What changed in MARCHEX INC's 10-K — 2023 vs 2024
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Paragraph-level year-over-year comparison of MARCHEX INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.
+166 added−224 removedSource: 10-K (2025-03-14) vs 10-K (2024-04-01)
Top changes in MARCHEX INC's 2024 10-K
166 paragraphs added · 224 removed · 143 edited across 7 sections
- Item 7. Management's Discussion & Analysis+59 / −121 · 52 edited
- Item 1A. Risk Factors+59 / −60 · 52 edited
- Item 1. Business+38 / −32 · 29 edited
- Item 5. Market for Registrant's Common Equity+5 / −5 · 5 edited
- Item 1C. Cybersecurity+3 / −3 · 3 edited
Item 1. Business
Business — how the company describes what it does
29 edited+9 added−3 removed42 unchanged
Item 1. Business
Business — how the company describes what it does
29 edited+9 added−3 removed42 unchanged
2023 filing
2024 filing
Biggest changeSpotlight was named “Product of the Year” as part of the 2023 BIG Awards for Business. • Engage . Engage is a comprehensive solution that provides locations with applications to enhance their overall performance. With a keen focus on call handling and outcomes, it helps improve customer satisfaction ratings, increase appointment set rates, and drive incremental sales.
Biggest changeWith this information, managers can make informed decisions to improve call handling and improve outcomes, leading to increased revenue and brand loyalty. Spotlight was named “Product of the Year” in the 2023 BIG Awards for Business. • Engage . Engage is a comprehensive solution that provides locations with applications to enhance their overall performance.
We also use the following social media channels as a means of disclosing information about us, our services, and other matters, and for complying with our disclosure obligations under Regulation FD: • Marchex X (formally known as Twitter) Account (https://twitter.com/marchex) • Marchex Company Blog (https://www.marchex.com/blog/) • Marchex LinkedIn Account (https://linkedin.com/company/marchex) The information we post through these social media channels may be deemed material.
We also use the following social media channels as a means of disclosing information about us, our services, and other matters, and for complying with our disclosure obligations under Regulation Fair Disclosure ("FD"): • Marchex X (formally known as Twitter) Account (https://twitter.com/marchex) • Marchex Company Blog (https://www.marchex.com/blog/) • Marchex LinkedIn Account (https://linkedin.com/company/marchex) The information we post through these social media channels may be deemed material.
Through these initiatives Marchex can integrate with our customers' existing communication providers, telephony infrastructure providers, or customer relationship management software systems to offer our products and services. This opens a new opportunity to reach potential business that may desire access to Marchex vertical market insights while keeping their existing telephone infrastructure in place.
Through these initiatives Marchex can integrate with our customers' existing communication providers, telephone infrastructure providers, or customer relationship management software systems to offer our products and services. This opens a new opportunity to reach potential business that may desire access to Marchex vertical market insights while keeping their existing telephone infrastructure in place.
Web site Our web site, www.marchex.com, provides access, without charge, to our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports as soon as reasonably practicable after such materials are electronically filed with the Securities and Exchange Commission.
Web site Our web site, www.marchex.com, provides access, without charge, to our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports as soon as reasonably practicable after such materials are electronically filed with the Securities and Exchange Commission ("SEC").
According to a 2023 eMarketer study, consumers are spending more time on their mobile connected devices than in front of televisions, a trend that is forecasted to grow. According to MarketingCharts, two of the top uses of mobile phones among consumers are texting/messaging and calling.
According to a eMarketer study, consumers are spending more time on their mobile connected devices than in front of televisions, a trend that is forecasted to grow. According to MarketingCharts, two of the top uses of mobile phones among consumers are texting/messaging and calling.
The platform allows a business to send phone call audio recordings directly from their existing communications platforms to Marchex and in turn receive actionable conversation insights such as call outcome, industry-specific deep call analysis, and speech-to-text transcripts, enabling data-driven decision-making, enhanced customer experiences, and improved sales outcomes.
The platform enables a business to send phone call audio recordings directly from their existing communications platforms to Marchex, and in turn, receive actionable conversation insights such as call outcome, industry-specific deep call analysis, and speech-to-text transcripts, enabling data-driven decision-making, enhanced customer experiences, and improved sales outcomes.
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. Our mission is to create intelligence around all types of business conversations. We desire to be a leader in vertical market conversational intelligence leveraging generative artificial intelligence and data analytics.
Marchex provides conversational intelligence AI-powered solutions for market-leading companies in leading business-to-business-to-consumer ("B2B2C") vertical markets, including several of the world’s most innovative and successful brands. Our mission is to create intelligence around all types of business conversations. We desire to be a leader in vertical market conversational intelligence leveraging generative AI and data analytics.
Increasingly, Marchex customers will no longer need to access separate telephony infrastructure to engage with our conversational intelligence suite of products but, instead, will be able to choose to access our products from within their existing communications provider of choice. Pursuing selective acquisition opportunities.
Increasingly, Marchex customers will no longer need to access separate telephone infrastructure to engage with our conversational intelligence suite of products but, instead, will be able to choose to access our products from within their existing communications provider of choice. Pursuing selective acquisition opportunities.
We continuously review ways to improve major aspects of our technology support and maintenance, including improving, upgrading, and implementing business continuity plans, data retention initiatives, and backup and recovery processes. Intellectual Property and Proprietary Rights We maintain a number of patents in the U.S. and other jurisdictions relating to various aspects of our technology.
We continuously review ways to improve major aspects of our technology support and maintenance, including improving, upgrading, and implementing business continuity plans, data retention initiatives, and backup and recovery processes. 8 Table of Contents Intellectual Property and Proprietary Rights We maintain a number of patents in the U.S. and other jurisdictions relating to various aspects of our technology.
In 2023, Marchex launched new features such as AI-generated Call Summaries and Sentiment Suite that are available via Marchex Platform Services. These new features analyze and generate summaries of consumer-to-business calls, enabling businesses to immediately identify customers who have had exceptionally good experiences, as well as dissatisfied customers.
Marchex launched new features such as AI-generated Call Summaries and Sentiment Suite that are available via Marchex Platform Services. These new features analyze and generate summaries of consumer-to-business calls, enabling businesses to immediately identify customers who have had exceptionally good and dissatisfied experiences.
Our proprietary data and conversational insights help enable brands to personalize customer interactions in order to accelerate sales and capture more opportunities to grow their business. We serve large enterprises with a distributed footprint that interact with their customers across multiple communication paths. We operate primarily in U.S. domestic markets with desires to move into other markets over time.
Our proprietary data and conversational insights help brands personalize customer interactions to accelerate sales and capture more opportunities to grow their business. We serve large enterprises with a distributed footprint that interact with their customers across multiple communication paths. We operate primarily in U.S. domestic markets with a desire to move into other markets over time.
Our marketing team focuses on promoting our services through online customer acquisition, affiliate relationships, press coverage, strategic marketing campaigns and industry exposure. Advertising and promotion of our services is broken into the following main categories: 7 Table of Contents • Direct Sales.
Our marketing team focuses on promoting our services through online customer acquisition, affiliate relationships, press coverage, strategic marketing campaigns and industry exposure. Advertising and promotion of our services is broken into the following main categories: • Direct Sales.
The solution integrates call data into the business’s CRM to capture all customer interactions in one place, providing valuable insights for optimization as well as real time alerts when a sales conversation ends negatively, creating opportunities for training, accountability and empowering revenue growth.
The solution integrates call data into the business’s customer relationship management ("CRM") to capture all customer interactions in one place, providing valuable insights for optimization and real-time alerts when a sales conversation ends negatively, creating opportunities for training, accountability, and empowering revenue growth.
We compete with conversation analytics providers such as Twilio, EZ Texting, CallSource, CallRail, and Invoca. As we advance our data analytics technologies, the competitive landscape will increase and become broader. Seasonality . Historically, our industry has experienced seasonality and we believe that it will continue to do so.
We compete with conversation analytics providers such as Twilio, EZ Texting, CallSource, CallRail, and Invoca. As we advance our data analytics technologies, the competitive landscape will increase and become broader. 6 Table of Contents Seasonality . Historically, our industry has experienced seasonality and we believe that it will continue to do so.
Working closely with our business clients, we have innovated in conversational intelligence technology, creating specific solutions to address common needs and wants among both large enterprises and small businesses. Transparent pricing model.
Working closely with our business clients, we have innovated in conversational intelligence technology, creating specific solutions to address common needs and wants among both large enterprises and small businesses. 7 Table of Contents Transparent pricing model.
We desire to normalize all conversational channels and leverage generative AI for understanding with scale and speed. The ability to interpret most any conversation through any potential channel and provide action to insight in real time adds value to our clients for revenue acceleration.
Innovating on conversational intelligence technology and solutions. We desire to normalize all conversational channels and leverage generative AI for understanding with scale and speed. The ability to interpret most any conversation through any potential channel and provide action to insight in real time adds value to our clients for revenue acceleration.
ITEM 1. BUSINESS Overview References herein to “we,” “us” or “our” refer to Marchex, Inc. (“Marchex” or the “Company”) and its wholly-owned subsidiaries unless the context specifically states or implies otherwise. Marchex harnesses the power of AI and omnichannel conversational intelligence to provide actionable insights aligned with prescriptive vertical market data analytics, driving operational excellence and revenue acceleration.
ITEM 1. BUSINESS Overview References herein to “we” “us” or “our” refer to Marchex, Inc. (“Marchex” or the “Company”) and its wholly-owned subsidiaries unless the context specifically states or implies otherwise. Marchex harnesses the power of artificial intelligence (“AI”) and conversational intelligence to provide actionable insights aligned with prescriptive vertical market data analytics, driving operational excellence and revenue acceleration.
The platform identifies which campaigns and channels are driving inbound conversations, evaluates what happens during those conversations, and closes the sales loop by connecting converted sales to marketing driven leads. Through optimization and advanced tracking, Marketing Edge enables customers to improve marketing, validate budgets, and drive revenue acceleration and operational excellence.
The platform identifies which campaigns and channels drive inbound conversations, evaluates what happens during those conversations, and closes the sales loop by connecting converted sales to marketing driven leads. Through optimization and advanced tracking, Marketing Edge enables customers to improve marketing, validate budgets, and drive revenue acceleration and operational excellence. • Sonar Business Text Messaging .
These efforts to protect our intellectual property rights may not be effective in preventing misappropriation of our technology or may not prevent the development and design by others of products or technologies similar to or competitive with those we develop. 8 Table of Contents Employees As of December 31, 2023, we employed a total of 164 full-time employees.
These efforts to protect our intellectual property rights may not be effective in preventing misappropriation of our technology or may not prevent the development and design by others of products or technologies similar to or competitive with those we develop. Employees As of December 31, 2024, we employed a total of 163 full-time employees.
The majority of the world’s population now utilizes mobile phones and mobile phone usage is expected to continue to grow as the primary consumer communication device for the foreseeable future. According a 2022 study published by ConsumerAffairs, 97% of the population in the United States has a mobile phone.
Mobile phone growth has changed the way customers and businesses interact. The majority of the world’s population now utilizes mobile phones and mobile phone usage is expected to continue to grow as the primary consumer communication device for the foreseeable future. According a study published by ConsumerAffairs, 97% of the population in the United States has a mobile phone.
OneStack enables our technologies, products and clients to be more easily managed in a unified operating environment and provides a streamlined go to market approach, allowing our vertical market clients to consume all our signals, data analytics and applied AI and also provides speed and scale for client onboarding while streamlining support and account management. 6 Table of Contents Innovating on conversational intelligence technology and solutions.
OneStack enables our technologies, products and clients to be more easily managed in a unified operating environment and provides a streamlined go to market approach, allowing our vertical market clients to consume all our signals, data analytics and applied AI and also provides speed and scale for client onboarding while streamlining support and account management.
Marchex Platform Services is a robust API-based, conversation intelligence product that allows executives, sales, customer engagement and marketing teams to apply Marchex AI to most any calls, regardless of communication platform, in order to identify actionable insights from conversations with their customers. This allows an active understanding of the conversations occurring.
Marchex Platform Services is a robust application programming interface ("API") for conversation intelligence. It allows executives, sales, customer engagement, and marketing teams to apply Marchex AI to most any calls, regardless of communication platform, to identify actionable insights from conversations with their customers. This allows an active understanding of the conversations occurring.
Marketing Edge received the 2022 Business Intelligence Group’s ("BIG") Sales And Marketing Technology Award. • Sonar Business Text Messaging . Sonar Business Text Messaging is an AI empowered, intelligent workflow enabled mobile messaging solution that enables operations, sales and marketing teams to communicate personally with field staff, prospects and customers.
Sonar Business Text Messaging is an AI-powered, intelligent, workflow-enabled mobile messaging solution that enables operations, sales, and marketing teams to communicate personally with field staff, prospects, and customers.
Overall, Marchex sales engagement technology is recognized as an industry leader, winning the 2023 Conversation DNA - Automation Category from AI Excellence Awards. Engage was also named "Best AI-Based Solution for Sales” by AI Breakthrough in 2023. Key Trends Driving our Industry and Business Understanding calls and/or texts is highly complex.
Overall, Marchex sales engagement technology is recognized as an industry leader, winning the 2023 Conversation DNA - Automation Category from AI Excellence Awards. Engage was also named "Best AI-Based Solution for Sales” by AI Breakthrough in 2023. • Call Summary and Sentiment Suite.
They leverage the power of generative AI to help transform the way businesses can capture and utilize critical insights from customer interactions, as well as combine structured and unstructured data to provide a holistic view of customer emotions during conversations. Marchex Platform Services earned the 2022 BIG New Product Award. • Spotlight .
They leverage the power of generative AI to help transform how businesses can capture and utilize critical insights from customer interactions and combine structured and unstructured data to provide a holistic view of customer emotions during conversations.
We have assembled a set of applications that incorporate artificial intelligence (“AI”) functionality for enterprises that depend on phone calls, texts and other communication channels to help convert prospects into customers, enabling compelling customer experiences during the sales process and helping maximize returns.
We have developed applications that incorporate AI functionality for enterprises that depend on phone calls, texts, and other communication channels to help convert prospects into customers, enabling marketing optimization and insights into customer experiences during the sales and support processes and helping maximize returns.
Unlike basic text messaging, it provides a comprehensive and flexible two-way messaging solution that uses AI-powered automation to augment field-facing and customer-facing staff, driving dramatic and measurable increases in critical actions, customer engagement and conversions.
Unlike basic text messaging, it provides a comprehensive and flexible two-way messaging solution that uses AI-powered automation to augment field-facing and customer-facing staff, driving dramatic and measurable increases in critical actions, customer engagement and conversions. The offering encompasses a unique workflow system that connects conversations to the client journey. 4 Table of Contents • Marchex Platform Services .
Spotlight is an innovative AI conversation analytics product that has been specifically designed for multi-location businesses. Trusted by top brands and used by thousands of multi-location rooftops, the product provides critical insights and delivers actionable, data-driven observations that help enterprises improve performance across their national and regional sales organizations.
Trusted by top brands and used by thousands of multi-location rooftops, the product provides critical insights and delivers actionable, data-driven observations that help enterprises improve performance across their national and regional sales organizations. With Spotlight, corporate and regional managers can easily identify and track top-performing locations and those that may be underperforming.
For many of Marchex’s customers calls are often tracked and routed through interactive voice response (“IVR”) phone systems and integrated with customer relationship management (“CRM”) applications and back-office systems to measure transactions and ROI.
For many of Marchex’s customers calls are often tracked and routed through interactive voice response (“IVR”) phone systems and integrated with CRM applications and back-office systems to measure transactions and ROI. Successful marketing analytics for calls and texts requires expertise from multiple disciplines, including digital advertising, communications infrastructure, voice and speech recognition expertise, and marketing software.
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The offering encompasses a unique workflow system that allows the conversations to be connected to the client journey. 4 Table of Contents • Marchex Platform Services .
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The platform received the "AI Excellence Award" in the Generative AI category as part of the 2024 Business Intelligence Group ("BIG") AI Intelligence Awards program. • Spotlight . Spotlight is an innovative AI conversation analytics product specifically designed for multi-location businesses.
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With Spotlight, corporate and regional managers can easily identify and track top-performing locations, as well as those that may be underperforming. Armed with this information, managers can make informed decisions to improve call handling and improve outcomes, leading to increased revenue and brand loyalty.
Added
With a keen focus on call handling and outcomes, it helps improve customer satisfaction ratings, increase appointment set rates, and drive incremental sales.
Removed
Successful marketing analytics for calls and texts requires expertise from multiple disciplines, including digital advertising, communications infrastructure, voice and speech recognition expertise, and marketing software. 5 Table of Contents Mobile phone growth has changed the way customers and businesses interact.
Added
Call Summary and Sentiment Suite are capabilities powered by generative AI that analyze and generate summaries of consumer-to-business calls, enabling businesses to identify customers who have had exceptionally good experiences and dissatisfied customers.
Added
This valuable data empowers companies to capitalize on positive interactions by advancing sales processes or encouraging positive online behaviors, including reviews, and take action to rectify concerns from dissatisfied customers.
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These products are the first in a series of AI enhancements in Marchex's product pipeline designed to equip organizations with applications to proactively identify sales and growth opportunities, and address issues that may lead to negative experiences and reviews from dissatisfied customers.
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The products were collectively chosen as the "Best Text Generative AI Solution" at the 2024 annual AI Breakthrough Awards program. The Sentiment Suite product also won the "New Product of the Year" as part of the 2024 BIG Awards for Business. • AI for Industry Solution.
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Marchex’s new AI for Industry solution offers a range of advanced capabilities designed to enhance business performance and customer engagement. The solution provides for automatic lead qualification, identifying high-value leads with industry-specific indicators to target the most valuable opportunities.
Added
Additionally, it offers improved attribution, allowing businesses to segment target audiences and improve automated bidding using attributes such as product/service, lead outcome, lead value, and topics.
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The solution enhances conversion performance by using high-quality metrics to understand the performance of conversion events through the sales funnel. 5 Table of Contents Key Trends Driving our Industry and Business Understanding calls and/or texts is highly complex.
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
52 edited+7 added−8 removed134 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
52 edited+7 added−8 removed134 unchanged
2023 filing
2024 filing
Biggest changeThe following are examples of such provisions in our certificate of incorporation, as amended, or our by-laws, as amended: the authorized number of our directors can be changed only by a resolution of our board of directors; advance notice is required for proposals that can be acted upon at stockholder meetings; there are limitations on who may call stockholder meetings; and our board of directors is authorized, without prior stockholder approval, to create and issue “blank check” preferred stock. 23 Table of Contents We are also subject to Section 203 of the Delaware General Corporation Law, which provides, subject to enumerated exceptions, that if a person acquires 15% or more of our voting stock, the person is an “interested stockholder” and may not engage in “business combinations” with us for a period of three years from the time the person acquired 15% or more of our voting stock.
Biggest changeThe following are examples of such provisions in our certificate of incorporation, as amended, or our by-laws, as amended: the authorized number of our directors can be changed only by a resolution of our board of directors; advance notice is required for proposals that can be acted upon at stockholder meetings; there are limitations on who may call stockholder meetings; and our board of directors is authorized, without prior stockholder approval, to create and issue “blank check” preferred stock.
Furthermore, our call recording and/or monitoring services may directly subject us to certain telecommunications-related regulations. Finally, in the event that any federal or state regulators were to expand the scope of applicable laws and regulations or their application to include certain end users and information service providers, then our business and operating results could also be adversely affected.
Furthermore, our call recording and/or monitoring services may directly subject us to certain telecommunications-related laws and regulations. Finally, in the event that any federal or state regulators were to expand the scope of applicable laws and regulations or their application to include certain end users and information service providers, then our business and operating results could also be adversely affected.
Our Class B common stock prices have been and are likely to continue to be highly volatile. The trading prices of our Class B common stock have been and are likely to continue to be highly volatile and subject to wide fluctuations and have at times declined significantly.
The trading prices of our Class B common stock have been and are likely to continue to be highly volatile and subject to wide fluctuations and have at times declined significantly.
We secure a majority of our phone numbers through telecommunication carriers that we have contracted with and a smaller number through the 800 Service Management System, and such telecommunication carriers provide the underlying telephone service. Our telecommunications carriers and telephone number acquisition process are subject to the rules and guidelines established by the Federal Communications Commission.
We secure a majority of our phone numbers through telecommunication carriers that we have contracted with and a smaller number through the 800 Service Management System, and such telecommunication carriers provide the underlying telephone service. Our telecommunications carriers and telephone number acquisition process are subject to the rules and guidelines established by the Federal Communications Commission ("FCC").
Such laws might include EU member country conforming legislation under applicable EU Privacy, eCommerce, Data Protection Directives (and similar legislation in other countries where we may have operations), the EU General Data Protection Regulation (“GDPR”), which is directly applicable to all member states and which has substantial compliance obligations and significant potential administrative fines for non-compliance, as well as the GDPR equivalent law retained by the United Kingdom and any successor legislation thereto.
Such laws might include European Union ("EU") member country conforming legislation under applicable EU Privacy, eCommerce, Data Protection Directives (and similar legislation in other countries where we may have operations), the EU General Data Protection Regulation (“GDPR”), which is directly applicable to all member states and which has substantial compliance obligations and significant potential administrative fines for non-compliance, as well as the GDPR equivalent law retained by the United Kingdom and any successor legislation thereto.
There are an increasing number of regulations and rulings that specifically address access to commerce and communications services on the Internet, including IP telephony.
There are an increasing number of regulations and rulings that specifically address access to commerce and communications services on the Internet, including internet protocol ("IP") telephony.
Any new laws or regulations concerning these, or other areas of our business could restrict our growth or increase our cost of doing business. • There is risk that a regulatory agency will require us to conform to rules that are unsuitable for IP communications technologies or rules that cannot be complied with due to the nature and efficiencies of IP routing, or are unnecessary or unreasonable in light of the manner in which we offer voice-related services such as call recording services to our customers. • Federal and state telemarketing laws including the Telephone Consumer Protection Act (“TCPA”) which limits the use of autodialing systems, artificial or prerecorded voice messages, SMS text messages and fax machines, the Telemarketing Sales Rule, the Telemarketing Consumer Fraud and Abuse Prevention Act and the rules and regulations promulgated thereunder.
Any new laws or regulations concerning these, or other areas of our business could restrict our growth or increase our cost of doing business. • There is risk that a regulatory agency will require us to conform to rules that are unsuitable for IP communications technologies or rules that cannot be complied with due to the nature and efficiencies of IP routing, or are unnecessary or unreasonable in light of the manner in which we offer voice-related services such as call recording services to our customers. • Federal and state telemarketing laws including the TCPA which limits the use of autodialing systems, artificial or prerecorded voice messages, SMS text messages and fax machines, the Telemarketing Sales Rule, the Telemarketing Consumer Fraud and Abuse Prevention Act and the rules and regulations promulgated thereunder.
The following existing and possible future federal and state laws could impact the growth and profitability of our business: • The Communications Act of 1934, as amended by the Telecommunications Act of 1996 (the “Act”), and the regulations promulgated by the Federal Communications Commission under Title II of the Act, may impose federal licensing, reporting and other regulatory obligations on the Company.
The following existing and possible future federal and state laws could impact the growth and profitability of our business: • The Communications Act of 1934, as amended by the Telecommunications Act of 1996 (the “Act”), and the regulations promulgated by the FCC under Title II of the Act, may impose federal licensing, reporting and other regulatory obligations on the Company.
It may be difficult for us to retain or attract qualified officers and directors, which could adversely affect our business and our ability to maintain the listing of our Class B common stock on the NASDAQ Global Select Market.
It may be difficult for us to retain or attract qualified officers and directors, which could adversely affect our business and our ability to maintain the listing of our Class B common stock on the NASDAQ Stock Market.
To the extent that we increase our market share of conversational analytics offerings for customers in the healthcare and/or financial services industries, our risk of possible costs and liabilities related to compliance with these additional laws increases as well. Foreign countries may enact laws that could negatively impact our business and/or may prosecute us for violating existing laws.
To the extent that we increase our market share of conversational analytics offerings for customers in the healthcare and/or financial services industries, our risk of possible costs and liabilities related to compliance with these additional laws increases as well. 19 Table of Contents Foreign countries may enact laws that could negatively impact our business and/or may prosecute us for violating existing laws.
Our founder controls the outcome of stockholder voting, and there may be an adverse effect on the price of our Class B common stock due to the disparate voting rights of our Class A common stock and our Class B common stock. As of December 31, 2023, Russell C.
Our founder controls the outcome of stockholder voting, and there may be an adverse effect on the price of our Class B common stock due to the disparate voting rights of our Class A common stock and our Class B common stock. As of December 31, 2024, Russell C.
In addition, certain regulatory developments in this area may adversely impact the demand for some of our services (e.g. our text analytics and communications services) if some our customers become unable to obtain proper consents for their communications at historical volumes. 18 Table of Contents • The Telephone Robocall Abuse Criminal Enforcement and Deterrence Act and the rules and regulations promulgated thereunder.
In addition, certain regulatory developments in this area may adversely impact the demand for some of our services (e.g. our text analytics and communications services) if some our customers become unable to obtain proper consents for their communications at historical volumes. • The Telephone Robocall Abuse Criminal Enforcement and Deterrence Act and the rules and regulations promulgated thereunder.
While we are developing and deploying features powered by artificial intelligence (AI) across our conversational analytics offerings, competitors may develop comparable or superior AI-powered features before we do, which could adversely affect our business.
While we are developing and deploying features powered by AI across our conversational analytics offerings, competitors may develop comparable or superior AI-powered features before we do, which could adversely affect our business.
The failure to hire and retain such personnel could adversely affect the implementation of our business plan. 21 Table of Contents If we are unable to obtain and maintain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately insured loss or damage.
The failure to hire and retain such personnel could adversely affect the implementation of our business plan. If we are unable to obtain and maintain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately insured loss or damage.
The FCC has adopted an initial set of rules requiring originating and terminating voice service providers to implement the STIR/SHAKEN caller ID authentication framework to combat spoofed robocalls and is expected to adopt additional measures for that purpose. A number of our information services depend on integrations with voice service providers subject to these regulations.
The FCC has adopted rules requiring originating and terminating voice service providers to implement the STIR/SHAKEN caller identification ("ID") authentication framework to combat spoofed robocalls and is expected to adopt additional measures for that purpose. A number of our information services depend on integrations with voice service providers subject to these regulations.
Furthermore, we may be directly subject to certain telecommunications-related regulations. The Federal Communications Commission and our telecommunication carriers may change the rules and guidelines for securing phone numbers or change the requirements for retaining the phone numbers we have already secured. As a result, we may not be able to secure or retain sufficient phone numbers needed for our services.
Furthermore, we may be directly subject to certain telecommunications-related regulations. The FCC and our telecommunication carriers may change the rules and guidelines for securing phone numbers or change the requirements for retaining the phone numbers we have already secured. As a result, we may not be able to secure or retain sufficient phone numbers needed for our services.
Our stock prices may fluctuate in response to a number of events and factors, which may be the result of our business strategy or events beyond our control, including: actual or anticipated fluctuations in our operating results; developments concerning proprietary rights, including patents, by us or a competitor; announcements by us or our competitors of significant contracts, acquisitions, financings, commercial relationships, joint ventures or capital commitments; loss of senior management or other key personnel; registration of additional shares of Class B common stock in connection with acquisitions; lawsuits initiated against us or lawsuits initiated by us; announcements of acquisitions or technical innovations; potential loss or reduced contributions from customers and reseller partners; significant volatility in the market price and trading volume of technology companies in general and of companies in our industry in particular; changes in growth or earnings estimates or recommendations by analysts; changes in the market valuations of similar companies; changes in our industry and the overall economic environment, including but not limited to uncertainty attributable to public health crises, such as disease outbreaks, epidemics or pandemics; volume of shares of Class B common stock available for public sale, including upon conversion of Class A common stock or upon exercise of stock options; Class B common stock repurchases under our share repurchase program; sales and purchases of stock by us or by our stockholders, including sales by certain of our executive officers and directors pursuant to written pre-determined selling and purchase plans under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”); short sales, hedging and other derivative transactions on shares of our Class B common stock; and an adverse impact on us from any of the other risks cited in this Risk Factors section. 22 Table of Contents In addition, the stock market in general, and the NASDAQ Global Select Market and the market for technology companies in particular, have experienced significant price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the listed companies.
Our stock prices may fluctuate in response to a number of events and factors, which may be the result of our business strategy or events beyond our control, including: actual or anticipated fluctuations in our operating results; developments concerning proprietary rights, including patents, by us or a competitor; announcements by us or our competitors of significant contracts, acquisitions, financings, commercial relationships, joint ventures or capital commitments; loss of senior management or other key personnel; registration of additional shares of Class B common stock in connection with acquisitions; lawsuits initiated against us or lawsuits initiated by us; announcements of acquisitions or technical innovations; potential loss or reduced contributions from customers and reseller partners; significant volatility in the market price and trading volume of technology companies in general and of companies in our industry in particular; changes in growth or earnings estimates or recommendations by analysts; changes in the market valuations of similar companies; changes in our industry and the overall economic environment, including but not limited to uncertainty attributable to public health crises, such as disease outbreaks, epidemics or pandemics; volume of shares of Class B common stock available for public sale, including upon conversion of Class A common stock or upon exercise of stock options; Class B common stock repurchases under our share repurchase program; sales and purchases of stock by us or by our stockholders, including sales by certain of our executive officers and directors pursuant to written pre-determined selling and purchase plans under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended; short sales, hedging and other derivative transactions on shares of our Class B common stock; and an adverse impact on us from any of the other risks cited in this Risk Factors section.
We received approximately 34% of our revenue from our five largest customers for the year ended December 31, 2023, and the loss of one or more of these customers could adversely impact our results of operations and financial condition. Our five largest customers accounted for approximately 34% of our total revenues for the year ended December 31, 2023.
We received approximately 33% of our revenue from our five largest customers for the year ended December 31, 2024, and the loss of one or more of these customers could adversely impact our results of operations and financial condition. Our five largest customers accounted for approximately 33% of our total revenues for the year ended December 31, 2024.
To the extent we contract with and use the networks of voice over IP service providers, new legislation or FCC regulation in this area could restrict our business, prevent us from offering service or increase our cost of doing business.
To the extent we contract with and use the networks of VoIP service providers, new legislation or FCC regulation in this area could restrict our business, prevent us from offering service or increase our cost of doing business.
Under the federal Wiretap Act, at least one-party taking part in a call must be notified if the call is being recorded. Under this law, and most state laws, there is nothing illegal about one of the parties to a telephone call recording the conversation.
Under the Federal Wiretap Act, at least one party taking part in a call must be notified if the call is being recorded. Under this law, and most state laws, there is nothing illegal about one of the parties to a telephone call recording the conversation. However, a number of states (i.e.
FINANCIAL RISKS We have largely incurred net losses since our inception, and we may incur net losses in the foreseeable future. We had an accumulated deficit of $321.2 million as of December 31, 2023.
FINANCIAL RISKS We have largely incurred net losses since our inception, and we may incur net losses in the foreseeable future. We had an accumulated deficit of $326.2 million as of December 31, 2024.
If we do not comply with our providers’ evolving requirements pertaining to these regulations or if future regulatory measures relative to the STIR/SHAKEN caller ID authentication framework result in unforeseen interoperability issues for our information services that we are unable to address in a timely and efficient manner, our business, financial condition, and results of operations could be negatively impacted and/or we could face liability. • Laws affecting telephone call recording and data protection, such as consent and personal data statutes.
If we do not comply with our providers’ evolving requirements pertaining to these regulations or if future regulatory measures relative to the STIR/SHAKEN caller ID authentication framework result in unforeseen interoperability issues for our information services that we are unable to address in a timely and efficient manner, our business, financial condition, and results of operations could be negatively impacted and/or we could face liability. 18 Table of Contents • Laws affecting telephone call recording and associated consent requirements.
A failure of service by one or more third-party provider(s) of technology, telecommunication or other communication services, software or hardware that we rely on could adversely affect our business and reputation. We rely upon third-party colocation providers to host a substantial set of our servers.
A failure of service by one or more third-party provider(s) of technology, telecommunication or other communication services, software or hardware that we rely on could adversely affect our business and reputation. We rely upon third-party cloud providers to host our products and services.
Further, companies in the internet, communications and technology industries may own large numbers of patents, copyrights and trademarks and may frequently threaten litigation, or file suit against us based on allegations of infringement or other violations of intellectual property rights, which may adversely affect our business or financial prospects.
Further, companies in the internet, communications and technology industries may own large numbers of patents, copyrights and trademarks and may frequently threaten litigation, or file suit against us based on allegations of infringement or other violations of intellectual property rights, which may adversely affect our business or financial prospects. 16 Table of Contents We may incur liabilities for the activities of our customers and other users of our services, which could adversely affect our business.
The telephone recording laws in other states, like federal law, require only one party to be aware of the recording. • The Communications Assistance for Law Enforcement Act may require that we undertake material modifications to our platforms and processes to permit wiretapping and other access for law enforcement personnel. • Under various Orders of the Federal Communications Commission, we may be required to make material retroactive and prospective contributions to funds intended to support Universal Service, Telecommunications Relay Service, Local Number Portability, the North American Numbering Plan and the budget of the Federal Communications Commission. • Laws in most states of the United States of America may require registration or licensing of one or more of our subsidiaries, and may impose additional taxes, fees or telecommunications surcharges on the provision of our services which we may not be able to pass through to customers. • Our international operations may expose us to telecommunications regulations and data and privacy regulations in the countries where we are operating, and these regulations could negatively affect the viability of our business in those regions. 19 Table of Contents We may also be subject to costs and liabilities with respect to privacy issues.
The scope of the consent requirements under these laws may expand over time based on evolving case law in this area. • The Communications Assistance for Law Enforcement Act may require that we undertake material modifications to our platforms and processes to permit wiretapping and other access for law enforcement personnel. • Under various Orders of the FCC, we may be required to make material retroactive and prospective contributions to funds intended to support Universal Service, Telecommunications Relay Service, Local Number Portability, the North American Numbering Plan and the budget of the FCC. • Laws in most states of the United States of America may require registration or licensing of one or more of our subsidiaries, and may impose additional taxes, fees or telecommunications surcharges on the provision of our services which we may not be able to pass through to customers. • Our international operations may expose us to telecommunications regulations and data and privacy regulations in the countries where we are operating, and these regulations could negatively affect the viability of our business in those regions.
If some of our customers experience financial distress or suffer disruptions in their business, their weakened financial position could negatively affect our own financial position and results. We have a diverse customer base, and, at any given time, one or more customers may experience financial distress, file for bankruptcy protection, go out of business, or suffer disruptions in their business.
We have a diverse customer base, and, at any given time, one or more customers may experience financial distress, file for bankruptcy protection, go out of business, or suffer disruptions in their business.
Similarly, security breaches of our vendors and partners, or ineffective data security by our vendors or partners, may result in similar significant liability. In addition, security breaches, actual or perceived, could result in legal liability, government fines, and the loss of customers that could potentially have an adverse effect on our business.
In addition, security breaches, actual or perceived, could result in legal liability, government fines, and the loss of customers that could potentially have an adverse effect on our business.
The application of Section 203 of the Delaware General Corporation Law could have the effect of delaying or preventing a change of control of our company. ITEM 1B. UNRESOLVED STAFF COMMENTS. Not applicable.
The application of the DGCL could have the effect of delaying or preventing a change of control of our company. ITEM 1B. UNRESOLVED STAFF COMMENTS. Not applicable.
Historically, we have seen this trend generally reversing in the first quarter of the calendar year with increased call volumes and often new budgets at the beginning of the year for many of our customers with fiscal years ending December 31. However, there can be no assurances such seasonal trends will consistently repeat each year.
Historically, we have seen this trend generally reversing in the first quarter of the calendar year with increased call volumes and often new budgets at the beginning of the year for many of our customers with fiscal years ending December 31.
Security breaches of our data storage systems or our third-party colocation and technology providers we utilize to process and store data and information relating to our customers and their respective users could expose us to significant potential liability.
Security breaches of our data storage systems or our technology providers we utilize to process and store data and information relating to our customers and their respective users could expose us to significant potential liability. Similarly, security breaches of our vendors and partners, or ineffective data security by our vendors or partners, may result in similar significant liability.
Further, applicable rules and regulations of the Securities and Exchange Commission and the NASDAQ Stock Market heighten the requirements for board or committee membership, particularly with respect to an individual’s independence from the corporation and level of experience in finance and accounting matters along with evolving diversity requirements for board composition.
Further, applicable rules and regulations of the SEC and the NASDAQ heighten the requirements for board or committee membership, particularly with respect to an individual’s independence from the corporation and level of experience in finance and accounting matters along with evolving diversity requirements for board composition. We may have difficulty attracting and retaining directors with the requisite qualifications.
A significant reduction in spending by our largest customers, or the loss of one or more of these customers, if not replaced by new customers or an increase in business from existing customers, would have a material adverse effect on our business, financial condition and results of operations.
A significant reduction in spending by our largest customers, or the loss of one or more of these customers, if not replaced by new customers or an increase in business from existing customers, would have a material adverse effect on our business, financial condition and results of operations. 10 Table of Contents Our large customers have substantial negotiating leverage, which may require that we agree to terms and conditions that may have an adverse effect on our business.
However, a number of states (i.e., California, Connecticut, Delaware, Florida, Illinois, Maryland, Massachusetts, Montana, Nevada, New Hampshire, Pennsylvania, and Washington) require that all parties consent when one party wants to record a telephone conversation.
California, Connecticut, Delaware, Florida, Illinois, Maryland, Massachusetts, Montana, Nevada, New Hampshire, Pennsylvania, and Washington) require that all parties consent when one party wants to record a telephone conversation. The telephone recording laws in other states, like federal law, require only one party to be aware of the recording.
Furthermore, global political crises such as terrorism or war, and public health crises, such as disease outbreaks, epidemics, or pandemics (including COVID-19) and their resulting impacts on the U.S. and global economies, our markets and business locations, could negatively impact our operating results.
Furthermore, global political crises such as terrorism or war, and public health crises, such as disease outbreaks, epidemics, or pandemics and their resulting impacts on the U.S. and global economies, our markets and business locations, could negatively impact our operating results. 20 Table of Contents The loss of our senior management, including other key personnel, could harm our current and future operations and prospects.
Each member of our senior management team and other key personnel are at-will employees and may voluntarily terminate their employment with us at any time with minimal notice. Following any termination of employment, each of these members would only be subject to a twelve-month non-competition and non-solicitation obligation with respect to our customers and employees under our standard confidentiality agreement.
Following any termination of employment, each of these members would only be subject to a twelve-month non-competition and non-solicitation obligation with respect to our customers and employees under our standard confidentiality agreement.
Any failure to implement required new or improved controls, or difficulties encountered in their implementation or operation, could harm our operating results, or cause us to fail to meet our financial reporting obligations.
We cannot be certain that these measures will ensure that we design, implement, and maintain adequate controls over our financial processes and reporting in the future. Any failure to implement required new or improved controls, or difficulties encountered in their implementation or operation, could harm our operating results, or cause us to fail to meet our financial reporting obligations.
We may have difficulty attracting and retaining directors with the requisite qualifications. If we are unable to attract and retain qualified officers and directors, our business and our ability to maintain the listing of our shares of Class B common stock on the NASDAQ Global Select Market could be adversely affected.
If we are unable to attract and retain qualified officers and directors, our business and our ability to maintain the listing of our shares of Class B common stock on the NASDAQ could be adversely affected. 21 Table of Contents Our Class B common stock prices have been and are likely to continue to be highly volatile.
For example, the Telephone Consumer Protection Act of 1991 restricts telemarketing and the sending of automatic SMS text messages without explicit customer consent. The scope and interpretation of the federal and state laws and regulations that are or may be applicable to the delivery of text messages or voice calls are continuously evolving and developing.
The scope and interpretation of the federal and state laws and regulations that are or may be applicable to the delivery of text messages or voice calls are continuously evolving and developing.
Several companies have incurred penalties for failing to abide by the representations made in their public-facing privacy policies. In addition, several states have passed laws that require businesses and their service providers to implement and maintain reasonable security procedures and practices to protect personal information and to provide notice to consumers in the event of a security breach.
In addition, a significant number of U.S. states have enacted laws that require businesses and their service providers to implement and maintain reasonable security procedures and practices to protect personal information and to provide notice to consumers in the event of a security breach.
If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud, which could harm our brand and operating results. 11 Table of Contents Effective internal controls are necessary for us to provide reliable and accurate financial reports and effectively prevent fraud.
However, there can be no assurances such seasonal trends will consistently repeat each year. 11 Table of Contents If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud, which could harm our brand and operating results.
If we are a party to material litigation and if the defenses we claim are ultimately unsuccessful, or if we are unable to achieve a favorable settlement, we could be liable for large damage awards that could have a material adverse effect on our business and Consolidated Financial Statements. 20 Table of Contents GENERAL RISKS We are susceptible to general economic conditions, climate change, natural catastrophic events and public health crises, and any resulting negative impacts on our customers could adversely affect our operating results.
If we are a party to material litigation and if the defenses we claim are ultimately unsuccessful, or if we are unable to achieve a favorable settlement, we could be liable for large damage awards that could have a material adverse effect on our business and Consolidated Financial Statements.
We also work with vendors and partners who may come into contact with certain data, such as carriers, colocation facilities, and data processing and storage providers. We deploy security measures to protect this data and information, as do the third parties we utilize to assist in data and information processing and storage.
We deploy security measures to protect this data and information, as do the third parties we utilize to assist in data and information processing and storage.
Our current and future compliance with the annual internal control report requirement will depend on the effectiveness of our financial reporting and data systems and controls across our operating subsidiaries. We expect these systems and controls to become increasingly complex to the extent that we integrate acquisitions and our business grows.
In addition, SOX Section 404 requires that we assess and in certain instances for our auditors to attest to the effectiveness of our controls over financial reporting. Our current and future compliance with the annual internal control report requirement will depend on the effectiveness of our financial reporting and data systems and controls across our operating subsidiaries.
The CPRA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. Virginia has enacted the Virginia Consumer Data Protection Act (“VDCPA”), which also took effect on January 1, 2023 and several other states have enacted privacy-related legislation that took effect in 2023 (e.g.
The CPRA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. Multiple other states have enacted privacy-related legislation that provides for consumer rights similar to the CPRA. Further, it is anticipated that additional federal and state privacy-related legislation may be enacted.
This difference in the voting rights of our Class A common stock and Class B common stock could adversely affect the price of our Class B common stock to the extent that investors or any potential future purchaser of our shares of Class B common stock give greater value to the superior voting rights of our Class A common stock.
This difference in the voting rights of our Class A common stock and Class B common stock could adversely affect the price of our Class B common stock to the extent that investors or any potential future purchaser of our shares of Class B common stock give greater value to the superior voting rights of our Class A common stock. 22 Table of Contents Further, as long as our founder has a controlling interest, he will continue to be able to elect all or a majority of our board of directors and generally be able to determine the outcome of all corporate actions requiring stockholder approval.
Short term or repeat problems with any of these service providers could provide an interruption of service or service quality impairment to significant customers, which could also impact materially our revenue in any period due to credits or potential loss of significant customers.
Short term or repeat problems with any of these service providers could provide an interruption of service or service quality impairment to significant customers, which could also impact materially our revenue in any period due to credits or potential loss of significant customers. 15 Table of Contents If our security measures, including those of our vendors or partners, are breached or are perceived as not being secure, we may lose customers and incur significant legal and financial exposure and suffer an adverse effect on our business.
These customers may seek for us to develop additional features, may require penalties for failure to deliver such features, may seek discounted product or service pricing, and may seek more favorable contractual terms. As we sell more products and services to this class of customer, we may be required to agree to such terms and conditions.
Our large customers have substantial purchasing power and leverage in negotiating contractual arrangements with us. These customers may seek for us to develop additional features, may require penalties for failure to deliver such features, may seek discounted product or service pricing, and may seek more favorable contractual terms.
To effectively manage this growth, we will need to continue to improve our operational, financial and management controls and our reporting systems and procedures. We cannot be certain that these measures will ensure that we design, implement, and maintain adequate controls over our financial processes and reporting in the future.
We expect these systems and controls to become increasingly complex to the extent that we integrate acquisitions and our business grows. To effectively manage this growth, we will need to continue to improve our operational, financial and management controls and our reporting systems and procedures.
We have devoted significant resources and time to comply with the internal control over financial reporting requirements of the Sarbanes-Oxley Act of 2002. In addition, Section 404 under the Sarbanes-Oxley Act of 2002 requires that we assess and in certain instances for our auditors to attest to the effectiveness of our controls over financial reporting.
Effective internal controls are necessary for us to provide reliable and accurate financial reports and effectively prevent fraud. We have devoted significant resources and time to comply with the internal control over financial reporting requirements of the Sarbanes-Oxley ("SOX") Act of 2002.
We may incur liabilities for the activities of our customers and other users of our services, which could adversely affect our business. 16 Table of Contents The actual or perceived improper sending of text messages or voice calls may subject us to potential risks, including liabilities or claims relating to consumer protection laws and regulatory enforcement, including fines.
The actual or perceived improper sending of text messages or voice calls may subject us to potential risks, including liabilities or claims relating to consumer protection laws and regulatory enforcement, including fines. For example, the Telephone Consumer Protection Act ("TCPA") of 1991 restricts telemarketing and the sending of automatic short message service ("SMS") text messages without explicit customer consent.
Such large customers also have substantial leverage in negotiating resolution of any disagreements or disputes that may arise. Any of the foregoing factors could result in a material adverse effect on our business, financial condition, and results of operations.
Any of the foregoing factors could result in a material adverse effect on our business, financial condition, and results of operations. If some of our customers experience financial distress or suffer disruptions in their business, their weakened financial position could negatively affect our own financial position and results.
The loss of our senior management, including other key personnel, could harm our current and future operations and prospects. We are heavily dependent upon the continued services of members of our senior management team and other key personnel.
We are heavily dependent upon the continued services of members of our senior management team and other key personnel. Each member of our senior management team and other key personnel are at-will employees and may voluntarily terminate their employment with us at any time with minimal notice.
Removed
Our large customers have substantial negotiating leverage, which may require that we agree to terms and conditions that may have an adverse effect on our business. 10 Table of Contents Our large customers have substantial purchasing power and leverage in negotiating contractual arrangements with us.
Added
As we sell more products and services to this class of customer, we may be required to agree to such terms and conditions. Such large customers also have substantial leverage in negotiating resolution of any disagreements or disputes that may arise.
Removed
If these providers are unable to handle current or higher volumes of use, experience any interruption in operations or cease operations for any reason or if we are unable to agree on satisfactory terms for continued hosting relationships, we would be forced to enter into a relationship with other service providers or assume hosting responsibilities ourselves.
Added
We store and transmit data and information about our customers and their respective users. We also work with vendors and partners who may come into contact with certain data, such as carriers, and data processing and storage providers.
Removed
If we are forced to switch hosting facilities, we may not be successful in finding an alternative service provider on acceptable terms or in hosting the servers ourselves. We may also be limited in our remedies against these providers in the event of a failure of service.
Added
We maintain a registration in FCC’s Robocall Mitigation Database as a Non-Gateway Intermediate Provider.
Removed
In the past, we have experienced short-term outages in the service maintained by one of our colocation providers. We rely upon third-party cloud providers to host certain of our products and services and this reliance is anticipated to increase over time.
Added
We may also be subject to costs and liabilities with respect to privacy issues. Several companies have incurred penalties for failing to abide by the representations made in their public-facing privacy policies.
Removed
If our security measures, including those of our vendors or partners, are breached or are perceived as not being secure, we may lose customers and incur significant legal and financial exposure and suffer an adverse effect on our business. 15 Table of Contents We store and transmit data and information about our customers and their respective users.
Added
GENERAL RISKS We are susceptible to general economic conditions, climate change, natural catastrophic events and public health crises, and any resulting negative impacts on our customers could adversely affect our operating results.
Removed
Some of these providers have taken the position that we must register in FCC’s Robocall Mitigation Database in order to continue doing business with them even though we are not a voice service provider.
Added
In addition, the stock market in general, and the NASDAQ, the market for technology companies in particular, have experienced significant price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the listed companies.
Removed
Connecticut, Colorado, and Utah) or is slated to take effect in the near-term (e.g. Montana, Texas, and Iowa ) and that each provide for consumer rights similar to the CPRA. Further, it is anticipated that additional federal and state privacy-related legislation may be enacted.
Added
We are also subject to Section 203 of the Delaware General Corporation Law ("DGCL"), which provides, subject to enumerated exceptions, that if a person acquires 15% or more of our voting stock, the person is an “interested stockholder” and may not engage in “business combinations” with us for a period of three years from the time the person acquired 15% or more of our voting stock.
Removed
Further, as long as our founder has a controlling interest, he will continue to be able to elect all or a majority of our board of directors and generally be able to determine the outcome of all corporate actions requiring stockholder approval.
Item 1C. Cybersecurity
Cybersecurity — threats and controls disclosure
3 edited+0 added−0 removed3 unchanged
Item 1C. Cybersecurity
Cybersecurity — threats and controls disclosure
3 edited+0 added−0 removed3 unchanged
2023 filing
2024 filing
Biggest changeFurthermore, the ISC meets quarterly to discuss and analyze any relevant developments within the organization and industry relative to cybersecurity, reviews our internal policies and operational procedures relevant to cybersecurity at least annually, and promulgates updates when deemed necessary or advisable.
Biggest changeFurthermore, the ISC meets quarterly to discuss and analyze any relevant developments within the organization and industry relative to cybersecurity, reviews our internal policies and operational procedures relevant to cybersecurity at least annually, and promulgates updates when deemed necessary or advisable. 23 Table of Contents
Our senior leadership, in consultation with our board of directors, has assigned responsibilities for ensuring and overseeing the operation of our information security program to the Marchex Information Security Committee (the “ISC”) comprised of senior representatives of departments across our organization. Effective risk management is a critical component of our operations. The ISC conducts a formal cybersecurity risk assessment annually.
Our senior leadership, in consultation with our board of directors, has assigned responsibilities for ensuring and overseeing the operation of our information security program to the Marchex Information Security Committee (“ISC”) comprised of senior representatives of departments across our organization. Effective risk management is a critical component of our operations. The ISC conducts a formal cybersecurity risk assessment annually.
The ISC also oversees day-to-day cybersecurity risk mitigation efforts, which include, but are not limited to monitoring systems for availability, performance, and security issues, periodic vulnerability scans, penetration testing performed at least annually by independent, reputable, third-party vendors, as well as evaluating any risk(s) associated with prospective third-party service providers who require access to sensitive customer data and implementing any additional controls to address significant risks identified.
The ISC also oversees day-to-day cybersecurity risk mitigation efforts, which include, but are not limited to monitoring systems for availability, performance, and security issues, periodic vulnerability scans, penetration testing performed at least annually by independent , reputable, third-party vendors, as well as evaluating any risks associated with prospective third-party service providers who require access to sensitive customer data and implementing any additional controls to address significant risks identified.
Item 2. Properties
Properties — owned and leased real estate
1 edited+0 added−1 removed0 unchanged
Item 2. Properties
Properties — owned and leased real estate
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2023 filing
2024 filing
Biggest changeSee Item 1 of this Annual Report on Form 10-K under the caption “Information Technology and Systems.” We believe that our existing facilities are adequate for our near-term business needs.
Biggest changeITEM 2. PROPERTIES. Our headquarters are located in Seattle, Washington and consist of approximately 12,000 square feet of leased office space. We lease additional office space in Wichita, Kansas. See Item 1 of this Annual Report on Form 10-K under the caption “Information Technology and Systems.” We believe that our existing facilities are adequate for our near-term business needs.
Removed
ITEM 2. PROPERTIES. Our headquarters are located in Seattle, Washington and consist of approximately 12,000 square feet of leased office space. We lease additional office space in Wichita, Kansas. Our information technology systems are hosted and maintained in third-party facilities under colocation services agreements.
Item 4. Mine Safety Disclosures
Mine Safety Disclosures — required of mining issuers
1 edited+0 added−0 removed0 unchanged
Item 4. Mine Safety Disclosures
Mine Safety Disclosures — required of mining issuers
1 edited+0 added−0 removed0 unchanged
2023 filing
2024 filing
Biggest changeITEM 4. MINE SAFETY DISCLOSURES 24 Part II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 25 ITEM 6. SELECTED FINANCIAL DATA 25 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 26 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 35 ITEM 8.
Biggest changeITEM 4. MINE SAFETY DISCLOSURES 24 Part II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 25 ITEM 6. SELECTED FINANCIAL DATA 25 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 26 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 31 ITEM 8.
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
5 edited+0 added−0 removed1 unchanged
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
5 edited+0 added−0 removed1 unchanged
2023 filing
2024 filing
Biggest changeThe following table sets forth, for the periods indicated, the high and low closing sales prices for Marchex’s Class B common stock as reported on the NASDAQ Global Select Market: High Low Year Ended December 31, 2022 First Quarter $ 2.63 $ 1.76 Second Quarter $ 2.35 $ 1.25 Third Quarter $ 2.23 $ 1.24 Fourth Quarter $ 1.89 $ 1.34 Year Ended December 31, 2023 First Quarter $ 2.16 $ 1.72 Second Quarter $ 2.17 $ 1.69 Third Quarter $ 2.11 $ 1.31 Fourth Quarter $ 2.11 $ 1.25 Holders As of March 25, 2024, there was 1 stockholder of record of our Class A common stock and there were approximately 38 stockholders of record of our Class B common stock, respectively.
Biggest changeThe following table sets forth, for the periods indicated, the high and low market prices for Marchex’s Class B common stock as reported on the NASDAQ: High Low Year Ended December 31, 2024 First Quarter $ 1.49 $ 1.11 Second Quarter 1.75 1.20 Third Quarter 2.16 1.36 Fourth Quarter 2.40 1.60 Year Ended December 31, 2023 First Quarter $ 2.16 $ 1.72 Second Quarter 2.17 1.69 Third Quarter 2.11 1.31 Fourth Quarter 2.11 1.25 Holders As of March 7, 2025, there was 1 shareholder of record of our Class A common stock and 34 shareholders of record of our Class B common stock, respectively.
Issuer Purchases of Equity Securities In November 2014, we established a 2014 share repurchase program, which supersedes and replaces any prior repurchase programs, and authorized the Company to repurchase up to 3,000,000 shares in the aggregate of the Company’s Class B common stock.
Issuer Purchases of Equity Securities In November 2014, the Company established a 2014 share repurchase program, which supersedes and replaces any prior repurchase programs, and authorized the Company to repurchase up to 3,000,000 shares in the aggregate of the Company’s Class B common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our Class B common stock has been traded on the NASDAQ Global Select Market under the symbol “MCHX” since March 31, 2004 when we completed our initial public offering at a price of $6.50 per share.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our Class B common stock has been traded on the NASDAQ Stock Market under the symbol “MCHX” since March 31, 2004 when we completed our initial public offering at a price of $6.50 per share.
Since many of our shares of Class B common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
Since many of our shares of Class B common stock are held by brokers and other institutions on behalf of shareholders, we are unable to estimate the total number of shareholders represented by these record holders.
During the fourth quarter of 2023, we did not have any share repurchases under this program and 1,319,128 Class B common shares remain available for purchase under the plan.
During the fiscal year 2024, we did not have any share repurchases under this program and 1,319,128 Class B common shares remain available for purchase under the plan.
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
52 edited+7 added−69 removed10 unchanged
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
52 edited+7 added−69 removed10 unchanged
2023 filing
2024 filing
Biggest changeResults of Operations The following table presents revenue and certain of our operating results as a percentage of revenue: (In Thousands, Except Percentages) Year Ended December 31, 2022 % of revenue Year Ended December 31, 2023 % of revenue Revenue $52,170 100% $49,910 100% Expenses: Service costs $20,462 39% $20,582 41% Sales and marketing 13,517 26% 11,412 23% Product development 14,355 28% 15,355 31% General and administrative 9,787 19% 10,205 20% Amortization of intangible assets from acquisitions 2,124 4% 1,987 4% Acquisition and disposition related costs 74 0% 12 0% Total operating expenses 60,319 116% 59,553 119% Stock-based compensation expense was included in the following operating expense categories as follows: Year Ended December 31, (In Thousands) 2022 2023 Service costs $ 171 $ 2 Sales and marketing 796 663 Product development 293 114 General and administrative 1,386 1,613 Total stock-based compensation $ 2,646 $ 2,392 See Note 6: Stockholders' Equity (b).
Biggest changeThe effect on deferred tax assets and liabilities of a change in tax law is recognized in results of operations in the period that includes the enactment date. 27 Table of Contents Results of Operations The following table presents revenue and certain operating results as a percentage of revenue: Year Ended December 31, % of revenue Year Ended December 31, % of revenue (In Thousands, Except Percentages) 2024 2023 Revenue $ 48,122 100 % $ 49,910 100 % Expenses: Cost of revenue 17,172 36 % 20,582 41 % Sales and marketing 12,136 25 % 11,412 23 % Product development 12,414 26 % 15,355 31 % General and administrative 10,245 21 % 10,205 20 % Amortization of intangible assets from acquisitions 602 1 % 1,987 4 % Acquisition and disposition related costs — 0 % 12 0 % Total operating expenses 52,569 109 % 59,553 119 % Loss from operations $ (4,447 ) -9 % $ (9,643 ) -19 % Stock-based compensation expense was included in the following operating expense categories as follows: Year Ended December 31, (In Thousands) 2024 2023 Cost of revenue $ 24 $ 2 Sales and marketing 308 663 Product development 54 114 General and administrative 1,321 1,614 Total stock-based compensation $ 1,707 $ 2,393 See Note 6: Stockholders' Equity of the Notes to Consolidated Financial Statements, as well as our Critical Accounting Policies for additional information about stock-based compensation.
If our stock price were to trade below book value per share for an extended period of time and/or we experience adverse effects of a continued downward trend in the overall economic environment, changes in the business itself, including changes in projected earnings and cash flows, we may have to recognize an impairment of all or some portion of our goodwill and intangible assets.
If our stock price were to trade below book value per share for an extended period of time and/or we experience adverse effects of a continued downward trend in the overall economic environment, changes in the business itself, including changes in projected earnings and cash flows, we may have to recognize an impairment of all or some portion of our goodwill assets.
Although the fair value of stock-based awards is determined in accordance with ASC 718, Compensation – Stock Compensation the assumptions used in calculating fair value of stock-based awards and the use of the Black-Scholes option pricing model is highly subjective, and other reasonable assumptions could provide differing results.
Although the fair value of stock-based awards is determined in accordance with ASC 718, the assumptions used in calculating fair value of stock-based awards and the use of the Black-Scholes option pricing model is highly subjective, and other reasonable assumptions could provide differing results.
Events and circumstances considered in determining whether the carrying value of goodwill and intangible assets may not be recoverable include but are not limited to: significant changes in performance relative to expected operating results; significant changes in the use of the assets; and significant changes in competition and market dynamics.
Events and circumstances considered in determining whether the carrying value of goodwill may not be recoverable include but are not limited to: significant changes in performance relative to expected operating results; significant changes in the use of the assets; and significant changes in competition and market dynamics.
While our significant accounting policies are more fully described in Note 1: Description of Business and Summary of Significant Accounting Policies and Practices , we believe the following topics reflect our critical accounting policies and our more significant judgment and estimates used in the preparation of our Consolidated Financial Statements.
While our significant accounting policies are more fully described in Note 1: Description of Business and Summary of Significant Accounting Policies , we believe the following topics reflect our critical accounting policies and our more significant judgment and estimates used in the preparation of our Consolidated Financial Statements.
Product Development Product development costs consist primarily of expenses incurred in the research and development, creation and enhancement of our products and services. Our research and development expenses include 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.
Product Development 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.
As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future. See Note 6: Stockholders' Equity(b). Stock Option Plan in the Notes to Consolidated Financial Statements for additional information.
As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future. See Note 6: Stockholders' Equity in the Notes to Consolidated Financial Statements for additional information.
We have assembled a set of applications that incorporate artificial intelligence (“AI”) functionality for enterprises that depend on phone calls, texts and other communication channels to help convert prospects into customers, enabling compelling customer experiences during the sales process and helping maximize returns.
We have assembled a set of applications that incorporate AI functionality for enterprises that depend on phone calls, texts, and other communication channels to help convert prospects into customers, enabling compelling customer experiences during the sales process and helping maximize returns.
This expense was associated with amortization of intangible assets acquired from business acquisitions made in 2018 and 2019, and is further categorized as service costs or sales and marketing expense in the Company's Consolidated Statements of Operations based on the nature of the underlying intangible asset.
This expense was associated with amortization of intangible assets acquired from business acquisitions made in 2018 and 2019, and is further categorized as cost of revenue or sales and marketing expense in the Company's Consolidated Statements of Operations based on the nature of the underlying intangible asset.
We apply the provisions of the FASB ASC Topic 350, “Intangibles - Goodwill and Other” (ASC 350) whereby assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead test for impairment at least annually.
We apply the provisions of the FASB ASC 350, Intangibles - Goodwill and Other, whereby assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead test for impairment at least annually.
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 U.S. GAAP.
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. generally accepted accounting principles ("GAAP").
The cash used in operating activities was primarily a result of a net loss of $9.9 million, adjusted for non-cash items of $7.1 million, which primarily included depreciation and amortization and stock-based compensation partially offset by changes in working capital of $1.6 million.
The cash used in operating activities was primarily the result of a net loss of $9.9 million, adjusted for non-cash items of $7.1 million, which primarily included depreciation and amortization and stock-based compensation, and the rest attributed to changes in working capital of $1.6 million.
The change in working capital was driven primarily by a decrease in accrued expenses and other current liabilities as well as a decrease in accounts payable and deferred revenue partially offset by an increase in accounts receivable. Cash used in operating activities was $2.3 million during the year ended December 31, 2022.
The change in working capital was driven primarily by a decrease in accrued expenses and other current liabilities as well as a decrease in accounts payable, partially offset by an increase in accounts receivable and prepaid expenses and other assets. Cash used in operating activities was $4.4 million during the year ended December 31, 2023.
In the ordinary course of business, we make a number of estimates and assumptions relating to the reporting of our results.
The policies below are critical to our business operations and the understanding of our results of operations. In the ordinary course of business, we make a number of estimates and assumptions relating to the reporting of our results.
Cash used in investing activities for the years ended December 31, 2023 and December 31, 2022, was $1.3 million and $2.9 million, respectively, and was primarily attributable to cash paid for purchases of property and equipment for our technology infrastructure platform as well as capitalized software development costs in both years.
Cash used in investing activities for the years ended December 31, 2024 and 2023, was $0.4 million and $1.3 million, respectively, and was primarily attributable to cash paid for purchases of property and equipment for our technology infrastructure platform as well as capitalized software development costs in both years. 29 Table of Contents Cash used in financing activities for the years ended December 31, 2024 and 2023, was $0.3 million and $0.2 million, respectively, and was primarily attributable to payments made related to equipment financing lease obligations for both years.
However, further iteration of the proposed legislation may yield different results. Components of the Results of our Operations Revenue We generate the majority of our revenues from our conversational intelligence product offerings. Our AI-powered conversational analytics technology platform provides data and insights into the conversations our clients are having with their customers across phone, text and other communication channels.
We have offices in Seattle, Washington and Wichita, Kansas. Components of the Results of our Operations Revenue We generate the majority of our revenues from our conversational intelligence product offerings. Our AI-powered conversational analytics technology platform provides data and insights into the conversations our clients are having with their customers across phone, text and other communication channels.
The effective tax rate differed from the expected tax rate of 21% in both years primarily due to a full valuation allowance and, to a lesser extent, changes in tax rates applied to ending deferred asset and liability balances, non-deductible stock-based compensation related to incentive stock options recorded under the fair-value method, and other non-deductible amounts.
The effective tax rate differed from the expected tax rate of 21% in both years primarily due to a the valuation allowance and, to a lesser extent, state income taxes, foreign branch income and rate differential, non-deductible stock-based compensation related to incentive stock options recorded under the fair-value method, and other non-deductible amounts.
An impairment loss is recognized to the extent that the carrying amount exceeds the asset or asset group’s fair value. If the fair value is lower than the carrying value, a material impairment charge may be reported in our financial results.
An impairment loss is recognized to the extent that the carrying amount exceeds the asset or asset group’s fair value. If the fair value is lower than the carrying value, a material impairment charge may be reported in our financial results. In certain instances, the fair value is determined in part based on cash flow forecasts and discount rate estimates.
We seek to empower performance improvements for our customers by giving them actionable, real-time insights into the conversations they are having with their customers across phone, text and other communication channels.
We desire to be a leader in vertical market conversational intelligence leveraging generative AI and data analytics. We seek to empower performance improvements for our customers by giving them actionable, real-time insights into the conversations they are having with their customers across phone, text, and other communication channels.
Overview Marchex harnesses the power of AI and omnichannel conversational intelligence to provide actionable insights aligned with prescriptive vertical market data analytics, driving operational excellence and revenue acceleration. We enable executive, sales and marketing teams to optimize customer journey experiences across communications channels and align enterprise strategy, empowering businesses to increase revenue through informed decision-making and strategic execution.
Overview 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 communications channels.
The standalone selling price for each performance obligation is established based on the sales price at which we would sell a promised good or service separately to a customer or the estimated standalone selling price. In certain cases, we record revenue based on available and reported preliminary information from third parties.
The standalone selling price for each performance obligation is established based on the sales price at which we would sell a promised good or service separately to a customer or the estimated standalone selling price.
At December 31, 2023, based on all the available evidence, both positive and negative, we determined that it is more likely than not that our deferred tax assets will not be realized and accordingly, we have recorded a full valuation allowance of $54.1 million against our net deferred tax assets ($54.3 million of deferred tax assets that are partially offset by $0.4 million in reversing deferred tax liabilities).
At both December 31, 2024 and 2023, based on all the available evidence, both positive and negative, we determined that it is more likely than not that our deferred tax assets will not be realized and accordingly recorded a full valuation allowance. Net Loss.
Our critical accounting policies are those that we believe have the most significant impact to reported amounts of assets, liabilities, revenue and expenses and the related disclosures of contingent assets and liabilities and that require the most difficult, subjective, or complex judgments. The policies below are critical to our business operations and the understanding of our results of operations.
Critical Accounting Policies Our Consolidated Financial Statements have been prepared in accordance with U.S. GAAP. Our critical accounting policies are those that we believe have the most significant impact to reported amounts of assets, liabilities, revenue and expenses and the related disclosures of contingent assets and liabilities and that require the most difficult, subjective, or complex judgments.
We account for forfeitures as they occur. Stock-based compensation expense is included in the same lines as compensation paid to the same employees in the Consolidated Statements of Operations. Amortization of Intangibles from Acquisitions Amortization of intangible assets excluding goodwill relates to intangible assets identified in connection with our acquisitions.
Stock-based compensation expense is included in the same lines as compensation paid to the same employees in the Consolidated Statements of Operations. Amortization of Intangibles from Acquisitions Amortization of intangible assets excluding goodwill relates to intangible assets identified in connection with our acquisitions. The intangible assets have been identified as customer relationships; acquired technology; non-competition agreements; trade names.
Our customers pay us a fee for each call, text, or other communication related data element they receive from calls or texts or for each phone number tracked based on a pre-negotiated rate. As such, the majority of total revenue is derived from contracts that include consideration that is variable in nature.
Revenue We generate the majority of our revenues from our conversational intelligence product offerings. Our customers pay us a fee for each call, text, or other communication related data element they receive from calls or texts or for each phone number tracked based on a pre-negotiated rate.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax law is recognized in results of operations in the period that includes the enactment date.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The cash used in operating activities was primarily a result of a net loss of $8.2 million, adjusted for non-cash items of $7.6 million, which primarily included depreciation and amortization and stock-based compensation, offset by changes in working capital of $1.7 million.
Cash used in operating activities was $1.1 million during the year ended December 31, 2024. The cash used in operating activities was primarily the result of a net loss of $4.9 million, adjusted for non-cash items of $4.5 million, which primarily included depreciation and amortization and stock-based compensation, and the rest attributed to changes in working capital of $0.7 million.
We measure stock-based compensation cost at the grant date based on the fair value of the award and recognize it as expense over the vesting or service period, as applicable, of the stock-based award using the straight-line method. 33 Table of Contents We use the Black-Scholes option pricing model as our method of valuation for stock-based awards with time-based vesting.
Stock-Based Compensation We measure stock-based compensation cost at the grant date based on the fair value of the award and recognize it as expense over the vesting or service period, as applicable, of the stock-based award using the straight-line method. We account for forfeitures as they occur.
The majority of the Company’s customers are invoiced on a monthly basis following the month of the delivery of services and are required to make payments under standard credit terms.
Customers typically receive the benefit of our services as they are performed and substantially all of our revenue is recognized over time as services are performed. The majority of the Company’s customers are invoiced on a monthly basis following the month of the delivery of services and are required to make payments under standard credit terms.
Marchex provides conversational intelligence AI-powered solutions for market-leading companies in many leading B2B2C vertical markets, including several of the world’s most innovative and successful brands. Our mission is to create intelligence around all types of business conversations. We desire to be a leader in vertical market conversational intelligence leveraging generative artificial intelligence and data analytics.
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. Our mission is to create intelligence around all types of business conversations.
Goodwill and Intangible Assets Goodwill represents the excess of the purchase price over the fair value of identifiable assets acquired and liabilities assumed in business combinations accounted for under the purchase method. Intangible assets from acquisitions represent customer relationships, technologies, non-compete agreements, and trade names related to previous acquisitions.
Goodwill Goodwill represents the excess of the purchase price over the fair value of identifiable assets acquired and liabilities assumed in business combinations accounted for under the purchase method.
Collection on the related receivables may vary from reported information based upon third-party refinement of the estimated and reported amounts owed that occurs subsequent to period ends.
Customers typically receive the benefit of our services as they are performed and substantially all of our revenue is recognized over time as services are performed. Collection on the related receivables may vary from reported information based upon third party refinement of the estimated and reported amounts owed that occurs subsequent to period ends.
Should the value of goodwill or intangible assets become impaired, we would record the appropriate charge. Any future impairment charges could have a material adverse effect on our financial condition and results of operations. Provision for Income Taxes We are subject to income taxes in the U.S. and certain international jurisdictions.
We cannot accurately predict the amount and timing of any impairment of goodwill. Should the value of goodwill assets become impaired, we would record the appropriate charge. Any future impairment charges could have a material adverse effect on our financial condition and results of operations.
The provisions of the accounting standard for goodwill and other intangible assets allow us to first assess qualitative factors to determine whether it is necessary to perform a quantitative impairment test.
Goodwill is tested annually on November 30 for impairment or more frequently if events and circumstances indicate that it might be impaired. The provisions of the accounting standard for goodwill allow us to first assess qualitative factors to determine whether it is necessary to perform a quantitative impairment test.
Our determination of the fair value of stock-based awards on the date of grant using an option pricing model is affected by our stock price as well as assumptions regarding a number of variables. These variables include, but are not limited to, the expected life of the award, our expected stock price, and volatility over the term of the award.
We use the Black-Scholes option pricing model as our method of valuation for stock-based awards with time-based vesting. Our determination of the fair value of stock-based awards on the date of grant using an option pricing model is affected by our stock price as well as assumptions regarding a number of variables.
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.
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.
General and Administrative General and administrative expenses consist primarily of payroll and related expenses for executive and administrative personnel; professional services, including accounting, legal and insurance; bad debt provisions; facilities costs; other general corporate expenses; and stock-based compensation of related personnel. 28 Table of Contents Stock-Based Compensation We measure stock-based compensation cost at the grant date based on the fair value of the award and recognize it as expense over the vesting or service period, as applicable, of the stock-based award using the straight-line method.
We account for forfeitures as they occur. We measure stock-based compensation cost at the grant date based on the fair value of the award and recognize it as expense over the vesting or service period, as applicable, of the stock-based award using the straight-line method.
General and administrative expenses increased $0.4 million or 4%, from $9.8 million for the year ended December 31, 2022 to $10.2 million for the year ended December 31, 2023. As a percentage of revenue, general and administrative expenses were 19% and 20% for the year ended December 31, 2022 and 2023, respectively.
General and administrative expenses was consistent at $10.2 million for both the years ended December 31, 2024 and 2023. As a percentage of revenue, general and administrative expenses were 21% and 20% for the years ended December 31, 2024 and 2023, respectively. Amortization of Intangible Assets from Acquisitions .
Income tax expense for the years ended December 31, 2022 and 2023 was $184.0 thousand and $94.0 thousand, respectively, consisting primarily of state income taxes in 2023 and a combination of state and international tax expense and in 2022.
Income tax expense was $0.4 million and $0.1 million for the years ended December 31, 2024 and 2023, respectively, consisting primarily of deferred tax expense and U.S. state income taxes. We incurred federal taxable losses in both 2024 and 2023.
Stock-Based Compensation FASB ASC Topic 718, Compensation – Stock Compensation (ASC 718) requires the measurement and recognition of compensation for all stock-based awards made to employees, non-employees and directors including stock options, restricted stock issuances, and restricted stock units be based on estimated fair values. We account for forfeitures as they occur.
Collection on the related receivables may vary from reported information based upon third-party refinement of the estimated and reported amounts owed that occurs subsequent to period ends. 30 Table of Contents Stock-Based Compensation Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 718, Compensation – Stock Compensation, requires the measurement and recognition of compensation for all stock-based awards made to employees, non-employees and directors including stock options, restricted stock issuances, and restricted stock units be based on estimated fair values.
The change in working capital was driven primarily by an increase in accounts receivable as well as a decrease in deferred revenue and accrued expenses partially offset by an increase in accounts payable. Cash used in operating activities for the year ended December 31, 2023 included higher costs to assist in reorganizing and efforts to reduce our on-going operating costs.
The change in working capital was driven primarily by a decrease in accrued expenses and other current liabilities as well as a decrease in accounts payable, partially offset by an increase in prepaid expenses and other assets and accounts receivable.
As a percentage of revenue, product development expenses were 28% and 31% for the year ended December 31, 2022 and 2023, respectively. The net increase in dollars and as a percentage of revenue was primarily attributable to a decrease in support services fee recovery of $1.4 million, partially offset by lower personnel costs totaling $0.6 million.
As a percentage of revenue, product development expenses were 26% and 31% for the years ended December 31, 2024 and 2023, respectively. The change from the prior year was primarily attributable to $2.9 million in lower personnel and contractor costs, as we reorganized and realigned our research and development teams. General and Administrative.
These costs primarily consist of telecommunication costs, including the use of phone numbers relating to our services; colocation service charges of our network equipment; bandwidth and software license fees; network operations; and payroll and related expenses of personnel, including stock based compensation.
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. 26 Table of Contents The Company has historically reported these costs under the caption "service costs" on the Consolidated Statement of Operations, but determined that the change to "cost of revenue" on a go-forward basis, beginning on December 31, 2024, better aligns the Company's financial reporting to its industry and competitors for comparison.
Business Update For our fiscal year ended December 31, 2023, our revenue was $49.9 million, which decreased by $2.3 million, or 5%, compared to $52.2 million for the fiscal year ended December 31, 2022. The decrease is attributable primarily to lower conversational volumes in 2023 compared to 2022, particularly with our small business listing and solutions resellers.
Revenue Revenue decreased $1.8 million, or 4%, to $48.1 million for the year ended December 31, 2024 from $49.9 million for the year ended December 31, 2023. This decrease was impacted primarily by lower conversational volumes in 2024 as compared to 2023, and certain non-recurring non-core analytics revenue in 2023.
The variable elements of these contracts primarily include the number of transactions (for example, the number of qualified phone calls). Customers typically receive the benefit of our services as they are performed and substantially all of our revenue is recognized over time as services are performed.
As such, the majority of total revenue is derived from contracts that include consideration that is variable in nature. The variable elements of these contracts primarily include the number of transactions (for example, the number of qualified phone calls).
We also expect, to the extent that we increase our marketing activities, this could correspondingly also cause an increase in sales and marketing expenses as a percentage of revenue. Product Development. Product development expenses increased $1.0 million, or 7%, from $14.4 million for the year ended December 31, 2022 to $15.4 million for the year ended December 31, 2023.
In addition, personnel costs were $1.7 million lower as we reorganized and realigned our technology teams. Sales and Marketing. Sales and marketing expenses increased $0.7 million, or 6%, to $12.1 million for the year ended December 31, 2024 from $11.4 million for the year ended December 31, 2023.
As a percentage of revenue, service costs were 39% and 41% for the year ended December 31, 2022 and 2023, respectively. The change from the prior year was primarily due to $0.2 million higher cloud compute and storage costs to support our growing technology infrastructure and related conversational data assets, partially offset by $0.2 million lower stock-based compensation.
As a percentage of revenue, cost of revenue was 36% and 41% for the years ended December 31, 2024 and 2023, respectively. The change from the prior year was primarily due to $1.8 million in lower conversational data processing and telecommunication costs due to a combination of lower conversational volumes, benefits from leveraging AI technology, and efficient vendor costs management.
Sales and marketing expenses decreased $2.1 million, or 18%, from $13.5 million for the year ended December 31, 2022 to $11.4 million for the year ended December 31, 2023. As a percentage of revenue, sales and marketing expenses were 26% and 23% for the year ended December 31, 2022 and 2023, respectively.
As a percentage of revenue, sales and marketing expenses were 25% and 23% for the years ended December 31, 2024 and 2023, respectively. The change from the prior year was primarily attributable to $1.0 million in higher personnel costs, primarily due to investments made in the sales and marketing function to increase the sales workforce and prioritize go-to-market initiatives.
The intangible assets have been identified as customer relationships; acquired technology; non-competition agreements; trade names. These assets are amortized over useful lives ranging from 12 to 60 months. Provision for Income Taxes We utilize the asset and liability method of accounting for income taxes.
These assets are fully amortized as of December 31, 2024. Provision for Income Taxes We utilize the asset and liability method of accounting for income taxes.
As of December 31, 2023, we had current and non-current contractual obligations of $0.9 million, of which $0.2 million is for rent under our facility operating leases. Cash used in operating activities was $4.4 million during the year ended December 31, 2023.
Liquidity and Capital Resources As of December 31, 2024 and 2023, we had cash and cash equivalents of $12.8 million and $14.6 million, respectively. As of December 31, 2024, we had current and non-current contractual obligations of $11.4 million, of which $1.8 million is for payments due under our facilities and financed equipment leases.
The increase in net loss for the year ended December 31, 2023 was primarily attributable to the $2.3 million decrease in revenue discussed above, partially offset by a net decrease in total operating expenses of $0.8 million, which was driven by the decrease in sales and marketing expenses discussed above. 31 Table of Contents Liquidity and Capital Resources As of December 31, 2022 and 2023, we had cash and cash equivalents of $20.5 million and $14.6 million, respectively.
The decrease in net loss was primarily attributable to the $7.0 million decrease in operating expenses, driven by the decrease in cost of revenue and product development expenses discussed above, that was partially offset by the $1.8 million decrease in revenue also discussed above.
We expect intangible asset amortization to decrease in the near term, as a result of certain assets reaching the end of their useful lives. Interest Income and Other, net . The interest income and other, net for the year ended December 31, 2022 and 2023 was interest income of $88.0 thousand and interest expense of $173.0 thousand, respectively.
The year over year decrease was driven by certain assets reaching the end of their useful life in the fourth quarter of the prior year. Intangible asset amortization from these acquisitions was completed in 2024 as a result of the remainder of these assets reaching the end of their useful lives. Income Tax.
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We have offices in Seattle, Washington; and Wichita, Kansas. Recent Developments New Product Launch In November 2023, Marchex announced its launch of Call Summary and Sentiment Suite capabilities. Powered by generative AI, these new features analyze and generate summaries of consumer-to-business calls, enabling businesses to identify customers who have had exceptionally good experiences, as well as dissatisfied customers.
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Cost of Revenue Our cost of revenue represents the cost of providing our services to our customers.
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This valuable data empowers companies to capitalize on positive interactions by advancing sales processes or encouraging positive online behaviors, including reviews, as well as take action to rectify concerns from dissatisfied customers.
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General and Administrative General and administrative expenses consist primarily of payroll and related expenses for executive and administrative personnel; professional services, including accounting, legal and insurance; bad debt provisions; facilities costs; other general corporate expenses; and stock-based compensation of related personnel.
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The Call Summary feature offers two distinct types of summaries: • Outcome Focused Summaries give concise, natural-language descriptions of what occurred during a consumer-to-business call. • Agent Focused Summaries provide comprehensive assessments of customer service or sales agent performance during calls.
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The lower volumes primarily came from several of our small business listing and solution providers that mostly sell marketing services to local businesses. Expenses Cost of Revenue. Cost of revenue decreased $3.4 million, or 17%, to $17.2 million for the year ended December 31, 2024 from $20.6 million for the year ended December 31, 2023.
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The Sentiment Suite feature combines structured and unstructured data to provide a holistic view of customer emotions during conversations, including: • Customer Emotion gives a high-level assessment of whether conversations were positive, negative, or neutral. 26 Table of Contents • Emotion Categories assign specific sentiments such as satisfied, frustrated, or confused to callers, enabling tailored response strategies. • View of Business combines emotion grading and call context to infer how the customer perceives your business: positive, negative, or neutral.
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This was partially offset by lower stock-based compensation costs of $0.3 million. 28 Table of Contents Product Development. Product development expenses decreased $3.0 million, or 19%, to $12.4 million for the year ended December 31, 2024 from $15.4 million for the year ended December 31, 2023.
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These structured data pieces are then paired with natural language explanations of why callers are reacting the way they are, enhancing the understanding of emotional dynamics during conversations.
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Intangibles amortization expense was $0.6 million and $2.0 million for the years ended December 31, 2024 and 2023, respectively.
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Call Summaries and Sentiment Suite are just the first in a series of AI enhancements in Marchex’s product pipeline, all designed to equip organizations with applications to proactively identify sales and growth opportunities, as well as address issues that may lead to negative experiences and reviews from dissatisfied customers.
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Net loss decreased $5.0 million, or 51%, to $4.9 million for the year ended December 31, 2024 from $9.9 million for the year ended December 31, 2023.
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While we do expect to see continued lower call volumes in the near term based on the continuation of certain volume trends from late 2023, we believe that previously won dealer channel and Auto OEM relationships ramping over the course of the year, extension of existing customers to multi-year arrangements, expansion of our go-to-market initiatives resulting in new customer relationships across our verticals, continued innovation in our AI capabilities and product offerings, and completion of the necessary infrastructure to accelerate product cross selling to existing and new customers may provide an opportunity for potential revenue growth.
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These variables include, but are not limited to, the expected life of the award, our expected stock price, and volatility over the term of the award.
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We believe our operating expenses have prospective opportunity for further efficiencies as we continue to make advancements in our technology infrastructure and cloud initiatives, to "OneStack". OneStack enables our technologies and clients to be more easily managed in a less costly operating environment.
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It provides a streamlined product innovation and go to market approach, allowing our vertical market clients to potentially consume all our signals, data analytics and applied AI and also provides speed and scale for client onboarding while streamlining support and account management.
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For additional information on the effects of our technology environment restructuring efforts on our business and operations, refer to “Results of Operations” within this discussion and analysis and Item 1 of Part I, “Business.” Factors Affecting our Performance We utilize phone numbers as part of a number of analytics services to our customers such as our call and text analytics and communications.
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If we are not able to secure or retain sufficient phone numbers needed for our services or we are limited in the number of available telecommunication carriers or vendors to provide such phone numbers to us in the event of any industry consolidation or if telecommunication carriers or vendors were to experience system disruptions, our revenue and results of operations, and our ability to grow, may be materially and adversely affected.
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Our quarterly results have fluctuated in the past and may fluctuate in the future due to seasonality.
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Our experience has shown that during the spring and summer months, call volumes in certain verticals such as home services are generally higher than during other times of the year and during the latter part of the fourth quarter of the calendar year we generally experience lower call volumes.
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The extent to which call volumes may decrease during these off-peak periods is difficult to predict. Prolonged or severe decreases in call volumes during these periods may adversely affect our growth rate and results and in turn the market price of our securities.
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Historically, we have seen this trend generally reversing in the first quarter of the calendar year with increased call volumes and often new budgets at the beginning of the year for many of our customers with fiscal years ending December 31. However, there can be no assurances such seasonal trends will consistently repeat each year.
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We believe that our future revenue growth will depend on, among other factors, our ability to attract new customers, compete effectively, maximize our sales efforts, successfully improve existing analytics products and sales engagement solutions, and develop successful new products and solutions.
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If we are unable to generate adequate revenue growth and to manage our expenses, we may continue to incur significant losses in the future and may not be able to achieve or maintain profitability. 27 Table of Contents Climate Change We have considered specific risks associated as a result of climate change legislation or regulation and determined that in their current form, legislation or regulation is not reasonably likely to have a material effect on our financial condition or results of operations.
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Customers typically receive the benefit of our services as they are performed and substantially all of our revenue is recognized over time as services are performed. In certain cases, we record revenue based on available and reported preliminary information from third parties.
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Collection on the related receivables may vary from reported information based upon third party refinement of the estimated and reported amounts owed that occurs subsequent to period ends. Service Costs Our service costs represent the cost of providing our services to our customers.
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Stock Option Plan of the Notes to Consolidated Financial Statements, as well as our Critical Accounting Policies for additional information about stock-based compensation. 29 Table of Contents Revenue Revenue decreased $2.3 million, or 5%, from $52.2 million for the year ended December 31, 2022 to $49.9 million for the year ended December 31, 2023.
Removed
This decrease was impacted primarily by lower conversational volumes in 2023 as compared to 2022.
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