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Exhibit 99.1

Marchex Announces Record Second Quarter 2014 Results

Company Reports Record Call-Driven Revenue

SEATTLE — (BUSINESS WIRE) – August 5, 2014 — Marchex, Inc. (NASDAQ:MCHX), a mobile advertising technology company, today announced its financial results for the second quarter ended June 30, 2014.

“Our ability to deliver strong returns for our customers through our call advertising products drove another record during the second quarter,” said Russell Horowitz, Chairman and CEO of Marchex. “Our focus on our clients’ success is the cornerstone of our business. Our Call Analytics platform is enabling Marchex to provide unique intelligence and insight around calls at the same time mobile and call-based advertising is emerging as a major theme for advertisers. As a result, we are further integrating with some of our largest advertisers and landing new customers, many of which are embracing mobile performance advertising for the first time.”

Q2 2014 Financial Highlights1

 

    GAAP revenue was $49.7 million for the second quarter of 2014, compared to $37.6 million for the second quarter of 2013. Non-GAAP revenue2, which excludes domain sales recorded in revenue, was $47.4 million for the second quarter of 2014.

 

    GAAP net income from continuing operations was $947,000 for the second quarter of 2014, compared to a GAAP net loss from continuing operations of $354,000 for the second quarter of 2013.

 

    GAAP net income from continuing operations attributable to common stockholders per diluted share was $0.02 for the second quarter of 2014. This compares to GAAP net loss from continuing operations attributable to common stockholders per diluted share of $0.01 for the second quarter of 2013.

 

     Q2 2014    Q2 2013
GAAP Revenue    $49.7 million    $37.6 million
Non-GAAP Results:
Non-GAAP Revenue 2, 5    $47.4 million    $37.6 million
Call-Driven and Related Revenue    $45.9 million    $33.9 million
Archeo Revenue including domain gains and sales 3, 5    $  3.8 million    $  5.0 million
Archeo Revenue excluding domain gains and sales 3, 5    $  1.5 million    $  3.7 million
Call-Driven Adjusted OIBA5    $  2.9 million    $  1.5 million
Call-Driven Adjusted EBITDA5    $  3.8 million    $  2.4 million
Adjusted OIBA4, 5    $  4.8 million    $  3.6 million
Adjusted EBITDA4, 5    $  5.7 million    $  4.5 million

Adjusted OIBA excluding domain gains and sales5

   $  2.6 million    $  2.2 million

Adjusted EBITDA excluding domain gains and sales5

   $  3.5 million    $  3.2 million

 

    Adjusted non-GAAP EPS3 from continuing operations for the second quarter of 2014 was $0.07, compared to $0.06 for the second quarter of 2013. Adjusted non-GAAP EPS3 from continuing operations excluding domain gains and sales for the second quarter of 2014 and 2013 were both $0.04.

 


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 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.
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  Includes/excludes domain sales recognized in GAAP revenue and domain sales recognized in gains on sales and disposals of intangible assets.
4  Adjusted OIBA, Adjusted EBITDA and Non-GAAP EPS include the impact of domain gains and sales. Historically, these non-GAAP measures excluded the impact of domain gains and sales.
5  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 Q2 and Recent Call-Driven Business Highlights:

 

    Revenue. Call-Driven and related revenue was $45.9 million for the second quarter of 2014 – a 35 percent increase compared to $33.9 million for the second quarter of 2013.

 

    Strategic Developments. Marchex raised $32.5 million as part of its secondary offering, which was completed on April 4th. Marchex intends to use the net proceeds of the offering for general corporate purposes, which may include acquisitions or licenses of, or investments in, products, services, technologies or other businesses.

Archeo Q2 Business Highlights:

 

    Revenue. Archeo non-GAAP revenue was $1.5 million for the second quarter of 2014, which excludes domain sales recognized in GAAP revenue.

 

    Domains sales. During the second quarter of 2014, domain sales yielded $2.2 million.

Business Outlook

The following forward-looking statements reflect Marchex’s expectations as of August 5, 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    $178 million or more
Call-Driven Adjusted OIBA 1    $10 million or more
Call Driven Adjusted EBITDA 1    $14 million or more

Call-Driven financial guidance for the Third Quarter ending September 30, 2014

 

Call-Driven Revenue    $46 million or more
Call-Driven Adjusted OIBA 1    $2.5-$3 million
Call-Driven Adjusted EBITDA 1    $3.5-$4 million

 

1 These 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 Tuesday, August 5, 2014 to discuss its second quarter ended June 30, 2014 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 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 August 5, 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 including and excluding domain gains and sales, Adjusted OIBA, EBITDA including and excluding domain gains and sales and Adjusted non-GAAP EPS including and excluding domain gains and sales. Marchex also provides Call-Driven Adjusted OIBA and EBITDA.

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 separation 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 separation related costs. Adjusted EBITDA represents income


before interest, income taxes, depreciation, amortization, stock compensation expense and acquisition and separation related cost. 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. Historically, these Non-GAAP measures excluded gain/loss on sales and disposals of intangible assets for each asset and any domain sales contribution.

Non-GAAP Revenue represents GAAP revenue excludes domain sales sold through Marchex’s Domain Marketplace, which are recognized in GAAP revenue. Archeo revenue including or excluding domain gains and sales represents GAAP revenue and includes/excludes sales proceeds from the sale of domains recognized in gain/loss on sales and disposals of intangible assets and domain sales sold through Marchex’s Domain Marketplace which are recognized in GAAP revenue. Adjusted OIBA and EBITDA including or excluding domain gains and sales includes the above descriptions of Adjusted OIBA and EBITDA and includes/excludes 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 general corporate overhead costs to the Call-Driven results. Financial analysts and investors may use the non-GAAP historical Revenue including/excluding domain gains and sales and Adjusted OIBA and EBITDA including/excluding domain gains and sales 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 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 separation related costs, (4) interest and other income (expense), (5) discontinued operations, net of tax and (6) dividends paid to participating securities, and also excludes the effect of any 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. Adjusted Non-GAAP EPS excluding domain gains and sales includes the above description of Adjusted non-GAAP EPS and excludes domain sales contribution and gain/loss on sales and disposals of intangible assets.

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  
     June 30,  
     2013     2014  

Revenue

   $ 37,578      $ 49,676   

Expenses:

    

Service costs (1)

     22,584        32,319   

Sales and marketing (1)

     2,906        2,839   

Product development (1)

     6,944        7,458   

General and administrative (1)

     5,526        5,386   

Amortization of intangible assets from acquisitions

     736        31   

Acquisition and separation related costs

     309        (68
  

 

 

   

 

 

 

Total operating expenses

     39,005        47,965   

Gain on sales and disposals of intangible assets, net

     1,329        —     
  

 

 

   

 

 

 

Income (loss) from operations

     (98     1,711   

Interest expense and other, net

     (12     (22
  

 

 

   

 

 

 

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

     (110     1,689   

Income tax expense

     244        709   
  

 

 

   

 

 

 

Net income (loss) from continuing operations

     (354     980   

Discontinued operations, net of tax

     0        —     
  

 

 

   

 

 

 

Net income (loss)

     (354     980   

Dividends paid to participating securities

     —          (33
  

 

 

   

 

 

 

Net income (loss) applicable to common stockholders

   $ (354   $ 947   
  

 

 

   

 

 

 

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

    

Continuing operations

   $ (0.01   $ 0.02   

Discontinued operations, net of tax

     0.00        —     
  

 

 

   

 

 

 

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

   $ (0.01   $ 0.02   

Dividends paid per share

   $ —        $ 0.02   

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

    

Class A

     9,570        5,243   

Class B

     25,853        35,441   

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

    

Class A

     9,570        5,243   

Class B

     35,423        43,453   

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

    

Service costs

   $ 183      $ 362   

Sales and marketing

     202        233   

Product development

     394        692   

General and administrative

     1,824        1,830   
  

 

 

   

 

 

 

Total

   $ 2,603      $ 3,117   
  

 

 

   

 

 

 


MARCHEX, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

 

     Six Months Ended  
     June 30,  
     2013     2014  

Revenue

   $ 72,310      $ 100,172   

Expenses:

    

Service costs (1)

     42,732        64,673   

Sales and marketing (1)

     5,550        6,221   

Product development (1)

     13,752        15,018   

General and administrative (1)

     10,323        10,747   

Amortization of intangible assets from acquisitions

     1,791        434   

Acquisition and separation related costs

     654        (68
  

 

 

   

 

 

 

Total operating expenses

     74,802        97,025   

Gain on sales and disposals of intangible assets, net

     2,691        —     
  

 

 

   

 

 

 

Income from operations

     199        3,147   

Interest expense and other, net

     (29     (24
  

 

 

   

 

 

 

Income from continuing operations before provision for income taxes

     170        3,123   

Income tax expense

     408        1,297   
  

 

 

   

 

 

 

Net income (loss) from continuing operations

     (238     1,826   

Discontinued operations, net of tax

     (31     9   
  

 

 

   

 

 

 

Net income (loss)

     (269     1,835   

Dividends paid to participating securities

     —          (69
  

 

 

   

 

 

 

Net income (loss) applicable to common stockholders

   $ (269   $ 1,766   
  

 

 

   

 

 

 

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

    

Continuing operations

   $ (0.01   $ 0.05   

Discontinued operations, net of tax

   $ (0.00   $ 0.00   
  

 

 

   

 

 

 

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

   $ (0.01   $ 0.05   

Dividends paid per share

   $ —        $ 0.04   

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

    

Class A

     9,570        6,483   

Class B

     25,720        32,277   

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

    

Class A

     9,570        6,483   

Class B

     35,290        41,658   

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

    

Service costs

   $ 363      $ 644   

Sales and marketing

     262        437   

Product development

     766        1,351   

General and administrative

     3,119        3,568   
  

 

 

   

 

 

 

Total

   $ 4,510      $ 6,000   
  

 

 

   

 

 

 


MARCHEX, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

     December 31,     June 30,  
     2013     2014  
Assets     

Current assets:

    

Cash and cash equivalents

   $ 30,912      $ 74,950   

Accounts receivable, net

     30,005        34,700   

Prepaid expenses and other current assets

     2,943        3,429   

Refundable taxes

     97        96   

Deferred tax assets

     1,016        1,251   
  

 

 

   

 

 

 

Total current assets

     64,973        114,426   

Property and equipment, net

     5,440        5,042   

Deferred tax assets

     25,138        23,012   

Intangibles and other assets, net

     484        422   

Goodwill

     65,679        65,679   

Intangible assets from acquisitions, net

     434        —     
  

 

 

   

 

 

 

Total Assets

   $ 162,148      $ 208,581   
  

 

 

   

 

 

 
Liabilities and Stockholders’ Equity     

Current liabilities:

    

Accounts payable

   $ 15,922      $ 20,179   

Accrued expenses and other current liabilities

     7,988        8,395   

Deferred revenue

     1,388        2,188   
  

 

 

   

 

 

 

Total current liabilities

     25,298        30,762   

Other non-current liabilities

     2,095        1,322   
  

 

 

   

 

 

 

Total Liabilities

     27,393        32,084   

Class A common stock

     80        55   

Class B common stock

     309        375   

Treasury stock

     (2     (1

Additional paid-in capital

     305,517        345,382   

Accumulated deficit

     (171,149     (169,314
  

 

 

   

 

 

 

Total Stockholders’ Equity

     134,755        176,497   
  

 

 

   

 

 

 

Total Liabilities and Stockholders’ Equity

   $ 162,148      $ 208,581   
  

 

 

   

 

 

 


MARCHEX, INC. AND SUBSIDIARIES

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

and Adjusted Operating Income Before Amortization (Adjusted OIBA)

(in thousands)

(unaudited)

 

     Three Months Ended  
     June 30,  
     2013     2014  

Income (loss) from operations

   $ (98   $ 1,711   

Stock-based compensation

     2,603        3,117   

Amortization of intangible assets from acquisitions

     736        31   
  

 

 

   

 

 

 

Operating income before amortization (OIBA)

     3,241        4,859   

Acquisition and separation related costs

     309        (68
  

 

 

   

 

 

 

Adjusted operating income before amortization (Adjusted OIBA)

   $ 3,550      $ 4,791   

Domain sales contribution

     —          (2,217

Gain on sales and disposals of intangible assets, net

     (1,329     —     
  

 

 

   

 

 

 

Adjusted OIBA excluding domain gains and sales

   $ 2,221      $ 2,574   
  

 

 

   

 

 

 
     Six Months Ended
June 30,
 
     2013     2014  

Income from operations

   $ 199      $ 3,147   

Stock-based compensation

     4,510        6,000   

Amortization of intangible assets from acquisitions

     1,791        434   
  

 

 

   

 

 

 

Operating income before amortization (OIBA)

     6,500        9,581   

Acquisition and separation related costs

     654        (68
  

 

 

   

 

 

 

Adjusted operating income before amortization (Adjusted OIBA)

   $ 7,154      $ 9,513   

Domain sales contribution

     —          (4,110

Gain on sales and disposals of intangible assets, net

     (2,691     —     
  

 

 

   

 

 

 

Adjusted OIBA excluding domain gains and sales

   $ 4,463      $ 5,403   
  

 

 

   

 

 

 

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


MARCHEX, INC. AND SUBSIDIARIES

Reconciliation from Net Cash provided by Operating Activities to Adjusted EBITDA

(in thousands)

(unaudited)

 

     Three Months Ended  
     June 30,  
     2013     2014  

Net cash provided by operating activities

   $ 1,014      $ 3,289   

Changes in assets and liabilities

     1,393        1,672   

Income tax expense

     244        709   

Acquisition and separation related costs

     309        —     

Interest expense and other, net

     12        22   

Gain on sales and disposals of intangible assets, net

     1,329        —     

Discontinued operations, net of tax

     (11     —     

Excess tax benefits related to stock compensation

     189        —     
  

 

 

   

 

 

 

Adjusted EBITDA

   $ 4,479      $ 5,692   

Domain sales contribution

     —          (2,217

Gain on sales and disposals of intangible assets, net

     (1,329     —     
  

 

 

   

 

 

 

Adjusted EBITDA excluding domain gains and sales

   $ 3,150      $ 3,475   
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

   $ 449      $ (545
  

 

 

   

 

 

 

Net cash provided by financing activities

   $ 179      $ 33,680   
  

 

 

   

 

 

 
     Six Months Ended
June 30,
 
     2013     2014  

Net cash provided by operating activities

   $ 3,155      $ 11,367   

Changes in asset and liabilities

     1,856        (1,312

Income tax expense

     408        1,297   

Acquisition and separation related costs

     654        —     

Interest expense and other, net

     29        24   

Gain on sales and disposals of intangible assets, net

     2,691        —     

Discontinued operations, net of tax

     6        (9

Excess tax benefits related to stock compensation

     196        —     
  

 

 

   

 

 

 

Adjusted EBITDA

   $ 8,995      $ 11,367   

Domain sales contribution

     —          (4,110

Gain on sales and disposals of intangible assets, net

     (2,691     —     
  

 

 

   

 

 

 

Adjusted EBITDA excluding domain gains and sales

   $ 6,304      $ 7,257   
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

   $ 961      $ (1,352
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

   $ (1,304   $ 34,023   
  

 

 

   

 

 

 

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


MARCHEX, INC. AND SUBSIDIARIES

Reconciliation of GAAP EPS to Adjusted Non-GAAP EPS

(in thousands, except per share data)

(unaudited)

 

     Three Months Ended  
     June 30,  
     2013     2014  

Adjusted Non-GAAP EPS from continuing operations

   $ 0.06      $ 0.07   
  

 

 

   

 

 

 

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

   $ (0.01   $ 0.02   

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

     35,423        43,453   

Net income (loss) applicable to common stockholders

   $ (354   $ 947   

Stock-based compensation

     2,603        3,117   

Acquisition and separation related costs

     309        (68

Amortization of intangible assets from acquisitions

     736        31   

Interest expense and other, net

     12        22   

Dividends paid to participating securities

     —          33   

Tax valuation allowance

     225        —     

Estimated impact of income taxes

     (1,219     (973
  

 

 

   

 

 

 

Adjusted Non-GAAP net income from continuing operations

   $ 2,312      $ 3,109   

Domain sales contribution

     —          (2,217

Gain on sales and disposals of intangible assets, net

     (1,329     —     

Estimated impact of income taxes on domain gains and sales

     463        785   
  

 

 

   

 

 

 

Adjusted Non-GAAP net income excluding domain gains and sales

   $ 1,446      $ 1,677   
  

 

 

   

 

 

 

Adjusted Non-GAAP EPS from continuing operations

   $ 0.06      $ 0.07   
  

 

 

   

 

 

 

Adjusted Non-GAAP EPS excluding domain gains and sales

   $ 0.04      $ 0.04   
  

 

 

   

 

 

 

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

     35,423        43,453   

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

     790        —     
  

 

 

   

 

 

 

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

     36,213        43,453   
  

 

 

   

 

 

 

 

(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

Reconciliation of GAAP EPS to Adjusted Non-GAAP EPS

(in thousands, except per share data)

(unaudited)

 

     Six Months Ended  
     June 30,  
     2013     2014  

Adjusted Non-GAAP EPS from continuing operations

   $ 0.13      $ 0.15   
  

 

 

   

 

 

 

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

   $ (0.01   $ 0.02   

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

     35,290        41,658   

Net income (loss) applicable to common stockholders

   $ (269   $ 1,766   

Stock-based compensation

     4,510        6,000   

Acquisition and separation related costs

     654        (68

Amortization of intangible assets from acquisitions

     1,791        434   

Interest expense and other, net

     29        24   

Dividends paid to participating securities

     —          69   

Tax valuation allowance

     651        —     

Discontinued operations, net of tax

     31        (9

Estimated impact of income taxes

     (2,743     (2,041
  

 

 

   

 

 

 

Adjusted Non-GAAP net income from continuing operations

   $ 4,654      $ 6,175   

Domain sales contribution

     —          (4,110

Gain on sales and disposals of intangible assets, net

     (2,691     —     

Estimated impact of income taxes on domain gains and sales

     940        1,449   
  

 

 

   

 

 

 

Adjusted Non-GAAP net income from continuing operations excluding domain gains and sales

   $ 2,903      $ 3,514   
  

 

 

   

 

 

 

Adjusted Non-GAAP EPS from continuing operations

   $ 0.13      $ 0.15   
  

 

 

   

 

 

 

Adjusted Non-GAAP EPS from continuing operations excluding domain gains and sales

   $ 0.08      $ 0.08   
  

 

 

   

 

 

 

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

     35,290        41,658   

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

     592        —     
  

 

 

   

 

 

 

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

     35,882        41,658   
  

 

 

   

 

 

 

 

(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

(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     6 months ended  
     3/31/2013     6/30/2013     9/30/2013     12/31/2013     3/31/2014     6/30/2014     6/30/2013     6/30/2014  

Income (loss) from operations

   $ 297      $ (98   $ 1,006      $ 1,544      $ 1,436      $ 1,711      $ 199      $ 3,147   

Stock-based compensation

     1,907        2,603        2,365        2,362        2,883        3,117        4,510        6,000   

Amortization of intangible assets from acquisitions

     1,055        736        709        426        403        31        1,791        434   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income before amortization (OIBA)

     3,259        3,241        4,080        4,332        4,722        4,859        6,500        9,581   

Acquisition and separation related costs

     345        309        286        (62     —          (68     654        (68
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted operating income before amortization (Adjusted OIBA)

   $ 3,604      $ 3,550      $ 4,366      $ 4,270      $ 4,722      $ 4,791      $ 7,154      $ 9,513   

Domain sales contribution

     —          —          (839     (1,549     (1,893     (2,217     —          (4,110

Gain on sales and disposals of intangible assets, net

     (1,362     (1,329     (1,047     (35     —          —          (2,691     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted OIBA excluding domain gains and sales

   $ 2,242      $ 2,221      $ 2,480      $ 2,686      $ 2,829      $ 2,574        4,463        5,403   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Reconciliation from Net Cash provided by Operating Activities to Adjusted EBITDA   
     3 months ended     6 months ended  
     3/31/2013     6/30/2013     9/30/2013     12/31/2013     3/31/2014     6/30/2014     6/30/2013     6/30/2014  

Net cash provided by operating activities

   $ 2,141      $ 1,014      $ 4,332      $ 6,109      $ 8,078      $ 3,289      $ 3,155      $ 11,367   

Changes in assets and liabilities

     463        1,393        (1,374     (1,636     (2,984     1,672        1,856        (1,312

Income tax expense

     164        244        389        958        588        709        408        1,297   

Acquisition and separation related costs

     345        309        286        —          —          —          654        —     

Gain on sales and disposals of intangible assets, net

     1,362        1,329        1,047        35        —          —          2,691        —     

Discontinued operations, net of tax

     17        (11     43        (7     (9     —          6        (9

Tax effect of gain on sale of discontinued operations

     —          —          563        —          —          —          —          —     

Interest expense and other, net

     17        12        15        (14     2        22        29        24   

Excess tax benefits related to stock compensation

     7        189        13        (209     —          —          196        —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 4,516      $ 4,479      $ 5,314      $ 5,236      $ 5,675      $ 5,692      $ 8,995      $ 11,367   

Domain sales contribution

     —          —          (839     (1,549     (1,893     (2,217     —          (4,110

Gain on sales and disposals of intangible assets, net

   $ (1,362   $ (1,329   $ (1,047   $ (35   $ —        $ —        $ (2,691   $ —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA excluding domain gains and sales

   $ 3,154      $ 3,150      $ 3,428      $ 3,652      $ 3,782      $ 3,475      $ 6,304      $ 7,257   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) investing activities

   $ 512      $ 449      $ 1,235      $ (549   $ (807   $ (545   $ 961      $ (1,352
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

   $ (1,483   $ 179      $ 842      $ 202      $ 343      $ 33,680      $ (1,304   $ 34,023   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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 Discontinued Operations

 

CONSOLIDATED

   Q113      Q213      Q313      Q413      Q114      Q214  

GAAP Revenue

   $ 34,732       $ 37,578       $ 40,560       $ 39,680       $ 50,496       $ 49,676   

Adjusted OIBA

   $ 3,604       $ 3,550       $ 4,366       $ 4,270       $ 4,722       $ 4,791   

Adjusted EBITDA

   $ 4,516       $ 4,479       $ 5,314       $ 5,236       $ 5,675       $ 5,692   

CALL-DRIVEN AND RELATED

   Q113      Q213      Q313      Q413      Q114      Q214  

GAAP Revenue

   $ 31,108       $ 33,893       $ 35,668       $ 34,457       $ 45,492       $ 45,857   

Adjusted OIBA

   $ 1,371       $ 1,509       $ 1,693       $ 1,725       $ 2,411       $ 2,897   

Adjusted EBITDA

   $ 2,246       $ 2,401       $ 2,598       $ 2,618       $ 3,312       $ 3,764   

ARCHEO

   Q113      Q213      Q313      Q413      Q114      Q214  

GAAP Revenue

   $ 3,624       $ 3,685       $ 4,892       $ 5,223       $ 5,004       $ 3,819   

Adjusted OIBA

   $ 2,233       $ 2,041       $ 2,673       $ 2,545       $ 2,311       $ 1,894   

Adjusted EBITDA

   $ 2,270       $ 2,078       $ 2,716       $ 2,618       $ 2,363       $ 1,928   

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 Gains and Sales and Discontinued Operations

 

CONSOLIDATED

   Q113      Q213      Q313      Q413      Q114      Q214  

Non-GAAP Revenue

   $ 34,732       $ 37,578       $ 39,661       $ 38,124       $ 48,598       $ 47,430   

Adjusted OIBA

   $ 2,242       $ 2,221       $ 2,480       $ 2,686       $ 2,829       $ 2,574   

Adjusted EBITDA

   $ 3,154       $ 3,150       $ 3,428       $ 3,652       $ 3,782       $ 3,475   

CALL-DRIVEN AND RELATED

   Q113      Q213      Q313      Q413      Q114      Q214  

GAAP Revenue

   $ 31,108       $ 33,893       $ 35,668       $ 34,457       $ 45,492       $ 45,857   

Adjusted OIBA

   $ 1,371       $ 1,509       $ 1,693       $ 1,725       $ 2,411       $ 2,897   

Adjusted EBITDA

   $ 2,246       $ 2,401       $ 2,598       $ 2,618       $ 3,312       $ 3,764   

ARCHEO

   Q113      Q213      Q313      Q413      Q114      Q214  

Non-GAAP Revenue

   $ 3,624       $ 3,685       $ 3,993       $ 3,667       $ 3,106       $ 1,574   

Adjusted OIBA

   $ 871       $ 712       $ 787       $ 961       $ 418       $ (323

Adjusted EBITDA

   $ 908       $ 749       $ 830       $ 1,034       $ 470       $ (289

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     Six months ended  
     3/31/2013      6/30/2013      9/30/2013      12/31/2013      3/31/2014      6/30/2014     6/30/2013      6/30/2014  

Marchex - Consolidated5

                      

Revenue - GAAP2

   $ 34,732       $ 37,578       $ 40,560       $ 39,680       $ 50,496       $ 49,676      $ 72,310       $ 100,172   

Revenue including domain gains3

   $ 36,094       $ 38,908       $ 41,607       $ 39,715       $ 50,496       $ 49,676      $ 75,002       $ 100,172   

Adjusted OIBA including domain gains and sales4

   $ 3,604       $ 3,550       $ 4,366       $ 4,270       $ 4,722       $ 4,791      $ 7,154       $ 9,513   

Adjusted OIBA excluding domain gains and sales4

   $ 2,242       $ 2,221       $ 2,480       $ 2,686       $ 2,829       $ 2,574      $ 4,463       $ 5,403   

Adjusted EBITDA including domain gains and sales4

   $ 4,516       $ 4,479       $ 5,314       $ 5,236       $ 5,675       $ 5,692      $ 8,995       $ 11,367   

Adjusted EBITDA excluding domain gains and sales4

   $ 3,154       $ 3,150       $ 3,428       $ 3,652       $ 3,782       $ 3,475      $ 6,304       $ 7,257   

Call-Driven and Related1

                      

Revenue - GAAP

   $ 31,108       $ 33,893       $ 35,668       $ 34,457       $ 45,492       $ 45,857      $ 65,001       $ 91,349   

Adjusted OIBA

   $ 1,371       $ 1,509       $ 1,693       $ 1,725       $ 2,411       $ 2,897      $ 2,880       $ 5,308   

Adjusted EBITDA

   $ 2,246       $ 2,401       $ 2,598       $ 2,618       $ 3,312       $ 3,764      $ 4,647       $ 7,076   

Archeo1,5

                      

Revenue - GAAP2

   $ 3,624       $ 3,685       $ 4,892       $ 5,223       $ 5,004       $ 3,819      $ 7,309       $ 8,823   

Revenue including domain gains3

   $ 4,986       $ 5,015       $ 5,939       $ 5,258       $ 5,004       $ 3,819      $ 10,002       $ 8,824   

Adjusted OIBA including domain gains and sales4

   $ 2,233       $ 2,041       $ 2,673       $ 2,545       $ 2,311       $ 1,894      $ 4,274       $ 4,205   

Adjusted OIBA excluding domain gains and sales4

   $ 871       $ 712       $ 787       $ 961       $ 418       $ (323   $ 1,583       $ 95   

Adjusted EBITDA including domain gains and sales4

   $ 2,270       $ 2,078       $ 2,716       $ 2,618       $ 2,363       $ 1,928      $ 4,348       $ 4,291   

Adjusted EBITDA excluding domain gains and sales4

   $ 908       $ 749       $ 830       $ 1,034       $ 470       $ (289   $ 1,657       $ 181   

 

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.

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 GAAP 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 Domain sales recognized in gain on sales and disposals of intangible assets, net.
4 Domain sales recognized in either gain on sales and disposals of intangible assets, net or in revenue and service costs in the unaudited condensed consolidated financial statements for each applicable period.
5 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.

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      Six months ended  
     3/31/2013      6/30/2013      9/30/2013      12/31/2013      3/31/2014      6/30/2014      6/30/2013      6/30/2014  

Revenue6

                       

Consolidated - GAAP1

   $ 34,732       $ 37,578       $ 40,560       $ 39,680       $ 50,496       $ 49,676       $ 72,310       $ 100,172   

Add: Domain Gains2

     1,362         1,330         1,047         35         —           —           2,692         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Consolidated including Domain Gains and Sales3

     36,094         38,908         41,607         39,715         50,496         49,676         75,002         100,172   

Less: Archeo including Domain Gains and Sales3,4

     4,986         5,015         5,939         5,258         5,004         3,819         10,001         8,823   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Call-Driven4 and related

   $ 31,108       $ 33,893       $ 35,668       $ 34,457       $ 45,492       $ 45,857       $ 65,001       $ 91,349   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted operating income6

                       

Consolidated excluding Domain Gains and Sales5

   $ 2,242       $ 2,221       $ 2,480       $ 2,686       $ 2,829       $ 2,574       $ 4,463       $ 5,403   

Add: Domain Gains and Sales5

     1,362         1,329         1,886         1,584         1,893         2,217         2,691         4,110   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Consolidated including Domain Gains and Sales

     3,604         3,550         4,366         4,270         4,722         4,791         7,154         9,513   

Less: Archeo including Domain Gains and Sales4,5

     2,233         2,041         2,673         2,545         2,311         1,894         4,274         4,205   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Call-Driven4 and related

   $ 1,371       $ 1,509       $ 1,693       $ 1,725       $ 2,411       $ 2,897       $ 2,880       $ 5,308   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA6

                       

Consolidated excluding Domain Gains and Sales5

   $ 3,154       $ 3,150       $ 3,428       $ 3,652       $ 3,782       $ 3,475       $ 6,304       $ 7,257   

Add: Domain Gains and Sales5

     1,362         1,329         1,886         1,584         1,893         2,217         2,691         4,110   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Consolidated including Domain Gains and Sales

     4,516         4,479         5,314         5,236         5,675         5,692         8,995         11,367   

Less: Archeo including Domain Gains and Sales4,5

     2,270         2,078         2,716         2,618         2,363         1,928         4,348         4,291   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Call-Driven4 and related

   $ 2,246       $ 2,401       $ 2,598       $ 2,618       $ 3,312       $ 3,764       $ 4,647       $ 7,076   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

1 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 GAAP 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.

2 Domain sales recognized in gain on sales and disposals of intangible assets, net in the unaudited consolidated financial statements.
3 Domain sales recognized in either gain on sales and disposals of intangible assets or in revenue and service costs in the unaudited condensed consolidated financial statements for each applicable period.
4 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.

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.

5 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.
6 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 consolidated condensed financial statements.

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