Marchex Reports First Quarter 2011 Financial Results
First Quarter 2011 Consolidated Financial Results:
- Revenue was $29.1 million for the first quarter of 2011, compared to $24.0 million for the same period of 2010.
- GAAP net income applicable to common stockholders was $513,000 for the first quarter of 2011 or $0.01 per diluted share. This compares to GAAP net loss applicable to common stockholders of $111,000 or $0.00 per diluted share for the same period of 2010. The first quarter 2011 results included non-cash stock-based compensation expense of $3.5 million, compared to non-cash stock-based compensation expense of $2.4 million for the same period in 2010.
- As discussed in the summary of the first quarter 2011 consolidated financial results, 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 first quarter 2011 was $0.06, compared to $0.04 for the same period in 2010. <?XML:NAMESPACE PREFIX = O />
- Adjusted operating income before amortization was $3.2 million for the first quarter of 2011, compared to $2.0 million for the same period of 2010. A reconciliation of non-GAAP adjusted operating income before amortization to GAAP operating income is included in the financial tables attached to this release.
- Adjusted EBITDA was $4.2 million in the first quarter of 2011, compared to $3.4 million for the same period of 2010. A reconciliation of adjusted EBITDA to GAAP net cash provided by operating activities is included in the financial tables attached to this release.
“We believe Call Advertising represents one of the primary growth opportunities in digital advertising,” said Russell C. Horowitz, Marchex Chairman and CEO. “We believe that continuing to invest in this opportunity -- specifically in our customers, products and people -- will drive our long-term success in defining this market.”
The following forward-looking statements reflect Marchex's expectations as of May 5, 2011.
To provide some color on business progress and context for 2011, Marchex is providing a non-recurring metric:
The following reflects Marchex financial guidance for fiscal year ending December 31, 2011:
|
Revenue estimate
|
$137 million to $141 million
| |
| Adjusted Operating Income Before Amortization:
|
More than $15 million
| |
| Adjusted EBITDA: | Estimated add-backs of approximately $4.5 million in additional depreciation and amortization to adjusted operating income before amortization, implying an adjusted EBITDA of more than $19.5 million. | |
| Long Term Adjusted EBITDA Margin Target: | 20% or more |
|
Revenue estimate
|
$35 million – $36 million
| |
| Revenue Detail | Marchex anticipates revenue from proprietary traffic sources for the second quarter of 2011 to be relatively consistent with the first quarter. Marchex expects revenue volatility from time to time from proprietary traffic sources due to the nature of large advertiser spending. | |
| Adjusted Operating Income Before Amortization:
|
More than $3.3 million
| |
| Adjusted EBITDA: | Estimated add-backs of approximately $1.2 million in additional depreciation and amortization to adjusted operating income before amortization, implying an adjusted EBITDA of more than $4.5 million. |
GAAP income (loss) from operations is expected to be ($4.3) million or better, assuming stock-based compensation between $3.7 million and $4.0 million and amortization of intangible assets from acquisitions between $2 million and $3 million. This estimate excludes any gain or loss on sales and disposals of intangible assets.
About Marchex:
Our performance-based call advertising products, the Marchex Call Advertising Network and Marchex Call Analytics, are reinventing how businesses acquire and upsell new customers through phone calls. Our award-winning Small Business Marketing products empower businesses to efficiently monitor their online presence, communicate with their customers, and acquire new ones. Every day, our products support hundreds of thousands of advertisers and partners, ranging from global enterprises to local businesses.
For more information about Marchex (NASDAQ: MCHX), please visit www.marchex.com.
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 and Adjusted non-GAAP EPS.
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 any gain/loss on sales and disposals of intangible assets for each asset and acquisition related costs as these items are 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 or gain/loss such as stock-based compensation, amortization of intangible assets from acquisitions, acquisition related costs and gain/loss on sales and disposals of intangible assets. Adjusted EBITDA represents income (loss) before interest, income taxes, depreciation, amortization, stock compensation expense, acquisition related costs and gain/loss on sales and disposals of intangible assets. 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.
Adjusted non-GAAP EPS represents Adjusted non-GAAP Net Income applicable to common stockholders divided by GAAP diluted shares outstanding. Historically, Marchex computed shares outstanding for the Non-GAAP EPS calculation to include dilution from options and warrants, exercise prices per the treasury stock method provided market conditions had been met and included the weighted average number of all potential common shares relating to restricted stock and restricted stock units, provided market conditions had been met. Non-GAAP shares historically were greater than shares outstanding for GAAP EPS purposes. 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 (loss) available to common stockholders plus the net of tax effects of: (1) stock-based compensation expense, (2) amortization of intangible assets from acquisitions, (3) gain/loss on sales and disposals of intangible assets, (4) acquisition related costs, (5) interest and other income (expense), and (6) dividends paid to participating securities. 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.
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.
Trevor Caldwell
Marchex Investor Relations
Email: ir(at)marchex.com
Click here to view Marchex's First Quarter 2011 Financial Tables (.pdf format)
MARCHEX, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(unaudited)
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2010 | 2011 | |||||||
|
Revenue |
$ | 24,001,981 | $ | 29,079,855 | ||||
|
Expenses: |
||||||||
|
Service costs (1) |
12,649,501 | 16,672,382 | ||||||
|
Sales and marketing (1) |
3,910,708 | 2,693,728 | ||||||
|
Product development (1) |
3,962,284 | 4,889,110 | ||||||
|
General and administrative (1) |
3,836,261 | 5,155,435 | ||||||
|
Amortization of intangible assets from acquisitions |
704,466 | 464,202 | ||||||
|
Acquisition related costs |
— | 402,123 | ||||||
|
Total operating expenses |
25,063,220 | 30,276,980 | ||||||
|
Gain on sales and disposals of intangible assets, net |
1,327,304 | 1,912,674 | ||||||
|
Income from operations |
266,065 | 715,549 | ||||||
|
Interest income (expense) and other, net |
(5,660 | ) | 102,885 | |||||
|
Income before provision for income taxes |
260,405 | 818,434 | ||||||
|
Income tax expense |
328,179 | 241,996 | ||||||
|
Net income (loss) |
(67,774 | ) | 576,438 | |||||
|
Dividends paid to participating securities |
(43,574 | ) | (63,505 | ) | ||||
|
Net income (loss) applicable to common stockholders |
$ | (111,348 | ) | $ | 512,933 | |||
|
Basic net income (loss) per share applicable to Class A and Class B common stockholders |
$ | (0.00 | ) | $ | 0.02 | |||
|
Diluted net income (loss) per share applicable to Class A and Class B common stockholders |
$ | (0.00 | ) | $ | 0.01 | |||
|
Dividends paid per share |
$ | 0.02 | $ | 0.02 | ||||
|
Shares used to calculate basic net income (loss) per share applicable to common stockholders |
||||||||
|
Class A |
10,835,671 | 10,235,865 | ||||||
|
Class B |
22,170,607 | 22,169,937 | ||||||
|
Shares used to calculate diluted net income (loss) per share applicable to common stockholders |
||||||||
|
Class A |
10,835,671 | 10,235,865 | ||||||
|
Class B |
33,006,278 | 34,254,797 | ||||||
|
(1) Includes stock-based compensation allocated as follows: |
||||||||
|
Service costs |
$ | 179,483 | $ | 284,978 | ||||
|
Sales and marketing |
166,657 | 218,841 | ||||||
|
Product development |
208,205 | 314,016 | ||||||
|
General and administrative |
1,832,978 | 2,693,209 | ||||||
|
Total |
$ | 2,387,323 | $ | 3,511,044 | ||||
MARCHEX, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(unaudited)
| December 31, 2010 |
March 31, 2011 |
|||||||
| Assets | ||||||||
|
Current assets: |
||||||||
|
Cash and cash equivalents |
$ | 37,328,052 | $ | 40,049,068 | ||||
|
Trade accounts receivable, net |
20,213,886 | 26,294,051 | ||||||
|
Prepaid expenses and other current assets |
3,567,504 | 3,140,110 | ||||||
|
Refundable taxes |
3,248,908 | 2,450,014 | ||||||
|
Deferred tax assets |
868,629 | 944,857 | ||||||
|
Total current assets |
65,226,979 | 72,878,100 | ||||||
|
Property and equipment, net |
4,709,907 | 4,970,233 | ||||||
|
Deferred tax assets |
50,768,525 | 50,321,582 | ||||||
|
Intangibles and other assets, net |
2,070,217 | 1,764,053 | ||||||
|
Goodwill |
35,337,428 | 35,328,143 | ||||||
|
Intangible assets from acquisitions, net |
1,576,687 | 1,112,485 | ||||||
|
Total assets |
$ | 159,689,743 | $ | 166,374,596 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
|
Current liabilities: |
||||||||
|
Accounts payable |
$ | 11,165,616 | $ | 13,633,347 | ||||
|
Accrued expenses and other current liabilities |
5,106,021 | 5,875,402 | ||||||
|
Deferred revenue |
1,649,851 | 1,749,713 | ||||||
|
Total current liabilities |
17,921,488 | 21,258,462 | ||||||
|
Other non-current liabilities |
2,076,332 | 2,047,465 | ||||||
|
Total liabilities |
19,997,820 | 23,305,927 | ||||||
|
Stockholders’ equity: |
||||||||
|
Class A common stock |
105,006 | 104,886 | ||||||
|
Class B common stock |
254,802 | 254,318 | ||||||
|
Treasury stock |
(1,360,238 | ) | (251,582 | ) | ||||
|
Additional paid-in capital |
281,421,696 | 283,113,952 | ||||||
|
Accumulated deficit |
(140,729,343 | ) | (140,152,905 | ) | ||||
|
Total stockholders’ equity |
139,691,923 | 143,068,669 | ||||||
|
Total liabilities and stockholders’ equity |
$ | 159,689,743 | $ | 166,374,596 | ||||
MARCHEX, INC. AND SUBSIDIARIES
Reconciliation of GAAP Income from Operations to Operating Income Before Amortization (OIBA) and
Adjusted Operating Income Before Amortization (Adjusted OIBA)
(unaudited)
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2010 | 2011 | |||||||
|
Income from operations |
$ | 266,065 | $ | 715,549 | ||||
|
Stock-based compensation |
2,387,323 | 3,511,044 | ||||||
|
Amortization of intangible assets from acquisitions |
704,466 | 464,202 | ||||||
|
Operating income before amortization (OIBA) |
3,357,854 | 4,690,795 | ||||||
|
Acquisition related costs |
— | 402,123 | ||||||
|
Gain on sales and disposals of intangible assets, net |
(1,327,304 | ) | (1,912,674 | ) | ||||
|
Adjusted operating income before amortization (Adjusted OIBA) |
$ | 2,030,550 | $ | 3,180,244 | ||||
MARCHEX, INC. AND SUBSIDIARIES
Reconciliation from Net Cash provided by Operating Activities to Adjusted EBITDA
(unaudited)
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2010 | 2011 | |||||||
|
Net cash provided by operating activities |
$ | 3,019,044 | $ | 2,519,054 | ||||
|
Changes in asset and liabilities |
62,481 | 1,161,144 | ||||||
|
Income tax expense |
328,179 | 241,996 | ||||||
|
Acquisition related costs |
— | 402,123 | ||||||
|
Interest expense (income) and other, net |
5,678 | (104,509 | ) | |||||
|
Adjusted EBITDA |
$ | 3,415,382 | $ | 4,219,808 | ||||
|
Net cash provided by investing activities |
$ | 41,160 | $ | 931,051 | ||||
|
Net cash used in financing activities |
$ | (2,859,895 | ) | $ | (729,089 | ) | ||
MARCHEX, INC. AND SUBSIDIARIES
Reconciliation of GAAP EPS to Adjusted Non-GAAP EPS
(unaudited)
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2010 | 2011 | |||||||
|
Adjusted Non-GAAP EPS |
$ | 0.04 | $ | 0.06 | ||||
|
Net income (loss) per Class B share applicable to common stockholders - diluted (GAAP EPS) |
$ | (0.00 | ) | $ | 0.01 | |||
|
Shares used to calculate diluted net income (loss) per Class B share applicable to common stockholders |
33,006,278 | 34,254,797 | ||||||
|
Net income (loss) applicable to common stockholders |
$ | (111,348 | ) | $ | 512,933 | |||
|
Stock-based compensation |
2,387,323 | 3,511,044 | ||||||
|
Acquisition related costs |
— | 402,123 | ||||||
|
Amortization of intangible assets from acquisitions |
704,466 | 464,202 | ||||||
|
Gain on sales and disposals of intangible assets, net |
(1,327,304 | ) | (1,912,674 | ) | ||||
|
Interest (income) expense and other, net |
5,660 | (102,885 | ) | |||||
|
Dividends paid to participating securities |
43,574 | 63,505 | ||||||
|
Estimated impact of income taxes |
(391,226 | ) | (878,693 | ) | ||||
|
Adjusted Non-GAAP net income applicable to common stockholders |
$ | 1,311,145 | $ | 2,059,555 | ||||
|
Adjusted Non-GAAP EPS |
$ | 0.04 | $ | 0.06 | ||||
|
Shares used to calculate diluted net income (loss) per Class B share applicable to common stockholders |
33,006,278 | 34,254,797 | ||||||
|
Weighted average stock options and common shares subject to repurchase or cancellation (if applicable) (1) |
415,580 | — | ||||||
|
Diluted shares used to calculate Adjusted Non-GAAP EPS (2) |
33,421,858 | 34,254,797 | ||||||
|
(1) For the three months ended March 31, 2010, these shares were excluded from the computation of diluted net loss per share as their effect would be anti-dilutive. |
| |||||||
|
(2) Marchex calculates diluted shares in accordance with GAAP in the computation of Non-GAAP EPS. Marchex had previously calculated diluted shares using the following methodology as calculated and described below. |
| |||||||
|
Shares used to calculate diluted net income (loss) per Class B share applicable to common stockholders |
33,006,278 | 34,254,797 | ||||||
|
Weighted average stock options and common shares subject to repurchase or |
2,446,818 | 3,125,166 | ||||||
|
Non-GAAP shares used to calculate Adjusted Non-GAAP EPS |
35,453,096 | 37,379,963 | ||||||
|
Adjusted Non-GAAP EPS (computed using Non-GAAP shares) |
$ | 0.04 | $ | 0.06 | ||||
| (a) | The impact of restricted stock (common shares subject to repurchase or cancellation) is based on the weighted average of restricted stock outstanding as compared with diluted shares for GAAP purposes, which included restricted stock using the treasury stock method in periods with income. The impact of restricted stock units and options subject to market conditions have or will be included once the market conditions have been met. |