Marchex Announces First Quarter 2020 Results
Q1 2020 Financial Highlights
- Revenue was
$24.8 million for the first quarter of 2020, compared to$26.4 million for the first quarter of 2019. - Core analytics and solutions revenue was
$11.8 million for the first quarter of 2020, compared to$12.8 million for the first quarter of 2019. - Net loss was
$24.9 million for the first quarter of 2020 or$0.53 per diluted share, which include the effect of estimated pre-tax$20.1 million , or$0.43 per diluted share1, non-cash impairment charges based on the preliminary results of the company’s goodwill and intangible asset impairment tests. Excluding the impact of the impairments, net loss was$4.8 million 1 or$0.10 per diluted share1 for the first quarter of 2020. For the first quarter of 2019, net loss was$1.3 million or$0.03 per diluted share.
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Q1 2019 |
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Q1 2020 |
Revenue |
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Net cash provided by (used in) operating activities |
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Cash Balance |
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Non-GAAP Results1: |
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Adjusted EBITDA |
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- Adjusted non-GAAP income (loss) per share1 for the first quarter of 2020 was (
$0.06 ), compared to$0.01 for the first quarter of 2019.
1 |
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. |
Covid-19 Pandemic Impact
The rapid spread of coronavirus (COVID-19) globally has resulted in the disruption and shutdown of businesses as well as increased travel restrictions. These events have had a severe impact on the company’s call analytics and solutions volumes, which started declining meaningfully in March and by the end of March were down materially as compared to early February. In recent days,
- The company recorded a preliminary estimate of impairment charges to goodwill and intangible assets totaling
$20.1 million as a result of the pandemics’ indirect varying impacts. - Included in revenue results is an adjustment or allowance reducing revenue by
$900,000 for call analytics services delivered, but where revenue was not recognized because criteria for recognition were not met. For instance, uncertainty of customers’ ability to contract with and pay for services delivered given their deteriorating operational and financial condition. - The company recorded an incremental bad debt allowance in the amount of
$300,000 . - In numerous cases the company also provided modified payment timing, short-term relief on payment amounts, or waived minimum package commitments. These factors, combined with customer cancellations caused by shut downs, will continue to impact
Marchex for at least the near term.
“While we work through these current circumstances, we are mindful of our cost structure and our investments in the future. We believe meaningfully in the trend toward AI-infused sales acceleration solutions and our long-term opportunity; however, the current environment and impacts require that we evaluate our fixed and variable cost structure. In several cases, we have already taken action, including delaying hiring as well as looking for cost efficiencies where possible. Additionally, subject to the ongoing risks of the COVID-19 situation and its dynamic nature, we will continue to evaluate strategic options to better position ourselves to achieve our long-term opportunity when things hopefully improve,” said
Strategic Priorities Update
Marchex Named Leader in Conversational Intelligence by Independent Research Firm. In April,
Grow New and Existing Client Relationships. In the first quarter, COVID-19 affected the company’s sales prospecting and customer expansion initiatives. In the earlier part of the quarter, prior to the most significant COVID-19 impact,
Accelerate Product Innovation. In 2020, the company is also accelerating, where possible, its infrastructure initiatives, including consolidating infrastructure and data centers. Through these initiatives,
“We believe the trend toward conversational analytics and sales acceleration solutions, artificial intelligence and data science has never been more important. These are the key ingredients that can empower businesses to drive more sales, create better customer experiences and make critical business decisions. We believe our investments in these areas will remain the foundation for Marchex’s long-term growth and leadership,” said Arends.
Business Outlook
Due to the unprecedented uncertainty and rapidly shifting market conditions in the current business environment, we are not providing revenue or adjusted operating income or adjusted EBITDA guidance for the second quarter.
“A number of key verticals we serve, such as auto manufacturing, auto services, healthcare, home services, hospitality and others, are broadly impacted in the present environment, as a large number of locations for our customers have remained closed into early May. For many of our customers, this is having a resulting impact on the planned ramps of some of our scheduled Sales Edge Rescue deployments, many of which were slated to start in March and in the second quarter. While we are seeing some verticals start to partially recover, the situation continues to be very fluid and there remains a broad range of potential outcomes,” said Arends.
Clarifying Note about Financial Results
Due to circumstances and disruptions related to the COVID-19 pandemic, amounts reported in this earnings release related to impairment evaluation of goodwill and intangible asset balances should be considered preliminary and subject to the finalization of the analyses required to complete the accounting for these non-cash items. Specifically, the company, with its external advisors, is determining the impact of the evolving COVID-19 situation on these amounts. The amounts associated with these
Conference Call and Webcast Information
Management will hold a conference call, starting at
About
Please visit http://www.marchex.com, www.marchex.com/blog or @marchex on Twitter (Twitter.com/Marchex), where
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 due to a number of important factors including but not limited to product demand, order cancellations and delays, competition, changes in business strategy or development plans, and general economic and business conditions, as well as the continuing impact of the COVID-19 pandemic on the general economy, our customers and on our business, operations, employees and financial condition. These factors are described in greater detail in the "Risk Factors" section of our most recent periodic report or registration statement filed with the
In the event the press release contains links to third party websites or materials, the links are provided solely as a convenience to you.
Non-GAAP Financial Information:
To supplement
Adjusted OIBA represents income (loss) from operations excluding stock-based compensation expense, amortization of intangible assets from acquisitions, a preliminary estimate of impairment of intangible assets and goodwill, and acquisition related costs (benefit). This measure, among other things, is one of the primary metrics by which
Condensed Consolidated Statements of Operations (in thousands, except per share amounts) (unaudited) |
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Three Months Ended |
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2019 |
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2020 |
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Revenue |
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$ |
26,406 |
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$ |
24,785 |
|
Expenses: |
|
|
|
|
||||
Service costs (1) |
|
|
14,258 |
|
|
|
14,498 |
|
Sales and marketing (1) |
|
|
4,113 |
|
|
|
4,991 |
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Product development (1) |
|
|
4,568 |
|
|
|
6,043 |
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General and administrative (1) |
|
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3,320 |
|
|
|
3,737 |
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Amortization of intangible assets from acquisitions |
|
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1,568 |
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1,763 |
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Acquisition-related costs (benefit) |
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|
182 |
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|
|
(635 |
) |
Total operating expenses |
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|
28,009 |
|
|
|
30,397 |
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Impairment of goodwill (2) |
|
— |
|
|
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(14,213 |
) |
|
Impairment of intangible assets from acquisitions (2) |
|
— |
|
|
|
(5,903 |
) |
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Loss from operations |
|
|
(1,603 |
) |
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|
(25,728 |
) |
Interest income and other, net |
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|
185 |
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|
|
110 |
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Loss before provision for income taxes |
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(1,418 |
) |
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(25,618 |
) |
Income tax expense (benefit) |
|
|
(119 |
) |
|
|
(743 |
) |
Net loss applicable to common stockholders |
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$ |
(1,299 |
) |
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$ |
(24,875 |
) |
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Basic and diluted net loss per Class A and Class B share applicable to common stockholders |
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$ |
(0.03 |
) |
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$ |
(0.53 |
) |
Shares used to calculate basic net loss per share applicable to common stockholders: |
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Class A |
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|
5,056 |
|
|
|
4,661 |
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Class B |
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39,827 |
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|
42,179 |
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Shares used to calculate diluted net loss per share applicable to common stockholders: |
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Class A |
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|
5,056 |
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|
4,661 |
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Class B |
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44,883 |
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46,840 |
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(1) Includes stock-based compensation allocated as follows: |
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Service costs |
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$ |
59 |
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$ |
22 |
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Sales and marketing |
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177 |
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316 |
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Product development |
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76 |
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94 |
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General and administrative |
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233 |
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|
|
625 |
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Total |
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$ |
545 |
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$ |
1,057 |
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(2) Preliminary estimates |
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Condensed Consolidated Balance Sheets (in thousands) (unaudited) |
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2019 |
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2020 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
42,526 |
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$ |
40,312 |
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Accounts receivable, net |
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17,809 |
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16,762 |
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Prepaid expenses and other current assets |
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2,084 |
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2,097 |
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Total current assets |
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62,419 |
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59,171 |
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Property and equipment, net |
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3,028 |
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3,264 |
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Right-of-use lease asset |
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5,801 |
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5,578 |
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Other assets, net |
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|
335 |
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|
1,096 |
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|
33,433 |
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|
19,132 |
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Intangible assets from acquisitions, net1 |
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19,485 |
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|
11,820 |
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Total assets |
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$ |
124,501 |
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$ |
100,061 |
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable |
|
$ |
7,082 |
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$ |
7,476 |
|
Accrued expenses and other current liabilities |
|
|
6,679 |
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|
7,223 |
|
Current portion of acquisition-related liabilities |
|
|
1,111 |
|
|
|
642 |
|
Deferred revenue and deposits |
|
|
1,173 |
|
|
|
1,380 |
|
Lease liability current |
|
— |
|
|
|
1,495 |
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|
Total current liabilities |
|
|
16,045 |
|
|
|
18,216 |
|
Other non-current liabilities |
|
|
— |
|
|
— |
|
|
Deferred tax liabilities |
|
|
981 |
|
|
|
181 |
|
Lease liability non-current |
|
|
5,664 |
|
|
|
5,410 |
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Non-current portion of acquisition-related liabilities |
|
|
473 |
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|
|
226 |
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Total liabilities |
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|
23,163 |
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|
|
24,033 |
|
Stockholders’ equity: |
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Class A common stock |
|
|
49 |
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|
49 |
|
Class B common stock |
|
|
396 |
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|
|
398 |
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Additional paid-in capital |
|
|
359,633 |
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|
|
360,696 |
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Accumulated deficit |
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|
(260,240 |
) |
|
|
(285,115 |
) |
Total stockholders’ equity |
|
|
99,838 |
|
|
|
76,028 |
|
Total liabilities and stockholders’ equity |
|
$ |
124,501 |
|
|
$ |
100,061 |
|
1 |
Includes preliminary estimate of impairment. |
(in thousands) (unaudited) Reconciliation of GAAP Loss from Operations to Adjusted Operating Income (Loss) Before Amortization (Adjusted OIBA) |
||||||||
|
|
Three Months Ended |
||||||
|
|
2019 |
|
2020 |
||||
Loss from operations |
|
$ |
(1,603 |
) |
|
$ |
(25,728 |
) |
Stock-based compensation |
|
|
545 |
|
|
|
1,057 |
|
Amortization of intangible assets from acquisitions |
|
|
1,568 |
|
|
|
1,763 |
|
Acquisition-related costs (benefit) |
|
|
182 |
|
|
|
(635 |
) |
Impairment of goodwill1 |
|
|
— |
|
|
|
14,213 |
|
Impairment of intangible assets from acquisitions1 |
|
— |
|
|
|
5,903 |
|
|
Adjusted OIBA |
|
$ |
692 |
|
|
$ |
(3,427 |
) |
1 |
Preliminary estimate |
Reconciliation from |
||||||||
|
|
Three Months Ended |
||||||
|
|
2019 |
|
2020 |
||||
Net cash provided by (used in) operating activities |
|
$ |
5,624 |
|
|
$ |
(1,714 |
) |
Changes in assets and liabilities |
|
|
(4,345 |
) |
|
|
290 |
|
Income tax expense (benefit) |
|
|
(119 |
) |
|
|
(743 |
) |
Acquisition-related costs (benefit) |
|
|
182 |
|
|
|
(635 |
) |
Interest income and other, net |
|
|
(185 |
) |
|
|
(110 |
) |
Adjusted EBITDA |
|
$ |
1,157 |
|
|
$ |
(2,912 |
) |
|
|
|
|
|
||||
Net cash used in investing activities |
|
$ |
(143 |
) |
|
$ |
(509 |
) |
|
|
|
|
|
||||
Net cash provided by financing activities |
|
$ |
195 |
|
|
$ |
9 |
|
Revenue Reconciliation
|
|
Three Months Ended |
||||
|
|
2019 |
|
2020 |
||
Core analytics and solutions revenue2 |
|
$ |
12,784 |
|
$ |
11,766 |
Marketplace, Local Leads, and other analytics3 |
|
|
13,622 |
|
|
13,019 |
Total Revenue |
|
$ |
26,406 |
|
$ |
24,785 |
2 |
Core analytics and solutions revenue includes revenue from analytics and sales engagement solutions customers, including those that are purchasing or buying products derived from the company’s speech technology platform. |
3 |
Includes revenue from marketplace, local leads and from tests, consulting services or other analytics revenues that may continue for a limited time but are not anticipated to continue in future periods. |
Certain immaterial reclassifications were made to the current presentation.
(in thousands, except per share amounts) (unaudited) Reconciliation of GAAP Net Loss per Share to Adjusted Non-GAAP Income (Loss) per Share |
||||||||
|
|
Three Months Ended |
||||||
|
|
2019 |
|
2020 |
||||
Adjusted Non-GAAP income (loss) per share |
|
$ |
0.01 |
|
|
$ |
(0.06 |
) |
|
|
|
|
|
||||
Net loss per share applicable to common stockholders - diluted (GAAP loss per share) |
|
$ |
(0.03 |
) |
|
$ |
(0.53 |
) |
Shares used to calculate diluted net loss per share applicable to common stockholders |
|
|
44,883 |
|
|
|
46,840 |
|
|
|
|
|
|
||||
Net loss applicable to common stockholders |
|
$ |
(1,299 |
) |
|
$ |
(24,875 |
) |
Stock-based compensation |
|
|
545 |
|
|
|
1,057 |
|
Acquisition-related costs (benefit) |
|
|
182 |
|
|
|
(635 |
) |
Amortization of intangible assets from acquisitions |
|
|
1,568 |
|
|
|
1,763 |
|
Impairment of goodwill2 |
|
— |
|
|
|
14,213 |
|
|
Impairment of intangible assets from acquisitions2 |
|
— |
|
|
|
5,903 |
|
|
Interest income and other, net |
|
|
(185 |
) |
|
|
(110 |
) |
Estimated impact of income taxes |
|
|
(309 |
) |
|
|
(111 |
) |
Adjusted Non-GAAP income (loss) |
|
$ |
502 |
|
|
$ |
(2,795 |
) |
Adjusted Non-GAAP income (loss) per share |
|
$ |
0.01 |
|
|
$ |
(0.06 |
) |
|
|
|
|
|
||||
Shares used to calculate diluted net loss per share applicable to common stockholders (GAAP) |
|
|
44,883 |
|
|
|
46,840 |
|
Weighted average stock options and common shares subject to purchase or cancellation (if applicable) |
|
|
756 |
|
|
— |
|
|
Diluted shares used to calculate Adjusted Non-GAAP income (loss) per share1 |
|
|
45,639 |
|
|
|
46,840 |
|
1 |
For the purpose of computing the number of diluted shares for Adjusted Non-GAAP income (loss) per share, |
2 |
Preliminary estimate |
Reconciliation of GAAP Net Loss to Non-GAAP Net Loss excluding Impairment of |
||||||||
|
|
Three Months Ended |
||||||
|
|
2019 |
|
2020 |
||||
Net loss applicable to common stockholders (GAAP) |
|
$ |
(1,299 |
) |
|
$ |
(24,875 |
) |
Impairment of goodwill2 |
|
— |
|
|
|
14,213 |
|
|
Impairment of intangible assets from acquisitions2 |
|
— |
|
|
|
5,903 |
|
|
Net loss excluding impairment of goodwill and intangible assets (Non-GAAP) |
|
$ |
(1,299 |
) |
|
$ |
(4,759 |
) |
|
|
|
|
|
||||
Net loss applicable to common stockholders - diluted (GAAP loss per share) |
|
$ |
(0.03 |
) |
|
$ |
(0.53 |
) |
Impairment of goodwill per diluted share2 |
|
— |
|
|
|
0.30 |
|
|
Impairment of intangible assets from acquisitions per diluted share2 |
|
— |
|
|
|
0.13 |
|
|
Net loss excluding impairment of goodwill and intangible assets per diluted share (Non-GAAP) |
|
$ |
(0.03 |
) |
|
$ |
(0.10 |
) |
Shares used to calculate diluted net loss per share applicable to common stockholders (GAAP) and diluted net loss excluding impairment of goodwill and intangible assets (Non-GAAP) |
44,883 |
46,840 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20200511005893/en/
Marchex Investor Relations
Telephone: 206.331.3600
Email: ir@marchex.com
Or
MEDIA INQUIRIES
Telephone: 206.331.3434
Email: marchex@edelman.com
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