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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                      to                     .

 

Commission File Number 000-50658

 

Marchex, Inc.

(Exact name of Registrant as specified in its charter)

 

 

Delaware

35-2194038

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

520 Pike Street, Suite 2000

 

Seattle, WA

(Address of Principal Executive Offices)

98101

(Zip Code)

Registrant’s telephone number, including area code: (206331-3300

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Class B Common Stock

 

MCHX

 

The Nasdaq Global Select Market

As of May 10, 2022, the registrant had 4,660,927 shares of Class A common stock, $.01 par value per share, and 37,652,822 shares of Class B common stock, $.01 par value per share, outstanding, respectively.

 

 

 

 


 

 

Marchex, Inc.

Form 10-Q

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

1

Item 1.

Condensed Consolidated Financial Statements (unaudited)

1

 

Condensed Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Operations

2

 

Condensed Consolidated Statements of Stockholders’ Equity

3

 

Condensed Consolidated Statements of Cash Flows

4

 

Notes to Condensed Consolidated Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

14

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

24

Item 4.

Controls and Procedures

25

 

 

 

PART II.

OTHER INFORMATION

26

Item 1.

Legal Proceedings

26

Item 1A.

Risk Factors

26

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

39

Item 4.

Mine Safety Disclosures

39

Item 6.

Exhibits

40

Signature

41

 

 


 

 

PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

MARCHEX, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

 

 

December 31,

 

 

March 31,

 

 

 

2021

 

 

2022

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

27,086

 

 

$

24,555

 

Accounts receivable, net

 

 

8,021

 

 

 

8,946

 

Prepaid expenses and other current assets

 

 

2,407

 

 

 

3,454

 

Total current assets

 

 

37,514

 

 

 

36,955

 

Property and equipment, net

 

 

2,817

 

 

 

3,702

 

Right-of-use lease asset

 

 

2,238

 

 

 

1,869

 

Other assets, net

 

 

986

 

 

 

1,000

 

Goodwill

 

 

17,558

 

 

 

17,558

 

Intangible assets from acquisitions, net

 

 

4,714

 

 

 

4,183

 

Total assets

 

$

65,827

 

 

$

65,267

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,363

 

 

$

2,375

 

Accrued benefits and payroll

 

 

3,631

 

 

 

3,628

 

Other accrued expenses and current liabilities

 

 

3,869

 

 

 

3,912

 

Deferred revenue and deposits

 

 

2,016

 

 

 

1,685

 

Lease liability, current

 

 

1,794

 

 

 

2,311

 

Total current liabilities

 

 

12,673

 

 

 

13,911

 

Deferred tax liabilities

 

 

186

 

 

 

199

 

Lease liability non-current

 

 

1,466

 

 

 

526

 

Total liabilities

 

 

14,325

 

 

 

14,636

 

Commitments and contingencies - See Note 10

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock, $0.01 par value, Authorized 137,500 shares

 

 

 

 

 

 

 

 

Class A: 12,500 shares authorized; 4,661 shares issued and

   outstanding at December 31, 2021 and March 31, 2022

 

 

49

 

 

 

49

 

Class B: 125,000 shares authorized; 37,391 shares issued and

   outstanding at December 31, 2021, including 965 shares

   of restricted stock; and 37,653 shares issued and outstanding at

   March 31, 2022, including 1,141 shares of restricted stock

 

 

374

 

 

 

377

 

Additional paid-in capital

 

 

354,155

 

 

 

354,863

 

Accumulated deficit

 

 

(303,076

)

 

 

(304,658

)

Total stockholders’ equity

 

 

51,502

 

 

 

50,631

 

Total liabilities and stockholders’ equity

 

$

65,827

 

 

$

65,267

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.

 

 

1


 

 

MARCHEX, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

(unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2022

 

Revenue

 

$

12,980

 

 

$

13,171

 

Expenses:

 

 

 

 

 

 

 

 

Service costs(1)(3)

 

 

5,422

 

 

 

4,935

 

Sales and marketing(1)(3)

 

 

3,637

 

 

 

3,165

 

Product development(1)(3)

 

 

5,322

 

 

 

3,460

 

General and administrative(1)(3)

 

 

2,620

 

 

 

2,606

 

Amortization of intangible assets from acquisitions(2)

 

 

1,181

 

 

 

531

 

Acquisition and disposition-related costs

 

 

45

 

 

 

5

 

Total operating expenses

 

 

18,227

 

 

 

14,702

 

Loss from operations

 

 

(5,247

)

 

 

(1,531

)

Interest income and other, net

 

 

(12

)

 

 

(21

)

Income (loss) before provision for income taxes

 

 

(5,259

)

 

 

(1,552

)

Income tax expense (benefit)

 

 

73

 

 

 

30

 

Net income (loss) applicable to common stockholders

 

$

(5,332

)

 

$

(1,582

)

Basic and diluted net income (loss) per Class A and Class B share

   applicable to common stockholders

 

$

(0.12

)

 

$

(0.04

)

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

   applicable to common stockholders:

 

 

 

 

 

 

 

 

Class A

 

 

4,661

 

 

 

4,661

 

Class B

 

 

39,087

 

 

 

38,666

 

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

   applicable to common stockholders:

 

 

 

 

 

 

 

 

Class A

 

 

4,661

 

 

 

4,661

 

Class B

 

 

43,748

 

 

 

43,327

 

(1) Excludes amortization of intangibles from acquisitions

 

 

 

 

 

 

 

 

(2) Components of amortization of intangibles from acquisitions

 

 

 

 

 

 

 

 

Service costs

 

 

623

 

 

 

117

 

Sales and marketing

 

 

530

 

 

 

414

 

General and administrative

 

 

28

 

 

 

 

Total

 

$

1,181

 

 

$

531

 

(3) Components of related party support services fee recovery

 

 

 

 

 

 

 

 

Service costs

 

$

763

 

 

$

781

 

Sales and marketing

 

 

60

 

 

 

231

 

Product development

 

 

275

 

 

 

517

 

General and administrative

 

 

133

 

 

 

503

 

Total

 

$

1,231

 

 

$

2,032

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.

 

2


 

 

MARCHEX, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands)

(unaudited)

 

 

 

Class A

 

 

Class B

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

common stock

 

 

common stock

 

 

Treasury stock

 

 

paid-in

 

 

Accumulated

 

 

stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

capital

 

 

deficit

 

 

equity

 

Balances at December 31, 2020

 

 

4,661

 

 

$

49

 

 

 

36,462

 

 

$

365

 

 

 

 

 

$

 

 

$

350,960

 

 

$

(298,686

)

 

$

52,688

 

Issuance of common stock upon exercise

   of options, issuance and vesting of

   restricted stock and under employee

   stock purchase plan, net

 

 

 

 

 

 

 

 

223

 

 

 

2

 

 

 

 

 

 

 

 

 

30

 

 

 

 

 

 

32

 

Stock compensation from options and

   restricted stock, net of forfeitures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

744

 

 

 

 

 

 

744

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,332

)

 

 

(5,332

)

Balances at March 31, 2021

 

 

4,661

 

 

$

49

 

 

 

36,685

 

 

$

367

 

 

 

 

 

$

 

 

$

351,734

 

 

$

(304,018

)

 

$

48,132

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

 

Class B

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

common stock

 

 

common stock

 

 

Treasury stock

 

 

paid-in

 

 

Accumulated

 

 

stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

capital

 

 

deficit

 

 

equity

 

Balances at December 31, 2021

 

 

4,661

 

 

$

49

 

 

 

37,391

 

 

$

374

 

 

 

(23

)

 

$

 

 

$

354,155

 

 

$

(303,076

)

 

 

51,502

 

Issuance of common stock upon exercise

   of options, issuance and vesting of

   restricted stock and under employee

   stock purchase plan, net

 

 

 

 

 

 

 

 

285

 

 

 

3

 

 

 

 

 

 

 

 

 

13

 

 

 

 

 

 

16

 

Retirements of restricted stock

 

 

 

 

 

 

 

 

(23

)

 

 

 

 

 

23

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock compensation from options and

   restricted stock, net of forfeitures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

695

 

 

 

 

 

 

695

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,582

)

 

 

(1,582

)

Balances at March 31, 2022

 

 

4,661

 

 

$

49

 

 

 

37,653

 

 

$

377

 

 

 

 

 

$

-

 

 

$

354,863

 

 

$

(304,658

)

 

 

50,631

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.

3


 

MARCHEX, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

March 31,

 

 

 

2021

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss applicable to common shareholders

 

$

(5,332

)

 

$

(1,582

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Amortization and depreciation

 

 

1,608

 

 

 

983

 

Allowance for doubtful accounts and advertiser credits

 

 

27

 

 

 

328

 

Stock-based compensation

 

 

744

 

 

 

695

 

Deferred income taxes

 

 

63

 

 

 

47

 

Change in certain assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

(564

)

 

 

(1,254

)

Prepaid expenses, other current assets and other assets

 

 

(394

)

 

 

(727

)

Accounts payable

 

 

(675

)

 

 

512

 

Accrued expenses and other current liabilities

 

 

(1,007

)

 

 

(77

)

Deferred revenue and deposits

 

 

(85

)

 

 

(331

)

Net cash used in operating activities

 

 

(5,615

)

 

 

(1,406

)

Investing Activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(100

)

 

 

(1,141

)

Net cash used in investing activities

 

 

(100

)

 

 

(1,141

)

Financing Activities:

 

 

 

 

 

 

 

 

Proceeds from exercises of stock options, issuance and vesting of restricted

   stock and employee stock purchase plan, net

 

 

33

 

 

 

16

 

Net cash provided by financing activities

 

 

33

 

 

 

16

 

Net decrease in cash and cash equivalents

 

 

(5,682

)

 

 

(2,531

)

Cash and cash equivalents at beginning of period

 

 

33,851

 

 

 

27,086

 

Cash and cash equivalents at end of period

 

$

28,169

 

 

$

24,555

 

Supplemental disclosures of cash inflows within operating activities:

 

 

 

 

 

 

 

 

Foreign government paycheck assistance and rent subsidies

 

$

150

 

 

$

-

 

Supplemental disclosure of cash flow and non-cash information:

 

 

 

 

 

 

 

 

Cash paid for operating leases

 

$

471

 

 

$

498

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.

4


 

MARCHEX, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(unaudited)

 

(1) Description of Business and Basis of Presentation

Description of Business

Marchex, Inc. (the “Company”) was incorporated in the state of Delaware on January 17, 2003. The Company is a conversational analytics and solutions company that helps businesses connect, drive, measure, and convert callers into customers, and connects the voice of the customer to their business. We deliver data insights and incorporate artificial intelligence (AI)-powered functionality that drives insights and solutions to help companies find, engage and support their customers across voice and text-based communication channels.

 

Basis of Presentation

 

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.  

 

The preparation of our unaudited Condensed Consolidated Financial Statements requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The Company has used estimates related to several financial statement amounts, including revenues, allowance for doubtful accounts, allowance for advertiser credits, useful lives for property and equipment and intangible assets, valuation of intangible assets, the fair value of stock option awards, the impairment of goodwill and the valuation allowance for deferred tax assets. The inputs into our judgments and estimates consider the economic implications of COVID-19 on our critical and significant accounting estimates. Actual results could differ from those estimates.

 

Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022, or for any other period. The interim financial information is unaudited, and reflects all normal adjustments that are, in our opinion, necessary to provide a fair statement of results for the interim periods presented. The balance sheet at December 31, 2021 has been derived from the audited Consolidated Financial Statements at that date. This report should be read in conjunction with the Consolidated Financial Statements in our 2021 Form 10-K where we include additional information about our policies and the methods and assumptions used in our estimates.

 

Our Company consolidates all entities that we control by ownership of a majority voting interest. 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 periods to conform to the current period presentation.

Assets, liabilities and operations of foreign subsidiaries are recorded based on the functional currency of the entity. For a majority of our foreign operations, the functional currency is the U.S. dollar. Assets and liabilities denominated in other than the functional currency are remeasured each month with the remeasurement gain or loss recorded in other income and expense in the Condensed Consolidated Statements of Operations.

Recent Accounting Pronouncements Not Yet Effective

 

To date, there have been no recent accounting pronouncements not yet effective that are expected to have a material impact on our Condensed Consolidated Financial Statements.

 

 

(2) Revenue Recognition

We generate the majority of our revenues from core analytics and solutions services. Customers typically receive the benefit of the Company’s services as they are performed and substantially all the Company’s revenue is recognized over time as the services are performed.

5


 

Revenue is recognized when a customer obtains control of services in an amount that reflects the consideration the Company expects to receive in exchange for those services. The Company measures revenue based on the consideration specified in the customer arrangement, and revenue is recognized when the performance obligations in the customer arrangement are satisfied. A performance obligation is a promise in a contract to transfer a distinct service or product to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the customer receives the benefit of the performance obligation.

The Company’s call analytics technology platform provides data and insights that can measure the performance of mobile, online and offline advertising for customers and small business resellers. The Company generates revenue from the Company’s call analytics technology platform when advertisers pay the Company a fee for each call/text or call/text related data element they receive from calls or texts or for each phone number tracked based on a pre-negotiated rate. Revenue is recognized as services are provided over time, which is generally measured by the delivery of each call/text or call/text related data element or each phone number tracked.  

The majority of the Company’s customers are invoiced on a monthly basis following the month of the delivery of services and are required to make payments under standard credit terms. Collection on the related receivables may vary from reported information based upon third-party refinement of the estimated and reported amounts owed that occurs subsequent to period ends. The Company establishes an allowance for advertiser credits, which is included in Other accrued expenses and current liabilities in the balance sheet, using its best estimate of the amount of expected future reductions in advertisers’ payment obligations related to delivered services based on analysis of historical credits. The balance associated with the allowance for advertiser credits in the Company’s Condensed Consolidated Balance Sheet was $157,000 and $219,000 as of December 31, 2021 and March 31, 2022, respectively. Customer payments received in advance of revenue recognition are also contract liabilities and are recorded as deferred revenue. The deferred revenue balance in the Company’s Condensed Consolidated Balance Sheet as of December 31, 2021 and March 31, 2022 was $2.0 million and $1.7 million, respectively. During the three months ended March 31, 2022 and 2021, revenue recognized that was included in the contract liabilities balances at the beginning of the period was $424,000 and $749,000, respectively.     

The majority of the Company’s total revenue is derived from contracts that include consideration that is variable in nature. The variable elements of these contracts primarily include the number of transactions (for example, the number qualified phone calls). For contracts with an effective term greater than one year, the Company applies the standard’s practical expedient that permits the exclusion of disclosure of the value of unsatisfied performance obligations for these contracts as the Company’s right to consideration corresponds directly to the value provided to the customer for services completed to date and all future variable consideration is allocated to wholly unsatisfied performance obligations. A term for purposes of these contracts has been estimated at 24 months. In addition, the Company applies the standard’s optional exemption to disclose information about performance obligations for contracts that have original expected terms of one year or less.

For arrangements that include multiple performance obligations, the transaction price from the arrangement is allocated to each respective performance obligation based on its relative standalone selling price and recognized when revenue recognition criteria for each performance obligation are met. The standalone selling price for each performance obligation is established based on the sales price at which the Company would sell a promised good or service separately to a customer or the estimated standalone selling price.

 

The Company’s incremental direct costs of obtaining a contract, which consist primarily of sales commissions, are generally deferred and amortized to sales and marketing expense over the estimated life of the relevant customer relationship of approximately 24 months and are subject to being monitored every period to reflect any significant change in assumptions. In addition, the deferred contract cost asset is assessed for impairment on a periodic basis. The Company’s contract acquisition costs are included in other assets, net in the balance sheet. The Company is applying the standard’s practical expedient permitting expensing of costs to obtain a contract when the expected amortization period is one year or less, which typically results in expensing commissions paid to acquire certain contracts. As of December 31, 2021 and March 31, 2022, the Company had $128,000 and $81,000 of net deferred contract costs, respectively, and the accumulated amortization associated with these costs was $1.2 million and $1.3 million for the periods ended December 31, 2021 and March 31, 2022, respectively.

 

(3) 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. For the three months ended March 31, 2022 and 2021, the Company operated in a single segment comprised of its core analytics and solutions services.

  

Long-lived assets by geographical region are based on the location of the legal entity that owns the assets. As of December 31, 2021 and March 31, 2022, no significant long-lived assets were held by entities outside of the United States.

 

Revenues from customers by geographical areas are tracked on the basis of the location of the customer. The majority of the Company’s revenue and accounts receivable are derived from domestic sales to customers.

6


 

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

 

 

 

Three Months Ended March 31,

 

 

 

 

2021

 

 

2022

 

 

United States

 

 

98

%

 

 

99

%

 

Canada

 

 

2

%

 

 

1

%

 

Total

 

 

100

%

 

 

100

%

 

 

 

(4) Concentrations

The Company maintains substantially all of its cash and cash equivalents with two high credit quality financial institutions and are all considered at Level 1 fair value with observable inputs that reflect quoted prices for identical assets or liabilities in active markets.

There were no customers that represented more than 10% of consolidated revenue for the three months ended December 31, 2021 and March 31, 2022.

The Company has one customer that represents more than 10% of consolidated accounts receivable. The outstanding receivable balance for this customer is as follows (in percentages):

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

March 31,

 

 

 

2021

 

 

2022

 

Customer A

 

 

11

%

 

 

17

%

 

 

(5) Fair Value of Financial Instruments

The Company had the following financial instruments as of December 31, 2021 and March 31, 2022: cash and cash equivalents, accounts receivable, and accounts payable and accrued liabilities. The carrying value of these financial instruments approximates their fair value based on the liquidity of these financial instruments and their short-term nature. Further, these financial instruments are considered at Level 1 fair value with observable inputs that reflect quoted prices for identical assets or liabilities in active markets.

The following table provides information about the fair value of our cash and cash equivalents balance as of December 31, 2021 and March 31, 2022 (in thousands):

 

 

December 31,

 

 

March 31,

 

 

2021

 

 

2022

 

Level 1 Assets:

 

 

 

 

 

 

 

Cash

$

10,725

 

 

$

13,193

 

Money market funds

 

16,361

 

 

 

11,362

 

Total cash and cash equivalents

$

27,086

 

 

$

24,555

 

 

 

(6) Stockholder’s Equity

 

Common Stock

 

In November 2014, the Company’s board of directors authorized a 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 three months ended March 31, 2022 and 2021, the Company did not repurchase any Class B common stock.

 

7


 

 

Stock-based Compensation Plans

The Company grants stock-based awards, including stock options, restricted stock awards, and restricted stock units. The Company measures stock-based compensation cost at the grant date based on the fair value of the award and recognizes it as expense over the vesting or service period, as applicable, of the stock-based award using the straight-line method. The Company accounts for forfeitures as they occur.

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

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2022

 

Service costs

 

$

8

 

 

$

34

 

Sales and marketing

 

 

229

 

 

 

191

 

Product development

 

 

97

 

 

 

82

 

General and administrative

 

 

410

 

 

 

388

 

Total stock-based compensation

 

$

744

 

 

$

695

 

 

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 three months ended March 31, 2021 and 2022 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 expirations. 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 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,

 

 

2021

 

2022

Expected life (in years)

 

4.0 - 6.25

 

4.0 - 6.25

Risk-free interest rate

 

0.64%-1.16%

 

2.41%-2.44%

Expected volatility

 

50%-56%

 

51%-60%

 

Stock option activity during the three months ended March 31, 2022 is summarized as follows:

 

 

 

Shares

(in thousands)

 

 

Weighted average

exercise price

 

 

Weighted average

remaining

contractual term

(in years)

 

Balance at December 31, 2021

 

 

3,601

 

 

$

3.43

 

 

 

6.46

 

Options granted

 

 

254

 

 

 

2.56

 

 

 

 

 

Options forfeited

 

 

(49

)

 

 

3.41

 

 

 

 

 

Options expired

 

 

(122

)

 

 

3.38

 

 

 

 

 

Options exercised

 

 

(2

)

 

 

1.66

 

 

 

 

 

Balance at March 31, 2022

 

 

3,682

 

 

$

3.37

 

 

 

6.65

 

Restricted stock awards and restricted stock unit activity during the three months ended March 31, 2022 is summarized as follows:

 

 

 

Shares/

Units

(in thousands)

 

 

Weighted average

grant date

fair value

 

Unvested balance at December 31, 2021

 

 

1,518

 

 

$

2.80

 

Granted

 

 

251

 

 

 

2.55

 

Vested

 

 

(102

)

 

 

2.73

 

Forfeited

 

 

(15

)

 

 

3.66

 

Unvested balance at March 31, 2022

 

 

1,652

 

 

$

2.76

 

 

8


 

 

(7) Net Income (Loss) Per Share

The Company computes net income (loss) 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 (loss) per share is computed by dividing net income (loss) applicable to common stockholders by the weighted average number of common shares outstanding during the year. Diluted net income (loss) per share is computed by dividing net income (loss) 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 (loss) 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 (loss) 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 (losses) for each year 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 the Company’s 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 the Company’s net assets in the event of liquidation, the Company has allocated undistributed earnings (losses) on a proportionate basis.

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.

The following tables present the computation of basic net loss per share applicable to common stockholders for the periods ended (in thousands, except per share amounts):

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2022

 

 

 

Class A

 

 

Class B

 

 

Class A

 

 

Class B

 

Basic net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) applicable to common stockholders

 

$

(568

)

 

$

(4,764

)

 

$

(170

)

 

$

(1,412

)

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding used to calculate

   basic net income (loss) per share

 

 

4,661

 

 

 

39,087

 

 

 

4,661