News Release Details

Record Revenue in Mobile Advertising focused on Calls; Accelerated Sequential Growth Driven by Existing Customers and New Customer Relationships

SEATTLE-- (BUSINESS WIRE)--Marchex, Inc. (NASDAQ:MCHX) today reported its results for the quarter ended September 30, 2012.

Third Quarter 2012 Consolidated Financial Results:

• Revenue was $34.8 million for the third quarter of 2012, compared to $39.9 million for the same period of 2011.
• GAAP net loss applicable to common stockholders was $666,000 for the third quarter of 2012 or $0.02 per diluted share. This compares to GAAP net income applicable to common stockholders of $1.2 million or $0.03 per diluted share for the same period of 2011. The third quarter 2012 results included non-cash stock-based compensation expense of $3.7 million, compared to non-cash stock-based compensation expense of $4.0 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 third quarter 2012 was $0.06, compared to $0.09 for the same period in 2011.
• Adjusted operating income before amortization was $3.9 million for the third quarter of 2012, compared to $5.4 million for the same period of 2011. 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 $4.8 million in the third quarter of 2012, compared to $6.4 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.

"During the third quarter, we made significant customer and product progress," said Russell C. Horowitz, Marchex Chairman and CEO. "Based on momentum in our business, we believe mobile will be an incredibly large market. We also believe mobile can be a transformational advertising medium where ultimate performance is driven through phone calls. We are adding new national and local customers, and our ability to drive high performance for them is leading to increased budget allocations for our mobile and call advertising products."

General Highlights:

1. Call-Driven Revenues: For the third quarter of 2012, revenue was $29.1 million, which was up $1.8 million, or 7%, from the prior quarter.

2. Non-Call-Driven Revenues: For the third quarter, revenue was $5.7 million, which was down $1.0 million from the prior quarter. Non-Call-Driven products include Marchex's domain and directory assets, pay-per-click and reputation management products.

3. During the third quarter, Marchex sold a small number of domains that yielded $713,000. Year to date domain sales totaled $5.4 million.

4. During the third quarter, Marchex purchased 80,000 shares of its outstanding Class B common stock for a total price of $301,000. This brings Marchex's total shares repurchased under its stock repurchase program to 11.2 million shares, or 30% of its outstanding common stock.

5. Marchex announced earlier today 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. This process is expected to be completed within nine months. For more information on this proposed transaction, please see the press release from earlier today available at www.marchex.com/archeo.

Marchex Guidance:

The following forward-looking statements reflect Marchex's expectations as of November 1, 2012.

2012 GAAP income (loss) from operations is expected to be ($3.3) million or better, assuming stock-based compensation between $16 million and $16.5 million and amortization of intangible assets from acquisitions between $4.7 million and $5.5 million. This estimate excludes any prospective gain or loss on sales and disposals of intangible assets.

Marchex has been impacted by reduced call volume and telecommunication systems disruption as a result of the damage caused by Hurricane Sandy. Our proprietary systems and infrastructure, as well as our telecommunications facilities, have not experienced any direct damage. Marchex is, however, seeing an impact from the significant cellular and telecommunications outages in the impacted areas. We believe the communications infrastructure damage that is impacting cellular and telecommunications usage will create non-recurring impacts to our operating forecasts in the fourth quarter and we have attempted to reflect those in our guidance. Marchex will continue to monitor events as they unfold. Beyond the short-term impact to infrastructure and customers, we do not believe this impacts the underlying trends in our business and our view on meaningful growth in 2013.

Fourth quarter GAAP income (loss) from operations is expected to be ($2.8) million or better, assuming stock-based compensation between $3.5 million and $4 million and amortization of intangible assets from acquisitions between $1.0 million and $1.8 million. This estimate excludes any prospective gain or loss on sales and disposals of intangible assets. In the short-term, the above estimates for our measures of profitability may be impacted further by the timing of investments and costs related to the separation of Archeo.

"In the third quarter, we saw sequential growth accelerate from call-driven revenues, as we continued to make progress with our mobile and call advertising products. While we anticipate that we will see growth in demand for our call-driven products as we move forward, it is worth noting that we have historically seen decreased call volumes in the latter part of the fourth quarter as we move into the U.S. holiday season. In addition, many of our advertisers are service-based businesses that typically dial back their marketing efforts in the fourth quarter. As a result of this and the hurricane impact on short term operating results, we anticipate call-driven revenue will be in the range to modestly lower as compared to the third quarter. That being said, the underlying trends in our business indicate we are well positioned for meaningful growth in 2013," said Michael Arends, Chief Financial Officer.

Conference Call and Webcast Information

Management will hold a conference call, starting at 5:00 p.m. ET on Thursday, November 1, 2012 to discuss its third quarter ended September 30, 2012 financial results, and other company updates. Access to the live webcast of the conference call will be available online from the Investors section of Marchex's website at www.marchex.com. An archived version of the webcast will also be available at the same location, beginning two hours after completion of the call.

About Marchex

Marchex, Inc. delivers customer calls to businesses and analyzes those calls so companies can get the most out of their mobile advertising.

Marchex supports its customers through a unique technology platform that has three primary components: (1) Call Analytics, which powers all of our advertising solutions, and allows partners to leverage data and insights that accurately measure the performance of mobile, online and offline call advertising; (2) Digital Call Marketplace, which annually connects millions of consumer calls to our advertisers from a range of mobile and online sources on a Pay For Call basis; and (3) Local Leads, a white-labeled, full service digital advertising solution for small business resellers that drives quality phone calls and other leads to their small business advertisers.

Marchex is based in Seattle. To learn more, please visit www.marchex.com/products.

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, projected costs, prospects, plans and objectives of management are forward-looking statements. In addition, there are certain risks and uncertainties relating to our previously announced spin-off transaction which contemplates a separation of our mobile and call advertising business and our domain and advertising marketplace business, including, but not limited to, the impact and possible disruption to our operations, the timing and certainty of completing the transaction, the high costs in connection with the spin-off which we would not be able to recoup if the spin-off is not consummated, the expectation that the spin-off will be tax-free, revenue and growth expectations for the two independent companies following the spin-off, unanticipated developments that may delay or negatively impact the spin-off, and the ability of each business to operate as an independent entity upon completion of the spin-off. 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. There are a number of important factors that could cause Marchex's actual results to differ materially from those indicated by such forward-looking statements which are described in the "Risk Factors" section of our most recent periodic report and registration statement filed with the SEC. All of the information provided in this release is as of November 1, 2012 and Marchex undertakes no duty to update the information provided herein.

Non-GAAP Financial Information:

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, Revenue with Domain Sales, Adjusted OIBA and EBITDA with Domain Sales 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 and separation 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 and separation 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 and separation 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. In conjunction with the spin-off, Marchex has also presented Revenue with Domain Sales, Adjusted OIBA and EBITDA with Domain Sales. Revenue with Domain Sales represents revenue plus sales proceeds from the sale of intangible domain assets and Adjusted OIBA and EBITDA with Domain Sales includes the above descriptions of Adjusted OIBA and EBITDA plus the gain/loss on sales and disposals of intangible assets. It is anticipated upon completion of the spin-off, that Archeo will further its domain marketplace business initiative to buy and sell domains which differs from Marchex's historical approach to intangible asset transactions. Accordingly, it is anticipated upon Archeo fully engaging in this business initiative, sales proceeds from intangible domain assets may be presented as revenue prospectively. Financial analysts and investors may use the non-GAAP historical Revenue with Domain Sales, Adjusted OIBA and EBITDA with Domain Sales to help with comparative financial evaluation to make informed investment decisions.

Adjusted non-GAAP EPS represents Adjusted non-GAAP Net Income (loss) applicable to common stockholders divided by GAAP diluted shares outstanding. Adjusted non-GAAP Net Income (loss) 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) applicable 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 and separation 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.

Source: Marchex, Inc.

Marchex, Inc.
Marchex Investor Relations
Trevor Caldwell, 206-331-3600
Email: ir(at)marchex.com
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Sonia Krishnan, 206-331-3434
Email: skrishnan(at)marchex.com