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MI

MARCHEX INC (MCHX)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 revenue was $11.5M, down 1.2% QoQ and 8.3% YoY, with GAAP diluted EPS of $(0.02); Adjusted EBITDA was $0.6M (5.4% margin), and management highlighted bookings at the highest levels of the year despite migration-related revenue dilution .
  • Versus S&P Global consensus, revenue missed ($11.51M vs $11.93M*) and EPS missed ($0.00 vs $0.01*); EBITDA also missed consensus ($0.62M vs $0.83M*), though excluding $0.5M reorg costs, Adjusted EBITDA would have been $1.1M, implying stronger underlying operating leverage .
  • Guidance: management reiterated Q4 2025 will be sequentially lower on revenue and Adjusted EBITDA due to seasonality and migration dilution; for 2026, they target ~10% run-rate revenue growth from year-end levels and ≥10% Adjusted EBITDA margins .
  • Strategic catalyst: agreement in principle to acquire Archenia (convertible note and performance-based share earnouts) to build an AI-driven “insights + actions + outcomes” platform; potential combined quarterly revenue run-rate of ~$15M with 15–20% growth in 2026, supporting a path toward “rule of 30–40” over time .

What Went Well and What Went Wrong

What Went Well

  • Bookings momentum: “meaningful increases in sales bookings” with Q3 at the highest levels this year, building visibility into sustainable sales growth for 2026 .
  • Operating leverage improving: Adjusted EBITDA improved net of reorg costs to $1.1M (approx. 50% over Q2), showing leverage as platform migration nears completion .
  • Product innovation: launched Industry Benchmarking in Engage (Oct 1) and a Senior Living AI solution (Oct 20), expanding vertical capabilities and prescriptive analytics for KPIs and occupancy optimization .

What Went Wrong

  • Top-line pressure: GAAP revenue fell QoQ to $11.5M (from $11.7M) and YoY from $12.6M, reflecting migration-related dilution as customers transition to the new platform .
  • Margin compression: Gross margin declined to 63.1% from 65.1% in Q2 and 66.4% YoY, with net loss margin of -8.9% reflecting ongoing investment and migration dynamics .
  • Near-term guide-down: Q4 revenue and Adjusted EBITDA guided “sequentially lower,” with management citing seasonality, migration effects, and macro uncertainty (including prior tariff impacts on automotive verticals) .

Financial Results

Consolidated Performance vs Prior Periods and Consensus

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$12.553 $11.402 $11.655 $11.514
Net Income ($USD Millions)$(0.831) $(1.982) $0.085 $(1.020)
GAAP Diluted EPS ($)$(0.02) $(0.05) $0.00 $(0.02)
Adjusted EBITDA ($USD Millions)$0.313 $(0.783) $0.648 $0.621
Adjusted non-GAAP EPS ($)$(0.01) $(0.04) $0.02 $0.00
Margin MetricQ3 2024Q1 2025Q2 2025Q3 2025
Gross Profit Margin %66.4% 63.3% 65.1% 63.1%
Net Income Margin %-6.6% -17.4% 0.7% -8.9%
Adjusted EBITDA Margin %2.5% -6.9% 5.6% 5.4%
Consensus vs Actual (Q3 2025)Consensus*Actual
Revenue ($USD Millions)$11.925*$11.514
GAAP EPS ($)$0.01*$0.00
EBITDA ($USD Millions)$0.826*$0.621 (Adjusted)
Outlook (Q4 2025 consensus)Consensus*
Revenue ($USD Millions)$10.969*
GAAP EPS ($)$0.01*

*Values retrieved from S&P Global.

KPIs

KPIQ1 2025Q2 2025Q3 2025
Cash & Equivalents ($USD Millions)$10.020 $10.491 $10.321
Accounts Receivable, net ($USD Millions)$7.584 $7.561 $7.396
Deferred Revenue & Deposits ($USD Millions)$1.293 $0.806 $0.430
Total Stock-Based Compensation ($USD Millions)$0.455 $0.556 $0.920

Note: Segment breakdown not disclosed.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ4 2025Sequentially lower vs Q3 2025 Sequentially lower vs Q3 2025 Maintained
Adjusted EBITDAQ4 2025Sequentially lower vs Q3 2025 Sequentially lower vs Q3 2025 Maintained
Revenue Run-Rate Growth2026—~10% from year-end levels Initiated
Adjusted EBITDA Margin2026—≥10% Initiated
Bookings trajectoryNear-termQ3 to be higher vs Q2 Q3 bookings at highest levels of year Achieved (directionally)

Clarification: Q2 guidance anticipated >50% QoQ Adjusted EBITDA increase in Q3; reported Adjusted EBITDA rose to $1.1M excluding $0.5M reorg costs (vs $0.7M excluding $0.1M reorg in Q2), aligning with guidance on an ex-reorg basis .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
AI/technology initiativesOneStack platform completed; unified UI; Azure Marketplace; plan to launch AI Benchmarking, AgentAI Optimizer, Marchex GPT Industry Benchmarking launched; Senior Living AI solution launched; AgentAI Optimizer and Engage GPT expected soon Accelerating product rollouts
Supply chain/tariffs/macroNew federal tariffs impacting automotive/auto services verticals; macro uncertainty escalates variability No new tariff update; continued caution in guide (seasonality, migration dilution) Macro caution persists
Platform migrationOneStack completed; Q2: migration ongoing; Q3: nearing completion by year-end; migration-related revenue dilution Completion expected by year-end; dilution pressured Q3 revenue Moving to completion
Vertical expansion (auto, healthcare, senior living)Expanded OEM channel (FordDirect) to >3,000 dealers; Engage for Service launched; Healthcare solution released Senior Living solution launched; continued verticalized AI analytics Broadening into new verticals
Go-to-market channelsAzure Marketplace live; plan more marketplaces and partners Continued channel expansion emphasis Channel leverage growing
Strategic M&A—AIP to acquire Archenia to add outcomes-based, performance marketing; build insights+actions+outcomes Combination catalyst

Management Commentary

  • “The third quarter represented continued progress with launching new products and accelerating sales bookings to our highest levels this year.” — Troy Hartless .
  • “We currently believe that in the course of 2026, we can see revenue growth on a run-rate basis in the 10% range from year-end levels… [and] adjusted EBITDA margins of 10% or more.” — Brian Nagle .
  • “We feel the company is at a very positive inflection point… expand into AI-powered bundled solutions that provide… insights, automated actions, and the outcomes those actions achieve.” — Russ Horowitz .
  • “Revenue run rates for the potential combined company are approximately $15 million quarterly… which could grow in the 15–20% range in the course of 2026.” — Frank Feeney .

Q&A Highlights

  • TAM expansion: Management sees addressable market as “multiples” of current by selling insights, actions, and outcomes across customer acquisition and optimization .
  • Growth vs profitability: Prioritizing revenue growth while maintaining baseline positive Adjusted EBITDA margins at ≥10% over time .
  • Installed base potential: Combined company could achieve $100M revenue “much sooner,” even within current installed base, as capabilities expand and become easier to adopt .

Estimates Context

  • Q3 2025 vs consensus: Revenue miss ($11.51M vs $11.93M*), EPS miss ($0.00 vs $0.01*), EBITDA miss ($0.62M Adjusted vs $0.83M*). Note: S&P Global EBITDA “actual” may reflect a different definition than company’s Adjusted EBITDA; company disclosed Adjusted EBITDA of $0.621M and $1.1M ex-reorg costs .
  • Q4 2025 consensus: Revenue $10.97M* and EPS $0.01*, consistent with management’s sequential decline commentary .

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Near-term headwind: Q4 guide “sequentially lower” on revenue/Adjusted EBITDA due to seasonality and migration dilution; monitor conversion of bookings to revenue post-migration .
  • Underlying leverage improving: Adjusted EBITDA ex-reorg rose to ~$1.1M, highlighting operating leverage as new products sell through and cost structure normalizes .
  • Product/vertical expansion as growth driver: Industry Benchmarking and Senior Living solutions broaden addressable markets and should support bookings strength into 2026 .
  • Strategic combination potential: Archenia AIP adds outcomes-based capabilities; combined run-rate ~$60M annualized with 15–20% 2026 growth could re-rate medium-term expectations .
  • Watch gross margin trajectory: Margins compressed in Q3 (63.1% GP margin vs 65.1% in Q2); management expects improvement as lower cost structure benefits the model .
  • Execution focus: Completion of platform migration by year-end is a key catalyst for cleaner sequential comparisons and sales conversion .
  • Trading setup: Post-guide-down into Q4, the setup favors looking through near-term softness toward 2026 run-rate growth/margin milestones and any AIP progress (fairness opinion, audited financials, shareholder approvals) .

Appendix: Source Documents

  • Q3 2025 Form 8-K and Exhibit 99.1 (Earnings Release): .
  • Q3 2025 Earnings Call Transcript: .
  • Product/Press Releases (Q3 window): Reporting schedule ; Senior Living solution ; Industry Benchmarking .
  • Prior quarters: Q2 2025 Form 8-K and Exhibit 99.1 ; Q1 2025 Form 8-K and Exhibit 99.1 .