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 11, 2020

 

Marchex, Inc.

(Exact name of Registrant as Specified in its Charter)

  

 

 

Registrant’s Telephone Number, Including Area Code: (206) 331-3300

Not Applicable

(Former name or former address, if changed since last report)

   

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

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Item 2.02Results of Operations and Financial Condition.

On May 11, 2020, Marchex, Inc. (“Marchex”) is issuing a press release and holding a conference call regarding its financial results for the quarter ended March 31, 2020 (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 Item 2.02 (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. Such information 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. 

 

(d) Exhibits.

 

 

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, Marchex has duly caused this Current Report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

Exhibit 99.1

 

 

Marchex Announces First Quarter 2020 Results

SEATTLE – May 11, 2020-- Marchex, Inc. (NASDAQ:MCHX), a leading conversational analytics and solutions company that connects the voice of the customer to your business, today announced its financial results for the first quarter ended March 31, 2020.

Q1 2020 Financial Highlights

 

 

Covid-19 Pandemic Impact  

The rapid spread of coronavirus (COVID-19) globally has resulted in the disruption and shutdown of businesses as well as increased travel restrictions. These events have had a severe impact on the company’s call analytics and solutions volumes, which started declining meaningfully in March and by the end of March were down materially as compared to early February. In recent days, Marchex has seen call volumes in certain verticals moving up slightly from the low points in April. However, overall call volumes remain down meaningfully, which includes the impacts from many of our customers’ locations and facilities remaining closed. Several items of note related to Marchex’s first quarter financial results:

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“While we work through these current circumstances, we are mindful of our cost structure and our investments in the future. We believe meaningfully in the trend toward AI-infused sales acceleration solutions and our long-term opportunity; however, the current environment and impacts require that we evaluate our fixed and variable cost structure. In several cases, we have already taken action, including delaying hiring as well as looking for cost efficiencies where possible.  Additionally, subject to the ongoing risks of the COVID-19 situation and its dynamic nature, we will continue to evaluate strategic options to better position ourselves to achieve our long-term opportunity when things hopefully improve,” said Mike Arends, Co-CEO & Chief Financial Officer.

 

Strategic Priorities Update

Marchex Named Leader in Conversational Intelligence by Independent Research Firm. In April, Opus Research named Marchex Conversational AI the industry leader in converting first party data to optimize customer experience and business outcomes. Opus’s Conversational Intelligence Intelliview research report revealed which providers of tools, services and platforms have most successfully delivered speech and text analytics, natural language processing and machine learning technologies to recognize the intent of consumers. The report comprehensively evaluated providers based on their ability to turn raw data into actionable business insights. The key factors evaluated include the breadth of conversational technology solutions, omnichannel view of the customer conversation, the vendor engagement model and speed of deployment, and customer base, size and longevity.  

 

Grow New and Existing Client Relationships. In the first quarter, COVID-19 affected the company’s sales prospecting and customer expansion initiatives.  In the earlier part of the quarter, prior to the most significant COVID-19 impact, Marchex added new enterprise clients in verticals such as financial services, automotive and home services.  While many of the planned Sales Edge Rescue pilots and planned rollouts have been delayed due to the current climate, they remain in the pipeline based on current conversations with customers.

 

Accelerate Product Innovation.  In 2020, the company is also accelerating, where possible, its infrastructure initiatives, including consolidating infrastructure and data centers.  Through these initiatives, Marchex anticipates achieving more than $1 million dollars in annualized cost savings beginning in 2021 and beyond.  These infrastructure initiatives will serve as the foundation for Marchex’s planned product pipeline and future innovation.

“We believe the trend toward conversational analytics and sales acceleration solutions, artificial intelligence and data science has never been more important. These are the key ingredients that can empower businesses to drive more sales, create better customer experiences and make critical business decisions. We believe our investments in these areas will remain the foundation for Marchex’s long-term growth and leadership,” said Arends.

 

Business Outlook

Due to the unprecedented uncertainty and rapidly shifting market conditions in the current business environment, we are not providing revenue or adjusted operating income or adjusted EBITDA guidance for the second quarter.

 

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“A number of key verticals we serve, such as auto manufacturing, auto services, healthcare, home services, hospitality and others, are broadly impacted in the present environment, as a large number of locations for our customers have remained closed into early May.  For many of our customers, this is having a resulting impact on the planned ramps of some of our scheduled Sales Edge Rescue deployments, many of which were slated to start in March and in the second quarter.  While we are seeing some verticals start to partially recover, the situation continues to be very fluid and there remains a broad range of potential outcomes,” said Arends.

 

Clarifying Note about Financial Results

Due to circumstances and disruptions related to the COVID-19 pandemic, amounts reported in this earnings release related to impairment evaluation of goodwill and intangible asset balances should be considered preliminary and subject to the finalization of the analyses required to complete the accounting for these non-cash items. Specifically, the company, with its external advisors, is determining the impact of the evolving COVID-19 situation on these amounts.  The amounts associated with these U.S. GAAP measures as presented in this earnings release are believed to be reasonable estimates based on the information available to, and assumptions and judgments made by the company, to date. Final results could differ from those presented here. With respect to financial results presented in this earnings release that are not affected by the calculations of goodwill impairment and intangible asset balances, the company does not expect any material changes except to the extent that such results are impacted by events between the date of this earnings release and the date on which it submits its Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 to the U.S. Securities and Exchange Commission (the “SEC”). The company intends to rely on the relief provided by the SEC under Release No. 34-88465 (the “Order”) and to comply with the timeframe authorized by the Order as it relates to its continued work to determine final goodwill impairment and intangible asset balances and expects to file its Form 10-Q with the SEC as soon as possible.

 

Conference Call and Webcast Information

Management will hold a conference call, starting at 5:00 p.m. ET on Monday May 11, 2020 to discuss its first quarter ended March 31, 2020 financial results and other company updates. Access to the live webcast of the conference call will be available online from the Investors section of Marchex’s website at www.marchex.com. An archived version of the webcast will also be available at the same location two hours after completion of the call.

 

About Marchex

Marchex understands the best customers are those who call your company - they convert faster, buy more, and churn less. Marchex provides solutions that help companies drive more calls, understand what happens on those calls, and convert more of those callers into customers. Our actionable intelligence strengthens the connection between companies and their customers, bridging the physical and digital world, to help brands maximize their marketing investments and operating efficiencies to acquire the best customers.

 

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

 

Forward-Looking Statements:

This press release contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this press release regarding our strategy, future operations, future financial position, future revenues, other financial guidance, acquisitions, dispositions, 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

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materially from the plans, intentions and expectations disclosed in the forward-looking statements we make due to a number of important factors including but not limited to product demand, order cancellations and delays, competition, changes in business strategy or development plans, and general economic and business conditions, as well as the continuing impact of the COVID-19 pandemic on the general economy, our customers and on our business, operations, employees and financial condition. These factors are described in greater detail in the "Risk Factors" section of our most recent periodic report or registration statement filed with the SEC. All of the information provided in this release is as of May 11, 2020 and Marchex undertakes no duty to update the information provided herein.

 

In the event the press release contains links to third party websites or materials, the links are provided solely as a convenience to you. Marchex is not responsible for the content of linked third-party sites or materials and does not make any representations regarding the content or accuracy thereof.

 

Non-GAAP Financial Information:

To supplement Marchex's consolidated financial statements presented in accordance with GAAP and to provide clarity internally and externally, Marchex uses certain non-GAAP measures of financial performance and liquidity, including Adjusted OIBA, Adjusted EBITDA, and Adjusted non-GAAP income (loss) per share.

 

Adjusted OIBA represents income (loss) from operations excluding stock-based compensation expense, amortization of intangible assets from acquisitions, a preliminary estimate of impairment of intangible assets and goodwill, and acquisition related costs (benefit). This measure, among other things, is one of the primary metrics by which Marchex evaluates the performance of its business. Adjusted OIBA is the basis on which Marchex's internal budgets are based and by which Marchex's management is currently evaluated. Marchex believes these measures are useful to investors because they represent Marchex's consolidated operating results, taking into account depreciation and other intangible amortization, which Marchex believes is an ongoing cost of doing business, but excluding the effects of certain other expenses such as stock-based compensation, amortization of intangible assets from acquisitions, a preliminary estimate of impairment of intangible assets and goodwill, and acquisition related costs (benefit). Adjusted EBITDA represents income (loss) before interest, income taxes, depreciation, amortization, stock compensation expense, a preliminary estimate of impairment of intangible assets and goodwill and acquisition related costs (benefit). Marchex believes that Adjusted EBITDA is another alternative measure of liquidity to GAAP net cash provided by (used in) 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. Financial analysts and investors may use Adjusted OIBA and Adjusted EBITDA to help with comparative financial evaluation to make informed investment decisions. Adjusted non-GAAP income (loss) per share represents Adjusted non-GAAP income (loss) divided by GAAP diluted shares outstanding. Adjusted non-GAAP income (loss) generally captures those items on the statement of operations that have been, or ultimately will be, settled in cash exclusive of certain items that are not indicative of Marchex’s recurring core operating results and represents net income (loss) applicable to common stockholders plus the net of tax effects of: (1) stock-based compensation expense, (2) acquisition related costs (benefit), (3) interest and other income (expense), and (4) amortization of intangible assets from acquisitions and (5) preliminary estimate of impairment of intangibles assets and goodwill. Financial analysts and investors may use Adjusted non-GAAP income (loss) per share to analyze Marchex's financial performance since these groups have historically used EPS related measures, along with other measures, to estimate the value of a company, to make informed investment decisions, and to evaluate a company's operating performance compared to that of other companies in its industry.

 

Marchex's management believes that investors should have access to, and Marchex is obligated to provide, the same set of tools that management uses in analyzing the company's results. These non-GAAP measures should be considered in addition to results prepared in accordance with GAAP, and should not be considered in isolation, as a substitute for, or superior to, GAAP results. Marchex’s non-GAAP financial measures may be defined differently from time to time and may be defined differently than similar titled terms used by other companies, and accordingly, care should be exercised in understanding how Marchex defines its non-GAAP

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financial measures in this release. Marchex endeavors to compensate for the limitations of the non-GAAP measures presented by providing the comparable GAAP measure with equal or greater prominence, GAAP financial statements, and detailed descriptions of the reconciling items and adjustments, including quantifying such items, to derive the non-GAAP measure.

 

For further information, contact:

Trevor Caldwell
Marchex Investor Relations

Telephone: 206.331.3600
Email: ir@marchex.com

Or

MEDIA INQUIRIES

Marchex Corporate Communications

Telephone: 206.331.3434

Email: marchex@edelman.com

 

 

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MARCHEX, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

(unaudited)

 

 

(2)  Preliminary estimates

 

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MARCHEX, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

 

 

¹  Includes preliminary estimate of impairment.

 

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MARCHEX, INC. AND SUBSIDIARIES

(in thousands)

(unaudited)

 

Reconciliation of GAAP Loss from Operations to Adjusted Operating Income (Loss) Before Amortization (Adjusted OIBA)

 

 

 

¹ Preliminary estimate

 

Reconciliation from Net Cash provided by (used in) Operating Activities to Adjusted EBITDA

 

 

 

 

Revenue Reconciliation

 

 

 

 

Certain immaterial reclassifications were made to the current presentation.

 

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MARCHEX, INC. AND SUBSIDIARIES

(in thousands, except per share amounts)

(unaudited)

 

Reconciliation of GAAP Net Loss per Share to Adjusted Non-GAAP Income (Loss) per Share

 

 

²  Preliminary estimate

Reconciliation of GAAP Net Loss to Non-GAAP Net Loss excluding Impairment of Goodwill and Intangible Assets