Marchex(US:MCHX)2019-08-08 20:46Acquisitions - Marchex's acquisition of Telmetrics Inc. in November 2018 was for $10.1 million in cash at closing, with an additional potential $3.0 million based on financial growth targets over two years[112]. - The acquisition of SITA Laboratories, Inc. (Callcap) in November 2018 was valued at approximately $25 million in cash and $10 million in Class B common stock, with shares issued over four years[113]. - Amortization of intangible assets from acquisitions was $1.6 million and $3.1 million for the three and six months ended June 30, 2019, respectively, related to the Telmetrics and Callcap acquisitions[167]. - The identified intangible assets acquired in the Telmetrics and Callcap acquisitions total $21.5 million and are being amortized over 12 to 60 months[168]. Revenue Growth - Revenue increased by 30% from $20.2 million for the three months ended June 30, 2018 to $26.3 million for the same period in 2019, and by 25% from $42.1 million to $52.7 million for the six months ended June 30, 2018 to 2019[145]. - Thryv accounted for 26% of total revenues for both the three and six months ended June 30, 2019, up from 22% and 20% for the same periods in 2018[148]. - Performance-based advertising services accounted for over 80% of total revenues in all periods presented[122]. - Revenue from the call analytics technology platform is generated when advertisers pay a fee for each call or text received, contributing significantly to overall revenue[123]. - Amounts from reseller partners and agencies accounted for 47% of total revenue and $8.0 million in net accounts receivable as of June 30, 2019[178]. - A single advertiser, State Farm, represented 14% of total revenues and 26% of accounts receivable for the six months ended June 30, 2019[178]. Market and Product Development - Marchex Speech Analytics is expected to contribute to the growth of the speech analytics market, projected to increase from $941 million in 2017 to $2.2 billion by 2022[107]. - The speech analytics market is expected to grow significantly, with a report indicating a rise from $941 million in 2017 to $2.2 billion by 2022[107]. - The company plans to innovate on conversational analytics technology, expanding AI, data science, and machine learning capabilities[109]. - The company is focused on developing new markets by analyzing opportunities for technology-based products and forming strategic partnerships[115]. - Marchex's analytics products provide actionable intelligence on major media channels, helping businesses optimize advertising expenditures[106]. Financial Performance - The company recorded a net loss applicable to common stockholders of 5% for the first half of 2019, compared to 4% in the same period of 2018[144]. - Net loss was ($1.1) million and ($2.4) million for the three and six months ended June 30, 2019, compared to ($658,000) and ($1.6) million in the same periods in 2018[172]. - Total operating expenses increased slightly from 105% of revenue in the first half of 2018 to 106% in the first half of 2019[144]. - Total expenses for the six months ended June 30, 2019 were $55.6 million, representing 106% of revenue, compared to $44.2 million or 105% of revenue in 2018[153]. Operational Insights - The company has offices in multiple locations, including Seattle, New York, and Mississauga, Canada, indicating a broad operational footprint[118]. - The company anticipates fluctuations in phone call usage and advertiser spending, which may impact future revenue growth[129]. - The company expects revenues to be lower in the near term due to fewer small business accounts and reduced demand for calls from pay-for-call service customers[146]. - The company plans to continue building strong relationships with advertising agencies to attract new large advertising customers[116]. Cost Management - Service costs decreased from 57% of revenue in the first half of 2018 to 54% in the first half of 2019[144]. - Sales and marketing expenses remained stable at 16% of revenue for both the second quarter of 2018 and 2019[144]. - Sales and marketing expenses increased by 23% from $3.3 million for the three months ended June 30, 2018 to $4.1 million in 2019, primarily due to increased personnel and stock-based compensation costs[158]. - Product development expenses rose by 29% from $3.9 million for the three months ended June 30, 2018 to $5.0 million in 2019, driven by higher personnel and service provider costs[161]. - General and administrative expenses increased 37% from $2.5 million for the three months ended June 30, 2018, to $3.5 million in the same period in 2019, remaining at 13% of revenue for both periods[164]. Cash Flow and Financial Position - Cash provided by operating activities for the six months ended June 30, 2019, was approximately $5.0 million, consisting of a net loss of $2.4 million adjusted for non-cash items[174]. - Cash used in investing activities for the six months ended June 30, 2019, was approximately $870,000, primarily for property and equipment purchases of $963,000[180]. - Cash provided by financing activities for the six months ended June 30, 2019, was approximately $1.7 million, primarily from employee stock option exercises[182]. - As of June 30, 2019, cash and cash equivalents totaled $51.0 million, with current and long-term contractual obligations of $12.0 million[173]. Accounting and Tax Considerations - The company has recorded a 100% valuation allowance against deferred tax assets as of June 30, 2019, indicating uncertainty in realizing these assets[142]. - The company is subject to uncertain tax positions, with $1.2 million reported as of June 30, 2019[209]. - Future impairment charges could materially affect financial results[207]. - Goodwill is tested annually for impairment, with potential impairment losses recognized if carrying amounts exceed fair values[205]. - The allowance for doubtful accounts is based on historical bad debts and current economic trends, with quarterly reviews conducted[201]. Revenue Recognition - Revenue recognition for arrangements with multiple performance obligations is based on relative standalone selling prices[196]. - The company recognizes revenue from reseller partners based on a percentage of the cost of every call or click delivered to advertisers[194]. - Agreements with third-party distribution partners are in place to expand the distribution network, with revenue derived from pay-for-call advertisement listings reported gross[195]. - Stock-based compensation is measured and recognized based on estimated fair values, with costs recognized over the vesting period[198]. - The company utilizes the Black-Scholes option pricing model for stock-based awards, which is subject to various assumptions[199].