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Marchex Announces Third Quarter 2013 Results

Nov 5, 2013
PDF Version

Strong Demand for Call Advertising Products Drives 22% year-over-year Revenue Growth

Leads to an Increase in Annual Guidance

Marchex, Inc. (NASDAQ:MCHX), a mobile advertising technology company, today announced its financial results for the third quarter ended September 30, 2013.

“As mobile adoption continues to expand, phone calls are rapidly emerging as one of the most valued actions in the purchasing path,” said Russell Horowitz, Chairman and CEO of Marchex. “We see growing momentum in our business as a result, and will continue to invest our time, energy and resources in building call analytics capabilities that drive the highest levels of client performance and transparency.”

Q3 2013 Financial Highlights1

  • GAAP revenue was $40.6 million for the third quarter of 2013, compared to $33.7 million for the third quarter of 2012. Non-GAAP revenue, which excludes domain sales recorded in GAAP revenue, was $39.7 million for the third quarter of 2013.
  • GAAP net income from continuing operations was $598,000 for the third quarter of 2013, compared to a GAAP net loss from continuing operations of $490,000 for the third quarter of 2012.
  • GAAP net income from continuing operations attributable to common stockholders per diluted share was $0.02 for the third quarter of 2013. This compares to GAAP net loss from continuing operations attributable to common stockholders per diluted share of $0.02 for the third quarter of 2012.
     
      Q3 2013    Q3 2012
GAAP Revenue    $40.6 million    $33.7 million
Non-GAAP Results below exclude Domain Sales and Discontinued Operations:
Non-GAAP Revenue 2, 3    $39.7 million    $33.7 million
Call-Driven and Other Revenue    $35.7 million    $29.3 million
Archeo Revenue 2, 3    $4.0 million    $4.4 million
Adjusted OIBA3    $2.5 million    $3.9 million
Adjusted EBITDA3    $3.4 million    $4.8 million
  

1 In July 2013, certain pay-per-click assets were sold. As a result, the financial results of these pay-per-click assets are presented as net loss from discontinued operations, net of tax in our condensed consolidated statements of operations in accordance with GAAP, and are excluded from all other results unless otherwise noted.

2 Excludes domain sales recognized in GAAP revenue. In September 2013 upon the launch of its domain marketplace, the company commenced recognizing domain sales as revenue.

3 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.

  • Adjusted non-GAAP EPS3 from continuing operations for the third quarter of 2013 was $0.04, compared to $0.06 for the third quarter of 2012.
  • Adjusted OIBA3 excluding domain sales2 was $2.5 million for the third quarter of 2013, compared to $3.9 million for the third quarter in 2012.
  • Adjusted EBITDA3 excluding domain sales2 was $3.4 million for the third quarter of 2013, compared to $4.8 million for the third quarter in 2012.

Marchex Q3 and Recent Call-Driven Business Highlights:

  • Revenue. Call-driven and other related revenue was $35.7 million for the third quarter of 2013 – a 22 percent increase compared to $29.2 million for the third quarter of 2012.
  • Products. We recently announced two technologies to transform mobile and call advertising measurement. Call DNA and Dynamic Tracking are designed to increase efficiency and significantly lower customer acquisition costs for advertisers by providing insights into which calls convert into sales. These unique, patent-pending technologies provide a new and deeper level of customer conversion data generated by ad campaigns.

Call DNA provides:

  • A simple, easy-to-understand visualization of what is happening on phone calls, and ultimately what outcomes were achieved, using automated call scoring technology.
  • A detailed break-down of how best to optimize advertising campaigns to improve sales and overall business performance.

Dynamic Tracking provides:

  • Details on what, exactly, triggered a phone call from a mobile consumer to an advertiser. This includes specific keywords, ad impressions and web-based sessions.
  • Easy campaign optimization to drive more calls from new customers.
  • People. During the quarter, Marchex announced that Clark Kokich, advertising technology expert and digital marketing thought leader, joined the company as its Chief Strategy Officer. Mr. Kokich, with more than 14 years of experience in the digital advertising space, most recently served as Chairman of Razorfish, one of the largest digital marketing agencies in the world, where he also held the roles of CEO and President. He also oversaw strategic direction at Razorfish and entrenched himself with clients, shaping digital innovation from the ground up. Razorfish was the largest operating division within aQuantive, an advertising technology and services giant, and Kokich helped grow the company from pre-IPO status in 1999 to more than $600 million in annualized sales, before it was acquired by Microsoft in 2007.
  • Customers and Partners. Marchex announced a partnership with Marin Software, a leading revenue acquisition management platform provider. Marin Software is now using Marchex Call Analytics to give agencies and advertisers powerful new insights into their ad campaigns and drive higher returns on ad spend. We also announced an integration with DoubleClick Search, a cross-engine search management platform. DoubleClick advertisers can now access our Call Analytics data to understand over-the-phone conversions that come from search-based ads.
  • In November, Marchex added its Twitter account @marchex.com (Twitter.com/Marchex) and its company blog at blog.marchex.com as designated channels to disclose material information.

Archeo Q3 Business Highlights:

  • Revenue. Archeo non-GAAP revenue was $4.0 million for the third quarter of 2013, which excludes domain sales recognized in GAAP revenue.
  • Domains sales. During the third quarter of 2013, Archeo sold a total of 81 domains that yielded $1.9 million.
  • During the quarter, Archeo announced the launch of the Domains Marketplace, which provides a gateway to the premium portfolio of more than 200,000 domain names.
  • In July 2013, certain pay-per-click assets were sold for proceeds totaling up to $2.6 million as part of a transaction to focus Archeo’s business on creating a premium domain marketplace. The financial results of these sold assets are presented as discontinued operations in our condensed consolidated statement of operations in accordance with GAAP.

Business Outlook

The following forward-looking statements reflect Marchex's expectations as of November 5, 2013 and exclude domain sales and discontinued operations:

  

Financial guidance for the fiscal year ending December 31, 2013

  

Non-GAAP Revenue1 excluding domain sales

   More than $148.5 million
Call Driven Revenue    More than $134 million

Adjusted OIBA from continuing operations

   $9-$10 million

Adjusted EBITDA from continuing operations2

    $13-$14 million

Call Driven Adjusted EBITDA3

    More than $9 million
  

1Excludes historical and any prospective domain sales.

2 Includes estimated addbacks of $4.0 million related to additional depreciation and amortization.

3This non-GAAP Call-Driven measure assigns all Marchex indirect overhead costs to the Call-Driven results. 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.

2013 GAAP income (loss) from continuing operations is expected to be ($0.8) million or better, assuming stock-based compensation between $9-$10 million and amortization of intangible assets from acquisitions between $3-$3.5 million. This estimate excludes any prospective domain sales or gain or loss on sales and disposals of intangible assets.

  

Financial guidance for the Fourth Quarter ending December 31, 2013

  
Non-GAAP Revenue1 excluding domain sales    More than $36.5 million
Call Driven Revenue    More than $33.5 million
Adjusted OIBA from continuing operations    $2.1-$3.1 million
Adjusted EBITDA from continuing operations2    $3.1-$4.1 million
  

1Excludes any prospective domain sales.

2 Includes estimated addbacks of $1.0 million related to additional depreciation and amortization.

Fourth quarter GAAP income (loss) from continuing operations is expected to be ($1.6) million or better, assuming stock-based compensation between $2-$3 million and amortization of intangible assets from acquisitions between $0.4-$0.7 million. This estimate excludes any prospective domain sales or gain or loss on sales and disposals of intangible assets.

Conference Call and Webcast Information

Management will hold a conference call, starting at 5:00 p.m. ET on Tuesday, November 5, 2013 to discuss its third quarter ended September 30, 2013 financial results, and other company updates. Access to the live webcast of the conference call will be available online from the Investors section of the 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 is a mobile advertising technology company. The company provides a suite of products and services for businesses that depend on consumer phone calls to drive sales. Marchex’s mobile advertising platform delivers new customer phone calls to businesses, while its technology analyzes the data in these calls to help maximize ad campaign results. Marchex disrupts traditional advertising models by giving businesses full transparency into their ad campaign performance and charging them based on new customer acquisition.

Please visit www.marchex.com, blog.marchex.com or @marchex on Twitter (Twitter.com/Marchex), where Marchex discloses material information from time to time about the company, its financial information, and its business.

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. 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 5, 2013 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 excluding and including Domain Sales, Adjusted OIBA and EBITDA excluding and including Domain Sales, Revenue with Discontinued Operations excluding and including Domain Sales, and Adjusted OIBA and EBITDA with Discontinued Operations excluding and including Domain Sales. Marchex also provides Call-Driven and Archeo Adjusted OIBA and 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 and separation related costs as these items are not indicative of Marchex’s recurring core operating results and any domain sales contribution. 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, domain sales contribution 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 cost, domain sales contribution 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.

Revenue excluding Domain Sales represents GAAP revenue excluding domain sales sold through Marchex’s Domain Marketplace which are recognized in GAAP revenue. Revenue with Domain Sales represents GAAP revenue plus sales proceeds from the sale of intangible assets. Adjusted OIBA and EBITDA with Domain Sales includes the above descriptions of Adjusted OIBA and EBITDA plus any domain sales contribution and gain/loss on sales and disposals of intangible assets. Revenue with Discontinued Operations excluding Domain Sales represents GAAP Revenue plus discontinued operations and excludes domain sales sold through Marchex’s Domain Marketplace and recognized in GAAP revenue. Revenue with Discontinued Operations including Domain Sales represents GAAP Revenue plus discontinued operations and includes sales proceeds from the sale of intangible assets. For GAAP purposes, operating results of discontinued operations are shown as discontinued operations in the condensed consolidated statements of operations. Adjusted OIBA and EBITDA with Discontinued Operations excluding Domain Sales includes the above descriptions of Adjusted OIBA and EBITDA plus the operating results of discontinued operations and excludes domain sales contribution. Adjusted OIBA and EBITDA with Discontinued Operations including Domain sales includes the above descriptions of Adjusted OIBA and EBITDA plus the operating results of discontinued operations and includes domain sales contribution and gain/loss on sales and disposals of intangible assets. Call-Driven Adjusted OIBA and EBITDA includes the above descriptions of Adjusted OIBA and EBITDA for the Call-Driven segment. Archeo non-GAAP Measures include the measures above for the Archeo segment. Financial analysts and investors may use the non-GAAP historical Revenue with Domain Sales, Adjusted OIBA and EBITDA with Domain Sales and similarly those including Discontinued Operations to help with comparative financial evaluation to make informed investment decisions. The Call-Driven Adjusted OIBA and EBITDAassigns all Marchex indirect overhead costs to the Call-Driven results.

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) domain sales contribution and gain/loss on sales and disposals of intangible assets and domain sales contribution, (4) acquisition and separation related costs, (5) interest and other income (expense), (6) discontinued operations and gain on sale of discontinued operations, net of tax and (7) dividends paid to participating securities, and also excludes the effect of the tax valuation allowance. 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.

  

MARCHEX, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
  
   Three Months Ended
September 30,
   2012          2013   
Revenue $ 33,691    $

40,560

Expenses:
Service costs (1),(2) 19,744

25,293

Sales and marketing (1),(2) 2,542

2,801

Product development (1),(2) 5,510

6,833

General and administrative (1),(2) 5,678

4,679

Amortization of intangible assets from acquisitions 1,055

709

Acquisition and separation related costs    296         

286

  
Total operating expenses 34,825

40,601

Gain on sales and disposals of intangible assets, net    713         

1,047

  
Income from operations (421 )

1,006

Interest expense and other, net    (118 )      

(19

)
Income (loss) from continuing operations before provision for income taxes (539 )

987

Income tax expense (benefit)    (49 )      

389

  
Net income (loss) from continuing operations (490 )

598

Discontinued operations:
Loss from discontinued operations, net of tax (53 )

(46

)
Gain on sale from discontinued operations, net of tax    -          929   
Discontinued operations, net of tax (53 )

883

Net income (loss) (543 )

1,481

Dividends paid to participating securities    (123 )       -   
Net income (loss) applicable to common stockholders $ (666 )    $

1,481

  
Basic and diluted net income (loss) per share:
Net income (loss) from continuing operations $ (0.02 ) $

0.02

Discontinued operations, net of tax    (0.00 )       0.02   
Net income (loss) applicable to common stockholders $ (0.02 ) $

0.04

Dividends paid per share $ 0.04 $ -
Shares used to calculate basic net income (loss) per share applicable to common stockholders
Class A 9,570

8,377

Class B 24,536

27,308

Shares used to calculate diluted net income (loss) per share applicable to common stockholders
Class A 9,570

8,377

Class B 34,106

37,277

(1) Includes stock-based compensation allocated as follows:
Service costs $ 554 $

455

Sales and marketing 153

211

  

Product development 203 361
General and administrative    2,792         

1,338

  
Total $ 3,702       $ 2,365   
(2) Certain reclassifications have been made to prior period to conform to current period presentation.
  
  
MARCHEX, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
  
Nine Months Ended
September 30,
   2012          2013   
Revenue $ 100,358 $ 112,870
Expenses:
Service costs (1),(2) 56,821 68,025
Sales and marketing (1),(2) 10,494 8,350
Product development (1),(2) 17,237 20,586
General and administrative (1),(2) 17,281 15,003
Amortization of intangible assets from acquisitions 3,674 2,500
Acquisition and separation related costs    164          940   
Total operating expenses 105,671 115,404
Gain on sales and disposals of intangible assets, net    5,434          3,739   
Income from operations 121 1,205
Interest expense and other, net    (430 )       (48 )
Income (loss) from continuing operations before provision for income taxes (309 ) 1,157
Income tax expense    458          797   
Net income (loss) from continuing operations (767 ) 360
Discontinued operations:
Loss from discontinued operations, net of tax (95 ) (77 )
Gain on sale from discontinued operations, net of tax    -          929   
Discontinued operations, net of tax (95 ) 852
Net income (loss) (862 ) 1,212
Dividends paid to participating securities    (262 )       -   
Net income (loss) applicable to common stockholders $ (1,124 )    $ 1,212   
Basic and diluted net income (loss) per share:
Net income (loss) from continuing operations $ (0.03 ) $ 0.01
Discontinued operations, net of tax    (0.00 )       0.02   
Net income (loss) applicable to common stockholders $ (0.03 ) $ 0.03
Dividends paid per share $ 0.08 $ -
Shares used to calculate basic net income (loss) per share applicable to common stockholders
Class A 9,576 9,168
Class B 24,303 26,280
Shares used to calculate diluted net income (loss) per share applicable to common stockholders
Class A 9,576 9,168
Class B 33,879 36,371

(1)

Includes stock-based compensation allocated as follows:
Service costs $ 1,545 $ 818
Sales and marketing 2,008 474
Product development 860 1,127
General and administrative    7,982          4,456   
Total $ 12,395       $ 6,875   

(2)

Certain reclassifications have been made to prior period to conform to current period presentation.
  
  
MARCHEX, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
           
December 31, September 30,
Assets    2012          2013   
Current assets:
Cash and cash equivalents $ 15,930 $ 25,151
Accounts receivable, net 25,988 30,817
Prepaid expenses and other current assets 2,667 3,149
Refundable taxes 264 72
Deferred tax assets    830          1,108   
Total current assets 45,679 60,297
  
Property and equipment, net 6,005 5,967
Deferred tax assets 27,677 26,494
Intangibles and other assets, net 611 569
Goodwill 65,815 65,679
Intangible assets from acquisitions, net    3,360          860   
Total Assets $ 149,147       $ 159,866   
  
Liabilities and Stockholders' Equity
  
Current liabilities:
Accounts payable $ 12,378 $ 15,440
Accrued expenses and other current liabilities 9,609 8,838
Deferred revenue    2,009          1,506   
Total current liabilities 23,996 25,784
  
Other non-current liabilities    2,216          2,186   
Total Liabilities 26,212 27,970
  
  
Class A common stock 98 80
Class B common stock 284 301
Treasury stock (13 ) -
Additional paid-in capital 295,532 303,269
Accumulated deficit    (172,966 )       (171,754 )
Total Stockholders' Equity    122,935          131,896   
Total Liabilities and Stockholders' Equity $ 149,147       $ 159,866   
  
  
MARCHEX, INC. AND SUBSIDIARIES
Reconciliation of GAAP Income (Loss) from Operations to Operating Income Before Amortization (OIBA)
and Adjusted Operating Income Before Amortization (Adjusted OIBA)
(in thousands)
(unaudited)
        
  
Three Months Ended
September 30,
   2012          2013   
Income (loss) from operations $ (421 ) $ 1,006
Stock-based compensation 3,702 2,365
Amortization of intangible assets from acquisitions    1,055          709   
Operating income before amortization (OIBA) 4,336 4,080
Acquisition and separation related costs 296 286
Domain sales contribution - (839 )
Gain on sales and disposals of intangible assets, net    (713 )       (1,047 )
Adjusted operating income before amortization (Adjusted OIBA) $ 3,919       $ 2,480   
  
  
Nine Months Ended
September 30,
   2012          2013   
  
Income from operations $ 121 $ 1,205
Stock-based compensation 12,395 6,875
Amortization of intangible assets from acquisitions    3,674          2,500   
Operating income before amortization (OIBA) 16,190 10,580
Acquisition and separation related costs 164 940
Domain sales contribution - (839 )
Gain on sales and disposals of intangible assets, net    (5,434 )       (3,739 )
Adjusted operating income before amortization (Adjusted OIBA) $ 10,920       $ 6,942   
  
  
Reconciliation from Net Cash provided by Operating Activities to Adjusted EBITDA
(in thousands)
(unaudited)
        
  
Three Months Ended
September 30,
   2012          2013   
  
Net cash provided by operating activities $ 3,656 $ 4,332
Changes in asset and liabilities 811 (1,374 )
Income tax expense (benefit) (49 ) 389
Separation related costs 296 286
Interest expense and other, net 28 15
Less: Domain sales contribution - (839 )
Loss from discontinued operations, net of tax 53 46
Tax effect on gain on sale of discontinued operations - 563
Excess tax benefits related to stock compensation    42          13   
Adjusted EBITDA $ 4,837       $ 3,431   
Net cash provided by (used in) investing activities $ (103 )    $ 1,235   
Net cash provided by (used in) financing activities $ (1,592 )    $ 842   
  
  
Nine Months Ended
September 30,
   2012          2013   
  
Net cash provided by operating activities $ 15,590 $ 7,487
  
Changes in asset and liabilities (2,884 ) 482
Income tax expense 458 797
Acquisition and separation related costs 296 940
Interest expense and other, net 68 44
Less: Domain sales contribution - (839 )
Loss from discontinued operations, net of tax 95 77
Tax effect on gain on sale of discontinued operations - 563
Excess tax benefits related to stock compensation    162          209   
Adjusted EBITDA $ 13,785       $ 9,760   
Net cash provided by investing activities $ 3,123       $ 2,197   
Net cash used in financing activities $ (20,622 )    $ (463 )
  
  
MARCHEX, INC. AND SUBSIDIARIES
Reconciliation of GAAP EPS to Adjusted Non-GAAP EPS
(in thousands, except per share data)
(unaudited)
        
Three Months Ended
September 30,
   2012          2013   
Adjusted Non-GAAP EPS from continuing operations $ 0.06       $ 0.04   
  
Net income (loss) from continuing operations 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 34,106 37,277
  
Net income (loss) applicable to common stockholders $ (666 ) $ 1,481
Stock-based compensation 3,702 2,365
Acquisition and separation related costs 296 286
Amortization of intangible assets from acquisitions 1,055 709
Gain on sales and disposals of intangible assets, net (713 ) (1,047 )
Domain sales contribution - (839 )
Interest expense and other, net 118 19
Dividends paid to participating securities 123 -
Discontinued operations, net of tax 53 (883 )
Estimated impact of income taxes    (1,399 )       (488 )
Adjusted Non-GAAP net income from continuing operations $ 2,569       $ 1,603   
        
Adjusted Non-GAAP EPS from continuing operations $ 0.06       $ 0.04   
  
Shares used to calculate diluted net income (loss) per share applicable to common stockholders
34,106 37,277
Weighted average stock options and common shares subject to purchase or cancellation (if applicable) 1,361 -
Weighted average common shares related to deferred acquisition payments    4,907          -   
Diluted shares used to calculate Adjusted Non-GAAP EPS (1)    40,374          37,277   
  
(1) For the purpose of computing the number of diluted shares for Adjusted Non-GAAP EPS, Marchex uses the accounting guidance that would be applicable for computing the number of diluted shares for GAAP EPS.
  
  
MARCHEX, INC. AND SUBSIDIARIES
Reconciliation of GAAP EPS to Adjusted Non-GAAP EPS
(in thousands, except per share data)
(unaudited)
     
Nine Months Ended
September 30,
   2012          2013   
        
Adjusted Non-GAAP EPS $ 0.18       $ 0.12   
  
Net income (loss) from continuing operations per share applicable to common stockholders - diluted (GAAP EPS) $ (0.03 ) $ 0.01
Shares used to calculate diluted net income (loss) per share applicable to common stockholders 33,879 36,371
  
Net income (loss) applicable to common stockholders $ (1,124 ) $ 1,212
Stock-based compensation 12,395 6,875
Acquisition and separation related costs 164 940
Amortization of intangible assets from acquisitions 3,674 2,500
Gain on sales and disposals of intangible assets, net (5,434 ) (3,739 )
Domain sales contribution - (839 )
Interest expense and other, net 430 48
Dividends paid to participating securities 262 -
Tax valuation allowance - 651
Discontinued operations, net of tax 95 (852 )
Estimated impact of income taxes    (3,373 )       (2,291 )
Adjusted Non-GAAP net income from continuing operations $ 7,089    $ 4,504   
        
Adjusted Non-GAAP EPS from continuing operations $ 0.18       $ 0.12   
  
Shares used to calculate diluted net income (loss) per share applicable to common stockholders
33,879 36,371
Weighted average stock options and common shares subject to purchase or cancellation (if applicable) 1,340 -
Weighted average common shares related to deferred acquisition payments    4,907          -   
Diluted shares used to calculate Adjusted Non-GAAP EPS (1)    40,126          36,371   
  
  
(1 )

For the purpose of computing the number of diluted shares for non-GAAP EPS, Marchex uses the accounting guidance that would be applicable for computing the number of diluted shares for GAAP EPS.

  
  
MARCHEX, INC. AND SUBSIDIARIES
(in thousands)
(unaudited)
  
Reconciliation of GAAP Income (Loss) from Operations to Operating Income before Amortization (OIBA)
and Adjusted Operating Income Before Amortization (Adjusted OIBA)
  
  
      3 months ended       9 months ended
   3/31/2012          6/30/2012          9/30/2012          12/31/2012          3/31/2013          6/30/2013          9/30/2013       9/30/2012          9/30/2013   
                    
Income (loss) from operations $ (616 ) $ 1,158 $ (421 ) $ (17,364 ) $ 297 $ (98 ) $ 1,006 $ 121 $ 1,205
Stock-based compensation 3,891 4,802 3,702 3,243 1,907 2,603 2,365 12,395 6,875
Amortization of intangible assets from acquisitions    1,537          1,082          1,055          1,055          1,055          736          709       3,674          2,500   
Operating income before amortization (OIBA) 4,812 7,042 4,336

(13,066

) 3,259 3,241 4,080 16,190 10,580
Acquisition and separation related costs (132 ) - 296 589 345 309 286 164 940
Impairment of goodwill - - - 15,837 - - - - -
Domain sales contribution - - - - - - (839 ) - (839 )
Gain on sales and disposals of intangible assets, net    (1,463 )       (3,258 )       (713 )       (862 )       (1,362 )       (1,330 )       (1,047 )    (5,434 )       (3,739 )
Adjusted operating income before amortization (Adjusted OIBA) $ 3,217       $ 3,784       $ 3,919       $

2,498

      $ 2,242       $ 2,220       $ 2,480    $ 10,920       $ 6,942   
  
Reconciliation from Net Cash provided by Operating Activities to Adjusted EBITDA
  
3 months ended 9 months ended
3/31/2012          6/30/2012          9/30/2012          12/31/2012          3/31/2013          6/30/2013          9/30/2013       9/30/2012          9/30/2013   
  
Net cash provided by operating activities $ 3,954 $ 7,980 $ 3,656 $ 4,311 $ 2,141 $ 1,014 $ 4,332 $ 15,590 $ 7,487
Changes in asset and liabilities 302 (3,997 ) 811 (17,696 )

462

1,394

(1,374 ) (2,884 ) 482
Income tax expense (benefit) (88 ) 595 (49 ) 16,109 165 243 389 458 797
Separation related costs - - 296 589 345 309 286 296 940
Less: Domain sales contribution - - - - - - (839 ) - (839 )
Discontinued operations, net of tax (10 ) 52 53 843 31 (0 ) 46 95 77
Tax effect of gain on sale of discontinued operations - - - - - - 563 - 563
Interest expense and other, net 18 22 28 19 17 12 15 68 44
Excess tax benefits related to stock compensation 97          23          42          146          7          189          13       162          209   
Adjusted EBITDA $ 4,273       $ 4,675       $ 4,837       $ 4,321       $

3,168

      $

3,161

      $ 3,431    $ 13,785       $ 9,760   
Net cash provided by (used in) investing activities $ 1,194       $ 2,032       $ (103 )    $ 197       $ 512       $ 449       $ 1,235    $ 3,123       $ 2,196   
Net cash provided by (used in) financing activities $(1,296 )    $ (17,734 )    $ (1,592 )    $ (24,112 )    $ (1,483 )    $ 179       $ 842    $ (20,622 )    $ (463 )
  
  
MARCHEX, INC. AND SUBSIDIARIES
  
Quarterly Financial Summary Information
(in thousands)
                                            
NON-GAAP MEASURES                     
Amounts below exclude Domain Sales and Discontinued Operations            
                                            
CONSOLIDATED    Q112    Q212    Q312    Q412    Q113    Q213    Q313
  
Non-GAAP Revenue $ 33,835 $ 32,832 $ 33,691 $ 32,436 $ 34,732 $ 37,578 $ 39,661
  
Adjusted OIBA $ 3,217 $ 3,784 $ 3,919 $ 2,498 $ 2,242 $ 2,220 $ 2,480
  
Adjusted EBITDA    $ 4,273    $ 4,675    $ 4,837    $ 4,321    $ 3,168    $ 3,161    $ 3,431
                                            
CALL-DRIVEN    Q112    Q212    Q312    Q412    Q113    Q213    Q313
  
Revenue $ 26,651 $ 27,497 $ 29,269 $ 28,470 $ 31,108 $ 33,893 $ 35,668
  
Adjusted OIBA $ 171 $ 1,513 $ 2,199 $ 1,145 $ 1,357 $ 1,496 $ 1,690
  
Adjusted EBITDA    $ 980    $ 2,316    $ 3,063    $ 2,917    $ 2,245    $ 2,399    $ 2,598
                                            
ARCHEO    Q112    Q212    Q312    Q412    Q113    Q213    Q313
  
Non-GAAP Revenue $ 7,184 $ 5,335 $ 4,422 $ 3,965 $ 3,624 $

3,685

$

3,993

  
Adjusted OIBA $ 3,046 $ 2,270 $ 1,720 $ 1,353 $ 885 $ 724 $ 790
  
Adjusted EBITDA    $ 3,293    $ 2,359    $ 1,774    $ 1,404    $ 923    $ 762    $ 833
  
Prior periods have been adjusted to confirm to current period presentation due to change in segment profitability measures.
  
  
MARCHEX, INC. AND SUBSIDIARIES
Financial Summary by Segment
(in thousands)
(unaudited)
                             
Three months ended Nine months ended
   3/31/2012       6/30/2012       9/30/2012       12/31/2012       3/31/2013       6/30/2013       9/30/2013    9/30/2012       9/30/2013
Marchex - consolidated   
Revenue excluding Discontinued Operations4 - GAAP    $ 33,835    $ 32,832    $ 33,691    $ 32,436    $ 34,732    $ 37,578    $ 40,560    $ 100,358    $ 112,870
Revenue excluding Discontinued Operations and Domain Sales2    $ 33,835    $ 32,832    $ 33,691    $ 32,436    $ 34,732    $ 37,578    $ 39,661    $ 100,358    $ 111,971
Revenue with Domain Sales3 and excluding Discontinued Operations $ 35,309 $ 36,102 $ 34,404 $ 33,299 $ 36,094 $ 38,908 $ 41,607 $ 105,815 $ 116,609
Revenue including Discontinued Operations and excluding Domain Sales2 $ 35,481 $ 34,014 $ 34,821 $ 33,990 $ 36,213 $ 39,019 $ 39,923 $ 104,316 $ 115,155
Revenue with Domain Sales3 and including Discontinued Operations    $ 36,955    $ 37,284    $ 35,534    $ 34,853    $ 37,575    $ 40,349    $ 41,869    $ 109,773    $ 119,793
Adjusted OIBA excluding Discontinued Operations and Domain Sales2    $ 3,217    $ 3,784    $ 3,919    $ 2,498    $ 2,242    $ 2,220    $ 2,480    $ 10,920    $ 6,942
Adjusted OIBA with Domain Sales and excluding Discontinued Operations4 $ 4,681 $ 7,042 $ 4,631 $ 3,360 $ 3,603 $ 3,550 $ 4,366 $ 16,354 $ 11,519
Adjusted OIBA including Discontinued Operations and excluding Domain Sales2 $ 3,252 $ 3,728 $ 3,862 $ 2,589 $ 2,205 $ 2,231 $ 2,409 $ 10,842 $ 6,845
Adjusted OIBA with Domain Sales3 and including Discontinued Operations    $ 4,715    $ 6,986    $ 4,575    $ 3,451    $ 3,568    $ 3,561    $ 4,295    $ 16,276    $ 11,424
Adjusted EBITDA excluding Discontinued Operations and Domain Sales2    $ 4,273    $ 4,675    $ 4,837    $ 4,321    $ 3,168    $ 3,161    $ 3,431    $ 13,785    $ 9,760
Adjusted EBITDA with Domain Sales3 and excluding Discontinued Operations4 $ 5,737 $ 7,933 $ 5,550 $ 5,183 $ 4,530 $ 4,490 $ 5,317 $ 19,219 $ 14,337
Adjusted EBITDA including Discontinued Operations and excluding Domain Sales2 $ 4,309 $ 4,619 $ 4,781 $ 4,412 $ 3,133 $ 3,172 $ 3,359 $ 13,709 $ 9,664
Adjusted EBITDA with Domain Sales3 and including Discontinued Operations $ 5,773 $ 7,877 $ 5,493 $ 5,275 $ 4,495 $ 4,501 $ 5,245 $ 19,143 $ 14,241
  
Call-Driven and Other1
Revenue $ 26,651 $ 27,497 $ 29,269 $ 28,470 $ 31,108 $ 33,893 $ 35,668 $ 83,417 $ 100,669
Adjusted OIBA $ 171 $ 1,513 $ 2,199 $ 1,145 $ 1,357 $ 1,496 $ 1,690 $ 3,883 $ 4,543
Adjusted EBITDA    $ 980    $ 2,316    $ 3,063    $ 2,917    $ 2,245    $ 2,399    $ 2,598 $ 6,359    $ 7,242
  
Archeo1
Revenue excluding Discontinued Operations $ 7,184 $ 5,335 $ 4,422 $ 3,965 $ 3,624 $ 3,685 $ 4,893 $ 16,941 $ 12,202
Revenue excluding Discontinued Operations and Domain Sales2 $ 7,184 $ 5,335 $ 4,422 $ 3,965 $ 3,624 $ 3,685 $ 3,994 $ 16,941 $ 11,303
Revenue with Domain Sales excluding Discontinued Operations4 $ 8,658 $ 8,605 $ 5,135 $ 4,828 $ 4,986 $ 5,016 $ 5,940 $ 22,398 $ 15,942
Revenue including Discontinued Operations and excluding Domain Sales2 $ 8,830 $ 6,517 $ 5,552 $ 5,519 $ 5,106 $ 5,127 $ 4,256 $ 20,899 $ 14,489
Revenue with Domain Sales3 and including Discontinued Operations    $ 10,304    $ 9,787    $ 6,265    $ 6,382    $ 6,467    $ 6,457    $ 6,202 $ 26,356    $ 19,126
Adjusted OIBA excluding Discontinued Operations and Domain Sales2 $ 3,046 $ 2,270 $ 1,720 $ 1,353 $ 885 $ 724 $ 790 $ 7,036 $ 2,399
Adjusted OIBA with Domain Sales3 excluding Discontinued Operations4 $ 4,510 $ 5,528 $ 2,431 $ 2,215 $ 2,246 $ 2,054 $ 2,676 $ 12,469 $ 6,976
Adjusted OIBA including Discontinued Operations and excluding Domain Sales2 $ 3,081 $ 2,215 $ 1,662 $ 1,444 $ 849 $ 735 $ 719 $ 6,958 $ 2,303
Adjusted OIBA with Domain Sales3 and including Discontinued Operations    $ 4,544    $ 5,472    $ 2,375    $ 2,306    $ 2,211    $ 2,065    $ 2,605 $ 12,391    $ 6,881
Adjusted EBITDA excluding Discontinued Operations and Domain Sales2 $ 3,293 $ 2,359 $ 1,774 $ 1,404 $ 923 $ 762 $ 833 $ 7,426 $ 2,518
Adjusted EBITDA with Domain Sales excluding Discontinued Operations4 $ 4,757 $ 5,617 $ 2,487 $ 2,266 $ 2,285 $ 2,091 $ 2,719 $ 12,860 $ 7,095
Adjusted EBITDA including Discontinued Operations and excluding Domain Sales2 $ 3,329 $ 2,303 $ 1,718 $ 1,495 $ 888 $ 773 $ 761 $ 7,350 $ 2,422
Adjusted EBITDA with Domain Sales3 and including Discontinued Operations $ 4,793 $ 5,561 $ 2,430 $ 2,358 $ 2,250 $ 2,102 $ 2,647 $ 12,784 $ 6,999
  
  
1 The financial results for Call-Driven and Archeo are preliminary and have been derived from the unaudited consolidated financial statements of Marchex, Inc. for all periods presented. Corporate overhead expenses have been reallocated in prior periods to conform to current period presentation.
  
The unaudited Call-Driven financial results include certain direct operating expenses and general corporate overhead expenses in all periods presented. The unaudited Archeo financial results include direct operating expenses for all periods presented.
  
2 In September 2013, Marchex announced and launched its Domain Marketplace and through it, commenced buying and selling of domains. Domain sales occurring after this date are included in revenue and related cost in service cost. Prior to this date, domain sales were recognized in gain on sales and disposals of intangible assets in the unaudited consolidated financial statements.
  
  
3 Includes all domain sales recognized in gain on sales and disposals of intangible assets and in revenue and service costs.
4 Operating results of discontinued operations relate to certain pay-per-click assets sold in July 2013 and are included in discontinued operations, net of tax in the unaudited consolidated financial statements.
  
  
  
MARCHEX, INC. AND SUBSIDIARIES
Archeo and Discontinued Operations
(in thousands)
(unaudited)
                                
      Three months ended Nine months ended
   3/31/2012       6/30/2012          9/30/2012       12/31/2012       3/31/2013          6/30/2013       9/30/2013    9/30/2012          9/30/2013   
Archeo1 including Discontinued Operations4            
Revenue excluding Domain Sales2 $ 8,830 $ 6,517 $ 5,552 $ 5,519 $ 5,106

$

5,127

$ 4,256

$

20,899

$ 14,489
Revenue with Domain Sales4    $ 10,304    $ 9,787       $ 6,265       $ 6,382    $ 6,467      

$

6,457

   $ 6,202   

$

26,356

      $ 19,126   
Adjusted OIBA excluding Domain Sales3 $ 3,081 $ 2,215 $ 1,662 $ 1,444 $ 849

$

735

$

719

$

6,958

$ 2,303
Adjusted OIBA with Domain Sales4    $ 4,544    $ 5,472       $ 2,375       $ 2,306    $ 2,211      

$

2,065

   $ 2,605      

$

12,391

      $ 6,881   
Adjusted EBITDA excluding Domain Sales3 $ 3,329 $ 2,303 $ 1,718 $ 1,495 $ 888

$

773

$ 761

$

7,350

$ 2,422
Adjusted EBITDA with Domain Sales4    $ 4,793    $ 5,561       $ 2,430       $ 2,358    $ 2,250      

$

2,102

   $ 2,647   

$

12,784

      $ 6,999   
  
Discontinued Operations4
Revenue $ 1,646 $ 1,182 $ 1,130 $ 1,554 $ 1,482

$

1,441

$ 262

$

3,958

$ 3,184
Adjusted OIBA $ 35 $ (56 ) $ (57 ) $ 91 $ (36 )

$

10

$ (71 )

$

(78

) $ (97 )
Adjusted EBITDA $ 36 $ (56 ) $ (56 ) $ 92 $ (36 )

$

11

$ (71 )

$

(76

) $ (96 )
  
Archeo excluding Discontinued Operations
Revenue excluding Domain Sales3 $ 7,184 $ 5,335 $ 4,422 $ 3,965 $ 3,624

$

3,685

$ 3,994

$

16,941

$ 11,303
Revenue with Domain Sales4    $ 8,658    $ 8,605       $ 5,135       $ 4,828    $ 4,986      

$

5,016

   $ 5,940   

$

22,398

      $ 15,942   
Adjusted OIBA excluding Domain Sales3 $ 3,046 $ 2,270 $ 1,720 $ 1,353 $ 885

$

724

$ 790

$

7,036

$ 2,399
Adjusted OIBA with Domain Sales4    $ 4,510    $ 5,528       $ 2,431       $ 2,215    $ 2,246      

$

2,054

   $ 2,676   

$

12,469

      $ 6,976   
Adjusted EBITDA excluding Domain Sales3 $ 3,293 $ 2,359 $ 1,774 $ 1,403 $ 923

$

762

$ 833

$

7,426

$ 2,518
Adjusted EBITDA with Domain Sales4    $ 4,757    $ 5,617       $ 2,487       $ 2,266    $ 2,285      

$

2,091

   $ 2,719   

  

  

$

12,860

      $ 7,095   
  
1 The financial results of Archeo are preliminary and have been derived from the unaudited consolidated financial statements of Marchex, Inc. for all periods presented. The unaudited Archeo financial results include direct operating expenses for all periods presented.
  
2 In September 2013, Marchex announced and launched its Domain Marketplace and through it, commenced buying and selling of domains. Domain sales occurring after this date are included in revenue and related cost in service cost. Prior to this date, domain sales were recognized in gain on sales and disposals of intangible assets in the unaudited consolidated financial statements.
  
  
3 Includes all domain sales recognized in gain on sales and disposals of intangible assets and in revenue and service costs.
4 Operating results of discontinued operations relate to certain pay-per-click assets sold in July 2013 and are included in discontinued operations, net of tax in the unaudited consolidated financial statements.
  
  
  
MARCHEX, INC. AND SUBSIDIARIES
   Corporate Overhead Cost Allocation by Segment
(in thousands)
(unaudited)
                    

Three months ended

Nine months ended
   3/31/2012       6/30/2012          9/30/2012          12/31/2012          3/31/2013          6/30/2013          9/30/2013       9/30/2012       9/30/2013   
Call Driven and Other1
Adjusted OIBA $ 171 $ 1,513 $ 2,199 $ 1,145 $ 1,356 $ 1,497

$

1,690

$ 3,883 $ 4,543
Adjusted EBITDA $ 980       $ 2,316       $ 3,063       $ 2,917       $ 2,245       $ 2,399      

$

2,598

   $ 6,359    $ 7,243   
  
Effect of Reallocated Corporate Overhead Costs:
Corporate Overhead Costs5 $ 675       $ 701       $ 574       $ 616       $ 855       $ 772      

$

658

   $ 1,950    $ 2,285   
Adjusted OIBA before Reallocation of corporate overhead costs $ 846 $ 2,214 $ 2,774 $ 1,762 $ 2,212 $ 2,268

$

2,348

$ 5,834 $ 6,828
Adjusted EBITDA before Reallocation corporate overhead costs $ 1,656       $ 3,017       $ 3,637       $ 3,533       $ 3,100       $ 3,171      

$

3,256

   $ 8,309    $ 9,527   
  
Archeo1
Adjusted OIBA excluding Discontinued Operations4 and Domain Sales2 $ 3,046 $ 2,270 $ 1,720 $ 1,353 $ 886 $ 724

$

790

$ 7,036 $ 2,399
Adjusted OIBA with Domain Sales4 excluding Discontinued Operations $ 4,510       $ 5,528       $ 2,431       $ 2,215       $ 2,246       $ 2,054      

$

2,676

   $ 12,469    $ 6,976   
Adjusted OIBA including Discontinued Operations4 $ 3,081 $ 2,215 $ 1,662 $ 1,444 $ 849 $ 735

$

719

$ 6,958 $ 2,303
Adjusted OIBA with Domain Sales4 and including Discontinued Operations $ 4,544       $ 5,472       $ 2,375       $ 2,306       $ 2,211       $ 2,065      

$

2,605

   $ 12,391    $ 6,881   
Adjusted EBITDA excluding Discontinued Operations4 and Domain Sales2 $ 3,293 $ 2,359 $ 1,774 $ 1,404 $ 923 $ 762

$

833

$ 7,426 $ 2,518
Adjusted EBITDA with Domain Sales4 excluding Discontinued Operations $ 4,757       $ 5,617       $ 2,487       $ 2,266       $ 2,285       $

2,091

     

$

2,719

   $ 12,860    $ 7,096   
Adjusted EBITDA including Discontinued Operations4 $ 3,329 $ 2,303 $ 1,718 $ 1,495 $ 888 $ 773

$

761

$ 7,350 $ 2,422
Adjusted EBITDA with Domain Sales4 including Discontinued Operations $ 4,793       $ 5,561       $ 2,430       $ 2,358       $ 2,250       $ 2,102      

$

2,647

   $ 12,784    $ 6,999   
  
Effect of Reallocated Corporate Overhead Costs:
Corporate Overhead Costs5 $ (675 ) $ (701 ) $ (574 ) $ (616 ) $ (855 ) $ (772 )

$

(658

) $ (1,950 ) $ (2,285 )
Adjusted OIBA excluding Discontinued Operations4 and Domain Sales2 $ 2,372 $ 1,569 $ 1,145 $ 736 $ 30 $ (48 )

$

132

$ 5,086 $ 114
Adjusted OIBA with Domain Sales4 excluding Discontinued Operations $ 3,835       $ 4,827       $ 1,857       $ 1,599       $ 1,391       $ 1,282      

$

2,018

   $ 10,519    $ 4,691   
Adjusted OIBA including Discontinued Operations4 $ 2,406 $ 1,514 $ 1,088 $ 828 $ (6 ) $ (37 )

$

61

$ 5,008 $ 18
Adjusted OIBA with Domain Sales4 and including Discontinued Operations $ 3,869       $ 4,771       $ 1,801       $ 1,690       $ 1,356       $ 1,293      

$

1,947

   $ 10,441    $ 4,596   
Adjusted EBITDA excluding Discontinued Operations4 and Domain Sales2 $ 2,618 $ 1,658 $ 1,200 $ 788 $ 68 $ (10 )

$

175

$ 5,476 $ 233
Adjusted EBITDA with Domain Sales4 excluding Discontinued Operations $ 4,082       $ 4,916       $ 1,913       $ 1,650       $ 1,430       $ 1,319      

$

2,061

   $ 10,910    $ 4,811   
Adjusted EBITDA including Discontinued Operations4 $ 2,654 $ 1,602 $ 1,144 $ 879 $ 33 $ 1

$

103

$ 5,400 $ 137
Adjusted EBITDA with Domain Sales4 including Discontinued Operations $ 4,118       $ 4,860       $ 1,856       $ 1,741       $ 1,395       $ 1,330      

$

1,989

   $ 10,834    $ 4,714   
     
1 The financial results for Call-Driven and Archeo are preliminary and have been derived from the unaudited consolidated financial statements of Marchex, Inc. for all periods presented. Corporate overhead expenses have been reallocated in prior periods to conform to current period presentation. The unaudited Call-Driven financial results include certain direct operating expenses and general corporate overhead expenses in all periods presented. The unaudited Archeo financial results include direct operating expenses for all periods presented.
2 In September 2013, Marchex announced and launched its Domain Marketplace and through it, commenced buying and selling of domains.

Domain sales occurring after this date are included in revenue and related cost in service cost. Prior to this date, domain sales were recognized in gain on sales and disposals of intangible assets in the unaudited consolidated financial statements.

3 Includes all domain sales recognized in gain on sales and disposals of intangible assets and in revenue and service costs.
  
  
MARCHEX, INC. AND SUBSIDIARIES
Reconciliation to Reported Financial and Non-GAAP Information
(in thousands)
(unaudited)
                                   
Three months ended Nine months ended
   3/31/2012       6/30/2012          9/30/2012          12/31/2012       3/31/2013          6/30/2013       9/30/2013       9/30/2012          9/30/2013   
Revenue
Consolidated excluding Discontinued Operations - GAAP $ 33,835 $ 32,832 $ 33,691 $ 32,436 $ 34,732 $ 37,578 $ 40,560 $ 100,358 $ 112,870
Less: Domain sales recognized in revenue3    -       -          -          -       -          -       899       -          899   
Consolidated excluding Domain Sales1 $ 33,835 $ 32,832 $ 33,691 $ 32,436 $ 34,732 $ 37,578 $ 39,661 $ 100,358 $ 111,971
Add: Domain sales recognized in revenue5 - - - - - - 899 - 899
Add: Domain Sales1    1,474       3,270          713          863       1,362          1,330       1,047       5,457          3,739   
Consolidated with Domain Sales1 35,309 36,102 34,404 33,299 36,094 38,908 41,607 105,815 116,609
Add: Discontinued Operations6    1,646       1,182          1,130          1,554       1,481          1,441       262       3,958          3,184   
Consolidated with Domain Sales and Discontinued Operations1 $ 36,955 $ 37,284 $ 35,534 $ 34,853 $ 37,575 $ 40,349 $ 41,869 $ 109,773 $ 119,793
Less: Domain sales recognized in revenue3 - - - - - - 899 - 899
Less: Domain Sales1    1,474       3,270          713          863       1,362          1,330       1,047       5,457          3,739   

Consolidated with Discontinued Operations1 and excluding Domain Sales

$ 35,481 $ 34,014 $ 34,821 $ 33,990 $ 36,213 $ 39,019 $ 39,923 $ 104,316 $ 115,155
Less: Discontinued Operations 1,646 1,182 1,130 1,554 1,481 1,441 262 3,958 3,184
Archeo excluding

Domain Sales4

 7,184 5,335 4,422

3,965

3,624 3,685 3,993 16,941 11,302
Other    181       175          174         

181

      171          162       131       530          464   
Call-Driven4 $ 26,470    $ 27,322       $ 29,095       $ 28,290    $ 30,937       $ 33,731    $ 35,537    $ 82,887       $ 100,205   
  
Adjusted operating income4
Consolidated excluding Discontinued Operations $ 3,217 $ 3,784 $ 3,919 $ 2,498 $ 2,242 $ 2,220 $ 2,480 $ 10,920 $ 6,942
Add: Gain on Domain Sales and Domain Sales Contribution7    1,463       3,258          713          862       1,362          1,330       1,886       5,434          4,578   
Consolidated with Domain Sales 4,680 7,042 4,632 3,360 3,604 3,550 4,366 16,354 11,520
Add: Discontinued Operations6    35       (56 )       (57 )       91       (36 )       10       (71 )    (78 )       (97 )
Consolidated with Domain Sales and Discontinued Operations $ 4,715 $ 6,986 $ 4,575 $ 3,451 $ 3,568 $ 3,560 $ 4,295 $ 16,276 $ 11,423
Less: Gain on Domain Sales and Domain Sales Contribution7    1,463       3,258          713          862       1,362          1,330       1,886       5,434          4,578   
Consolidated with Discontinued Operations $ 3,252 $ 3,728 $ 3,862 $ 2,589 $ 2,206 $ 2,230 $ 2,409 $ 10,841 $ 6,845
Less: Discontinued Operations 35 (56 ) (57 ) 91 (36 ) 10 (71 ) (78 ) (97 )
Archeo excluding

Domain Sales4

 3,046 2,271 1,720 1,353

885

724 790 7,037

2,399

Other    71       116          104          105       106          86       75       291          267   
Call-Driven4 $ 100    $ 1,397       $ 2,095       $ 1,040    $ 1,251       $ 1,410    $ 1,615    $ 3,592       $ 4,276   
  
Adjusted EBITDA5
Consolidated excluding Discontinued Operations $ 4,273 $ 4,675 $ 4,837 $

4,321

$ 3,168 $ 3,161 $ 3,431 $ 13,785 $ 9,760
Add: Gain on Domain Sales and Domain Sales Contribution7    1,463       3,258          713          862       1,362          1,330       1,886       5,434          4,577   
Consolidated with Domain Sales 5,736 7,933 5,550

5,183

4,530 4,491 5,317 19,219 14,338
Add: Discontinued Operations6    36       (56 )       (56 )       92       (36 )       11       (71 )    (76 )       (96 )
Consolidated with Domain Sales and Discontinued Operations $ 5,773 $ 7,877 $ 5,493 $ 5,275 $ 4,495 $ 4,501 $ 5,245 $ 19,143 $ 14,242
Less: Gain on Domain Sales and Domain Sales Contribution7    1,463       3,258          713         

863

      1,362          1,330       1,886       5,434          4,578   
Consolidated with Discontinued Operations $ 4,309 $ 4,619 $ 4,781 $ 4,411 $ 3,132 $ 3,172 $ 3,360 $ 13,709 $ 9,664
Less: Discontinued Operations 36 (56 ) (56 ) 92 (36 ) 11 (71 ) (76 ) (96 )
Archeo excluding

Domain Sales

3,293 2,359 1,774

1,404

923 762 833 7,426 2,518
Other    71       116          104          105       106          86       75       291          267   
Call-Driven4 $ 909    $ 2,200       $ 2,959       $ 2,812    $ 2,139       $ 2,313    $ 2,523    $ 6,068       $ 6,975   
  
1 These are non-GAAP measures of financial results which are adjusted for sales proceeds from sales of intangible assets, domain sales recognized as revenue3 and/or revenue from Discontinued Operations6.
  
2 Sales proceeds from sales of intangible domain assets.
3 In September 2013, Marchex announced and launched its Domain Marketplace and through it, commenced buying and selling of domains.

Domain sales occurring after this date are included in revenue and related cost in service cost. Prior to this date, domain sales were recognized in gain on sales and disposals of intangible assets in the unaudited condensed consolidated financial statements.

  
4

The financial results for Call-Driven and Archeo are preliminary and have been derived from the unaudited condensed consolidated financial statements of Marchex, Inc. for all periods presented. Corporate overhead expenses have been reallocated in prior periods to conform to current period presentation. The unaudited Call-Driven financial results include certain direct operating expenses and general corporate overhead expenses in all periods presented. The unaudited Archeo financial results include direct operating expenses for all periods presented.

  
  
  
5 These are non-GAAP measures of operating results and liquidity. These non-GAAP measures are adjusted for net gains from sales of intangible assets, direct contribution of domain sales sold through Marchex's Domain Marketplace5 and/or include operating results of Discontinued Operations6.
  
6

Financial results of discontinued operations related to certain pay-per-click assets sold in July 2013 and are included in discontinued operations, net of tax in the unaudited condensed consolidated financial statements.

  
7 Includes net gains from sales of intangible assets and direct contribution of domain sales sold through Marchex's Domain Marketplace5.

Source: Marchex, Inc.

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

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