News Column

Marchex Announces Record Second Quarter 2014 Results

August 5, 2014

Company Reports Record Call-Driven Revenue

SEATTLE--(BUSINESS WIRE)-- Marchex, Inc. (NASDAQ:MCHX), a mobile advertising technology company, today announced its financial results for the second quarter ended June 30, 2014.

“Our ability to deliver strong returns for our customers through our call advertising products drove another record during the second quarter,” said Russell Horowitz, Chairman and CEO of Marchex. “Our focus on our clients’ success is the cornerstone of our business. Our Call Analytics platform is enabling Marchex to provide unique intelligence and insight around calls at the same time mobile and call-based advertising is emerging as a major theme for advertisers. As a result, we are further integrating with some of our largest advertisers and landing new customers, many of which are embracing mobile performance advertising for the first time.”

Q2 2014 Financial Highlights1

  • GAAP revenue was $49.7 million for the second quarter of 2014, compared to $37.6 million for the second quarter of 2013. Non-GAAP revenue2, which excludes domain sales recorded in revenue, was $47.4 million for the second quarter of 2014.
  • GAAP net income from continuing operations was $947,000 for the second quarter of 2014, compared to a GAAP net loss from continuing operations of $354,000 for the second quarter of 2013.
  • GAAP net income from continuing operations attributable to common stockholders per diluted share was $0.02 for the second quarter of 2014. This compares to GAAP net loss from continuing operations attributable to common stockholders per diluted share of $0.01 for the second quarter of 2013.
     
     

    Q2 2014

      Q2 2013

    GAAP Revenue

    $49.7 million$37.6 million
    Non-GAAP Results:
    Non-GAAP Revenue 2, 5$47.4 million$37.6 million
    Call-Driven and Related Revenue$45.9 million$33.9 million
    Archeo Revenue including domain gains and sales 3,5$3.8 million$5.0 million
    Archeo Revenue excluding domain gains and sales 3, 5$1.5 million$3.7 million
     
    Call-Driven Adjusted OIBA5$2.9 million$1.5 million
    Call-Driven Adjusted EBITDA5$3.8 million$2.4 million
    Adjusted OIBA4, 5$4.8 million$3.6 million
    Adjusted EBITDA4, 5$5.7 million$4.5 million
     
    Adjusted OIBA excluding domain gains and sales5$2.6 million$2.2 million
    Adjusted EBITDA excluding domain gains and sales5$3.5 million$3.2 million
     
  • Adjusted non-GAAP EPS3 from continuing operations for the second quarter of 2014 was $0.07, compared to $0.06 for the second quarter of 2013. Adjusted non-GAAP EPS3 from continuing operations excluding domain gains and sales for the second quarter of 2014 and 2013 were both $0.04.

    1 In July 2013, certain pay-per-click assets were sold.As a result, the financial results of these pay-per-click assets are presented as discontinued operations, net of tax in our condensed consolidated statements of operations in accordance with GAAP, and are excluded from all other results unless otherwise noted.

    2 Excludes domain sales recognized in GAAP revenue. In September 2013 upon the launch of its domain marketplace, the company commenced recognizing domain sales as revenue.

    3 Includes/excludes domain sales recognized in GAAP revenue and domain sales recognized in gains on sales and disposals of intangible assets.

    4 Adjusted OIBA, Adjusted EBITDA and Non-GAAP EPS include the impact of domain gains and sales. Historically, these non-GAAP measures excluded the impact of domain gains and sales.

    5 Reconciliations of non-GAAP measures are included in the financial tables attached to this press release and we encourage investors to examine the reconciling adjustments between the GAAP and non-GAAP measures.

    Marchex Q2 and Recent Call-Driven Business Highlights:

  • Revenue. Call-Driven and related revenue was $45.9 million for the second quarter of 2014 – a 35 percent increase compared to $33.9 million for the second quarter of 2013.
  • Strategic Developments.Marchex raised $32.5 million as part of its secondary offering, which was completed on April4th. Marchex intends to use the net proceeds of the offering for general corporate purposes, which may include acquisitions or licenses of, or investments in, products, services, technologies or other businesses.

    Archeo Q2 Business Highlights:

  • Revenue. Archeo non-GAAP revenue was $1.5 million for the second quarter of 2014, which excludes domain sales recognized in GAAP revenue.
  • Domains sales. During the second quarter of 2014, domain sales yielded $2.2 million.

    Business Outlook

    The following forward-looking statements reflect Marchex's expectations as of August 5, 2014 and exclude any contribution from Archeo operations, domain sales and discontinued operations. Archeo operating results would be incremental and additive to our Call-Driven revenue, profitability, and other measures below:

     

    Call-Driven financial guidance for the fiscal year ending December 31, 2014

     
    Call-Driven Revenue   $178 million or more
    Call-Driven Adjusted OIBA 1   $10 million or more
    Call Driven Adjusted EBITDA 1   $14 million or more
     

    Call-Driven financial guidance for the Third Quarter ending September 30, 2014

     

    Call-Driven Revenue

     

    $46 million or more

    Call-Driven Adjusted OIBA 1

     

    $2.5-$3 million

    Call-Driven Adjusted EBITDA 1

     

    $3.5-$4 million

     


    1 These non-GAAP Call-Driven measures assign all Marchex corporate overhead costs to the Call-Driven results. Reconciliations of non-GAAP measures are included in the financial tables attached to this press release and we encourage investors to examine the reconciling adjustments between the GAAP and non-GAAP measures.

    Conference Call and Webcast Information

    Management will hold a conference call, starting at 5:00 p.m. ET on Tuesday, August 5, 2014 to discuss its second quarter ended June 30, 2014 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, beginning two hours after completion of the call.

    About Marchex

    Marchex is a mobile advertising technology company. The company provides a suite of products and services for businesses that depend on consumer phone calls to drive sales. Marchex’s mobile advertising platform delivers new customer phone calls to businesses, while its technology analyzes the data in these calls to help maximize ad campaign results. Marchex disrupts traditional advertising models by giving businesses full transparency into their ad campaign performance and charging them based on new customer acquisition.

    Please visit www.marchex.com, blog.marchex.com 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, projected costs, prospects, plans and objectives of management are forward-looking statements. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. There are a number of important factors that could cause Marchex's actual results to differ materially from those indicated by such forward-looking statements which are described in the "Risk Factors" section of our most recent periodic report and registration statement filed with the SEC. All of the information provided in this release is as of August 5, 2014 and Marchex undertakes no duty to update the information provided herein.

    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 OIBA , Adjusted OIBA, Adjusted EBITDA, Revenue including and excluding domain gains and sales, Adjusted OIBA, EBITDA including and excluding domain gains and sales and Adjusted non-GAAP EPS including and excluding domain gains and sales. Marchex also provides Call-Driven Adjusted OIBA and EBITDA.

    OIBA represents income (loss) from operations plus (1) stock-based compensation expense and (2) amortization of intangible assets from acquisitions. This measure, among other things, is one of the primary metrics by which Marchex evaluates the performance of its business. Additionally, Marchex's management uses Adjusted OIBA, which excludes acquisition and separation related costs, as this item is not indicative of Marchex’s recurring core operating results. 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 and acquisition and separation related costs. Adjusted EBITDA represents income before interest, income taxes, depreciation, amortization, stock compensation expense and acquisition and separation related cost. Marchex believes that Adjusted EBITDA is another alternative measure of liquidity to GAAP net cash provided by operating activities that provides meaningful supplemental information regarding liquidity and is used by Marchex's management to measure its ability to fund operations and its financing obligations. Historically, these Non-GAAP measures excluded gain/loss on sales and disposals of intangible assets for each asset and any domain sales contribution.

    Non-GAAP Revenue represents GAAP revenue excludes domain sales sold through Marchex’s Domain Marketplace, which are recognized in GAAP revenue. Archeo revenueincluding or excluding domain gains and salesrepresents GAAP revenue and includes/excludes sales proceeds from the sale of domains recognized in gain/loss on sales and disposals of intangible assets and domain sales sold through Marchex’s Domain Marketplace which are recognized in GAAP revenue. Adjusted OIBA and EBITDA including or excluding domain gains and sales includes the above descriptions of Adjusted OIBA and EBITDA and includes/excludes domain sales contribution and gain/loss on sales and disposals of intangible assets. Call-Driven Adjusted OIBA and EBITDA includes the above descriptions of Adjusted OIBA and EBITDA for the Call-Driven segment. The Call-Driven Adjusted OIBA and EBITDAassigns all Marchex general corporate overhead costs to the Call-Driven results.Financial analysts and investors may use the non-GAAP historical Revenue including/excluding domain gains and sales and Adjusted OIBA and EBITDA including/excluding domain gains and sales to help with comparative financial evaluation to make informed investment decisions. Adjusted non-GAAP EPSrepresents Adjusted non-GAAP net income applicable to common stockholders divided by GAAP diluted shares outstanding. Adjusted non-GAAP net income applicable to common stockholders 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 applicable to common stockholders plus the net of tax effects of: (1) stock-based compensation expense, (2) amortization of intangible assets from acquisitions, (3) acquisition and separation related costs, (4) interest and other income (expense), (5) discontinued operations, net of tax and (6) dividends paid to participating securities, and also excludes the effect of any tax valuation allowance. Financial analysts and investors may use Adjusted non-GAAP EPS 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. Adjusted Non-GAAP EPS excluding domain gains and sales includes the above description of Adjusted non-GAAP EPS and excludes domain sales contribution and gain/loss on sales and disposals of intangible assets.

    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 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.

     
    MARCHEX, INC. AND SUBSIDIARIES

    Condensed Consolidated Statements of Operations

    (in thousands, except per share data)

    (unaudited)
     
      Three Months Ended

    June 30,
    2013   2014
    Revenue $ 37,578   $ 49,676
     
    Expenses:
    Service costs (1) 22,584 32,319
    Sales and marketing (1) 2,906 2,839
    Product development (1) 6,944 7,458
    General and administrative (1) 5,526 5,386
    Amortization of intangible assets from acquisitions 736 31
    Acquisition and separation related costs   309       (68 )

    Total operating expenses

    39,005 47,965
    Gain on sales and disposals of intangible assets, net   1,329       -  
    Income (loss) from operations (98 ) 1,711
    Interest expense and other, net   (12 )     (22 )
    Income (loss) from continuing operations before provision for income taxes (110 ) 1,689
    Income tax expense   244       709  
    Net income (loss) from continuing operations (354 ) 980
    Discontinued operations, net of tax   0       -  
    Net income (loss) (354 ) 980
    Dividends paid to participating securities   -       (33 )
    Net income (loss) applicable to common stockholders $ (354 )   $ 947  
     
    Basic and diluted net income (loss) per Class A and Class B share applicable to common stockholders:
    Continuing operations $ (0.01 ) $ 0.02
    Discontinued operations, net of tax   0.00       -  
    Basic and diluted net income (loss) per Class A and Class B share applicable to common stockholders $ (0.01 ) $ 0.02
    Dividends paid per share $ - $ 0.02
    Shares used to calculate basic net income (loss) per share applicable to common stockholders
    Class A 9,570 5,243
    Class B 25,853 35,441
    Shares used to calculate diluted net income (loss) per share applicable to common stockholders
    Class A 9,570 5,243
    Class B 35,423 43,453

    (1) Includes stock-based compensation allocated as follows:

    Service costs $ 183 $ 362
    Sales and marketing 202 233
    Product development 394 692
    General and administrative   1,824       1,830  
    Total $ 2,603     $ 3,117  
     
     
    MARCHEX, INC. AND SUBSIDIARIES

    Condensed Consolidated Statements of Operations

    (in thousands, except per share data)

    (unaudited)
     
      Six Months Ended

    June 30,
    2013   2014
    Revenue $ 72,310   $ 100,172
     
    Expenses:
    Service costs (1) 42,732 64,673
    Sales and marketing (1) 5,550 6,221
    Product development (1) 13,752 15,018
    General and administrative (1) 10,323 10,747
    Amortization of intangible assets from acquisitions 1,791 434
    Acquisition and separation related costs   654       (68 )
    Total operating expenses 74,802 97,025
    Gain on sales and disposals of intangible assets, net   2,691       -  
    Income from operations 199 3,147
    Interest expense and other, net   (29 )     (24 )
    Income from continuing operations before provision for income taxes 170 3,123
    Income tax expense   408       1,297  
    Net income (loss) from continuing operations (238 ) 1,826
    Discontinued operations, net of tax   (31 )     9  
    Net income (loss) (269 ) 1,835
    Dividends paid to participating securities   -       (69 )
    Net income (loss) applicable to common stockholders $ (269 )   $ 1,766  
     
    Basic and diluted net income (loss) per Class A and Class B share applicable to common stockholders:
    Continuing operations $ (0.01 ) $ 0.05
    Discontinued operations, net of tax $ (0.00 )   $ 0.00  
    Basic and diluted net income (loss) per Class A and Class B share applicable to common stockholders $ (0.01 ) $ 0.05
    Dividends paid per share $ - $ 0.04
    Shares used to calculate basic net income (loss) per share applicable to common stockholders
    Class A 9,570 6,483
    Class B 25,720 32,277
    Shares used to calculate diluted net income (loss) per share applicable to common stockholders
    Class A 9,570 6,483
    Class B 35,290 41,658

    (1) Includes stock-based compensation allocated as follows:

    Service costs $ 363 $ 644
    Sales and marketing 262 437
    Product development 766 1,351
    General and administrative   3,119       3,568  
    Total $ 4,510     $ 6,000  
     
     
    MARCHEX, INC. AND SUBSIDIARIES

    Condensed Consolidated Balance Sheets

    (in thousands)

    (unaudited)
     
    Assets   December 31,

    2013
      June 30,

    2014
    Current assets:  
    Cash and cash equivalents $ 30,912 $ 74,950
    Accounts receivable, net 30,005 34,700
    Prepaid expenses and other current assets 2,943 3,429
    Refundable taxes 97 96
    Deferred tax assets   1,016       1,251  
    Total current assets 64,973 114,426
     
    Property and equipment, net 5,440 5,042
    Deferred tax assets 25,138 23,012
    Intangibles and other assets, net 484 422
    Goodwill 65,679 65,679
    Intangible assets from acquisitions, net   434       -  
    Total Assets $ 162,148     $ 208,581  
     
    Liabilities and Stockholders' Equity
     
    Current liabilities:
    Accounts payable $ 15,922 $ 20,179
    Accrued expenses and other current liabilities 7,988 8,395
    Deferred revenue   1,388       2,188  
    Total current liabilities 25,298 30,762
     
    Other non-current liabilities   2,095       1,322  
    Total Liabilities 27,393 32,084
     
     
    Class A common stock 80 55
    Class B common stock 309 375
    Treasury stock (2 ) (1 )
    Additional paid-in capital 305,517 345,382
    Accumulated deficit   (171,149 )     (169,314 )
    Total Stockholders' Equity   134,755       176,497  
    Total Liabilities and Stockholders' Equity $ 162,148     $ 208,581  
     
     
    Reconciliation of GAAP Income from Operations to Operating Income Before Amortization (OIBA)

    and Adjusted Operating Income Before Amortization (Adjusted OIBA)

    (in thousands)

    (unaudited)
     
      Three Months Ended

    June 30,
    2013   2014
    Income (loss) from operations $ (98 )   $ 1,711
    Stock-based compensation 2,603 3,117
    Amortization of intangible assets from acquisitions   736       31  
    Operating income before amortization (OIBA) 3,241 4,859
    Acquisition and separation related costs   309       (68 )
    Adjusted operating income before amortization (Adjusted OIBA)$3,550$4,791
    Domain sales contribution - (2,217 )
    Gain on sales and disposals of intangible assets, net   (1,329 )     -  
     
    Adjusted OIBA excluding domain gains and sales $ 2,221     $ 2,574  
     
     
     
    Six Months Ended

    June 30,
    2013   2014
     
    Income from operations $ 199 $ 3,147
    Stock-based compensation 4,510 6,000
    Amortization of intangible assets from acquisitions   1,791       434  
    Operating income before amortization (OIBA) 6,500 9,581
    Acquisition and separation related costs   654       (68 )
    Adjusted operating income before amortization (Adjusted OIBA)$7,154$9,513
    Domain sales contribution - (4,110 )
    Gain on sales and disposals of intangible assets, net   (2,691 )     -  
     
    Adjusted OIBA excluding domain gains and sales $ 4,463     $ 5,403  
     
     
    Certain reclassifications have been made to prior periods to conform to current presentation.
     
     
    MARCHEX, INC. AND SUBSIDIARIES

    Reconciliation from Net Cash provided by Operating Activities to Adjusted EBITDA

    (in thousands)

    (unaudited)
     
      Three Months Ended

    June 30,
    2013   2014
     
    Net cash provided by operating activities $ 1,014 $ 3,289
    Changes in assets and liabilities 1,393 1,672
    Income tax expense 244 709
    Acquisition and separation related costs 309 -
    Interest expense and other, net 12 22
    Gain on sales and disposals of intangible assets, net 1,329 -
    Discontinued operations, net of tax (11 ) -
    Excess tax benefits related to stock compensation   189       -  
     
    Adjusted EBITDA$4,479$5,692
    Domain sales contribution - (2,217 )
    Gain on sales and disposals of intangible assets, net   (1,329 )     -  
    Adjusted EBITDA excluding domain gains and sales $ 3,150     $ 3,475  
         
    Net cash provided by (used in) investing activities $ 449     $ (545 )
         
    Net cash provided by financing activities $ 179     $ 33,680  
     
     
     
    Six Months Ended

    June 30,
    2013   2014
     
    Net cash provided by operating activities $ 3,155 $ 11,367
    Changes in asset and liabilities 1,856 (1,312 )
    Income tax expense 408 1,297
    Acquisition and separation related costs 654 -
    Interest expense and other, net 29 24
    Gain on sales and disposals of intangible assets, net 2,691 -
    Discontinued operations, net of tax 6 (9 )
    Excess tax benefits related to stock compensation   196       -  
     
    Adjusted EBITDA$8,995$11,367
    Domain sales contribution - (4,110 )
    Gain on sales and disposals of intangible assets, net   (2,691 )     -  
    Adjusted EBITDA excluding domain gains and sales $ 6,304     $ 7,257  
         
    Net cash provided by (used in) investing activities $ 961     $ (1,352 )
         
    Net cash provided by (used in) financing activities $ (1,304 )   $ 34,023  
     
     
    Certain reclassifications have been made to prior periods to conform to current presentation.
     
     
    MARCHEX, INC. AND SUBSIDIARIES

    Reconciliation of GAAP EPS to Adjusted Non-GAAP EPS

    (in thousands, except per share data)

    (unaudited)
     
      Three Months Ended

    June 30,
    2013   2014
    Adjusted Non-GAAP EPS from continuing operations $ 0.06     $ 0.07  
     
    Net income (loss) applicable to common stockholders - diluted (GAAP EPS) $ (0.01 ) $ 0.02

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

    35,423 43,453
     
    Net income (loss) applicable to common stockholders $ (354 ) $ 947
    Stock-based compensation 2,603 3,117
    Acquisition and separation related costs 309 (68 )
    Amortization of intangible assets from acquisitions 736 31
    Interest expense and other, net 12 22
    Dividends paid to participating securities - 33
    Tax valuation allowance 225 -
    Estimated impact of income taxes   (1,219 )     (973 )
     
    Adjusted Non-GAAP net income from continuing operations$2,312$3,109
    Domain sales contribution - (2,217 )
    Gain on sales and disposals of intangible assets, net (1,329 ) -
    Estimated impact of income taxes on domain gains and sales   463       785  
     
    Adjusted Non-GAAP net income excluding domain gains and sales $ 1,446     $ 1,677  
     
    Adjusted Non-GAAP EPS from continuing operations$0.06     $0.07  
     
    Adjusted Non-GAAP EPS excluding domain gains and sales $ 0.04     $ 0.04  
     
     

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

    35,423 43,453
     
    Weighted average stock options and common shares subject to purchase or cancellation (if applicable)   790       -  
    Diluted shares used to calculate Adjusted Non-GAAP EPS (1)   36,213       43,453  
     

    (1) For the purpose of computing the number of diluted shares for Adjusted Non-GAAP EPS, Marchex uses the accounting guidance that would be applicable for computing the number of diluted shares for GAAP EPS.

     
     
    Certain reclassifications have been made to prior periods to conform to current presentation.
     
     
    MARCHEX, INC. AND SUBSIDIARIES

    Reconciliation of GAAP EPS to Adjusted Non-GAAP EPS

    (in thousands, except per share data)

    (unaudited)
     
      Six Months Ended

    June 30,
    2013   2014
    Adjusted Non-GAAP EPS from continuing operations $ 0.13     $ 0.15  
     
    Net income (loss) from continuing operations applicable to common stockholders - diluted (GAAP EPS) $ (0.01 ) $ 0.02
    Shares used to calculate diluted net income (loss) per share applicable to common stockholders 35,290 41,658
     
    Net income (loss) applicable to common stockholders $ (269 ) $ 1,766
    Stock-based compensation 4,510 6,000
    Acquisition and separation related costs 654 (68 )
    Amortization of intangible assets from acquisitions 1,791 434
    Interest expense and other, net 29 24
    Dividends paid to participating securities - 69
    Tax valuation allowance 651 -
    Discontinued operations, net of tax 31 (9 )
    Estimated impact of income taxes   (2,743 )     (2,041 )
     
    Adjusted Non-GAAP net income from continuing operations$4,654$6,175
    Domain sales contribution - (4,110 )
    Gain on sales and disposals of intangible assets, net (2,691 ) -
    Estimated impact of income taxes on domain gains and sales   940       1,449  
     
    Adjusted Non-GAAP net income from continuing operations excluding domain gains and sales $ 2,903     $ 3,514  
     
    Adjusted Non-GAAP EPS from continuing operations$0.13     $0.15  
     
    Adjusted Non-GAAP EPS from continuing operations excluding domain gains and sales $ 0.08     $ 0.08  
     
     

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

    35,290 41,658
     
    Weighted average stock options and common shares subject to purchase or cancellation (if applicable)   592       -  
    Diluted shares used to calculate Adjusted Non-GAAP EPS (1)   35,882       41,658  
     

    (1) For the purpose of computing the number of diluted shares for Adjusted Non-GAAP EPS, Marchex uses the accounting guidance that would be applicable for computing the number of diluted shares for GAAP EPS.

     
     
    Certain reclassifications have been made to prior periods to conform to current presentation.
     
     
    MARCHEX, INC. AND SUBSIDIARIES

    (in thousands)

    (unaudited)
     
    Reconciliation of GAAP Income (Loss) from Operations to Operating Income before Amortization (OIBA)

    and Adjusted Operating Income Before Amortization (Adjusted OIBA)
     
     

    Three months ended

     

    Six months ended

    3/31/2013   6/30/2013   9/30/2013   12/31/2013   3/31/2014   6/30/20146/30/2013   6/30/2014
               
    Income (loss) from operations $ 297 $ (98 ) $ 1,006 $ 1,544 $ 1,436 $ 1,711 $ 199 $ 3,147
    Stock-based compensation 1,907 2,603 2,365 2,362 2,883 3,117 4,510 6,000
    Amortization of intangible assets from acquisitions   1,055       736       709       426       403       31     1,791       434  
    Operating income before amortization (OIBA) 3,259 3,241 4,080 4,332 4,722 4,859 6,500 9,581
    Acquisition and separation related costs   345       309       286       (62 )     -       (68 )   654       (68 )
    Adjusted operating income before amortization (Adjusted OIBA)$3,604$3,550$4,366$4,270$4,722$4,791$7,154$9,513
    Domain sales contribution - - (839 ) (1,549 ) (1,893 ) (2,217 ) - (4,110 )
    Gain on sales and disposals of intangible assets, net   (1,362 )     (1,329 )     (1,047 )     (35 )     -       -     (2,691 )     -  
    Adjusted OIBA excluding domain gains and sales $ 2,242     $ 2,221     $ 2,480     $ 2,686     $ 2,829     $ 2,574     4,463       5,403  
     
     
    Reconciliation from Net Cash provided by Operating Activities to Adjusted EBITDA
     

    Three months ended

    Six months ended

    3/31/2013   6/30/2013   9/30/2013   12/31/2013   3/31/2014   6/30/20146/30/2013   6/30/2014
     
    Net cash provided by operating activities $ 2,141 $ 1,014 $ 4,332 $ 6,109 $ 8,078 $ 3,289 $ 3,155 $ 11,367
    Changes in assets and liabilities 463 1,393 (1,374 ) (1,636 ) (2,984 ) 1,672 1,856 (1,312 )
    Income tax expense 164 244 389 958 588 709 408 1,297
    Acquisition and separation related costs 345 309 286 - - - 654 -
    Gain on sales and disposals of intangible assets, net 1,362 1,329 1,047 35 - - 2,691 -
    Discontinued operations, net of tax 17 (11 ) 43 (7 ) (9 ) - 6 (9 )
    Tax effect of gain on sale of discontinued operations - - 563 - - - - -
    Interest expense and other, net 17 12 15 (14 ) 2 22 29 24
    Excess tax benefits related to stock compensation   7       189       13       (209 )     -       -     196       -  
    Adjusted EBITDA$4,516$4,479$5,314$5,236$5,675$5,692

    $

    8,995

    $

    11,367

    Domain sales contribution - - (839 ) (1,549 ) (1,893 ) (2,217 ) - (4,110 )
    Gain on sales and disposals of intangible assets, net $ (1,362 )   $ (1,329 )   $ (1,047 )   $ (35 )   $ -     $ -   $ (2,691 )   $ -  
    Adjusted EBITDA excluding domain gains and sales $ 3,154     $ 3,150     $ 3,428     $ 3,652     $ 3,782     $ 3,475   $ 6,304     $ 7,257  
     
    Net cash provided by (used in) investing activities $ 512     $ 449     $ 1,235     $ (549 )   $ (807 )   $ (545 ) $ 961     $ (1,352 )
    Net cash provided by (used in) financing activities $ (1,483 )   $ 179     $ 842     $ 202     $ 343     $ 33,680   $ (1,304 )   $ 34,023  
     
     
    Due to rounding, the sum of quarterly amounts may not equal amounts reported for year-to-date periods.
     
     
    MARCHEX, INC. AND SUBSIDIARIES

    Quarterly Financial Summary Information

    (in thousands)
     
     
    NON-GAAP MEASURES

    Amounts below exclude Discontinued Operations
     
    CONSOLIDATED   Q113   Q213   Q313   Q413   Q114   Q214
    GAAP Revenue   $34,732   $37,578   $40,560   $39,680   $50,496   $49,676
    Adjusted OIBA$3,604$3,550$4,366$4,270$4,722$4,791
    Adjusted EBITDA   $4,516   $4,479   $5,314   $5,236   $5,675   $5,692
                             
    CALL-DRIVEN AND RELATED   Q113   Q213   Q313   Q413   Q114   Q214
    GAAP Revenue$31,108$33,893$35,668$34,457$45,492$45,857
    Adjusted OIBA$1,371$1,509$1,693$1,725$2,411$2,897
    Adjusted EBITDA   $2,246   $2,401   $2,598   $2,618   $3,312   $3,764
                             
    ARCHEO   Q113   Q213   Q313   Q413   Q114   Q214
    GAAP Revenue$3,624$3,685$4,892$5,223$5,004$3,819
    Adjusted OIBA$2,233$2,041$2,673$2,545$2,311$1,894
    Adjusted EBITDA   $2,270   $2,078   $2,716   $2,618   $2,363   $1,928
     
     
    Due to rounding, the sum of quarterly amounts may not equal amounts reported for year-to-date periods.
     
     
    MARCHEX, INC. AND SUBSIDIARIES

    Quarterly Financial Summary Information

    (in thousands)
     
     
    NON-GAAP MEASURES

    Amounts below exclude Domain Gains and Sales and Discontinued Operations
     
    CONSOLIDATED   Q113   Q213   Q313   Q413   Q114   Q214
    Non-GAAP Revenue   $34,732   $37,578   $39,661   $38,124   $48,598   $47,430
    Adjusted OIBA$2,242$2,221$2,480$2,686$2,829$2,574
    Adjusted EBITDA   $3,154   $3,150   $3,428   $3,652   $3,782   $3,475  
                             
    CALL-DRIVEN AND RELATED   Q113   Q213   Q313   Q413   Q114   Q214
    GAAP Revenue$31,108$33,893$35,668$34,457$45,492$45,857
    Adjusted OIBA$1,371$1,509$1,693$1,725$2,411$2,897
    Adjusted EBITDA   $2,246   $2,401   $2,598   $2,618   $3,312   $3,764  
                             
    ARCHEO   Q113   Q213   Q313   Q413   Q114   Q214
    Non-GAAP Revenue$3,624$3,685$3,993$3,667$3,106$1,574
    Adjusted OIBA$871$712$787$961$418$(323)
    Adjusted EBITDA   $908   $749   $830   $1,034   $470   $(289)
     
     
    Due to rounding, the sum of quarterly amounts may not equal amounts reported for year-to-date periods.
     
     
    MARCHEX, INC. AND SUBSIDIARIES

    Financial Summary by Segment

    (in thousands)

    (unaudited)
     
     

    Three months ended

      Six months ended
    3/31/2013   6/30/2013   9/30/2013   12/31/2013   3/31/2014   6/30/20146/30/2013   6/30/2014
    Marchex - Consolidated5                                
    Revenue - GAAP2   $34,732   $37,578   $40,560   $39,680   $50,496   $49,676     $72,310   $100,172
    Revenue including domain gains3   $ 36,094   $ 38,908   $ 41,607   $ 39,715   $ 50,496   $ 49,676     $ 75,002   $ 100,172

    Adjusted OIBA including domain gains and sales4

      $3,604   $3,550   $4,366   $4,270   $4,722   $4,791  

     

    $7,154   $9,513
    Adjusted OIBA excluding domain gains and sales4   $ 2,242   $ 2,221   $ 2,480   $ 2,686   $ 2,829   $ 2,574     $ 4,463   $ 5,403
    Adjusted EBITDA including domain gains and sales4   $4,516   $4,479   $5,314   $5,236   $5,675   $5,692  

     

    $8,995   $11,367
    Adjusted EBITDA excluding domain gains and sales4 $ 3,154   $ 3,150   $ 3,428   $ 3,652   $ 3,782   $ 3,475 $ 6,304   $ 7,257
     
    Call-Driven and Related1
    Revenue - GAAP $ 31,108 $ 33,893 $ 35,668 $ 34,457 $ 45,492 $ 45,857 $ 65,001 $ 91,349
    Adjusted OIBA $ 1,371 $ 1,509 $ 1,693 $ 1,725 $ 2,411 $ 2,897 $ 2,880 $ 5,308
    Adjusted EBITDA $ 2,246 $ 2,401 $ 2,598 $ 2,618 $ 3,312 $ 3,764 $ 4,647 $ 7,076
     
    Archeo1,5
    Revenue - GAAP2 $ 3,624 $ 3,685 $ 4,892 $ 5,223 $ 5,004 $ 3,819 $ 7,309 $ 8,823
    Revenue including domain gains3 $ 4,986 $ 5,015 $ 5,939 $ 5,258 $ 5,004 $ 3,819

     

    $ 10,002 $ 8,824
    Adjusted OIBA including domain gains and sales4 $ 2,233 $ 2,041 $ 2,673 $ 2,545 $ 2,311 $ 1,894 $ 4,274 $ 4,205
    Adjusted OIBA excluding domain gains and sales4 $ 871 $ 712 $ 787 $ 961 $ 418 $ (323 ) $ 1,583 $ 95
    Adjusted EBITDA including domain gains and sales4 $ 2,270 $ 2,078 $ 2,716 $ 2,618 $ 2,363 $ 1,928 $ 4,348 $ 4,291
    Adjusted EBITDA excluding domain gains and sales4 $ 908 $ 749 $ 830 $ 1,034 $ 470 $ (289 ) $ 1,657 $ 181
     
     

    1 The financial results for Call-Driven and Archeo are preliminary and have been derived from the unaudited condensed consolidated financial statements of Marchex, Inc. for all periods presented.

    The unaudited Call-Driven financial results include certain direct operating expenses and general corporate overhead expenses in all periods presented.
    The unaudited Archeo financial results include direct operating expenses for all periods presented.

    2 In September 2013, Marchex announced and launched its Domains Marketplace and through it, commenced buying and selling of domains.

    Domain sales occurring after this date are included in GAAP revenue and related cost in service cost. Prior to this date, domain sales were recognized in gain on sales and disposals of intangible assets in the unaudited condensed consolidated financial statements.

    3 Domain sales recognized in gain on sales and disposals of intangible assets, net.

    4 Domain sales recognized in either gain on sales and disposals of intangible assets, net or in revenue and service costs in the unaudited condensed consolidated financial statements for each applicable period.

    5 Amounts presented exclude results of discontinued operations. Operating results of discontinued operations relate to certain pay-per-click assets sold in July 2013 and are included in discontinued operations, net of tax in the unaudited condensed consolidated financial statements.

     
     
    Due to rounding, the sum of quarterly amounts may not equal amounts reported for year-to-date periods.
     
     
    MARCHEX, INC. AND SUBSIDIARIES

    Reconciliation to Reported Financial and Non-GAAP Information

    (in thousands)

    (unaudited)
     
     

    Three months ended

     

    Six months ended

    3/31/2013   6/30/2013   9/30/2013   12/31/2013   3/31/2014   6/30/20146/30/2013   6/30/2014
    Revenue6            
    Consolidated - GAAP1$34,732$37,578$40,560$39,680$50,496$49,676$72,310$100,172
    Add: Domain Gains2   1,362     1,330     1,047     35     -     -   2,692     -
    Consolidated including Domain Gains and Sales3 36,094 38,908 41,607 39,715 50,496 49,676 75,002 100,172
    Less: Archeo including Domain Gains and Sales3,4   4,986     5,015     5,939     5,258     5,004     3,819   10,001     8,823
    Call-Driven4 and related $ 31,108   $ 33,893   $ 35,668   $ 34,457   $ 45,492   $ 45,857 $ 65,001   $ 91,349
     
    Adjusted operating income6
    Consolidated excluding Domain Gains and Sales5 $ 2,242 $ 2,221 $ 2,480 $ 2,686 $ 2,829 $ 2,574 $ 4,463 $ 5,403
    Add: Domain Gains and Sales5   1,362     1,329     1,886     1,584     1,893     2,217   2,691     4,110
    Consolidated including Domain Gains and Sales3,6043,5504,3664,2704,7224,791

    7,154

    9,513

    Less: Archeo including Domain Gains and Sales4,5   2,233     2,041     2,673     2,545     2,311     1,894   4,274     4,205
    Call-Driven4 and related $ 1,371   $ 1,509   $ 1,693   $ 1,725   $ 2,411   $ 2,897 $ 2,880   $ 5,308
     
    Adjusted EBITDA6
    Consolidated excluding Domain Gains and Sales5 $ 3,154 $ 3,150 $ 3,428 $ 3,652 $ 3,782 $ 3,475 $ 6,304 $ 7,257
    Add: Domain Gains and Sales5   1,362     1,329     1,886     1,584     1,893     2,217   2,691     4,110
    Consolidated including Domain Gains and Sales4,5164,4795,3145,2365,6755,692

    8,995

    11,367

    Less: Archeo including Domain Gains and Sales4,5   2,270     2,078     2,716     2,618     2,363     1,928   4,348     4,291
    Call-Driven4 and related $ 2,246   $ 2,401   $ 2,598   $ 2,618   $ 3,312   $ 3,764 $ 4,647   $ 7,076
     
     

    1 In September 2013, Marchex announced and launched its Domains Marketplace and through it, commenced buying and selling of domains.

    Domain sales occurring after this date are included in GAAP revenue and related cost in service cost. Prior to this date, domain sales were recognized in gain on sales and disposals of intangible assets in the unaudited condensed consolidated financial statements.

    2 Domain sales recognized in gain on sales and disposals of intangible assets, net in the unaudited consolidated financial statements.

    3 Domain sales recognized in either gain on sales and disposals of intangible assets or in revenue and service costs in the unaudited condensed consolidated financial statements for each applicable period.

    4 The financial results for Call-Driven and Archeo are preliminary and have been derived from the unaudited condensed consolidated financial statements of Marchex, Inc. for all periods presented.

    The unaudited Call-Driven financial results include certain direct operating expenses and general corporate overhead expenses in all periods presented.
    The unaudited Archeo financial results include direct operating expenses for all periods presented.

    5 These are non-GAAP measures of operating results and liquidity. These non-GAAP measures are adjusted for net gains from sales of intangible assets, direct contribution of domain sales sold through Marchex'sDomains Marketplace.

    6 Amounts presented exclude results of discontinued operations. Financial results of discontinued operations related to certain pay-per-click assets sold in July 2013 and are included in discontinued operations, net of tax in the unaudited consolidated condensed financial statements.

     
     
    Due to rounding, the sum of quarterly amounts may not equal amounts reported for year-to-date periods.
     





    Marchex Investor Relations

    Trevor Caldwell, 206-331-3600

    ir(at)marchex.com

    or

    Media Inquiries

    Marchex Corporate Communications

    Sonia Krishnan, 206-331-3434

    skrishnan(at)marchex.com

    Source: Marchex, Inc.


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