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Marchex(MCHX) - 2022 Q3 - Quarterly Report
MCHXMarchex(MCHX)2022-11-04 20:07
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Revenue Performance - For the nine months ended September 30, 2022, revenue was 39.9million,adecreaseof39.9 million, a decrease of 808,000, or 2%, compared to 40.7millionforthesameperiodin2021[90]−Thedecreaseinrevenueisprimarilyduetolowerconversationalvolumescomparedtotherecoveryperiodin2021,alongwithongoingimpactsfromCOVID−19variants,supplychaindisruptions,inflation,andlaborshortages[90]−Revenuedecreasedby40.7 million for the same period in 2021[90] - The decrease in revenue is primarily due to lower conversational volumes compared to the recovery period in 2021, along with ongoing impacts from COVID-19 variants, supply chain disruptions, inflation, and labor shortages[90] - Revenue decreased by 808,000 or 2%, from 40.7millionfortheninemonthsendedSeptember30,2021to40.7 million for the nine months ended September 30, 2021 to 39.9 million for the same period in 2022[104] - The company expects revenues to be slightly lower in the near term due to reduced seasonal call volume, particularly in the latter part of the fourth quarter[105] - The company expects revenues to recover if macroeconomic conditions improve and business interruptions subside, but potential disruptions from COVID-19 and supply chain issues could lower revenues[127] Operating Expenses - Service costs decreased by 1.6millionor101.6 million or 10%, from 16.4 million for the nine months ended September 30, 2021 to 14.8millionforthesameperiodin2022,representing4014.8 million for the same period in 2022, representing 40% and 37% of revenue respectively[108] - Product development expenses decreased by 2.8 million or 21%, from 13.3millionfortheninemonthsendedSeptember30,2021to13.3 million for the nine months ended September 30, 2021 to 10.5 million for the same period in 2022, accounting for 33% and 26% of revenue respectively[114] - General and administrative expenses increased by 413,000or6413,000 or 6%, from 7.0 million for the nine months ended September 30, 2021 to 7.4millionforthesameperiodin2022,representing177.4 million for the same period in 2022, representing 17% and 19% of revenue respectively[117] - Stock-based compensation expense totaled 2.034 million for the nine months ended September 30, 2022, compared to 2.007millionforthesameperiodin2021[103]−Thecompanyanticipatesstabletomodestlyhigherexpendituresforproductdevelopmentinitiativesinthenearandintermediateterm[129]FinancialPosition−ThenetlossfortheninemonthsendedSeptember30,2022,was2.007 million for the same period in 2021[103] - The company anticipates stable to modestly higher expenditures for product development initiatives in the near and intermediate term[129] Financial Position - The net loss for the nine months ended September 30, 2022, was 4.7 million, an increase from a net loss of 2.4millionforthesameperiodin2021[124]−Cashusedinoperatingactivitieswas2.4 million for the same period in 2021[124] - Cash used in operating activities was 1.8 million for the nine months ended September 30, 2022, compared to 5.8millionforthesameperiodin2021[126]−Cashusedininvestingactivitiesincreasedto5.8 million for the same period in 2021[126] - Cash used in investing activities increased to 2.0 million for the nine months ended September 30, 2022, from 504,000inthesameperiodin2021[128]−Cashprovidedbyfinancingactivitieswas504,000 in the same period in 2021[128] - Cash provided by financing activities was 30,000 for the nine months ended September 30, 2022, down from 252,000inthesameperiodin2021[130]−Thecompanyhadcashandcashequivalentsof252,000 in the same period in 2021[130] - The company had cash and cash equivalents of 23.3 million as of September 30, 2022, down from 27.1millionasofDecember31,2021[125]−Long−termcontractualobligationsasofSeptember30,2022,totaled27.1 million as of December 31, 2021[125] - Long-term contractual obligations as of September 30, 2022, totaled 4.9 million, including 2.0millionforrentunderfacilityoperatingleases[125]−Thecompanybelievesitsresourceswillbesufficienttofundoperationsforatleasttwelvemonths,butadditionalfinancingmaybeneededforacquisitionsandlong−termobligations[131]StrategicInitiatives−Marchex′sprimaryproductofferingsincludeMarchexCallAnalytics,whichhelpsbusinessesoptimizeadvertisingexpendituresandmeasurecalloutcomes[80]−MarchexlaunchedMarchexConversationDNAinMarch2022,enablingvoiceandtextconversationdecodingandscoringacrossitsproducts,utilizingoveronebillionminutesofvoiceconversations[89]−MarchexplanstoexpanditsconversationalintelligencetechnologyandinvestinAI,datascience,andmachinelearningcapabilities[83]−Thecompanyaimstogrowitscustomerbasebyintegratingitsproductswithexistingcommunicationproviders,enhancingaccessibilityforbusinesses[84]−Marchexispursuingselectiveacquisitionopportunitiestoenhanceitsstrategicpositionandincreaseshareholdervalue[85]−Thecompanycontinuestofocusonimprovingmarketingperformancethroughitsconversationalanalyticssolutions,whichreceivedtheMarTechBestMarketingAttributionSolutionawardin2021[81]MarketOutlook−TheglobalconversationalAImarketisprojectedtogrowatacompoundedannualgrowthrateof222.0 million for rent under facility operating leases[125] - The company believes its resources will be sufficient to fund operations for at least twelve months, but additional financing may be needed for acquisitions and long-term obligations[131] Strategic Initiatives - Marchex's primary product offerings include Marchex Call Analytics, which helps businesses optimize advertising expenditures and measure call outcomes[80] - Marchex launched Marchex Conversation DNA in March 2022, enabling voice and text conversation decoding and scoring across its products, utilizing over one billion minutes of voice conversations[89] - Marchex plans to expand its conversational intelligence technology and invest in AI, data science, and machine learning capabilities[83] - The company aims to grow its customer base by integrating its products with existing communication providers, enhancing accessibility for businesses[84] - Marchex is pursuing selective acquisition opportunities to enhance its strategic position and increase shareholder value[85] - The company continues to focus on improving marketing performance through its conversational analytics solutions, which received the MarTech Best Marketing Attribution Solution award in 2021[81] Market Outlook - The global conversational AI market is projected to grow at a compounded annual growth rate of 22%, from 6.8 billion in 2021 to 18.4billionby2026[81]−Thecompanyanticipatesvolatilityinresultsduetotheongoingimpactsofthecoronaviruspandemicandmacroeconomicconditions[105]−Thecompanybelievesnewproductreleasesandgrowthinitiativesmayprovideopportunitiesforpotentialrevenuegrowthinthelongerterm[106]TaxandValuation−AsofSeptember30,2022,thecompanyrecordeda10018.4 billion by 2026[81] - The company anticipates volatility in results due to the ongoing impacts of the coronavirus pandemic and macroeconomic conditions[105] - The company believes new product releases and growth initiatives may provide opportunities for potential revenue growth in the longer term[106] Tax and Valuation - As of September 30, 2022, the company recorded a 100% valuation allowance of 54.7 million against its net deferred tax assets, compared to 53.0millionatDecember31,2021[123]−Amortizationofintangibleassetsfromacquisitionswas53.0 million at December 31, 2021[123] - Amortization of intangible assets from acquisitions was 3.7 million for the nine months ended September 30, 2021, decreasing to 1.6millionforthesameperiodin2022[120]−Interestincomedecreasedsignificantlyfrom1.6 million for the same period in 2022[120] - Interest income decreased significantly from 2.5 million for the nine months ended September 30, 2021 to $33,000 for the same period in 2022[121] Lease Accounting - The company has elected the short-term lease recognition exemption for all qualifying leases, meaning no ROU assets or lease liabilities are recognized for these leases[154] - Operating lease ROU assets and liabilities are recognized at commencement based on the present value of lease payments over the lease term[153] - The company primarily leases office facilities classified as operating leases and does not have finance leases[153] - Lease payments included in the measurement of lease liability are comprised of fixed payments[153] - The company uses its incremental borrowing rate to determine the present value of lease payments as the implicit interest rate is not readily determinable[153] - The lease term includes the non-cancellable period of the lease, with options for lease renewals excluded from the lease term[153] Investor Relations - The company provides access to its financial reports and material information through its investor relations website and social media channels[156] - As a smaller reporting company, the company is not required to provide quantitative and qualitative disclosures about market risk[157]