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8-K - FORM 8-K - MARCHEX INCd679710d8k.htm

Exhibit 99.1

Marchex Announces Fourth Quarter and Full Year 2013 Results

Company Sees Strong Demand for Mobile, Call-Driven Products

Forecasts Record Call-Driven Revenue For 2014

SEATTLE — (BUSINESS WIRE) – February 19, 2014— Marchex, Inc. (NASDAQ:MCHX), a mobile advertising technology company, today announced its financial results for the fourth quarter and full year ended December 31, 2013.

“Marchex made significant strides in 2013 as we expanded our Call Analytics technology, won new clients and retained and grew important, existing relationships,” said Russell Horowitz, Chairman and CEO of Marchex. “Specifically, our Call Analytics platform connected and analyzed hundreds of millions of calls on behalf of our clients; we added new advertisers to our Call Marketplace and we grew our mobile distribution partner network. This progress builds a strong foundation for 2014 as we enter the year with product and business momentum.”

Q4 2013 Financial Highlights1

 

    GAAP revenue was $39.7 million for the fourth quarter of 2013, compared to $32.4 million for the fourth quarter of 2012. Non-GAAP revenue2, which excludes domain sales recorded in GAAP revenue, was $38.1 million for the fourth quarter of 2013.

 

    GAAP net income from continuing operations was $597,000 for the fourth quarter of 2013, compared to a GAAP net loss from continuing operations of $33.5 million for the fourth quarter of 2012.

 

    GAAP net income from continuing operations attributable to common stockholders per diluted share was $0.02 for the fourth quarter of 2013. This compares to GAAP net loss from continuing operations attributable to common stockholders per diluted share of $1.00 for the fourth quarter of 2012.

 

     Q4 2013      Q4 2012  

GAAP Revenue

   $ 39.7 million       $ 32.4 million   

Non-GAAP Results below exclude Domain Sales and Discontinued Operations:

     

Non-GAAP Revenue 2, 3

   $ 38.1 million       $ 32.4 million   

Call-Driven and Other Revenue

   $ 34.5 million       $ 28.5 million   

Archeo Revenue 2, 3

   $ 3.7 million       $ 4.0 million   

Call-Driven Adjusted OIBA3

   $ 1.7 million       $ 1.2 million   

Call-Driven Adjusted EBITDA3

   $ 2.6 million       $ 2.0 million   

Adjusted OIBA2,3

   $ 2.7 million       $ 2.5 million   

Adjusted EBITDA2,3

   $ 3.7 million       $ 3.4 million   

 

    Adjusted non-GAAP EPS3 from continuing operations for the fourth quarter of 2013 was $0.04, compared to $0.05 for the fourth quarter of 2012.

Full Year 2013 Consolidated Financial Results1

 

    GAAP revenue was $152.6 million for 2013, compared to $132.8 million for 2012. Non-GAAP revenue2, which excludes domain sales recorded in GAAP revenue, was $150.1 million for 2013.


    GAAP net income from continuing operations applicable to common stockholders was $957,000 or $0.03 per diluted share for 2013. This compares to GAAP net loss from continuing operations applicable to common stockholders of $34.3 million or $1.03 per diluted share in 2012.

 

     FY 2013      FY 2012  

GAAP Revenue

   $ 152.6 million       $ 132.8 million   

Non-GAAP Results below exclude Domain Sales and Discontinued Operations:

     

Non-GAAP Revenue 2, 3

   $ 150.1 million       $ 132.8 million   

Call-Driven and Other Revenue

   $ 135.1 million       $ 111.9 million   

Archeo Revenue 2, 3

   $ 15.0 million       $ 20.9 million   

Call-Driven Adjusted OIBA3

   $ 6.3 million       $ 5.1 million   

Call-Driven Adjusted EBITDA3

   $ 9.9 million       $ 8.4 million   

Adjusted OIBA2,3

   $ 9.6 million       $ 13.4 million   

Adjusted EBITDA2,3

   $ 13.4 million       $ 17.1 million   

 

    Adjusted non-GAAP EPS3 from continuing operations for 2013 was $0.17, compared to $0.25 in 2012.

 

1 In July 2013, certain pay-per-click assets were sold. As a result, the financial results of these pay-per-click assets are presented as income (loss) from discontinued operations, net of tax in our consolidated statements of operations in accordance with GAAP, and are excluded from all other results unless otherwise noted.
2 Excludes domain sales recognized in GAAP revenue. In September 2013 upon the launch of its domain marketplace, the company commenced recognizing domain sales as revenue.
3  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.

Marchex Q4 and Recent Call-Driven Business Highlights:

 

    Revenue. Call-Driven and other related revenue was $34.5 million for the fourth quarter of 2013 – a 21 percent increase compared to $28.5 million for the fourth quarter of 2012.

 

    Products. We recently released data showing that Marchex blocked approximately 40 million phone calls in 2013 to U.S. small businesses through its Clean Call™ technology. Marchex started aggressively going after spam calls in 2011, after noticing the detrimental effect these calls were having on businesses. Clean Call™ technology is now used by hundreds of thousands of advertisers to detect and block telemarketers, robocallers and other spam dialers. Marchex found that these calls cost small businesses about half a billion dollars a year in lost productivity.

 

    Customers and Partners. We recently announced a preferred partnership with MapQuest to connect mobile and online consumers to businesses via pay-for-call ads. MapQuest is one of the leading mapping brands online, reaching 28.4 million web users and 13.7 million mobile and tablet users, with 4.0 million users across devices in November 2013, according to comScore Media Metrix. The partnership allows Marchex to leverage MapQuest’s broad reach of consumers across every digital channel for Pay-for-Call advertising.

Archeo Q4 Business Highlights:

 

    Revenue. Archeo non-GAAP revenue was $3.7 million for the fourth quarter of 2013, which excludes domain sales recognized in GAAP revenue.

 

    Domains sales. During the fourth quarter of 2013, Archeo sold a total of 262 domains that yielded $1.6 million.


Business Outlook

“Our business is being driven by our advertiser demand for mobile performance. Our Call-Driven products and investments are centered on unlocking this opportunity,” said Mike Arends, Chief Financial Officer of Marchex. “Given the relative size and importance of our Call-Driven products, we believe that focusing on these revenue and profitability measures is the most appropriate way to communicate our business progress and guidance going forward. While advertiser budgets can change and we can experience period-to-period variability based on a variety of factors, we are excited about the ongoing progress we are making in our business. Today we are forecasting accelerated Call-Driven revenue year-over-year growth of approximately 30% in the first quarter.”

The following forward-looking statements reflect Marchex’s expectations as of February 19, 2014 and exclude any contribution from Archeo operations, domain sales and discontinued operations. Archeo operating results would be incremental and additive to our Call-Driven revenue, profitability, and other measures below:

Call-Driven financial guidance for the fiscal year ending December 31, 2014

 

Call-Driven Revenue

   $  162 million or more   

Call-Driven Adjusted OIBA 1

   $ 7.5 million or more   

Call Driven Adjusted EBITDA 1

   $  11.5 million or more   

Call-Driven financial guidance for the First Quarter ending March 31, 2014

 

Call-Driven Revenue

   $ 40 million or more

Call-Driven Adjusted OIBA 1

   $ 1-$ 2 million

Call-Driven Adjusted EBITDA 1

   $ 2-$ 3 million

 

1  These non-GAAP Call-Driven measures assign all Marchex indirect overhead costs to the Call-Driven results. 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.

Conference Call and Webcast Information

Management will hold a conference call, starting at 5:00 p.m. ET on Wednesday, February 19, 2014 to discuss its fourth quarter and year ended December 31, 2013 financial results, and other company updates. Access to the live webcast of the conference call will be available online from the Investors section of the Marchex’s website at www.marchex.com. An archived version of the webcast will also be available at the same location, beginning two hours after completion of the call.

About Marchex

Marchex is a mobile advertising technology company. The company provides a suite of products and services for businesses that depend on consumer phone calls to drive sales. Marchex’s mobile advertising platform delivers new customer phone calls to businesses, while its technology analyzes the data in these calls to help maximize ad campaign results. Marchex disrupts traditional advertising models by giving businesses full transparency into their ad campaign performance and charging them based on new customer acquisition.

Please visit www.marchex.com, blog.marchex.com 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, 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 which are described 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 February 19, 2014 and Marchex undertakes no duty to update the information provided herein.

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 OIBA , Adjusted OIBA, Adjusted EBITDA, Revenue excluding and including Domain Sales, and Adjusted OIBA and EBITDA excluding and including Domain Sales. Marchex also provides Call-Driven and Archeo Adjusted OIBA and EBITDA, and Adjusted non-GAAP EPS.

OIBA represents income (loss) from operations plus (1) stock-based compensation expense and (2) amortization of intangible assets from acquisitions. This measure, among other things, is one of the primary metrics by which Marchex evaluates the performance of its business. Additionally, Marchex’s management uses Adjusted OIBA, which excludes any gain/loss on sales and disposals of intangible assets for each asset and acquisition and separation related costs as these items are not indicative of Marchex’s recurring core operating results and any domain sales contribution. 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 or gain/loss such as stock-based compensation, amortization of intangible assets from acquisitions, acquisition and separation related costs, domain sales contribution and gain/loss on sales and disposals of intangible assets. Adjusted EBITDA represents income (loss) before interest, income taxes, depreciation, amortization, stock compensation expense, acquisition and separation related cost, domain sales contribution and gain/loss on sales and disposals of intangible assets. Marchex believes that Adjusted EBITDA is another alternative measure of liquidity to GAAP net cash provided by 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.

Revenue excluding Domain Sales represents GAAP revenue excluding domain sales sold through Marchex’s Domain Marketplace which are recognized in GAAP revenue. Revenue with Domain Sales represents GAAP revenue plus sales proceeds from the sale of intangible assets. Adjusted OIBA and EBITDA with Domain Sales includes the above descriptions of Adjusted OIBA and EBITDA plus any domain sales contribution and gain/loss on sales and disposals of intangible assets. Call-Driven Adjusted OIBA and EBITDA includes the above descriptions of Adjusted OIBA and EBITDA for the Call-Driven segment. The Call-Driven Adjusted OIBA and EBITDA assigns all Marchex indirect overhead costs to the Call-Driven results. Archeo non-GAAP Measures include the measures above for the Archeo segment. Financial analysts and investors may use the non-GAAP historical Revenue with Domain Sales, Adjusted OIBA and EBITDA with Domain Sales to help with comparative financial evaluation to make informed investment decisions.


Adjusted non-GAAP EPS represents Adjusted non-GAAP Net Income (Loss) applicable to common stockholders divided by GAAP diluted shares outstanding. Adjusted non-GAAP Net Income (Loss) applicable to common stockholders 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 expense, (2) amortization of intangible assets from acquisitions, (3) domain sales contribution and gain/loss on sales and disposals of intangible assets and domain sales contribution, (4) acquisition and separation related costs, (5) interest and other income (expense), (6) discontinued operations and gain on sale of discontinued operations, net of tax and (7) dividends paid to participating securities, and also excludes the effect of the tax valuation allowance. Financial analysts and investors may use Adjusted non-GAAP EPS 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.

For further information, contact:

Trevor Caldwell

Marchex Investor Relations

Telephone: 206.331.3600

Email: ir(at)marchex.com

Or

MEDIA INQUIRIES

Sonia Krishnan

Marchex Corporate Communications

Telephone: 206-331-3434

Email: skrishnan(at)marchex.com


MARCHEX, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

 

     Three Months Ended
December 31,
 
     2012     2013  

Revenue

   $ 32,436      $ 39,680   

Expenses:

    

Service costs (1)

     19,099        23,833   

Sales and marketing (1)

     2,563        2,832   

Product development (1)

     5,963        6,760   

General and administrative (1)

     5,557        4,382   

Amortization of intangible assets from acquisitions

     1,054        426   

Acquisition and separation related costs

     589        (62
  

 

 

   

 

 

 

Total operating expenses

     34,825        38,171   

Impairment of goodwill

     (15,837     —     

Gain on sales and disposals of intangible assets, net

     862        35   
  

 

 

   

 

 

 

Income (loss) from operations

     (17,364     1,544   

Interest expense and other, net

     (20     11   
  

 

 

   

 

 

 

Income (loss) from continuing operations before provision for income taxes

     (17,384     1,555   

Income tax expense

     16,108        958   
  

 

 

   

 

 

 

Net income (loss) from continuing operations

     (33,492     597   

Discontinued operations:

    

Income (loss) from discontinued operations, net of tax

     (843     7   

Gain on sale from discontinued operations, net of tax

     —          1   
  

 

 

   

 

 

 

Discontinued operations, net of tax

     (843     8   

Net income (loss)

     (34,335     605   

Dividends paid to participating securities

     (394     —     
  

 

 

   

 

 

 

Net income (loss) applicable to common stockholders

   $ (34,729   $ 605   
  

 

 

   

 

 

 

Basic and diluted net income (loss) per Class A share applicable to common stockholders:

    

Continuing operations

   $ (1.00   $ 0.02   

Discontinued operations, net of tax

     (0.02     0.00   
  

 

 

   

 

 

 

Basic and diluted net income (loss) per Class A share applicable to common stockholders

   $ (1.02   $ 0.02   

Basic net income (loss) per Class B share applicable to common stockholders:

    

Continuing operations

   $ (0.99   $ 0.02   

Discontinued operations, net of tax

     (0.02     0.00   
  

 

 

   

 

 

 

Basic net income (loss) per Class B share applicable to common stockholders:

   $ (1.01   $ 0.02   

Diluted net income (loss) per Class B share applicable to common stockholders:

    

Continuing operations

   $ (1.00   $ 0.02   

Discontinued operations, net of tax

     (0.02     0.00   
  

 

 

   

 

 

 

Diluted net income (loss) per Class B share applicable to common stockholders:

   $ (1.02   $ 0.02   

Dividends paid per share

   $ 0.18      $ —     

Shares used to calculate basic net income (loss) per share applicable to common stockholders

    

Class A

     9,570        7,770   

Class B

     24,642        28,371   

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

    

Class A

     9,570        7,770   

Class B

     34,212        38,713   

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

    

Service costs

   $ 325      $ 362   

Sales and marketing

     20        171   

Product development

     178        508   

General and administrative

     2,720        1,321   
  

 

 

   

 

 

 

Total

   $ 3,243      $ 2,362   
  

 

 

   

 

 

 


MARCHEX, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

 

     Twelve Months Ended
December 31,
 
     2012     2013  

Revenue

   $ 132,794      $ 152,550   

Expenses:

    

Service costs (1)

     75,920        91,858   

Sales and marketing (1)

     13,057        11,182   

Product development (1)

     23,200        27,346   

General and administrative (1)

     22,838        19,385   

Amortization of intangible assets from acquisitions

     4,728        2,926   

Acquisition and separation related costs

     753        878   
  

 

 

   

 

 

 

Total operating expenses

     140,496        153,575   

Impairment of goodwill

     (15,837     —     

Gain on sales and disposals of intangible assets, net

     6,296        3,774   
  

 

 

   

 

 

 

Income (loss) from operations

     (17,243     2,749   

Interest expense and other, net

     (449     (37
  

 

 

   

 

 

 

Income (loss) from continuing operations before provision for income taxes

     (17,692     2,712   

Income tax expense

     16,566        1,755   
  

 

 

   

 

 

 

Net income (loss) from continuing operations

     (34,258     957   

Discontinued operations:

    

Loss from discontinued operations, net of tax

     (938     (70

Gain on sale from discontinued operations, net of tax

     —          930   
  

 

 

   

 

 

 

Discontinued operations, net of tax

     (938     860   

Net income (loss)

     (35,196     1,817   

Dividends paid to participating securities

     (657     —     
  

 

 

   

 

 

 

Net income (loss) applicable to common stockholders

   $ (35,853   $ 1,817   
  

 

 

   

 

 

 

Basic and diluted net income (loss) per Class A share applicable to common stockholders:

    

Continuing operations

   $ (1.03   $ 0.03   

Discontinued operations, net of tax

     (0.03     0.02   
  

 

 

   

 

 

 

Basic and diluted net income (loss) per Class A share applicable to common stockholders

   $ (1.06   $ 0.05   

Basic and diluted net income (loss) per Class B share applicable to common stockholders:

    

Continuing operations

   $ (1.02   $ 0.03   

Discontinued operations, net of tax

     (0.03     0.02   
  

 

 

   

 

 

 

Basic and diluted net income (loss) per Class A share applicable to common stockholders

   $ (1.05   $ 0.05   

Dividends paid per share

   $ 0.25      $ —     

Shares used to calculate basic net income (loss) per share applicable to common stockholders

    

Class A

     9,574        8,816   

Class B

     24,412        26,798   

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

    

Class A

     9,574        8,816   

Class B

     33,986        36,999   

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

    

Service costs

   $ 1,869      $ 1,180   

Sales and marketing

     2,029        645   

Product development

     1,038        1,635   

General and administrative

     10,702        5,777   
  

 

 

   

 

 

 

Total

   $ 15,638      $ 9,237   
  

 

 

   

 

 

 


MARCHEX, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

     December 31,
2012
    December 31,
2013
 
Assets     

Current assets:

    

Cash and cash equivalents

   $ 15,930      $ 30,912   

Accounts receivable, net

     25,988        30,005   

Prepaid expenses and other current assets

     2,667        2,943   

Refundable taxes

     264        97   

Deferred tax assets

     830        1,016   
  

 

 

   

 

 

 

Total current assets

     45,679        64,973   

Property and equipment, net

     6,005        5,440   

Deferred tax assets

     27,677        25,446   

Intangibles and other assets, net

     611        484   

Goodwill

     65,815        65,679   

Intangible assets from acquisitions, net

     3,360        434   
  

 

 

   

 

 

 

Total Assets

   $ 149,147      $ 162,456   
  

 

 

   

 

 

 
Liabilities and Stockholders’ Equity     

Current liabilities:

    

Accounts payable

   $ 12,378      $ 15,922   

Accrued expenses and other current liabilities

     9,609        7,988   

Deferred revenue

     2,009        1,388   
  

 

 

   

 

 

 

Total current liabilities

     23,996        25,298   

Other non-current liabilities

     2,216        2,095   
  

 

 

   

 

 

 

Total Liabilities

     26,212        27,393   

Class A common stock

     98        80   

Class B common stock

     284        309   

Treasury stock

     (13     (2

Additional paid-in capital

     295,532        305,825   

Accumulated deficit

     (172,966     (171,149
  

 

 

   

 

 

 

Total Stockholders’ Equity

     122,935        135,063   
  

 

 

   

 

 

 

Total Liabilities and Stockholders’ Equity

   $ 149,147      $ 162,456   
  

 

 

   

 

 

 


MARCHEX, INC. AND SUBSIDIARIES

Reconciliation of GAAP Income (Loss) from Operations to Operating Income Before Amortization (OIBA)

and Adjusted Operating Income Before Amortization (Adjusted OIBA)

(in thousands)

(unaudited)

 

     Three Months Ended
December 31,
 
     2012     2013  

Income (loss) from operations

   $ (17,364   $ 1,544   

Stock-based compensation

     3,243        2,362   

Amortization of intangible assets from acquisitions

     1,054        426   
  

 

 

   

 

 

 

Operating income before amortization (OIBA)

     (13,067     4,332   

Acquisition and separation related costs

     589        (62

Impairment of goodwill

     15,837        —     

Domain sales contribution

     —          (1,549

Gain on sales and disposals of intangible assets, net

     (862     (35
  

 

 

   

 

 

 

Adjusted operating income before amortization (Adjusted OIBA)

   $ 2,497      $ 2,686   
  

 

 

   

 

 

 
     Twelve Months Ended
December 31,
 
     2012     2013  

Income (loss) from operations

   $ (17,243   $ 2,749   

Stock-based compensation

     15,638        9,237   

Amortization of intangible assets from acquisitions

     4,728        2,926   
  

 

 

   

 

 

 

Operating income before amortization (OIBA)

     3,123        14,912   

Acquisition and separation related costs

     753        878   

Impairment of goodwill

     15,837        —     

Domain sales contribution

     —          (2,388

Gain on sales and disposals of intangible assets, net

     (6,296     (3,774
  

 

 

   

 

 

 

Adjusted operating income before amortization (Adjusted OIBA)

   $ 13,417      $ 9,628   
  

 

 

   

 

 

 


MARCHEX, INC. AND SUBSIDIARIES

Reconciliation from Net Cash provided by Operating Activities to Adjusted EBITDA

(in thousands)

(unaudited)

 

     Three Months Ended
December 31,
 
     2012     2013  

Net cash provided by operating activities

   $ 4,311      $ 6,109   

Changes in asset and liabilities

     (17,696     (1,636

Income tax expense

     16,108        958   

Separation related costs

     589        —     

Interest expense and other, net

     19        (14

Less: Domain sales contribution

     —          (1,549

Discontinued operations, net of tax

     (73     (7

Excess tax benefits related to stock compensation

     146        (209
  

 

 

   

 

 

 

Adjusted EBITDA

   $ 3,404      $ 3,652   
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

   $ 197      $ (549
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

   $ (24,112   $ 202   
  

 

 

   

 

 

 
     Twelve Months Ended
December 31,
 
     2012     2013  

Net cash provided by operating activities

   $ 19,901      $ 13,596   

Changes in asset and liabilities

     (20,580     (1,154

Income tax expense

     16,566        1,755   

Separation related costs

     885        940   

Interest expense and other, net

     88        30   

Less: Domain sales contribution

     —          (2,388

Discontinued operations, net of tax

     (24     42   

Tax effect on gain on sale of discontinued operations

     —          563   

Excess tax benefits related to stock compensation

     308        —     
  

 

 

   

 

 

 

Adjusted EBITDA

   $ 17,144      $ 13,384   
  

 

 

   

 

 

 

Net cash provided by investing activities

   $ 3,320      $ 1,647   
  

 

 

   

 

 

 

Net cash used in financing activities

   $ (44,734   $ (261
  

 

 

   

 

 

 

Certain reclassifications have been made to prior periods to conform to current period presentation.


MARCHEX, INC. AND SUBSIDIARIES

Reconciliation of GAAP EPS to Adjusted Non-GAAP EPS

(in thousands, except per share data)

(unaudited)

 

     Three Months Ended
December 31,
 
     2012     2013  

Adjusted Non-GAAP EPS from continuing operations

   $ 0.05      $ 0.04   
  

 

 

   

 

 

 

Net income (loss) from continuing operations applicable to common stockholders - diluted (GAAP EPS)

   $ (1.00   $ 0.02   

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

     34,212        38,713   

Net income (loss) applicable to common stockholders

   $ (34,729   $ 605   

Stock-based compensation

     3,243        2,362   

Acquisition and separation related costs

     589        (62

Impairment of goodwill

     15,837        —     

Amortization of intangible assets from acquisitions

     1,054        426   

Gain on sales and disposals of intangible assets, net

     (862     (35

Domain sales contribution

     —          (1,549

Interest expense and other, net

     20        (11

Dividends paid to participating securities

     394        —     

Tax valuation allowance

     16,400        —     

Discontinued operations, net of tax

     843        (8

Estimated impact of income taxes

     (1,170     (69
  

 

 

   

 

 

 

Adjusted Non-GAAP net income from continuing operations

   $ 1,619      $ 1,659   
  

 

 

   

 

 

 

Adjusted Non-GAAP EPS from continuing operations

   $ 0.05      $ 0.04   
  

 

 

   

 

 

 

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

     34,212        38,713   

Weighted average stock options and common shares subject to purchase or cancellation (if applicable)

     1,523        —     
  

 

 

   

 

 

 

Diluted shares used to calculate Adjusted Non-GAAP EPS (1)

     35,735        38,713   
  

 

 

   

 

 

 

 

(1) For the purpose of computing the number of diluted shares for Adjusted Non-GAAP EPS, Marchex uses the accounting guidance that would be applicable for computing the number of diluted shares for GAAP EPS.


MARCHEX, INC. AND SUBSIDIARIES

Reconciliation of GAAP EPS to Adjusted Non-GAAP EPS

(in thousands, except per share data)

(unaudited)

 

     Twelve Months Ended
December 31,
 
     2012     2013  

Adjusted Non-GAAP EPS

   $ 0.25      $ 0.17   
  

 

 

   

 

 

 

Net income (loss) from continuing operations per share applicable to common stockholders - diluted (GAAP EPS)

   $ (1.03   $ 0.03   

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

     33,986        36,999   

Net income (loss) applicable to common stockholders

   $ (35,853   $ 1,817   

Stock-based compensation

     15,638        9,237   

Acquisition and separation related costs

     753        878   

Impairment of goodwill

     15,837        —     

Amortization of intangible assets from acquisitions

     4,728        2,926   

Gain on sales and disposals of intangible assets, net

     (6,296     (3,774

Domain sales contribution

     —          (2,388

Interest expense and other, net

     449        37   

Dividends paid to participating securities

     657        —     

Tax valuation allowance

     16,400        651   

Discontinued operations, net of tax

     938        (860

Estimated impact of income taxes

     (4,544     (2,268
  

 

 

   

 

 

 

Adjusted Non-GAAP net income from continuing operations

   $ 8,707      $ 6,256   
  

 

 

   

 

 

 

Adjusted Non-GAAP EPS from continuing operations

   $ 0.25      $ 0.17   
  

 

 

   

 

 

 

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

     33,986        36,999   

Weighted average stock options and common shares subject to purchase or cancellation (if applicable)

     1,377        —     
  

 

 

   

 

 

 

Diluted shares used to calculate Adjusted Non-GAAP EPS (1)

     35,363        36,999   
  

 

 

   

 

 

 

 

(1) For the purpose of computing the number of diluted shares for non-GAAP EPS, Marchex uses the accounting guidance that would be applicable for computing the number of diluted shares for GAAP EPS.


MARCHEX, INC. AND SUBSIDIARIES

(in thousands)

(unaudited)

Reconciliation of GAAP Income (Loss) from Operations to Operating Income before Amortization (OIBA)

and Adjusted Operating Income Before Amortization (Adjusted OIBA)

 

     3 months ended     12 months ended  
     3/31/2012     6/30/2012     9/30/2012     12/31/2012     3/31/2013     6/30/2013     9/30/2013     12/31/2013     12/31/2012     12/31/2013  

Income (loss) from operations

   $ (616   $ 1,158      $ (421   $ (17,364   $ 297      $ (98   $ 1,006      $ 1,544      $ (17,243   $ 2,749   

Stock-based compensation

     3,891        4,802        3,702        3,243        1,907        2,603        2,365        2,362        15,638        9,237   

Amortization of intangible assets from acquisitions

     1,537        1,082        1,055        1,054        1,055        736        709        426        4,728        2,926   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income before amortization (OIBA)

     4,812        7,042        4,336        (13,067     3,259        3,241        4,080        4,332        3,123        14,912   

Acquisition and separation related costs

     (132     —          296        589        345        309        286        (62     753        878   

Impairment of goodwill

     —          —          —          15,837        —          —          —          —          15,837        —     

Domain sales contribution

     —          —          —          —          —          —          (839     (1,549     —          (2,388

Gain on sales and disposals of intangible assets, net

     (1,463     (3,258     (713     (862     (1,362     (1,330     (1,047     (35     (6,296     (3,774
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted operating income before amortization (Adjusted OIBA)

   $ 3,217      $ 3,784      $ 3,919      $ 2,497      $ 2,242      $ 2,220      $ 2,480      $ 2,686      $ 13,417      $ 9,628   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation from Net Cash provided by Operating Activities to Adjusted EBITDA

 

     3 months ended     12 months ended  
     3/31/2012     6/30/2012     9/30/2012     12/31/2012     3/31/2013     6/30/2013     9/30/2013     12/31/2013     12/31/2012     12/31/2013  

Net cash provided by operating activities

   $ 3,954      $ 7,980      $ 3,656      $ 4,311      $ 2,141      $ 1,014      $ 4,332      $ 6,109      $ 19,901      $ 13,596   

Changes in asset and liabilities

     302        (3,997     811        (17,696     463        1,393        (1,374     (1,636     (20,580     (1,154

Income tax expense (benefit)

     (88     595        (49     16,108        165        243        389        958        16,566        1,755   

Separation related costs

     —          —          296        589        345        309        286        —          885        940   

Less: Domain sales contribution

     —          —          —          —          —          —          (839     (1,549     —          (2,388

Discontinued operations, net of tax

     (27     38        38        (73     17        (11     43        (7     (24     42   

Tax effect of gain on sale of discontinued operations

     —          —          —          —          —          —          563        —          —          563   

Interest expense and other, net

     19        22        28        19        17        12        15        (14     88        30   

Excess tax benefits related to stock compensation

     97        23        42        146        7        189        13        (209     308        —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 4,257      $ 4,661      $ 4,822      $ 3,404      $ 3,155      $ 3,149      $ 3,428      $ 3,652      $ 17,144      $ 13,384   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) investing activities

   $ 1,194      $ 2,032      $ (103   $ 197      $ 512      $ 449      $ 1,235      $ (549   $ 3,320      $ 1,647   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

   $ (1,296   $ (17,734   $ (1,592   $ (24,112   $ (1,484   $ 179      $ 842      $ 202      $ (44,734   $ (261
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Certain reclassifications have been made to prior periods to conform to current period presentation and to exclude the results from discontinued operations.

Due to rounding, the sum of quarterly amounts may not equal amounts reported for year-to-date periods.


MARCHEX, INC. AND SUBSIDIARIES

Quarterly Financial Summary Information

(in thousands)

NON-GAAP MEASURES

Amounts below exclude Domain Sales and Discontinued Operations

 

CONSOLIDATED

   Q112      Q212      Q312      Q412      Q113      Q213      Q313      Q413  

Non-GAAP Revenue

   $ 33,835       $ 32,832       $ 33,691       $ 32,436       $ 34,732       $ 37,578       $ 39,661       $ 38,124   

Adjusted OIBA

   $ 3,217       $ 3,784       $ 3,919       $ 2,497       $ 2,242       $ 2,220       $ 2,480       $ 2,686   

Adjusted EBITDA

   $ 4,257       $ 4,661       $ 4,822       $ 3,404       $ 3,155       $ 3,149       $ 3,428       $ 3,652   

CALL-DRIVEN AND OTHER

   Q112      Q212      Q312      Q412      Q113      Q213      Q313      Q413  

GAAP Revenue

   $ 26,651       $ 27,497       $ 29,269       $ 28,469       $ 31,108       $ 33,893       $ 35,668       $ 34,457   

Adjusted OIBA

   $ 188       $ 1,530       $ 2,215       $ 1,158       $ 1,371       $ 1,508       $ 1,693       $ 1,725   

Adjusted EBITDA

   $ 980       $ 2,319       $ 3,064       $ 2,016       $ 2,247       $ 2,400       $ 2,598       $ 2,618   

ARCHEO

   Q112      Q212      Q312      Q412      Q113      Q213      Q313      Q413  

Non-GAAP Revenue

   $ 7,184       $ 5,335       $ 4,422       $ 3,967       $ 3,624       $ 3,685       $ 3,993       $ 3,667   

Adjusted OIBA

   $ 3,029       $ 2,254       $ 1,704       $ 1,339       $ 871       $ 712       $ 787       $ 961   

Adjusted EBITDA

   $ 3,277       $ 2,342       $ 1,758       $ 1,388       $ 908       $ 749       $ 830       $ 1,034   

Certain reclassifications have been made to prior periods to conform to current period presentation and to exclude the results from discontinued operations.

Due to rounding, the sum of quarterly amounts may not equal amounts reported for year-to-date periods.


MARCHEX, INC. AND SUBSIDIARIES

Financial Summary by Segment

(in thousands)

(unaudited)

 

     Three months ended      Twelve months ended  
     3/31/2012      6/30/2012      9/30/2012      12/31/2012      3/31/2013      6/30/2013      9/30/2013      12/31/2013      12/30/2012      12/31/2013  

Marchex - consolidated4

                             

Revenue - GAAP

   $ 33,835       $ 32,832       $ 33,691       $ 32,436       $ 34,732       $ 37,578       $ 40,560       $ 39,680       $ 132,794       $ 152,550   

Revenue excluding Domain Sales2

   $ 33,835       $ 32,832       $ 33,691       $ 32,436       $ 34,732       $ 37,578       $ 39,661       $ 38,124       $ 132,794       $ 150,095   

Revenue with Domain Sales3

   $ 35,309       $ 36,101       $ 34,404       $ 33,298       $ 36,094       $ 38,908       $ 41,607       $ 39,715       $ 139,112       $ 156,324   
  

 

 

 

Adjusted OIBA excluding Domain Sales2

   $ 3,217       $ 3,784       $ 3,919       $ 2,497       $ 2,242       $ 2,220       $ 2,480       $ 2,686       $ 13,417       $ 9,628   

Adjusted OIBA with Domain Sales3

   $ 4,680       $ 7,042       $ 4,632       $ 3,359       $ 3,604       $ 3,550       $ 4,366       $ 4,270       $ 19,713       $ 15,790   
  

 

 

 

Adjusted EBITDA excluding Domain Sales2

   $ 4,257       $ 4,661       $ 4,822       $ 3,404       $ 3,155       $ 3,149       $ 3,428       $ 3,652       $ 17,144       $ 13,384   

Adjusted EBITDA with Domain Sales3

   $ 5,720       $ 7,919       $ 5,535       $ 4,266       $ 4,517       $ 4,479       $ 5,314       $ 5,236       $ 23,440       $ 19,546   

Call-Driven and Other1

                             

Revenue

   $ 26,651       $ 27,497       $ 29,269       $ 28,469       $ 31,108       $ 33,893       $ 35,668       $ 34,457       $ 111,886       $ 135,126   

Adjusted OIBA

   $ 188       $ 1,530       $ 2,215       $ 1,158       $ 1,371       $ 1,508       $ 1,693       $ 1,725       $ 5,091       $ 6,297   

Adjusted EBITDA

   $ 980       $ 2,319       $ 3,064       $ 2,016       $ 2,247       $ 2,400       $ 2,598       $ 2,618       $ 8,379       $ 9,863   

Archeo1,4

                             

Revenue

   $ 7,184       $ 5,335       $ 4,422       $ 3,967       $ 3,624       $ 3,685       $ 4,892       $ 5,223       $ 20,908       $ 17,424   

Revenue excluding Domain Sales2

   $ 7,184       $ 5,335       $ 4,422       $ 3,967       $ 3,624       $ 3,685       $ 3,993       $ 3,667       $ 20,908       $ 14,969   

Revenue with Domain Sales3

   $ 8,658       $ 8,604       $ 5,135       $ 4,829       $ 4,986       $ 5,015       $ 5,939       $ 5,258       $ 27,226       $ 21,198   
  

 

 

 

Adjusted OIBA excluding Domain Sales2

   $ 3,029       $ 2,254       $ 1,704       $ 1,339       $ 871       $ 712       $ 787       $ 961       $ 8,326       $ 3,331   

Adjusted OIBA with Domain Sales3

   $ 4,492       $ 5,512       $ 2,417       $ 2,201       $ 2,233       $ 2,042       $ 2,673       $ 2,545       $ 14,622       $ 9,493   
  

 

 

 

Adjusted EBITDA excluding Domain Sales2

   $ 3,277       $ 2,342       $ 1,758       $ 1,388       $ 908       $ 749       $ 830       $ 1,034       $ 8,765       $ 3,521   

Adjusted EBITDA with Domain Sales3

   $ 4,740       $ 5,600       $ 2,471       $ 2,250       $ 2,270       $ 2,079       $ 2,716       $ 2,618       $ 15,061       $ 9,683   

 

1 The financial results for Call-Driven and Archeo are preliminary and have been derived from the unaudited condensed consolidated financial statements of Marchex, Inc. for all periods presented. Corporate overhead expenses have been reallocated in prior periods to conform to current period presentation. The unaudited Call-Driven financial results include certain direct operating expenses and general corporate overhead expenses in all periods presented. The unaudited Archeo financial results include direct operating expenses for all periods presented.
2 In September 2013, Marchex announced and launched its Domains Marketplace and through it, commenced buying and selling of domains. Domain sales occurring after this date are included in revenue and related cost in service cost. Prior to this date, domain sales were recognized in gain on sales and disposals of intangible assets in the unaudited condensed consolidated financial statements.
3 Includes all domain sales recognized in gain on sales and disposals of intangible assets and in revenue and service costs.
4 Amounts presented exclude results of discontinued operations. Operating results of discontinued operations relate to certain pay-per-click assets sold in July 2013 and are included in discontinued operations, net of tax in the unaudited condensed consolidated financial statements.

Certain reclassifications have been made to prior periods to conform to current period presentation and to exclude the results from discontinued operations.

Due to rounding, the sum of quarterly amounts may not equal amounts reported for year-to-date periods.


MARCHEX, INC. AND SUBSIDIARIES

Reconciliation to Reported Financial and Non-GAAP Information

(in thousands)

(unaudited)

 

     Three months ended      Twelve months ended  
     3/31/2012      6/30/2012      9/30/2012      12/31/2012      3/31/2013      6/30/2013      9/30/2013      12/31/2013      12/31/2012      12/31/2013  

Revenue5

                             

Consolidated - GAAP

   $ 33,835       $ 32,832       $ 33,691       $ 32,436       $ 34,732       $ 37,578       $ 40,560       $ 39,680       $ 132,794       $ 152,550   

Less: Domain sales recognized in revenue2

     —           —           —           —           —           —           899         1,556         —           2,455   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Consolidated excluding Domain Sales1

   $ 33,835       $ 32,832       $ 33,691       $ 32,436       $ 34,732       $ 37,578       $ 39,661       $ 38,124       $ 132,794       $ 150,095   

Add: Domain sales recognized in revenue4

     —           —           —           —           —           —           899         1,556         —           2,455   

Add: Domain Sales1

     1,474         3,269         713         862         1,362         1,330         1,047         35         6,318         3,774   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Consolidated with Domain Sales1

     35,309         36,101         34,404         33,298         36,094         38,908         41,607         39,715         139,112         156,324   

Less: Archeo including Domain Sales3

     8,658         8,604         5,135         4,829         4,986         5,015         5,939         5,258         27,226         21,198   

Other

     181         175         174         180         171         162         131         99         710         563   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Call-Driven3

   $ 26,470       $ 27,322       $ 29,095       $ 28,289       $ 30,937       $ 33,731       $ 35,537       $ 34,358       $ 111,176       $ 134,563   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted operating income3,5

                             

Consolidated

   $ 3,217       $ 3,784       $ 3,919       $ 2,497       $ 2,242       $ 2,220       $ 2,480       $ 2,686       $ 13,417       $ 9,628   

Add: Gain on Domain Sales and Domain Sales Contribution6

     1,463         3,258         713         862         1,362         1,330         1,886         1,584         6,296         6,162   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Consolidated with Domain Sales

     4,680         7,042         4,632         3,359         3,604         3,550         4,366         4,270         19,713         15,790   

Less: Archeo including Domain Sales3

     4,492         5,512         2,417         2,201         2,233         2,042         2,673         2,545         14,622         9,493   

Other

     71         116         104         105         106         86         75         59         396         326   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Call-Driven3

   $ 117       $ 1,414       $ 2,111       $ 1,053       $ 1,265       $ 1,422       $ 1,618       $ 1,666       $ 4,695       $ 5,971   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA4,5

                             

Consolidated

   $ 4,257       $ 4,661       $ 4,822       $ 3,404       $ 3,155       $ 3,149       $ 3,428       $ 3,652       $ 17,144       $ 13,384   

Add: Gain on Domain Sales and Domain Sales Contribution6

     1,463         3,258         713         862         1,362         1,330         1,886         1,584         6,296         6,162   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Consolidated with Domain Sales

     5,720         7,919         5,535         4,266         4,517         4,479         5,314         5,236         23,440         19,546   

Less: Archeo including Domain Sales3

     4,740         5,600         2,471         2,250         2,270         2,079         2,716         2,618         15,061         9,683   

Other

     71         116         104         105         106         86         75         59         396         326   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Call-Driven3

   $ 909       $ 2,203       $ 2,960       $ 1,911       $ 2,141       $ 2,314       $ 2,523       $ 2,559       $ 7,983       $ 9,537   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

1 These are non-GAAP measures of financial results which are adjusted for sales proceeds from sales of intangible assets and/or domain sales recognized as revenue.
2 In September 2013, Marchex announced and launched its Domains Marketplace and through it, commenced buying and selling of domains. Domain sales occurring after this date are included in revenue and related cost in service cost. Prior to this date, domain sales were recognized in gain on sales and disposals of intangible assets in the unaudited condensed consolidated financial statements.
3 The financial results for Call-Driven and Archeo are preliminary and have been derived from the unaudited condensed consolidated financial statements of Marchex, Inc. for all periods presented. Corporate overhead expenses have been reallocated in prior periods to conform to current period presentation. The unaudited Call-Driven financial results include certain direct operating expenses and general corporate overhead expenses in all periods presented. The unaudited Archeo financial results include direct operating expenses for all periods presented.
4 These are non-GAAP measures of operating results and liquidity. These non-GAAP measures are adjusted for net gains from sales of intangible assets, direct contribution of domain sales sold through Marchex’s Domains Marketplace.
5 Amounts presented exclude results of discontinued operations. Financial results of discontinued operations related to certain pay-per-click assets sold in July 2013 and are included in discontinued operations, net of tax in the unaudited condensed consolidated financial statements.
6 Includes net gains from sales of intangible assets and direct contribution of domain sales sold through Marchex’s Domains Marketplace.

Certain reclassifications have been made to prior periods to conform to current period presentation and to exclude the results from discontinued operations.

Due to rounding, the sum of quarterly amounts may not equal amounts reported for year-to-date periods.