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Marchex, Inc. (NASDAQ:MCHX) has a negative ROIC to WACC ratio of -1.28, indicating poor capital efficiency.QuinStreet, Inc. (QNST) and Liquidity Services, Inc. (LQDT) show more favorable financial positions with positive ROIC to WACC ratios, suggesting better capital utilization.Maiden Holdings, Ltd. (MHLD) also struggles with capital efficiency, having an even less favorable ROIC to WACC ratio than Marchex.Marchex, Inc. (NASDAQ:MCHX) is a company that specializes in call analytics and call tracking solutio ...

Core Viewpoint - Halper Sadeh LLC is investigating the fairness of the merger between Marchex, Inc. and Archenia, Inc. for Marchex shareholders [1] Group 1 - The investigation focuses on whether Marchex and its board violated federal securities laws [1]

Revenue Performance - Revenue decreased by $1.1 million, or 9%, to $11.5 million for the three months ended September 30, 2025, compared to $12.6 million for the same period in 2024[79] - For the nine months ended September 30, 2025, revenue decreased by $1.6 million, or 4%, to $34.6 million from $36.2 million in the prior year[79] Cost and Expenses - Cost of revenue for the three months ended September 30, 2025, was $4.2 million, representing 37% of revenue, compared to 34% in the same period of 2024[80] - Total operating expenses for the three months ended September 30, 2025, were $12.5 million, which is 108% of revenue, compared to 107% in the same period of 2024[77] - Loss from operations for the three months ended September 30, 2025, was $941,000, or -8% of revenue, compared to a loss of $825,000, or -7% in 2024[77] - Sales and marketing expenses decreased by $0.3 million, or 9%, to $2.9 million for the three months ended September 30, 2025[82] - Product development expenses decreased by $0.7 million, or 23%, to $2.4 million for the three months ended September 30, 2025[84] - General and administrative expenses increased by $0.2 million, or 7%, to $2.9 million for the three months ended September 30, 2025[86] - General and administrative expenses increased by $1.0 million, or 13%, to $8.5 million for the nine months ended September 30, 2025, compared to $7.5 million for the same period in 2024[87] - Stock-based compensation expense totaled $920,000 for the three months ended September 30, 2025, compared to $411,000 in the same period of 2024[78] Cash Flow and Financial Position - Cash used in operating activities was $1.5 million during the nine months ended September 30, 2025, primarily due to a net loss of $2.9 million, adjusted for non-cash items of $3.4 million[92] - Cash used in investing activities was $0.9 million for the nine months ended September 30, 2025, primarily for software development costs for new products[93] - Cash used in financing activities was $25.0 thousand for the nine months ended September 30, 2025, consisting of payments for equipment financing lease obligations[94] - As of September 30, 2025, the company had cash and cash equivalents of $10.3 million, down from $12.8 million as of December 31, 2024[91] - Cash used in operating activities was $2.0 million for the nine months ended September 30, 2024, primarily due to a net loss of $3.0 million[92] Tax and Valuation - The effective tax rate differed from the expected tax rate of 21% due to valuation allowance and non-deductible stock-based compensation[89] - The company recorded a full valuation allowance for deferred tax assets as it is more likely than not that these assets will not be realized[90] Future Outlook - The company aims to leverage AI and data analytics to enhance customer interactions and drive revenue growth[64] - The company believes its resources will be sufficient to fund operations for at least twelve months, but macroeconomic factors could significantly influence this[95] - Intangible amortization expense was $0 for the nine months ended September 30, 2025, as all intangible assets from acquisitions reached the end of their useful lives[88]

Core Insights - Marchex (MCHX) reported break-even quarterly earnings per share, missing the Zacks Consensus Estimate of $0.01, compared to a loss of $0.01 per share a year ago, resulting in an earnings surprise of -100.00% [1] - The company posted revenues of $11.51 million for the quarter ended September 2025, missing the Zacks Consensus Estimate by 3.49%, and down from $12.55 million year-over-year [2] - Marchex shares have declined approximately 8.6% year-to-date, contrasting with the S&P 500's gain of 16.5% [3] Earnings Outlook - The future performance of Marchex's stock will largely depend on management's commentary during the earnings call and the company's earnings outlook [4][6] - The current consensus EPS estimate for the upcoming quarter is $0.01 on revenues of $11.33 million, and for the current fiscal year, it is -$0.01 on revenues of $46.31 million [7] Industry Context - The Internet - Services industry, to which Marchex belongs, is currently ranked in the bottom 41% of over 250 Zacks industries, indicating potential challenges ahead [8]

Group 1 - The article does not provide any relevant content regarding company or industry insights [1]

Financial Data and Key Metrics Changes - Revenue for Q3 2025 was $11.5 million, down from $11.7 million in Q2 2025, with some revenue migration dilution due to technology platform migration [8][9] - Cash decreased to $10.3 million from $10.5 million at the end of Q2 2025, primarily due to the timing of customer payments [9] - Anticipated sequential decline in revenue and adjusted EBITDA for Q4 2025, but expected sales growth moving into 2026 [9][10] Business Line Data and Key Metrics Changes - Continued progress in launching new products and accelerating sales bookings to the highest levels of the year [6] - Focus on large vertical markets, delivering industry-specific AI solutions across various sectors including automotive, healthcare, and advertising [6][7] Market Data and Key Metrics Changes - The company is positioned to expand into a larger addressable market by selling bundled solutions that integrate insights, actions, and outcomes [21][14] - The potential combined company with Arcaneum could achieve a revenue run rate of approximately $15 million quarterly, growing in the 15%-20% range in 2026 [14] Company Strategy and Development Direction - The company aims to evolve from providing strategic analytics to delivering comprehensive AI-powered solutions that enhance customer acquisition and optimization [4][5] - The acquisition of Arcaneum is expected to create a vertically focused, AI-driven customer acquisition platform, enhancing market reach and strategic flexibility [13][14] Management's Comments on Operating Environment and Future Outlook - Management believes the company is at a positive inflection point, with significant opportunities for growth through AI-driven solutions [4][5] - The focus will be on maximizing revenue growth while maintaining positive adjusted EBITDA margins of 10% or more [22] Other Important Information - The agreement to acquire Arcaneum includes a $10 million convertible promissory note and an earnout based on performance metrics [11][12] - The anticipated closing date for the acquisition is in the first half of 2026, pending approval from disinterested stockholders [12] Q&A Session Summary Question: What is the TAM for the combined solution? - The addressable market for the combined company is expected to be multiples of the current market, with significant customer acquisition budgets tied to insights [21] Question: How does the company view the trade-off between growth and profitability? - The focus is on maximizing revenue growth while maintaining positive adjusted EBITDA margins, prioritizing customer penetration and scaling [22] Question: How does growth break down between new and existing customers? - The company believes it can achieve a $100 million revenue opportunity much sooner with the combined capabilities, leveraging existing customer relationships [23][24]

Financial Performance - GAAP revenue for Q3 2025 was $11.5 million, a decrease from $12.6 million in Q3 2024[6] - Revenue for Q3 2025 was $11,514 million, a decrease of 8.3% compared to $12,553 million in Q3 2024[31] - For the nine months ended September 30, 2025, Archenia's estimated revenue was over $14 million, with a projected full-year revenue of more than $17 million[16] - Marchex anticipates a revenue growth run rate of approximately 10% in 2026, driven by ongoing product launches and platform migration completion[4] - Marchex believes the combined company could achieve quarterly revenue run rates of approximately $15 million, or $60 million annualized, with growth in the 15-20% range in 2026[24] Adjusted EBITDA - Adjusted EBITDA for Q3 2025 was $0.6 million, up from $0.3 million in Q3 2024, with a potential adjusted EBITDA gain of $1.1 million after excluding reorganization costs[6] - Adjusted EBITDA for Q3 2025 was $621 million, an increase of 98.7% from $313 million in Q3 2024[35] - The company expects Adjusted EBITDA margins to reach 10% or more in 2026 due to increasing revenue and lower operating expenses[4] - Marchex expects sequentially lower revenue and Adjusted EBITDA in Q4 2025 due to typical seasonality and revenue migration dilution[5] Operating Expenses and Losses - Total operating expenses for Q3 2025 were $12,455 million, down from $13,378 million in Q3 2024, reflecting a reduction of 6.9%[31] - Net loss applicable to common stockholders for Q3 2025 was $1,020 million, compared to a loss of $831 million in Q3 2024, representing a 22.7% increase in losses[31] - Basic and diluted net loss per share for Q3 2025 remained at $(0.02), consistent with Q3 2024[37] - Stock-based compensation for Q3 2025 was $920 million, significantly higher than $411 million in Q3 2024[35] Cash and Assets - Cash and cash equivalents as of September 30, 2025, were $10,321 million, down from $12,767 million at the end of 2024[33] - Total assets decreased to $41,145 million as of September 30, 2025, from $43,200 million at the end of 2024[33] - Total liabilities decreased to $9,203 million as of September 30, 2025, from $10,567 million at the end of 2024[33] - The company reported a total accumulated deficit of $(329,096) million as of September 30, 2025, compared to $(326,178) million at the end of 2024[33] Strategic Initiatives - Marchex has entered into an agreement to acquire Archenia for a $10 million convertible promissory note, with interest at 6%[12] - The potential combination with Archenia could create a vertically focused, AI-driven customer acquisition platform, enhancing revenue scale and market reach[17] - The company launched new AI-powered solutions for healthcare and senior living industries, enhancing its product offerings[10][11]

Company Analysis - Marchex, Inc. has a Return on Invested Capital (ROIC) of -15.82% and a Weighted Average Cost of Capital (WACC) of 12.69%, indicating it is not generating returns above its cost of capital, which is a concerning sign for investors [1] - comScore, Inc. shows a ROIC of -22.54% with a WACC of 5.57%, resulting in a ROIC to WACC ratio of -4.05, highlighting significant inefficiencies in generating returns relative to its cost of capital, indicating potential financial struggles [2] - Liquidity Services, Inc. has a ROIC of 10.21% and a WACC of 8.71%, leading to a ROIC to WACC ratio of 1.17, indicating it is generating returns above its cost of capital, making it the most efficient among its peers and an attractive option for investors [3]

Executive Team Changes - Edwin Miller, CEO, is stepping down and will serve as a senior advisor to the Chairman [1][2] - Troy Hartless has been appointed as President in addition to his role as Chief Revenue Officer [1] - Francis Feeney has been appointed Chief Operating Officer alongside his role as Chief Corporate and Legal Affairs Officer [1] - Brian Nagle has been appointed Chief Financial Officer, previously serving as Senior Vice President, Controller [1] Company Growth and Strategy - Marchex is positioned for future growth with a focus on AI-driven product offerings and operational efficiencies [2] - The company aims to expand customer penetration and grow its addressable market through a growing portfolio of AI products [2] - The leadership transition is seen as a strategic move to capitalize on increasing opportunities and the company's evolution [2] Financial Performance - Marchex reported GAAP revenue of $11.7 million for Q2 2025, a decrease from $12.1 million in Q2 2024 [8]