Marchex, Inc. (NASDAQ:MCHX), a leading mobile advertising
analytics company, today announced its financial results for the
second quarter ended June 30, 2016.
"We are disappointed with our Q2 financial results and revised
2016 outlook, which were primarily driven by a small
number of our large clients that reduced their marketing
spend," said Pete Christothoulou, CEO. "It does not
impact our long-term relationship with these clients
or our belief in the Online-to-Offline opportunity. Our new
client wins and strong customer feedback point to a growing
pipeline. We are eager to see our strategic progress flow
through to our financial performance and, ultimately, category
leadership."
Q2 2016 Financial
Highlights
- GAAP revenue was $34.4
million for the second quarter of 2016, compared to $35.3
million for the second quarter of 2015.
- GAAP net loss from continuing
operations was $68.8 million for the second quarter of 2016 or
$1.65 per diluted share, which includes the effect of an estimated
pre-tax $63.3 million, or $1.52 per diluted share2, non-cash
impairment charge based on the preliminary results of the company’s
goodwill impairment tests. Excluding the impact of the impairment,
net loss from continuing operations was $5.5 million2 or $0.13 per
diluted share2 for the second quarter of 2016. For the second
quarter of 2015, GAAP net loss from continuing operations was $1.3
million or $0.03 per diluted share.
Q2 2015 Q2 2016 GAAP
Revenue $35.3 million
$34.4 million
Call-Driven Revenue1
$34.5 million $34.4 million
Non-GAAP
Results2:
Enterprise Revenue3
$24.1 million $26.3 million
Call-Driven Adjusted OIBA $1.4 million
($1.6) million
Call-Driven Adjusted
EBITDA $2.4 million
($0.8) million
Cash Balance $104 million
$106 million
- Adjusted non-GAAP earnings (loss) per
share2 from continuing operations for the second quarter of 2016
was ($0.02), compared to $0.02 for the second quarter of 2015.
- During the second quarter of 2016, YP
contributed $8.1 million in Call-Driven Revenue, compared to $10.4
million in the second quarter 2015.
____________________
1Call-Driven revenue includes revenue generated from our contracts
with YP.
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.
3Enterprise Revenue, also referred to as “Call-Driven Revenue
excluding YP”, represents Call-Driven revenue excluding revenue
generated from our contracts with YP.
Strategic Priorities
Update
The following highlights our recent progress:
Grow New and Existing Enterprise Client Relationships
- We are seeing positive progress in our
sales metrics, including new clients, estimated annualized new
client bookings, and our pipeline. We have added more than 15
enterprise scale clients in the second quarter and are beginning to
more deeply penetrate our core verticals, such as Travel and
Communications. For example, we work with four of the largest Hotel
brands of which three were signed in the first half of 2016. Our
estimated annualized new client bookings through the first half of
2016 have grown more than 50% from the annualized run rate of the
fourth quarter of 2015 despite many of our new sales reps not being
fully ramped.
Accelerate Product Innovation
- We continue to execute our omni-channel
analytics strategy. We are on track to deliver several new products
including Display Analytics for general availability in the near
term. These products enable clients to measure the effectiveness of
display and other digital media in driving call conversions. Upon
launching Display Analytics, we expect to also measure the consumer
journey and interplay between Display and Search.
- We have integrated our Display
Analytics technology with more than 40 of the world’s leading
mobile publishers, including more than half of comScore’s top ten
digital media properties.
Expand Global Strategic Partnerships
- We have a new integration with Adobe’s
Marketing Cloud that delivers better return on advertising spend
for enterprise search marketers that rely upon inbound phone calls
to drive sales. The integration delivers automated insights on
phone calls directly into the Adobe Media Optimizer for each
keyword, including call outcomes and Interactive Voice Response
(IVR) inputs. These insights allow marketers to properly automate
paid search bidding by allocating budgets towards keywords that
best drive over-the-phone purchases.
Business Outlook
The following forward-looking statements reflect Marchex's
expectations as of August 9, 2016.
Total Call-Driven
financial guidance for the Third Quarter ending September 30,
2016
Call-Driven Revenue1 $30 million or more
Call-Driven Adjusted OIBA2 a loss of ($2) million to
a loss of ($4) million Call-Driven Adjusted EBITDA2 a
loss of ($1) million to a loss of ($3) million
We are providing annual guidance on Call-Driven revenue which
includes anticipated contributions by YP due to increased
visibility in the remaining year outlook from this customer. We
anticipate Enterprise Revenue for the full year will be lower than
our previously stated annual guidance, primarily due to increasing
variability in marketing budgets from a small number of our largest
enterprise customers.
Total Call-Driven
financial guidance for the year ending December 31,
2016
Call-Driven Revenue1 $128 million or more
Conference Call and Webcast
Information
Management will hold a conference call, starting at 5:00 p.m. ET
on Tuesday, August 9, 2016 to discuss its second quarter ended June
30, 2016 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, www.marchex.com/blog/ or @marchex
on Twitter (Twitter.com/Marchex), where Marchex discloses material
information from time to time about the Company, its financial
information, and its business.
Forward-Looking
Statements:
This press release contains forward-looking statements that
involve substantial risks and uncertainties. All statements, other
than statements of historical facts, included in this press release
regarding our strategy, future operations, future financial
position, future revenues, other financial guidance, acquisitions,
dispositions, projected costs, prospects, plans and objectives of
management are forward-looking statements. We may not actually
achieve the plans, intentions, or expectations disclosed in our
forward-looking statements and you should not place undue reliance
on our forward-looking statements. Actual results or events could
differ materially from the plans, intentions and expectations
disclosed in the forward-looking statements we make. There are a
number of important factors that could cause Marchex's actual
results to differ materially from those indicated by such
forward-looking statements 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 August 9, 2016 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 earnings (loss) per share and Call-Driven
and Archeo and Other Adjusted OIBA and EBITDA. Additionally,
Marchex also provides Enterprise Revenue, which represents
Call-Driven revenue excluding revenue generated from our contracts
with Yellowpages.com LLC (“YP”).
OIBA represents income (loss) from
operations plus stock-based compensation expense. 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 and preliminary
estimate of impairment of goodwill, as these items are 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, acquisition and disposition related costs, and
preliminary estimate of impairment of goodwill. Adjusted EBITDA represents income before interest,
income taxes, depreciation, amortization, stock compensation
expense, acquisition and disposition related costs, and preliminary
estimate of impairment of goodwill. Marchex believes that Adjusted
EBITDA is another alternative measure of liquidity to GAAP net cash
provided by (used in) operating activities that provides meaningful
supplemental information regarding liquidity and is used by
Marchex's management to measure its ability to fund operations and
its financing obligations.
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 includes all Marchex general corporate overhead costs.
Archeo and Other Adjusted OIBA and
EBITDA includes the above descriptions of Adjusted OIBA and
EBITDA for the Archeo segment in 2015, and in 2016, Other operating
results primarily includes transition activities provided to buyer
of Archeo assets which are not material. Enterprise Revenue represents Call-Driven revenue
excluding revenue generated through our contracts with YP.
Financial analysts and investors may use Adjusted OIBA and EBITDA
and Enterprise Revenue to help with comparative financial
evaluation to make informed investment decisions. Net loss from continuing operations excluding impairment
of goodwill and related per diluted share amount represents
GAAP net loss from continuing operations adding back the impact of
the preliminary estimate of impairment of goodwill with the
corresponding diluted share amount derived by using GAAP diluted
shares outstanding. Adjusted non-GAAP
earnings (loss) per share 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) acquisition
and disposition related costs, (3) interest and other income
(expense), (4) discontinued operations, net of tax, (5) dividends
paid to participating securities and (6) preliminary estimate of
impairment of goodwill. Financial analysts and investors may use
Adjusted non-GAAP earnings (loss) per share to analyze Marchex's
financial performance since these groups have historically used EPS
related measures, along with other measures, to estimate the value
of a company, to make informed investment decisions, and to
evaluate a company's operating performance compared to that of
other companies in its industry.
Marchex's management believes that investors should have access
to, and Marchex is obligated to provide, the same set of tools that
management uses in analyzing the company's results. These non-GAAP
measures should be considered in addition to results prepared in
accordance with GAAP, and should not be considered in isolation, as
a substitute for, or superior to, GAAP results. Marchex’s non-GAAP
financial measures may be defined differently from time to time and
may be defined differently than similar titled terms used by other
companies, and accordingly, care should be exercised in
understanding how Marchex defines its non-GAAP financial measures
in this release. Marchex endeavors to compensate for the
limitations of the non-GAAP measures presented by providing the
comparable GAAP measure with equal or greater prominence, GAAP
financial statements, and detailed descriptions of the reconciling
items and adjustments, including quantifying such items, to derive
the non-GAAP measure.
MARCHEX, INC. AND SUBSIDIARIES Condensed
Consolidated Statements of Operations (in thousands, except
per share amounts) (unaudited)
Three months ended
Six Months Ended June 30, June 30, 2015
2016 2015 2016
Revenue $ 35,346 $ 34,412 $ 71,261 $ 70,397 Expenses:
Service costs (1) 19,797 20,477 39,163 42,459 Sales and marketing
(1) 4,245 5,649 7,703 11,171 Product development (1) 8,147 7,555
15,839 15,027 General and administrative (1) 4,505 5,833 10,204
10,495 Acquisition and disposition related costs 118
304 118
308 Total operating expenses 36,812 39,818 73,027
79,460 Impairment of goodwill -
(63,305 ) - (63,305 ) Loss from
operations (1,466 ) (68,711 ) (1,766 ) (72,368 ) Interest expense
and other, net (16 ) (68 ) (41 )
(75 ) Loss from continuing operations before
provision for income taxes (1,482 ) (68,779 ) (1,807 ) (72,443 )
Income tax expense (benefit) (185 ) 12
(180 ) 25 Net loss from
continuing operations (1,297 ) (68,791 ) (1,627 ) (72,468 )
Discontinued operations: Income (loss) from discontinued
operations, net of tax (92 ) - 5,047 - Gain on sale from
discontinued operations, net of tax 22,257
- 22,032 -
Discontinued operations, net of tax 22,165
- 27,079
- Net income (loss) 20,868 (68,791 ) 25,452 (72,468 )
Dividends paid to participating securities (19 )
- (37 ) -
Net income (loss) applicable to common stockholders $ 20,849
$ (68,791 ) $ 25,415 $ (72,468 )
Basic and diluted net income (loss) per Class A and Class B
share applicable to common stockholders: Continuing operations $
(0.03 ) $ (1.65 ) $ (0.04 ) $ (1.75 ) Discontinued operations, net
of tax $ 0.53 $ - $ 0.66
$ - Basic and diluted net income (loss) per Class A
and Class B share applicable to common stockholders $ 0.50 $ (1.65
) $ 0.62 $ (1.75 ) Dividends paid per share $ 0.02 $ - $ 0.04 $ -
Shares used to calculate basic net income (loss) per share
applicable to common stockholders Class A 5,233 5,233 5,233 5,233
Class B 36,072 36,499 35,919 36,238 Shares used to calculate
diluted net income (loss) per share applicable to common
stockholders Class A 5,233 5,233 5,233 5,233
Class B
41,305 41,732 41,152 41,471
(1) Includes stock-based compensation
allocated as follows:
Service costs $ 552 $ 207 $ 772 $ 405 Sales and marketing 309 529
554 968 Product development 644 629 1,223 1,161 General and
administrative 1,162 2,136
2,909 2,933 Total
$ 2,667 $ 3,501 $ 5,458
$ 5,467
MARCHEX, INC. AND
SUBSIDIARIES Condensed Consolidated Balance Sheets
(in thousands) (unaudited)
December 31, June 30, Assets
2015 2016 Current assets: Cash and cash
equivalents $ 109,155 $ 105,777 Accounts receivable, net 24,621
25,301 Prepaid expenses and other current assets 1,784 2,393
Refundable taxes 127 124
Total current assets 135,687 133,595 Property and equipment,
net 5,778 4,454 Intangibles and other assets, net 222 222 Goodwill
63,305 - Total Assets $
204,992 $ 138,271
Liabilities
and Stockholders' Equity Current liabilities: Accounts
payable $ 9,460 $ 9,614 Accrued expenses and other current
liabilities 6,712 7,583 Deferred revenue 692
333 Total current liabilities 16,864 17,530
Other non-current liabilities 662
407 Total Liabilities 17,526 17,937
Class A common stock 55 55 Class B common stock 368 381
Treasury stock (238 ) (95 ) Additional paid-in capital 350,799
355,979 Accumulated deficit (163,518 )
(235,986 ) Total Stockholders' Equity 187,466
120,334 Total Liabilities and Stockholders'
Equity $ 204,992 $ 138,271
MARCHEX, INC. AND SUBSIDIARIES (in thousands)
(unaudited)
Reconciliation of GAAP Loss from
Operations to Operating Income Before Amortization (OIBA) and
Adjusted Operating Income Before Amortization (Adjusted
OIBA)
Three Months Ended Six Months Ended
June 30, June 30, 2015
2016 2015 2016 Loss from
operations $ (1,466 ) $
(68,711 ) $ (1,766 ) $
(72,368 ) Stock-based compensation 2,667
3,501 5,458
5,467 Operating income before amortization
(OIBA) 1,201 (65,210 ) 3,692 (66,901 ) Acquisition and disposition
related costs 118 304 118 308 Impairment of goodwill -
63,305 -
63,305
Adjusted operating income before
amortization (Adjusted OIBA) - Consolidated $
1,319 $ (1,601 ) $ 3,810
$ (3,288 ) Less: Archeo and Other Adjusted
OIBA1 (81 ) 11 (222 )
27 Call-Driven Adjusted OIBA1 $ 1,400
$ (1,612 ) $ 4,032 $
(3,315 )
Reconciliation from Net Cash provided by
(used in) Operating Activities to Adjusted EBITDA
Three Months Ended Six Months Ended June 30,
June 30, 2015 2016 2015
2016 Net cash provided by (used in)
operating activities $ (1,814 ) $
(386 ) $ 4,437 $ (2,653
) Changes in asset and liabilities 3,883 (785 ) 6,111 647
Income tax expense (benefit) (185 ) 12 (180 ) 25 Acquisition and
disposition related costs 118 304 118 308 Interest expense and
other, net 16 68 41 75 Loss (income) from discontinued operations,
net of tax 91 - (5,065 ) - Tax effect on gain on sale of
discontinued operations 163 -
163 -
Adjusted
EBITDA - Consolidated $ 2,272 $
(787 ) $ 5,625 $ (1,598
) Less: Archeo and Other Adjusted EBITDA1 (81 )
11 (222 )
27 Call-Driven Adjusted EBITDA1 $ 2,353
$ (798 ) $ 5,847 $ (1,625 )
Net cash
provided by (used in) investing activities $
23,767 $ (119 )
$ 22,840 $ (594
) Net cash used in financing activities
$ (1,181 ) $ (321
) $ (2,878 ) $
(131 ) 1
The financial results have been derived
from the condensed consolidated financial statements. In April
2015, Marchex divested certain Archeo domain name and related
assets and the operating results of these divested assets are
included in discontinued operations, net of tax, in the condensed
consolidated financial statements. In December 2015, Marchex sold
the remaining Archeo assets and its operating results are included
in continuing operations for 2015. Unless otherwise indicated,
information presented in these financial tables relates only to
Marchex's continuing operations. In 2016, Other operating results
related primarily to transition activities provided to the buyer of
the Archeo assets and were not significant.
MARCHEX, INC. AND SUBSIDIARIES
Reconciliation
of GAAP earnings (loss) per share to Adjusted Non-GAAP earnings
(loss) per share (in thousands, except per share
amounts) (unaudited) Three Months
Ended Six Months Ended June 30, June 30,
2015 2016 2015
2016 Adjusted Non-GAAP earnings (loss) per share from
continuing operations $ 0.02 $ (0.02 ) $ 0.06
$ (0.05 )
Net loss from continuing
operations applicable to common stockholders - diluted (GAAP loss
per share) $ (0.03 ) $ (1.65
) $ (0.04 ) $ (1.75
) Shares used to calculate diluted net loss from continuing
operations per share applicable to common stockholders 41,305
41,732 41,152 41,471
Net income (loss) applicable to
common stockholders $ 20,849 $
(68,791 ) $ 25,415 $
(72,468 ) Stock-based compensation 2,667 3,501 5,458
5,467 Acquisition and disposition related costs 118 304 118 308
Impairment of goodwill - 63,305 - 63,305 Interest expense and
other, net 16 68 41 75 Dividends paid to participating securities
19 - 37 - Discontinued operations, net of tax (22,165 ) - (27,079 )
- Estimated impact of income taxes (646 )
746 (1,516 ) 1,093
Adjusted Non-GAAP net income (loss) from continuing
operations $ 858 $
(867 ) $ 2,474
$ (2,220 ) Adjusted Non-GAAP
earnings (loss) per share from continuing operations $
0.02 $ (0.02 )
$ 0.06 $ (0.05
)
Shares used to calculate diluted net
income (loss) from continuing operations per share applicable to
common stockholders (GAAP)
41,305 41,732 41,152 41,471 Weighted average stock options and
common shares subject to purchase or cancellation (if applicable)
415 - 366
- Diluted shares used to calculate
Adjusted Non-GAAP earnings (loss) per share 1 41,720
41,732 41,518
41,471 1 For the purpose
of computing the number of diluted shares for Adjusted Non-GAAP
earnings (loss) per share, Marchex uses the accounting guidance
that would be applicable for computing the number of diluted shares
for GAAP earnings (loss) per share.
Reconciliation
of GAAP net loss from continuing operations to Non-GAAP net loss
from continuing operations excluding impairment of
goodwill (in thousands, except per share amounts)
(unaudited) Three
Months Ended Six Months Ended June
30, June 30, 2015 2016
2015 2016
Net loss from continuing operations (GAAP) $
(1,297 ) $ (68,791 ) $
(1,627 ) $ (72,468 ) Impairment
of goodwill - 63,305
- 63,305
Net loss from
continuing operations excluding goodwill impairment (NON-GAAP)
$ (1,297 ) $
(5,486 ) $ (1,627 )
$ (9,163 ) Net loss
from continuing operations applicable to common stockholders -
diluted (GAAP loss per share) $ (0.03 )
$ (1.65 ) $ (0.04 )
$ (1.75 ) Impairment of goodwill per diluted
share - 1.52 -
1.53
Net loss from continuing
operations excluding goodwill impairment per diluted share
(NON-GAAP) $ (0.03 )
$ (0.13 ) $ (0.04 )
$ (0.22 )
Shares used to calculate diluted net loss
from continuing operations per share applicable to common
stockholders (GAAP) and diluted net loss from continuing operations
excluding goodwill impairment (NON-GAAP)
41,305 41,732 41,152 41,471
MARCHEX, INC. AND
SUBSIDIARIES Financial Summary Information (in
thousands) (unaudited) NON-GAAP MEASURES
CONSOLIDATED1
Q215 Q216 YTD Q215
YTD Q216 GAAP Revenue $
35,346 $ 34,412 $ 71,261
$ 70,397 Adjusted OIBA $ 1,319
$ (1,601 ) $ 3,810 $
(3,288 ) Adjusted EBITDA
$ 2,272 $ (787 )
$ 5,625 $ (1,598 )
CALL-DRIVEN
Q215 Q216 YTD Q215
YTD Q216 GAAP Revenue $ 34,458 $
34,412 $ 69,486 $ 70,376
Adjusted OIBA $ 1,400 $ (1,612
) $ 4,032 $ (3,315 )
Adjusted EBITDA $ 2,353
$ (798 ) $ 5,847
$ (1,625 )
ENTERPRISE REVENUE2 Q215
Q216 YTD Q215 YTD
Q216 Call-Driven GAAP Revenue $ 34,458
$ 34,412 $ 69,486 $
70,376 Less: YP Revenue $ 10,362
$ 8,091 $ 21,119
$ 16,610 Enterprise Revenue
$ 24,096 $
26,321 $ 48,367 $
53,766 1 In April 2015, Marchex
divested certain Archeo domain name and related assets and the
operating results of these divested assets are included in
discontinued operations, net of tax, in the condensed consolidated
financial statements. In December 2015, Marchex sold the remaining
Archeo assets and its operating results are included in continuing
operations for 2015. In 2016, there were Other operating activities
that related primarily to transition activities provided to the
buyer of the Archeo assets and were not significant. Unless
otherwise indicated, information presented in these financial
tables relates only to Marchex's continuing operations. 2
Enterprise Revenue, also referred to as “Call-Driven Revenue
excluding YP”, represents Call-Driven revenue excluding revenue
generated from our contracts with YP.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160809006400/en/
Marchex Investor RelationsTrevor Caldwell, 206-331-3600Email:
ir(at)marchex.comorMEDIA INQUIRIESMarchex Corporate
Communications206-331-3434Email: pr(at)marchex.com
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