Q4 2024 Marchex Inc Earnings Call
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and Darren Aftahi. Thank you.
Aftahi, Dillon Heslin, Edwin Miller,
Cole: Good afternoon. Thank you for attending today's March X 4th quarter 2024 earnings call. My name is Cole and I'll be the moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end.
Speaker Change: If you'd like to cue for a question, you can do so by pressing star one on your telephone keypad. And now I'd like to pass call over to Trevor Caldwell, please go ahead.
Thank you.
Trevor Caldwell: Thank you, Cole. Good afternoon everyone and welcome to Marchex's business update in fourth quarter of 2024 conference call. Joining us today are Edwin Miller, our CEO , Russ Horowitz, our chairman, and Brian Nagel, our S.V.P.
Trevor Caldwell: 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 made different materially from those contemplated by these forward-looking statements.
Trevor Caldwell: Risks and uncertainties that could cause these results to differ materially or set forth in today's earnings press release in our most recent annual and quarterly report filed
Trevor Caldwell: A full of looking statements that we make on this call are based on assumptions as of today and we undertake no obligation to update these for statements for subsequent events. During this call, we will present both GAP and non-GAAP financial measures.
Trevor Caldwell: Reconciliation of Gap to non-GAAP measures is included in today's earnings press release.
Trevor Caldwell: Learning's press release is available in the Investor Relations section of our website.
Edwin Miller: At this time, I'd like to come to Caldwell Edwin
Michael Latimore, Dillon Heslin
Edwin Miller: Thank you Trevor. Good afternoon everyone and thank you for joining us today. We appreciate your interest in Marchex and look forward to sharing our progress as we execute on our strategic vision and objectives.
Edwin Miller: I'd like to start by thanking our employees, customers, and shareholders for their continued trust and commitment.
Our vision is clear.
Edwin Miller: We are building a global leader in conversational intelligence, delivering cutting edge AI driven solutions.
The Fortune 500 companies and beyond.
[inaudible]
and a data-driven world.
businesses need real-time insights to make informed decisions.
Edwin Miller: 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.
Edwin Miller: It was a year of foundational progress and sets the stage for a next phase of execution, acceleration and growth.
Edwin Miller: A key highlight was a successful completion of one stack in the fourth quarter.
Edwin Miller: which unified our numerous status backs into a single cloud-based architecture.
Edwin Miller: This was a significant strategic list for a company given the size of our data assets.
[inaudible]
Edwin Miller: Further, this was a critical step in optimizing performance, scalability and efficiency across
Edwin Miller: With one stack now implemented, we are well positioned on a forward looking basis to serve enterprise customers with seamless, high-performing AI solutions.
. . . . .
Edwin Miller: We now have a technical foundation in place to accelerate innovation and launch growth initiatives throughout 2025.
Edwin Miller: Beyond the Foundational Technology Initiatives, we made important strides in refining our Goats Market Strategy.
Edwin Miller: Strengthening our customer relationships and expanding our reach across key vertical markets.
Edwin Miller: Turning to 2025, we see this year as a launching point.
Edwin Miller: One where the groundwork from 2024 sets the stage for measurable, sustained growth and increased efficiency.
Aftahi, Dillon Heslin, Edwin Miller,
Edwin Miller: We remain focused on building a 100 million revenue plus business, and we are taking deliberate steps to achieve this goal.
Edwin Miller: In the coming months, we will complete multiple technology advances that leverage the Marchex Cloud Platform.
Two of these exciting initiatives are...
Our Unified User Interface, or UI.
Edwin Miller: This creates a seamless and intuitive experience across our entire product suite.
Edwin Miller: 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.
Edwin Miller: This simplifies our customer enterprise access and security and significantly enhances the overall customer experience with the Marchex platform.
Edwin Miller: These initiatives will accelerate our progress, advance our innovation initiatives, improve the efficiency for our customers.
Edwin Miller: and Enable Marchex with well-timed, cross-cell and up-cell capabilities that can help unlock their growth opportunity.
Edwin Miller: As we move through the year, we will also deliver numerous new AI-powered products.
Edwin Miller: Beginning this quarter, we will launch our new Vertical Specific AI Solutions to the settlement, our recent launch of Engage for Service.
There it's more to come this year.
Edwin Miller: including the rollout of our partnership with Microsoft, as well as other new channel partners and marketplaces.
[inaudible]
Edwin Miller: These innovations and expanded sales channels will strengthen our position as the go-to conversational intelligence provider for large enterprises in our vertical markets.
Edwin Miller: 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 for growth.
Edwin Miller: This included gaining organization with efficiencies in certain areas while freeing up resources to increase our investments in our sales and marketing teams.
Aftahi, Edwin Miller,
This will position us to accelerate the business.
while continuing to preserve financial discipline.
With that, I will hand the call to Brian .
Aftahi, Dillon Heslin, Edwin Miller
Edwin Miller: Thank you, Edwin. For the fourth quarter of 2024, revenue was 11.9 million versus 12.4 million for the same quarter last year.
Edwin Miller: During the fourth quarter, we saw a typical seasonal flow of call volumes with overall volumes decreasing relative to the third quarter across our quarter verticals along with some headwinds on a year-over-year basis in certain customer segments like small business resellers.
Edwin Miller: As a reminder, we typically see a 10 to 15% decrease in volumes across our core verticals in the forest quarter.
Edwin Miller: In the future, with the launch of our new products, new channel partners, and 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.
[inaudible]
Turning to operating expenses for the fourth quarter.
Edwin Miller: Excluding stock-based compensation, amortization of the tangible assets, and acquisition and disposition-related costs, total operating costs for the fourth quarter of 2024 were 12.9 million compared to 12.6 million for the fourth quarter of 2020-23.
Aftahi, Edwin Miller, Edwin Miller
Edwin Miller: The cost of revenues was $4.4 million for the fourth quarter, the cost of revenue as a percentage was improved on a year-over-year basis compared to the fourth quarter of 2023.
Edwin Miller: The cost of revenue was somewhat higher sequentially due to the timing of certain expense items, including costs related to the completion of our infrastructure and one stack initiatives.
Edwin Miller: We believe that there's a significant room for additional efficiency with our costs of revenue as new AI products are introduced and sell through.
Edwin Miller: Sales and marketing costs were approximately 3.4 million for the fourth quarter. This was up from the fourth quarter of 2023 as we increased our investment and our go-to-market teams.
Edwin Miller: As we complete ongoing phases of our infrastructure initiatives, we will be balancing profitability
Edwin Miller: Product development costs were 2.8 million for the fourth quarter as we continue to invest in expanding our AI suite of products and innovation.
Edwin Miller: Moving to profitability measures, the adjusted EBITDA was a loss of $386,000 for the fourth quarter of 2024, which was down from the adjusted EBITDA of $112,000 for the fourth quarter of 2023, reflecting our investments related to infrastructure initiatives.
Edwin Miller: Gapnet loss was 1.9 million for the 4th quarter of 2024 or negative 4 cents per diluted share. This compares to a loss of 1.1 million or negative 2 cents per diluted share for the 4th quarter of 2023.
Edwin Miller: Adjusted non-GAAP loss was negative three cents per share for the fourth quarter of 2024 compared to zero cents per share for the fourth quarter of 2023.
Edwin Miller: Additionally, we ended the fourth quarter, 2024, with approximately 12.8 million in cash on hand.
Edwin Miller: Now, turning to our business outlook. The following four looking statements reflect Marchex's expectations as of March 6, 2025.
Edwin Miller: For the first quarter ending March 31, 2025, revenue was currently anticipated to be in the range of fourth quarter 2024 levels.
Edwin Miller: Adjusted EBITDA, excluding a certain one-time expenses associated with organizational re-alignment, is currently anticipated to be in the range of 4th quarter 2024 levels.
Edwin Miller: This takes into account typically higher first-quarter operating expenses as compared to the fourth quarter of 2024 and some overlap of charges related to the completion of one-stack initiatives.
Edwin Miller: For the fiscal year 2025, revenue was currently anticipated to grow on a year-over-year basis with the opportunity for sequential revenue acceleration throughout 2025, as we execute all of a series of strategic sequential product launch and go to market initiatives.
Edwin Miller: Growth margins for the full year 2025 are currently anticipated to be higher than 2024, with the opportunity for improvement during the year.
Edwin Miller: Adjusted EBITDA is currently anticipated to be positive for the 4-year 2025. Given our current belief that the company can increase revenues sequentially, while also continuing to gain expensive efficiencies, we believe we have the opportunity to see meaningful improvements in sequential quarterly adjusted EBITDA.
Edwin Miller: 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 in growth initiatives.
With that, I'll hand the call back to Edwin.
. . . . . .
Thank you, Brian .
Edwin Miller: 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.
Aftahi, Dillon Heslin, Edwin Miller,
Edwin Miller: We also anticipate achieving significant positives adjusted EBITDA, progress for the full year, demonstrating both revenue growth,
An Operational Discipline [inaudible]
Edwin Miller: We will deploy some of this progress back into our growth initiatives.
that summarized.
Edwin Miller: 2024 was a year of foundational transformation and 2025 is our year of acceleration.
Edwin Miller: With a strong foundation in place, a clear vision, and an exceptional team, we are more confident than ever in our ability to deliver innovation, sustainable growth.
Edwin Miller: expanded market leadership and further creation of long-term value for our customers and shareholders.
Edwin Miller: 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.
Speaker Change: Great. If you'd like to cue for a question, you can do so by pressing star 1, your telephone keypad.
Edwin Miller: For whatever reason you'd like to remove your question, it is star two two.
Speaker Change: But again to join the question, can you please press star one?
Speaker Change: Our first question is from Darren Afti with Roth Capital Partners. Your line is now open.
Aftahi, Dillon Heslin,
Speaker Change: Hi, this is Dillon Aftahi and thanks for taking my questions. Just to start, when you talk about your outlook in...
Speaker Change: How revenue is supposed to improve sequentially throughout the year? Can you just talk a little about what you're seeing that gives you confidence into any line of sight and how that's a bit different from some of the things in the past that were sort of of the similar tone?
Thanks for the question, Darren.
Let's go ahead.
[inaudible]
Speaker Change: Sure. I can start and feel free to jump in. Yet one of the things that Edwin's really hit on is all the technological progress in terms of our positioning the platform, you know, with kind of the emergence of gender of AI.
Speaker Change: to innovate more rapidly and do so in a way that is easier to sell and easier to adopt.
Speaker Change: 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.
Speaker Change: Two 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 analytic solutions. [inaudible]
Speaker Change: when we look at our ability to rapidly leverage our first party data into new AI signals and bundle those into
Speaker Change: 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 a Products
Speaker Change: These are what we collectively look at as our strategic sequential accelerants for 25 and why we think 2025 is different than prior years when we look at how we can build the business.
Speaker Change: and accelerate it and hopefully see that translate into kind of higher run rates.
Speaker Change: and with a combination of IR revenue and increased efficiencies with gross margins and operations, you know, the latitude that comes with extended adjusted EBITDA, both to occur to the bottom line and invest more in growth.
Aftahi, Dillon Heslin, Edwin Miller
Speaker Change: I would add a few things. One, and I did mention this in the...
Speaker Change: and the reading, but the one platform having everything in one stack is really huge, that that delivers the ability for us to have.
Speaker Change: That's single UI and single sign on, which means every client can now in the near-term access all signals in one web interface.
Speaker Change: And in the past, we would have to have multiple interfaces for them as we put everything together in one platform that's come together really, really well. I hope that the team is working really well together.
Speaker Change: 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 the
Speaker Change: Brian's come on board and done a great job, so I think that's really important.
Speaker Change: We got one billing system coming and that enables our channel, including a new API to take off. So, there's a lot of things we did, a lot of work and...
Speaker Change: of past couple of years that are going to help us make this a transformational year.
Speaker Change: I mean, this is what you asked is the critical question, so historically we sold one-to-one enterprises.
Edwin Miller: Now, you know, 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. You know, we mentioned engage for service, you know, now we look at expanded franchises and dealers that we can sell direct to on increased volumes.
Edwin Miller: and the expansion of our addressable market as part of this. Those are all the things that make us feel like 25 kind of.
Thank you.
Edwin Miller: That's an important one, Russ, in that when I put the reins here, we were selling into a sales group or a marketing function. With engaged for service, we jumped in the defense and now are selling into service.
of Business Units
a customer experience group.
Edwin Miller: All the scripts are now 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.
Edwin Miller: Additionally, we can ingest the data they're pulling in from other systems like a POS or their survey data, et cetera, to give them a better view of how to make great business decisions. So, we're looking forward to getting into the year.
Aftahi, Dillon Heslin,
Edwin Miller: Hopefully, that helps going. Yeah, thank you. And just as a follow up, I know it's really fluid, but considering your turn. Thank you very much, and congratulations.
Edwin Miller: Auto OEMs, do you talk about how tariffs might potentially impact your market presence?
Dr. Prado, Dillon Heslin, Edwin Miller, Dillon Heslin, Edwin Miller,
Speaker Change: Look, right now there's I think a lot of unknowns and people kind of speculating on what some of those might be. You know, we do know that, you know, auto has.
Speaker Change: Managed through ups and downs, supply chain disruptions. We looked through that kind of in and beyond COVID and so you know some of that you know we just got to kind of wait and adapt to based on you know what normalize behaviors look like.
Currently in our planning cycles.
Speaker Change: There's nothing specifically that's come up that we view as disruptive. Does it mean it can't happen?
Speaker Change: But at this point, our dialogue is really tied towards.
Speaker Change: The strategic role maps 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.
Speaker Change: We have no further questions at this time, so I'll pass the call back to the team for any final remarks.
Aftahi, Edwin Miller, Edwin Miller
Speaker Change: Okay, thank you all for joining and we look forward to our next call. Take care.
Aftahi, Dillon Heslin, Edwin Miller