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 third quarter ended
September 30, 2018.
Q3 2018 Financial
Highlights
- Revenue was $20.0 million for
the third quarter of 2018, compared to $22.1 million for the third
quarter of 2017.
- Net loss was $0.5 million for the third
quarter of 2018 or $0.01 per diluted share. For the third quarter
of 2017, net loss was $0.8 million or $0.02 per diluted share.
Q3 2017 Q3 2018 Revenue
$22.1 million $20.0 million
Net cash provided by operating
activities $2.3 million $2.3 million
Cash Balance $104
million $79 million
Non-GAAP Results1:
Adjusted EBITDA $1.1 million $0.5 million
- Adjusted non-GAAP loss per
share1 for the third quarter of 2018 was ($0.00), compared to
$0.00 for the third quarter of 2017.
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 third quarter, Marchex added more than 5 new clients in
multiple verticals, including Auto and Financial Services.
Continued Growth in Call Volume. During the third
quarter, Marchex set a new monthly record with more than 23 million
calls across its analytics platform. While seasonal call volume is
typically slower late in the year, Marchex is also seeing building
momentum among new and existing customers. Based on this progress,
the Company believes call volumes can continue to grow in 2019.
Accelerate Product Innovation. Marchex recently launched
the Marchex Innovation Development (MIND) Lab, a new research and
development group, to support product innovation and help
businesses engage and nurture customer relationships across
communications channels, including voice and text. The MIND Lab
will incubate new technologies and products utilizing Marchex’s
continuing investment in artificial intelligence, speech
technology, personalization customer solutions and conversational
analytics. Marchex has appointed Dr. Junmei Zhong, a pioneer in
artificial intelligence (AI) and natural language processing (NLP),
as the Company’s Chief AI Scientist.
Expanded Call Analytics Leadership with the addition of
Telmetrics. Marchex today announced the acquisition of
Telmetrics, an enterprise call and text tracking and analytics
company. With the addition of Telmetrics, Marchex is expanding its
enterprise client and data footprint as well as adding new
capabilities to expand its solutions across new customer
communication channels. Amortization of intangible assets from
acquisition will impact GAAP results. For the remainder of 2018 and
for 2019, we expect the acquisition to be accretive to Adjusted
OIBA.
Telmetrics 2018 Financial Summary.
On a standalone basis, Telmetrics is projecting $10 million or more
in total revenue, including $8.5 million or more in core analytics
revenue and approximately $0.7 million of operating income for
2018. Non-core and other analytics revenue includes revenue from
tests, consulting services, or other non-core analytics revenue
that may continue for a limited time but is not anticipated to
continue in future periods.
“In the third quarter, we saw growth with several recently
signed conversation analytics relationships, while we continued to
build our customer pipeline and add new analytics relationships,”
said Mike Arends, Chief Financial Officer. “We continue to see
early traction, particularly with those customers who are adopting
solutions created from or integrated with our speech technology.
With the addition of Telmetrics and as our call volume levels
continue to grow, the underlying conversational data set that
drives our AI efforts is also expanding, which fuels future product
development initiatives and opens up new growth opportunities for
Marchex.”
Business Outlook
The following forward-looking statements reflects the Company’s
current outlook as of November 5, 2018.
- For the fourth quarter, the Company
anticipates the continuation of double digit percentage
year-over-year growth in Marchex’s core analytics revenue, and that
this trend will continue into the first quarter of 2019 as well.
For a breakout of Marchex’s historical core analytics revenue,
please refer to the financial tables included in this press
release.
- For the fourth quarter, the Company
expects to see stabilization in Marchex’s marketplace revenue as
compared to the third quarter.
- For the partial fourth quarter,
Telmetrics is anticipated to contribute $1.25 million in core
analytics revenue and $0.2 million to Adjusted OIBA.
Financial Guidance
(including Telmetrics) for the Fourth Quarter ending December 31,
2018
Total Revenue $22 million or more Income
(loss) from operations loss of ($1.1) million or better Adjusted
OIBA1,2 $0.2 million or more Adjusted EBITDA1,2 $0.8 million or
more
2
Fourth quarter GAAP income (loss) from
operations is expected to be ($1.1) million or better, assuming
stock-based compensation between $0.9 and $1.1 million for the
quarter. Fourth quarter includes estimated addbacks of $1.0 million
related to depreciation and amortization and Telmetrics
amortization of intangible assets from acquisition.
- In 2019, the Company believes
Telmetrics will contribute $8.5 million or more in core analytics
revenue and $1 million or more in Adjusted OIBA. In 2020, the
Company anticipates realization of potential increased annualized
cost synergies of an incremental $1 million or more.
Conference Call and Webcast
Information
Management will hold a conference call, starting at 5:00 p.m. ET
on Monday, November 5, 2018, to discuss its third quarter ended
September 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.com, www.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 November 5, 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, amortization of intangible assets from acquisition, and
acquisition related costs. 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, amortization of intangible assets from
acquisition, and acquisition related costs. Adjusted EBITDA represents income (loss)
before interest, income taxes, depreciation, amortization,
acquisition related costs, 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; (2) interest income and other, net,
(3) amortization of intangible assets from acquisition; and (4)
acquisition related costs. 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 EndedSeptember
30,
Nine Months EndedSeptember
30,
2017 2018 2017 2018
Revenue $ 22,053 $ 20,006 $ 68,444 $ 62,120 Expenses: Service costs
(1) 11,917 10,877 37,690 35,084 Sales and marketing (1) 3,612 3,330
12,075 10,275 Product development (1) 4,256 3,861 13,809 11,382
General and administrative (1) 3,144 2,570 10,568 8,083 Acquisition
related costs — 110 — 110 Total
operating expenses 22,929 20,748 74,142
64,934 Loss from operations (876 ) (742 ) (5,698 ) (2,814 )
Interest income and other, net 77 296 134
805 Loss before provision for income taxes (799 ) (446 )
(5,564 ) (2,009 ) Income tax expense 12 11 37
32 Net loss applicable to common stockholders $ (811 ) $
(457 ) $ (5,601 ) $ (2,041 ) Basic and diluted net loss per
Class A and Class B share applicable
to common stockholders
$ (0.02 ) $ (0.01 ) $ (0.13 ) $ (0.05 ) 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 37,820 36,127 37,565 37,243
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 42,876 41,183 42,621 42,299
(1) Includes stock-based compensation allocated as follows:
Service costs $ 130 $ 108 $ 385 $ 338 Sales and marketing 299 125
768 411 Product development 199 94 497 276 General and
administrative 534 375 1,850 1,310
Total $ 1,162 $ 702 $ 3,500 $ 2,335
MARCHEX, INC. AND SUBSIDIARIES Condensed Consolidated
Balance Sheets (in thousands) (unaudited)
December 31, September 30, 2017 2018
Assets Current assets: Cash and cash equivalents $ 104,190 $
78,605 Accounts receivable, net 14,860 13,646 Prepaid expenses and
other current assets 2,041 2,322 Total current assets
121,091 94,573 Property and equipment, net 2,405 2,797 Other
assets, net 326 919 Total assets $ 123,822 $ 98,289
Liabilities and Stockholders’ Equity Current liabilities:
Accounts payable $ 4,928 $ 5,258 Accrued expenses and other current
liabilities 5,585 5,804 Deferred revenue and deposits 313 1,165
Dividends payable 21,907 — Total current liabilities
32,733 12,227 Other non-current liabilities 1,090
1,155 Total liabilities 33,823 13,382 Stockholders’ equity: Class A
common stock 53 53 Class B common stock 387 368 Additional paid-in
capital 343,268 340,047 Accumulated deficit (253,709 )
(255,561 ) Total stockholders’ equity 89,999
84,907 Total liabilities and stockholders’ equity $ 123,822 $
98,289
MARCHEX, INC. AND SUBSIDIARIES (in
thousands) (unaudited) Reconciliation of GAAP
Loss from Operations to Adjusted Operating Income (Loss) Before
Amortization (OIBA)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2017 2018 2017 2018 Loss
from operations $ (876 ) $ (742 ) $ (5,698 ) $ (2,814 ) Stock-based
compensation 1,162 702 3,500 2,335 Acquisition related costs
— 110 — 110 Adjusted OIBA1 $ 286 $ 70 $ (2,198
) $ (369 )
Reconciliation from Net Cash provided
by Operating Activities to Adjusted EBITDA
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2017 2018 2017 2018 Net
cash provided by operating activities $ 2,316 $ 2,325 $ 1,692 $
4,062 Changes in assets and liabilities (1,178 ) (1,655 ) (1,528 )
(2,409 ) Income tax expense 12 11 37 32 Acquisition related costs —
110 — 110 Interest income and other, net (77 ) (296 )
(134 ) (805 ) Adjusted EBITDA1 $ 1,073 $ 495 $ 67 $
990 Net cash used in investing activities $ (377 ) $ (545 )
$ (1,289 ) $ (2,156 ) Net cash provided by (used in)
financing activities $ 9 $ 22 $ 24 $ (27,491 )
1
Includes reorganization costs of
approximately $700,000 in Q1 2017.
Revenue Reconciliations
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2017 2018 2017
2018 Revenue $ 22,053 $ 20,006 $ 68,444 $ 62,120 Less: YP or
DexYP Revenue 4,584 5,100 14,816 13,483
Enterprise Revenue2 $ 17,469 $ 14,906 $ 53,628 $ 48,637
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.
Q117 Q217
Q317 Q417 Q118 Q218 Q318 Core
Analytics revenue3 $ 7,079 $ 7,353 $ 7,589 $ 7,384 $ 7,401 $ 8,234
$ 8,896 Marketplace, Local Leads, and other analytics4
17,296 14,663 14,464 14,463 14,495
11,984 11,110 Total revenue $ 24,375 $ 22,016 $
22,053 $ 21,847 $ 21,896 $ 20,218 $ 20,006
3
Core analytics revenue includes revenue
from analytics customers, including those that are purchasing or
buying products derived from the company’s speech technology
platform.
4
Includes revenue from marketplace, local
leads and from tests, consulting services or other analytics
revenues that may continue for a limited time but is not
anticipated to continue in future periods.
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 EndedSeptember
30,
Nine Months EndedSeptember
30,
2017 2018 2017 2018
Adjusted Non-GAAP income (loss) per share $ 0.00 $ (0.00 ) $ (0.04
) $ (0.01 ) Net loss per share applicable to common
stockholders - diluted
(GAAP loss per share)
$ (0.02 ) $ (0.01 ) $ (0.13 ) $ (0.05 ) Shares used to calculate
diluted net loss per share applicable to
common stockholders
42,876 41,183 42,621 42,299 Net loss applicable to common
stockholders $ (811 ) $ (457 ) $ (5,601 ) $ (2,041 ) Stock-based
compensation 1,162 702 3,500 2,335 Acquisition related costs — 110
— 110 Interest income and other, net (77 ) (296 ) (134 ) (805 )
Estimated impact of income taxes (104 ) (192 )
725 (119 ) Adjusted Non-GAAP income (loss) $ 170 $ (133 ) $
(1,510 ) $ (520 ) Adjusted Non-GAAP income (loss) per share $ 0.00
$ (0.00 ) $ (0.04 ) $ (0.01 ) Shares used to calculate
diluted net loss per share applicable to
common stockholders (GAAP) and Adjusted
Non-GAAP income (loss) per share1
42,876 41,183 42,621 42,299 Weighted average stock options and
common shares subject to
purchase or cancellation (if
applicable)
186 — — — Diluted shares used to
calculate Adjusted Non-GAAP income (loss) per share 1 43,062
41,183 42,621 42,299
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.
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version on businesswire.com: https://www.businesswire.com/news/home/20181105005904/en/
Marchex Investor RelationsTrevor Caldwell, 206-331-3600Email:
ir(at)marchex.comOrMEDIA INQUIRIESMarchex Corporate
Communications206-331-3434Email: pr(at)marchex.com
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