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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 September 30, 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 October 31, 2022, the registrant had 4,660,927 shares of Class A common stock, $.01 par value per share, and 37,802,129 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

16

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

28

Item 4.

Controls and Procedures

28

 

 

 

PART II.

OTHER INFORMATION

29

Item 1.

Legal Proceedings

29

Item 1A.

Risk Factors

29

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

42

Item 4.

Mine Safety Disclosures

42

Item 6.

Exhibits

43

Signature

44

 

 


 

 

PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

MARCHEX, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

 

 

December 31,

 

 

September 30,

 

 

 

2021

 

 

2022

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

27,086

 

 

$

23,329

 

Accounts receivable, net

 

 

8,021

 

 

 

8,437

 

Prepaid expenses and other current assets

 

 

2,407

 

 

 

2,554

 

Total current assets

 

 

37,514

 

 

 

34,320

 

Property and equipment, net

 

 

2,817

 

 

 

3,839

 

Right-of-use lease asset

 

 

2,238

 

 

 

1,119

 

Other assets, net

 

 

986

 

 

 

1,009

 

Goodwill

 

 

17,558

 

 

 

17,558

 

Intangible assets from acquisitions, net

 

 

4,714

 

 

 

3,121

 

Total assets

 

$

65,827

 

 

$

60,966

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,363

 

 

$

1,315

 

Accrued benefits and payroll

 

 

3,631

 

 

 

4,228

 

Other accrued expenses and current liabilities

 

 

3,869

 

 

 

3,480

 

Deferred revenue and deposits

 

 

2,016

 

 

 

878

 

Lease liability, current

 

 

1,794

 

 

 

1,520

 

Total current liabilities

 

 

12,673

 

 

 

11,421

 

Deferred tax liabilities

 

 

186

 

 

 

217

 

Lease liability non-current

 

 

1,466

 

 

 

433

 

Total liabilities

 

 

14,325

 

 

 

12,071

 

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 September 30, 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 37,740 shares issued and outstanding

at September 30, 2022, including 1,022 shares of restricted stock

 

 

374

 

 

 

378

 

Additional paid-in capital

 

 

354,155

 

 

 

356,215

 

Accumulated deficit

 

 

(303,076

)

 

 

(307,747

)

Total stockholders’ equity

 

 

51,502

 

 

 

48,895

 

Total liabilities and stockholders’ equity

 

$

65,827

 

 

$

60,966

 

 

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)

 

 

 

Nine Months Ended

September 30,

 

 

Three Months Ended

September 30,

 

 

 

2021

 

 

2022

 

 

2021

 

 

2022

 

Revenue

 

$

40,686

 

 

$

39,878

 

 

$

13,700

 

 

$

13,197

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service costs(1)(3)

 

 

16,389

 

 

 

14,791

 

 

 

5,507

 

 

 

4,992

 

Sales and marketing(1)(3)

 

 

10,245

 

 

 

10,172

 

 

 

3,906

 

 

 

3,388

 

Product development(1)(3)

 

 

13,289

 

 

 

10,515

 

 

 

3,178

 

 

 

3,524

 

General and administrative(1)(3)

 

 

6,960

 

 

 

7,397

 

 

 

1,875

 

 

 

2,351

 

Amortization of intangible assets from acquisitions(2)

 

 

3,708

 

 

 

1,593

 

 

 

1,149

 

 

 

531

 

Acquisition and disposition-related costs

 

 

103

 

 

 

37

 

 

 

(18

)

 

 

10

 

Total operating expenses

 

 

50,694

 

 

 

44,505

 

 

 

15,597

 

 

 

14,796

 

Loss from operations

 

 

(10,008

)

 

 

(4,627

)

 

 

(1,897

)

 

 

(1,599

)

Gain on loan extinguishment

 

 

5,185

 

 

 

 

 

 

5,185

 

 

 

 

Interest income and other, net

 

 

2,453

 

 

 

33

 

 

 

(21

)

 

 

37

 

Income (loss) before provision for income taxes

 

 

(2,370

)

 

 

(4,594

)

 

 

3,267

 

 

 

(1,562

)

Income tax expense (benefit)

 

 

(15

)

 

 

77

 

 

 

(43

)

 

 

(4

)

Net income (loss) applicable to common stockholders

 

$

(2,355

)

 

$

(4,671

)

 

$

3,310

 

 

$

(1,558

)

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

   applicable to common stockholders

 

$

(0.05

)

 

$

(0.11

)

 

$

0.07

 

 

$

(0.04

)

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

   applicable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

 

4,661

 

 

 

4,661

 

 

 

4,661

 

 

 

4,661

 

Class B

 

 

39,213

 

 

 

38,735

 

 

 

39,246

 

 

 

38,861

 

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

   applicable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

 

4,661

 

 

 

4,661

 

 

 

4,661

 

 

 

4,661

 

Class B

 

 

43,874

 

 

 

43,396

 

 

 

44,385

 

 

 

43,522

 

(1) Excludes amortization of intangibles from acquisitions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2) Components of amortization of intangibles from acquisitions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service costs

 

$

1,885

 

 

 

351

 

 

$

610

 

 

 

117

 

Sales and marketing

 

 

1,711

 

 

 

1,242

 

 

 

539

 

 

 

414

 

General and administrative

 

 

112

 

 

 

 

 

 

 

 

 

 

Total

 

$

3,708

 

 

$

1,593

 

 

$

1,149

 

 

$

531

 

(3) Components of related party support services fee recovery

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service costs

 

$

2,151

 

 

$

2,208

 

 

$

825

 

 

 

772

 

Sales and marketing

 

 

447

 

 

 

572

 

 

 

281

 

 

 

200

 

Product development

 

 

1,501

 

 

 

1,439

 

 

 

550

 

 

 

521

 

General and administrative

 

 

1,065

 

 

 

1,168

 

 

 

584

 

 

 

304

 

Total

 

$

5,164

 

 

$

5,387

 

 

$

2,240

 

 

$

1,797

 

 

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

 

Issuance of common stock upon exercise

   of options, issuance and vesting of

   restricted stock and under employee

   stock purchase plan, net

 

 

 

 

 

 

 

 

56

 

 

 

 

 

 

 

 

 

 

 

 

67

 

 

 

 

 

 

67

 

Stock compensation from options and

   restricted stock, net of forfeitures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

655

 

 

 

 

 

 

655

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(333

)

 

 

(333

)

Balances at June 30, 2021

 

 

4,661

 

 

$

49

 

 

 

36,741

 

 

$

367

 

 

 

 

 

 

 

 

$

352,456

 

 

$

(304,351

)

 

$

48,521

 

Issuance of common stock upon exercise

   of options, issuance and vesting of

   restricted stock and under employee

   stock purchase plan, net

 

 

 

 

 

 

 

 

63

 

 

 

1

 

 

 

 

 

 

 

 

 

153

 

 

 

 

 

 

154

 

Stock compensation from options and

   restricted stock, net of forfeitures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

607

 

 

 

 

 

 

607

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,310

 

 

 

3,310

 

Balances at September 30, 2021

 

 

4,661

 

 

$

49

 

 

 

36,804

 

 

$

368

 

 

 

 

 

 

 

 

$

353,216

 

 

$

(301,041

)

 

$

52,592

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

Issuance of common stock upon exercise

   of options, issuance and vesting of

   restricted stock and under employee

   stock purchase plan, net

 

 

 

 

 

 

 

 

5

 

 

 

 

 

 

 

 

 

 

 

 

7

 

 

 

 

 

 

7

 

Stock compensation from options and

   restricted stock, net of forfeitures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

714

 

 

 

 

 

 

714

 

Net loss