Q4 2023 Marchex Inc Earnings Call

Operator: Good afternoon. Thank you for attending the Marchex fourth quarter 2023 conference call. My name is Victoria, and I'll be your moderator today.

Good afternoon. Thank you for attending the March X fourth quarter 2023 conference call.

My name is Victoria and I'll be your moderator for today.

Operator: All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. I would now like to pass the conference over to your host, Trevor Caldwell, Senior Vice President, Strategic Initiatives and Investor Relations, Marchex. Thank you. You may proceed, Trevor. Thank you, Victoria. Good afternoon, everyone.

All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end I would now like to pass the conference over to your host Trevor Caldwell Senior Vice President of strategic initiatives and Investor Relations with my checks. Thank you you May proceed Trevor.

Thank you Victoria good.

Good afternoon, everyone and welcome to <unk> business update and fourth quarter 2023 conference call.

Trevor Caldwell: And welcome to Marchex's business update and fourth quarter 2023 conference call. Joining us today are Edwin Miller, our CEO, and Holly Aglio, our Chief Financial Officer. Before we get started, I would 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 reports 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 statements for subsequent events. During this call, we will present both GAAP and non-GAAP financial measures. Reconciliation of GAAP to non-GAAP measures is included in today's Earnings Press Release, which is available in the Investor Relations section of our website. And at this time, I'm going to turn the call over to Edwin.

Joining us today are Edward Miller, our CEO.

Oh, our chief Financial Officer.

How do we get started I would 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.

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 todays 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 statements for subsequent events. During this call. We will present, both GAAP and non-GAAP financial measures reconciliation of GAAP to non-GAAP measures is included in today's earnings press release and earnings press release is available on the Investor Relations section of.

Our website.

And at this time I'm going to turn the call over to Edmund.

Edwin A. Miller: Thank you, Trevor, and good afternoon, everyone, and thank you for joining us today. I've been in this job for just over a year, and I'd like to begin by telling you I am as excited as ever about March. From the multitude of conversations I've had with our existing customer base and the strides we've made in leveraging the power of AI, I see a tremendous opportunity for Marchex to build a nine-figure business. Over the past year, we've taken significant steps toward achieving that outcome. Marchex sits on a gold mine of first-party vertical data. We have over one billion of them.

Thank you Trevor and good afternoon, everyone.

And thank you for joining us today.

I've been on the job for just over a year and I'd like to begin by telling you.

Hi, I'm as excited as ever about <unk>.

From the multitude of conversations I've had with our existing customer base.

With the strides we've made in leveraging the power of AI.

I see a tremendous opportunity for <unk> to build a nine figure business.

Over the past year, we've taken significant steps toward achieving that outcome.

March exits on a gold mine of <unk>.

First party vertical data.

We have over 1 billion conversational minutes of data that refreshes every day.

Edwin A. Miller: Conversational Minutes of Data that refreshes every day, and the World's Generative AI. Having access to this type of first-party data is foundational to delivering unique analytics and Insights Across Valuable Markets. This is key to our current and future success. It allows us to move from diagnostic and descriptive analytics to Predictive Analytics, which in turn paves the path to delivering prescriptive analytics, which is our ultimate goal, using all that AI has to offer.

And the world generics with AI.

Having access to this type of first party data is foundational to delivering unique analytics.

And in fact, the cross valuable markets.

This is key for our current and future success.

It allows us to move from diagnostic and descriptive analytics.

To predictive analytics, which in turn paves the path.

To delivering prescriptive analytics, which is our ultimate goal.

Using all the AI has to offer.

Edwin A. Miller: We see Marchex driving the future of conversational intelligence in the most lucrative vertical markets. This includes our current verticals of focus, which are Auto Auto Services, Home Services, and Health Care. To foster growth, Marchex needs to solve real-world problems for businesses by delivering industry-defining insights and AI signals that can evolve in real time with robust data, while adopting large language models company-wide to ingrain an innovative mindset we can take to our clients. By working to become the trusted source for proprietary predictive insights in our vertical markets, we can empower Fortune 500 companies to thrive in rapidly evolving markets. Each of these vertical markets represents substantial opportunity for March, and we are executing to unlock it.

We see March it's driving the future of conversational intelligence and the most lucrative vertical markets.

This includes our current verticals of focus which are.

Auto order.

Auto services.

Home services and healthcare.

The foster growth Mark Jackson needs to solve real world problems for businesses by delivering industry defining insights.

Signals that can that can evolve in real time with robust data.

Adopting large language models companywide to ingrain and innovative mindset, we can take to our clients.

By working to become the trusted source for our proprietary predictive insights into vertical markets.

We can empower fortune 500 companies to thrive and rapidly evolving markets.

Each of these vertical markets represent substantial opportunity for <unk>, and we are executing to unlock them.

Edwin A. Miller: Over the past year, we've moved quickly to concentrate our resources on our core vertical markets while returning the company to a cash-generating business with increasing gross margins. However, there is much more to do to achieve the threshold of our growth ambition. But I am proud of the team for its considerable commitment and effort over the last year and for moving us well down this path. We have several key initiatives planned for the year ahead. First,

Over the past year, we've moved quickly to concentrate our resources on our core vertical markets, while returning the company to a cash generating business with increasing gross margins.

There is much more to do to achieve the threshold of our growth ambitions, but I am proud of the team for its considerable commitment and effort over the last year and moving as well down this path.

We have several key initiatives planned for the year ahead.

First.

Edwin A. Miller: We are focused on moving to One Stack, our new cloud-based infrastructure. Our product platforms and data will be united across all verticals, giving Marchex the ability to unleash the power of generative AI as we transition resources from infrastructure to data science and AI model development. In addition...

We are focused on moving to one stack, our new cloud based infrastructure.

Our product platforms and data will be United across all verticals.

Providing march that's the ability to unleash the power of junior to the AI as we transitioned resources from infrastructure, the data science and AI model development.

In addition, it will enhance our ability to integrate broadly within our vertical market ecosystems through new API capabilities.

Edwin A. Miller: It will enhance our ability to integrate broadly within our vertical market ecosystem through new API capabilities. Having our data in one place and on one architecture will enable Marchex to leverage the power of data across all vertical markets, leveraging generative AI models. This will also reduce our long-term infrastructure costs.

Having our data in one place and one architecture will enable more checks to leverage the power of data across all vertical markets leveraging <unk> AI models.

This will also reduce our long term infrastructure costs.

Edwin A. Miller: And, just as importantly, help accelerate our pace of innovation and customer adoption. We also anticipate the completion of single sign-on and our single interface by Q3 of this year. Uniting our products within one interface will allow us to sell more effectively, accelerate adoption of multiple products, and improve our ability to onboard new customers more quickly. These initiatives are significant undertakings, and we expect to see key progress achieved throughout the year.

And just as importantly, help accelerate our pace of innovation and customer adoption.

We also anticipate the completion of single sign on and our single unit.

Interface by Q3 of this year.

Uniting our products within one interface will allow us to sell more effectively.

Celebrate adoption of multiple products and improve our ability to onboard new customers more quickly.

These initiatives are significant undertaking and we expect to see key progress achieved throughout the year.

Edwin A. Miller: The takeaway is that we are on track to capitalize on our tremendous state assets in new and differentiated ways that will drive growth this year and beyond. Throughout the year, we will be launching new products that deliver high-impact solutions for our expanding base of Fortune 500 customers. These solutions will empower clients to unlock new insights and drive operational excellence in their business. Consider our most recent product award, from the Big Intelligence Group, naming Spotlight for Automotive Product of the Year. Marchex Spotlight for Automotive won this award because it empowers OEMs, brands, and dealers to make informed, data-driven decisions that drive positive business results, leading to increased revenue and improved customer satisfaction.

The takeaway is that we are on track to capitalize on our tremendous state asset in new and differentiated ways that will drive growth this year and beyond.

Throughout the year, we will be launching new products that deliver high impact solutions for our expanding base of fortune 500 customers.

These solutions will empower clients to unlock new insights and drive operational excellence and their businesses.

Consider our most recent product award.

From the Big Intelligence group.

Naming spotlight for automotive product of the year.

March 6th Spotlight for automotive won this award because it empowers Oems brands and dealers to make informed data driven decisions that drive positive business results.

Leading to increased revenue and improved customer satisfaction.

Edwin A. Miller: We added hundreds of dealers last year, and we'll add many more this year. This is an illustrative and repeatable example of how Marchex can win expanding market share by working with vertical market leaders. We are a differentiated player because of our wealth of vertical data and expertise. Today, we work with 22 brands within the auto vertical.

We added hundreds of dealers last year.

And we will add many more this year.

This is an illustrative and repeatable example of how March excuse me and expanding market share by working with vertical market leaders.

We are a differentiated player because of our wealth of vertical data and expertise.

Today, we work with 22 brands with within the auto vertical.

Edwin A. Miller: With a significant 8-figure business, we believe that our product roadmap will enable us to grow our business in the auto vertical meaningfully over time. Our product plans will open even more opportunities to penetrate that existing base of customers and win new relationships this year. Our goal is to replicate that success and scale in home services, healthcare, and auto services because these verticals share very similar business problems.

With a significant eight figure business, we believe that our product road map will enable us to grow our business in the auto vertical meaningfully over time.

Our product plans will open even more opportunities to penetrate that existing base of customers and win new relationships. This year.

Our goal is to replicate that success and scale in home services.

Health care and auto services.

These vertical share very similar business problems to the auto vertical this is our roadmap to accelerating growth and building a larger AI and analytics business.

Edwin A. Miller: This is our roadmap to accelerating growth and building a larger AI and analytics business. We are seeing strong interest from the release of our first AI feature, Cost Summaries and Census.

We are seeing strong interest from the release of our first AI features cost some reason sentiment.

Edwin A. Miller: With dozens of current pilots, there is early demand for these initial AI features, which will open the door to wider adoption by our vertical market customers. We believe that our current customer expansion engagements, coupled with our new and developing customer pipeline and product plans, have established a roadmap for an increasing and accelerating growth profile throughout 2024. In summary, I and we at 1MARCHX are focused on one.

With dozens of current pilots there.

Early demand for these initial AI features which we will open which will open the door.

To wider adoption by a vertical market customers.

We believe that our current customer expansion engagements, coupled with our new and developing customer pipeline and product plans have establish a roadmap for an increasing and accelerating growth profile throughout 2024.

In summary, I and we at <unk> are focused on one.

Edwin A. Miller: Booking more business and increasing the speed and scale of new revenue, to positioning the business with current and future clients around prescriptive data analytics and AI capabilities. Three are a successful migration to OneStack by Q3 of this year, as One Stack is a catalyst for revenue acceleration with our vertical market growth strategy. See ya!

Booking more business and increasing speed and scale of new revenue.

Two.

Positioning the business with current and future clients around prescriptive data analytics and AI capabilities.

Three our successful migration to one stack by Q3 of this year as.

<unk> is a catalyst revenue acceleration with our vertical market growth strategy.

Sure.

Edwin A. Miller: continuing to deliver on operations and technology efficiencies that we anticipate could expand our gross margins and increase free cash flow. With that, I'll hand the call to Holly to walk you through the financials. Thank you, Edwin.

Continuing to deliver on operations and technology efficiencies.

That we anticipate could expand our gross margins and increase free cash flow.

With that I'll hand, the call to Holly to walk you through the financials.

Thank you Edwin.

Holly A. Aglio: For the fourth quarter of 2023, revenue was $12.4 million versus $12.3 million for the same quarter last year and down from third quarter 2023 revenue of $12.8 million. In the fourth quarter, our traction within the automotive vertical led to double-digit growth on an annualized run rate year-over-year basis in that vertical. We saw a positive impact from our OEM wins throughout 2023 and a growing dealer channel in the fourth quarter. We also saw expansion with certain relationships and core verticals like home services. We expect to continue winning more business in the auto and home services verticals in 2020. On a sequential basis, however, the seasonal flow of call volumes decreased in the fourth quarter relative to the third quarter, and we did see continued pressure on conversation volumes on a year-over-year basis, particularly with our small business listing and solutions resellers. Our business typically sees a decrease in call volumes over the holiday periods relative to other periods for verticals like auto, auto services, and home services.

For the fourth quarter of 2023 revenue was $12 $4 million versus.

$12 3 million for the same quarter last year and down from third quarter 2023 revenue at $12 $8 million.

In the fourth quarter, our traction within the automotive vertical led to double digit growth on an annualized run rate year over year basis in that vertical.

We saw a positive impact from our OEM wins throughout 2023.

And a growing dealer channel in the fourth quarter.

We also saw expansion with certain relationships and core vertical like home services.

We expect to continue winning more business in the auto and home services verticals in 2024.

On a sequential basis, however, the seasonal flow of call volumes decreased in the fourth quarter relative to the third quarter.

We did see continued pressure on conversation volumes on a year over year basis, particularly with our small business listing and solutions resellers.

Our business typically sees a decrease in activity of call volumes over the holiday periods relative to other periods for verticals like auto auto services and home services.

Holly A. Aglio: With that said, our ability to grow our dealer channel, extend existing customers to multi-year arrangements, and expand our footprint of new auto OEM customers in 2023, along with our planned go-to-market initiatives across our other verticals, sets up well to make progress in 2024. This is reinforced by the fact that we already have these core foundational relationships with vertical market leaders in each of auto, home services, healthcare, and auto services to build upon. Turning to the panel for the fourth quarter, excluding stock-based compensation, amortization of intangible assets, and Acquisition and Disposition Related Costs.

With that said our ability to grow our dealer channel.

Stand existing customers to multiyear arrangements and expand our footprint of new auto OEM customers in 2023.

Along with our plan go to market initiatives across our other verticals that's.

That's up well to make progress in 2024.

This is reinforced by the fact that we already have the core foundational relationships with vertical market leaders.

And each of auto home services health care and auto services to build upon.

Turning to the P&L for the fourth quarter.

Excluding stock based compensation amortization of intangible assets.

And acquisition and disposition related costs.

Holly A. Aglio: Total operating costs for the fourth quarter were $12.6 million, compared to $14.6 million for the fourth quarter of 2022. Service costs were $4.7 million for the fourth quarter, which decreased as a percentage of revenue from the third quarter of 2023. Over time, we anticipate our service costs as a percentage of revenue to decrease as a result of our current technology infrastructure initiative. That should enable additional leverage with our growth margins as we see traction in the sales of our new conversational intelligence products and features in 2024 and beyond. Sales and marketing costs were approximately $2.5 million in the fourth quarter.

Total operating costs for the fourth quarter were $12 6 million compared to $14 6 million for the fourth quarter of 2022.

Service costs were $4 7 million for the fourth quarter, which decreased as a percentage of revenue from the third quarter of 2023.

Over time, we anticipate our service costs as a percentage of revenue the decrease as a result of our current technology infrastructure initiatives.

That should enable additional leverage with our gross margins as we see traction in the sales of our new conversational intelligence products and features in 2024 and beyond.

Sales and marketing costs were approximately $2 5 million for the fourth quarter.

Holly A. Aglio: This one down from the fourth quarter of 2022, as we realigned and focused our go-to-market initiative. Product development costs were $3.2 million for the fourth quarter, as we continued to invest in our products and in building AI to expand our conversational intelligence capability. Moving to profitability measures, adjusted EBITDA was a gain of approximately $100,000 for the fourth quarter. Gap's net loss was $1.1 million for the fourth quarter, or a loss of two cents per diluted share.

This was down from the fourth quarter of 2022, as we realigned and focused our go to market initiatives.

Product development costs were $3 $2 million for the fourth quarter as we continued to invest in our products and in building AI to expand our conversational intelligence capabilities.

Moving to profitability measures adjusted EBITDA was a gain of approximately $100000 for the fourth quarter.

GAAP net loss was $1 $1 million for the fourth quarter or a loss of <unk>.

Our diluted share.

Holly A. Aglio: This compares to a loss of $3.6 million or a loss of $0.08 per diluted share for the fourth quarter of 2022. Adjusted non-gap loss was 0 cents per share or break even for the fourth quarter compared to a loss of 5 cents per share for the fourth quarter of 2021. Additionally, we ended the fourth quarter with approximately $14.6 million in cash on hand. Now, turning to our 2024 outlook. First, let's discuss revenue. We anticipate Q1 2024 revenue will be somewhat lower than Q4 2023, based on the continuation of certain volume trends from the fourth quarter so far in Q1. We believe that this includes the impacts of two primary things.

This compares to a loss of $3 $6 million or a loss of eight cents per diluted share for the fourth quarter of 2022.

Adjusted non-GAAP loss was zero cents per share or breakeven for the fourth quarter compared to a loss of <unk> <unk> per share for the fourth quarter of 2022.

Additionally, we ended the fourth quarter with approximately $14 $6 million in cash on hand.

Now turning to our 2024 outlook first let's discuss revenue.

We anticipate Q1 2020 for revenue will be somewhat lower than Q4 2023 based.

Based on the continuation of certain volume trends from the fourth quarter, so far in Q1.

We believe that this includes the impact from two primary things first continued lower volumes from our small business reseller customers and second a collection of certain macroeconomic factors across our verticals as consumer traffic is lower across home services and automotive to start the year.

Holly A. Aglio: First, continued lower volumes from our small business reseller customers, and second, a collection of certain macroeconomic factors across our verticals, as consumer traffic is lower across home services and automotive to start the year. From Q1 2024 forward, we anticipate sequential revenue growth during the year. We expect the ramping of existing customer relationships and new wins will result in 2024 revenue growing year over year, and we expect to exit 2024 with accelerating growth rates. We have seen positive early adoption of our recently released AI signals by customers. As we expand our products and capabilities in this area, we expect these AI offerings to fuel our growth this year and well into the future. For adjusted EBITDA, we anticipate breakeven to positive adjusted EBITDA for the year.

From Q1, 2024 forward, we anticipate sequential revenue growth during the year.

We expect the ramping of existing customer relationships and new wins will result in 2024 revenue growing year over year, and we expect to exit 2024 with accelerating growth rates.

We have seen positive early adoption of our recently released AI signals by customers.

As we expand our products and capabilities in this area. We expect these AI offerings to fuel our growth this year and well into the future.

For adjusted EBITDA, we anticipate breakeven to positive adjusted EBITDA for the year.

Edwin A. Miller: For Q1, we anticipate somewhat negative adjusted EBITDA with improvement sequentially through the year, which we believe should collectively lead to neutral to positive adjusted EBITDA for the full year. We currently anticipate 2024 year-end cash balances to be at or near year-end 2023 levels. For growth margins, we anticipate that we can increase our growth margins by five percentage points or more by the end of 2024, with the successful completion of the One Stack initiative and acceleration of our vertical market growth strategy. Even with the noted lower volumes in certain areas to start the year, we believe those factors should be offset by our new customer adoption and previously won relationships ramping up over the course of the year. We anticipate the early traction with our AI product pilots and new customer engagements, combined with execution on go-to-market initiatives, will lead to sequential growth throughout the year and overall revenue growth for 2024.

For Q1, we anticipate somewhat negative adjusted EBITDA with improvement sequentially through the year, which we believe should collectively lead to neutral to positive adjusted EBITDA for the full year.

We currently anticipate 2020 for yearend cash balances to be at or near year end 2023 levels.

For gross margin, we anticipate that we can increase our gross margins by five percentage points or more by the end of 2024 with the successful completion of the one stack initiative and acceleration of our vertical market growth strategy.

Even with the noted lower volumes in certain areas to start the year. We believe those factors should be offset by our new customer adoption and previously won relationships ramping over the course of the year.

We anticipate the early traction with our AI product pilots and new customer engagements combined with execution on go to market initiatives will lead to sequential growth throughout the year and overall revenue growth for 'twenty one 2024.

Edwin A. Miller: Our existing pipeline across our core verticals looks strong, and as we complete the necessary infrastructure to accelerate cross-selling of our products, including our AI signals, we believe we will see favorable impacts from these as well. Additionally, we expect to win more new automotive OEM customers and add meaningfully to our dealer channel, as well as win more new relationships and home services, and other verticals. Furthermore, our current initiatives to move to One Stack, combined with other cost savings initiatives, in tandem with anticipated future revenue growth, should enable greater overall operating leverage in the business and, consequently, improvements and profitability measures into the future. Thank you. And with that, I'd like to pass the call back to Edwin for his closing remarks. Thank you, Holly.

Our existing pipeline across our core verticals look strong.

And as we complete the necessary infrastructure to accelerate cross selling our products, including our AI signals. We believe we will see favorable impacts from these as well.

Additionally.

We expect to win more new automotive OEM customers and add meaningfully to our dealer channel as well as win more new relationships in home services and other verticals.

Furthermore, our current initiatives to move to one stack combined with other cost savings initiatives.

In tandem with anticipated future revenue growth should enable greater overall operating leverage in the business and consequently improvements and profitability measures into the future.

Thank you and with that I'd like to pass the call back to Ed one for closing remarks.

Thank you Holly.

Edwin A. Miller: I'm excited about where we're heading as a company. I've spent considerable time meeting with customers in the past year. They want us to lean in and do more to help them drive sales, marketing, and operations. They need to understand customers' conversations from lead to aftermarket support at a more detailed level and at a scale. Generative AI can help us rapidly advance this goal.

I'm excited about where we're heading as a company.

I've spent considerable time meeting with customers in the past year.

They want us to lean in and do more to help them drive sales marketing and operational excellence.

I need to understand customers' conversation from leaf the aftermarket support at a more detailed level and at a scale.

Generative AI can help us rapidly advance this goal.

Edwin A. Miller: These are large, diverse businesses with complex technology ecosystems. They need a partner who understands conversational intelligence. AI and Data Analytics to help them achieve operational excellence. Marchex is ideally positioned here. I believe there is a robust opportunity for our business to grow from our existing customer base and new client wins. I also believe that we will drive the future of conversational AI and prescriptive data analytics within our vertical market. Biscuit Open, new avenues for growth as we launch new offerings throughout the year. I want to thank the team for their hard work. And we look forward to accomplishing much together on behalf of our customers and shareholders. Thank you for your time today.

These are large diverse businesses with complex technology ecosystems.

They need a partner who understands conversation intelligence AI.

AI and data analytics to help them achieve operational excellence.

<unk> is ideally positioned here.

I believe there is a robust robust opportunity for our business to grow from our existing customer base and new client wins.

I also believe that we will drive the future of conversational AI and prescriptive data analytics within our vertical markets.

This could open new avenues for growth as we launched new offerings throughout the year.

I want to thank the team for their hard work.

And we look forward to accomplishing much together on behalf of our customers and shareholders. Thank you for your time today.

Operator: With that said, Operator, let's move to questions. Of course. We will now begin the question and answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. If, for any reason, you would like to remove a question, please press star followed by two.

With that said operator, let's move to questions.

Of course.

We will now begin the question and answer session if you'd like to ask a question. Please press star followed by one on your telephone keypad. If for any reason you would like to remove that question. Please press star followed by two again to ask a question press Star one.

Operator: Again, to ask a question, press star one. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking a question. Our first question comes from Darren Aftahi on the Roth MKM line. Your line is now open.

As a reminder, if you are using a speakerphone. Please remember to pick up your handset before asking a question.

Our first question comes from the line of Darren <unk>.

With Ross and Cam.

Your line is now open.

Darren Paul Aftahi: Hey guys, thanks for checking my questions. First, I guess on your commentary about revenue growth starting in 2Q and beyond. I'm curious, how much of that is from existing expansion from 23 clients and or wins versus new customers. You're going to sign this year, like I said, another way. What kind of visibility do you have in that growth beyond the Q1 dip? Yeah, thanks for the question. And good to hear your voice. I, you know, we did a lot of work in 23 in that go-to-market motion and aligning alignment of what I would consider product marketing, the product management to dev with output into cells. So lining all that up and getting the team ready to compete on the field.

Hey, guys. Thanks for taking my questions.

First I guess on your commentary about a revenue growth starting in <unk> and beyond.

I'm curious how much of that is from.

Existing expansion from 23 clients and or wins versus new customers.

Youre going to sign this year like I said, another way what kind of visibility you have into that growth beyond the <unk>.

Into Q1.

Okay.

Yes, thanks for the question.

Good to hear your voice.

We did a lot of work in 'twenty, three and that go to market motion and aligning alignment of what I would consider product marketing.

The product management to Dev with output into cells. So.

Aligning all of that up and getting the team ready to compete on the field, we've done which is good we also.

Edwin A. Miller: We've done this, which is good. We also consolidated how we manage a pipeline and a funnel all into Salesforce.com in a very sequential manner under Troy Hartless as our CRO. So much better understanding of our client base. And I would add, you know, I don't know how many customers I've met with personally, probably over 20. And as you meet them three and four times, you begin to understand their roadmaps, and that just takes time to build that trust with the team.

Consolidated how we manage the pipeline and our funnel all into Salesforce dot com in a very.

Sequential manner under Troy Heartless as our CRO.

Much better understanding of our client base and I would add I don't know how many customers ive met with personally probably over 20.

And as you need them three and four times you begin to get their roadmaps and that just takes time to build that trust with.

With the team.

Edwin A. Miller: So I think we're kind of in the throes of that. We're lining up our product development and our engineering against what our clients have said are the real pain points that we know we can deliver with our generated AI and our data analytics. And as we move to one stack, it's just going to be much simpler to sell, which is going to create velocity. And the single API is going to, I think, open up the ability to have channel capabilities for the first time for the company. So I think it's all coming together. I don't know if that answers your question, but a lot of the lift in 23 was...

I think we're kind of in the throes of that.

We're lining up our product development and engineering against what our clients have said are there real pain points that we know we can deliver with regenerative AI and data analytics.

And as we moved to one stack, it's just going to be much simpler to sell which is going to create velocity.

And the.

Single API.

Is going to I think open second half of the year the ability to have.

Channel capabilities for the first time for the company so.

Just I'll come it's all coming together I don't know if that answers your question, but.

Lot of the lift in 'twenty three was.

Edwin A. Miller: Think of it as getting the team in shape and studying the playbook, and now we're executing that playbook. That's helpful, thanks Edwin. How much of that growth can be achieved with your current cost structure? I guess, said another way. If you start growing more quickly, do you need to add headcount or is existing infrastructure support a much bigger business? Another good question, and thanks for the softball.

Think about it as getting the team in shape.

And getting ready to and studying the playbook and that we're executing that playbook.

That's helpful. Thanks Edwin.

And then I guess.

Uh huh.

How much of that growth can be achieved with your current.

Cost structure, I guess set away said another way.

If you start growing.

More quickly do you need to add head count or is existing infrastructure support.

A much bigger business.

Another good question.

Thanks for the softball.

Edwin A. Miller: The cool thing that we've done in the lift in 23, moving to one stack, and we'll get there early in Q3, is the touch in the business, which helps us see our gross margins. It just gets easier to sell at speed. It gets easier to onboard at speed and scale.

The cool thing that we've done and the lift in 'twenty three moving to one stack and we'll get there early Q3 is the touching the business, which helps us <unk> gross margins. It just gets easier to sell at speed it gets easier to onboard at speed and scale it gets easier to support.

Edwin A. Miller: It gets easier to support our clients at scale. We will invest in this business. I think it's a growth business. I think we're in the right place at the right time. I love the market. I love the talent on the field we have.

Our clients at scale.

So the.

We will invest in this business I think it's a growth business I think we are in the right place at the right time I love the market I love the talent.

On the field we have.

Edwin A. Miller: I love the customers we have, just incredible Fortune 500 companies trying to solve big problems. Operational excellence, sales, and marketing are right across the areas of how to help them grow their business. So, I just think it all comes together.

Loved the customers, we have just incredible fortune 500 company.

Companies trying to solve big problems operational excellent sales and marketing were right across the areas of how to help them grow their business.

So I just think at all.

Edwin A. Miller: The investment in our business will be, as I mentioned, data science and AI, and we certainly will invest in the go-to-market as we see the verticals opening up and driving speed, but we'll be fiscally responsible and do our best to drive growth in this business and margins in this business as we grow. Great, there's one last one for me, more financial in nature on the unified stack and the benefit to gross margins you kind of spoke about in the release on the call. Um, when exactly is that going to be complete, and... Do you need to see revenue growth in order to see gross margin benefits? Good question.

Together the investment in our business will be as I mentioned data science AI.

And we certainly will invest in the go to market SBC.

The vertical is opening up.

And driving speed, but will be fiscally responsible and.

Do our best to drive growth in this business and margins of this business as we grow.

Great and then just one last one for me more financial in nature on the unified stack and the benefit to gross margins you kind of spoke to in the release on the call.

When exactly is that going to be complete and.

Do you need to see revenue growth in order to see gross margin benefit.

Good question.

Edwin A. Miller: The fact that we're bringing together what I think were really good acquisitions and technology stacks into one stack inevitably alleviates support for multiple systems. So you know, I like to tell the team at the very first offside and the second offside we had with our executive leadership team and senior leadership teams is that you know, we've got a wagon. It has a bunch of things to sell in that wagon, and we're going to sell them every day, and I'm going to be on the front line selling with you. And right now, we've got some really good cool boxes and shiny boxes in the wagon of the acquisitions that were made over time, and they really were good acquisitions. Bringing all those code bases into one stack, one architecture, one API just gives us the ability to deliver them with more ease and more scale, so the margins will go up with that touch going down.

The fact that we're bringing together what I think were really good acquisitions and technology stacks into one stack.

Inevitably.

<unk> support of multiple systems.

So I'd like to tell the team and the very first soft side in the second half that we had with our executive leadership team as senior leadership teams.

Is that we've got a wagon its got a bunch of things to sell network and we're going to sell them every day and I'm going to be on the front lines selling with you.

And right now we've got some really good kool boxes and shiny boxes in the wagon.

The acquisitions that were made over time and they really were good acquisitions.

Bringing all of those co bases into one stack one architecture one API.

Just gives us the ability to deliver it with more ease and more scale. So the margins will lift with that touch.

Going down.

Edwin A. Miller: Volume should lift because we're adding AI models now, so we've got existing customers adopting things like cost summaries and sentiments, and that's just an additive purchase by them, so they're already integrated into our data pipe and our stack, so as we add on more of those models, we can add on and layer on additional revenue, which will add on margin. But of course, the more we sell with speed and scale and the go-to-market motion, the higher the margin can go as well, so I think it's a couple, but I don't need the company to drive a bunch of new revenue in order to increase the margins. That's operating the company more effectively and efficiently with one stack, but we are definitely focused on that go-to-market and the verticals.

The volume.

We should lift because were adding on AI models now so we've got existing customers adopting things like call. Some reason sentiment.

And that's just in its additive.

Purchase by them so they're already.

Integrated into our into our.

Data pipe in our stack.

So as we add more of those models. We can we can add on and layer on additional revenue, which will add on margin but of course, the more we sell.

With speed and scale and the go to market motion.

The higher the margin can go as well so I think I think it's a couple but I don't need the company to drive a bunch of new revenue in order to increase the margins that's operating the company more effectively and efficiently with one stack.

But we are definitely focused on that go to market in the verticals, we want to replicate what we've done in automotive.

Edwin A. Miller: We want to replicate what we've done in the automotive industry, and we do, as Holly mentioned, we've got some really strong anchors in home services, health care, and what we call auto services. I've been out meeting with those clients as well, so as we penetrate all four verticals in more of an equal manner, it's just going to drive growth into the business and margin into the business. Great, thank you. Yeah, you're welcome

And we do as Harley mentioned, we've got some really strong anchors and home services health care and what we call auto services.

And we're going to I've been out meeting with those clients as well so as we penetrate all four verticals and more of an equal manner.

It's just going to drive growth into the business and margin into the business.

Great. Thank you Youre welcome.

Operator: Thank you for your question. The next question comes from the line of Matt, not Matt, Mike Latimore with Northland Capital Market. Your line is now open.

Thank you for your question.

The next question comes from the line of Matt.

Matt Mike Latimore with Northland Capital markets. Your line is now open.

Michael James Latimore: Great. Hi there. Yeah, thanks very much. Yeah, on the, so I guess Edwin, when you get back to growth later in the year, do you think the growth will come evenly from new logos being layered in versus, you know, expansions, or is it logical that, you know, one of those two categories really is the key growth driver later in the year? Nice to hear your voice, Mike. Good question.

Great Hi, there yeah, thanks very much.

Yes.

So I guess Edwin.

When you get back to growth later in the year do you think the growth will come evenly from new logos being layered in versus.

Expansions or is a logical one of those two categories really is the key growth driver later on there.

Nice to hear your thoughts Mike.

Yes, a good question.

Edwin A. Miller: You know, we're focused on new logos and existing ones. And when you when you have the kind of client base we do in this for verticals, it's kind of hard to ignore them. And they're spending money.

We're focused on.

New logos and existing and when you when you're when you have the kind of client base. We do in those four verticals, it's kind of hard to ignore them.

And they are spending money everyone's trying to figure out what to do with AI and.

Edwin A. Miller: Everyone's trying to figure out what to do with AI. And the way we were positioning it is it's AI plus prescriptive analytics. It's, I think about the three categories of analytics. You can be descriptive about what happened yesterday, which is important, right? We all want reports of what happened.

The way, we're positioning it as its AI plus prescriptive analytics.

You think about the three categories of analytics you can you can be descriptive of what happened yesterday, which is important right. We all want reports of what happened.

You can get descriptive.

Edwin A. Miller: You can get descriptive in that report and make good business decisions, I think. But where you really want to get in the future is prescriptive. And you basically want to be able to tell them, if you do this, this will happen. And I think that's going to resonate well with our existing clients, and it's going to resonate well with AI models with new logos. And I'll add to that the fact that the kind of clients we have and the experience we have in these verticals with deep data, and it's a billion conversations that are refreshing every day, which is crazy. For us, it's awesome.

And in that report and make good business decisions I think.

But where you really want to get in the future as prescriptive and he basically wanted them to tell them. If you do this this this will happen and I think that's going to resonate well with our existing clients and it's going to resonate well with AI models with with new logos.

And I'll add to that the fact that.

Clients, we have and the experience we have in these verticals with the data and its 1 billion conversations that are refreshing every day, which is insanity.

For us.

It's awesome.

Edwin A. Miller: Our understanding of the market and our ability to go talk through what business problems exist and what they're going to look like is pretty powerful. So I think it's going to be a mix of both. If you look at our pipeline, it's growing each day. We've got a great sales team aligned with our go-to-market strategy. We've launched a couple of new AI modules, and we're going to launch more. So I think it's going to be both throughout the year. Thank you. Bye. And on the small business segment, what percent of revenues is that? It's around 15%.

Our understanding of our market and our ability to go talk through what business problems exist and what they are going to look like.

It's pretty powerful so I think it's going to be a mix of both would you look at our pipeline as its growing each day, we've got a great.

<unk> team aligned with the go to market, we've launched new couple of new AI.

Modules were going to launch more so I think it can be both.

Throughout the year.

Okay.

And on the small business segment what percent of revenues is that now.

It's around 15%.

Edwin A. Miller: And we're not ignoring it. It's, but it's not a focus of ours. It's Fortune 500. I mean, you know, that's a multi, multi, multi, multi, multi, billion dollar segment to go after. And I just don't see them taking AI and prescriptive analytics all in-house and trying to solve the problems themselves.

We're not ignoring it.

But it's not a focus of ours a fortune 500.

That's a multi multi multi multi multibillion dollar.

Segment to go after.

And I just don't see them.

Taking AI and prescriptive analytics, all in house and trying to solve the problems themselves, they're going to rely on experts theyre going to rely on.

Edwin A. Miller: They're going to rely on experts. They're going to rely on AI staffing companies to help them, which is where I'm focused the company to go. And so as long as we're delivering new value in the AI market and can hit all three buckets of analytics but land on prescriptive, we're going to grow that Fortune 500 footprint. I'm just going to try to make it much easier over time for small businesses to consume with very low touch, because you're talking very low numbers compared to the focus we have and the ability we have to sell. Again, landing some of the logos we have in all four verticals. Good luck to companies trying to penetrate those businesses, because they're hard. It takes a long time to build trust, and we're embedded, and they're great partners. They're just fantastic.

AI SaaS companies to help them, which is where I'm focused the company to go.

And so as long as we're delivering.

New value add in the AI market and can.

Hit all three buckets of analytics that land on prescriptive.

Going to grow that fortune 500 footprint.

I'm, just going to try to make it much easier over time for small businesses to consume.

With very low touch.

Because you are talking very low numbers compared to the focus we have and the ability we have the sale again.

Lending some of the logos, we have an all fort worth four verticals.

Good luck the companies trying to penetrate those businesses because they are hard it takes a long time to build trust and we're embedded so and they're great partners. So just fantastic we got some of the best logos in the world. So.

Edwin A. Miller: We got some of the best logos in the world. Not ignoring that 15% at all, but really focused on the Fortune 500 and the four verticals I've mentioned. And then just in terms of how you price for your service, any notable changes there? Do you feel like you have the pricing model down? Yeah, I think we've got the pricing model down. It's set, you know, if you think about the whole stack of what we deliver, or it's a texting solution or a number solution. That's kind of set in the marketplace. The question I've got in my mind is, what's the model really going to be when we deliver accurate design?

Not ignoring that 15% at all.

But really focused on the fortune 500, and the four verticals I've mentioned.

Got it and then just in terms of how you price for your service any notable changes there do you feel like you have pricing model down.

Yeah.

Yeah, I think we've got the pricing model down it is set.

If you think about the full stack of what we deliver.

Whether it's a texting solution or a number solution.

That's kind of set in the marketplace. The question I've got in my mind is can we.

What's the model really going to be when we're delivering.

SaaS and <unk> as a service with 20 different AI models.

Edwin A. Miller: Marchex is a service with 20 different AI models, and we're driving prescriptive analytics. So I think there's probably some, if you think about product placement price promotion, I think the pricing and promotion, we're going to learn a lot in 24, going into 25. But I'll echo, I don't know if you've met Troy Hartless, our CRO. He cut his teeth at GE in product. I've worked with him a couple of times, one private, one public. And he may be the best CRO I've seen in the field. He's not your normal, what I'd call a sales person. He is a kind of finance meets engineering mind, and he thinks of products in a very distinct way. So I think we will probably learn this year on pricing, on things that we're going to launch into the marketplace. And I think that's healthy. But what we've been selling, I think we know extremely well how we add more value around that with an API and new data models and leveraging LLMs out there. I think that could shift a bit for us and in a positive manner.

And we're driving prescriptive analytics, so I think theres, probably some some if you think about product place price promotion I think the pricing and promotion.

We're going to learn a lot.

In 24 going into 'twenty five.

But I'll I'll Echo I don't know if you've met towards heartless, our CRO he cut his teeth at GE and products.

Within a couple of times when one private one public.

And.

He may be the best <unk> seen in the field. He is not your normal what I would call cells.

Person he is a.

Kind of a finance meets engineering mines.

Think of product and a very distinct way so.

I think we'll probably learn this year on pricing on things that were going to launch into the marketplace and I think thats healthy, but what we've been selling I think we know extremely well, how we add more value around that with an API.

And new data models, and leveraging <unk> out there I think that could could shift a bit for us in a positive manner.

Edwin A. Miller: Great, great. And just last on LLMs, you know, there's different varieties out there. They all have, there's a wide spectrum of costs, I guess.

Alright, Great and then just lastly on <unk>.

Theres different varieties out there they all have.

Do I expect to hear more costs I guess.

Edwin A. Miller: You know, do you kind of leverage any particular LLMs, like open source, and how do you view the costs involved? We're looking at all the LLMs, so... I'm going to. Stay away from being specific there, if you don't mind. It is definitely a horse race out there for who can drive the model.

Do you.

Kind of leverage that any particular llm's like open source and how do you view the cost involved in those.

Yes, we.

Looking at all the <unk>.

So.

I'm going to.

Stay away from being specific there if you don't mind.

It is definitely a horse race out there for who can drive the model. What we're focused on is we've got the vertical market datasets to informed as LMS.

Edwin A. Miller: What we're focused on is we have the vertical market data sets to inform those LLMs and make them intelligent. And I think I've said this on a call in the past, you know, if you're in the automotive vertical, Bronco doesn't mean horse; it means a vehicle, but in health services, Bronco wouldn't mean anything to anyone, and that's a trite example, but at the end All right, thanks. Yeah, you're welcome. Thank you. Thank you for your question. There are no additional questions waiting at this time. I would now like to pass the conference back to the management team for any additional remarks. Okay, well, thank you everyone for dialing in, and thank you for the questions. We look forward to working hard in the coming quarters for you all and look forward to the next call. Thank you. Bye. That concludes today's call. Thank you for your participation, and enjoy the rest of your day. www.globalonenessproject.org

And make them intelligence and I think I said this on a call in the past if youre in the automotive vertical bronco needs doesn't mean horse it means a vehicle.

But in health Health services Bronco wouldn't mean anything to anyone.

That's a trite example, but at the end of the day.

When you have millions of words being used and youre informing those models.

We're going to do our best to say agnostic and Leverages, the best of the best and brightest out there.

Okay. Thanks.

Yes, Youre welcome. Thank you.

Thank you for your question.

There are no additional questions waiting at this time I would now like to pass the conference back to management team for any additional remarks.

Okay, well. Thank you everyone for dialing in and thank you for the questions. We look forward to working hard.

In the coming quarters for you all and look forward to the next call. Thank you.

All right.

That concludes today's call. Thank you for your participation and enjoy the rest of your day.

[music].

Okay.