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General and administrative

$ 42,575

$ 50,496

Expenses:

Service costs

^[1]

20,688

32,354

Sales and marketing

3,657

3,382

Product development

7,693

7,560

5,699

5,361

Amortization of intangible assets from acquisitions

^[2]

403

Acquisition and disposition related costs

225

Total operating expenses

37,962

49,060

Interest and line of credit expense

4,613

1,436

Other income (expense):

(19)

Other

(6)

Total other expense

(25)

(2)

Income from continuing operations before provision for income taxes

4,588

1,434

Income tax expense

588

Net income from continuing operations

4,583

846

Discontinued operations, net of tax

Net income

4,583

855

Dividends paid to participating securities

(19)

(36)

Net income applicable to common stockholders

$ 4,564

$ 819

Basic and diluted net income per share applicable to Class A and Class B common stockholders:

Continuing operations

$ 0.11

$ 0.02

Discontinued operations, net of tax

0.00

Basic and diluted net income applicable to Class A and Class B common stockholders

0.11

0.02

Dividends paid per share

$ 0.02

Class A

Other income (expense):

Net income from continuing operations

$ 573

$ 170

Net income applicable to common stockholders

$ 573

$ 172

Shares used to calculate basic net income per share applicable to common stockholders

Shares used to calculate basic net income (loss) per share applicable to common stockholders

5,233

7,741

Shares used to calculate diluted net income per share applicable to common stockholders

Shares used to calculate diluted net income (loss) per share applicable to common stockholders

5,233

7,741

Class B

Other income (expense):

Net income from continuing operations

$ 4,010

$ 676

Dividends paid to participating securities

(19)

(36)

Net income applicable to common stockholders

$ 3,991

$ 647

Shares used to calculate basic net income per share applicable to common stockholders

Shares used to calculate basic net income (loss) per share applicable to common stockholders

35,766

29,035

Shares used to calculate diluted net income per share applicable to common stockholders

Shares used to calculate diluted net income (loss) per share applicable to common stockholders

41,310

39,761

[1]	Excludes amortization of intangible assets from acquisitions
[2]	Components of amortization of intangible assets from acquisitions: Service costs $ 403 $ -

Condensed Consolidated Statements of Operations (Parenthetical) $ in Thousands	3 Months Ended
	Mar. 31, 2014 USD ($)
Service costs	$ 403

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Cash flows from operating activities:
Net income	$ 4,583	$ 855
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and depreciation	877	1,356
Allowance for doubtful accounts and advertiser credits	(40)	701
Stock-based compensation	2,794	2,883
Deferred income taxes		576
Change in certain assets and liabilities:
Accounts receivable, net	(1,962)	(5,741)
Refundable taxes	(2)	12
Prepaid expenses, other current assets and other assets	58	187
Accounts payable	(125)	5,976
Accrued expenses and other current liabilities	782	1,135
Deferred revenue	(663)	243
Other non-current liabilities	(102)	(105)
Net cash provided by operating activities	6,200	8,078
Cash flows from investing activities:
Purchases of property and equipment	(853)	(672)
Purchases of intangible assets and changes in other non-current assets	(24)	(135)
Net cash used in investing activities	(877)	(807)
Cash flows from financing activities:
Deferred offering costs		(67)
Tax withholding related to restricted stock awards		(148)
Common stock dividend payments	(839)	(771)
Repurchase of Class B common stock	(931)
Proceeds from exercises of stock options and issuance of restricted stock to employees, net of repurchases of forfeited unvested restricted stock	52	1,329
Proceeds from employee stock purchase plan	21
Net cash provided by (used in) financing activities	(1,697)	343
Net increase in cash and cash equivalents	3,626	7,614
Cash and cash equivalents at beginning of period	80,032	30,912
Cash and cash equivalents at end of period	$ 83,658	$ 38,526

Description of Business and Basis of Presentation

3 Months Ended

Mar. 31, 2015

Description of Business and Basis of Presentation

(1) Description of Business and Basis of Presentation

Marchex, Inc. (the “Company”) was incorporated in the state of Delaware on January 17, 2003. The Company is a mobile advertising analytics company that connects online behavior to real-world, offline actions. The Company provides products and services for businesses of all sizes that depend on consumer phone calls to drive sales. The Company’s technology can facilitate call quality, analyze calls in real time and measure the outcomes of calls while its technology platform delivers performance-based, pay-for-call advertising across numerous mobile and online publishers to connect consumers with businesses over the phone. The Company also provides performance-based online advertising that connects advertisers with consumers across our owned websites as well as third party websites.

The accompanying unaudited condensed consolidated financial statements of Marchex, Inc. and its wholly-owned subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for annual financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015, or for any other period. The balance sheet at December 31, 2014 has been derived from the audited consolidated financial statements at that date but does not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. These condensed consolidated financial statements and notes should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes included in the Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC.

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All inter-company transactions and balances have been eliminated in consolidation. Certain reclassifications have been made to the condensed consolidated financial statements in the prior period to conform to the current period presentation.

In July 2013, the Company sold certain assets related to Archeo’s pay-per-click advertising services. As a result, the operating results related to these certain pay-per-click assets are shown as discontinued operations in the condensed consolidated statements of operations for all periods presented (see Note 14. Discontinued Operations).

In April 2015, the Company sold certain assets related to Archeo’s domain operations, including the bulk of its domain name portfolio. The Company anticipates the divesture will be classified as discontinued operations for the quarter ending June 30, 2015.

Significant Accounting Policies

3 Months Ended

Mar. 31, 2015

Significant Accounting Policies

(2) Significant Accounting Policies

The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These judgments are difficult as matters that are inherently uncertain directly impact their valuation and accounting. Actual results may vary from management’s estimates and assumptions.

Recent Accounting Pronouncement(s) Not Yet Effective

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09), which amends the existing accounting standards for revenue recognition. ASU 2014-09 requires an entity to recognize the amount of revenue to which it expects to be entitled when products or services are transferred to customers. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is not permitted. ASU 2014-09 may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. We are currently in the process of evaluating the impact of adoption of ASU 2014-09 on our consolidated financial statements.

Revenues

The following table presents the Company’s revenues by segment for the periods presented (in thousands):


	Three months ended March 31,
	2014		2015
Call-Driven	$	45,492	$	35,029
Archeo		5,004		7,546

Total Revenue	$	50,496	$	42,575

Call-Driven revenue consists of payments from advertisers for pay-for-call marketing services and for use of the Company’s call analytics technology. Call-Driven revenue also consists of payments from reseller partners for use of the Company’s technology platform and marketing services, which they offer to their small business customers, as well as payments from advertisers for cost-per-action marketing services. Archeo revenue includes revenue generated from advertisements on the Company’s network of owned and operated websites and third-party distribution, as well as from the sale of domain names. See Note 6. Segment Reporting and Geographic Information for further discussion regarding the Company’s operating segments.

The following table presents the Company’s revenues, by revenue source, for the periods presented (in thousands):


	Three months ended March 31,
	2014		2015
Partner and Other Revenue Sources	$	46,870	$	35,694
Proprietary Website Traffic Sources and Domain Names		3,626		6,881

Total Revenue	$	50,496	$	42,575

The Company’s partner network revenues are primarily generated using third party distribution networks to deliver the pay-for-call and pay-for-click advertisers’ listings. The distribution network includes mobile and online search engines and applications, directories, destination sites, shopping engines, third party Internet domains or websites; other targeted web and mobile-based content, mobile carriers and other offline sources. The Company generates revenue upon delivery of qualified and reported phone calls or click-throughs to our advertisers or to advertising services providers’ listings. The Company also generates revenue from cost-per-action services, which occurs when a user makes a phone call from the Company’s advertiser’s listing or is redirected from one of the Company’s websites or a third party website in the Company’s distribution network to an advertiser website and completes the specified action. The Company pays a revenue share to the distribution partners to access their mobile, online, offline and other user traffic. Other revenues include call provisioning and call tracking services, presence management services, campaign management services and outsourced search marketing platforms.

The Company’s proprietary website traffic revenues are generated from its portfolio of owned websites which are monetized with pay-for-call or pay-per-click listings that are relevant to the websites, as well as other forms of advertising, including banner advertising and sponsorships. When an online user navigates to one of the Company’s owned and operated websites and calls or clicks on a particular listing or completes the specified action, the Company receives a fee. Other proprietary website traffic revenues include domain name sales.

Stock-based Compensation Plans

3 Months Ended

Mar. 31, 2015

Stock-based Compensation Plans

(3) Stock-based Compensation Plans

Stock-based compensation expense has been included in the same lines as compensation paid to the same employees in the condensed consolidated statement of operations. Stock-based compensation expense was included in the following operating expense categories as follows (in thousands):


	Three months ended March 31,
	2014		2015
Service costs	$	282	$	223
Sales and marketing		204		246
Product development		659		579
General and administrative		1,738		1,746

Total stock-based compensation	$	2,883	$	2,794

For the three months ended March 31, 2014 and 2015, the income tax benefit related to stock-based compensation included in net income (loss) from continuing operations was $0.9 million and $0, respectively. FASB ASC 718 requires the benefits of tax deductions in excess of the stock-based compensation cost to be classified as financing cash inflows and is shown as “Excess tax benefit related to stock-based compensation” on the consolidated statement of cash flows. In addition, a tax benefit and a credit to additional paid-in capital for the excess deductions is not recognized until that deduction reduces taxes payable. For the three months ended March 31, 2014 and 2015, the Company incurred excess tax deductions of $1.3 million and $27,000, which were not recorded because the Company is in a cumulative loss carryforward position for income taxes.

The Company uses the Black-Scholes option pricing model to estimate the per share fair value of stock option grants with time-based vesting. The Black-Scholes model relies on a number of key assumptions to calculate estimated fair values. For the quarters ended March 31, 2014 and 2015, the expected life of each award granted was determined based on historical experience with similar awards, giving consideration to contractual terms, anticipated exercise patterns, vesting schedules and forfeitures. Expected volatility is based on historical volatility levels of the Company’s Class B common stock and the expected volatility of companies in similar industries that have similar vesting and contractual terms. The risk-free interest rate is based on the implied yield currently available on U.S. Treasury issues with terms approximately equal to the expected life of the option. The Company uses an expected annual dividend yield in consideration of the Company’s common stock dividend payments.

The following weighted average assumptions were used in determining the fair value of time-vested stock option grants for the periods presented:


	Three months ended March 31,
	2014	2015
Expected life (in years)	4.0	4.0-6.25
Risk-free interest rate	1.32%	1.13%-1.54%
Expected volatility	55%-60%	62%-65%
Expected dividend yield	0.76%	0.23%-0.36%

Stock option activity during the three months ended March 31, 2015 is summarized as follows:


	Shares			Weighted average exercise price		Weighted average remaining contractual term (in years)		Aggregate intrinsic value (in thousands)
Balance at December 31, 2014		7,797,228		$	7.90		6.58	$	800
Options granted		359,215			4.13
Options forfeited		(46,217	)		7.21
Options expired		(122,837	)		15.66
Options exercised		(12,312	)		4.10

Balance at March 31, 2015		7,975,077		$	7.63		6.53	$	151

The Company issues restricted stock awards and restricted stock units to employees for future services and in connection with acquisitions. Restricted stock units entitle the holder to receive one share of the Company’s Class B common stock upon satisfaction of certain service conditions. Restricted stock awards and restricted stock units are generally measured at fair value on the date of grant based on the number of awards granted and the quoted price of the Company’s common stock. Restricted stock awards and restricted stock units are accounted for under FASB ASC 718 using the straight-line method net of estimated forfeitures.

Restricted stock awards and restricted stock unit activity during the three months ended March 31, 2015 is summarized as follows:


	Shares/ Units			Weighted average grant date fair value
Unvested balance at December 31, 2014		2,140,762		$	6.55
Granted		255,000			4.02
Vested		(145,375	)		6.36
Forfeited		(35,362	)		5.18

Unvested balance at March 31, 2015		2,215,025		$	6.29

In the three months ended March 31, 2014, the Company repurchased 12,008 shares from certain executives for minimum withholding taxes on 41,000 restricted stock award vests. The number of shares repurchased was based on the value on the vesting date of the restricted stock awards equivalent to the value of the executives’ minimum withholding taxes of $148,000, which was remitted in cash to the appropriate taxing authorities. The payments are reflected as a financing activity within the consolidated statement of cash flows when paid. The payments had the effect of share repurchases by the Company as they reduced the number of shares that would have otherwise been issued on the vesting date and were recorded as a reduction of additional paid-in capital.

In February 2015, vesting of approximately 139,000 stock options and 108,000 restricted stock awards were fully accelerated in connection with an executive’s employment agreement.

Net Income Per Share

3 Months Ended

Mar. 31, 2015

Net Income Per Share

(4) Net Income Per Share

The Company computes net income per share of Class A and Class B common stock using the two class method. Under the provisions of the two class method, basic net income per share is computed by dividing net income applicable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed by dividing net income applicable to common stockholders by the weighted average number of common and dilutive common equivalent shares outstanding during the period. The computation of the diluted net income per share of Class B common stock assumes the conversion of Class A common stock to Class B common stock, while the diluted net income per share of Class A common stock does not assume the conversion of those shares.

In accordance with the two class method, the undistributed earnings for each period are allocated based on the contractual participation rights of the Class A and Class B common shares and the restricted shares as if the earnings for the year had been distributed. Considering the terms of the Company’s charter which provides that, if and when dividends are declared on our common stock in accordance with Delaware General Corporation Law, equivalent dividends shall be paid with respect to the shares of Class A common stock and Class B common stock and that both classes of common stock have identical dividend rights and would share equally in our net assets in the event of liquidation, we have allocated undistributed losses on a proportionate basis. Additionally, the Company has paid dividends equally to both classes of common stock and the unvested restricted shares since it initiated a quarterly cash dividend in November 2006.

Instruments granted in unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents, whether paid or unpaid, are participating securities prior to vesting. As such, the Company’s restricted stock awards are considered participating securities for purposes of calculating earnings per share. Under the two class method, dividends paid on unvested restricted stock are allocated to these participating securities and therefore impacts the calculation of amounts allocated to common stock.

The following table calculates net income applicable to common stockholders used to compute basic net income per share for the periods ended (in thousands, except per share amounts):


	Three months ended March 31,
	2014					2015
	Class A		Class B			Class A		Class B
Numerator:
Net income from continuing operations	$	170	$	676		$	573	$	4,010
Dividends paid to participating securities		—		(36	)		—		(19	)

Net income from continuing operations applicable to common stockholders	$	170	$	640		$	573	$	3,991
Discontinued operations, net of tax		2		7			—		—

Net income applicable to common stockholders	$	172	$	647		$	573	$	3,991

Denominator:
Weighted average number of shares outstanding used to calculate basic net income per share		7,741		29,035			5,233		35,766

Basic net income per share:
Net income from continuing operations applicable to common stockholders	$	0.02	$	0.02		$	0.11	$	0.11
Discontinued operations, net of tax		—		—			—		—

Basic net income per share applicable to common stockholders	$	0.02	$	0.02		$	0.11	$	0.11

The following table calculates net income to diluted net income applicable to common stockholders used to compute diluted net income per share for the periods ended (in thousands, except per share amounts):


	Three months ended March 31,
	2014					2015
	Class A		Class B			Class A		Class B
Numerator:
Net income from continuing operations	$	170	$	676		$	573	$	4,010
Dividends paid to participating securities		—		(36	)		—		(19	)
Reallocation of net income for Class A shares as a result of conversion of Class A to Class B shares		—		170			—		573

Net income from continuing operations applicable to common stockholders	$	170	$	810		$	573	$	4,564
Discontinued operations, net of tax		2		7			—		—
Reallocation of discontinued operations for Class A shares as a result of conversion of Class A to Class B shares		—		2			—		—

Discontinued operations, net of tax	$	2	$	9		$	—	$	—

Net income applicable to common stockholders	$	172	$	819		$	573	$	4,564

Denominator:
Weighted average number of shares outstanding used to calculate basic net income per share		7,741		29,035			5,233		35,766
Weighted average stock options and common shares subject to repurchase or cancellation		—		2,985			—		311
Conversion of Class A to Class B common shares outstanding		—		7,741			—		5,233

Weighted average number of shares outstanding used to calculate diluted net income per share		7,741		39,761			5,233		41,310

Diluted net income per share:
Net income from continuing operations applicable to common stockholders	$	0.02	$	0.02		$	0.11	$	0.11
Discontinued operations, net of tax		—		—			—		—

Diluted net income per share applicable to common stockholders	$	0.02	$	0.02		$	0.11	$	0.11

The computation of diluted net income per share excludes the following because their effect would be anti-dilutive (in thousands):

•

For the three months ended March 31, 2014 and 2015, outstanding options to acquire 1,998 and 7,829 shares, respectively of Class B common stock.

•

For the three months ended March 31, 2014 and 2015, 51 and 235 shares of unvested Class B restricted common shares, respectively, issued to employees and in connection with acquisitions.

•

For the three months ended March 31, 2014 and 2015, 131 and 96 restricted stock units, respectively.

Concentrations

3 Months Ended

Mar. 31, 2015

Concentrations

(5) Concentrations

The Company maintains substantially all of its cash and cash equivalents with one financial institution.

A significant majority of the Company’s revenue earned from advertisers is generated through arrangements with distribution partners. The Company may not be successful in renewing any of these agreements, or if they are renewed, they may not be on terms as favorable as current agreements. The Company may not be successful in entering into agreements with new distribution partners or advertisers on commercially acceptable terms. In addition, several of these distribution partners or advertisers may be considered potential competitors. The Company’s largest distribution partner was paid less than 20% of consolidated revenue for the three months ended March 31, 2014 and 2015.

The advertisers representing more than 10% of consolidated revenue are as follows (in percentages):


	Three months ended March 31,
	2014			2015
Advertiser A		21	%		26	%
Advertiser B		*			18	%
Advertiser C		34	%		*

Advertiser A is also a distribution partner.

The outstanding receivable balance for each advertiser representing more than 10% of accounts receivable is as follows (in percentages):


	At December 31, 2014			At March 31, 2015
Advertiser A		41	%		38	%
Advertiser B		16	%		19	%

*	Less than 10%

In certain cases, the Company may engage directly with one or more advertising agencies who act on an advertiser’s behalf. In addition, an advertising agency may represent more than one advertiser that utilizes the Company’s products and services. For the three months ended March 31, 2014, no advertising agency represented more than 10% of consolidated revenue and as of December 31, 2014, one advertising agency represented 13% of consolidated accounts receivable. For the three months ended March 31, 2015, there was one advertising agency which represented 16% of consolidated revenue and as of March 31, 2015, represented 19% of the consolidated accounts receivable balance.

Segment Reporting and Geographic Information

3 Months Ended

Mar. 31, 2015

Segment Reporting and Geographic Information

(6) Segment Reporting and Geographic Information

Operating segments are revenue-producing components of the enterprise for which separate financial information is produced internally for the Company’s management. In July 2013, the Company sold certain assets related to Archeo’s pay-per-click advertising services. As a result, the operating results related to these certain pay-per-click assets are shown as discontinued operations, net of tax in the condensed consolidated statements of operations for all periods presented and are excluded from segment reporting. See Note14. Discontinued Operations for further discussion.

The Company’s Call-Driven segment comprises its performance-based advertising business focused on driving phone calls. The Archeo segment comprises the Company’s click-based advertising and Internet domain name businesses. Call-Driven segment expenses include both direct costs incurred by the segment business as well as corporate overhead costs. Archeo segment expenses only include direct costs incurred by the segment. Segment expenses exclude the following: stock-based compensation, amortization of intangible assets from acquisitions, separation related costs, and other income (expense).

A measure of segment assets is not currently provided to the Company’s chief operating decision maker and has therefore not been disclosed. The carrying amount of goodwill by operating segment at March 31, 2015 was approximately $63.3 million and $2.4 million for Call-Driven and Archeo, respectively.

Selected segment information (in thousands):


	Three months ended March 31, 2015
	Call-Driven		Archeo		Total
Revenue	$	35,029	$	7,546	$	42,575
Operating expenses		32,398		2,545		34,943

Segment profit	$	2,631	$	5,001	$	7,632
Less reconciling items:
Stock based compensation						2,794
Acquisition and disposition related costs						225
Other expense						25

Income from continuing operations before provision for income taxes					$	4,588


	Three months ended March 31, 2014
	Call-Driven		Archeo		Total
Revenue	$	45,492	$	5,004	$	50,496
Operating expenses		43,081		2,693		45,774

Segment profit	$	2,411	$	2,311	$	4,722
Less reconciling items:
Stock based compensation						2,883
Amortization of intangible assets from acquisitions						403
Other expense						2

Income from continuing operations before provision for income taxes					$	1,434

Revenues from advertisers by geographical areas are tracked on the basis of the location of the advertiser. The vast majority of the Company’s revenue and accounts receivable are derived from domestic sales to advertisers engaged in various mobile, online and other activities.

Revenues by geographic region are as follows (in percentages):


	Three months ended March 31,
	2014			2015
United States		96	%		87	%
Canada		4	%		3	%
Other countries		*			10	%

		100	%		100	%

*	Less than 1% of revenue.

Intangible and other assets, net

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 34
-URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8981-108599

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 41
-URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e9038-108599

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 33
-URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8971-108599

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
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-SubTopic 10
-Section 50
-Paragraph 12
-URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8595-108599

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
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-SubTopic 10
-Section 50
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-URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8380-108599

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
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-URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8933-108599

Reference 7: http://www.xbrl.org/2003/role/presentationRef
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-Topic 280
-SubTopic 10
-Section 50
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-URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8844-108599

Reference 8: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
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-URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8984-108599

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 40
-URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e9031-108599

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 42
-URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e9054-108599

Reference 11: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 10
-URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8538-108599

Reference 12: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 29
-URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8864-108599

Reference 13: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 31
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-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 30
-URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8906-108599

+ Details

Property and Equipment

3 Months Ended

Mar. 31, 2015

Property and Equipment

(7) Property and Equipment

Property and equipment consisted of the following (in thousands):


	At December 31, 2014			At March 31, 2015
Computer and other related equipment	$	18,662		$	19,549
Purchased and internally developed software		7,836			7,836
Furniture and fixtures		1,416			1,444
Leasehold improvements		1,834			1,834

	$	29,748		$	30,663
Less: accumulated depreciation and amortization		(24,318	)		(25,158	)

Property and equipment, net	$	5,430		$	5,505

Depreciation and amortization expense, related to property and equipment was approximately $865,000 and $839,000 for the three months ended March 31, 2014 and 2015, respectively.

Commitments

3 Months Ended

Mar. 31, 2015

Commitments

(8) Commitments

The Company has commitments for future payments related to office facilities leases and other contractual obligations. The Company leases its office facilities under operating lease agreements expiring through 2018. The Company recognizes rent expense under such agreements on a straight-line basis over the lease term with any lease incentive amortized as a reduction of rent expense over the lease term. The Company also has other contractual obligations expiring over varying time periods through 2018. Other contractual obligations primarily relate to minimum contractual payments due to distribution partners and other outside service providers.

Future minimum payments are approximately as follows (in thousands):


	Facilities operating leases		Other contractual obligations		Total
2015	$	1,697	$	2,475	$	4,172
2016		2,313		1,946		4,259
2017		2,372		57		2,429
2018		577		1		578
2019 and after		—		—		—

Total minimum payments	$	6,959	$	4,479	$	11,438

Rent expense incurred by the Company was approximately $462,000 and $492,000 for the three months ended March 31, 2014 and 2015, respectively.

Credit Agreement

3 Months Ended

Mar. 31, 2015

Credit Agreement

(9) Credit Agreement

In April 2008, the Company entered into a credit agreement providing for a senior secured $30 million revolving credit facility (“Credit Agreement”). The Credit Agreement, as amended, matures on April 1, 2017. Interest on outstanding balances under the Credit Agreement will accrue at LIBOR plus an applicable margin rate, as determined under the agreement and has an unused commitment fee. The Credit Agreement contains certain customary representations and warranties, financial covenants, events of default and is secured by substantially all of the assets of the Company. During the three months ended March 31, 2014 and 2015, the Company had no borrowings under the Credit Agreement.

In April 2015, the Company signed an amendment to the Credit Agreement which clarified the LIBOR rate as determined under the Credit Agreement cannot be below zero percent (0%) and added a financial covenant limiting outstanding balances under the Credit Agreement not to exceed a collateral value as defined in the Credit Agreement.

Contingencies and Taxes

3 Months Ended

Mar. 31, 2015

Contingencies and Taxes

(10) Contingencies and Taxes

(a) Contingencies

The Company is involved in legal and administrative proceedings and claims of various types from time to time. While any litigation contains an element of uncertainty, the Company is not aware of any legal proceedings or claims which are pending that the Company believes, based on current knowledge, will have, individually or taken together, a material adverse effect on the Company’s financial condition or results of operations or liquidity. In some agreements to which the Company is a party, the Company has agreed to indemnification provisions of varying scope and terms with advertisers, vendors and other parties with respect to certain matters, including, but not limited to, losses arising out of the Company’s breach of agreements or representations and warranties made by the Company, services to be provided by the Company and intellectual property infringement claims made by third parties. As a result of these provisions, the Company may from time to time provide certain levels of financial support to its contract parties to seek to minimize the impact of any associated litigation in which it may be involved. To date, there have been no known events or circumstances that have resulted in any material costs related to these indemnification provisions and no liabilities therefore have been recorded in the accompanying unaudited condensed consolidated financial statements. However, the maximum potential amount of the future payments we could be required to make under these indemnification provisions could be material.

(b) Taxes

During the third quarter of 2014, based upon both positive and negative evidence available, the Company determined that it is not more likely than not that its deferred tax assets will be realized and accordingly recorded 100% valuation allowance against these deferred tax assets. In assessing the realizability of deferred tax assets, the Company considered whether it is more likely than not that some or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. The Company considered the future reversal of deferred tax liabilities, carryback potential, projected taxable income, and tax planning strategies as well as its history of taxable income or losses in the relevant jurisdictions in making this assessment. The Company has incurred taxable losses from 2012 to 2014. Based on the level of historical taxable losses and the uncertainty of projections for future taxable income over the periods for which the deferred tax assets are deductible, the Company concluded that it is not more likely than not that the gross deferred tax assets will be realized.

From time to time, various state, federal and other jurisdictional tax authorities undertake audits of the Company and its filings. In evaluating the exposure associated with various tax filing positions, the Company on occasion accrues charges for uncertain positions. Resolution of uncertain tax positions will impact our effective tax rate when settled. The Company does not have any significant interest or penalty accruals. The provision for income taxes includes the impact of contingency provisions and changes to contingencies that are considered appropriate. The Company files U.S. federal, certain U.S. states, and certain foreign tax returns. Generally, U.S. federal, U.S. state, and foreign tax returns filed for years after 2010 are within the statute of limitations and are under examination or may be subject to examination.

Goodwill

3 Months Ended

Mar. 31, 2015

Goodwill

(11) Goodwill

There was no change in goodwill during the three months ended March 31, 2015. The following table outlines the Company’s goodwill by reporting unit at March 31, 2015 (in thousands):


Call-Driven	$	63,305
Archeo		2,374

Total	$	65,679

The Company reviews goodwill for impairment annually on November 30 and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. When evaluating goodwill for impairment, the Company may first perform a qualitative assessment to determine if the fair value of the reporting unit is more likely than not greater than its carrying amount. The testing of goodwill and other intangible assets for impairment requires the Company to make significant estimates about its future performance and cash flows, as well as other assumptions. Events and circumstances considered in determining whether the carrying value of goodwill may not be recoverable include, but are not limited to: significant changes in performance relative to expected operating results; significant changes in the use of the assets; and significant changes in competition and market dynamics. These estimates are inherently uncertain and can be affected by numerous factors, including changes in economic, industry or market conditions, changes in business operations, a loss of a significant customer, changes in competition or changes in the share price of the Company’s common stock and market capitalization. Significant and sustained declines in the Company’s stock price and market capitalization, a significant decline in its expected future cash flows or a significant adverse change in the Company’s business climate, among other factors, could result in the need to perform an impairment analysis in future periods. The Company cannot accurately predict the amount and timing of any future impairment of goodwill or other intangible assets. Should the value of goodwill or other intangible assets become impaired, the Company would record an impairment charge, which could have an adverse effect on its financial condition and results of operations.

The current business environment is subject to evolving market conditions and requires significant management judgment to interpret the potential impact to our assumptions. At various points in time during the period April 1, 2015 to May 6, 2015, the Company’s stock price approached the then book value. To the extent that changes in the current business environment impact the Company’s ability to achieve levels of forecasted operating results and cash flows, if the Company’s stock price were to trade below book value per share for an extended period of time and/or should other events occur indicating the remaining carrying value of our assets might be impaired, the Company would test its goodwill and intangible assets for impairment and may recognize an impairment loss to the extent that the carrying amount exceeds such asset’s fair value. The Company will continue to monitor its financial performance, stock price and other factors in order to determine if there are any indicators of impairment prior to its annual impairment evaluation in November 2015.

Intangible and other assets, net

3 Months Ended

Mar. 31, 2015

(12) Intangible and other assets, net

Intangible and other assets, net consisted of the following (in thousands):


	At December 31, 2014			At March 31, 2015
Internet domain names	$	14,607		$	13,172
Less accumulated amortization		(14,499	)		(13,079	)

Internet domain names, net		108			93
Other assets:
Other		205			274

Total intangibles and other assets, net	$	313		$	367

The Company capitalizes costs incurred to acquire domain names or URLs, which include the initial registration fees, to other intangible assets which excludes intangible assets acquired through business combinations. The capitalized costs are amortized over the expected useful life of the domain names on a straight-line basis. The net carrying value of Internet domain names as of March 31, 2014 and 2015 related to both domain names held for use and available for sale.

The Company also capitalizes costs incurred to renew or extend the term of the domain names or URLs to prepaid expenses and other current assets or registration fees, net. The capitalized costs are amortized over the renewal or extended period on a straight-line basis. The total amount of costs incurred for the three months ended March 31, 2014 and 2015 to renew or extend the term for domain names was $460,000 and $480,000, respectively. The weighted average renewal period for registration fees as of March 31, 2015 was approximately one year.

Amortization expense for internet domain names was $88,000 and $38,000 for the three months ended March 31, 2014 and 2015, respectively. Based upon the current amount of domains subject to amortization, and as a result of the sale of the majority of the Company’s domain names in April 2015, the estimated expense for the next five years is as follows: $48,000 for the remainder of 2015, $3,000 in 2016 and $0 thereafter.

Common Stock

3 Months Ended

Mar. 31, 2015

Common Stock

(13) Common Stock

In November 2014, the Company’s board of directors authorized a new share repurchase program (the “2014 Repurchase Program”), which supersedes and replaces any prior repurchase programs. Under the 2014 Repurchase Program, the Company is authorized to repurchase up to 3 million shares of the Company’s Class B common stock in the aggregate through open market and privately negotiated transactions, at such times and in such amounts as the Company deems appropriate. Repurchases may also be made under a Rule 10b5-1 plan, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, capital availability, and other market conditions. The 2014 Repurchase Program does not have an expiration date and may be expanded, limited or terminated at any time without prior notice. During the quarter ended March 31, 2015, the Company repurchased 238,000 shares of Class B common stock for $931,000. During the three months ended March 31, 2014, the Company did not repurchase any shares of Class B common stock under the prior stock repurchase program.

During the three months ended March 31, 2014 and 2015, the Company’s board of directors approved and the Company retired 174,808 and 469,961 shares, respectively, of treasury stock.

In January 2015, the Company’s board of directors declared a regular quarterly dividend in the amount of $0.02 per share on the Company’s Class A and Class B common stock. The Company paid these dividends on February 17, 2015 to the holders of record as of the close of business on February 6, 2015. This quarterly dividend totaled approximately $839,000.

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
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Reference 3: http://www.xbrl.org/2003/role/presentationRef
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Reference 9: http://www.xbrl.org/2003/role/presentationRef
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-Publisher SEC
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Reference 15: http://www.xbrl.org/2003/role/presentationRef
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Reference 16: http://www.xbrl.org/2003/role/presentationRef
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Reference 17: http://www.xbrl.org/2003/role/presentationRef
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Reference 18: http://www.xbrl.org/2003/role/presentationRef
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Reference 19: http://www.xbrl.org/2003/role/presentationRef
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+ Details

Discontinued Operations

3 Months Ended

Mar. 31, 2015

Discontinued Operations

(14) Discontinued Operations

On July 19, 2013, the Company completed the sale of certain pay-per-click advertising services to an unrelated third party. Accordingly, the results of operations of these certain pay-per-click assets are presented in the condensed consolidated financial statements as discontinued operations, net of tax. The operating results for the discontinued operations were as follows (in thousands):


	Three Months Ended March 31, 2014
Revenue	$	—
Income before provision for income taxes		14
Income tax expense		5

Discontinued operations, net of tax	$	9

The net cash proceeds from the sale received were approximately $1.4 million. The sale includes contingent earn-out consideration payments that depend upon the achievement of certain thresholds and will be recognized as income when received.

Recent Accounting Pronouncement(s) Not Yet Effective

The entire disclosure for the facts and circumstances leading to the completed or expected disposal, manner and timing of disposal, the gain (loss) recognized in the income statement and the income statement caption that includes that gain (loss), amounts of revenues and pretax profit or loss reported in discontinued operations, the segment in which the disposal group was reported, and the classification (whether sold or classified as held for sale) and carrying value of the assets and liabilities comprising the disposal group. Includes all disposal groups, including those classified as components of the entity (discontinued operations).

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
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+ Details

Subsequent Events

3 Months Ended

Mar. 31, 2015

Subsequent Events

(15) Subsequent Events

In April 2015, the Company’s board of directors declared a regular quarterly dividend in the amount of $0.02 per share on the Company’s Class A and Class B common stock. The Company will pay these dividends on May 18, 2015 to the holders of record as of the close of business on May 7, 2015. The Company expects to pay approximately $845,000 for these quarterly dividends.

In April 2015, the Company sold certain assets related to Archeo’s domain operations, including the bulk of its domain name portfolio. The Company received cash consideration at closing of $28.1 million and the sale includes contingent earn-out consideration payments that depend on the achievement of certain sales thresholds. The Company anticipates the divesture will be classified as discontinued operations for the quarter ending June 30, 2015 and estimates the gain on sale of the discontinued operations before any provision for income taxes will be approximately $22 million. This estimate is preliminary.

Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2015

Recent Accounting Pronouncement(s) Not Yet Effective

Revenues

Revenues

The following table presents the Company’s revenues by segment for the periods presented (in thousands):


	Three months ended March 31,
	2014		2015
Call-Driven	$	45,492	$	35,029
Archeo		5,004		7,546

Total Revenue	$	50,496	$	42,575

The following table presents the Company’s revenues, by revenue source, for the periods presented (in thousands):


	Three months ended March 31,
	2014		2015
Partner and Other Revenue Sources	$	46,870	$	35,694
Proprietary Website Traffic Sources and Domain Names		3,626		6,881

Total Revenue	$	50,496	$	42,575

Stock Based Compensation Expense Included in Operating Expense

Disclosure of accounting policy for revenue recognition. If the entity has different policies for different types of revenue transactions, the policy for each material type of transaction is generally disclosed. If a sales transaction has multiple element arrangements (for example, delivery of multiple products, services or the rights to use assets) the disclosure may indicate the accounting policy for each unit of accounting as well as how units of accounting are determined and valued. The disclosure may encompass important judgment as to appropriateness of principles related to recognition of revenue. The disclosure also may indicate the entity's treatment of any unearned or deferred revenue that arises from the transaction.

+ References + Details

Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2015

Revenues by Segment

The following table presents the Company’s revenues by segment for the periods presented (in thousands):


	Three months ended March 31,
	2014		2015
Call-Driven	$	45,492	$	35,029
Archeo		5,004		7,546

Total Revenue	$	50,496	$	42,575

Revenues

The following table presents the Company’s revenues, by revenue source, for the periods presented (in thousands):


	Three months ended March 31,
	2014		2015
Partner and Other Revenue Sources	$	46,870	$	35,694
Proprietary Website Traffic Sources and Domain Names		3,626		6,881

Total Revenue	$	50,496	$	42,575

Stock-based Compensation Plans (Tables)

3 Months Ended

Mar. 31, 2015

Stock-based compensation expense was included in the following operating expense categories as follows (in thousands):


	Three months ended March 31,
	2014		2015
Service costs	$	282	$	223
Sales and marketing		204		246
Product development		659		579
General and administrative		1,738		1,746

Total stock-based compensation	$	2,883	$	2,794

Assumptions to Estimate Fair Value for Stock Options at Grant Date

The following weighted average assumptions were used in determining the fair value of time-vested stock option grants for the periods presented:


	Three months ended March 31,
	2014	2015
Expected life (in years)	4.0	4.0-6.25
Risk-free interest rate	1.32%	1.13%-1.54%
Expected volatility	55%-60%	62%-65%
Expected dividend yield	0.76%	0.23%-0.36%

Summary of Stock Option Activity

Stock option activity during the three months ended March 31, 2015 is summarized as follows:


	Shares			Weighted average exercise price		Weighted average remaining contractual term (in years)		Aggregate intrinsic value (in thousands)
Balance at December 31, 2014		7,797,228		$	7.90		6.58	$	800
Options granted		359,215			4.13
Options forfeited		(46,217	)		7.21
Options expired		(122,837	)		15.66
Options exercised		(12,312	)		4.10

Balance at March 31, 2015		7,975,077		$	7.63		6.53	$	151

Summary of Restricted Stock Awards and Restricted Stock Units

Restricted stock awards and restricted stock unit activity during the three months ended March 31, 2015 is summarized as follows:


	Shares/ Units			Weighted average grant date fair value
Unvested balance at December 31, 2014		2,140,762		$	6.55
Granted		255,000			4.02
Vested		(145,375	)		6.36
Forfeited		(35,362	)		5.18

Unvested balance at March 31, 2015		2,215,025		$	6.29

Net Income Per Share (Tables)

3 Months Ended

Mar. 31, 2015

Computation of Net Income per Share Basic and Diluted

The following table calculates net income applicable to common stockholders used to compute basic net income per share for the periods ended (in thousands, except per share amounts):


	Three months ended March 31,
	2014					2015
	Class A		Class B			Class A		Class B
Numerator:
Net income from continuing operations	$	170	$	676		$	573	$	4,010
Dividends paid to participating securities		—		(36	)		—		(19	)

Net income from continuing operations applicable to common stockholders	$	170	$	640		$	573	$	3,991
Discontinued operations, net of tax		2		7			—		—

Net income applicable to common stockholders	$	172	$	647		$	573	$	3,991

Denominator:
Weighted average number of shares outstanding used to calculate basic net income per share		7,741		29,035			5,233		35,766

Basic net income per share:
Net income from continuing operations applicable to common stockholders	$	0.02	$	0.02		$	0.11	$	0.11
Discontinued operations, net of tax		—		—			—		—

Basic net income per share applicable to common stockholders	$	0.02	$	0.02		$	0.11	$	0.11


	Three months ended March 31,
	2014					2015
	Class A		Class B			Class A		Class B
Numerator:
Net income from continuing operations	$	170	$	676		$	573	$	4,010
Dividends paid to participating securities		—		(36	)		—		(19	)
Reallocation of net income for Class A shares as a result of conversion of Class A to Class B shares		—		170			—		573

Net income from continuing operations applicable to common stockholders	$	170	$	810		$	573	$	4,564
Discontinued operations, net of tax		2		7			—		—
Reallocation of discontinued operations for Class A shares as a result of conversion of Class A to Class B shares		—		2			—		—

Discontinued operations, net of tax	$	2	$	9		$	—	$	—

Net income applicable to common stockholders	$	172	$	819		$	573	$	4,564

Denominator:
Weighted average number of shares outstanding used to calculate basic net income per share		7,741		29,035			5,233		35,766
Weighted average stock options and common shares subject to repurchase or cancellation		—		2,985			—		311
Conversion of Class A to Class B common shares outstanding		—		7,741			—		5,233

Weighted average number of shares outstanding used to calculate diluted net income per share		7,741		39,761			5,233		41,310

Diluted net income per share:
Net income from continuing operations applicable to common stockholders	$	0.02	$	0.02		$	0.11	$	0.11
Discontinued operations, net of tax		—		—			—		—

Diluted net income per share applicable to common stockholders	$	0.02	$	0.02		$	0.11	$	0.11

Concentrations (Tables)

3 Months Ended

Mar. 31, 2015

Consolidated Revenue

Schedules of Concentration of Risk, by Risk Factor

The advertisers representing more than 10% of consolidated revenue are as follows (in percentages):


	Three months ended March 31,
	2014			2015
Advertiser A		21	%		26	%
Advertiser B		*			18	%
Advertiser C		34	%		*

Consolidated Accounts Receivable

Schedules of Concentration of Risk, by Risk Factor

The outstanding receivable balance for each advertiser representing more than 10% of accounts receivable is as follows (in percentages):


	At December 31, 2014			At March 31, 2015
Advertiser A		41	%		38	%
Advertiser B		16	%		19	%

*	Less than 10%

Segment Reporting and Geographic Information (Tables)

3 Months Ended

Mar. 31, 2015

Segment Information

Selected segment information (in thousands):


	Three months ended March 31, 2015
	Call-Driven		Archeo		Total
Revenue	$	35,029	$	7,546	$	42,575
Operating expenses		32,398		2,545		34,943

Segment profit	$	2,631	$	5,001	$	7,632
Less reconciling items:
Stock based compensation						2,794
Acquisition and disposition related costs						225
Other expense						25

Income from continuing operations before provision for income taxes					$	4,588


	Three months ended March 31, 2014
	Call-Driven		Archeo		Total
Revenue	$	45,492	$	5,004	$	50,496
Operating expenses		43,081		2,693		45,774

Segment profit	$	2,411	$	2,311	$	4,722
Less reconciling items:
Stock based compensation						2,883
Amortization of intangible assets from acquisitions						403
Other expense						2

Income from continuing operations before provision for income taxes					$	1,434

Revenues by Geographic Region

Revenues by geographic region are as follows (in percentages):


	Three months ended March 31,
	2014			2015
United States		96	%		87	%
Canada		4	%		3	%
Other countries		*			10	%

		100	%		100	%

*	Less than 1% of revenue.

Property and Equipment (Tables)

3 Months Ended

Mar. 31, 2015

Property and Equipment

Property and equipment consisted of the following (in thousands):


	At December 31, 2014			At March 31, 2015
Computer and other related equipment	$	18,662		$	19,549
Purchased and internally developed software		7,836			7,836
Furniture and fixtures		1,416			1,444
Leasehold improvements		1,834			1,834

	$	29,748		$	30,663
Less: accumulated depreciation and amortization		(24,318	)		(25,158	)

Property and equipment, net	$	5,430		$	5,505

Commitments (Tables)

3 Months Ended

Mar. 31, 2015

Future Minimum Payments

Future minimum payments are approximately as follows (in thousands):


	Facilities operating leases		Other contractual obligations		Total
2015	$	1,697	$	2,475	$	4,172
2016		2,313		1,946		4,259
2017		2,372		57		2,429
2018		577		1		578
2019 and after		—		—		—

Total minimum payments	$	6,959	$	4,479	$	11,438

Goodwill (Tables)

3 Months Ended

Mar. 31, 2015

Goodwill by Segment

The following table outlines the Company’s goodwill by reporting unit at March 31, 2015 (in thousands):


Call-Driven	$	63,305
Archeo		2,374

Total	$	65,679

Intangible and other assets, net (Tables)

3 Months Ended

Mar. 31, 2015

Intangible and Other Assets, Net

Intangible and other assets, net consisted of the following (in thousands):


	At December 31, 2014			At March 31, 2015
Internet domain names	$	14,607		$	13,172
Less accumulated amortization		(14,499	)		(13,079	)

Internet domain names, net		108			93
Other assets:
Other		205			274

Total intangibles and other assets, net	$	313		$	367

Discontinued Operations (Tables)

3 Months Ended

Mar. 31, 2015

Operating Results for Discontinued Operations

The operating results for the discontinued operations were as follows (in thousands):


	Three Months Ended March 31, 2014
Revenue	$	—
Income before provision for income taxes		14
Income tax expense		5

Discontinued operations, net of tax	$	9

Tabular disclosure of disposal groups, which may include the gain (loss) recognized in the income statement and the income statement caption that includes that gain (loss), amounts of revenues and pretax profit or loss reported in discontinued operations, the classification and carrying value of the assets and liabilities comprising the disposal group, and the segment in which the disposal group was reported. Also may include the amount of adjustments to amounts previously reported in discontinued operations such as resolution of contingencies arising from the disposal transaction or the operations of the component prior to disposal.

+ References + Details

Revenues by Segment (Detail) - USD ($) $ in Thousands	3 Months Ended
Revenues by Segment (Detail) - USD ($) $ in Thousands	Mar. 31, 2015	Mar. 31, 2014
Segment Reporting Information
Total Revenue	$ 42,575	$ 50,496
Call Driven
Segment Reporting Information
Total Revenue	35,029	45,492
Archeo
Segment Reporting Information
Total Revenue	$ 7,546	$ 5,004

Revenues by Revenue Sources (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Revenue [Line Items]
Total Revenue	$ 42,575	$ 50,496
Partner and Other Revenue Sources
Revenue [Line Items]
Total Revenue	35,694	46,870
Proprietary Website Traffic Sources and Domain Names
Revenue [Line Items]
Total Revenue	$ 6,881	$ 3,626

Stock-Based Compensation Expense by Operating Expense (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation	$ 2,794	$ 2,883
Service Costs
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation	223	282
Sales and Marketing
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation	246	204
Product Development
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation	579	659
General and Administrative
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation	$ 1,746	$ 1,738

Stock Based Compensation Plans - Additional Information (Detail) - USD ($)	1 Months Ended	3 Months Ended
	Feb. 28, 2015	Mar. 31, 2015	Mar. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Income tax benefit related to stock-based compensation included in net income (loss)		$ 0	$ 900,000
Excess tax benefit		$ 27,000	$ 1,300,000
Repurchase of stock for tax withholding			12,008
Vesting of restricted shares	108,000		41,000
Minimum withholding tax			$ 148,000
Options vested	139,000

Assumptions to Estimate Fair Value for Stock Options at Grant Date (Detail) - Time Vested Stock Options	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected life (in years)		4 years
Risk-free interest rate		1.32%
Risk-free interest rate, minimum	1.13%
Risk-free interest rate, maximum	1.54%
Expected volatility, minimum	62.00%	55.00%
Expected volatility, maximum	65.00%	60.00%
Expected dividend yield		0.76%
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected life (in years)	4 years
Expected dividend yield	0.23%
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected life (in years)	6 years 3 months
Expected dividend yield	0.36%

Summary of Stock Option Activity (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares, Beginning Balance	7,797,228
Options granted, Shares	359,215
Options forfeited, Shares	(46,217)
Options expired, Shares	(122,837)
Options exercised, Shares	(12,312)
Number of shares, Ending Balance	7,975,077	7,797,228
Weighted average exercise price, Beginning Balance	$ 7.90
Options granted, Weighted average exercise price	4.13
Options forfeited, Weighted average exercise price	7.21
Options expired, Weighted average exercise price	15.66
Options exercised, Weighted average exercise price	4.10
Weighted average exercise price, Ending Balance	$ 7.63	$ 7.90
Weighted average remaining contractual term, End of the period	6 years 6 months 11 days	6 years 6 months 29 days
Aggregate intrinsic value, Outstanding Ending Balance	$ 151	$ 800

Summary Restricted Stock Awards and Restricted Stock Units Activity (Detail) - $ / shares	1 Months Ended	3 Months Ended
	Feb. 28, 2015	Mar. 31, 2015	Mar. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vested, Shares	(108,000)		(41,000)
Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unvested Shares, Beginning Balance		2,140,762
Granted, Shares		255,000
Vested, Shares		(145,375)
Forfeited, Shares		(35,362)
Unvested Shares, Ending Balance		2,215,025
Weighted average grant date fair value, Beginning Balance		$ 6.55
Granted, Weighted average grant date fair value		4.02
Vested, Weighted average grant date fair value		6.36
Forfeited, Weighted average grant date fair value		5.18
Weighted average grant date fair value, Ending Balance		$ 6.29

Computation of Net Income Per Share Basic and Diluted (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Numerator:
Net income from continuing operations	$ 4,583	$ 846
Dividends paid to participating securities	(19)	(36)
Net income applicable to common stockholders	4,564	819
Numerator:
Net income from continuing operations	4,583	846
Dividends paid to participating securities	(19)	(36)
Class A
Numerator:
Net income from continuing operations	573	170
Net income from continuing operations applicable to common stockholders	573	170
Discontinued operations, net of tax		2
Net income applicable to common stockholders	$ 573	$ 172
Denominator:
Weighted average number of shares outstanding used to calculate basic net income per share	5,233	7,741
Basic net income per share:
Net income from continuing operations applicable to common stockholders	$ 0.11	$ 0.02
Discontinued operations, net of tax	0	0
Basic net income per share applicable to common stockholders	$ 0.11	$ 0.02
Numerator:
Net income from continuing operations	$ 573	$ 170
Net income from continuing operations applicable to common stockholders	573	170
Discontinued operations, net of tax		2
Discontinued operations, net of tax		2
Net income applicable to common stockholders	$ 573	$ 172
Denominator:
Weighted average number of shares outstanding used to calculate basic net income per share	5,233	7,741
Weighted average number of shares outstanding used to calculate diluted net income per share	5,233	7,741
Diluted net income per share:
Net income from continuing operations applicable to common stockholders	$ 0.11	$ 0.02
Discontinued operations, net of tax	0	0
Diluted net income per share applicable to common stockholders	$ 0.11	$ 0.02
Class B
Numerator:
Net income from continuing operations	$ 4,010	$ 676
Dividends paid to participating securities	(19)	(36)
Net income from continuing operations applicable to common stockholders	3,991	640
Discontinued operations, net of tax		7
Net income applicable to common stockholders	$ 3,991	$ 647
Denominator:
Weighted average number of shares outstanding used to calculate basic net income per share	35,766	29,035
Basic net income per share:
Net income from continuing operations applicable to common stockholders	$ 0.11	$ 0.02
Discontinued operations, net of tax	0	0
Basic net income per share applicable to common stockholders	$ 0.11	$ 0.02
Numerator:
Net income from continuing operations	$ 4,010	$ 676
Dividends paid to participating securities	(19)	(36)
Reallocation of discontinued operations for Class A shares as a result of conversion of Class A to Class B shares	573	170
Net income from continuing operations applicable to common stockholders	4,564	810
Discontinued operations, net of tax		7
Discontinued operations, net of tax		9
Net income applicable to common stockholders	$ 4,564	$ 819
Denominator:
Weighted average number of shares outstanding used to calculate basic net income per share	35,766	29,035
Weighted average stock options and common shares subject to repurchase or cancellation	311	2,985
Conversion of Class A to Class B common shares outstanding	5,233	7,741
Weighted average number of shares outstanding used to calculate diluted net income per share	41,310	39,761
Diluted net income per share:
Net income from continuing operations applicable to common stockholders	$ 0.11	$ 0.02
Discontinued operations, net of tax	0	0
Diluted net income per share applicable to common stockholders	$ 0.11	$ 0.02
Class B \| Discontinued Operations
Numerator:
Reallocation of discontinued operations for Class A shares as a result of conversion of Class A to Class B shares		$ 2

Net Income Per Share - Additional Information (Detail) - shares shares in Thousands	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Restricted Stock Units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive shares	96	131
Class B \| Equity Option
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive shares	7,829	1,998
Class B \| Restricted Stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive shares	235	51

Concentrations - Additional Information (Detail) - Agency	3 Months Ended		12 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014
Maximum
Concentration Risk [Line Items]
Percentage of revenue as criteria for major distribution partners	20.00%	20.00%
Consolidated Revenue \| Customer Concentration Risk
Concentration Risk [Line Items]
Number of advertising agencies	1	0
Concentration Risk, Percentage	16.00%	10.00%
Consolidated Accounts Receivable \| Customer Concentration Risk
Concentration Risk [Line Items]
Number of advertising agencies	1		1
Concentration Risk, Percentage	19.00%		13.00%

Schedules of Concentration of Risk Based on Consolidated Revenue (Detail) - Customer Concentration Risk - Consolidated Revenue

3 Months Ended

Mar. 31, 2015

Mar. 31, 2014

16.00%

10.00%

Advertiser A

26.00%

21.00%

Advertiser B

18.00%

^[1]

Advertiser C

^[1]

34.00%

[1]	Less than 10%

Schedules of Concentration of Risk Based on Accounts Receivable (Detail) - Customer Concentration Risk - Consolidated Accounts Receivable	3 Months Ended	12 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Concentration Risk [Line Items]
Concentration Risk, Percentage	19.00%	13.00%
Advertiser A
Concentration Risk [Line Items]
Concentration Risk, Percentage	38.00%	41.00%
Advertiser B
Concentration Risk [Line Items]
Concentration Risk, Percentage	19.00%	16.00%

Segment Reporting and Geographic Information - Additional Information (Detail) - USD ($) $ in Thousands	Mar. 31, 2015	Dec. 31, 2014
Segment Reporting Information
Goodwill	$ 65,679	$ 65,679
Call Driven
Segment Reporting Information
Goodwill	63,305
Archeo
Segment Reporting Information
Goodwill	$ 2,374

Segment Information (Detail) - USD ($)
$ in Thousands

3 Months Ended

Mar. 31, 2015

Mar. 31, 2014

$ 42,575

$ 50,496

37,962

49,060

Acquisition and disposition related costs

4,613

1,436

Less reconciling items:

Stock based compensation

2,794

2,883

225

Amortization of intangible assets from acquisitions

^[1]

403

Income from continuing operations before provision for income taxes

4,588

1,434

Call Driven

35,029

45,492

Archeo

7,546

5,004

Operating Segments

42,575

50,496

34,943

45,774

Acquisition and disposition related costs

7,632

4,722

Less reconciling items:

Stock based compensation

2,794

2,883

225

Amortization of intangible assets from acquisitions

403

Other expense

Income from continuing operations before provision for income taxes

4,588

1,434

Operating Segments | Call Driven

35,029

45,492

32,398

43,081

Operating Segments | Archeo

2,631

2,411

7,546

5,004

2,545

2,693

$ 5,001

$ 2,311

[1]	Components of amortization of intangible assets from acquisitions: Service costs $ 403 $ -

Revenues by Geographic Region (Detail)

3 Months Ended

Mar. 31, 2015

Mar. 31, 2014

100.00%

United States

87.00%

96.00%

Canada

3.00%

4.00%

Other Countries

10.00%

^[1]

[1]	Less than 1% of revenue.

Property and Equipment (Detail) - USD ($) $ in Thousands	Mar. 31, 2015	Dec. 31, 2014
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 30,663	$ 29,748
Less: accumulated depreciation and amortization	(25,158)	(24,318)
Property and equipment, net	5,505	5,430
Computer and Other Related Equipment
Property, Plant and Equipment [Line Items]
Property and equipment, gross	19,549	18,662
Purchased and Internally Developed Software
Property, Plant and Equipment [Line Items]
Property and equipment, gross	7,836	7,836
Furniture and Fixtures
Property, Plant and Equipment [Line Items]
Property and equipment, gross	1,444	1,416
Leasehold Improvements
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 1,834	$ 1,834

Property and Equipment - Additional Information (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Property, Plant and Equipment [Line Items]
Depreciation and amortization expense	$ 839,000	$ 865,000

Commitments - Additional Information (Detail) - USD ($)	3 Months Ended
Commitments - Additional Information (Detail) - USD ($)	Mar. 31, 2015	Mar. 31, 2014
Schedule Of Contractual Commitments [Line Items]
Expiration of operating lease agreements	Through 2018
Expiration of other contractual obligations	Through 2018
Rent expense	$ 492,000	$ 462,000

Future Minimum Payments (Detail) $ in Thousands	Mar. 31, 2015 USD ($)
Schedule Of Contractual Commitments [Line Items]
Facilities operating leases 2015	$ 1,697
Facilities operating leases 2016	2,313
Facilities operating leases 2017	2,372
Facilities operating leases 2018	577
Facilities operating leases 2019 and after	0
Facilities operating leases Total minimum payments	6,959
Other contractual obligations 2015	2,475
Other contractual obligations 2016	1,946
Other contractual obligations 2017	57
Other contractual obligations 2018	1
Other contractual obligations 2019 and after	0
Other contractual obligations, Total minimum payments	4,479
Total 2015	4,172
Total 2016	4,259
Total 2017	2,429
Total 2018	578
Total 2019 and after	0
Total minimum payments	$ 11,438

Credit Agreement - Additional Information (Detail) - USD ($)	1 Months Ended	3 Months Ended
	Apr. 30, 2015	Mar. 31, 2015	Mar. 31, 2014	Apr. 30, 2008
Debt And Credit Agreements [Line Items]
Secured revolving credit facility				$ 30,000,000
Borrowings under the credit agreement		$ 0	$ 0
Subsequent Event \| Minimum
Debt And Credit Agreements [Line Items]
LIBOR rate	0.00%
Amended Credit Agreement
Debt And Credit Agreements [Line Items]
Maturity period		Apr. 01, 2017