Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - MARCHEX INC | d914037d8k.htm |
| EX-2.11 - EX-2.11 - MARCHEX INC | d914037dex211.htm |
Exhibit 99.1
MARCHEX, INC.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
On April 21, 2015, Marchex, Inc. (the “Company” or “Marchex”) sold the bulk of its domain portfolio and certain related assets (“Domain Name Operations”) to GoDaddy.com LLC (“GoDaddy”), pursuant to the terms and conditions of the Asset Purchase Agreement, dated April 21, 2015, (the “Asset Purchase Agreement”), by and among NameFind LLC, a Delaware limited liability company (“Buyer”), GoDaddy, the ultimate parent of Buyer, Marchex Sales, LLC, a Delaware limited liability company (the “Seller”) and Marchex, the ultimate parent of Seller. Marchex received aggregate sale proceeds of $28.1 million, which was paid in cash at closing, and the Asset Purchase Agreement provides for additional earn-out payments subject to achieving certain sales targets.
The following unaudited pro forma condensed consolidated financial statements give effect to the disposition of Marchex’s Domain Name Operations. The unaudited pro forma condensed consolidated financial statements are based on the historical consolidated financial statements of Marchex. The unaudited pro forma condensed consolidated statements of operations for the years ended December 31, 2012, 2013 and 2014 give effect to the divestiture as if it had been completed on January 1, 2012. The unaudited pro forma condensed consolidated balance sheet gives effect to the acquisition as if it had been completed on December 31, 2014.
The historical financial information has been adjusted to give effect to pro forma adjustments that are (1) directly attributable to the divestiture, (2) factually supportable and (3) for purposes of the pro forma condensed consolidated statements of operations, expected to have a continuing impact on the consolidated results of Marchex. The unaudited pro forma condensed consolidated financial statements do not reflect any operating efficiencies, cost savings or revenue enhancements that may be achieved by the divestiture. In addition, certain nonrecurring expenses expected to be incurred within the first twelve months after the divestiture are also not reflected in the pro forma statements.
The pro forma adjustments are based on preliminary information available as of the date of this current report on Form 8-K. Assumptions and estimates underlying the pro forma adjustments are described in the accompanying notes. These preliminary assumptions and estimates are subject to change as Marchex finalizes the accounting for the divestiture.
These unaudited pro forma condensed consolidated financial statements are provided for informational purposes only and are not necessarily indicative of what the actual results of operations and financial position would have been had the divestiture taken place on the dates indicated, nor are they indicative of the future consolidated results of operations or financial position of Marchex.
The unaudited pro forma condensed consolidated financial statements, including the notes thereto, should be read in conjunction with the historical consolidated financial statements of Marchex included in its Annual Report on Form 10-K for the year ended December 31, 2014.
MARCHEX, INC.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of December 31, 2014
(in thousands)
| Divestiture | Marchex, Inc. | |||||||||||||
| Marchex, Inc. | Pro Forma | Pro Forma | ||||||||||||
| Historical | Adjustments | Adjusted | ||||||||||||
| Assets | ||||||||||||||
| Current assets: |
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| Cash and cash equivalents |
$ | 80,032 | $ | 28,105 | a | $ | 108,137 | |||||||
| Trade accounts receivable, net |
25,941 | — | 25,941 | |||||||||||
| Prepaid expenses and other current assets |
3,143 | (829 | ) | b | 2,314 | |||||||||
| Refundable income taxes |
131 | — | 131 | |||||||||||
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| Total current assets |
109,247 | 27,276 | 136,523 | |||||||||||
| Property and equipment, net |
5,430 | — | 5,430 | |||||||||||
| Intangible and other assets, net |
313 | (59 | ) | b | 254 | |||||||||
| Goodwill |
65,679 | (2,374 | ) | c | 63,305 | |||||||||
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| Total assets |
$ | 180,669 | $ | 24,843 | $ | 205,512 | ||||||||
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| Liabilities and Stockholders’ Equity | ||||||||||||||
| Current liabilities: |
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| Accounts payable |
$ | 13,766 | $ | — | $ | 13,766 | ||||||||
| Accrued expenses and other current liabilities |
7,515 | 2,758 | d | 10,273 | ||||||||||
| Deferred revenue |
2,117 | — | 2,117 | |||||||||||
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| Total current liabilities |
23,398 | 2,758 | 26,156 | |||||||||||
| Other non-current liabilities |
1,118 | — | 1,118 | |||||||||||
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| Total liabilities |
24,516 | 2,758 | 27,274 | |||||||||||
| Stockholders’ equity |
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| Common stock |
428 | — | 428 | |||||||||||
| Treasury stock |
(2,503 | ) | — | (2,503 | ) | |||||||||
| Additional paid-in capital |
348,467 | — | 348,467 | |||||||||||
| Accumulated deficit |
(190,239 | ) | 22,085 | e | (168,154 | ) | ||||||||
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| Total stockholders’ equity |
156,153 | 22,085 | 178,238 | |||||||||||
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| Total liabilities and stockholders’ equity |
$ | 180,669 | $ | 24,843 | $ | 205,512 | ||||||||
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See notes to unaudited pro forma condensed consolidated financial statements.
MARCHEX, INC.
Unaudited Pro Forma Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
| For the twelve months ended December 31, | ||||||||||||||||||||||||||||||||||||||||
| 2012 | 2013 | 2014 | ||||||||||||||||||||||||||||||||||||||
| Divestiture | Marchex, Inc. | Divestiture | Marchex, Inc. | Divestiture | Marchex, Inc. | |||||||||||||||||||||||||||||||||||
| Marchex, Inc. | Pro Forma | Pro Forma | Marchex, Inc. | Pro Forma | Pro Forma | Marchex, Inc. | Pro Forma | Pro Forma | ||||||||||||||||||||||||||||||||
| Historical | Adjustments | Adjusted | Historical | Adjustments | Adjusted | Historical | Adjustments | Adjusted | ||||||||||||||||||||||||||||||||
| Revenue |
$ | 132,794 | $ | (3,485 | ) | $ | 129,309 | $ | 152,550 | $ | (4,713 | ) | $ | 147,837 | $ | 182,644 | $ | (9,043 | ) | $ | 173,601 | f | ||||||||||||||||||
| Expenses: |
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| Service costs (1) |
75,920 | (2,551 | ) | 73,369 | 91,858 | (3,240 | ) | 88,618 | 114,581 | (3,283 | ) | 111,298 | g | |||||||||||||||||||||||||||
| Sales and marketing (1) |
13,057 | (4 | ) | 13,053 | 11,182 | (341 | ) | 10,841 | 12,251 | (494 | ) | 11,757 | g | |||||||||||||||||||||||||||
| Product development (1) |
23,200 | — | 23,200 | 27,346 | (15 | ) | 27,331 | 29,561 | — | 29,561 | g | |||||||||||||||||||||||||||||
| General and administrative (1) |
22,838 | (126 | ) | 22,712 | 19,385 | (30 | ) | 19,355 | 20,923 | (17 | ) | 20,906 | g | |||||||||||||||||||||||||||
| Amortization of intangible assets from acquisitions (2) |
4,728 | (149 | ) | 4,579 | 2,926 | — | 2,926 | 434 | — | 434 | g | |||||||||||||||||||||||||||||
| Acquisition and separation related costs |
753 | — | 753 | 878 | — | 878 | (68 | ) | — | (68 | ) | |||||||||||||||||||||||||||||
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| Total operating expenses |
140,496 | (2,830 | ) | 137,666 | 153,575 | (3,626 | ) | 149,949 | 177,682 | (3,794 | ) | 173,888 | ||||||||||||||||||||||||||||
| Impairment of goodwill |
(15,837 | ) | — | (15,837 | ) | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Gain on sales and disposals of intangible assets, net |
6,296 | (6,296 | ) | — | 3,774 | (3,774 | ) | — | — | — | — | h | ||||||||||||||||||||||||||||
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| Income (loss) from operations |
(17,243 | ) | (6,951 | ) | (24,194 | ) | 2,749 | (4,861 | ) | (2,112 | ) | 4,962 | (5,249 | ) | (287 | ) | ||||||||||||||||||||||||
| Interest expense and other, net |
(449 | ) | (1 | ) | (450 | ) | (37 | ) | (1 | ) | (38 | ) | (62 | ) | — | (62 | ) | g | ||||||||||||||||||||||
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| Income (loss) from continuing operations before provision for income taxes |
(17,692 | ) | (6,952 | ) | (24,644 | ) | 2,712 | (4,862 | ) | (2,150 | ) | 4,900 | (5,249 | ) | (349 | ) | ||||||||||||||||||||||||
| Income tax expense |
16,566 | (2,364 | ) | 14,202 | 1,755 | (1,653 | ) | 102 | 24,277 | (1,785 | ) | 22,492 | i | |||||||||||||||||||||||||||
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| Net income (loss) from continuing operations |
$ | (34,258 | ) | $ | (4,588 | ) | $ | (38,846 | ) | $ | 957 | $ | (3,209 | ) | $ | (2,252 | ) | $ | (19,377 | ) | $ | (3,464 | ) | $ | (22,841 | ) | ||||||||||||||
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| Basic and diluted net income (loss) per share applicable to common stockholders from continuing operations |
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| Class A |
$ | (1.03 | ) | $ | (1.17 | ) | $ | 0.03 | $ | (0.06 | ) | $ | (0.49 | ) | $ | (0.57 | ) | |||||||||||||||||||||||
| Class B |
$ | (1.02 | ) | $ | (1.16 | ) | $ | 0.03 | $ | (0.06 | ) | $ | (0.49 | ) | $ | (0.57 | ) | |||||||||||||||||||||||
| Dividends paid per share |
$ | 0.25 | $ | 0.25 | $ | — | $ | — | $ | 0.08 | $ | 0.08 | ||||||||||||||||||||||||||||
| Shares used to calculate basic net income (loss) per share applicable to common stockholders from continuing operations |
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| Class A |
9,574 | 9,574 | 8,816 | 8,816 | 5,853 | 5,853 | ||||||||||||||||||||||||||||||||||
| Class B |
24,412 | 24,412 | 26,798 | 26,798 | 34,157 | 34,157 | ||||||||||||||||||||||||||||||||||
| Shares used to calculate diluted net income (loss) per share applicable to common stockholders from continuing operations |
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| Class A |
9,574 | 9,574 | 8,816 | 8,816 | 5,853 | 5,853 | ||||||||||||||||||||||||||||||||||
| Class B |
33,986 | 33,986 | 36,999 | (1,385 | ) | 35,614 | 40,010 | 40,010 | j | |||||||||||||||||||||||||||||||
| (1) Excludes amortization of intangibles from acquisitions. |
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| (2) Components of amortization of intangible assets |
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| Service costs |
$ | 3,484 | (149 | ) | $ | 3,335 | $ | 1,981 | — | $ | 1,981 | $ | 434 | — | $ | 434 | g | |||||||||||||||||||||||
| Sales and marketing |
1,228 | — | 1,228 | 945 | — | 945 | — | — | — | |||||||||||||||||||||||||||||||
| General and administrative |
16 | — | 16 | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
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| $ | 4,728 | (149 | ) | $ | 4,579 | $ | 2,926 | — | $ | 2,926 | $ | 434 | — | $ | 434 | |||||||||||||||||||||||||
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See notes to unaudited pro forma condensed consolidated financial statements.
MARCHEX, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Pro Forma Adjustments
(a) Represents the cash consideration received at closing. Any potential additional earn-out cash payments, which are subject to achieving certain sales targets per the terms of the Asset Purchase Agreement dated as of April 21, 2015, are excluded from the pro forma adjustments.
(b) Represents elimination of certain prepaid domain costs paid to renew or extend the terms of the domain names and the carrying value of the domains names related to the divested operations under current and non-current assets, respectively.
(c) Represents elimination of estimated goodwill allocated to the divested operations. The allocation is based on the estimated relative fair value of the divested assets in relation to the fair value of the Company’s Archeo reporting unit.
(d) Represents estimated non-recurring disposition related costs such as legal, accounting and other professional services and expenses associated with the divestiture, which Marchex has incurred or expects to incur subsequent to December 31, 2014. These non-recurring disposition related costs are not reflected in the unaudited pro forma condensed consolidated statements of operations.
(e) Represents the estimated net impact of the balance sheet pro forma adjustments on stockholders’ equity and Marchex’s estimate of the gain on sale of approximately $22 million, excluding any potential tax effects, from the divested operations. The gain on sale is non-recurring and not reflected in the unaudited pro forma consolidated statements of operations.
(f) Represents the elimination of estimated revenues from domain name sales and advertisement listings generated from the domain names related to the divested operations.
(g) Represents the elimination of estimated expenses related to the divested operations, including amortization of prepaid domain costs and certain operating expenses involved with supporting the divested operations
(h) Represents the elimination of gains on sales and disposals of domain names related to the divested operations.
(i) Represents the income tax effects of the pro forma adjustments using a statutory tax rate of 34%.
(j) For purposes of calculating the shares used for the pro forma diluted net loss per share for the year ended December 31, 2013, potentially dilutive securities were not included in the computation when their effects would be anti-dilutive.