MARCHEX INC

Previous wording

Marchex, Inc. harnesses the power of AI and conversational intelligence to provide actionable insights aligned with prescriptive vertical market data analytics, driving operational excellence and revenue acceleration. Marchex enables executive, sales, and marketing teams to optimize customer journey experiences across all communications channels. Through our prescriptive analytics solutions, we enable the alignment of enterprise strategy, empowering businesses to increase revenue through informed decision-making and strategic execution. Marchex provides conversational intelligence AI-powered solutions for market-leading companies in leading B2B2C vertical markets, including several of the world’s most innovative and successful brands.

Current wording

Marchex harnesses the power of AI and conversation intelligence to provide actionable insights derived from prescriptive vertical market data analytics. Marchex enables organizations across business functions to optimize customer acquisitions and experiences, transforming conversations into meaningful business outcomes. Marchex provides AI-powered conversation intelligence solutions for market-leading companies in leading B2B2C vertical markets, including many of the world’s most innovative and successful brands.

Previous wording

Our cost of revenue represents the cost of providing our services to our customers. These costs primarily consist of telecommunication costs, including the use of phone numbers relating to our services; bandwidth and software license fees; network operations; and payroll and related expenses of personnel, including stock-based compensation.

Current wording

Our cost of revenue represents the cost of providing our services to our customers. These costs primarily consist of cloud computing and hosting costs; telecommunication costs, including the use of phone numbers relating to our services; bandwidth and software license fees; network operations; and payroll and related expenses of personnel, including stock-based compensation.

Previous wording

Product development costs consist primarily of expenses incurred in the research and development, and creation and enhancement, of our products and services. These costs primarily consist of payroll and related expenses for personnel; costs of computer hardware and software; costs incurred in developing features and functionality of the services we offer; and stock-based compensation of related personnel.

Current wording

Product development costs consist primarily of expenses incurred in the research and development ("R&D") of our products and services. These costs primarily consist of payroll and related expenses for personnel; costs of computer hardware and software; costs incurred for features and functionality of the services we offer; and stock-based compensation of related personnel.

Previous wording

For the periods presented, substantially all of our product development expenses are research and development. Product development costs are expensed as incurred or capitalized into property and equipment in accordance with U.S. GAAP.

Current wording

For the periods presented, substantially all of our product development expenses are R&D and are expensed as incurred or capitalized into property and equipment in accordance with U.S. GAAP once requirements have been met. See Note 8: Property and Equipment for more information on software development capitalization.

Previous wording

The following tables present revenue and certain of our operating results as a percentage of revenue:

Current wording

The following tables present revenue and certain operating results as a percentage of revenue:

Previous wording

Stock-based compensation expense was included in the operating expense categories as follows:

Current wording

Stock-based compensation expense was included in the following operating expense categories:

Previous wording

Cost of Revenue. Cost of revenue was $4.2 million for both the three months ended September 30, 2025 and September 30, 2024. As a percentage of revenue, cost of revenue was 37% and 33% for the three months ended September 30, 2025 and 2024, respectively.

Current wording

Cost of Revenue. Cost of revenue was $4.2 million for both the three months ended March 31, 2026 and 2025. As a percentage of revenue, cost of revenue was 40% and 37% for the three months ended March 31, 2026 and 2025, respectively. During the three months ended March 31, 2026 payroll costs increased $0.1 million as a result of reorganization charges of $0.1 million related to severance. The increase was offset by savings of $0.1 million realized as a result of the platform migration activities.

Previous wording

Sales and Marketing. Sales and marketing expenses decreased $0.3 million, or 9%, to $2.9 million for the three months ended September 30, 2025 from $3.2 million for the three months ended September 30, 2024. As a percentage of revenue, sales and marketing expenses were 25% for both the three months ended September 30, 2025 and 2024. The change from prior year was primarily attributable to a decrease in payroll and benefit related charges of $0.3 million, partially offset by an increase in contract asset amortization charges of $0.1 million.

Current wording

Sales and Marketing. Sales and marketing expenses were $3.3 million for both the three months ended March 31, 2026 and 2025. As a percentage of revenue, sales and marketing expenses were 31% and 29% for the three months ended March 31, 2026 and 2025, respectively. During the three months ended March 31, 2026 payroll costs decreased $0.1 million which was offset by an increase in contract asset amortization charges of $0.1 million. The three months ended March 31, 2026 includes reorganization charges related to severance of $0.4 million.

Previous wording

Product Development. Product development expenses decreased $0.7 million, or 23%, to $2.4 million for the three months ended September 30, 2025 from $3.1 million for the three months ended September 30, 2024. As a percentage of revenue, product development expenses were 21% and 25% for the three months ended September 30, 2025 and 2024, respectively. The change from the prior year was primarily attributable to $0.7 million in lower personnel and outside labor costs due to the capitalization of software development costs in 2025 and the reorganization and realignment of our personnel in 2025.

Current wording

Product Development. Product development expenses decreased $0.3 million, or 11%, to $2.4 million for the three months ended March 31, 2026 from $2.7 million for the three months ended March 31, 2025. As a percentage of revenue, product development expenses were 23% and 24% for the three months ended March 31, 2026 and 2025, respectively. The three months ended March 31, 2026 includes reorganization charges of $0.2 million related to severance. Inclusive of the $0.2 million of reorganization charges the decrease was primarily attributable to $0.3 million in lower personnel and outside labor costs due the reorganization and realignment of our personnel that occurred in 2025 and 2026.

Previous wording

General and Administrative. General and administrative expenses increased $0.2 million, or 7%, to $2.9 million for the three months ended September 30, 2025 from $2.7 million for the nine months ended September 30, 2024. As a percentage of revenue, general and administrative expenses were 25% and 21% for the three months ended September 30, 2025 and 2024, respectively. The change from prior year was primarily attributable to an increase in personnel costs and share-based compensation, which largely consist of one-time reorganization charges incurred during 2025.

Current wording

General and Administrative. General and administrative expenses decreased $1.0 million, or 32%, to $2.1 million for the three months ended March 31, 2026 from $3.1 million for the three months ended March 31, 2025. As a percentage of revenue, general and administrative expenses were 20% and 27% for the three months ended March 31, 2026 and 2025, respectively. The change from prior year was primarily attributable to a decrease in personnel costs of $0.9 million and share-based compensation of $0.2 million, largely due to reorganization charges that occurred in 2025 and reduced the payroll cost run-rate entering 2026.

Previous wording

Income Tax. Income tax expense was $27.0 thousand and $25.0 thousand for the three months ended September 30, 2025 and 2024, respectively. Income tax expense was $0.1 million for both the nine months ended September 30, 2025 and 2024. The income tax expense consists primarily of deferred tax expense and U.S. state income taxes. The effective tax rate differed from the expected tax rate of 21% in both years primarily due to the valuation allowance and, non-deductible stock-based compensation related to incentive stock options recorded under the fair-value method, and other non-deductible amounts.

Current wording

Income Tax. Income tax expense was $0.2 million and $0.1 million for the three months ended March 31, 2026 and 2025, respectively. The income tax expense consists primarily of deferred tax expense and U.S. state income taxes. The effective tax rate differed from the expected tax rate of 21% in both years primarily due to the valuation allowance and, non-deductible stock-based compensation related to incentive stock options recorded under the fair-value method, and other non-deductible amounts.

Previous wording

As of September 30, 2025 and December 31, 2024, we had cash and cash equivalents of $10.3 million and $12.8 million, respectively. As of September 30, 2025, we had current and non-current contractual obligations of $8.5 million, of which $0.9 million is for payments due under our facility and financed equipment leases.

Current wording

As of March 31, 2026 and December 31, 2025, we had cash and cash equivalents of $9.0 million and $9.9 million, respectively. As of March 31, 2026, we had current and non-current contractual obligations of $6.0 million, of which $0.6 million is for payments due under our facility lease.

Previous wording

Cash used in operating activities was $1.5 million during the nine months ended September 30, 2025. The cash used in operating activities was primarily a result of a net loss of $2.9 million, adjusted for an increase in cash due to non-cash items of $3.4 million, which primarily included depreciation, amortization, and stock-based compensation, partially offset by a decrease in cash due to changes in working capital of $2.1 million. The change in working capital was driven primarily by a decrease in accrued benefits and payroll, other accrued expenses, and other current liabilities and a decrease in deferred revenue and deposits, partially offset by an increase in accounts payable. Cash used in operating activities was $2.0 million for the nine months ended September 30, 2024. The cash used in operating activities was primarily a result of a net loss of $3.0 million adjusted for an increase in cash due to non-cash items of $3.0 million, which primarily included depreciation, amortization, and stock-based compensation, offset by a decrease in cash due to changes in working capital of $2.0 million, which primarily included a decrease in accrued benefits and payroll, other accrued expenses, and other current liabilities and accounts payable.

Current wording

Cash used in operating activities was $0.5 million during the three months ended March 31, 2026. The cash used in operating activities was primarily a result of a net loss of $1.7 million, adjusted for an increase in cash due to non-cash items of $1.6 million, which primarily included depreciation, amortization, and stock-based compensation, partially offset by a decrease in cash due to changes in working capital of $0.4 million. The change in working capital was driven primarily by a decrease in accounts payable and an increase in accounts receivable and prepaid expenses, other current assets, and other assets. Cash used in operating activities was $2.6 million for the three months ended March 31, 2025. The cash used in operating activities was primarily a result of a net loss of $2.0 million adjusted for an increase in cash due to non-cash items of $1.1 million, which primarily included depreciation, amortization, losses on disposals, and stock-based compensation, offset by a decrease in cash due to changes in working capital of $1.7 million, which primarily included a decrease in accrued benefits and payroll, other accrued expenses, and other current liabilities and an increase in accounts receivable.

Previous wording

Cash used in investing activities for the nine months ended September 30, 2025 and 2024, was $0.9 million and $0.3 million, respectively. During the nine months ended September 30, 2025 the cash used in investing activities was primarily attributable to software development costs for new products in development and launched in 2025. During the nine months ended September 30, 2024, the cash used in investing activities was attributable to purchases of property and equipment.

Current wording

Cash used in investing activities for the three months ended March 31, 2026 and 2025, was $0.4 million and $0.3 million, respectively. During the three months ended March 31, 2026 the cash used in investing activities was primarily attributable to software development costs for new products in development, partially offset by proceeds for the prior year domain asset sale. During the three months ended March 31, 2025, the cash used in investing activities was attributable to software development costs for new products in development.

Previous wording

Cash used in financing activities for the nine months ended September 30, 2025 and 2024 was $25.0 thousand and $0.3 million, respectively. During the nine months ended September 30, 2025, the cash used in financing activities consisted of payments made for equipment financing lease obligations, partially offset by cash received from the exercise of stock options. During the nine months ended September 30, 2024, the cash used in financing activities was attributable to payments made for equipment financing lease obligations.

Current wording

Cash from financing activities for the three months ended March 31, 2026 and 2025 was $2.0 thousand and $0.2 million, respectively. During the three months ended March 31, 2026, the cash from financing activities was attributable to cash received from the exercise of stock options. During the three months ended March 31, 2025, the cash from financing activities was primarily attributable to cash received from the exercise of stock options, partially offset by payments made for equipment financing lease obligations.

Previous wording

Based on our operating plans we believe that our resources will be sufficient to fund our operations, including any investments in strategic initiatives, for at least twelve months, however macroeconomic factors could influence our operating plans and resources significantly. Additional equity and debt financing may be needed to support our acquisition strategy, our long-term obligations, and our Company’s needs. There can be no assurance that, if we needed additional funds, financing arrangements would be available in amounts or on terms acceptable to us, if at all. Failure to generate sufficient revenue or raise additional capital could have a material adverse effect on our ability to continue as a going concern and to achieve our intended business objectives.

Current wording

Based on our operating plans we believe that our resources will be sufficient to fund our operations, including any investments in strategic initiatives, for at least twelve months, however macroeconomic factors could influence our operating plans and resources significantly. Additional equity and debt financing may be needed to support our acquisition strategy, long-term obligations, and other Company’s needs. There can be no assurance that, if we needed additional funds, financing arrangements would be available in amounts or on terms acceptable to us, if at all. Failure to generate sufficient revenue or raise additional capital could have a material adverse effect on our ability to continue as a going concern and to achieve our intended business objectives.

Previous wording

There have been no significant changes in our critical accounting policies and estimates during the three and nine months ended September 30, 2025, as compared to those disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Form 10-K for the year ended December 31, 2024, filed with the SEC on March 14, 2025.

Current wording

There have been no significant changes in our critical accounting policies and estimates during the three months ended March 31, 2026, as compared to those disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Form 10-K for the year ended December 31, 2025, filed with the SEC on March 26, 2026.