Marchex Q3 2026 Earnings Call Transcript

Marchex (NASDAQ:MCHX) reported third-quarter financial results on Tuesday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Marchex, Inc. reported year-over-year revenue growth to $16 million for Q3 2026, up from $15.2 million in Q3 2025, with positive GAAP net income of $1.3 million.

The acquisition of Arcana has allowed Marchex to integrate complementary technologies, enhancing solutions for lead qualification, call handling, and sales conversion.

The company successfully expanded its AI Voice Agent solution, which is expected to generate over $200,000 in additional annualized revenue in 2027 from existing customers.

Marchex received approval from a major automotive OEM to offer its Engage for Service solution, expanding the potential adoption across the dealer network.

The company aims to become a $100 million revenue business by expanding customer relationships and adopting AI-powered solutions.

For Q4 2026, Marchex expects revenue of $15 million or more and adjusted EBITDA between $2.3 million and $2.5 million, acknowledging normal seasonal trends.

Travis Fairchild was appointed as President of Marchex to drive commercialization and growth, following his tenure as CEO of Arcania.

Management emphasized the significant opportunity to increase revenue through upselling and cross-selling within its existing customer base.

The company is focused on increasing investor engagement and believes its stock is undervalued, with plans to attend conferences and seek additional research coverage.

Full Transcript

OPERATOR

Welcome to Marchex’s 2026 earnings conference call. After today’s prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Francis Feeney, Chief Operating Officer. Francis, please go ahead.

Francis Feeney (Chief Operating Officer)

Good afternoon, everyone, and welcome to Marchex’s business update and third quarter 2026 conference call. Joining us today are Russ Horowitz, our Chairman of the Board, and Brian Nagel, our Chief Financial Officer. Before we get started, I would like to take this opportunity to remind you that our remarks today will include forward-looking statements, including references to our financial and operational performance, and actual results may differ materially from those contemplated by these forward-looking statements. Risks and uncertainties that could cause these results to differ materially are set forth in today’s earnings press release and in our most recent annual or quarterly report filed with the SEC.

Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements for subsequent events. During this call we will present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today’s earnings press release. The earnings press release is available in the Investor Relations section of our website. At this time, I want to turn the call over to Russ.

Russ Horowitz (Chairman of the Board)

Thank you, Frank, and thank you everyone for joining us today. Our third quarter results reflect meaningful progress in strengthening Marchex’s financial performance. During the quarter, we delivered year-over-year revenue growth, positive GAAP net income, and significant improvement in adjusted EBITDA. Since completing the acquisition of Arcana in July, our focus has been on bringing together the complementary technologies of both companies. Our combined solutions help customers use insights from consumer conversations to qualify leads, improve call handling, and convert more inquiries into appointments and sales. We believe these capabilities create opportunities to expand our existing enterprise relationships and reach new customers and markets. Our expanded offerings also broaden how we generate revenue, and we are seeing encouraging early commercial traction, including expanded relationships with existing customers and deployments of new AI-powered solutions.

Let me share two examples of our progress with customers and products. One example is the expansion of our relationship with an existing advertising and media customer. Following a successful paid pilot, the customer commercially deployed our AI Voice Agent solution. The existing relationship represents approximately $400,000 in annualized revenue. We expect the new deployment to generate incremental revenue in the remainder of 2026 and add more than $200,000 to annualized revenue from this customer in 2027.

This deployment demonstrates our ability to cross-sell AI-powered solutions while helping customers capture qualified leads and sales opportunities that otherwise might be missed. As we disclosed in September, we’ve also added additional customers for our AI Voice Agent solution and have been discussing paid pilot programs with several large enterprises. The solution qualifies callers when sales representatives are unavailable, helping businesses capture opportunities they might otherwise miss.

Since quarter-end, Marchex has received approval from a major automotive original equipment manufacturer, or OEM, to offer our Engage for Service solution through its dealer portal. This enables eligible dealers to use OEM co-op funding toward the solution. The approval follows an early access deployment across 75 dealerships within a bundled offering, where Engage for Service helped improve service operations and identify missed appointments and revenue opportunities.

It creates an additional channel for expanding adoption across the OEM’s dealer network. The solution also provides real-time alerts that flag missed appointment opportunities and customer frustration, helping dealership teams prioritize follow-up. These developments provide early evidence and validation of the opportunity to expand adoption of our solutions within existing customer relationships. These examples and the other points of progress we’re seeing across the business continue to reinforce our belief that 2027 will be an increasing growth year and that we have a tangible path to a more than $100 million revenue business. As we execute with our current operating efficiencies in 2027, we also have the opportunity to increase adjusted EBITDA levels beyond third quarter’s annualized run rate of more than $10 million.

I’ll now turn the call over to Brian to discuss our third quarter 2026 financial results and fourth quarter outlook.

Brian Nagel (Chief Financial Officer)

Thank you, Russ. Before we review the results, I want to note that the financial results we’re discussing today reflect both Marchex and Arcania on a combined basis for the current and all historical periods presented as required by GAAP. Our Form 10-Q quarterly report for the third quarter will provide additional information on this accounting treatment. Revenue for the quarter increased to $16 million compared to $15.2 million in the third quarter of 2025. The growth reflected favorable customer activity, upsell initiatives within our existing customer base, and coordinated sales efforts following the acquisition of Arcana. Net income for the quarter was $1.3 million, or $0.03 per diluted share, compared with a net loss of $1.3 million, or negative $0.03 per diluted share, in the prior-year period.

The improvement primarily reflects the benefits of our operational and organizational initiatives, which significantly reduced operating expenses. Gross margin was 51% compared with 54% a year ago, reflecting the impact of our revenue mix as well as costs associated with the paid pilots during the quarter. Operating expenses excluding cost of revenue were $6.7 million in the third quarter of 2026 compared with $9.3 million in the third quarter of 2025, reflecting our expense efficiency initiatives and organization realignment which have streamlined our operation and reduced our operating cost base.

Adjusted EBITDA increased to $2.4 million compared with $0.5 million in the third quarter of 2025. As adjusted, the quarter also included approximately $0.2 million of reorganization and acquisition-related costs. Adjusted EBITDA before those costs was $2.6 million. We intend to build on the stronger financial foundation while making targeted investments to support growth and maintain disciplined expense management. We ended the quarter with $8.7 million in cash and cash equivalents.

Now turning to our outlook for the fourth quarter of 2026, Marchex currently expects revenue of $15 million or more and adjusted EBITDA in the range of $2.3 million to $2.5 million. The expected decrease in revenue from Q3 primarily reflects normal seasonal trends, as the fourth quarter has typically seen lower call volumes and advertiser budgets impacting both Marchex and Arcania. We do believe that based on our current sales pipeline and cost efficiencies, there may be opportunities to offset or potentially outperform such typical seasonality depending on the timing and formalization of opportunities, which will also provide additional visibility on growth acceleration into 2027.

We plan to provide our first quarter 2027 financial outlook when we report fourth quarter and full year 2026 results, which is currently anticipated in early March of 2027. With that, I will hand the call back to Russ.

Russ Horowitz (Chairman of the Board)

Thank you, Brian. Before we open the call for questions, I’d like to discuss the appointment of Travis Fairchild as President of Marchex, effective yesterday. Travis previously served as CEO of Arcania and, before that, spent 18 years at Marchex in strategy and development positions. His experience across both businesses positions him well to accelerate commercialization of our combined capabilities, deepen customer relationships, and support our next phase of growth.

I’d also like to note that Troy Hartless will continue to serve as Chief Revenue Officer, where he will remain focused on new and emerging opportunities and sales channels to support our increased growth ambitions. As I noted before, our longer-term objective remains to build a business generating more than $100 million in annual revenue. We believe the combination of Marchex and Arcana expands our opportunities to grow organically through a broader offering and deeper customer relationships.

Our priorities are clear: expand adoption of our combined solutions, convert successful pilots into broader deployments, and translate customer results into sustainable revenue growth. We will support these efforts with targeted investments in sales and product development while maintaining disciplined expense management. We will measure our progress by the business outcomes we deliver for customers, the revenue growth those outcomes generate, and our ability to improve financial performance and shareholder value.

We’ve also expanded our investor relations program to increase engagement with institutional investors and analysts as we communicate our progress. I want to thank our employees for their expertise and commitment, and our investors, partners, and other stakeholders for their ongoing support. With that, I will hand the call back to the operator for questions.

OPERATOR

Thank you. We will now begin the question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. 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 Capital Markets. Mike, your line is open.

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

Vijay Devar (Analyst at Northland Capital Markets)

Hi, this is Vijay Devar for Mike Latimore. First question is about what’s the pro forma organic growth implied in your 4Q guidance?

Brian Nagel (Chief Financial Officer)

Okay, thank you for the question. If you look at our guidance of $15 million or more on the revenue line, you need to go back to last year’s Q4, which I believe was in the low $14 millions. And so we’re giving a range today. So we are implying year-over-year growth on both revenue and adjusted EBITDA given the trends of the business and the outlook of our pipeline and efficiency initiatives.

Vijay Devar (Analyst at Northland Capital Markets)

Okay. Of the initial one-third of your top hundred clients that received product presentations, how many have purchased a product?

Russ Horowitz (Chairman of the Board)

Yeah, if you go back to May, we talked about some early metrics where we had approached about 30 of our top hundred and seen a meaningful number adopt one or more products and expressed our belief that that trend would continue. And that trend has continued. We’re not quantifying it today. We do intend to share more details and success metrics as we go forward, but based on some of the deals that we’re looking to close between now and the end of the year, that will help inform some of the metrics that we potentially will lay out as part of our early 2027 guidance.

Good question. And we look forward to sharing more detail around those as we go forward.

Vijay Devar (Analyst at Northland Capital Markets)

And finally, what’s the average incremental RFO from upsells?

Russ Horowitz (Chairman of the Board)

I’m sorry, could you repeat that?

Vijay Devar (Analyst at Northland Capital Markets)

What’s average incremental ARPU from upsell?

Russ Horowitz (Chairman of the Board)

Yeah, we have not given an overall metric on average increased revenue. We have given some specific product and customer examples, and when we launch the combined solutions that bundle insights, actions, and outcomes versus analytics and insights only, we’ve seen numerous examples of revenue per customer increasing by 50% to 100% or more. We’ve laid out a number of those, and we continue to see that trend continue when we’re successful with upsells.

And obviously we’re feeling increasingly confident that we’re going to continue to be able to extend that model. And we believe that our biggest opportunity to drive growth and achieve that hundred million dollar revenue goal is really about penetrating the existing customer base, given how much more wallet share is available to us based on the expanded product capabilities. So we have shared some metrics, as we mentioned, examples of 50% to 100% revenue expansion on selective customers, and we think that’s reflective of what we can see as we penetrate and broaden some of our sales efforts.

Vijay Devar (Analyst at Northland Capital Markets)

Understood. Thank you.

Ross Koller (Analyst at Caller Capital)

Hi guys. Congrats on the quarter, on the progress. I have a few questions today. First, Russ, last quarter you mentioned a significant number of seven-figure deals in the pipeline. Is that still the case, and if so, how should we think about the progression of those deals both through the pipeline and how they scale over time?

Russ Horowitz (Chairman of the Board)

That’s a good question and something we think a lot about. As we noted last quarter, we believe we have a double-digit number of customers where the potential is for seven figures or more of incremental revenue. Within that group, we believe many of them likely have the potential over time to incrementally deliver multi-millions of dollars of revenue per year. So if we can make this happen, it’s very meaningful and a significant needle mover for us.

This has been one of the big takeaways so far—that we have this big potential revenue expansion on a per-customer basis. And we believe our expanded TAM just on existing customers is very significant, and it’s why we’re working with urgency on building the momentum. In terms of the progression of these deals, since last quarter, a number of them have positively moved forward, and we believe that will continue to be the case with others as well. Our goal is obviously to formalize as many as possible, but there are a few specific deals that we’re trying to get done by year’s end to contribute to our visibility on increased growth in 2027 as we enter next year.

Ross Koller (Analyst at Caller Capital)

Awesome. And Russ, what’s driving the increased deal sizes? Are there certain products that are resonating particularly well with the existing base?

Russ Horowitz (Chairman of the Board)

Yeah. What’s driving increased deal sizes and the increased number of these potential deals is our ability to move beyond selling just the analytics and the resulting insights, and now our ability to bundle it with action and revenue-generating outcomes. The insights inform. When we can show tangible positive impact to the revenue line based on our actions, the dollars customers can and are willing to pay us goes up significantly. Right now there’s three or four new products that we’re bundling and selling based on this opportunity profile. As I noted in the past, when we sold insights only, we had very little influence or control on whether the customer actually followed through and took action on these. And in the absence of action, they don’t achieve the revenue and value impact that our insights highlight. Looking back, taking those actions isn’t trivial. It can require making operational changes, needing to mobilize cross-departmental collaboration—another coordination within large, complex companies.

But it’s different now. With AI, we have the ability to more easily bundle and connect our insights to AI-driven automated actions. When we can effectively take the needed action on behalf of the customer, the outcomes become tangibly achievable and measurable, which changes how much they can or are willing to pay us. Another virtuous element of this whole thing is that our analytics are able to objectify the improved results by measuring the value impact of the outcomes we generate through things like increased bookings, appointment rates, and revenue.

Good question.

Ross Koller (Analyst at Caller Capital)

Awesome. And then the $10 million EBITDA run rate looks great this quarter, but, you know, in the PR you mentioned targeted investments back in the business to drive growth. Is there any way you can quantify the size of these investments? And how should we think about the operating leverage in the business as you invest to reaccelerate the growth towards the $100 million target?

Russ Horowitz (Chairman of the Board)

Yeah, look, we’re feeling really good about the strategy, the opportunity, and we are intent, as we’ve noted, to make selective investments focused primarily on sales and product development that can drive increasing revenue growth. But based on our current outlook, it shouldn’t have any substantial effect on our EBITDA profile. And looking at our executive and management teams, with Travis now in the President’s role and the rest of us executing within our roles as well, we’re now largely built out. On the customer and product side, we have the key data and expertise capabilities we need to evolve our product sets. So as we increase revenue run rates and harvest some of the operating efficiencies we already have planned, we can make those investments in further growth and still scale up the EBITDA beyond the current $10 million plus of run rate, which will also drive increasing free cash flow.

We’re focused on all of those as core metrics as we execute.

Ross Koller (Analyst at Caller Capital)

Awesome. And then lastly, Russ, can you talk about the IR strategy going forward and how you’re going to go about increasing the awareness in the investor community?

Russ Horowitz (Chairman of the Board)

Definitely. First and foremost, we believe the stock is meaningfully undervalued. I mean, we spent the last 12 months architecting the evolved strategy and executing and integrating the acquisition, and now we want to tell the story. We’re going to be attending conferences—we have a couple coming up in Q4—and trying to pick up more sell-side research coverage. We believe the company has a very attractive foundation with our having established the $10 million in annualized adjusted EBITDA and a potential path to more.

You know, this is the highest EBITDA levels we’ve seen in over a decade. And we believe that we are and will be an AI winner. Other companies in our tangential markets are being acquired for huge multiples of revenue. You know, we’re currently trading at about one times sales on an enterprise value basis and about six times enterprise value on an adjusted EBITDA basis. With a business with accelerating growth and profitability, we believe the gap between where our stock’s trading and the intrinsic value should close over time with our successful execution and our telling the story, which we’re going to be increasingly doing.

We really look forward to doing that.

Ross Koller (Analyst at Caller Capital)

Awesome. Thanks for taking my questions.

Russ Horowitz (Chairman of the Board)

Appreciate it. Thank you.

OPERATOR

We have reached the end of the Q&A session. I will now turn the call back over to the management team for closing remarks.

Russ Horowitz (Chairman of the Board)

Yeah, this is Russ. We just want to thank everybody again for the ongoing support, and we look forward to updating you as we make progress, including additional interim announcements as we achieve key elements as well. Thank you everybody, and again appreciate everything.

OPERATOR

Thank you for attending. You may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.