Marchex (MCHX) Q1 2026 Earnings Transcript

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DATE

May 13, 2026, 5 p.m. ET

CALL PARTICIPANTS

• Executive Chairman and CEO — Russell C. Horowitz
• Chief Operating Officer — Troy W. Hartless
• Chief Financial Officer — Brian Nagle
• General Counsel — Francis J. Feeney Jr.

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TAKEAWAYS

• Revenue -- $10.6 million, down from $10.8 million, with the decrease attributed to legacy platform migration effects, despite growth from new sales and upsells.
• Cash balance -- $9 million at quarter-end, compared to $9.9 million in the prior period; the decline was attributed to annual payroll, and severance payments related to organizational realignment.
• Customer concentration -- About 90% of revenue comes from the top 100 customers, and nearly one-third of these customers have already received presentations of bundled AI-driven products.
• Bundled solutions adoption -- Approximately half of the top 100 customers who received presentations have purchased bundled solutions on a recurring or paid pilot basis.
• Operating expense trends -- Operating expenses could decrease by more than 5%, driven by completed realignment and platform initiatives; efficiencies have lowered the overall recurring cost structure.
• Adjusted EBITDA guidance -- Updated range for the next quarter raised to $1.6 million-$1.8 million, up from prior guidance of more than $1 million; a stand-alone figure of $2 million or higher is targeted as revenue accelerates.
• Archenia transaction status -- Marchex (NASDAQ:MCHX) entered into a stock purchase agreement to acquire 100% of Archenia; closing is targeted for July 2026, pending disinterested stockholder approval and other customary conditions.
• Combined company financial outlook -- With Archenia, expected quarterly revenue run rate is about $15 million, or $60 million annualized, with projected annualized growth of 15%-20%, and adjusted EBITDA margins reaching 10% or more.
• Strategic focus -- Leadership confirmed emphasis on expanding bundled AI-powered solutions across key verticals like automotive, home services, and healthcare for increased per-customer revenue, and enhanced customer retention.
• Capital allocation -- Marchex highlighted an existing 3 million share buyback authorization to optimize future free cash flow.

SUMMARY

Marchex (NASDAQ:MCHX) outlined significant steps toward scaling its AI-driven solutions platform by presenting a transaction to acquire Archenia, which is expected to close in July 2026 pending shareholder approval. Management stated that the combined entity could expand addressable markets, revenue run rate, and margin potential, projecting a $60 million annualized revenue base and 10% or higher adjusted EBITDA margins. The company's new bundled solution approach has already seen adoption among roughly half of targeted customers, indicating notable momentum in per-customer revenue growth. Ongoing efficiency measures contributed to a more than 5% decrease in operating expenses, supporting margin expansion initiatives. The board-formed special committee secured a fairness opinion and legal counsel to validate and safeguard the interests of disinterested shareholders in the Archenia acquisition process.

• Management described material upsell dynamics, stating these bundled offerings offer the potential to "double revenue on a per customer basis" as bundling expands.
• An immediate focus is accelerating bundled AI solution presentations to the remainder of the top 100 customer set, and expanding vertical exposure, with evidence cited that "the business has a $100 million revenue opportunity."
• Leadership confirmed the prospective combined company is targeting a "Rule of 30 to 40" financial metric, defined as the sum of annual revenue growth rate and adjusted EBITDA margin, contingent upon deal completion and revenue scaling.
• Management reasserted ongoing authorization of a share repurchase program, with historical use of buybacks, special dividends, and tenders noted as part of their capital deployment strategy when cash flows rise.

INDUSTRY GLOSSARY

• Rule of 30 to 40: A financial target where a company aims for the sum of annual revenue growth rate and adjusted EBITDA margin to fall within the 30%-40% range, signaling balanced growth and profitability for SaaS or recurring-revenue focused businesses.
• Archenia: A performance-based customer qualification and acquisition company leveraging AI for real-time detection of consumer intent, delivering pay-for-outcome solutions such as qualified appointments, and sales.
• Bundled solutions: Combined product offerings that integrate Marchex’s and Archenia’s insights, actions, and outcomes capabilities in a single customer value proposition to drive higher revenue per client, and retention.

Full Conference Call Transcript

Russell C. Horowitz: I will now turn the call over to Russell. Thank you, Frank. I am going to start with a few current thoughts and then hand the call over to Troy, Brian, and then Frank again. The main item I would like to share is that we believe the company is crossing a positive inflection point both strategically and operationally. 2026 is marking an important step in showing our execution is beginning to translate into improved business performance. The indicators we care about are moving in the right direction. We have come a long way in evolving our product and technology capabilities we are beginning to increase penetration of our customer footprint. Which is starting to create real sales momentum.

With this progress and deeper strategic understanding, which is against the backdrop of the very real and massive AI revolution, we have gained proprietary insight into what we believe may be a much bigger market opportunity. 1 where we are now evolving beyond mainly providing strategic analytics to vertical market leading companies to 1 where we accelerate delivering more comprehensive solutions that open up new revenue opportunities by addressing higher value impact needs across the entire customer acquisition and optimization journey. If you zoom out, you consider what our customers most fundamentally rely on, it is knowing how to leverage AI driven strategic solutions, to more efficiently drive growth oriented customer acquisition and optimization.

We believe that we are seeing initial signs of validation that there is significant opportunity for us to rapidly expand into highly measurable AI powered bundled solutions which provide the strategic insights our customers need the automated actions those insights inform, and the outcomes those actions achieve. We believe that there are significant untapped opportunities within our existing customer base and within each of our current verticals. We believe selling bundled solutions across this entire customer value chain can accelerate our business and make us more valuable, within our vertical markets. As AI opens up new product possibilities that can help businesses grow meaningfully while driving efficiencies.

At Marchex, we view ourselves as a meaningful AI beneficiary based on how rapidly we are now able to leverage AI develop and deploy new products into our customer base that can deliver high customer value as well as significant new company revenue opportunities. We see significant new business potential in introducing agentic workflows for customers who are integrated on our platform. Additionally, AI is making our business more agile and efficient to operate. The combination of these factors including our vast amount of first party data and vertical expertise, are key elements in our improving outlook for meaningful business acceleration as we move through the year.

With that, I will hand the call to Troy to briefly discuss the first quarter.

Troy W. Hartless: Thank you, Russell. With our previously announced proposed acquisition of Archenia, Marchex and Arcania have been collaborating to jointly develop and sell initial products that reflect the combined capabilities of the 2 companies. Product examples of this collaboration, which leverages Martex's data and AI signals, and Archenia's AI tool sets and user interface. Our AI verified outcomes which drive increased revenue on a pay per event basis, and conversational AI agents, which increase customer bookings and appointment rate. In the first quarter, our focus included continuing to define the initial key products that most leverage our strategic insights, into AI based action and outcome solutions. That we could present to our installed customer base.

And so far, we have seen very encouraging initial adoption. While we operate in a rapidly evolving and dynamic industry with uncertainty, these sales efforts and customer interactions so far continue to reinforce our belief. That we are now in a strong position with our ability to leverage new AI capabilities across the customer acquisition and optimization journey with highly impactful insight. Action, and outcome based solutions. In terms of customers for background, Marchex's top 100 customers represent about 90% of our revenue. And this customer set has been initial focus of presenting the products which leverage the combined capabilities of the company. To date, we have made presentations to nearly a third of these customers.

And approximately half of them have already purchased 1 or more of these products on a recurring or paid pilot basis. Of those remaining, we believe the majority are likely to also purchase 1 or more of these products on a recurring or paid pilot basis. Additionally, as the potential transaction closing approaches, we are focused on accelerating our efforts to present these products the majority of our top customers. Marchex believes our ability to sell these and other combined solutions reflect the bundling of insights, actions, and outcomes to our installed customer base, will be a meaningful sales catalyst in 2026 and beyond. As a reminder, we have a core focus on select large vertical markets.

Where the combination of our expanding AI capabilities built on years of operating with first party data across these verticals give us the ability to deliver unique solutions for world class market leading companies. To that end, we deliver industry specific AI solutions for automotive, auto services, home services, health care, and advertising and media, as well as other industries and sub verticals. With that, I will turn the call over to Brian to provide an overview of the first quarter 2020 financial results.

Brian Nagle: Thank you, Troy. Revenue for 2026 was $10.6 million, compared to $10.8 million for 2025. We saw favorable impact of new sales and existing customer upsells benefit the company in the first quarter. We also saw offsets to that growth due to the previously completed migration activities from our legacy platforms onto our new Marchex Engage platform. Which impacted revenue run rates entering 2026. For operating expenditures, we saw efficiencies throughout the business as we benefited from the continued realignment of the organization and the completion of certain technology platform initiatives during 2025, which have lowered our overall recurring cost structure.

We anticipate that our gross profit margins can continue to improve over time as we are carrying an overall lower cost structure going forward. Which could enable meaningful future operating and financial leverage for the business as new products and features sell through. On the balance sheet, cash decreased to $9 million from $9.9 million at the end of 2025. The decrease in cash was primarily due to annual payroll and severance payments associated with our organizational realignment and efficiency initiatives. Moving to guidance. Based on our evolved strategic approach, with delivering bundled solutions across insights, actions, and outcomes, as well as other positive factors, for 2026, Marchex currently anticipates that revenue will see sequential increases from the first quarter.

And that adjusted EBITDA is now anticipated to increase to a range of $1.6 million to $1.8 million up from prior guidance of more than $1 million. Additionally, in terms of initial guidance for 2026, we currently anticipate that revenue will sequentially increase and potentially accelerate over second quarter 26 levels. And that on a stand alone basis, adjusted EBITDA can potentially be in the $2 million range or more. To the extent the Archenia transaction has been approved, and closed by 2026, Marchex believes that the combined company can potentially see adjusted EBITDA in the $2.5 million range or more for the third quarter or an annualized run rate of $10 million or more.

We currently anticipate that we can continue to see quarterly revenue increases during the 2026 and that over the course of the year, we can potentially see revenue growth on a run rate basis in the 10% range from the 2025 year end levels. We also currently anticipate that in the course of the 2026, the combination of anticipated increasing revenue growth combined with lower overall operating expenses can potentially lead to adjusted EBITDA margins of 10% or more. With that, I will hand the call to Frank.

Francis J. Feeney Jr.: You, Brian. I would like to take a moment to provide an update on the Archenia transaction. On May 8, 2026, Marchex entered into a stock purchase agreement (the SPA), to acquire 100% of the stock of Archenia Inc. (the transaction), from the Archenia stockholders (the sellers). A special committee of Marchex's board of directors consisting solely of independent directors (the special committee), has approved Marchex entering into the SPA because certain of the sellers are related parties. In considering the SPA, the special committee retained Craig Hallum Capital Group LLC as financial adviser, which provided a fairness opinion with respect to the purchase price. DLA Piper LLP US served as independent legal counsel to the special committee.

Subject to receiving approval of the transaction by a majority of Marchex's disinterested stockholders, and satisfaction of other closing conditions, the company expects the transaction to close in July of 2026. For your reference, Archenia is a performance based customer qualification and acquisition company, which transforms consumer intent into AI verified outcome based results. Leveraging advanced AI signals, natural language analytics, and automated decisioning, Archenia detects consumer intent and advertiser value in real time. Optimizing customer acquisition campaigns dynamically across channels. With machine learning models that continuously refine qualification accuracy in ROI, Archenia enables its customers to pay for verified AI validated outcomes such as appointments, sales, and high intent conversations.

We believe that our potential combination with Archenia is successfully consummated, we create a vertically focused AI driven customer acquisition and outcome optimization platform. Integrating deep insights automated actions, and verifiable outcomes. Additionally, we believe that the expanded AI driven product offerings across insights, actions, and outcomes could create more ways to win new business and the bundling of solutions could create greater customer value stickiness, and risk mitigation. We believe that the potential combined company could have the opportunity to achieve greater revenue scale and growth higher margins, expanded market reach, and enhanced strategic flexibility. Which could include first, a potentially expandable addressable market with opportunity to cross sell and bundle.

We believe the combined ability to sell insights, actions, and outcomes would meaningfully expand our addressable market into new large vertical markets. Additionally, we believe we would have the ability to relatively quickly offer or bundle Arcania's outcome based solutions to many of Marchex insights based enterprise customers. Second, greater potential revenue, scale, and growth. Marchex believes that revenue run rates for the potential combined company are approximately $15 million quarterly or approximately $60 million annualized which could grow in the 15% to 20% range in the course of the 2026. Third, we see the potential for adjusted EBITDA expansion. We believe that our adjusted EBITDA margins are anticipated to trend up to 10% or more in the 2026.

And then Archenia could contribute additional positive adjusted EBITDA beyond these levels. And finally, Rule of 30 to 40 trajectory. For reference, the Rule of 30 to 40 metric represents the combination of annual revenue growth rates plus adjusted EBITDA margins. If we are able to achieve the anticipated revenue run rate growth, in the 15 to 20% range, and combine this with improving adjusted EBITDA margins in double digits, the combined company could be positioned to potentially achieve these Rule of 30 to 40 metric over time. Which we believe helps highlight the unique opportunity of the combined company if consummated. I will now hand the call back to Russell for closing remarks.

Russell C. Horowitz: Thank you, Frank. I would like to close out today's call by thanking all of our investors, partners, and other stakeholders for your ongoing support. I would also like to deeply thank our employees for their expertise, sense of urgency, and continued commitment as we execute on what we believe is an increasingly dynamic opportunity. And with that, I will hand the call back to the operator.

Operator: We will now begin the question-and-answer session. Please limit yourself to 1 question and 1 follow-up. If you would like to ask a question, please press *1 to raise your hand. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Your first question comes from the line of Mike Latimore with Northland Markets. Mike, your line is open. Please go ahead.

Analyst (Mike Latimore): Alright. Thanks. So the EBITDA guidance for the second quarter, is that largely driven by OpEx refinements? And if so, what kind of reduction OpEx should we see?

Brian Nagle: Yeah. it is driven by a combination of our expected sales acceleration. And the sequential growth in the second quarter and then there is also contribution from some of the operations efficiencies. So if you are looking at Q1 revenue levels, I think you could see a kind of reduction in the 5% plus range on the OpEx side. And on the other parts of it, you know, we see the sell through on products and upsells and expansion of the new revenue opportunities. being drivers as well.

Analyst (Mike Latimore): Okay. Thanks. And then, it sounds like you are already selling some bundles with Archenia, and I think the kind of math suggests, like 15% of the base that already bought them. I guess talk a little bit about the size of the upsell there? How much revenue per sale and if you are already selling some bundles, like, assume there is more bundles to come. Like, what percent of the total bundle potential are we selling right now?

Russell C. Horowitz: Yeah. If you hit on the metrics as it relates to, the initial customer outreach, Yeah. it is been very validating. When you look at, some of the elements that I think we are most encouraged by, it is that the adoption of some of these new products are seeing opportunities to potentially double revenue on a per customer basis. And the fact that we are seeing guesses pretty quickly and indications on you know, the ones we have met with is what gives us, I think, a an encouraging lens in combination with the efficiency and just the acceleration of the whole business both with product development customers, some more than expansion.

So the intent is to sell bundles to everybody. We know that is going to allow them to maximize the value of our capabilities And we are leveraging our vertical expertise and their data illuminate where they have big opportunities to drive increased customer acquisition as well as drive more customer bookings and appointments, with the qualified leads they already have coming into their ecosystem. Bundled solution we think meaningfully expands per customer revenue opportunity and also is going to drive a lot of increased stickiness as well. So, all the pulse metrics that we think translate to more dynamic company that can support the kind of growth we foresee and expanding EBITDA margins that we are starting to message.

Good questions. Okay. Great. Thank you.

Operator: Your next question comes from the line of Ross Koller with Koller Capital. Ross, your line is open. Please go ahead.

Analyst (Ross Koller): A few questions here. Russ, you mentioned that you have met with or pitched about a third of your top 100 customers. Do you go about targeting the other 2/3?

Russell C. Horowitz: Yeah. it is another good question. Yeah. As we got started pitching the new stuff, we decided to focus on specific customers and specific verticals like auto and home services. Who we believe had common problems and where bundling was the logical next step. Given what we knew to be their pain points and the value impacts of our solutions against those pain points. Doing it this way was really first to try and have success with revenue expansion, but also to validate our approach expose ourselves into the learnings we need to scale our sales efforts and then iterate.

We feel like this approach has worked really well so far and what we have learned in terms of is informing us on how to start expanding. To our other verticals and also to more of the top customers. Obviously, our intent is to get to all of the top 100 customers as soon as practical, and then go beyond where we see strategic product fit and meaningful revenue opportunities. So this is happening, like, right now as we speak. We are at that inflection point. You know, the metrics we provided around initial update has given us the line of sight on how we approach and scale those efforts to more of the top 100 and beyond.

So what we have also learned in this process is doing nothing but continuing to support our belief that on a combined basis, the business has a $100 million revenue opportunity. And we are approaching all of our efforts in viewing this as a profitably focused sprint to that $100 million revenue run rate and beyond. Awesome. Thanks, Ross.

Analyst (Ross Koller): And then the $10 million annualized adjusted EBITDA guidance for Q3 is impressive. As the business returns to substantial profitability, what are your thoughts on capital allocation? Allocation?

Russell C. Horowitz: Yeah. The first and most important thing is we think we are at a really positive inflection point and, obviously, the updated guidance today with the increased EBITDA reflects that. You know, we are just getting started in this new up cycle. And we are working toward the Archenia transaction approval and formalization. But in looking at increasing cash generation, we will assess the best and highest use of increasing cash as we go forward and we achieve these milestones. But it is worth noting we are a low CapEx business. And we have meaningful tax shields. And with the Archenia transaction, this will help us optimize our free cash flow generation as we go forward.

And as I have noted before in our history, we have had times where we have done stock buybacks, self tender offers, record special dividends, and more. As a reminder, we do have an existing 3 million share buyback program authorized at this time. In terms of primary focus, we understand it is a simple concept. But if we can just keep driving increasing organic growth with expanding profitability, and we will have a lot of flexibility and latitude with the business and with our cash. Awesome. that is us. Thank you.

Operator: We have reached the end of the Q&A. I will now turn the call back to the management team to conclude the call.

Russell C. Horowitz: Once again, just want to thank everybody for your ongoing support, participation in today's call. And, we are just energized with where we are. Look forward to executing on what we think is an increasingly dynamic opportunity. And updating you as we move forward. Thanks again.

Operator: Thank you for attending. You may now disconnect.

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