Marchex, Inc. Price & Performance (MCHX)

Before we get started, I'd like to take this opportunity to remind you that our remarks today will include forward looking statements.

Including references to our financial and operational performance, and actual results may differ materially from those contemplated by these forward looking statements. Risks and uncertainties that could cause these results to differ materially are set forth in today's earnings press release and in our most recent annual and quarterly report filed with the SEC. Any forward looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these or statements for subsequent events. During this call, we will present both GAAP non GAAP financial measures. Reconciliation of GAAP to non GAAP measures is included in today's earnings press release. Earnings press release is available in the Investor Relations section of our website. At this time, I'd like to turn the call over to Edwin.

Thank you, Trevor. Good afternoon, everyone, and thank you for joining us today. We appreciate your interest in Marchex Marchex.

And look forward to sharing our progress as we execute on our strategic vision and objectives. I'd like to start by thanking our employees customers and shareholders for their continued trust and commitment Our vision is clear, We are building a global leader in conversational intelligence delivering cutting edge AI driven solutions to Fortune 500 companies and beyond.

In a data driven world, businesses need real time insights to make informed decisions.

And we are at the forefront of enabling this transformation for our customers. While leveraging unique first party data. Looking back at 2024, I'm proud of what we achieved It was a year of foundational progress and sets the stage for our next phase of execution.

Acceleration and growth. A key highlight was the successful completion of OneStack in the fourth quarter. Which unified our numerous data stacks into a single cloud based architecture.

This was a significant strategic lift for our company given the size of our data assets.

Further, this was a critical step in optimizing performance scalability and efficiency across our business. With one stack now implemented, we are well positioned on a forward looking basis to serve enterprise customers with seamless high performing AI solutions, We now have the technical foundation in place to accelerate and launch growth initiatives [indiscernible] 2025. [indiscernible] Beyond the foundational technology initiatives, We made important strides in refining our go to market strategy.

Strengthening our customer relationships and expanding our reach across key vertical Marchex. Turning to 2025, we see this year as a launching point one where the groundwork from 2024 sets stage for measurable sustained growth and increased efficiency.

We remain focused on building a $100,000,000 revenue plus business and we are taking deliberate steps to achieve this goal.

In the coming months, We will complete multiple technology advances that leverage the Marchex Marchex platform Two of these exciting initiatives are our unified user interface or UI This creates a seamless intuitive experience across our entire product suite Further, this will enable one to many go to market capabilities where all of our AI signals are consumed by our customers through one web based interface. Second, Our single sign on or SSO This simplifies our customer enterprise access and security and significantly enhances the overall customer experience with the Marchex platform.

These initiatives will accelerate our progress advance our innovation initiatives, improve efficiencies for our customers and enable Marchex with well timed cross sell and up sell capabilities that can help unlock our growth opportunity. As we move through the year, we will also deliver numerous new AI powered products. Beginning this quarter, we will launch our new vertical specific AI solutions to complement our recent launch of Engage for Service. There is more to come this year. Including the rollout of our partnership with Microsoft, as well as other new channel partners and marketplaces. These innovations and expanded sales channels as the go to conversational intelligence provider for large enterprises in our vertical markets. To take advantage of this progress, we moved aggressively at the beginning of this year To reposition our team for the future and further alignment of our organization, [indiscernible] This included gaining organizational efficiencies in certain areas, while freeing up resources to increase our investments in our sales and marketing teams.

This will position us to accelerate the business while continuing to preserve financial discipline. With that, I will hand the call to Brian.

Thank you, Edwin.

For the fourth quarter of twenty twenty four, revenue was 11,900,000.0 versus $12,400,000 for the same quarter last year. During the fourth quarter, we saw a typical seasonal slow of call volumes with overall volumes decreasing relative to the third quarter across our core verticals Along with some headwinds on a year over year basis, certain customer segments, like small business resellers. As a reminder, we typically see a 10% to 15% decrease volumes across our core verticals in the fourth quarter. In the future, with the launch of our new products, new channel partners, along with new initiatives to enhance our cross sell and up sell initiatives, we believe these measures have the potential to offset some of these historical seasonal patterns. Turning to operating expenses for the fourth quarter. Excluding stock based compensation, amortization of intangible assets and acquisition and disposition related costs total operating costs for the fourth quarter of twenty twenty four $12,900,000 compared to $12,600,000 for the fourth quarter of twenty twenty three. Cost of revenues was $4,400,000 for the fourth quarter Cost of revenue as a percentage was improved on a year over year basis compared to the fourth quarter of twenty twenty three.

Cost of revenue was somewhat higher sequentially due to the timing of certain expense items. Including costs related to the completion of our infrastructure, [indiscernible] We believe that there is significant room for additional efficiency with our cost of revenue as new AI products are introduced and sell through. Sales and marketing costs were approximately $3,400,000 for the fourth quarter. This was up from the fourth quarter of twenty twenty three as we increased our investment in our go to market teams. As we complete ongoing phases of our infrastructure initiatives, we will be balancing profitability goals along with increasing Product development costs were $2,800,000 for the fourth quarter, as we continue to invest in expanding our AI suite of products and innovation. Moving to profitability measures. Adjusted EBITDA was a loss of $386,000 for the fourth quarter of twenty twenty four.

Which was down from an adjusted EBITDA of 112,000 for the fourth quarter of twenty twenty three reflecting our investments related to infrastructure initiatives. GAAP net loss was $1,900,000 for the fourth quarter twenty twenty four, or negative $0.04 per diluted share. This compares to a loss of $1,100,000 or negative $0.02 per diluted share for the fourth quarter of twenty twenty three. Adjusted non GAAP loss was negative $0.03 per share for the fourth quarter of twenty twenty four compared to $0 per share for the fourth quarter of twenty twenty three.

Additionally, we ended the fourth quarter twenty twenty four with a approximately $12,800,000 in in cash on hand.

Now turning to our business outlook.

The following forward looking statements reflect Marchex's expectations as of 03/06/2025. For the first quarter ending 03/31/2025, revenue is currently anticipated to be in the range of fourth quarter twenty twenty four level.

Adjusted EBITDA excluding certain one time expenses associated with organizational realignment is currently anticipated to be in the range of fourth quarter twenty twenty four levels.

This takes into account typically higher first quarter operating expenses as compared to the fourth quarter of twenty twenty four and some overlap of charges related to the completion of OneStack initiatives. For the fiscal year 2025, revenue is currently anticipated to grow on a year over year basis with the opportunity for sequential revenue acceleration throughout 2025 we execute on a series of strategic sequential product launch and go to market initiatives. Gross margins for the full year 2025 are currently anticipated to be higher than 2024. With the opportunity for improvement during the year. Adjusted EBITDA is currently anticipated to be positive for the full year 2025? Given our current belief that the company can increase revenue sequentially, while also continuing to gain expense efficiencies we believe we have the opportunity to see meaningful improvements in sequential quarterly adjusted EBITDA. To the extent this progress manifests throughout the year, we may have the ability to allocate some of these potential gains into incremental discretionary investments and growth initiatives. With that, I'll hand the call back to Edwin. Thank you, Brian. [indiscernible] From a financial perspective, we are striving for sequential growth throughout the year. Driven by customer demand the expansion of our product offerings and the efficiency gains from our technology investments.

We also anticipate achieving significant positive adjusted EBITDA progress for the full year demonstrating both revenue growth and operational discipline. We will deploy some of this progress back into our growth initiatives. To summarize, 2024 was a year of foundational transformation.

And 2025 is our year of acceleration.

With a strong foundation in place, a clear vision and an exceptional team we are more confident than ever our ability to deliver innovation, sustainable growth expanded market leadership and further creation of long term value Thank you again for your support. And I look forward to keeping you updated on our progress throughout the year. Now let's open up the call for questions. Great. Our first question is from Darren Afdey with ROTH Capital partners, Hi, this is Dylan on for Darren. Thanks for taking my questions. Just to start, when you talk about your outlook [indiscernible] How revenue is supposed to improve sequentially throughout the year. Can you just talk a little bit about what you're seeing gives you confidence into any line of sight and how that's a bit different from some of the things In the past, That was sort of of the similar tone. Thanks for the question, Darren.

Russ, go ahead.

Sure. I can start and feel free to jump in.

Yes, one of the things that Edwin's really hit on is all the technological progress in terms of our positioning the platform kind of the emergence of generative AI, to innovate more rapidly and do so in a way that is easier to sell and easier to adopt. And so right now when we look at what the critical path items have been for us to expand conversation volumes beyond our traditional sales and marketing use cases to things such as service We're now in a position where we've got clarity around our ability to capture more conversation volumes with our predictive and prescriptive analytics solutions. When we look at our ability to rapidly leverage our first party data into new AI signals and bundle those into [indiscernible] We've got clear line of sight of which customers can most harvest the value impact of those And when we look at the critical path aspects around a new unified UI, and call it click to buy or accelerated adoption and launching of products these are what we collectively look at as our strategic sequential accelerants for 2025 and why we think 2025 is different than prior years. When we look at how we can build the business and accelerate it and hopefully see that translate into kind of higher run rates And with the combination of higher revenue and increased efficiencies with gross margins and operations the latitude that comes with expanded adjusted EBITDA, both to accrue to the bottom line and invest more in growth.

Yes. And I would add, Darin, again. Thanks for the question. Good to hear you. I would add a few things. One, and I did mention this in the in the reading, but the one platform having everything in one stack is really huge that delivers the ability for us to have that single UI and single sign on, which means every client can now in the near term access all signals in one web interface And in the past, we would have to have multiple interfaces for them as we put everything together in one platform. That's together really, really well. I don't think the team is working really well together. So Troy's got a our CRO has a great, handle on what the strategy is and how to implement the go to market motion. And I think Brian's come on board and done a great job. So I think that's really important.

We got one billing system coming that enables our channel including a new API to take off. So there's a lot of things we did, a lot of work in the past couple of years that are going to help us make this a transformational year.

I mean, this is what you asked is the critical question. And so historically, we've sold one to one enterprises.

Now hitting on what Edwin just said, we're going to light up channel partners and be able to sell one to many. So that kind of expands the opportunity. We mentioned Engage for Service. Now we look at expanded franchises and dealers that we can sell direct to on increased volumes. And the expansion of our addressable market as part of this. Those are all the things that make us feel like '25 is going to to be a year where we see a lot of these investments Thank you.

That's an important one, Russ, in that when I took the reins here, we were selling into a sales group or marketing function with Engage for Service we jumped the suspense and now are selling into service business units and there are multiple functions we've spoken of, whether it's operation, a strategy group, a data analytics group, a CSAT group, a customer experience group. All those groups are now with the with the single UI and what we're doing with our data analytics and the first party data are able to either view their data in a new continuing new ways with signals And additionally, we can ingest the data they're pulling in from other systems like a POS or their survey data, etcetera, to give them a view a better view of how to make great business decisions. So it's looking forward to getting into the year. Hopefully that helps going. [indiscernible] Yes. Thank you. And just as a follow-up, I know it's really fluid, but considering your exposure to [indiscernible] Can you talk about how tariffs potentially impact your market presence?

Right now, There's I think a lot of unknowns and people kind of speculating on what some of those might be. We do know that Auto has managed through ups and downs, supply chain disruptions. We look through that kind of in and beyond COVID.

And so so some of that we've just got to kind of wait and adapt to based on what normalized behaviors look like. Currently in our planning cycles, there's nothing specifically that's come up that we view as disruptive. Doesn't mean it can't happen. But at this point, Hi. Our dialogue is really tied towards the strategic roadmaps of our customers and we have not yet heard anything specifically related to tariffs that are disrupting those in any manner. Great. That's it for me. Thank you.

Thank you.

We have no further questions at this time. So I'll pass the call back to the team for any final remarks.

Okay. Thank you all for joining and we look forward to our next call.

That concludes today's call. Thank you all for your participation. You may now disconnect.