Marchex (NASDAQ:MCHX) reported higher third-quarter revenue and a return to profitability, as the company integrated its July acquisition of Archenia and pursued sales of artificial intelligence-powered products to existing customers.
Revenue rose to $16 million from $15.2 million a year earlier, while net income was $1.3 million, or $0.03 per diluted share, compared with a net loss of $1.3 million, or $0.03 per share, in the prior-year quarter. Chief Financial Officer Brian Nagle attributed the improvement in net income primarily to operational and organizational initiatives that reduced expenses.
Nagle said the financial results reflect Marchex and Archenia on a combined basis for both the current and historical periods presented, as required by generally accepted accounting principles. He said the company’s third-quarter Form 10-Q would provide more information on the accounting treatment.
Profitability Improves as Expenses Fall
Adjusted EBITDA increased to $2.4 million from $0.5 million in the year-earlier quarter, as adjusted. The latest quarter included approximately $200,000 in reorganization and acquisition-related costs; adjusted EBITDA before those costs was $2.6 million.
Operating expenses excluding cost of revenue fell to $6.7 million from $9.3 million, reflecting expense-efficiency initiatives and an organizational realignment, Nagle said. Gross margin declined to 51% from 54%, which he attributed to the revenue mix and costs associated with paid pilots.
Marchex ended the quarter with $8.7 million in cash and cash equivalents.
AI Deployments and Customer Expansion
Chairman Russ Horowitz said the combination of Marchex and Archenia enables customers to use insights from consumer conversations to qualify leads, improve call handling and convert inquiries into appointments and sales.
One existing advertising and media customer commercially deployed Marchex’s AI Voice Agent after a paid pilot, Horowitz said. The existing relationship represents approximately $400,000 in annualized revenue, and the company expects the new deployment to generate incremental revenue during the rest of 2026 and add more than $200,000 to annualized revenue from the customer in 2027.
Horowitz said Marchex has also added other AI Voice Agent customers and discussed paid pilots with several large enterprises. The product qualifies callers when sales representatives are unavailable.
Since the quarter ended, a major automotive manufacturer approved Marchex’s Engage for Service product for its dealer portal, allowing eligible dealers to use manufacturer co-op funding toward the solution, Horowitz said. The approval followed an early-access deployment at 75 dealerships as part of a bundled offering.
Asked about upselling to existing customers, Horowitz did not provide an overall average increase in revenue per user. He said Marchex had seen numerous examples of customer revenue rising 50% to 100% or more when it successfully sold bundles that combine insights with automated actions and outcomes.
Horowitz also said the company sees potential for seven figures or more in incremental revenue from each of a double-digit number of customers, with some potentially generating multiple millions of dollars annually over time. He said several opportunities had moved forward since the previous quarter, and Marchex was seeking to formalize some deals by year-end.
Outlook and Leadership
For the fourth quarter, Marchex expects revenue of $15 million or more and adjusted EBITDA of $2.3 million to $2.5 million. Nagle said the expected sequential revenue decline primarily reflects seasonal reductions in call volumes and advertiser budgets, although the sales pipeline and cost efficiencies could help offset typical seasonality depending on the timing of opportunities.
Horowitz said Marchex believes it has a path to more than $100 million in annual revenue and an opportunity to increase adjusted EBITDA in 2027 beyond the third quarter’s annualized run rate of more than $10 million. He said selective investments would focus primarily on sales and product development and, based on the current outlook, should not substantially affect the company’s EBITDA profile.
Marchex plans to provide its first-quarter 2027 outlook when it reports fourth-quarter and full-year results, anticipated in early March 2027, Nagle said.
The company also appointed former Archenia Chief Executive Officer Travis Fairchild as president, effective the day before the call. Fairchild previously spent 18 years at Marchex in strategy and development positions. Troy Hartless will continue as chief revenue officer, Horowitz said.
About Marchex (NASDAQ:MCHX)
Marchex, Inc. is a conversational intelligence and analytics company that helps businesses understand and improve customer interactions. The company analyzes phone calls, text messages and other customer conversations to provide insights into marketing performance, sales effectiveness and service quality. Its solutions include call tracking and attribution, conversation analytics, lead management and artificial intelligence-powered tools that identify customer intent, buying signals and opportunities for follow-up.
