UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): May 10, 2005
Marchex, Inc.
(Exact name of Registrant as Specified in its Charter)
| Delaware | 000-50658 | 35-2194038 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) | (I.R.S. Employer Identification No.) |
413 Pine Street
Suite 500
Seattle, Washington 98101
(Address of Principal Executive Offices)
(206) 331-3300
(Registrant’s telephone number, including area code)
Check the appropriate box if the Form 8-K filing is intended to simultaneously satisfy the reporting obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act |
| ¨ | Soliciting material pursuant to Rule 14a-12 of the Exchange Act |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) Exchange Act |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) Exchange Act |
Item 2.02 Results of Operations and Financial Condition.
On May 10, 2005, Marchex, Inc. (“Marchex”) is issuing a press release and holding a conference call regarding its financial results for the quarter ended March 31, 2005 (the “Press Release”). The full text of the Press Release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information in this Current Report (including Exhibit 99.1) is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Marchex is referencing non-GAAP financial information in both the Press Release and on the conference call. A reconciliation of these non-GAAP financial measures to the comparable GAAP financial measures is contained in the attached Press Release. Disclosures regarding definitions of these financial measures used by Marchex and why Marchex’s management believes these financial measures provide useful information to investors is also included in the Press Release.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
| Exhibit No. |
Description | |
| 99.1 | Press Release of Marchex, Inc., dated May 10, 2005. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Current Report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: May 10, 2005 | MARCHEX, INC. | |||
| By: | /s/ Michael A. Arends | |||
| Name: | Michael A. Arends | |||
| Title: | Chief Financial Officer (Principal Financial and Accounting Officer) | |||
EXHIBIT INDEX
| Exhibit No. |
Description | |
| 99.1 | Press Release of Marchex, Inc., dated May 10, 2005. |
Exhibit 99.1
Marchex Reports First Quarter 2005 Financial Results
SEATTLE, WA – May 10, 2005 - Marchex, Inc. (NASDAQ: MCHX, MCHXP), today announced its results for the first quarter ended March 31, 2005.
| • | Revenue was $18.4 million for the first quarter of 2005, a 142% increase compared to $7.6 million for the same period of 2004. |
| • | Adjusted operating income before amortization was $4.2 million for the first quarter of 2005, a 582% increase compared to $612,000 for the same period for 2004. A reconciliation of non-GAAP adjusted operating income before amortization to GAAP operating income (loss) and GAAP net income (loss) is attached to the financial tables included in this release. |
| • | GAAP net income applicable to common stockholders was $388,000 for the first quarter of 2005, or $0.01 per share, compared to a GAAP net loss of $1.4 million for the same period of 2004, or a GAAP net loss of $0.11 per share. |
| • | EBITDA was $4.7 million in the first quarter of 2005, an increase of 982% compared to $438,000 for the same period in 2004. A reconciliation of non-GAAP EBITDA to GAAP net cash provided by operating activities is attached to the financial tables included in this release. |
“During the quarter, we continued to experience progress in our business as a result of successfully executing several strategic and operational initiatives throughout 2004 and thus far in 2005,” said Russell C. Horowitz, Marchex Chairman and CEO. “We took several steps toward becoming a leader in search engine marketing, local search, and direct navigation. Today, we are building an ecosystem in which each of our services can benefit one another to drive growth and expand margins for Marchex as a whole.”
Financial Guidance
Marchex announced that it is updating its financial guidance as follows:
| 2005 consolidated revenue estimate: | More than $86 million | |
| 2005 adjusted operating income before amortization margin target: | More than 28% | |
The company is also reiterating its long-term adjusted operating income before amortization margin target of 30% or more.
Conference Call and Webcast Information
Management will hold a conference call, starting at 5:00 p.m. EDT on Tuesday, May 10th to discuss these quarterly 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/ir.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) helps merchants sell products and services through multiple online channels. The company connects merchants with consumers who are searching for information, products and services on the Internet. Marchex’s platform of integrated performance-based advertising and search marketing services enables merchants to efficiently market and sell their products and services across multiple online distribution channels, including search engines, product shopping engines, directories and selected Web properties.
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, 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. We disclaim any intention or obligation to update any forward-looking statements.
About non-GAAP financial measures
To supplement Marchex’s consolidated financial statements presented in accordance with GAAP, Marchex uses certain non-GAAP measures of financial performance and liquidity. Marchex reports operating income before amortization (OIBA) which 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 (Adjusted OIBA) which excludes both acquisition-related retention consideration, as management views this as part of the earn-out incentives related to the Enhance Interactive acquisition transaction, and a facility relocation expense. Both of these considerations are viewed as non-recurring in nature with the facility relocation expense recognized in calendar year 2004 and the earn-out consideration related to calendar year 2004. 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. Marchex also reports EBITDA, which represents income before interest, income taxes, depreciation, amortization, and stock compensation expense. Marchex believes that 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.
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.
The accompanying tables have more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures.
For further information, contact:
Press:
Mark S. Peterson
VP of Public Relations
Marchex, Inc.
206-331-3344
mark@marchex.com
Investor relations:
Trevor Caldwell
VP of Investor Relations & Strategic Initiatives
Marchex, Inc.
206-331-3316
tcaldwell@marchex.com
#####
MARCHEX, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(unaudited)
| Quarter March 31, |
Quarter March 31, |
|||||||
| Revenue |
$ | 7,601,911 | $ | 18,395,983 | ||||
| Expenses: |
||||||||
| Service costs |
4,779,575 | 10,668,907 | ||||||
| Sales and marketing |
1,009,972 | 1,324,986 | ||||||
| Product development |
505,535 | 774,549 | ||||||
| General and administrative |
694,748 | 1,452,034 | ||||||
| Acquisition-related retention consideration |
132,936 | — | ||||||
| Facility relocation |
230,459 | — | ||||||
| Stock-based compensation |
360,764 | 146,538 | ||||||
| Amortization of acquired intangible assets |
1,034,868 | 3,083,157 | ||||||
| 8,748,857 | 17,450,171 | |||||||
| Income (loss) from operations |
(1,146,946 | ) | 945,812 | |||||
| Other income (expense): |
||||||||
| Interest income |
11,016 | 268,383 | ||||||
| Interest expense |
(325 | ) | (1,860 | ) | ||||
| Adjustment to fair value of redemption obligation |
55,250 | — | ||||||
| Other |
3,644 | 4,000 | ||||||
| 69,585 | 270,523 | |||||||
| Income (loss) before provision for income taxes |
(1,077,361 | ) | 1,216,335 | |||||
| Income tax expense (benefit) |
(53,700 | ) | 478,933 | |||||
| Net income (loss) |
(1,023,661 | ) | 737,402 | |||||
| Convertible preferred stock dividends |
— | 348,993 | ||||||
| Accretion to redemption value of redeemable convertible preferred stock |
402,679 | — | ||||||
| Net income (loss) applicable to common stockholders |
$ | (1,426,340 | ) | $ | 388,409 | |||
| Net income (loss) per share applicable to common stockholders – basic |
$ | (0.11 | ) | $ | 0.01 | |||
| Net income (loss) per share applicable to common stockholders – diluted |
$ | (0.11 | ) | $ | 0.01 | |||
| Shares used to calculate basic net income (loss) per share applicable to common stockholders |
13,446,542 | 30,245,678 | ||||||
| Shares used to calculate diluted net income (loss) per share applicable to common stockholders |
13,446,542 | 32,920,472 | ||||||
MARCHEX, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(unaudited)
| December 31, 2004 |
March 31, 2005 |
|||||||
| Assets | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 24,933,066 | $ | 86,465,826 | ||||
| Trade accounts receivable, net |
4,773,646 | 6,005,845 | ||||||
| Prepaid expenses and other current assets |
513,427 | 1,046,059 | ||||||
| Refundable income taxes |
902,246 | 1,509,531 | ||||||
| Deferred tax assets |
522,754 | 415,469 | ||||||
| Total current assets |
31,645,139 | 95,442,730 | ||||||
| Property and equipment, net |
1,508,446 | 1,542,106 | ||||||
| Deferred tax assets |
— | 402,484 | ||||||
| Intangibles and other assets |
1,067,896 | 9,159,167 | ||||||
| Goodwill |
32,375,966 | 142,482,696 | ||||||
| Intangible assets from acquisitions, net |
4,996,289 | 55,756,253 | ||||||
| Total assets |
$ | 71,593,736 | $ | 304,785,436 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 6,227,274 | $ | 6,180,961 | ||||
| Accrued expenses and other current liabilities |
1,170,039 | 1,979,509 | ||||||
| Deferred revenue |
1,947,617 | 1,908,869 | ||||||
| Earn-out liability payable |
6,237,578 | — | ||||||
| Total current liabilities |
15,582,508 | 10,069,339 | ||||||
| Deferred tax liabilities |
245,657 | — | ||||||
| Other non-current liabilities |
93,539 | 76,564 | ||||||
| Total liabilities |
15,921,704 | 10,145,903 | ||||||
| Stockholders’ equity: |
||||||||
| Convertible preferred stock |
— | 55,205,369 | ||||||
| Class A common stock |
122,500 | 122,500 | ||||||
| Class B common stock |
135,115 | 231,618 | ||||||
| Additional paid-in capital |
60,577,997 | 243,708,679 | ||||||
| Deferred stock-based compensation |
(521,820 | ) | (375,282 | ) | ||||
| Accumulated deficit |
(4,641,760 | ) | (4,253,351 | ) | ||||
| Total stockholders’ equity |
55,672,032 | 294,639,533 | ||||||
| Total liabilities and stockholders’ equity |
$ | 71,593,736 | $ | 304,785,436 | ||||
MARCHEX, INC. AND SUBSIDIARIES
Reconciliation of Adjusted Operating Income Before Amortization and
Operating Income Before Amortization (OIBA) to GAAP Net Income (Loss)
(unaudited)
| Quarter March 31, |
Quarter March 31, |
|||||||
| Adjusted operating income before amortization (Adjusted OIBA) |
$ | 612,081 | $ | 4,175,507 | ||||
| Acquisition-related retention consideration |
(132,936 | ) | — | |||||
| Facility relocation |
(230,459 | ) | — | |||||
| Operating income before amortization (OIBA) |
248,686 | 4,175,507 | ||||||
| Stock-based compensation |
(360,764 | ) | (146,538 | ) | ||||
| Amortization of acquired intangible assets |
(1,034,868 | ) | (3,083,157 | ) | ||||
| Income (loss) from operations |
(1,146,946 | ) | 945,812 | |||||
| Interest income and other, net |
69,585 | 270,523 | ||||||
| Income (loss) before provision for income taxes |
(1,077,361 | ) | 1,216,335 | |||||
| Income tax expense (benefit) |
(53,700 | ) | 478,933 | |||||
| Net income (loss) |
(1,023,661 | ) | 737,402 | |||||
| Convertible preferred stock dividends |
— | 348,993 | ||||||
| Accretion to redemption value of redeemable convertible preferred stock |
402,679 | — | ||||||
| Net income (loss) applicable to common stockholders |
$ | (1,426,340 | ) | $ | 388,409 | |||
| MARCHEX, INC. AND SUBSIDIARIES | ||||||||
| Reconciliation from Net Cash provided by Operating Activities to EBITDA | ||||||||
| (unaudited) | ||||||||
| Quarter March 31, |
Quarter March 31, |
|||||||
| Net cash provided by operating activities |
$ | 1,062,094 | $ | 1,758,826 | ||||
| Changes in asset and liabilities, net of effects of acquisitions |
(326,012 | ) | 2,885,731 | |||||
| Provision for income taxes |
(53,700 | ) | 478,933 | |||||
| Other items - facility relocation (1) |
(230,459 | ) | 8,738 | |||||
| Interest income and other, net |
(14,335 | ) | (266,523 | ) | ||||
| Tax benefits from exercise of stock options |
— | (129,774 | ) | |||||
| EBITDA |
$ | 437,588 | $ | 4,735,931 | ||||
| (1) | Other items consist of a facility relocation charge. |