Marchex Q3 2014 Report: $1.6 Million Domain Sales & $49.2 Million Revenue

Marchex, Inc. announced today its financial results for the third quarter ended September 30, 2014.

During the third quarter of 2014, Archeo domain sales yielded $1.6 million. During the second quarter of 2014, domain sales yielded $2.2 million. During the third quarter of 2013, Archeo had sold a total of 81 domains that yielded $1.9 million.

“While the third quarter came with certain challenges, we continued to make progress with our customers and products,” said Russell Horowitz, Chairman and CEO of Marchex. “More and more consumers are searching for products and services on their smartphones and clicking to call businesses. This trend is accelerating demand for Marchex’s technology, which provides unique intelligence for advertisers that need to drive and measure the growing volume of over-the-phone sales.”

Q3 2014 Financial Highlights¹

• GAAP revenue was $49.2 million for the third quarter of 2014, compared to $40.6 million for the third quarter of 2013. Non-GAAP revenue², which excludes domain sales recorded in revenue, was $47.6 million for the third quarter of 2014.
• GAAP net loss from continuing operations was $21.8 million for the third quarter of 2014, which includes the effect of a non-cash charge to income tax expense of $22.3 million for a valuation allowance on our deferred tax assets, compared to GAAP net income from continuing operations of $598,000 for the third quarter of 2013.
• GAAP net loss from continuing operations attributable to common stockholders per diluted share was $0.53 for the third quarter of 2014. This compares to GAAP net income from continuing operations attributable to common stockholders per diluted share of $0.02 for the third quarter of 2013.

• Adjusted non-GAAP EPS³ from continuing operations for the third quarter of 2014 was $0.06, compared to $0.08 for the third quarter of 2013. Adjusted non-GAAP EPS³ from continuing operations excluding domain gains and sales for the third 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.

²Excludes domain sales recognized in GAAP revenue. In September 2013 upon the launch of its domain marketplace, the Company commenced recognizing domain sales as revenue.

³Includes/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.

⁶ Allstate contributed revenue of $15.4 million and the related distribution partner costs (a component of service costs) were $13.7 million resulting in a difference of $1.7 million in the third quarter of 2014.

Marchex Q3 and Recent Call-Driven Business Highlights:

• Revenue. Call-Driven and related revenue was $46.4 million for the third quarter of 2014 compared to $35.7 million for the third quarter of 2013.
• Products. Marchex announced the launch of Real Time Call DNA in October. This technology enables advertisers to visually map, analyze, and measure what happens inside a phone conversation after a consumer calls their business – without recording any of the actual dialogue. Real-Time Call DNA is the newest addition to Marchex Call Analytics, the leading enterprise platform for measuring phone calls from advertising.

Archeo Q3 Business Highlights:

• Revenue. Archeo non-GAAP revenue was $1.2 million for the third quarter of 2014, which excludes domain sales recognized in GAAP revenue.
• Domains sales. During the third quarter of 2014, domain sales yielded $1.6 million.
• During the third quarter of 2014, the company received earn-out consideration as part of the July 2013 pay-per-click asset sale transaction and recognized $278,000 of gain on sale, net of tax, on discontinued operations.

Non-Operating Highlights:

• Share Repurchase Program. Marchex announced today that the Board of Directors has authorized a new share repurchase program, which supersedes and replaces any prior company repurchase programs. Under the new share repurchase program the Board of Directors has authorized the repurchase of up to 3 million shares of the company’s Class B common stock in the aggregate through open market and privately negotiated transactions at times and in such amounts as the company deems appropriate. Repurchases may also be made under a Rule 10b5-1 plan, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, capital availability, and other market conditions. This new share repurchase program does not have an expiration date and may be limited or terminated at any time without prior notice.