Marchex Announces Third Quarter 2015 Results

SEATTLE--(BUSINESS WIRE)-- Marchex, Inc. (NASDAQ: MCHX), a mobile advertising analytics company, today announced its financial results for the third quarter ended September 30, 2015.

"We are building momentum towards establishing Marchex as the world’s leading mobile advertising analytics company,” said Pete Christothoulou, CEO. “As mobile rapidly evolves into a performance medium, the world’s largest, most sophisticated marketers are choosing Marchex for their mobile analytics needs. We'll continue to build our team and accelerate the pace of innovation as we expand our global opportunity.”

Q3 2015 Financial Highlights1

• GAAP revenue was $36.9 million for the third quarter of 2015, compared to $47.2 million for the third quarter of 2014.

• GAAP net loss from continuing operations was $191,000 for the third quarter of 2015, compared to GAAP net loss from continuing operations of $22.5 million for the third quarter of 2014.
• GAAP net loss from continuing operations attributable to common stockholders per diluted share was $0.00 for the third quarter of 2015 compared to GAAP net loss from continuing operations of $0.55 for the third quarter of 2014.

		Q3 2015		Q3 2014
GAAP Revenue		$36.9 million		$47.2 million
Call-Driven and related revenue		$36.1 million		$46.4 million
Non-GAAP Results:
Call-Driven Adjusted OIBA2		$2.2 million		$3.3 million
Call-Driven Adjusted EBITDA2		$3.1 million		$4.2 million
Adjusted OIBA2		$2.4 million		$3.2 million
Adjusted EBITDA2		$3.3 million		$4.1 million
Archeo Revenue		$0.8 million		$0.8 million
Cash Balance		$108.9 million		$80.7 million

• Adjusted non-GAAP EPS2 from continuing operations for the third quarter of 2015 was $0.04, compared to $0.05 for the third quarter of 2014.

1The Company sold certain Archeo domain name and related assets in April 2015 and certain pay-per-click assets in July 2013. As a result, the financial results of these dispositions are presented as discontinued operations, net of tax in our condensed consolidated statements of operations in accordance with GAAP, and are excluded from all other results unless otherwise noted.2Reconciliations 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.

Other Financial Highlights

• During the third quarter of 2015, YP contributed $10.1 million in call-driven revenues, compared to $11.2 million in the third quarter of 2014.
• During the third quarter of 2015, Marchex purchased 476,000 shares of its outstanding Class B common stock for a total price of $1.9 million. This brings Marchex’s total shares repurchased under its November 2014 share repurchase program to 1.5 million shares or 4% of its outstanding Class B common stock.

Recent Business Highlights

• Later this month, Marchex expects to release a beta product that enables enterprise marketers to measure when any inbound phone call to a call center or store is influenced by exposure to a display advertisement on a desktop or mobile device.
• In October, Marchex opened an office in Sydney, Australia and expanded its technology facilities to support growing demand for the company’s industry-leading Call Analytics platform.
• In September, Marchex released Call Analytics For Search 2.0 bringing new, industry-first features enabling brands and agencies to track and measure their conversions from offline actions through their search campaigns. New features include updates such as Call-Only support, Real-time Call DNA, Premium Conversations technology and other features.
• In September, Marchex appointed Gary Nafus as Chief Revenue Officer and Matthew Muilenburg as Senior Vice President and Customer Engagement Specialist to accelerate mobile advertising analytics leadership.
• In July, Marchex announced a strategic, exclusive global partnership with Light Reaction, a mobile-first performance advertising business that is part of GroupM and Xaxis, to launch M-Call, a new click-to-call mobile performance product that enables advertisers to generate high quality phone leads directly from mobile Web and in-app ads across hundreds of top publishers, social media sites and apps, and Call Analytics. M-Call and Call Analytics are available to both Light Reaction and Xaxis clients, as well as other GroupM agencies.

Business Outlook

The following forward-looking statements reflect Marchex's expectations as of November 4, 2015, and exclude any impact from Archeo operating results and discontinued operations. Archeo operating results are not included in our Call-Driven revenue, profitability, and other measures below:

Call-Driven financial guidance for the Fourth Quarter ending December 31, 2015
Call-Driven Revenue		$33 million or more
Call-Driven Adjusted OIBA3		$1.5 million or more
Call-Driven Adjusted EBITDA3		$2.5 million or more

3These non-GAAP Call-Driven measures assign all Marchex corporate 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, November 4, 2015 to discuss its third quarter ended September 30, 2015 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, beginning two hours after completion of the call.

About Marchex

Marchex is a mobile advertising analytics company that connects online behavior to real-world, offline actions. By linking critical touchpoints in the customer journey, Marchex’s products enable a 360-degree view of marketing effectiveness. Brands and agencies utilize Marchex’s products to transform business performance.

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, 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 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 November 4, 2015 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, Adjusted non-GAAP EPS and Call-Driven and Archeo Adjusted OIBA and EBITDA. Additionally, Marchex also provides Call-Driven and Archeo Revenue excluding revenue generated from our contracts with Yellowpages.com LLC (“YP”).

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 acquisition and disposition related costs, as this item is not indicative of Marchex’s recurring core operating results. 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 acquisitions and acquisition and disposition related costs. Adjusted EBITDA represents income before interest, income taxes, depreciation, amortization, stock compensation expense, and acquisition and disposition related costs. 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.

Call-Driven Adjusted OIBA and EBITDA include the above descriptions of Adjusted OIBA and EBITDA for the Call-Driven segment. The Call-Driven Adjusted OIBA and EBITDA assign all Marchex general corporate overhead costs to the Call-Driven results. Archeo Adjusted OIBA and EBITDA include the above descriptions of Adjusted OIBA and EBITDA for the Archeo segment. Call-Driven and Archeo Revenue excluding YP excludes revenue generated through our contracts with YP. Financial analysts and investors may use Adjusted OIBA and EBITDA and Revenue excluding YP to help with comparative financial evaluation to make informed investment decisions. Adjusted non-GAAP EPS represents Adjusted non-GAAP net income applicable to common stockholders divided by GAAP diluted shares outstanding. Adjusted non-GAAP net income 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) acquisition and disposition related costs, (4) interest and other income (expense), (5) discontinued operations, net of tax and (6) dividends paid to participating securities. 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.

MARCHEX, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
				Three months ended									Nine Months Ended
				September 30,									September 30,
					2014				2015					2014				2015
Revenue				$	47,238			$	36,852				$	142,374			$	108,113
Expenses:
		Service costs (1)			31,270				20,003					94,226				59,166
		Sales and marketing (1)			2,814				4,266					8,759				11,969
		Product development (1)			7,581				7,769					22,599				23,608
		General and administrative (1)			5,380				4,721					16,127				14,925
		Amortization of intangible assets from acquisitions			-				-					434				-
		Acquisition and disposition related costs			-				81					(68	)			199
		Total operating expenses			47,045				36,840					142,077				109,867
Income (loss) from operations					193				12					297				(1,754	)
Interest expense and other, net					(19	)			(12	)				(43	)			(52	)
Income (loss) from continuing operations before provision for income taxes					174				-					254				(1,806	)
Income tax expense					22,642				191					22,901				11
Net loss from continuing operations					(22,468	)			(191	)				(22,647	)			(1,817	)
Discontinued operations:
		Income from discontinued operations, net of tax			694				37					2,708				5,084
		Gain on sale from discontinued operations, net of tax			278				163					278				22,195
Discontinued operations, net of tax					972				200					2,986				27,279
Net income (loss)					(21,496	)			9					(19,661	)			25,462
Dividends paid to participating securities					(29	)			-					(98	)			(37	)
Net income (loss) applicable to common stockholders				$	(21,525	)		$	9				$	(19,759	)		$	25,425
Basic and diluted net income (loss) per Class A and Class B share applicable to common stockholders:
		Continuing operations		$	(0.55	)		$	(0.00	)			$	(0.57	)		$	(0.04	)
		Discontinued operations, net of tax		$	0.03			$	0.00				$	0.07			$	0.66
Basic and diluted net income (loss) per Class A and Class B share applicable to common stockholders				$	(0.52	)		$	0.00				$	(0.50	)		$	0.62
Shares used to calculate basic net income (loss) per share applicable to common stockholders
		Class A			5,233				5,233					6,062				5,233
		Class B			36,041				36,120					33,546				35,980
Shares used to calculate diluted net income (loss) per share applicable to common stockholders
		Class A			5,233				5,233					6,062				5,233
		Class B			41,274				41,353					39,608				41,213
(1)		Includes stock-based compensation allocated as follows:
		Service costs		$	371			$	273				$	1,010			$	1,046
		Sales and marketing			224				339					659				893
		Product development			666				620					2,017				1,843
		General and administrative			1,759				1,119					5,327				4,027
		Total		$	3,020			$	2,351				$	9,013			$	7,809

MARCHEX, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
				December 31,				September 30,
		Assets			2014				2015
Current assets:
	Cash and cash equivalents			$	80,032			$	108,936
	Accounts receivable, net				25,941				25,862
	Prepaid expenses and other current assets				3,143				1,996
	Refundable taxes				131				135
		Total current assets			109,247				136,929
	Property and equipment, net				5,430				6,238
	Intangibles and other assets, net				313				233
	Goodwill				65,679				63,305
		Total Assets		$	180,669			$	206,705
		Liabilities and Stockholders' Equity
Current liabilities:
	Accounts payable			$	13,766			$	12,105
	Accrued expenses and other current liabilities				7,515				7,743
	Deferred revenue				2,117				1,328
		Total current liabilities			23,398				21,176
	Other non-current liabilities				1,118				779
		Total Liabilities			24,516				21,955
	Class A common stock				55				55
	Class B common stock				373				369
	Treasury stock				(2,503	)			(91	)
	Additional paid-in capital				348,467				349,194
	Accumulated deficit				(190,239	)			(164,777	)
		Total Stockholders' Equity			156,153				184,750
		Total Liabilities and Stockholders' Equity		$	180,669			$	206,705

MARCHEX, INC. AND SUBSIDIARIES
(in thousands)
(unaudited)
Reconciliation of GAAP Income from Operations to Operating Income Before Amortization (OIBA)
and Adjusted Operating Income Before Amortization (Adjusted OIBA)
			Three Months Ended									Nine Months Ended
			September 30,									September 30,
				2014				2015					2014				2015
Income (loss) from operations			$	193			$	12				$	297			$	(1,754	)
	Stock-based compensation			3,020				2,351					9,013				7,809
	Amortization of intangible assets from acquisitions			-				-					434				-
Operating income before amortization (OIBA)				3,213				2,363					9,744				6,055
	Acquisition and disposition related costs			-				81					(68	)			199
Adjusted operating income before amortization (Adjusted OIBA)			$	3,213			$	2,444				$	9,676			$	6,254
Reconciliation from Net Cash provided by Operating Activities to Adjusted EBITDA
			Three Months Ended									Nine Months Ended
			September 30,									September 30,
				2014				2015					2014				2015
Net cash provided by operating activities			$	6,750			$	7,563				$	18,117			$	12,000
	Changes in asset and liabilities			(24,737	)			(4,299	)				(26,048	)			1,813
	Income tax expense			22,642				191					22,901				11
	Acquisition and disposition related costs			-				81					-				199
	Interest expense and other, net			19				12					43				52
	Income on discontinued operations, net of tax			(713	)			(37	)				(2,822	)			(5,102	)
	Tax effect on gain on sale of discontinued operations			144				(163	)				144				-
Adjusted EBITDA			$	4,105			$	3,348				$	12,335			$	8,973
Net cash provided by (used in) investing activities			$	(826	)		$	(1,260	)			$	(2,178	)		$	21,580
Net cash provided by (used in) financing activities			$	(221	)		$	(1,798	)			$	33,801			$	(4,676	)

MARCHEX, INC. AND SUBSIDIARIES
Reconciliation of GAAP EPS to Adjusted Non-GAAP EPS
(in thousands, except per share data)
(unaudited)
					Three Months Ended									Nine Months Ended
					September 30,									September 30,
						2014				2015					2014				2015
Adjusted Non-GAAP EPS from continuing operations					$	0.05			$	0.04				$	0.15			$	0.10
Net loss from continuing operations applicable to common stockholders - diluted (GAAP EPS)					$	(0.55	)		$	(0.00	)			$	(0.57	)		$	(0.04	)
Shares used to calculate diluted net income (loss) per share applicable to common stockholders						41,274				41,353					39,608				41,213
Net income (loss) applicable to common stockholders					$	(21,525	)		$	9				$	(19,759	)		$	25,425
		Stock-based compensation				3,020				2,351					9,013				7,809
		Acquisition and disposition related costs				-				81					(68	)			199
		Amortization of intangible assets from acquisitions				-				-					434				-
		Interest expense and other, net				19				12					43				52
		Dividends paid to participating securities				29				-					98				37
		Tax valuation allowance				22,345				-					22,345				-
		Discontinued operations, net of tax				(972	)			(200	)				(2,986	)			(27,279	)
		Estimated impact of income taxes				(781	)			(662	)				(2,824	)			(2,182	)
Adjusted Non-GAAP net income from continuing operations					$	2,135			$	1,591				$	6,296			$	4,061
Adjusted Non-GAAP EPS from continuing operations					$	0.05			$	0.04				$	0.15			$	0.10
Shares used to calculate diluted net income (loss) per share applicable to common stockholders (GAAP)						41,274				41,353					39,608				41,213
		Weighted average stock options and common shares subject to purchase or cancellation (if applicable)				2,286				394					2,698				373
Diluted shares used to calculate Adjusted Non-GAAP EPS (1)						43,560				41,747					42,306				41,586
(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.
Certain reclassifications have been made to prior periods to conform to current presentation.

	MARCHEX, INC. AND SUBSIDIARIES
	Quarterly Financial Summary Information
	(in thousands)
	(unaudited)
	NON-GAAP MEASURES
	CONSOLIDATED1		Q314				Q414				Q115				Q215			Q315
	GAAP Revenue		$	47,238			$	31,226			$	35,915			$	35,346		$	36,852
	Adjusted OIBA		$	3,213			$	2,355			$	2,491			$	1,319		$	2,444
	Adjusted EBITDA		$	4,105			$	3,253			$	3,353			$	2,272		$	3,348
	CALL-DRIVEN AND RELATED		Q314				Q414				Q115				Q215			Q315
	GAAP Revenue		$	46,379			$	30,324			$	35,028			$	34,458		$	36,135
	Adjusted OIBA		$	3,279			$	2,511			$	2,632			$	1,400		$	2,177
	Adjusted EBITDA		$	4,171			$	3,409			$	3,494			$	2,353		$	3,081
	ARCHEO		Q314				Q414				Q115				Q215			Q315
	GAAP Revenue		$	859			$	902			$	887			$	888		$	717
	Adjusted OIBA		$	(66	)		$	(156	)		$	(141	)		$	(81	)	$	267
	Adjusted EBITDA		$	(66	)		$	(156	)		$	(141	)		$	(81	)	$	267
	CALL-DRIVEN REVENUE EXCLUDING YP		Q314				Q414				Q115				Q215			Q315
	GAAP Revenue		$	46,379			$	30,324			$	35,028			$	34,458		$	36,135
	Revenue excluding YP		$	35,162			$	19,261			$	24,271			$	24,096		$	26,007
	YP Revenue		$	11,217			$	11,063			$	10,757			$	10,362		$	10,128
	ARCHEO REVENUE EXCLUDING YP		Q314				Q414				Q115				Q215			Q315
	GAAP Revenue		$	859			$	902			$	887			$	888		$	717
	Revenue excluding YP		$	608			$	524			$	525			$	515		$	418
	YP Revenue		$	251			$	378			$	362			$	373		$	299
	1 In April 2015, Marchex divested certain Archeo domain name and related assets. The operating results of the divested assets are included in discontinued operations, net of tax, in the unaudited consolidated financial statements. Unless otherwise indicated, information presented in these financial tables relates only to Marchex's continuing operations. The financial results for the discontinued operations are preliminary, subject to updates, and have been derived from the unaudited consolidated financial statements of Marchex, Inc. for all periods presented.
	Due to rounding, the sum of quarterly amounts may not equal amounts reported for year-to-date periods.

	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)
					Three Months Ended
						9/30/2014				12/31/2014				3/31/2015				6/30/2015				9/30/2015
	Income (loss) from operations				$	193			$	(521	)		$	(300	)		$	(1,466	)		$	12
	Stock-based compensation					3,020				2,876				2,791				2,667				2,351
	Operating income before amortization (OIBA)					3,213				2,355				2,491				1,201				2,363
	Acquisition and disposition related costs					-				-				-				118				81
	Adjusted OIBA - Consolidated				$	3,213			$	2,355			$	2,491			$	1,319			$	2,444
	Less: Archeo Adjusted OIBA1					(66	)			(156	)			(141	)			(81	)			267
	Call-Driven and related Adjusted OIBA1				$	3,279			$	2,511			$	2,632			$	1,400			$	2,177
	Reconciliation from Net Cash provided by Operating Activities to Adjusted EBITDA
					Three Months Ended
						9/30/2014				12/31/2014				3/31/2015				6/30/2015				9/30/2015
	Net cash provided by (used in) operating activities				$	6,750			$	4,302			$	6,251			$	(1,814	)		$	7,563
		Changes in assets and liabilities				(24,737	)			58				2,228				3,884				(4,299	)
		Income tax expense (benefit)				22,642				(393	)			5				(185	)			191
		Acquisition and disposition related costs				-				-				-				118				81
		Income on discontinued operations, net of tax				(713	)			(734	)			(5,156	)			91				(37	)
		Tax effect of gain on sale of discontinued operations				144				-				-				163				(163	)
		Interest expense and other, net				19				20				25				15				12
	Adjusted EBITDA - Consolidated				$	4,105			$	3,253			$	3,353			$	2,272			$	3,348
	Less: Archeo Adjusted EBITDA1					(66	)			(156	)			(141	)			(81	)			267
	Call-Driven and related Adjusted EBITDA1				$	4,171			$	3,409			$	3,494			$	2,353			$	3,081
	Summary of Revenue by Segment
					Three Months Ended
						9/30/2014				12/31/2014				3/31/2015				6/30/2015				9/30/2015
	Call-Driven1 and related Revenue				$	46,379			$	30,324			$	35,028			$	34,458			$	36,135
	Archeo Revenue1					859				902				887				888				717
	Revenue - Consolidated				$	47,238			$	31,226			$	35,915			$	35,346			$	36,852
1	The financial results for Call-Driven and Archeo have been derived from the unaudited condensed consolidated financial statements.
	The Call-Driven financial results include certain direct operating expenses and general corporate overhead expenses.
	The Archeo financial results include direct operating expenses.
	Due to rounding, the sum of quarterly amounts may not equal amounts reported for year-to-date periods.

View source version on businesswire.com: http://www.businesswire.com/news/home/20151104006695/en/

Marchex Investor Relations
Trevor Caldwell, 206-331-3600
ir(at)marchex.com
or
MEDIA INQUIRIES
Marchex Corporate Communications
206-331-3434
pr(at)marchex.com

Source: Marchex, Inc.

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