Marchex Inc (MCHX) 2014 Q1 法說會逐字稿

Good day.

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

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

(Operator Instructions).

It is now my pleasure to turn our call over to Mr. Ethan Caldwell, Chief Administrative Officer, General Counsel, and Secretary.

Mr. Caldwell, you may begin.

Thank you.

Good afternoon, everyone, and welcome to Marchex's business update and first-quarter 2014 conference call.

Joining us today are Russell Horowitz, Chairman and Chief Executive Officer, Peter Christothoulou, President, Michael Arends, Chief Financial Officer, and Dennis Cline, Director.

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 finance 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 on 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 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 liquidity.

A reconciliation of these non-GAAP financial measures to the comparable GAAP financial measures is contained in today's earnings 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 release.

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

Thanks, Ethan, and thanks everyone for joining us for today's conference call.

I'm pleased to report that Marchex had a great first quarter.

We delivered strong performance for our clients which resulted in record revenue and growth.

I want to take a moment to thank our employees who solve hard problems every day to make mobile and call advertising work for our customers.

Keeping our client's success at the forefront of what we do has positioned Marchex as a leader in this crucial and emerging market.

The growth we are experiencing is being driven by two factors.

First, advertisers are increasingly embracing mobile as a performance-based medium.

This means they want measurable results for mobile and they are now investing significant budget in call-driven advertising to get those results.

Second, with the rapid adoption of mobile, consumer phonecalls are fast becoming one of the most important outcomes of mobile ad campaigns.

We recognized several years ago that calls would transform the mobile advertising landscape and we invested heavily in unlocking this opportunity.

Phone calls contain valuable information about consumer to business interactions and the data that Marchex can extract from these conversations makes our call analytics, technologies, and services indispensable to our client success.

We are providing strategic insights for advertisers with new layers of depth and granularity, insights that have never surfaced before.

We are pleased with our early progress this year and excited by the trends we see playing out in our business.

In a recent study, Google found that 70% of consumers call businesses after conducting a mobile search.

This consumer behavior, coupled with growing call volume for mobile apps, maps, [VOiP] searches, and other searches means call supply is growing rapidly.

Advertisers are increasingly noticing that as consumers go mobile, the phone is ringing more than ever.

This shows no signs of slowing down.

The International Data Corporation, a global market research firm, predicts that there will be 10 times the number of mobile phones versus PCs in consumers' hands by 2017.

We believe this will continue to be a force that drives calls to businesses.

Understanding what's happening on these phone calls presents a large opportunity.

Businesses already spend billions of dollars annually across media platforms to capture and drive consumer calls to call centers and small businesses.

BIA/Kelsey, a media research firm, found that 61% of businesses prefer a phone call in response to an advertisement over any other action, including website visits and clicks.

We can see why.

Phone calls can yield greater customer conversions, particularly for service-based businesses.

When a consumer is engaged in a live conversation, businesses have an open door to creating a real-time authentic exchange.

Ultimately, it's these connections that drive sales and plant the seeds of customer loyalty.

How do we know this?

We know because our technology examines data from hundreds of millions of conversations between advertisers and their customers.

In fact, Marchex has processed and analyzed more than 1 billion phone calls including more than 300 million last year alone.

This data gives advertisers a 360 degree view of their ad campaign performance, a transparency our clients are hungry for, while shedding light on how they can provide the best consumer experience over the phone.

And we've only scratched the surface with the data and insights we can provide.

Being an early entrant in this market has given us the advantage in developing the technologies needed to make mobile work.

As we embarked on our mission, we quickly learned that the complexity of doing this required us to invest in hiring a diverse team that intimately understands voice technology, call centers, and telecom infrastructure, as well as other aspects.

Our call analytics platform has been the focus of our investment for more than four years and it's designed specifically around understanding conversations and solving fundamental problems like caller targeting, calls found, attribution, and most important, conversions.

Years later, we now have a deep understanding of what makes a high-quality consumer to business phone call and we know how to consistently and efficiently drive more of these calls than anyone else.

Our intellectual capital is the foundation on which we have innovated with more than 30 patents granted or pending.

One example is our call spam blocking technology, CleanCall, which aggressively detects and blocks telemarketers, robo-callers, and other spam dialers while ensuring good callers aren't blocked.

In 2013 alone, we blocked more than 40 million spam calls to small businesses who are dramatically impacted by the cost of handling unwanted calls.

Our capabilities are only growing.

We recently developed a transformative new product named Call DNA, which produces real-time insights into the quality of a call.

This technology reveals interactions between consumers and call centers with a granularity that advertisers have never had before.

Call DNA distills the dialogue between a consumer and a call center by creating an automated visual map of the conversation.

This gives advertisers the power to immediately assess the media channel, advertisement, and keyword that generated the phone call and decide if the [at or] source merits additional budget or needs to be deemphasized in the marketing mix.

We are receiving very encouraging early feedback from advertisers as we continue to evolve our products.

Today, our technology's providing us with a unique competitive advantage in delivering transparency and a high return on investment for advertisers who rely on customer phone calls as part of their customer acquisition process.

As the first quarter demonstrates, our products are well positioned to meet the needs of advertisers as they begin to increase spending in mobile performance advertising.

We've been able to expand budgets with existing advertisers, which has helped inform our approach and strategy with how we grow opportunities with new advertisers.

During the quarter, we continued to expand our advertiser footprint, adding relationships with Tire Factory and Trilogy Automotive.

This, along with the high retention rates, are what helps set a foundation for strong long-term growth.

We're also focused on other growth catalysts, including expanding our agency channel.

We have early growing relationships with OMB, Havas, and Resolution Media, among others.

We look forward to broadening these conversations as calls become a critical consideration for advertisers looking to make mobile performance advertising work for them as a key part of their customer acquisition strategies.

In addition, we continue to expand our footprint of mobile and online sources during the first quarter.

This year, we announced a preferred partnership with MapQuest, one of the leading mobile and online map destinations.

The partnership allows Marchex to leverage MapQuest's broad reach of consumers across every digital channel.

The intelligence we built around calls has helped us build trust with our clients.

They see us as an integral partner in making mobile work and driving customer acquisition.

That trust is helping us win additional budget and increase our penetration with some of the nation's largest advertisers.

In turn, this has helped us build relationships with publishers who view us as a critical partner in monetizing mobile and call advertising.

The convergence of all these pieces will continue to support leadership and growth now and into the future.

And with that, I will hand the call to Mike to discuss our first-quarter results and our updated outlook for 2014.

Thanks, Russ.

For the first quarter, call-driven and other related revenues were $45.5 million while total revenue was $50.5 million, including $1.9 million in domain sales.

The first quarter represented a record in call-driven revenue and growth.

Our call advertising products continued to see strong sellthrough with existing advertisers on a year-over-year basis as we've grown budgets with many of our advertisers in 2014.

We also benefited from some of our advertisers shifting a small portion of their budgets into the first quarter from later in the year.

This progress, combined with our growing pipeline, led to our continued strong growth.

For the first quarter, including domain sales, Archeo revenue was $5 million.

Domain sales were $1.9 million during the quarter.

Total operating costs were $45.8 million for the first quarter of 2014.

This total reflects continuing operating costs and excludes stock-based compensation, separation costs, and amortization of intangible assets.

Sales and marketing costs, excluding stock-based compensation, were $3.2 million.

Over the coming periods, we expect our marketing expense may modestly increase from current levels in support of continued growth of our sales and customer support teams.

Moving to adjusted operating income before amortization and EBITDA from continuing operations.

For this quarter and the foreseeable future, we are reporting two separate methodologies, one including and one excluding domain sales.

We are doing this to ease comparisons with revenue recognition.

As we've highlighted previously, since the launch of the domain marketplace in September last year, we record domains and revenue in accordance with GAAP.

We believe this approach makes comparisons easier on a prospective basis.

Including domain name sales, adjusted operating income before amortization from continuing operations for the first quarter was $4.7 million, and adjusted EBITDA was $5.7 million.

Excluding domain sales, adjusted OIBDA and EBITDA was $2.8 million and $3.8 million, respectively.

Call-driven adjusted OIBDA and EBITDA was $2.4 million and $3.3 million, respectively.

GAAP net income from continuing operations was $810,000 for the first quarter of 2014 or $0.02 per diluted share.

This compares to GAAP net income from continuing operations or $85,000 for the same period of 2013 or $0.00 per diluted share.

Including domain name sales, adjusted non-GAAP income per share from continuing operations, an estimate some Wall Street investors utilize as a supplemental measure of our operating progress, was $0.08 per share and $0.05 per share excluding domain sales.

During the first quarter, we generated $8.1 million in operating cash flow and had more than $38 million in cash on hand as of March 31, 2014.

In addition, we added $32 million in early April as part of our financing, bringing our pro forma cash balances to more than $70 million.

Now turning to our updated outlook for 2014 in the second quarter.

I'd like to continue highlighting that our business is being driven by call-driven products and our investments are centered on maximizing market adoption, given the relative nascent stage of performance-based mobile and call advertising.

Given the relative contribution of our call-driven products and magnitude of our opportunity, we believe focusing on call-driven revenues and profitability measures is the most appropriate way to communicate our business progress and guidance going forward.

Given this and the variability inherent inherent in Archeo domain sales, we are not providing financial guidance on any Archeo operating results today or prospectively.

Archeo operating results would be incremental and additive to our call-driven revenue, profitability, and other measures provided in our guidance.

Looking first at our call-driven revenue guidance for 2014, for the year, we are raising our forecast for call-driven revenue to $171 million or more, which represents 27% growth over 2013.

Additionally, for the second quarter of 2014, we anticipate call-driven revenue of $43.5 million or more.

While advertiser budgets can change and we can experience period to period variability based on a variety of factors, we are excited about the progress we are making with our existing customers.

The visibility in our business is increasing as we further entrench ourselves with our customers through deep integrations.

Furthermore, this success creates a roadmap to win and scale new customers over time.

Next, looking at call-driven adjusted OIBDA and EBITDA margins.

For 2014, we are projecting $8 million or more in call-driven adjusted operating income before amortization and $12 million or more in call-driven adjusted EBITDA.

This guidance implies year-over-year call-driven adjusted OIBDA growth of more than 27% and reflects fully burdened call-driven results under a standalone model.

These amounts exclude any contribution from the Archeo assets in domain sales.

For the second quarter, we anticipate a range of $1.5 million to $2.5 million in call-driven adjusted operating income before amortization in a range of $2.5 million to $3.5 million in call-driven adjusted EBITDA.

A key area of focus for us is to continue to invest in building our technology and support of our partners as they expand their footprint with us in 2014.

We are highly focused on capitalizing on our early mover advantage and performance-based call advertising and we are continuing to invest to support our growth opportunity.

While we believe there is significant margin leverage in our business over the long term, we are focused on becoming leaders in this emerging market and supporting the momentum in our business in the near term.

And with that, I will hand the call back to you, Russ.

Thanks, Mike.

While we are encouraged by the momentum in our business, there's still much to do.

We believe we are in the early stages of our opportunity as advertisers continue to embrace mobile and call advertising as a performance medium.

To our technology, people, and products, we believe Marchex will continue to emerge as a leader in this market.

We're excited about our progress and we look forward to updating you throughout the year.

With that, I'd like to hand the call back to the operator for questions.

(Operator Instructions) Ross Sandler, Deutsche Bank.

I guess, Mike, just two questions for you and then a couple for Russ.

So Mike, on the financials, the quarter was even stronger than the updated guidance from March, so can you just give us a little more color about what you're seeing that drove that upside and is the pace of call revenue exiting the quarter and into 2Q accelerating?

And then if you look at the full-year guidance, you went up by $9 million versus where we were last quarter, and yet only $5 million of upside in the first quarter, so implying an additional $4 million of future flow-throughs.

So can you talk about what's giving you guys the confidence this early in the year to put up such a big number on the call-based revenue?

And then I've got two follow-ups for Russ.

Thanks for the question, Ross.

So a couple of things are driving this.

I think from a customer standpoint, just the message of performance and providing the insights in the intelligence functions around the transparency of what's happening in the course of those phone calls is starting to resonate more and more, especially with some of our existing customers the we've been working with for 18, 24, and 36 months.

And so there is some significant growth from a lot of those kind of customers that we've had for 12 months or more.

And that included customers like Allstate.

But we also made significant progress in the first quarter from customers like Time Warner Cable.

We have been onboarding and piloting Bridgestone for many months now and in the first quarter, they were a growth contributor.

Some of the folks in the real estate vertical, Primedia and Zillow, were growth catalysts for us.

State Farm was an insurance company that we were working with for a little while now and they were also a driver of our opportunity.

And when you think about how that is translating, one, it's helped us from the first-quarter perspective.

It's also helping us get more confidence in terms of just our outlook as we look through the rest of the year and what some of those existing customers may be contributing.

We also have been onboarding and piloting more new customers here in the last little bit.

Whether those are contributing meaningfully or not for us this year, we're not building into our forecast models, but I do think there's also some potential further updates that we could look at later on this year if any of those new ones also provide meaningful contribution.

This is Russ.

Just to briefly augment what Mike said, the other aspect is the market is catching up with us.

We knew we were very early in this market.

Still very early in this market but the market is catching up with us.

The second part is, we have a lot of confidence in the solution we built and its ability to measure calls and find high-quality calls in mobile.

What's harder for us to predict outside of our ability to deliver performance for our clients is when budgets tip.

And when they tip, they can move, and we're seeing that happen in certain cases and we do view that as a good thing and a validator of we are going.

Great.

And Russ, the two I had for you is just more on the customer wins.

So in the quarter, you signed a master/service level agreement with Allstate and how many other large advertises do you think would be potential candidates for that type of a strategic partnership?

And can you give us an update on the push into the agency channel and some of the bigger potential customers coming from that effort?

Thanks, both good questions.

When we think about how many potential customers are there that we can achieve real scale with, like we have with Allstate and some others, we have identified what we think are the 10 verticals that are the early adopter verticals for mobile and call advertising.

And within each of these 10 verticals, you could see -- yes, this generally 8 to 10 or more players with 3 to 5 really big players.

And so when you look at how we've mapped out the opportunity, we do think there's a couple dozen verticals that we're very well-suited to step in and solve this problem and lead with and we're focusing on those 10 that we think are most here and now.

So we think there's a lot of other customers like Allstate for whom we can be a good partner and achieve a significant level of scale.

And we continue to add to the roster and perform in ways that we think can help support the direction of our growth.

In the context of the agency push, this continues to be very much front and center.

We mentioned some of the early relationships we formed.

We are really looking at this as a catalyst for growth for us, based on relationships we formed this year going into 2015.

To Mike's point, to the extent that success happens earlier, that is upside for us.

But this is an area that you'll be hearing more from us for sure as the year unfolds.

Great.

Okay, that's it for me.

Congrats, guys.

I haven't seen these growth rates from you in a long time.

So this is definitely an exciting time.

Gene Munster, Piper Jaffray.

Hey, good afternoon, and congratulations.

Ross, you mentioned a minute ago that the market is catching up to you.

Can you expand on what you mean by that?

And then separately, we've always talked about this market being generally in its infancy.

Can you do the classic what inning are we in in this whole call phenomena?

And then I have a follow-up question.

Sure.

In a nine inning game, I think we're second or third inning.

So I think it continues to be very early.

When we think about the market catching up with us, the way I would describe it is ad dollars follow consumers, consumers increasingly are accessing content that's driving decisions through mobile devices.

A couple years ago, that might have been 10%-ish, and so even though people knew mobile would be big someday, there was not a ton of urgency to having to solve that problem right then.

As of 2013, we exited with most folks seeing more than 35% of the traffic coming from mobile, and pretty much everybody knowing it was a fait accompli that very soon mobile would be the predominant way through which consumers were accessing information.

And we continue to see that accelerate and it won't look back.

And so what's happened in the course of the steepening of mobile adoption and knowing that ad dollars follow consumers is that this has become -- gone from a nice to have or a nice to understand to a must-have because at the end of the day, these companies count on these channels for customer acquisition.

And so that's where it's catching up with us.

Because we've been out there building this solution and being focused on solving this problem and we have gained some early adopters but we are at a stage now where it appears we are approaching a tipping point in that this is becoming a must-have.

If you're out there doing strategic customer acquisition, you have to understand mobile.

And if you're focused on mobile, you have to understand phone calls.

The combination of those two things now is really helping us.

Okay.

And then just a follow-up in terms of pricing, I guess one thing that's unique about your model is you charging for successful calls and any just general trends -- is it pricing coming down and that's having a positive impact on getting in new customers or is pricing going up as existing customers are commencing ROI?

Any just kind of general trends within a pricing phenomena?

Thanks for the question.

This is Mike.

So pricing is consistently across the board generally stable and the same as -- to what it's been.

And that's very much predicated on something that we are doing consciously as part of the marketplace.

Our goals here are to make sure that we can get market adoption and drive forward the opportunity with more and more customers being able to get penetration.

And even as we advance some of the product offerings and evolve the analytics where we are able to actually provide better returns for the advertisers, we're passing that improvement, those technology innovations and improvements on to the advertises so that they can actually get more of a return on an ad spend today, on the same basis compared to what they were getting in the past.

And that's our goal, not just today, but for the near term at the very least, to try and continue to gain market adoption.

And just to briefly augment that -- so if you look at prior transformative opportunities in the advertising space, the companies that have won big haven't come in with the new solution that's 10% better at driving performance.

It's been 30%, 50% better which people, when they understand that, really gets them to take notice and start moving against it.

And so for us, we believe in the longer term, we'll be benefactors of increased pricing, but on a shorter term basis, it's translate our capabilities and to perform measurability and transparency in a manner that can tighten the cycle around adoption of our products and help accelerate our growth.

Okay, and I guess just final question, you mentioned continuing to invest in the business.

Is there kind of some big (inaudible) investing, whether it's sales, people, or technology or both?

And is there one that ends up being a little bit bigger than the other?

You know, today, over half of our Company is dedicated to the product development and innovation teams, and we see that continuing on a go-forward basis just given the early stage of the market and also trying to advance the innovation in the intelligence functions.

I also think on the sales side of things, because of the accelerating market opportunity, expanding our sales footprint is one of the initiatives that we have on the table in the near term, and then just making sure that our infrastructure is able to accommodate some of the significant scaling and volume initiatives we have on a go forward basis.

Those are the three key areas that we are focused on in the near to intermediate term.

All right, thank you.

Dan Salmon, BMO Capital.

You -- this question has been asked before and often in reference to Google and lately it's come up a little bit more around Twitter moving into call-based advertising.

I know your response has always been that bringing some new competition and new exposure to the medium has been a bonus and that certainly seems to have been the case with your results here, but maybe just -- Russ, just maybe a little bit on how you see the competitive environment evolving these days, particularly with some of those big publishers and mobile publishers versus Morvin intermediary business that you provide.

And then just maybe some bigger picture thoughts on where you could potentially see international expansion going?

I know you had some work in Canada at different times but is that a near- , mid- , or long-term strategic issue for you?

Sure.

First off, hitting on the second part of your question first, anybody facilitating calls, we think is good for us.

We think we are ideally positioned by virtue of the products we build and our approach to helping advertisers navigate a diversified and fragmented ecosystem.

And so when you see some of the social media companies and others step in and this will kind of dovetail into your question about Google.

At Marchex, our promise to these customers is we're going to get you in front of your customers in the market you serve when they're looking for the products or services you offer.

And so we're excited about the evolution of publishers and their focus on mobile because we know that means they need to understand calls and aggregate and be able to target the budgets to deliver quality and volume.

And so overall, we're -- we feel like we're well-positioned to again deliver value to the clients as you see some of these publishers adopt new solutions in mobile.

And then as it relates to Google, what we've talked about in the past is in conjunction with that promise, Google turns out to be a pretty good source of high volume and quality, but without the right analytics to measure it and find it and understand what the right approach is to creating campaigns that can target it, you're in a tough spot.

And so for us, as we've gone out and built these relationships, we've organically reached the place where customers come to us and ask if we will extend our solution to Google.

And historically it's been less than 10% of our business, but there's a lot of volume there and we've been able to leverage our solution to grow that business and Google has been very happy with that relationship because we've been a big validator of where the value lies within Google and an accelerant of budgets moving in that direction.

And we think there's more opportunity there with them.

And so all in all, we like the relationship and again, we think there's opportunities for growth.

And then maybe just a follow-up on international ambitions?

Yes, this is an area where it's a global market.

At the same time, we've been focused on building a beachhead if you're in the United States where you've got a gigantic opportunity.

But what we understand is a lot of our customers are multinational and have interests abroad and we need to be that solution that travels with them.

And so we're really using them as the catalyst and we do view international -- when you think about the next 12, 24 months -- as an incremental growth opportunity for the Company.

We haven't built it into the revenue side, although we have factored in investment in both people and infrastructure to the cost side to some degree to get us out there and to be able to support those customers and as we go with them into markets, it gives us the opportunity to add in market customers as well.

So that will be a growth catalyst for us as we think about the next 12 to 24 months.

Great.

Thanks, Russ.

(Operator Instructions) Darren Aftahi, Northland Securities.

(technical difficulty) my questions and congratulations.

Just a handful.

So is it possible to kind of get a sense for maybe same-store sales with existing customers?

And in that vein, kind of a breakdown perhaps of the mix of existing customers in the quarter for call-driven and new customers?

And then I got a handful of follow-ups.

So when we think about just how we on board a lot of our customers, think about $25,000 to $30,000 test programs that trial over a 3- to 6-month period of time and it is those trials and tests when we can on board them in progress them from a trial where they can expand their budgets fairly significantly -- particularly in the Fortune 5000 national enterprise type customers -- and they can double and quadrupled the budgets fairly quickly after those kinds of trials.

But from a contribution perspective, the onboarding and the piloting of customers this year, just by virtue of those dollars that were talking about, haven't contributed a lot.

So a lot of the growth is coming from some of the existing customer base that we either onboarded 12, 18, 24 plus months ago and have grown and entrenched themselves and gone through the annual budget cycle with us where they've committed hundreds of thousands of dollars and, in some cases, millions or multi-million dollars of budget spend with us for the current year.

And some of the [example] customers -- a key growth driver for us is just the relationship that we have with Allstate where we are growing them now to a multi-million-dollar customer -- over eight figures -- but we have expansion, I mentioned earlier with State Farm, another insurance company of significance during this past quarter.

Time Warner Cable was another example.

Bridgestone in the automotive area was a key driver for us.

DISH was a driver.

And in the real estate verticals, some of the examples we have, Primedia and Zillow, were customer growth areas.

And as I also mentioned before, we've got some of these onboarding and pilots and they are literally just trials at this stage.

They could be very meaningful customers whether they hit and contribute significantly this year or not, we don't have that built into our forecast.

But we do think there's some robustness in terms of how they can progress into the latter part of this year and obviously become contributors in 2015.

And simplistically, last year's customer wins drive this year's growth and this year's customer wins drive next year's growth, given the way we know we go in, prove out our value, and then see budgets increase.

And so when we modeled our business and thought about it, it is predominantly modeled around growth from existing customers.

Great.

And then, two more.

One for Mike, I think you had said you saw a little bit of budget spillover from 4Q into 1Q.

Was that material in the quarter?

And then perhaps for Ross -- so intraquarter in 1Q you guys obviously had a relationship with YP and Yelp has partnered with them.

Can you talk about any potential opportunity there longer term?

Thanks.

Just in terms of some of the budget shifts, we did have some moves and shift of budget.

It wasn't large amounts and we do think there's opportunity to get even more budget as we progress throughout the course of the year.

So I'll leave it at that.

And then Russ, if you want to address the other question.

We look at the different players again in the mobile and call-driven ecosystem and our focus says we're not going to come at anyone specific today but we see opportunities for lots of folks and wherever we see opportunity, we're cultivating and building relationships.

Great, thank you.

John Campbell, Stephens.

Guys, thanks for taking our questions and congrats on a great quarter.

So most of the questions -- most of my questions have been answered, but Russ, you talked about seeing budgets tip or hitting a tipping point and going from maybe a modest rev contributor to kind of a meaningful contributor overnight but just curious about the typical timing of how customers transition.

I know that's going to very much vary by customer but just generally, is it typically like a one-year pilot, do you see that budget tip or is it a kind of multi-year process?

It ranges.

The good news is it seems to be tightening, but we kind of look at this through the lens of a 6- to 9-month process.

Okay, great.

And then, I hate to continue harping on this, but if we look at ADT and Allstate, two of your larger customers, both start off as very, very small customers and now have grown to obviously meaningful contributors now on the national side.

But as you guys look at some of those Bridgestones, Time Warners of the world, are those relationships pretty similar?

Obviously the companies are similar in size, but were they running similar type test budgets and basically as you look back at your relationships as you started off with ADT and Allstate, are those kind of similar to what you're seeing now?

We have many relationships with seven-figure customers with whom we see lots of opportunities to grow potentially in very meaningful ways.

Okay, great.

Thanks for taking our questions.

And ladies and gentlemen, there are no further questions at this time.

Do you have any closing remarks?

We appreciate everyone's participation and we are glad to be able to update you on our progress and we look forward to updating you as we continue to build and go through the year.

Thanks again.

This concludes today's Marchex first-quarter earnings conference call.

Thank you for joining.

You may now disconnect.