Marchex(MCHX) - 2023 Q3 - Quarterly Report

Financial Performance - For the nine months ended September 30, 2023, the company's revenue was $37.5 million, a decrease of$2.4 million, or 6%, compared to the same period in 2022[84]. - Revenue decreased by $2.4 million, or 6$39.9 million for the nine months ended September 30, 2022, to $37.5 million for the same period in 2023[98]. - Net loss for the nine months ended September 30, 2023, was$8.8 million, an increase from a net loss of $4.7 million for the same period in 2022, primarily due to$2.4 million lower revenue and $1.5 million higher operating expenses[118]. - The company expects revenues to be similar or modestly lower in the short term due to reduced seasonal call volume[99]. - The company expects revenues to recover if macroeconomic conditions improve, but supply chain issues could negatively impact revenue levels[122]. Operating Expenses - Operating expenses increased by$1.5 million, or 3%, for the nine months ended September 30, 2023, primarily due to reorganization costs and increased investments in AI technology[85]. - Service costs increased by $1.1 million, or 7$14.8 million for the nine months ended September 30, 2022, to $15.9 million for the same period in 2023, representing 37$1.3 million, or 12%, from $10.2 million for the nine months ended September 30, 2022, to$8.9 million for the same period in 2023, accounting for 26% and 24% of revenue respectively[105]. - Product development expenses increased by $1.7 million, or 16$10.5 million for the nine months ended September 30, 2022, to $12.2 million for the same period in 2023, representing 26$7.4 million for the nine months ended September 30, 2022, and 2023, accounting for 19% and 20% of revenue respectively[111]. - Stock-based compensation expense totaled $1.9 million for the nine months ended September 30, 2023, down from$2.0 million in the same period of 2022[97]. Cash Flow and Financial Position - Cash and cash equivalents decreased from $20.5 million as of December 31, 2022, to$13.7 million as of September 30, 2023[119]. - Cash used in operating activities for the nine months ended September 30, 2023, was $6.1 million, compared to$1.8 million for the same period in 2022[120][121]. - Cash used in investing activities for the nine months ended September 30, 2023, was $458,000, a decrease from$2.0 million in the same period in 2022[123]. - Cash used by financing activities for the nine months ended September 30, 2023, was $150,000, compared to cash provided of$30,000 in the same period in 2022[125]. - The company believes its resources will be sufficient to fund operations for at least twelve months, but additional financing may be needed for strategic initiatives[126]. Market and Strategic Initiatives - The global conversational AI market is projected to grow at a compounded annual growth rate of 22%, from $6.8 billion in 2021 to$18.4 billion by 2026[77]. - The company plans to expand its conversational intelligence technology and invest in AI, data science, and machine learning capabilities to enhance customer experiences[79]. - Marchex's conversational intelligence solutions are designed to provide real-time insights into customer interactions across multiple communication channels[75]. - The company aims to increase its customer base through direct sales, marketing efforts, and partnerships with resellers[80]. - Marchex is pursuing selective acquisition opportunities to enhance its strategic position and increase shareholder value[81]. - The company is focused on developing new markets and expanding its technology-based products into new business areas[83]. - Long-term growth opportunities are anticipated from new product releases and growth initiatives, with several customers indicating plans to initiate trials[100]. Tax and Valuation - The income tax expense for the nine months ended September 30, 2023, was $53,000, compared to$77,000 for the same period in 2022[115]. - A 100% valuation allowance of $58.5 million has been recorded against net deferred tax assets as of September 30, 2023[116]. - The company recorded a 100% valuation allowance against deferred tax assets as of September 30, 2023, indicating uncertainty in realizing these assets[146]. Lease and Asset Management - Operating and finance lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term[150]. - The company elected the short-term lease recognition exemption for all qualifying leases, meaning no ROU assets or lease liabilities were recognized for those leases[151]. - The lease payments included in the measurement of the lease liability are comprised of fixed payments[150]. - The company uses its incremental borrowing rate to determine the present value of lease payments as the implicit interest rate is not readily determinable[150]. - Options for lease renewals have been excluded from the lease term and lease liability as the reasonably certain threshold is not met[150]. Investor Relations - The company provides access to its financial reports and material information through its investor relations website and social media channels[153]. - Investors are encouraged to monitor the company's social media accounts for material information disclosures[154]. - As a smaller reporting company, the company is not required to provide quantitative and qualitative disclosures about market risk[155].