press release contains links to third-party websites or
materials, the links are provided solely as a convenience to you.
Marchex is not responsible for the content of linked third-party sites
or materials and does not make any representations regarding the content
or accuracy thereof.

Non-GAAP Financial Information:

To supplement Marchex's consolidated financial statements presented in
accordance with GAAP and to provide clarity internally and externally,
Marchex uses certain non-GAAP measures of financial performance and
liquidity, including Adjusted OIBA, Adjusted EBITDA, and Adjusted
non-GAAP income (loss) per share. Marchex also provides Enterprise
Revenue, which represents revenue excluding Yellowpages.com LLC ("YP")
revenue generating contracts and, subsequent to Dex Media, Inc.'s
acquisition of YP (collectively "DexYP"), DexYP revenue generating
contracts.

Adjusted OIBA represents income
(loss) from operations excluding stock-based compensation expense. This
measure, among other things, is one of the primary metrics by which
Marchex evaluates the performance of its business. Adjusted OIBA is the
basis on which Marchex's internal budgets are based and by which
Marchex's management is currently evaluated. Marchex believes these
measures are useful to investors because they represent Marchex's
consolidated operating results, taking into account depreciation and
other intangible amortization, which Marchex believes is an ongoing cost
of doing business, but excluding the effects of certain other expenses
such as stock-based compensation. Adjusted
EBITDA
 represents income (loss) before interest, income
taxes, depreciation, amortization, and stock-based compensation. Marchex
believes that Adjusted EBITDA is another alternative measure of
liquidity to GAAP net cash provided by (used in) operating activities
that provides meaningful supplemental information regarding liquidity
and is used by Marchex's management to measure its ability to fund
operations and its financing obligations. Financial analysts and
investors may use Adjusted OIBA and EBITDA and Enterprise Revenue to
help with comparative financial evaluation to make informed investment
decisions. Adjusted non-GAAP income (loss)
per share
 represents Adjusted non-GAAP income (loss) divided
by GAAP diluted shares outstanding. Adjusted non-GAAP income (loss)
generally captures those items on the statement of operations that have
been, or ultimately will be, settled in cash exclusive of certain items
that are not indicative of Marchex's recurring core operating results
and represents net income (loss) applicable to common stockholders plus
the net of tax effects of: (1) stock-based compensation; and (2)
interest income and other, net. Financial analysts and investors may use
Adjusted non-GAAP income (loss) per share to analyze Marchex's financial
performance since these groups have historically used EPS related
measures, along with other measures, to estimate the value of a company,
to make informed investment decisions, and to evaluate a company's
operating performance compared to that of other companies in its
industry.

Marchex's management believes that investors should have access to, and
Marchex is obligated to provide, the same set of tools that management
uses in analyzing the company's results. These non-GAAP measures should
be considered in addition to results prepared in accordance with GAAP,
and should not be considered in isolation, as a substitute for, or
superior to, GAAP results. Marchex's non-GAAP financial measures may be
defined differently from time to time and may be defined differently
than similar titled terms used by other companies, and accordingly, care
should be exercised in understanding how Marchex defines its non-GAAP
financial measures in this release. Marchex endeavors to compensate for
the limitations of the non-GAAP measures presented by providing the
comparable GAAP measure with equal or greater prominence, GAAP financial
statements, and detailed descriptions of the reconciling items and
adjustments, including quantifying such items, to derive the non-GAAP
measure.

 
MARCHEX, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
 
   

Three Months Ended
June 30,

   

Six Months Ended
June 30,

2017     2018 2017     2018
Revenue $ 22,016 $ 20,218 $ 46,391 $ 42,114
Expenses:
Service costs (1) 12,175 11,384 25,773 24,207
Sales and marketing (1) 3,471 3,335 8,463 6,945
Product development (1) 4,283 3,873 9,553 7,521
General and administrative (1)   3,394     2,543     7,424     5,513  
Total operating expenses   23,323     21,135     51,213     44,186  
Loss from operations (1,307 ) (917 ) (4,822 ) (2,072 )
Interest income and other, net   40     269     57     509  
Loss before provision for income taxes (1,267 ) (648 ) (4,765 ) (1,563 )
Income tax expense   13     10     25     21  
Net loss applicable to common stockholders $ (1,280 ) $ (658 ) $ (4,790 ) $ (1,584 )
 

Basic and diluted net loss per Class A and Class B share
applicable to common stockholders

$ (0.03 ) $ (0.02 ) $ (0.11 ) $ (0.04 )

Shares used to calculate basic net loss per share applicable to
common stockholders:

Class A 5,056 5,056 5,056 5,056
Class B 37,698 37,584 37,435 37,811

Shares used to calculate diluted net loss per share applicable to
common stockholders:

Class A 5,056 5,056 5,056 5,056
Class B 42,754 42,640 42,491 42,867
 

(1) Includes stock-based compensation allocated as follows:

Service costs $ 130 $ 102 $ 255 $ 230
Sales and marketing 63 72 469 286
Product development 207 91 298 182
General and administrative   581     417     1,316     935  
Total $ 981   $ 682   $ 2,338   $ 1,633  
 
 
MARCHEX, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
 
    December 31,     June 30,
2017 2018
Assets
Current assets:
Cash and cash equivalents $ 104,190 $ 76,803
Accounts receivable, net 14,860 15,322
Prepaid expenses and other current assets   2,041     2,266  
Total current assets 121,091 94,391
Property and equipment, net 2,405 2,566
Other assets, net   326     877  
Total assets $ 123,822   $ 97,834  
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 4,928 $ 5,142
Accrued expenses and other current liabilities 5,585 5,872
Deferred revenue and deposits 313 1,079
Dividends payable   21,907      
Total current liabilities 32,733 12,093
Other non-current liabilities   1,090     1,110  
Total liabilities 33,823 13,203
Stockholders' equity:
Class A common stock 53 53
Class B common stock 387 367
Additional paid-in capital 343,268 339,315
Accumulated deficit   (253,709 )   (255,104 )
Total stockholders' equity   89,999     84,631  
Total liabilities and stockholders' equity $ 123,822   $ 97,834  
 
 
MARCHEX, INC. AND SUBSIDIARIES
(in thousands)
(unaudited)
 
Reconciliation of GAAP Loss from Operations to Adjusted Operating
Income (Loss) Before Amortization (OIBA)
 
   

Three Months Ended
June 30,

   

Six Months Ended
June 30,

2017     2018 2017     2018
Loss from operations $ (1,307 ) $ (917 ) $ (4,822 ) $ (2,072 )
Stock-based compensation   981     682     2,338     1,633  
Adjusted OIBA1 $ (326 ) $ (235 ) $ (2,484 ) $ (439 )
 
 

Reconciliation from Net Cash provided by (used in) Operating
Activities to Adjusted EBITDA

 
   

Three Months Ended
June 30,

   

Six Months Ended
June 30,

2017       2018   2017       2018  
Net cash provided by (used in) operating activities $ 254 $ (1,284 ) $ (624 ) $ 1,737
Changes in assets and liabilities 174 1,717 (350 ) (754 )
Income tax expense 13 10 25 21
Interest income and other, net   (40 )   (269 )   (57 )   (509 )
Adjusted EBITDA1 $ 401   $ 174   $ (1,006 ) $ 495  
 
Net cash used in investing activities $ (906 ) $ (842 ) $ (912 ) $ (1,611 )
 
Net cash provided by (used in) financing activities $ 9   $ (5,633 ) $ 15   $ (27,513 )
 
1     Includes reorganization costs of approximately $700,000 in Q1 2017.
 
 

Reconciliation from Revenue to Enterprise Revenue

 
   

Three Months Ended
June 30,

   

Six Months Ended
June 30,

2017     2018 2017     2018
Revenue $ 22,016 $ 20,218 $ 46,391 $ 42,114
Less: YP or DexYP Revenue   4,829   4,468   10,232   8,384
Enterprise Revenue2 $ 17,187 $ 15,750 $ 36,159 $ 33,730
 
2     Enterprise Revenue represents total revenue less revenue generated
from contracts with YP, and for the 2018 period, total revenue less
revenue generated from contracts with YP and Dex Media, Inc.
(collectively "DexYP"). In 2017, Dex Media, Inc. acquired YP
Holdings LLC, which is the parent company of YP.
 
 
MARCHEX, INC. AND SUBSIDIARIES
Reconciliation of GAAP Net Loss per Share to Adjusted Non-GAAP
Income (Loss) per Share
(in thousands, except per share amounts)
(unaudited)
 
   

Three Months Ended
June 30,

   

Six Months Ended
June 30,

2017     2018 2017     2018
Adjusted Non-GAAP loss per share $ (0.01 ) $ (0.00 ) $ (0.04 ) $ (0.01 )
 

Net loss per share applicable to common stockholders - diluted
(GAAP loss per share)

$ (0.03 ) $ (0.02 ) $ (0.11 ) $ (0.04 )

Shares used to calculate diluted net loss per share applicable to
common stockholders

42,754 42,640 42,491 42,867
 
Net loss applicable to common stockholders $ (1,280 ) $ (658 ) $ (4,790 ) $ (1,584 )
Stock-based compensation 981 682 2,338 1,633
Interest income and other, net (40 ) (269 ) (57 ) (509 )
Estimated impact of income taxes   115     49     829     73  
Adjusted Non-GAAP loss $ (224 ) $ (196 ) $ (1,680 ) $ (387 )
Adjusted Non-GAAP loss per share $ (0.01 ) $ (0.00 ) $ (0.04 ) $ (0.01 )
 

Shares used to calculate diluted net loss per share applicable to
common stockholders (GAAP) and Adjusted Non-GAAP loss per share1

  42,754     42,640     42,491     42,867  
 
1     For the purpose of computing the number of diluted shares for
Adjusted Non-GAAP income (loss) per share, Marchex uses the
accounting guidance that would be applicable for computing the
number of diluted shares for GAAP net income (loss) per share.

View Comments and Join the Discussion!