Marchex 2012 Report: $6.3 million domains sold, revenue down by $9 million

Marchex, Inc. (NASDAQ:MCHX) reported yesterday its results for the quarter and the full year ended December 31, 2012.

Full Year 2012 Consolidated Financial Results

• Revenue for the year ended December 31, 2012 was $138.3 million, compared to $146.7 million in 2011.
• GAAP net loss applicable to common stockholders was $35.9 million or $1.05 per diluted share for 2012. As discussed in the summary of the fourth quarter 2012 consolidated financial results, this includes the effect of the $16.7 million non-cash pre-tax goodwill impairment and the $16.4 non-cash tax expense. This compares to GAAP net income applicable to common stockholders of $2.7 million or $0.08 per diluted share in 2011.
• A reconciliation is provided of GAAP diluted EPS to Adjusted Non-GAAP EPS 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. Adjusted non-GAAP EPS for 2012 was $0.25, compared to $0.30 in 2011.
• Adjusted operating income before amortization was $13.4 million for 2012, compared to $19.1 million in 2011. A reconciliation of non-GAAP adjusted operating income before amortization to GAAP operating income (loss) is included in the financial tables attached to this release.
• Adjusted EBITDA was $17.2 million for 2012, compared to $23.1 million in 2011. A reconciliation of adjusted EBITDA to GAAP net cash provided by operating activities is included in the financial tables attached to this release.

Fourth Quarter 2012 Consolidated Financial Results:

• Revenue was $34.0 million for the fourth quarter of 2012, compared to $39.0 million for the same period of 2011.
• GAAP net loss applicable to common stockholders was $34.7 million for the fourth quarter of 2012 or $1.02 per diluted share, which includes the effect of an estimated pre-tax $16.7 million non-cash impairment charge based on the preliminary results of the company’s goodwill impairment tests and a non-cash charge to income tax expense of $16.4 million to establish a valuation allowance on certain deferred tax assets. Marchex began segmenting its Archeo financial results this quarter and the goodwill amounts allocated to Archeo initiated the non-cash goodwill charge. This compares to GAAP net income applicable to common stockholders of $920,000 or $0.03 per diluted share for the same period of 2011. The fourth quarter 2012 results included non-cash stock-based compensation expense of $3.3 million, compared to non-cash stock-based compensation expense of $3.7 million for the same period in 2011.
• We provide a reconciliation of GAAP diluted EPS to Adjusted Non-GAAP EPS 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. Adjusted non-GAAP EPS for the fourth quarter 2012 was $0.05, compared to $0.08 for the same period in 2011.
• Adjusted operating income before amortization was $2.6 million for the fourth quarter of 2012, compared to $5.5 million for the same period of 2011. A reconciliation of non-GAAP adjusted operating income before amortization to GAAP operating income (loss) is included in the financial tables attached to this release.
• Adjusted EBITDA was $3.5 million in the fourth quarter of 2012, compared to $6.5 million for the same period of 2011. A reconciliation of adjusted EBITDA to GAAP net cash provided by operating activities is included in the financial tables attached to this release.

“We feel good about our progress in the fourth quarter, especially as it relates to building momentum for 2013 and beyond,” said Russell C. Horowitz, Marchex Chairman and CEO. “We are seeing several trends emerge that we believe benefit Marchex, including more businesses embracing mobile advertising for the first time, and businesses who have tested mobile advertising now focusing on driving performance in their ad campaigns.”

General Highlights:

1. Call-Driven and other related Revenues: For the fourth quarter of 2012, revenue was $28.5 million, which was impacted during the fourth quarter due to damage from Hurricane Sandy and the resulting reduced call volume and telecommunication systems disruption.

2. Archeo Non-Call-Driven Revenues: For the fourth quarter, revenue was $5.5 million, which was stable with the prior quarter. Archeo non-Call-Driven products include Marchex’s domain and directory assets, pay-per-click and reputation management products.

3. During the fourth quarter, Marchex sold a small number of domains that yielded $863,000, bringing the total for the full year 2012 to $6.3 million.

4. During the fourth quarter, Marchex purchased 22,000 shares of its outstanding Class B common stock for a total price of $87,000. This brings Marchex’s total shares repurchased under its stock repurchase program to 11.3 million shares, or 30% of its outstanding common stock.

5. In November 2012, Marchex announced that its board of directors has authorized management to pursue the separation of its business into two distinct, publicly traded entities. Upon closing of the proposed tax-free spin-off transaction, Marchex’s existing shareholders would hold interests in: (1) Marchex, a pure-play mobile advertising company focused on calls; and (2) Archeo, Inc. (“Archeo”), a premium domain and advertising marketplace. For more information on this proposed transaction, please see the press release available at www.marchex.com/archeo.

6. Marchex is in the process of completing its goodwill and intangible asset impairment test and deferred tax valuation allowance analysis. These preliminary non-cash charge estimates, and the related tax impact, may change. Accordingly, fourth quarter 2012 and full year 2012 GAAP operating results included in this press release are preliminary and subject to change. GAAP operating results will be included in the Marchex’s annual report on Form 10-K. The tax valuation allowance reflects the company’s assessment of whether the deferred tax assets will be more likely than not realizable in the future, but has no effect on the company’s ability to utilize deferred tax assets, such as loss carryforwards and tax credits, to reduce future cash tax payments.