Marchex Inc (MCHX) 2011 Q2 法說會逐字稿

Good evening.

My name is Vivian, and I will be your conference operator today.

At this time, I would like to welcome everyone to the Marchex second quarter earnings conference call.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question-and-answer session.

(Operator instructions).

Thank you.

I would now like to turn the call over to Mr.

Ethan Caldwell, Chief Administrative Officer and General Counsel.

Sir, you may begin your conference.

Thank you.

Good afternoon, everyone, and welcome to Marchex's business update and second quarter 2011 conference call.

Joining us today are Russell Horowitz, Chairman and Chief Executive Officer; John Keister, Executive Vice Chairman; Peter Christothoulou, Chief Operating Officer; Michael Arends, Chief Financial Officer; Brent Turner, Executive Vice President of Call Advertising; and Matthew Berk, Executive Vice President of Product Engineering.

During the course of this conference call, we will make forward-looking statements that involve substantial risks and uncertainties.

All statements other than statements of historical fact included on this call regarding our strategy, future operations, future financial position, future revenues and other financial guidance, acquisitions, projected costs, prospects, plans and objectives of management are forward-looking statements.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements.

Actual results or events could differ materially from the plans, intentions, and expectations disclosed in the forward-looking statements we make.

There are a number of important factors that could cause Marchex's actual results to differ materially from those indicated by such forward-looking statements, as are described in the Risk Factors section of our most recent periodic report and registration statement filed with the Securities and Exchange Commission.

All of the information provided on this conference call is as of today's date, and we undertake no duty to update the information provided herein.

During the course of this conference call, we will also reference certain non-GAAP measures of financial performance and liquidity, including OIBA, adjusted OIBA, adjusted EBITDA, and adjusted non-GAAP EPS.

A reconciliation of these non-GAAP financial measures to the comparable GAAP financial measures is contained in today's earnings press release, which is available on the Investor Relations section of our website, and definitions of these measures as used by us and the reasons why we believe these measures provide useful information are also contained in today's earnings press release.

At this time, I would like to turn the call over to Russell Horowitz.

Thank you, Ethan, and welcome, everyone.

On today's call, I'll briefly discuss our progress, Mike will review our financial results, and then we'll open it up for Q&A.

The second quarter represents an initial point of validation for Marchex and for all the hard work our people have poured into this company.

Our second quarter was not only a record for us in many ways, but highlights that the bet we made several years ago to focus on and lead in the transformation of digital call advertising is beginning to pay off.

A few years back, we recognized an emerging and unique opportunity to leverage technology to transform an industry, call advertising.

As a relatively smaller company in 2008, if we were going to claim a leadership position in what we believed would be a transformative market, we would need to invest well ahead of our thesis, as the emergence of mobile and other call media sources, when combined with deep co-analytics, would transform how advertisers bought and measured phone calls as a lead source.

We believed that if we could bring singularity of focus around this opportunity, Marchex could be the leader when it came to digitally driven live connections, new customers, and more sales through the phone.

For decades, advertisers have been using offline media channels, such as newspapers, radio and Yellow Pages, with the explicit intent to drive phone calls from new customers, and doing so without any measurability.

This meant that there were no business rules for incoming calls, no filters for bad calls, no analytics to understand the phone calls, no customer conversion information, and no performance-based business models.

The advent of search marketing, while clearly important, did not and still does not solve the need for these advertisers, which tend to be service-based businesses who want to drive live connections, new customers and more sales.

Our focus has been to solve this customer need through building the largest and highest quality digital call marketplace and facilitating calls for advertisers of all sizes and in all geographies and through all devices.

Our strategy has been two-fold.

One, leverage our co-analytics platform as the foundation of our advertising center to support hundreds of thousands of national and local businesses, and two, build exclusive partnerships with the large mobile carriers, mobile applications developers, and VoIP providers as unique call media sources.

Our investments in technology have led to such innovations as call mining, call optimization, and call targeting and filtering features.

All of these are examples of areas that have allowed us to succeed in unlocking the value of calls as the highest return on investment lead source for hundreds of thousands of advertisers.

In turn, our success here has allowed us to drive very high yields for our publisher partners, meaning on a relative basis, we believe we are driving higher revenue and margin for the advertising inventory allocated to us versus their alternative.

As we sit here today, Marchex is well positioned to help define this rapidly evolving industry as it gains momentum.

Here are some of the near-term items we're executing against.

First, we want to make it easier for advertisers and publishers to work with us.

Our focus is to continue driving technical innovations and building call advertising products that make it simple and lucrative for both advertisers and call media publishers to work with us, and it is one of the areas we are most heavily investing against.

Second, we want to add more call media publishers to grow our digital call marketplace.

Our focus is to continue extending our supply-side leadership, which currently consists of more than 100 call media sources, to drive hundreds of millions of annualized calls.

We will both grow existing relationships, as well as add more mobile partnerships.

Third, we want to add more national and local business advertisers to scale both our advertiser coverage and budgets.

We are focused on doubling our sales and support personnel to grow our direct customer relationships, add reseller partners who support local businesses, and further extend our agency presence.

We're already making very good progress here, having built a base of hundreds of thousands of advertiser relationships.

Our advertisers tell us every day about the superior value that our digital call marketplace drives compared to other forms of advertising, including pay-per-click advertising.

And fourth, we'll expand internationally.

We believe the digital call advertising call opportunity is global, and we expect to be operating in Europe this year and are focused on other potential markets as well.

With that, I'll hand the call over to Mike.

Thanks, Russ.

During the second quarter, continued progress with our digital call advertising customers and products helped drive significant year-over-year growth.

Total revenue for the second quarter was $38.8 million.

Growth was driven by continued execution across all of our call-driven product and customer initiatives.

Revenue from publishing was $5.4 million.

Jingle results included from the date of acquisition accounted for slightly more than our previous forecast of $5 million.

The integration of Jingle into Marchex, including our integrated sales effort, is well underway and so far is on track with expectations.

As we've previously stated, we will not be breaking out Jingle's contribution prospectively given it will be a highly integrated part of the Marchex digital call marketplace.

Excluding stock-based compensation, acquisition costs and amortization of intangible assets, total operating costs were $38.8 million for the second quarter of 2011.

Sales and marketing, excluding stock-based compensation, was $3.5 million.

During the quarter, sales and marketing expense levels were in line with our expectations.

In the near term, we expect our marketing expense to increase modestly.

Longer term, we expect to increase marketing expense in support of the continued growth of our sales and customer support teams and the evolution of our products.

Adjusted operating income before amortization for the second quarter was $5 million.

Adjusted EBITDA was $6 million.

GAAP net income applicable to common stockholders was $80,000 for the second quarter of 2011, or $0.00 per diluted share.

This compares to GAAP net loss applicable to common stockholders of $3.2 million for the same period of 2010, or $0.10 per diluted share.

Adjusted non-GAAP income per share, an estimate some Wall Street investors utilize as a supplemental measure of our operating progress, was $0.08 per share.

During the second quarter, we generated $5.7 million in operating cash flow, and had $28.3 million cash on hand as of June 30, 2011.

Additionally, we sold a small number of nonstrategic domains that yielded $2.7 million in incremental cash flow.

This quarter's domain sales represented the largest quarter since we began selling nonstrategic domains.

As highlighted previously, we expect nonstrategic domain sales to be uneven quarter to quarter, but we do continue to see strong demand here.

During the quarter, we acquired 379,000 of our common shares for a total price of $2.8 million, bringing our total shares acquired under our repurchase program to 10.4 million, or 28% of our common shares outstanding.

We will continue to be opportunistic with respect to share repurchases while also maintaining a meaningful cash position for financial flexibility.

Now, turning to our outlook for 2011, which includes our guidance for the third quarter.

First, looking at our revenue guidance for the remainder of 2011, we are seeing continued momentum with our digital call advertising products for all customer types, and we expect that momentum to drive growth throughout the year.

As a result, today we are increasing our guidance for the year by $10 million, to a range of $147 million to $149 million.

For the third quarter, we expect revenue of between $39 million and $40 million driven by continued growth in our call advertising products, while factoring in relatively consistent revenue in publishing.

Momentum in our digital call advertising products continues to build and is on track to represent more than 75% of our revenue by year's end.

Based on this progress with our call-driven revenue, revenue from publishing sources continues to become less material.

Also, as we develop some of our publishing assets to focus on driving phone calls, the distinction between publishing revenue and our call-driven revenue is becoming less meaningful.

As a result, going forward, we are no longer going to disclose our publishing revenue as a part of our quarterly press release.

In the future, we may include new metrics that more closely align with our progress with call-driven revenue and with our call advertising customer and product progress.

Next, looking adjusted at OIBA and EBITDA margins.

For 2011, we expect more than $18.5 million in adjusted operating income before amortization, implying more than $23 million in adjusted EBITDA.

It's important to note we weren't able to invest as much and hire as many people as we would have liked in the second quarter to support our digital call advertising leadership position, so additional hiring and investing, particularly in the areas of product engineering and sales, will be an important focus both in the third quarter and throughout the remainder of 2011.

For the third quarter, even with our focus on investing our current growth back into hiring and market leadership opportunities, we expect adjusted operating income before amortization and EBITDA to be sequentially higher than the second quarter.

And OIBA should be $5.1 million or more, and EBITDA should be $6.1 million or more.

We are carefully managing our investment in the digital call advertising opportunity such that as we grow, a portion of the incremental contribution will be allocated to support our growth initiatives, including investments in our products, our people and our customers.

The rest will flow through to contribute to expanding profit margins.

As previously communicated, we believe Marchex can deliver strong annual growth rates with revenue and EBITDA margins scaling beyond 20% over the long term.

And just to clarify one of my prior comments, excluding stock-based compensation, acquisition costs and amortization of intangible assets, total operating costs were $33.8 million for the second quarter of 2011.

And with that, I'd like to hand it back to Russ.

Thanks, Mike.

We're pleased with the progress we've made so far in 2011, but we also recognize that the digital call advertising industry is in its early stages.

Therefore, we'll need to stay focused on both adding new customers and growing our existing relationships in order to deliver on the sustained growth that we expect over time.

I want to thank our employees for their continued dedication and hard work, and we look forward to updating you on all our progress throughout the year.

With that, I'll hand the call back to the operator for Q&A.

(Operator instructions).

And your first question is from the line of Ross Sandler with RBC Capital Markets.

Hey, guys, good quarter.

I've got three questions for you.

First, can you give us an update on the Jingle integration, where we are with that?

And can you talk about the sources of inventory from Jingle and how that might be different than some of the other stuff in the pay-per-call network?

Second, Mike, did you guys call out the growth rate for call-based advertising specifically in the quarter?

What was that, and is that accelerating?

And then, third, Russ, Google has made some announcements around call analytics products recently.

Can you just talk about the differences between what Marchex is offering and their services and maybe some of the differences in the features that are being provided?

That's it.

Thanks, guys.

Sure.

All good questions.

Thanks, Ross.

On your first one, the Jingle integration status, it's going well.

I think the teams are operating at this stage as an integrated part of Marchex, and we're seeing a lot of those benefits play out, I'd say consistent with what motivated the acquisition.

So we really look at Jingle at this point as an integrated part of Marchex's digital call marketplace.

So things are on track, and we feel really good about the integrated team.

In terms of the unique sources that Jingle brought to Marchex, a lot of it was centered on those existing relationships with mobile carriers, and those have turned out, again, to be an accelerant for us overall, and I think are giving us some runway both for increased penetration with those pre-deal relationships that Jingle had, as well as opening up relationships with new mobile carriers just given at this point our collective credibility and opportunity.

So good things happening there.

In terms of the call advertising growth, I'll hand that one to Mike and come back to your last question.

So, Ross, if you look at a little over a year ago, we had less than 38% of our revenues were coming from call-driven revenue sources, and at the end of the fourth quarter of 2010, it was about 55%.

We're forecasting today still that it's going to be over 75% of our revenue by the end of 2011.

We didn't break out the specific growth rate this quarter, but just like the revenues for us were a record quarter, we had record growth with our call-driven advertising products.

And I'll -- happy to hit the last question you asked on what Google is doing with launching a call-tracking product.

What it appears they're doing is allowing advertisers to pay them to utilize call tracking, to have a number that they can imbed as part of their click campaigns and measure the outcomes.

It's different in that it's specific to Google and it's specific to those existing search campaigns.

With Marchex call analytics, it's a much broader solution when you look at basically tracking and analyzing any phone calls derived from any media source.

And so when you look at it, I'd say the richness of the features, the ability to layer in call mining, intelligence and optimization, and do so across any number of media sources versus integrating call tracking specifically into Google click campaigns -- they're very different products in that regard, and they're solving very different problems.

And your next question is from Eric Martinuzzi with Craig-Hallum.

My congratulations as well on the good quarter and outlook.

By not breaking out the call advertising, I guess we're sort of left with our own projections as far as the ad services group revenue.

Obviously, you're having good success with Jingle here, but I'm just curious.

Maybe I could back into it.

This proprietary traffic historically wouldn't have been up sequentially.

What explains that?

I'm not sure we're following the question, Eric.

Maybe you can help us.

For the publisher revenue, I have that at 5.4, up from 5.3.

Eric, I'm happy to -- let me know if I don't answer the question that you're looking for some feedback on, but last quarter I believe we conveyed that we expected publishing revenue this quarter would be in the same range as the previous quarter, so it did perform in line with our expectations.

The outperformance clearly came from our call-driven products, and we're really pleased to see the momentum and outperformance of our business and what opportunities are coming from it.

We also tried to provide some new metrics based on call-driven revenue and the incremental contribution margins there of 20% to 35%, and then the non-call-driven revenue, which includes publishing and the incremental margin contribution of 50%, as a means to understand who we are today, what's driving our business, and how that can financially contribute to our all out performance.

So hopefully that clarifies it, but if there's another question, either Mike or I are happy to address it.

Okay.

I just -- being able to capture that, you've given us these fourth quarter touch points.

Is there some reason why we can't get quarterly touch points on the call, advertising as a percent of?

We think that we've given some metrics that allow for a pretty transparent view into what our revenue is based on both having disclosed what the publishing numbers are today and clearly where we expect call-driven revenue to be, and the margin characteristics associated with each.

So we do intend to provide more metrics as we go forward with a goal of making our business as transparent as possible for all those folks, including yourself, who have invested their time to understand what we're doing.

Okay.

Let me shift gears here.

The R&D that you had for the quarter, about $5.5 million there, is that sort of a -- can we use that as a run rate on a go-forward basis?

We're actually -- when we talked about this in our prepared comments a little bit, we actually think that it's going to increase on a go-forward basis, because we're investing significantly just in some of the product positions and the people and the efforts there.

And so we do think that it's going to go up over the next six- to nine-plus months type outlook.

All right.

And then the two sides of your business, we've got the supply side on the one hand, and you've obviously inherited some terrific relationships with those four of the top five mobile carriers, but the demand side as well.

I know that part of this is a -- I won't say it's a struggle, but getting a consistent demand out of the supply side.

Could you address sort of if you've gone back in and taken a look at those supply-side contacts, or if those have been renegotiated in any way.

I'd love to know if they're on equivalent or perhaps more favorable terms on the supply side, and then on the demand side, any even anecdotal evidence of a ramp up on the demand side?

Sure.

I'll do the best I can to provide some color.

On the supply side, nothing has really changed there, except we've increased, I'd say, our penetration with existing customers.

We've added new ones, and we think that's a rhythm that will really continue.

In terms of on the demand side and with our business overall, we're having a good time over here.

We're operating in a space we believe in.

We're seeing points of validation happen before our very eyes.

It's nice to be able to see that increasingly show up in our financial results.

And there are a lot of advertisers out there for a long time who have built their business through the phone.

It's how they've acquired new customers and how they've grown their sales.

And clicks emerged and a lot of them tried it, but it really didn't deliver what they needed, even if it was more measurable than those old models they bought that didn't provide any measurability.

As they now increasingly understand that they can buy calls on a performance basis and have measurability and transparency, we see really good adoption.

We see it with the big national guys, and we also see it with the small businesses.

So we feel pretty good about what's happening on both the supply and demand side.

Thanks.

The next question is from Gene Munster with Piper Jaffray.

Good afternoon, and I'll add my congratulations and maybe two questions.

First just broadly from an opportunity standpoint, what opportunity do you see in selling click-to-call for your own sales force?

I don't know how many people you might have on your own team, on the Marchex team, selling click products today, versus where you think that could go a year from now.

And separately, there has been some talk I guess from a couple of recent calls in the last two days, actually, that talked about the softness in the small to medium business market.

Are you seeing any of that softness, and how do you -- if it is soft, how do you guys see yourselves navigating through that?

Thanks.

Thanks, Gene.

Again, both good questions, and I think very timely.

When you look at what we're doing in sales and with customer support, we communicated as part of today's call presentation that our goal was to double our sales in customer support organizations.

So if you look at the two ends of the funnel that drive our business, our investment in predominantly focused on product and engineering on the one side.

We have a -- I think our company is doing a very good job of listening to our customers, and it's really informing our product road map.

And we want to add the resources that allow us to take this early leadership position and really extend it and keep making it more and more defensible.

On the front end, we feel like we just need to keep executing and kind of mark time, because we see market education working for us, and we know that the more we can grow our sales force and spread the word, the more that's going to drive the growth of Marchex.

And so those two components are really where I'd say we're focusing our greatest investment, particularly in terms of the human resources.

In terms of the kind of macro backdrop and some of the comments on small businesses, I really can only comment on the Marchex [wins].

And kind of to what I said a moment ago, in small businesses specifically, historically they've [loved] products that were centered on phone calls as the predominant driver of acquiring new customers and increasing their sales even though they couldn't measure it.

And they've gone through their own transition as ad models have been disrupted and consumers have adopted new means of making phone calls.

But today, when we go out to these customers and offer them phone calls under a performance-based model with transparency, we see pretty rapid adoption, so from our lens, we really like the trends.

Okay, but I guess are you seeing -- it sounds you may or may not be seeing a softness or you're not seeing it at all just because your wallet share is increasing?

Again, through our lens, these small businesses have a problem or a need that they need solved, and it's to acquire new customers and grow sales.

And for a whole bunch of categories of advertisers and small businesses, it happens through the phone.

And we're taking risk off the table for how they buy those phone calls, and we're bringing measurability with call analytics so they know what they get for what they spend.

So when you look at that value proposition addressing that need, it's very persuasive.

Got it.

Okay, great.

Thank you.

The next question is from Sameet Sinha with B.

Riley.

Yes, thank you very much.

The first question is in regards to the guidance.

It seems like sequentially you're expecting revenues to increase by less than $1 million.

Then the implied fourth quarter revenue growth is, again, just $1 million.

Assuming that pay-per-call still follows the same trends as the overall advertising industry, do you think that that's being extremely conservative at this point?

That's my first question, and then I'll have a couple of follow ups.

Sure.

I think we're being appropriately conservative in our guidance.

We don't mind if you look at that as a conservative lens in terms of looking at our business.

We're in a young industry.

We obviously like the acceleration of growth.

Typically in young industries, growth doesn't kind of go up in a linear fashion, and so we felt that's the most responsible methodology to apply to our guidance.

Okay.

Then the second question as it relates to guidance is, I mean, you had a good [beat] and you're obviously raising guidance.

Is that because you're seeing better than expected performance amongst your national advertisers, or is it the small and medium businesses?

We're in the fortunate position we're actually seeing adoption and penetration across both of those, so across both the large national advertisers as well as thousands, tens of thousands and hundreds of thousands of small businesses.

Okay.

And my final question is, you're putting together a pay-per-call platform.

Can you talk about how unique that is?

The market opportunity is still -- I mean, we are still in the early stages.

One of your competitors, Yext, pivoted out of this business last week.

Is it because the market opportunity wasn't big enough or the platform wasn't appropriate for this opportunity?

This is Russ.

I think it's, again, an excellent question.

We think Yext pivoting out really highlights that this is hard to do.

And we've spent more than -- the better part of the last three to four years and more than $100 million, obviously through kind of a lot of thankless time, hoping that we were doing the right thing and taking this call analytics platform and trying to make it really the industry standard and then creating a performance-based media marketplace on top of it.

And so we think that bringing together the combination of resources, capital and time to create that is very much a unique asset.

We think it's difficult to replicate today, and we think it gets increasingly difficult to replicate with time.

Clearly, having that technology platform only matters if you're able to get adoption from both advertisers and with supply sources.

And so when you look at spending that same three to four years getting out there and building the relationships with direct national advertisers, with agencies, with kind of broad-based resellers as well as vertical specific resellers, we feel we've done something very unique in terms of how we've approached demand and making key parts of it defensible.

And then on the supply side, we made an early bet that this would be the right -- one of the best models to leverage the trends with mobile and smartphone adoption, and we've been able to get out there and create a lot of defensible and exclusive relationships as well.

So we do think that the platform is unique, and we do think that our position is unique and will be increasingly difficult to replicate.

Thank you, and thank you also for providing some relief after a brutal day in the market today.

We're happy to play that role today.

Thank you.

And your next question is from Robert Coolbrith with ThinkEquity.

Good afternoon, and congratulations again.

With the record growth in call advertising that you're talking about, do you view maybe an inflection point sort of taking place with the business, also with sort of the big increase in guidance?

Was there anything particularly that's been happening recently in the environment or your business that you're sort of incrementally excited about beyond an already sort of pretty exciting opportunity?

Good questions.

We may well be at an inflection point.

They're always easier to recognize looking backwards.

But having lived through some of these, it feels like that may well be what's happening, and clearly our focus is on, as you talk about, kind of the drivers.

I'd say the best news for us is that it doesn't feel like there's something new or outside of what we're already doing, that it really is about just continuing to kind of focus and execute, and time works for us.

And so the theme and the rhythms feel pretty good, and I think that we have an opportunity to be looking back three, six months from now and feeling like this was an important inflection point.

And is it something where maybe budgets are starting to open up, or do people sort of begin to think of this as an unlimited budget item, where it's positive ROI, so they'll take as much as they can get versus deploying a fixed budget?

Just is there any change in how your customers are thinking about the product?

And also, I'll just ask a follow up right now as well.

Any update on just things that are going on with Skype, as well?

Thank you again.

Yes, sure, thank you.

It's kind of all of the above, and you have different customers at kind of different points in their own adoption curve once they bought these products.

One of the ways that we really look at this is can we compress the timelines or cycles from when an advertiser comes in and buys our products to when they really get it, and it gets an institutional mind share and commitment.

And it feels like those timelines are compressing and there are opportunities to compress them more.

Clearly, if we can make that happen, that'll be a good thing for Marchex.

In terms of what's going on with Skype, Skype obviously is an important relationship.

It's a differential part of our digital call marketplace, and it's one of the catalysts amongst many that are helping drive our growth.

Great.

Thank you.

The next question is from [James Addison] with Benchmark Company.

Great.

Thank you for taking my calls.

First, I think earlier in the call you referred to trying to double the sales force.

Could you give us a little more color on where it stands now and sort of the timeline that you would like to get that to?

Sure.

I probably can't give you the specifics on its size today.

The best directional color I could provide is if you look at Marchex as a whole, products and engineering as a group is our biggest group.

When you get to the next level, sales and customer support is kind of number two or three.

And in terms of doubling it, there are some short -- we view this as having some urgency, but we're both moving quickly against -- trying to staff up against both the potential demand and opportunity, tempered against really wanting to hire the right folks with the right experience sets so that those folks we hire really stick and culturally add to what we're trying to do.

So directionally, I look at this thing as over the next year or so would be -- maybe a little sooner, maybe a little longer would be our goal.

Okay, great.

And then it looks like G&A increased a little bit sequentially, roughly $700,000, $800,000.

Is this the run rate we should expect going forward?

This is Mike, James.

It may drop a little bit as we move into the latter part of the year.

There was some work in connection with the Jingle acquisition, and that spiked it a little bit, and so we should see some decline as we move into the third and fourth quarter.

Okay, great.

And then my final question, one of your three focus points is -- or four, is making Marchex easier to work with for advertisers.

One of the push backs I hear from local advertisers related to online call products is they don't own the phone number, the phone number changes.

People write down the number.

If they decide to switch the service, that number that they had written down maybe a couple months ago is no longer really useful to them.

Is there any way to solve that problem, and do you see that as a big hurdle to growing the business?

First off, I commend you for digging in and understanding some of the nuanced challenges that come with actually creating a technology platform that manages this thoughtfully against the needs of the customer.

Whether it's blocking telemarketers before they ever get through to those small businesses and cause a lot of noise, which is part of what we do, whether it's leveraging call mining to really drive how we optimize the campaigns.

There are just a lot of nuanced elements that come into doing this well for call-focused advertisers and small businesses in particular.

What you just said is a great example of a problem that we're focused on solving, and one that we do think there are opportunities to address.

There are ways in which we do it today.

There are ways in which we may -- they may get calls they don't get billed for, because we don't charge for calls generally.

We actually have quality thresholds that must be met before it becomes a billable event for those customers.

So one of the elements is recognizing what's a qualified call they ought to pay for and how do we block calls that otherwise we wouldn't want to even make it through as kind of themes that we focus on as technology-based solutions.

But, again, a good point to raise, a problem that's on our radar, and both in progress as it relates to addressing that customer need.

Great.

Thank you.

The next question is from Dan Salmon with BMO.

Good afternoon, guys.

Two quick questions.

First, one of the earlier questions were asking about the tone of business in light of the macro opportunity.

I wanted to just sort of ask it differently in terms of your tone of business perhaps related to local businesses' fatigue with the daily deal model a little bit.

We've been hearing a lot of small advertisers getting a bit frustrated with the number of folks coming their way with that model, and perhaps if you've seen some effect from that.

And then just secondly, maybe updating us on your work with the carriers on call supply through the wireless guys via Jingle Networks.

Two super thoughtful questions.

Our belief has been that if you look at the transformation of advertising with local businesses -- and as we say, we focus on national companies that are targeting local consumers as well as smaller local businesses.

And our belief was if you look back at kind of the biggest categories in those markets, the two predominant lead forms they valued historically are in-store visits and the phone call.

And the deals model seemed to do a good job of addressing how you get people in the store, and other folks have focused on solving that problem.

And we've been out there focusing on the phone call one without, I'd say, as much noise or fanfare.

And one of the advantages of the phone call is that we're driving qualified customers when they're ready to make a purchasing decision, but it doesn't have the dilution in terms of discounting and promotional elements or churn.

And so we do think there is viability to how people approach leveraging deals for customer acquisition, and as you've noted, there are some challenges that come with it as well.

We do think the unique value proposition associated with calls is gaining increased visibility and increased traction.

How some of that noise around deals is impacting it I can't exactly quantify, but we do see increased momentum and recognition on the value of qualified calls under a performance model.

Okay, and then just an update on Jingle and in particular the opportunity with the carriers.

As I've kind of noted throughout, those are important relationships all of which are contributing meaningfully today, and all of which we think have meaningful opportunities to see expansion and increased supply as part of our continued support of those customers.

Okay, great.

Thanks, guys.

Thank you.

And we have a follow up from Sameet Sinha with B.

Riley.

Yes, thank you very much.

Can you talk about your hiring plans?

Obviously, you've spoken about hiring more salespeople, but how about people in the engineering or product development divisions?

And secondly, can you tell us how much revenues came from Jingle this quarter?

So the second part, Sameet, let me address that first.

So we had forecast around $5 million for the quarter, and Jingle came in just over $5.5 million.

Now, again, Jingle is part of an integrated sales operation already, and we commenced that in the second quarter, so it will be not something that's easily broken out on a go-forward basis, but we were able to do that for the second quarter.

In terms of the other question you had just on our hiring plans, we do think that we will have significant additional investment in hiring people, and it's not just in sales, it's also in the product and the engineering front.

And if you look over the course of the next year, we have just over 350 FTEs currently, and if you look over the next 12 months, we could easily that exceed 450 if all things went according to the plans that we have today.

Just to add to that, probably at least half would be in product engineering and sales, and customer support would be the majority of the rest.

Thank you.

(Operator instructions).

There are no questions at this time.

Mr.

Caldwell?

It's Russell Horowitz, and I just want to reiterate our appreciation for everyone's participation today, and we very much look forward to continuing to report our progress to you guys as we move through the balance of the year.

Thank you.

And thank you for your participation in today's call.

You may now disconnect.