Marchex, Inc. (MCHX) Q1 2012 Earnings Report, Transcript and Summary

Good afternoon. My name is Marvin, 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] I'll now hand the call over to Mr. Ethan Caldwell, General Counsel and Chief Administrative Officer. Sir, you may begin.

Thank you. Good afternoon, everyone, and welcome to Marchex's Business Update and First Quarter 2012 Conference Call. Joining us today are Russell Horowitz, Chairman and Chief Executive Officer; John Keister, Executive Vice Chairman; Peter Christothoulou, President; Brent Turner, EVP; and Michael Arends, Chief Financial Officer. 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 the 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. On today's call, I'm going to provide a quick business update. Mike will review our financial results, and then we'll open it up for Q&A. Before we get into the business update, in thinking about Marchex as it is being valued today relative to both our assets and business opportunity. We think there's a real disconnect. For example, on an asset basis, over the last few years, we've sold a small portion of the more than 200,000 domains we own, for more than $30 million in cash cumulatively. It is largely been a reactive process based on unsolicited offers received on domains we own. We feel confident that the majority of our domain asset value has not been touched. So when we add up what we believe our domain assets are worth, along with the cash on our balance sheet and present value tax assets, we believe that our core mobile performance, call-driven business, is currently being valued at effectively 0. And this call-driven business is one that's currently more than $100 million in annualized revenue and is well positioned in an emerging mobile advertising market. This is one of the reasons why the company continues to buy back our stock and is also one of the reasons why today I, and certain other executives, announced our intent to personally purchase more Marchex shares in the open market. Also, when looking at this $100 million call-driven revenue business, we've had 3 years of strong growth, but right now, we're working through some classic growing pains. We have a number of great success stories that demonstrate the value we provide our customers when we execute well, and we have some areas where we've underexecuted. Our focus now is to make sure we're replicating and institutionalizing best practices across our organization and operating in a way that enables our customers and products to succeed. We're committed to investing in the people, the products and processes that will help us accomplish these goals and put our growing pains in the rearview mirror. I believe that by approaching our challenges this way, it will allow us to deliver on what is a very meaningful long-term growth opportunity and enable us to get to the next level. So now, let's talk about our core business in the mobile advertising market. Over the last several years, the rapid adoption of mobile devices has started a significant shift in the advertising landscape. Mobile advertising inventory is expanding and advertisers are following consumers into this market. Importantly, the mobile advertising market is in its early stages, and we believe it will continue to evolve and grow based on 3 fundamental trends. First, strong advertiser demand exists for connecting with new customers through the phone. Mobile devices and smartphones deliver the leads that many advertisers want most, which are phone calls from prospective new customers. In a mobile-dominated world, the call is the click. Second, the long-term Call Advertising opportunity is large. For the first time, mobile devices are outselling desktop PCs and the gap is expected to expand significantly in the coming years. As a result, mobile is becoming even more important to advertisers in terms of new customer acquisition strategies, and with this, they have a greater need for deep analytics and performance-based ad solutions that can help them accomplish this. And third, education and technology are the current obstacles to growth, but they're evolving. Currently, advertisers are spending a majority of their ad dollars on mobile display as they gain initial exposure to the mobile market. At the same time, many advertisers are simply unaware of the opportunity to buy phone calls on a performance basis. As this market grows and performance-based customer acquisition becomes increasingly important to unlock the mobile opportunity, we believe that companies like Marchex, with strong technology platforms specifically tuned to the needs of mobile performance advertisers, will be positioned to benefit the most. In response to these trends, Marchex has transitioned to a business that is leveraging the growth of mobile and focused on the call as the ultimate driver of performance in this medium. We believe we're creating a unique ecosystem with a technology platform comprised of the 3 critical components needed for long-term success in mobile performance advertising. The first is Marchex Call Analytics, which we believe is the industry-leading Call Analytics platform. With Marchex Call Analytics, advertisers can analyze and optimize ad campaigns across mobile, online and off-line media, and publishers can understand the true value of their advertising inventory. Additionally, our Call Analytics platform is the foundation of all of our mobile and call-based advertising products. The second component is our Digital Call Marketplace, which uses the phone to connect hundreds of millions of consumers who are searching for specific products or services with large national and smaller local advertisers across more than 100 different sources. The mass shift of consumers into mobile devices has unlocked an opportunity to drive new customers to the phone. We're very much in the early adopter phase of the shift of advertising dollars into mobile advertising. In the first quarter, we continued to add new advertisers, many of them are utilizing mobile performance advertising for the first time. A key part of our Digital Call Marketplace is our voice search platform for mobile carriers and consumers. Our voice search platform supports customizable, private label products that mobile carriers use to monetize many of the most common ways consumers find business information, including automated directory assistance and mobile search applications. And the third component is Local Leads, which is an advertising platform designed to drive quality phone calls, clicks and other leads to small business advertisers at a lower cost per lead than any other industry alternative. Local Leads is a private label platform sold to our network of small-business resellers. Recently, we made progress here by adding Intuit as a new reseller partner while continuing to support existing customers such as a AT&T Interactive and YPG in Canada. One quick note. As most folks know, AT&T Interactive is a large customer and partner of Marchex, and a private equity group is in the process of purchasing a majority stake in the subsidiary business from AT&T. Money transaction like this creates some questions, we believe that our multi-faceted relationship and capabilities remain valuable to AT&T Interactive and our ability to drive cost-effective quality leads to AT&T Interactive's customers, increasingly over the phone, is a competitive differentiator for us that should lay the groundwork for a continued positive relationship with AT&T Interactive going forward. While there's still significant work to do as this mobile market evolves from its early stages, with this approach, over 3 short years, we have built a mobile and Call Advertising business and more than $100 million in annualized revenue and significant long-term growth potential. While we have paid to make it through the phase bumps in the road in the process of establishing early leadership in this emerging market, we believe this will be a meaningful long-term growth opportunity for our company and so we are continuing to invest for long-term growth. Additionally, we believe strongly that as a company, we are building unique intellectual property that solves real customer problems in what is a complex and exciting space. With that, I'll hand the call over to Mike.

Thanks, Russ. Total revenue for the first quarter was $35.5 million, with call-driven revenues representing $26.4 million. Our non-call-driven revenue has experienced a decline of nearly $2 million sequentially, as we saw weakness from advertiser spending given our decision to concentrate our investment in product development and support for a higher growth mobile performance and Call Advertising Products. We previously communicated that we believe our non-call-driven revenue will decline over time as a result. Excluding stock-based compensation, acquisition costs and amortization of intangible assets, total operating costs were $32.2 million for the first quarter of 2012. Sales and marketing costs, excluding stock-based compensation, were $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 be relatively stable with current levels. Longer term, consistent with what we've messaged in prior quarters, we expect to increase sales and 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 first quarter was $3.3 million. Adjusted EBITDA was $4.3 million. GAAP net loss applicable to common stockholders was $788,000 for the first quarter of 2012 or $0.02 per diluted share. This compares to GAAP net income applicable to common stockholders of $513,000 for the same period of 2011 or $0.01 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 $0.05 per share. During the first quarter, we generated $4 million in operating cash flow and had $41 million cash on hand as of March 31, 2012. In addition, in April, we paid Jingle shareholders approximately $18 million in cash as part of our aggregate compensation for the acquisition, bringing our cash balance to approximately $23 million at the time of the payment. During the quarter, we acquired 136,000 of our common shares for a total price of $682,000, bringing our total shares acquired under our repurchase program to 11 million or 30% of our common shares outstanding. Now turning to our outlook for 2012 and the second quarter. First, looking at our revenue guidance for 2012. For the year, we currently anticipate revenue will be between $144 million and $152 million. For the second quarter, we anticipate revenue will be between $34.5 million and $36 million. We anticipate sequentially increasing call-driven and total revenues in the third and fourth quarters of 2012. Next, looking at adjusted OIBA and EBITDA margins for the year. For 2012, we currently expect more than $14.5 million in adjusted operating income before amortization and more than $19 million in adjusted EBITDA. For the second quarter, we anticipate approximately $3.3 million in adjusted operating income before amortization, and approximately $4.3 million in adjusted EBITDA, with adjusted OIBA and adjusted EBITDA scaling up for each of the remaining quarters in 2012. While we anticipate that we will see growth in demand for our call-driven products as we go through the year, our sales strategy to direct national call advertisers and resellers is still evolving, and we have exposure to period-to-period variability with committed budgets. And this can translate to variability in our financial performance. As we move forward, we are managing our investment levels, 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. Over the long term, we believe Marchex can deliver healthy annual growth rates in revenue, with EBITDA margin scaling beyond 20%. As we have communicated previously, we are also evaluating potential strategic alternatives for our non-call-driven products and assets, including our domain name assets, in order to further focus on the products and opportunities that can drive business growth. We believe our rich asset base is not being properly valued and whether through select development of these assets, sales or a combination of both, we are more aggressively pursuing how best to get this value realized. We expect this process will take time, but we are actively working on it today and will continue the conversations we have begun with a number of different parties that have expressed interest in various of our nonstrategic assets. In the period between January and April 2012, we sold more than $2.6 million of nonstrategic domains. While there are no guarantees regarding the outcome of these conversations or what sales will actually be realized, we do feel we will be able to build on our efforts so far in terms of domain or asset sales. We expect to have more information to share with you in the coming periods. And with that, I'd like to hand the call back to Russ.

Thanks, Mike. We believe there's a meaningful long-term opportunity in driving mobile advertising performance. We worked hard in this area for several years and have learned a great deal. We have an update to support our thesis that's driving phone calls from consumers to businesses will be a major component of monetization, if not the primary component for mobile device. Today, we have many world-class companies working with Marchex and using our products. Their feedback to us has been very positive. Our core focus now and for the coming quarters is simply to execute on the opportunity we've been working so hard to unlock. In order to execute at a high level, we need to continue developing and deepening these partner relationships, while outsliding new ones out to support our growth, as well as the diversification of our business. We'll also continue investing and bringing in the highest quality people at all levels of the company, including at the executive level. In short, we're deeply committed to investing in the people, products and processes that will help us take the next step forward to be a long-term leader in mobile and Call Advertising. For the coming months, as we continue to invest in educating the market and steepening the adoption curve, we believe we'll see a pickup in the adoption of our mobile performance and call advertising products. Marchex is already profitable and we are confident in our ability to take our early position in the mobile and Call Advertising market and translate them to strong financial growth as this category matures. I want to thank our employees for their continued hard work and dedication and we look forward to updating you throughout the year. Additionally, we recently launched the new corporate website at marchex.com that we encourage you all to visit. Now I'll hand the call back to the operator for Q&A.

[Operator Instructions] Our first question comes from the line of Ross Sandler with RBC.

Just a couple of questions, Mike. First, can we go over a little more detail in the asset value? So can you remind us what the aggregate amount of dollars was spent on the purchases of name development area connected by 3 factors there or any of the other domain portfolios. I think $200 million was around a ballpark number. Is that a fair characterization?

That's a fair number. If you go back into 2005, the name development was about $160 million and then the area connect and the pike streets were in the teens. So if you add those together, you get close to $200 million.

Okay. And then the 2.6 in domain sales since the beginning of the year, what kind of average revenue per domain are you seeing or average sale value per domain are using right now and how is that trend over the last 2 years since you've been selling?

Thanks for the question. It's a good one. So there is quite a bit of variability. We do have some domains that are hundreds of thousands of dollars and we've talked about some of those in the past. And then there are others which are tens of thousands of dollars, but regardless of how you look at it, the average price point is still quite high and it remains that we have tens of thousands of these sites remaining that invariably aren't generating a lot of revenue for us. We don't plan on investing in further and we do believe that with the $30 million cash proceeds we received to date, that is a minority of the overall value. I think it's significantly more than that and there's tens of millions of dollars of unlocked value, and the conversations we're having today are giving us comfort that there is validity in these healthy prices.

Okay. And just a few more operational questions. So if we just take the worst-case scenario on the AT&T private equity situation, let's just assume that you lost 100% of your AT&T business in a year or 2. So how big of a revenue would that be, ballpark?

Well, first of all, I think that isn't a scenario that's actually plausible. I don't think there's a scenario where we would be in a situation where all of the revenues would go away. So we don't view that as a possibility. At the same time, just to address your question, which I think is what you're getting to, is what is the amount of dollars from AT&T in the first quarter. It was a little over $9.5 million or just under 28% of our total revenues and I think that's what the key was that you're getting at?

Yes. 28% Okay.

And this is Russ. On the AT&T relationship, we've worked with AT&T Interactive for a lot of years. They're going through a transaction, which we think will help give them more focus on how to grow their business. And we have a multifaceted relationship that we think is very valuable for them, and where we see catalyst for expansion as well. There are risks but for opportunities, we have new products that we're talking about. And so directionally, we feel good about the leadership team at AT&T Interactive and the status of our relationship.

Okay. And then when do you think the sales force increases or the sales force kind of reinvigoration that's going to happen this year, when do you think that will start to drive revenue and, Mike, what's the incremental margin on the new call-based revenue that's coming in?

So why don't I take a step back. Thanks for the question. It's a very good question. We -- the overhang with our overall growth is still coming from our non-call driven revenues. We do have new sales that are coming in with our call-driven products. We are working on execution and making sure that we can onboard those customers and ramp them, and we do think there's going to be more ramp as we move to the latter half of 2012. And then given some of the conversations we're having with our existing customers in the call-driven space, as we also see budget movements from them, especially as we look out into the third and fourth quarter, we do think there's going to be some uptick there, setting a good healthy stage for robust growth in our call-driven revenues as we move into 2013.

Got it. And then just one more. Thanks for the latitude here. Do you know how big your call-based revenue run rate is, I guess, compared to Google at this point, the relative size? And then any update on the Yellow Pages Canada partnership?

To answer the first one, I don't have any insights on the Google amounts. And on terms of yellow media and the Canadian partnership, I think we continue to see growth opportunity there. It is a company that continues to focus on moving more and more of their progress in the digital world. Call-driven revenues for the small businesses are a key part of those relationships and where they see some of the future moving towards and we're looking forward to continuing the long-standing and growing relationship that we have with them.

Our next question comes from the line of Eric Martinuzzi with Craig Hallum.

The reduction in the 2012 revenue forecast, if I take the midpoint of your old and the midpoint of your new, it's about $7 million. It sounds like the bulk of that reduction is non-call revs. But I wanted to ask specifically what is driving that reduction?

It's actually both of it, Eric. The non-call-driven revenue still remain the overhang as I mentioned earlier, but we do have just in terms of onboarding and ramping up some of our existing -- or sorry, onboarding some of the new customers within our call-driven revenue streams, it is taking longer than we originally would've anticipated that we would like. We do still think that there are a lot of ramps that is going to occur in the latter part of the year, just given some of the new customers that we've signed. And just with some of the variability in the budgets from our existing customers, that is impacting somewhat in the lower revenue streams that we're forecasting right now, but it does look like it's setting the stage in the third and fourth quarter for good healthy growth and moving us well into 2013 for a good healthy organic growth rate as we move into those periods.

But as I revise my model, is it fair to take an equal amount out of the 2 sides, the call and non-call?

We haven't given the exact specifics on that, but I do think there's a lowering in both, yes.

Okay. And a little bit deeper on the AT&T relationship, and this is specifically around the reduction that dates back to December. Has there been any update there with either the incentives for the alternative spend that they put that budget towards? Is there any signs that, that might come back or is it just sort of status quo?

It's a good question. As it relates to AT&T and those circumstances, we feel like we're at a stable place today in terms of how those budgets are flowing. Our current outlook and forecast assumes that it stays stable. We think there's opportunity there but our current outlook is for an ongoing kind of status quo on that front. But with what we're doing with AT&T and, frankly, a lot of the opportunities we see in the reseller channel where we have a lot of history and deep relationships, I think our outlook reflects the status quo, but we're optimistic in terms of our opportunity to grow our presence in the channel. Winning Intuit was obviously a good customer to get on board and we think we have a chance to develop a lot of trust and opportunity in that relationship as we go forward to.

Yes. That actually leads into my next question because I think that's just a terrific win, a wonderful SMB brand to be associated with as far as a reseller. What is the mechanics of that relationship? Is it somebody signs up for a quickbooks, they sign up for a website and oh, by the way, they could sign up for phone calls to.

Probably premature to get into the specifics of the product. That would be forthcoming. And obviously, for folks to understand Intuit, they're one of the real world-class companies and supporting this market. We're glad to be aligned with them and we're glad to look at kind of how the products get phased and rolled out based on where they see the opportunities and set the priorities.

Okay. And then, Mike, it's kind of a mechanics of the P&L. I had, had a real large share count because I was assuming that the payment to Jingle would involve equity. I'm wondering, and maybe you covered this in the press release and I have not read it from end-to-end, but what should we be using for a share count, given the April payment was done in cash?

It's a good one, Eric. If you drop it, so we made -- there's 2 payments, there's still some more payment, which we can pay in cash or stock. But for your share count, you should be dropping likely $4 million from where most folks have it modeled today.

Okay. And then lastly, the 10b5 purchase plans, love it, glad to see it. What took so long? That's a rhetorical question. Did this require the breaking of any prior -- because I think there were some 10b5 sale plans that -- have they all run their course and now these are 10b5 purchase plans or were any of those plans broken in order to participate in this purchase plan?

This is Russ. I'll just comment on mine. I did have a plan in effect, I've got a sale in December. There had been no sale subsequent to that. And obviously, so that plan was discontinued and at this point, we obviously feel that it's a good time at a personal level to be buying Marchex shares.

And Eric, this is Mike. Just to add on. It did require from the executives team changes and cancellations of some of the existing plans, yes.

Our next question comes from the line of Dan Salmon with BMO Capital Markets.

I just want to switch back to the call business and in particular on the national side. I know you've been doing some hiring in New York and interfacing with the agencies more and more. And was hoping you could expand on how your analytics tools are playing a role in those conversations as you're looking to penetrate agencies and by extension, more sophisticated clients.

Look, it's a fantastic question that actually gets into the heart of what we do every day. We're out there as the pioneers in this market, which gives us a big opportunity and creates its own unique challenges. And when we're out in front of national advertisers and particularly agencies, we're really out there to educate them because we live in the details of this world. When you look at our Call Analytics platform and the insights and expertise that it gives us, you can look at any source of calls, whether it's Google mobile or others, and the fact is out of every 100 calls, less than 1/4 of them represent prospective new customers. And at the end of the day, that's what businesses focused on phone calls want. We see 1/2 the calls effectively relate to spam and misdials or existing customers and the balance, kind of that delta, falls into telemarketers that we utilize our technology to block before they ever get connected. But we've created a process and a system and a product that gives us the visibility to kind of filter out the quality and the gold or the leads that they want. Most folks don't realize that. The early adopters in many cases have been exposed to Google Click-to-Call, where they're effectively buying clicks on a phone number, but have very little visibility into what happens after that. So we have a great opportunity to educate them, help them understand our expertise and at the end of the day, help sell them the outcome of a new customer through the phone. And most of them are out there looking to buy that outcome, which is a new customer through the phone. And so the analytics gives us a great foundation of a conversation to educate them on our unique value proposition, in terms of bringing them visibility around marketing in general, when it's centered around driving phone calls. And now Marchex specifically is qualified to be a partner with them in driving them more of those outcomes.

Our next question comes from the line of Robert Coolbrith with ThinkEquity.

A couple of housekeeping questions first. What was growth in call-driven revenue in the quarter versus 1Q '11? I just want to make sure I have that correct. And also on call-driven revenue, are you still on either side taking down guidance? I know you said previously you're on track to grow that business but 20% plus year-over-year. What would you -- do you have any update on that given the new guidance? And I have a follow up.

This is Mike. To address the second part first, in terms of our call-driven revenue, if you look at the forecast and you just look at how the numbers would roll, they would likely be less than 20% at this stage. Again, I think in the second quarter, it will be relatively stable to some modest growth, and then I think in terms of absolute dollars, you would have sequential increases that would increase sequentially each quarter as we move into the back half of 2012 for the call-driven sources. If you just look at it year-over-year, part of this is, if there's somewhat limited comparability, you'd be looking at an absolute level of over 30%. If you pro forma that for the acquisition, it would be just under 20% year-over-year.

Okay. And can you remind us, I know you addressed the AT&T exposure overall, but how much of that is associated with Connect, which I would assume will be contractually guaranteed no matter what happens or at least assuming the same level of -- or same number of customers on their end versus what I would say with a more variable portion associated with calls and clicks?

Again, it's a good question, Rob, but we have not broken out the specifics, although recognize that the local leads platform or the Connect, I think, as you referred to it, is a core piece and a significant portion and still today, a majority of the aggregate revenues that we generate with our relationship there.

Okay. I'm just wondering if you could maybe tell us how to partner pipeline in developing in general both on the reseller and inventory side. Just -- I know you don't want to preempt yourselves but anything you could tell us about how things are going, pipeline coming up or just -- any color you could provide would be great.

Clearly, we want to be, I don't know, cautious in our communications. Given that right now, we are dealing with some growing pains. We've absorbed declines in our non-call-driven business fairly gracefully the last couple of years. Just given the magnitude of growth in the call-driven revenue, as we're kind of working through and setting ourselves up to go to the next level, we're clearly trying to be cautious on this. But I'd say that -- and I want to acknowledge, we're pretty enthusiastic about where we sit and what this opportunity looks like. We know that it's really about execution for us. At a pipeline level, the reseller pipeline looks as tangible as it's ever been across all of our products. When you look at, call it, the general directory and local resellers, as well as some of the rich verticals when you get into things like autos and real estate and a variety of others, we've got a lot of prospects that we look like a very good fit for in terms of enabling their success around mobile and call-driven opportunities. On the national side, where we look at direct relationships in agencies, it feels like we're still very much scratching the surface and it's just about continuing to try and steepen that adoption curve, educate them and we know that we have examples of where we've done that and it's worked tremendously well. But we haven't been able to institutionalize it yet, and I think it's the whole organization kind of operating the same way. That's really what we allude to when I talk about areas where we've underexecuted. And frankly, there's a big opportunity. But we have no shortage of conversations and we feel pretty optimistic, I'd say, given the rate of new customer wins that, as Mike said, we do see opportunities to grow sequentially in fairly meaningful ways as we exit the year.

Great. And final question, I know demand is more the issue right now, but I think it's been a while since you sort of updated us on the overall inventory marketplace, the total number of available calls per your estimates. Just wondering what the growth in mobile, how much that may change over time?

We said in the past that our network has access to about 0.5 billion calls and it's really driven by mobile. If anything, that's only been, the point's only been accentuated as mobile continues to grow on a relative basis much faster than any of the other channels. We've also noted we have relationships with 4 of the top 5 mobile carriers. So the good news is, we're over the hump on integration and now it's about expansion. So no updated metrics to give you there, but I think we're in pretty good shape on the supply side to be able to support growth. If we're successful in the demand side, that won't be the case forever, and so we still put a premium on deepening these relationships with the mobile carriers and mobile applications providers and also forming new ones as well. So a lot of focus around that. We do have plenty of capacity to grow within our network.

[Operator Instructions] Our next question comes from the line of Gene Munster with Piper Jaffray.

Could you talk a little bit about just the kind of EBITDA margin profile between the call business and the rest of the business? I'm trying to just get in the idea into how you think about the value, the respective value pieces of Marchex?

Good question, Gene. This is Mike. Thank you. If you think about our websites and the domains, for the most part, they generate a fairly high contribution because we don't have revenue shares with some of our supply sources. And so those would be over 50% contribution in that arena. In terms of the other pay-per-click or the non-call-driven type of revenue streams, those would be generally in the 20% to 25%, maybe 30% contribution ranges for every dollar that comes in from those sources. And then when you think about our call-driven sources, every incremental dollar that we generate there can move anywhere from between $0.20 to $0.35. There are some cases where we can get a little bit more than $0.35 on an incremental dollar, but the range would be in that 20% to 35% range.

Are there any businesses that are dragging EBITDA?

No, I don't think there isn't -- we don't have anything that isn't a contributor in terms of actual direct contribution, if that's what your question was getting at.

Okay. That was it. That answered my question.

And there seems to be no further questions at this time.

We thank everybody for participating today, and we look forward to updating you in the subsequent months and quarters. Thanks again.

Ladies and gentlemen, this concludes today's conference call. We thank you for your participation. You may now disconnect.