Marchex, Inc. (MCHX) Earnings Call Transcript
November 10, 2026
Earnings Call Speaker Segments
Hello, everyone. Thank you for joining us, and welcome to the Marchex Third Quarter 2026 Earnings Conference Call. [Operator Instructions] I will now hand the conference over to Francis Feeney, Chief Operating Officer. Francis, please go ahead.
Good afternoon, everyone, and welcome to Marchex's Business Update and Third Quarter 2026 Conference Call. Joining us today are Russ Horowitz, our Chairman of the Board; and Brian Nagle, 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 or 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. A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release. The earnings press release is available on the Investor Relations section of our website. At this time, I want to turn the call over to Russ.
Thank you, Frank, and thank you, everyone, for joining us today. Our third quarter results reflect meaningful progress in strengthening Marchex's financial performance. During the quarter, we delivered year-over-year revenue growth, positive GAAP net income and significant improvement in adjusted EBITDA. Since completing the acquisition of Archenia in July, our focus has been on bringing together the complementary technologies of both companies. Our combined solutions help customers use insights from consumer conversations to qualify leads, improve call handling and convert more inquiries into appointments and sales. We believe these capabilities create opportunities to expand our existing enterprise relationships and reach new customers and markets. Our expanded offerings are also -- expanded offerings also broaden how we generate revenue, and we are seeing encouraging early commercial traction, including expanded relationships with existing customers and deployments of new AI-powered solutions. Let me share 2 examples of our progress with customers and products. One example is the expansion of our relationship with an existing advertising and media customer. Following a successful paid pilot, the customer commercially deployed our AI Voice Agent solution. The existing relationship represents approximately $400,000 in annualized revenue. We expect the new deployment to generate incremental revenue in the remainder of 2026 and add more than $200,000 to annualized revenue from this customer in 2027. This deployment demonstrates our ability to cross-sell AI-powered solutions while helping customers capture qualified leads and sales opportunities that otherwise might be missed. As we disclosed in September, we've also added additional customers for our AI Voice Agent solution and have been discussing paid pilot programs with several large enterprises. The solution qualifies callers when sales representatives are unavailable, helping businesses capture opportunities they might otherwise miss. Since quarter end, Marchex received approval from a major automotive original equipment manufacturer, or OEM, to offer our Engage for Service solution through its dealer portal. This enables eligible dealers to use OEM co-op funding towards the solution. The approval follows an early access deployment across 75 dealerships within a bundled offering where Engage for Service helped improve service operations and identify missed appointments and revenue opportunities. It creates an additional channel for expanding adoption across the OEM's dealer network. The solution also provides real-time alerts that flag missed appointment opportunities and customer frustration, helping dealership teams prioritize follow-up. These developments provide early evidence and validation of the opportunity to expand adoption of our solutions within existing customer relationships. These examples and the other points of progress we're seeing across the business continue to reinforce our belief that 2027 will be an increasing growth year and that we have a tangible path to a more than $100 million revenue business as we execute. With our current operating efficiencies, in 2027, we also have the opportunity to increase adjusted EBITDA levels beyond third quarter's annualized run rate of more than $10 million. I'll now turn the call over to Brian to discuss our third quarter 2026 financial results and fourth quarter outlook.
Thank you, Russ. Before we review the results, I want to note that the financial results we're discussing today reflect both Marchex and Archenia on a combined basis for the current and all historical periods presented as required by GAAP. Our Form 10-Q quarterly report for the third quarter will provide additional information on this accounting treatment. Revenue for the quarter increased to $16 million compared to $15.2 million in the third quarter of 2025. The growth reflected favorable customer activity, upsell initiatives within our existing customer base and coordinated sales efforts following the acquisition of Archenia. Net income for the quarter was $1.3 million, or $0.03 per diluted share, compared with a net loss of $1.3 million, or negative $0.03 per diluted share, in the prior year period. The improvement primarily reflects the benefits of our operational and organizational initiatives, which significantly reduced operating expenses. Gross margin was 51% compared with 54% a year ago, reflecting the impact of our revenue mix as well as costs associated with the paid pilots during the quarter. Operating expenses, excluding cost of revenue, were $6.7 million in the third quarter of 2026 compared with $9.3 million in the third quarter of 2025, reflecting our expense efficiency initiatives and organization realignment, which have streamlined our operation and reduced our operating cost base. Adjusted EBITDA increased to $2.4 million compared with $0.5 million in the third quarter of 2025, as adjusted. The quarter also included approximately $0.2 million of reorganization and acquisition-related costs. Adjusted EBITDA before those costs was $2.6 million. We intend to build on the stronger financial foundation while making targeted investments to support growth and maintain disciplined expense management. We ended the quarter with $8.7 million in cash and cash equivalents. Now turning to our outlook. For the fourth quarter of 2026, Marchex currently expects revenue of $15 million or more and adjusted EBITDA in the range of $2.3 million to $2.5 million. The expected decrease in revenue from Q3 primarily reflects normal seasonal trends as the fourth quarter has typically seen lower call volumes and advertising -- advertiser budgets impacting both Marchex and Archenia. We do believe that, based on our current sales pipeline and cost efficiencies, there may be opportunities to offset or potentially outperform the typical seasonality depending on the timing and formalization of opportunities, which will also provide additional visibility on growth acceleration into 2027. We plan to provide our first quarter 2027 financial outlook when we report fourth quarter and full year 2026 results, which is currently anticipated in early March of 2027. With that, I will hand the call back to Russ.
Thank you, Brian. Before we open the call for questions, I'd like to discuss the appointment of Travis Fairchild as President of Marchex effective yesterday. Travis previously served as CEO of Archenia, and before that, spent 18 years at Marchex in strategy and development positions. His experience across both businesses positions him well to accelerate commercialization of our combined capabilities, deepen customer relationships and support our next phase of growth. I'd also like to note that Troy Hartless will continue to serve as Chief Revenue Officer, where he will remain focused on new and emerging opportunities and sales channels to support our increased growth ambitions. As I noted before, our longer-term objective remains to build a business generating more than $100 million in annual revenue. We believe the combination of Marchex and Archenia expands our opportunities to grow organically through a broader offering and deeper customer relationships. Our priorities are clear: expand adoption of our combined solutions, convert successful pilots into broader deployments and translate customer results into sustainable revenue growth. We will support these efforts with targeted investments in sales and product development while maintaining disciplined expense management. We will measure our progress by the business outcomes we deliver for customers, the revenue growth those customers -- those outcomes generate and our ability to improve financial performance and shareholder value. We've also expanded our Investor Relations program to increase engagement with institutional investors and analysts as we communicate our progress. I want to thank our employees for their expertise and commitment and our investors, partners and other stakeholders for their ongoing support. With that, I will hand the call back to the operator for questions.
[Operator Instructions] Your first question comes from the line of Mike Latimore with Northland Capital Markets.
This is [ Vijay Devar ] for Mike Latimore. First question is about what's the pro forma organic growth implied in your 4Q guidance?
Okay. Thank you for the question. The -- if you look at our guidance of $15 million or more on the revenue line, you need to go back to last year's Q4, which I believe was in the low $14 million. And so we're giving a range today. So we are implying year-over-year growth on both revenue and adjusted EBITDA given the trends of the business and the outlook of our pipeline and efficiency initiatives.
Okay. Of the initial 1/3 of your top 100 clients that received product presentations, so how many have purchased a product?
Yes. We -- if you go back to May, we talked about some early metrics where we had approached about 30 of our top 100 and seen a meaningful number adopt one or more products and expressed our belief that, that trend would continue. And that trend has continued. We're not quantifying it today. We do intend to share more details and success metrics as we go forward. But based on some of the deals that we're looking to close between now and the end of the year, that will help inform some of the metrics that we potentially will lay out as part of our early 2027 guidance. Good question, and we look forward to sharing more detail around those as we go forward.
Sure. Got it. And finally, what's the average incremental ARPU from upsells?
I'm sorry, could you repeat that?
What's the average incremental ARPU, ARPU from that upsell?
Yes. We have not given an overall metric on average increased revenue. We have given some specific product and customer examples that when we launched the combined solutions that bundle insights, actions and outcomes versus analytics and insights only, we've seen numerous examples of revenue per customer increasing by 50% to 100% or more. We've laid out a number of those, and we continue to see that trend continue when we're successful with upsells. And obviously, we're feeling increasingly confident that we're going to continue to be able to extend that model. And we believe that our biggest opportunity to drive growth and achieve that $100 million revenue goal is really about penetrating the existing customer base given how much more wallet share is available to us based on the expanded product capabilities. So we have shared some metrics, as we mentioned, examples of 50% to 100% revenue expansion on selective customers and that we think that's reflective of what we can see as we penetrate and broaden some of our sales efforts.
Your next question comes from the line of Ross Koller with Koller Capital.
Congrats on the quarter and the progress. I have a few questions today. First, Russ, last quarter, you mentioned a significant number of 7-figure deals in the pipeline. Is that still the case? And if so, how should we think about the progression of those deals both through the pipeline and how they scale over time?
Yes. That's a good question, and it's something we think a lot about. And as we noted last quarter, we believe we have a double-digit number of customers where the potential is for 7 figures or more of incremental revenue. Within that group, we believe many of them likely have the potential over time to incrementally deliver multimillions of dollars of revenue per year. So if we can make this happen, it's very meaningful and a significant needle mover. For us, this has been one of the big takeaways so far that we have this big potential revenue expansion on a per customer basis. And we believe our expanded TAM just on existing customers is very significant, and it's why we're working with urgency on building the momentum. In terms of hitting on the question of kind of deal progression and how to think about the progression of these deals, since last quarter, a number of them have positively moved forward, and we believe that will continue to be the case with others as well. Our goal is obviously to formalize as many as possible, but there are a few specific deals that we're trying to get done by year's end to contribute to our visibility on increased growth in 2027 as we enter next year.
Awesome. And Russ, what's driving the increased deal sizes? Are there certain products that are resonating particularly well with the existing base?
Yes. What's driving the increased deal sizes and the increased number of these potential deals is our ability to move beyond selling just the analytics and the resulting insights and now our ability to bundle it with action and revenue-generating outcomes the insights inform. When we can show tangible positive impact to the revenue line based on our actions, the dollars customers can and are willing to pay us goes up significantly. Right now, there's 3 or 4 new products that we're bundling and selling based on this opportunity profile. As I noted in the past, when we sold insights only, we had very little influence or control on whether the customer actually followed through and took action on these. But in the absence of action, they don't achieve the revenue and value impact that our insights highlight. Looking back, taking those actions isn't trivial. It can require making operational changes, needing to mobilize cross-departmental collaboration, and other coordination in what are large, complex companies. But it's different now. With AI, we have the ability to more easily bundle and connect our insights to AI-driven automated actions. When we can effectively take the needed action on behalf of the customer, the outcomes become tangibly achievable and measurable, which changes how much they can and are willing to pay us. It's another kind of virtuous element of this whole thing is that our analytics are able to objectify the improved results by measuring the value impact of the outcomes we generate through things like increased bookings, appointment rates and revenue. Good question.
Awesome. And then the $10 million EBITDA run rate looks great this quarter. But in the PR, you mentioned targeted investments back in the business to drive growth. Is there any way you can quantify the size of these investments? And how should we think about the operating leverage in the business as you invest to reaccelerate the growth towards the $100 million target?
Yes. Look, we're feeling really good about the strategy, the opportunity, and we are of an intent, as we've noted, to make selective investments focused primarily on sales and product development that can drive increasing revenue growth. But based on our current outlook, it shouldn't have any substantial effect on our EBITDA profile. And looking at our executive and management teams with Travis now in the President's role and the rest of us executing within our roles as well, we're now largely built out. And on the customer and product side, we have the key data and expertise capabilities we need to evolve our product sets. So as we increase revenue run rates and harvest some of the operating efficiencies we already have planned, we can make those investments in further growth and still scale up the EBITDA beyond the current $10 million plus of run rate, which will also drive increasing free cash flow. We're focused on all of those kind of core metrics as we execute.
Awesome. And then lastly, Russ, can you talk about the IR strategy going forward and how you're going to go about increasing the awareness in the investor community?
Definitely. Look, first and foremost, we believe the -- our stock is meaningfully undervalued. I mean, we spent the last 12 months architecting the evolved strategy and executing and integrating the acquisition. And now we want to tell the story. We're going to be attending conferences. We have a couple coming up in Q4 and trying to pick up more sell-side research coverage. We believe the company has a very attractive foundation with our having established the $10 million in annualized adjusted EBITDA and a potential path to more. This is the highest EBITDA levels we've seen in over a decade. And we believe that we're going to -- we are and will be an AI winner. Other companies in our tangential markets are being acquired for huge multiples of revenue. We're currently trading at about 1x sales on an enterprise value basis and about 6x enterprise value on an adjusted EBITDA basis with a business with accelerating growth and profitability. We believe the gap between our stock and where our stock is trading and the intrinsic value should close over time with our successful execution and our telling the story, which we're going to be increasingly doing. We look forward -- we really look forward to doing that.
We have reached the end of the Q&A session. I will now turn the call back over to the management team for closing remarks.
Yes. This is Russ. We just want to thank everybody again for the ongoing support, and we look forward to updating you as we make progress, including additional interim announcements as we achieve key elements as well. Thank you, everybody, and again, appreciate everything.
Thank you for attending. You may now disconnect.
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