Marchex (MM) (NASDAQ:MCHXP)
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Marchex, Inc. (NASDAQ:MCHX) (NASDAQ:MCHXP), a local search and
advertising company, today reported its results for the first quarter
ended March 31, 2008.
First Quarter 2008 Consolidated Financial Results:
Revenue was $37.0 million for the first quarter of 2008, compared to
$34.2 million for the same period of 2007.
GAAP net loss applicable to common stockholders was $1.2 million for
the first quarter of 2008 or $0.03 loss per diluted share. This
compares to GAAP net income applicable to common stockholders of
$548,000 or $0.01 per diluted share for the same period of 2007. The
first quarter 2008 results included non-cash stock-based compensation
expense recorded under the fair value method of $3.1 million, compared
to non-cash stock-based compensation expense of $2.9 million for the
same period in 2007.
We provide a reconciliation of GAAP diluted EPS to Adjusted Non-GAAP
EPS in the financial tables attached to this press release and
encourage investors to examine the reconciling adjustments between the
GAAP and non-GAAP measures. Adjusted non-GAAP EPS for the first
quarter of 2008 was $0.08, compared to $0.11 for the same period of
2007. Some Wall Street analysts use non-GAAP measures to analyze our
operating results, which may include adjusted non-GAAP EPS, adjusted
operating income before amortization and adjusted EBITDA. We present
GAAP measures with equal or greater prominence than non-GAAP measures
and such non-GAAP measures should not be considered a substitute for,
or superior to, GAAP results.
Adjusted operating income before amortization was $5.1 million for the
first quarter of 2008, compared to $7.6 million for the same period of
2007. A reconciliation of non-GAAP adjusted operating income before
amortization to GAAP operating income and GAAP net income is included
in the financial tables attached to this release.
Adjusted EBITDA was $7.7 million in the first quarter of 2008,
compared to $9.5 million for the same period of 2007. A reconciliation
of operating income before taxes, depreciation, amortization and
gain/loss on sales of intangible assets to GAAP net cash provided by
operating activities is included in the financial tables attached to
this release.
“Marchex’s focus on
the local online industry continues to drive growth in our business,”
said Russell C. Horowitz, Marchex Chairman and CEO. “Local
is increasingly recognized as one of the most dynamic opportunities in
the online universe and Marchex is well positioned to be a leader across
both the local advertising and search ecosystems. We will continue to
stay focused on executing on our objectives related to strategic
partnerships, product milestones and operational objectives as we move
through 2008.”
Operating Highlights:
Local Advertising Services: For the first quarter of 2008, revenue from
Local Advertising Services was $22.3 million. One of the primary factors
driving growth on a year-over-year basis was the continued increase in
the number of new advertisers using Marchex products and services. In
the first quarter, Marchex added more than 10,000 new advertisers
through its local aggregator partnerships and direct sales channel.
Marchex now has more than 65,000 advertisers using its products and
services and, based on current growth rates, is updating its forecast to
reflect that it now anticipates it will have more than 100,000
advertisers using its products and services by the end of 2009, up from
a forecast of 80,000 advertisers previously.
Local Search Network (proprietary traffic sources): For the first
quarter of 2008, revenue from Marchex’s Local
Search Network was $14.7 million. Additionally, Marchex attracted more
than 30 million unique visitors for the month of March 2008 and
delivered more than 85 million revenue-generating events and referrals
in the first quarter. Unique visitor statistics are based on internal
traffic logs, which calculate unique IP (Internet protocol) addresses on
an unduplicated basis during a given month.
Stock Repurchase Program:
During the first quarter of 2008, Marchex purchased 786,000 shares of
its outstanding Class B common stock for a total price of $7.2 million,
bringing its total shares repurchased under its stock repurchase program
to 3 million shares, or 7% of its outstanding common stock.
Marchex Financial Guidance:
The following forward-looking statements reflect Marchex's expectations
as of May 6, 2008.
Guidance for fiscal year 2008 (Year ending December 31, 2008):
Revenue estimate:
$152 million or more
Adjusted operating income before amortization estimate:
$22 million or more
Adjusted EBITDA: For adjusted EBITDA, Marchex anticipates
add-backs of approximately $9 million in additional depreciation and
amortization to its adjusted operating income before amortization range,
implying an adjusted EBITDA of $31 million or more for 2008.
Guidance for second quarter 2008:
Revenue estimate:
Approximately $37 million
Adjusted operating income before amortization estimate:
Approximately $5.0 million
Adjusted EBITDA: For adjusted EBITDA, Marchex anticipates
add-backs of approximately $2.3 million in additional depreciation and
amortization to its adjusted operating income before amortization range,
implying an adjusted EBITDA of approximately $7.3 million for the second
quarter of 2008.
For color on guidance for the second quarter of 2008, while Marchex
anticipates continued momentum in the growth of new local advertisers
using its products and services, the company does expect a seasonal
impact from certain categories of advertisers lowering their budgets
with the seasonally slow summer months. Additionally, Marchex
anticipates revenue from proprietary traffic sources will be in a
similar range to or slightly better than the first quarter of 2008. This
is based on anticipated increases in consumer usage on Marchex’s
Local Search Network, with certain offsets from the company’s
ongoing efforts to increase direct sales of proprietary advertising
inventory.
Conference Call and Webcast Information:
Management will hold a conference call, starting at 5:00 p.m. EDT on
Tuesday, May 6, 2008 to discuss its first quarter 2008 financial results
and other company updates. To access the call by live Webcast, please
log onto the Investor Relations section of the Marchex Web site (www.marchex.com/investors).
An archived version of the Webcast will also be available, beginning two
hours after completion of the call, at the same location.
About Marchex, Inc.
Marchex (www.marchex.com) is a
local search and advertising company. Marchex's innovative advertising
platform delivers search- and call-based marketing products and services
for local and national advertisers. Marchex's local search network, one
of the largest online, helps consumers make better, more informed local
decisions through its content-rich Web sites that reach tens of millions
of unique visitors each month.
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, 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 May 6, 2008 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 and Adjusted
non-GAAP EPS. Marchex also provides Pro Forma Revenue information for
the three months ended March 31, 2007 and 2008 as if the VoiceStar
acquisition in September 2007 occurred as of January 1, 2007.
OIBA represents income (loss) from operations plus (1) stock-based
compensation expense and (2) amortization of acquired intangible assets.
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 (1) any gain/loss
on sales and disposals of intangible assets and (2) facility relocation
as these are viewed as non-recurring in nature. 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 non-cash
and non-recurring expenses. Adjusted EBITDA represents income before
interest, income taxes, depreciation, amortization, stock compensation
expense, and gain/loss on sales 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.
Adjusted non-GAAP EPS represents Adjusted Net Income divided by weighted
average fully diluted shares outstanding for Adjusted non-GAAP EPS
purposes. Adjusted Net Income generally captures those items on the
statement of operations that have been, or ultimately will be, settled
in cash exclusive of certain non-recurring items and represents net
income (loss) available to common stockholders plus: (1) stock based
compensation expense, (2) amortization of acquired intangible assets,
(3) gain/loss on sales and disposals of intangible assets, (4) other
income (expense), (5) the cumulative effect of changes in accounting
principles, (6) facility relocation and less (7) discount on preferred
stock redemption. Adjusted non-GAAP EPS includes dilution from options
and warrants per the treasury stock method, includes the weighted
average number of all potential common shares relating to convertible
preferred stock and restricted stock and excludes the weighted average
common share equivalents for redeemed preferred shares. Shares
outstanding for Adjusted non-GAAP EPS purposes are therefore higher than
shares outstanding for GAAP EPS purposes. 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. These non-GAAP terms, as defined by Marchex,
may not be comparable to similarly titled measures used by other
companies. 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
(unaudited)
Three Months Ended
March 31,
2007
2008
Revenue
$
34,223,401
$
37,042,327
Expenses:
Service costs (1)
15,241,228
18,887,315
Sales and marketing (1)
7,509,921
6,971,748
Product development (1)
2,597,656
4,187,104
General and administrative (1)
4,180,775
4,959,109
Amortization of intangible assets from acquisitions
4,523,134
4,052,362
Total operating expenses
34,052,714
39,057,638
Gain on sales and disposals of intangible assets, net
32,264
144,691
Income (loss) from operations
202,951
(1,870,620
)
Interest income and other, net
711,987
284,326
Income (loss) before provision for income taxes
914,938
(1,586,294
)
Income tax expense (benefit)
473,788
(339,953
)
Net income (loss)
441,150
(1,246,341
)
Convertible preferred stock dividends and discount on preferred
stock redemption, net
(106,548
)
(10,888
)
Net income (loss) applicable to common stockholders
$
547,698
$
(1,235,453
)
Basic net income (loss) applicable to common stockholders
$
0.01
$
(0.03
)
Diluted net income (loss) applicable to common stock holders
$
0.01
$
(0.03
)
Shares used to calculate basic net income (loss) per share
applicable to common stockholders
39,165,916
37,578,538
Shares used to calculate diluted net income (loss) per share
applicable to common stockholders
40,417,741
37,580,492
(1
)
Includes stock-based compensation allocated as follows:
Service costs
$
118,535
$
139,571
Sales and marketing
372,358
530,710
Product development
489,252
410,709
General and administrative
1,907,069
1,986,482
Total
$
2,887,214
$
3,067,472
MARCHEX, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(unaudited)
December 31,
March 31,
Assets
2007
2008
Current assets:
Cash and cash equivalents
$
36,456,307
$
34,452,286
Trade accounts receivable, net
18,307,386
19,817,306
Prepaid expenses and other current assets
2,118,390
2,758,491
Refundable taxes
1,693,695
982,856
Deferred tax assets
867,465
995,545
Total current assets
59,443,243
59,006,484
Property and equipment, net
7,357,903
7,199,607
Deferred tax assets
7,447,315
8,413,749
Intangibles and other assets, net
17,381,827
16,044,512
Goodwill
204,766,826
204,787,040
Intangible assets from acquisitions, net
23,797,231
19,744,271
Total assets
$
320,194,345
$
315,195,663
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
$
11,625,779
$
11,894,408
Accrued expenses and other current liabilities
3,668,342
4,473,307
Deferred revenue
2,906,379
2,736,998
Total current liabilities
18,200,500
19,104,713
Other non-current liabilities
105,370
87,876
Total liabilities
18,305,870
19,192,589
Stockholders' equity:
Convertible preferred stock
1,446,649
1,302,637
Class A common stock
113,717
112,217
Class B common stock
321,061
302,850
Treasury stock
(22,116,275
)
(7,203,550
)
Additional paid-in capital
329,835,529
310,463,575
Accumulated deficit
(7,712,206
)
(8,974,655
)
Total stockholders' equity
301,888,475
296,003,074
Total liabilities and stockholders' equity
$
320,194,345
$
315,195,663
MARCHEX, INC. AND SUBSIDIARIES
Reconciliation of Revenue to Pro Forma Revenue
(unaudited)
Three Months Ended
March 31,
2007
2008
Revenue, as reported
$
34,223,401
$
37,042,327
VoiceStar pro forma revenue
392,209
-
Pro forma Revenue
$
34,615,610
$
37,042,327
MARCHEX, INC. AND SUBSIDIARIES
Reconciliation of GAAP Net Income (Loss) to Operating Income Before
Amortization (OIBA) and
Adjusted Operating Income Before Amortization (Adjusted OIBA)
(unaudited)
Three Months Ended
March 31,
2007
2008
Net income (loss) applicable to common stockholders
$
547,698
$
(1,235,453
)
Convertible preferred stock dividends and discount on preferred
stock redemption, net
(106,548
)
(10,888
)
Net income (loss)
441,150
(1,246,341
)
Income tax expense (benefit)
473,788
(339,953
)
Income (loss) before provision for income taxes
914,938
(1,586,294
)
Interest income and other, net
(711,987
)
(284,326
)
Income (loss) from operations
202,951
(1,870,620
)
Stock-based compensation
2,887,214
3,067,472
Amortization of intangible assets from acquisitions
4,523,134
4,052,362
Operating income before amortization (OIBA)
7,613,299
5,249,214
Gain on sales and disposals of intangible assets, net
(32,264
)
(144,691
)
Adjusted operating income before amortization (Adjusted OIBA)
$
7,581,035
$
5,104,523
MARCHEX, INC. AND SUBSIDIARIES
Reconciliation from Net Cash provided by Operating Activities to
Adjusted EBITDA
(unaudited)
Three Months Ended
March 31,
2007
2008
Net cash provided by operating activities
$
12,478,122
$
6,657,174
Changes in asset and liabilities, net of effects of acquisitions
(4,256,141
)
1,653,478
Provision (benefit) for income taxes
473,788
(339,953
)
Other item - facility relocation
-
(4,635
)
Interest income and expense
(706,703
)
(283,825
)
Income and excess tax benefits related to stock options
1,492,991
33,161
Adjusted EBITDA
$
9,482,057
$
7,715,400
MARCHEX, INC. AND SUBSIDIARIES
Reconciliation of GAAP EPS to Adjusted Non-GAAP EPS
(unaudited)
Three Months Ended
March 31,
2007
2008
Adjusted Non-GAAP EPS
$
0.11
$
0.08
Net income (loss) per share applicable to common stockholders -
diluted (GAAP EPS)
$
0.01
$
(0.03
)
Shares used to calculate diluted net income (loss) per share
applicable to common stockholders
40,417,741
37,580,492
Net income (loss) applicable to common stockholders
$
547,698
$
(1,235,453
)
Discount on preferred stock redemption
(122,594
)
(26,106
)
Stock-based compensation
2,887,214
3,067,472
Amortization of intangible assets from acquisitions
4,523,134
4,052,362
Gain on sales and disposals of intangible assets, net
(32,264
)
(144,691
)
Interest income and other, net
(711,987
)
(284,326
)
Estimated impact of income taxes
(2,259,129
)
(2,182,679
)
Adjusted Non-GAAP net income applicable to common stockholders
$
4,832,072
$
3,246,579
Adjusted Non-GAAP EPS
$
0.11
$
0.08
Shares used to calculate diluted net income (loss) per share
applicable to common stockholders
40,417,741
37,580,492
Weighted average common share equivalents for redeemed preferred
shares
(1,604
)
(1,954
)
Weighted average stock options and warrants and common shares
subject to repurchase or cancellation (if applicable)
2,480,483
3,641,416
Shares used to calculate Adjusted Non-GAAP EPS
42,896,620
41,219,954
For Adjusted Non-GAAP EPS, the impact of restricted stock (common
shares subject to repurchase or cancellation) is based on the
weighted average of restricted stock outstanding as compared with
diluted shares for GAAP purposes, which included restricted stock
on a treasury stock method basis.