Marchex, Inc. (NASDAQ:MCHX) (NASDAQ:MCHXP), a local search and
advertising company, today reported its results for the second
quarter ended June 30, 2008. Second Quarter 2008 Consolidated
Financial Results Revenue was $37.4 million for the second quarter
of 2008, compared to $34.7 million for the same period of 2007.
GAAP net income applicable to common stockholders was $509,000 for
the second quarter of 2008 or $0.01 per diluted share. This
compares to GAAP net income applicable to common stockholders of
$354,000 or $0.01 per diluted share for the same period of 2007.
The second quarter 2008 results included non-cash stock-based
compensation expense recorded under the fair value method of $2.7
million, compared to non-cash stock-based compensation expense of
$2.3 million for the same period in 2007. We provide a
reconciliation of GAAP diluted EPS to Adjusted Non-GAAP EPS in the
financial tables attached to this press release and encourage
investors to examine the reconciling adjustments between the GAAP
and non-GAAP measures. Adjusted non-GAAP EPS for the second quarter
of 2008 was $0.09, compared to $0.10 for the same period of 2007.
Some Wall Street analysts use non-GAAP measures to analyze our
operating results, which may include adjusted non-GAAP EPS,
adjusted operating income before amortization and adjusted EBITDA.
We present GAAP measures with equal or greater prominence than
non-GAAP measures and such non-GAAP measures should not be
considered a substitute for, or superior to, GAAP results. Adjusted
operating income before amortization was $5.4 million for the
second quarter of 2008, compared to $6.4 million for the same
period of 2007. A reconciliation of non-GAAP adjusted operating
income before amortization to GAAP operating income and GAAP net
income is included in the financial tables attached to this
release. Adjusted EBITDA was $8.0 million in the second quarter of
2008, compared to $8.6 million for the same period of 2007. A
reconciliation of operating income before taxes, depreciation,
amortization and gain/loss on sales and disposals of intangible
assets to GAAP net cash provided by operating activities is
included in the financial tables attached to this release.
�Marchex�s execution on our local mission continues to drive growth
in our business, which led to our positive financial results in the
second quarter,� said Russell C. Horowitz, Marchex Chairman and
CEO. �We remain laser-focused on making Marchex the most relevant
integration point for connecting local advertisers - large and
small - to consumers with local intent. Continued execution on our
operational, strategic and financial goals will drive our growth
for the balance of 2008 and beyond, and further position Marchex as
a leader in the online local advertising market.� Operating
Highlights Local Advertising Services: For the second quarter of
2008, revenue from Local Advertising Services was $20.8 million. In
the second quarter, Marchex added more than 10,000 new advertisers
through its local aggregator partnerships and direct sales channel.
Marchex now has more than 75,000 advertisers using its products and
services and, based on current growth rates, is ahead of pace to
reach its previously stated goal of 100,000 advertisers using
Marchex products and services by the end of 2009. Local Search
Network (proprietary traffic sources): For the second quarter of
2008, revenue from Marchex's Local Search Network was $16.6
million. Additionally, Marchex attracted more than 32 million
unique visitors for the month of June 2008 and delivered more than
125 million revenue-generating events and referrals in the second
quarter. Unique visitor statistics are based on internal traffic
logs, which calculate unique IP (Internet protocol) addresses on an
unduplicated basis during a given month. Non-Operating Highlights
Marchex today announced that it is increasing its stock repurchase
program by 1 million shares. This allows Marchex to purchase up to
a total of 6 million shares, which is up from the 5 million shares
previously authorized, less shares repurchased to date. During the
second quarter of 2008, Marchex purchased 845,000 shares of its
outstanding Class B common stock for a total price of $10.0
million, bringing its total shares repurchased under its stock
repurchase program to 3.8 million shares, or 10% of its outstanding
common stock. Marchex Financial Guidance The following
forward-looking statements reflect Marchex's expectations as of
August 5, 2008. Marchex is reiterating its guidance for fiscal year
2008 (Year ending December 31, 2008): Revenue estimate: � $152
million or more Adjusted operating income before amortization
estimate: $22 million or more Adjusted EBITDA: For adjusted EBITDA,
Marchex anticipates add-backs of $9 million or more in additional
depreciation and amortization to its adjusted operating income
before amortization range, implying an adjusted EBITDA of $31
million or more for 2008. Guidance for third quarter 2008: Revenue
estimate: � $37.5 million to $38.5 million Adjusted operating
income before amortization estimate: Approximately $5.5 million
Adjusted EBITDA: For adjusted EBITDA, Marchex anticipates add-backs
of approximately $2.5 million in additional depreciation and
amortization to its adjusted operating income before amortization
range, implying an adjusted EBITDA of approximately $8.0 million
for the third quarter 2008. For the third quarter of 2008, Marchex
anticipates revenue from proprietary traffic sources will be in a
similar range to or slightly better than the second quarter of
2008. Conference Call and Webcast Information Management will hold
a conference call, starting at 5:00 p.m. EDT on Tuesday, August 5,
2008 to discuss its second quarter 2008 financial results and other
company updates. To access the call by live Webcast, please log
onto the Investor Relations section of the Marchex Web site
(www.marchex.com/investors/earningsreleases.html). An archived
version of the Webcast will also be available, beginning two hours
after completion of the call, at the same location. About Marchex,
Inc. Marchex (www.marchex.com) is a local search and advertising
company. Marchex's innovative advertising platform delivers search-
and call-based marketing products and services for local and
national advertisers. Marchex's local search network, one of the
largest online, helps consumers make better, more informed local
decisions through its content-rich Web sites that reach tens of
millions of unique visitors each month. 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 and other financial guidance,
acquisitions, 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. 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 August 5, 2008 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 and Adjusted non-GAAP EPS.
Marchex also provides Pro Forma Revenue information for the three
and six months ended June 30, 2007 and 2008 as if the VoiceStar
acquisition in September 2007 occurred as of January 1, 2007. OIBA
represents income (loss) from operations plus (1) stock-based
compensation expense and (2) amortization of acquired intangible
assets. 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 (1) any gain/loss on sales and disposals of intangible
assets and (2) facility relocation as these are viewed as
non-recurring in nature. 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 non-cash and non-recurring expenses. Adjusted EBITDA
represents income before interest, income taxes, depreciation,
amortization, stock compensation expense, and gain/loss on sales 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 Net Income
divided by weighted average fully diluted shares outstanding for
Adjusted non-GAAP EPS purposes. Adjusted Net Income generally
captures those items on the statement of operations that have been,
or ultimately will be, settled in cash exclusive of certain
non-recurring items and represents net income (loss) available to
common stockholders plus: (1) stock based compensation expense, (2)
amortization of acquired intangible assets, (3) gain/loss on sales
and disposals of intangible assets, (4) other income (expense), (5)
facility relocation and less (6) discount on preferred stock
redemption. Adjusted non-GAAP EPS includes dilution from options
and warrants per the treasury stock method, includes the weighted
average number of all potential common shares relating to
convertible preferred stock and restricted stock and excludes the
weighted average common share equivalents for redeemed preferred
shares. Shares outstanding for Adjusted non-GAAP EPS purposes are
therefore higher than shares outstanding for GAAP EPS purposes.
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. These non-GAAP
terms, as defined by Marchex, may not be comparable to similarly
titled measures used by other companies. 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. MARCHEX, INC. AND
SUBSIDIARIES Condensed Consolidated Statements of Operations
(unaudited) � � � � Three Months Ended June 30, � 2007 � � 2008 � �
Revenue $ 34,665,637 � $ 37,363,887 � � Expenses: Service costs (1)
16,764,588 17,414,301 Sales and marketing (1) 7,112,929 7,896,035
Product development (1) 2,662,779 4,252,469 General and
administrative (1) 4,057,643 5,074,875 Amortization of intangible
assets from acquisitions 4,074,254 3,661,275 Facility relocation �
121,124 � � - � Total operating expenses � 34,793,317 � �
38,298,955 � � Gain on sales and disposals of intangible assets,
net � 123,246 � � 2,010,576 � � Income (loss) from operations
(4,434 ) 1,075,508 � Interest income and other, net � 748,314 � �
133,080 � � Income before provision for income taxes 743,880
1,208,588 � Income tax expense � 412,978 � � 733,229 � � Net income
330,902 475,359 � Convertible preferred stock dividends and
discount on preferred stock redemption, net � (23,482 ) � (33,697 )
� Net income applicable to common stockholders $ 354,384 � $
509,056 � � Basic and diluted net income applicable to common
stockholders $ 0.01 $ 0.01 � Shares used to calculate basic net
income per share applicable to common stockholders 39,597,600
36,580,610 Shares used to calculate diluted net income per share
applicable to common stockholders 40,534,319 37,504,686 � (1)
Includes stock-based compensation allocated as follows: �Service
costs $ 31,741 $ 86,087 �Sales and marketing 89,800 326,004
�Product development 450,692 396,289 �General and administrative �
1,770,488 � � 1,860,856 � �Total $ 2,342,721 � $ 2,669,236 � � �
MARCHEX, INC. AND SUBSIDIARIES Condensed Consolidated Statements of
Operations (unaudited) � � � Six Months Ended June 30, � 2007 � �
2008 � � Revenue $ 68,889,038 � $ 74,406,214 � � Expenses: Service
costs (1) 32,005,816 36,301,616 Sales and marketing (1) 14,622,850
14,867,783 Product development (1) 5,260,435 8,439,573 General and
administrative (1) 8,238,418 10,033,984 Amortization of intangible
assets from acquisitions 8,597,388 7,713,637 Facility relocation �
121,124 � � - � Total operating expenses � 68,846,031 � �
77,356,593 � � Gain on sales and disposals of intangible assets,
net � 155,510 � � 2,155,267 � � Income (loss) from operations
198,517 (795,112 ) � Interest income and other, net � 1,460,301 � �
417,406 � � Income (loss) before provision for income taxes
1,658,818 (377,706 ) � Income tax expense � 886,766 � � 393,276 � �
Net income (loss) 772,052 (770,982 ) � Convertible preferred stock
dividends and discount on preferred stock redemption, net �
(130,030 ) � (44,585 ) � Net income (loss) applicable to common
stockholders $ 902,082 � $ (726,397 ) � � Basic and diluted net
income (loss) per share applicable to common stockholders $ 0.02 $
(0.02 ) � Shares used to calculate basic net income (loss)
applicable to common stockholders 39,382,979 37,121,849 Shares used
to calculate diluted net income (loss) applicable to common stock
holders 40,371,282 37,130,260 � (1) Includes stock-based
compensation allocated as follows: ����Service costs $ 150,276 $
225,658 ����Sales and marketing 462,158 856,714 ����Product
development 939,944 806,998 ����General and administrative �
3,677,557 � � 3,847,338 � ����Total $ 5,229,935 � $ 5,736,708 � � �
MARCHEX, INC. AND SUBSIDIARIES Condensed Consolidated Balance
Sheets (unaudited) � December 31, June 30, Assets � 2007 � � 2008 �
� Current assets: Cash and cash equivalents $ 36,456,307 $
28,978,958 Trade accounts receivable, net 18,307,386 22,407,461
Prepaid expenses and other current assets 2,118,390 3,553,256
Refundable taxes 1,693,695 1,538,255 Deferred tax assets � 867,465
� � 1,213,561 � Total current assets 59,443,243 57,691,491 �
Property and equipment, net 7,357,903 6,727,401 Deferred tax assets
7,447,315 9,395,438 Intangibles and other assets, net 17,381,827
14,832,251 Goodwill 204,766,826 204,777,254 Intangible assets from
acquisitions, net � 23,797,231 � � 16,071,848 � � Total assets $
320,194,345 � $ 309,495,683 � � � Liabilities and Stockholders'
Equity � Current liabilities: Accounts payable $ 11,625,779 $
13,525,119 Accrued expenses and other current liabilities 3,668,342
4,887,395 Deferred revenue � 2,906,379 � � 2,616,993 � Total
current liabilities 18,200,500 21,029,507 � Other non-current
liabilities � 105,370 � � 68,213 � Total liabilities 18,305,870
21,097,720 � Stockholders' equity: Convertible preferred stock
1,446,649 964,689 Class A common stock 113,717 112,217 Class B
common stock 321,061 286,419 Treasury stock (22,116,275 ) (134,460
) Additional paid-in capital 329,835,529 295,683,672 Accumulated
deficit � (7,712,206 ) � (8,514,574 ) Total stockholders' equity �
301,888,475 � � 288,397,963 � � Total liabilities and stockholders'
equity $ 320,194,345 � $ 309,495,683 � � � MARCHEX, INC. AND
SUBSIDIARIES Reconciliation of Revenue to Pro Forma Revenue
(unaudited) � � � Three Months Ended Six Months Ended June 30, June
30, � 2007 � 2008 � 2007 � 2008 � Revenue, as reported $ 34,665,637
$ 37,363,887 $ 68,889,038 $ 74,406,214 � VoiceStar pro forma
revenue � 569,810 � - � 962,019 � - � Pro forma Revenue $
35,235,447 $ 37,363,887 $ 69,851,057 $ 74,406,214 � � MARCHEX, INC.
AND SUBSIDIARIES Reconciliation of GAAP Net Income (Loss) to
Operating Income Before Amortization (OIBA) and Adjusted Operating
Income Before Amortization (Adjusted OIBA) (unaudited) � � � Three
Months Ended June 30, � 2007 � � 2008 � � Net income applicable to
common stockholders $ 354,384 $ 509,056 � Convertible preferred
stock dividends and discount on preferred stock redemption, net �
(23,482 ) � (33,697 ) � Net income 330,902 � 475,359 � Income tax
expense � 412,978 � � 733,229 � � Income before provision for
income taxes 743,880 1,208,588 � Interest income and other, net �
(748,314 ) � (133,080 ) � Income (loss) from operations (4,434 )
1,075,508 � Stock-based compensation 2,342,721 2,669,236
Amortization of intangible assets from acquisitions � 4,074,254 � �
3,661,275 � � Operating income before amortization (OIBA) 6,412,541
7,406,019 � Facility relocation 121,124 - Gain on sales and
disposals of intangible assets, net � (123,246 ) � (2,010,576 ) �
Adjusted operating income before amortization (Adjusted OIBA) $
6,410,419 � $ 5,395,443 � � � MARCHEX, INC. AND SUBSIDIARIES
Reconciliation of GAAP Net Income (Loss) to Operating Income Before
Amortization (OIBA) and Adjusted Operating Income Before
Amortization (Adjusted OIBA) (unaudited) � � � � Six Months Ended
June 30, � 2007 � � 2008 � � Net income (loss) applicable to common
stockholders $ 902,082 $ (726,397 ) � Convertible preferred stock
dividends and discount on preferred stock redemption, net �
(130,030 ) � (44,585 ) � Net income (loss) 772,052 � (770,982 ) �
Income tax expense � 886,766 � � 393,276 � � Income (loss) before
provision for income taxes 1,658,818 (377,706 ) � Interest income
and other, net � (1,460,301 ) � (417,406 ) � Income (loss) from
operations 198,517 (795,112 ) � Stock-based compensation 5,229,935
5,736,708 Amortization of intangible assets from acquisitions �
8,597,388 � � 7,713,637 � � Operating income before amortization
(OIBA) 14,025,840 12,655,233 � Facility relocation 121,124 - Gain
on sales and disposals of intangible assets, net � (155,510 ) �
(2,155,267 ) � Adjusted operating income before amortization
(Adjusted OIBA) $ 13,991,454 � $ 10,499,966 � � � MARCHEX, INC. AND
SUBSIDIARIES Reconciliation from Net Cash provided by Operating
Activities to Adjusted EBITDA (unaudited) � � Three Months Ended
June 30, � 2007 � � 2008 � � Net cash provided by operating
activities $ 4,282,562 $ 4,552,353 � Changes in asset and
liabilities, net of effects of acquisitions 3,697,066 2,825,234
Provision for income taxes 412,978 733,229 Other item - facility
relocation 17,106 1,663 Interest income and expense (756,841 )
(131,726 ) Income and excess tax benefits related to stock options
� 953,773 � � 20,380 � Adjusted EBITDA $ 8,606,644 � $ 8,001,133 �
� Net cash (used in) provided by investing activities $ (10,844,476
) $ 794,288 � � Net cash provided by (used in) financing activities
$ 1,387,221 � $ (10,819,969 ) � Six Months Ended June 30, � 2007 �
� 2008 � � Net cash provided by operating activities $ 16,760,683 $
11,209,527 � Changes in asset and liabilities, net of effects of
acquisitions (559,074 ) 4,478,712 Provision for income taxes
886,766 393,276 Other item - facility relocation 17,106 (2,972 )
Interest income and expense (1,463,544 ) (415,551 ) Income and
excess tax benefits related to stock options � 2,446,764 � � 53,541
� Adjusted EBITDA $ 18,088,701 � $ 15,716,533 � � Net cash used in
investing activities $ (12,349,883 ) $ (83,043 ) � Net cash
provided by (used in) financing activities $ 3,375,636 � $
(18,603,833 ) � � MARCHEX, INC. AND SUBSIDIARIES Reconciliation of
GAAP EPS to Adjusted Non-GAAP EPS (unaudited) � � � � Three Months
Ended June 30, � 2007 � � 2008 � � � � � � � Adjusted Non-GAAP EPS
$ 0.10 � $ 0.09 � � � Net income per share applicable to common
�stockholders - diluted (GAAP EPS) $ 0.01 $ 0.01 Shares used to
calculate diluted net income per share applicable to common
stockholders 40,534,319 37,504,686 � Net income applicable to
common stockholders $ 354,384 $ 509,056 � Discount on preferred
stock redemption (40,923 ) (46,884 ) Stock-based compensation
2,342,721 2,669,236 Facility relocation 121,124 - Amortization of
intangible assets from acquisitions 4,074,254 3,661,275 Gain on
sales and disposals of intangible assets, net (123,246 ) (2,010,576
) Interest income and other, net (748,314 ) (133,080 ) Estimated
impact of income taxes � (1,895,669 ) � (1,214,728 ) � Adjusted
Non-GAAP net income applicable to common stockholders $ 4,084,331 �
$ 3,434,299 � � � � � � � Adjusted Non-GAAP EPS $ 0.10 � $ 0.09 � �
Shares used to calculate diluted net income per share applicable to
common stockholders 40,534,319 37,504,686 Weighted average common
share equivalents for redeemed preferred shares (3,266 ) (8,327 )
Weighted average stock options and warrants and common shares
subject to repurchase or cancellation (if applicable) � 2,328,137 �
� 2,583,167 � Shares used to calculate Adjusted Non-GAAP EPS �
42,859,190 � � 40,079,526 � � � For Adjusted Non-GAAP EPS, 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 on a treasury stock method basis. �
� � MARCHEX, INC. AND SUBSIDIARIES Reconciliation of GAAP EPS to
Adjusted Non-GAAP EPS (unaudited) � � � Six Months Ended June 30, �
2007 � � 2008 � � � � � � � Adjusted Non-GAAP EPS $ 0.21 � $ 0.16 �
� � Net income (loss) per share applicable to common stockholders -
diluted (GAAP EPS) $ 0.02 $ (0.02 ) Shares used to calculate
diluted net income (loss) per share applicable to common
stockholders 40,371,282 37,130,260 � Net income (loss) applicable
to common stockholders $ 902,082 $ (726,397 ) � Discount on
preferred stock redemption (163,867 ) (72,990 ) Stock-based
compensation 5,229,935 5,736,708 Facility relocation 121,124 -
Amortization of intangible assets from acquisitions 8,597,388
7,713,637 Gain on sales and disposals of intangible assets, net
(155,510 ) (2,155,267 ) Interest income and other, net (1,460,301 )
(417,406 ) Estimated impact of income taxes � (4,154,741 ) �
(3,397,604 ) � Adjusted Non-GAAP net income applicable to common
stockholders $ 8,916,110 � $ 6,680,681 � � � � � � � Adjusted
Non-GAAP EPS $ 0.21 � $ 0.16 � � Shares used to calculate diluted
net income (loss) per share applicable to common stockholders
40,371,282 37,130,260 Weighted average common share equivalents for
redeemed preferred shares (7,058 ) (8,411 ) Weighted average stock
options and warrants and common shares subject to repurchase or
cancellation (if applicable) � 2,425,488 � � 3,623,698 � Shares
used to calculate Adjusted Non-GAAP EPS � 42,789,712 � � 40,745,547
� � � For Adjusted Non-GAAP EPS, 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 on a treasury stock method basis. �
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