Good afternoon. My name is Jeffery, and I will your conference operator today. At this time, I'd like to welcome everyone to the Marchex Fourth Quarter Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, we will have a question-and-answer session. [Operator Instructions] Thank you. Trevor Caldwell, VP of Investor Relations, you may begin your conference.

Good afternoon, everyone, and welcome to Marchex's business update and fourth quarter 2018 conference call. Joining us today are Michael Arends and Russell Horowitz. Before we get started, I would like to take this opportunity to remind you that our remarks today will include forward-looking statements, including references to our financial and operational performance, and actual results may differ materially from those contemplated by these forward-looking statements. Risks and uncertainties that could cause these results to differ materially are set forth in today's earnings press release and in our most recent annual and quarterly report filed with the SEC. Any forward-looking statements that we make on this call are based on assumption as of today, and we undertake no obligation to update these statements for subsequent events. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release. The earnings press release is available on the Investor Relations section of our website. At this time, I'd like to turn the call over to our Chief Financial Officer, Mike Arends.

Thank you, Trevor. Good afternoon and thank you everyone for joining us today. We have several significant updates to share. Over the last few months, we've been focused on driving product and customer momentum. We’ve also acquired two companies, Telmetrics and Callcap, which has given us greater scale, helped us expand our market opportunity and grow our customer base. The combination of these organic and strategic initiatives has given Marchex unique position in our industry. Our significant progress with product innovation is accelerating our growth, driving new opportunities across our business and helping to position us as a leader in conversational analytics and sales acceleration solutions. Our customer progress reflects this. Through Marchex's internal sales efforts, combined with the additions of Callcap and Telmetrics, we added more than 300 new customers in the fourth quarter across several of the most valuable commercial verticals, including auto. We've also broadened our footprint into the small business ecosystem by expanding our presence across verticals, such as home services and healthcare. Home services and healthcare are examples of valuable commercial verticals that are right for technology-based sales acceleration solutions, given the significant challenges that exist in these categories. Within home services, for example, HVAC workers and electricians can find it very challenging at times to take inbound calls during the day when they are actually doing their work. That's where our technology comes in. We can help them engage in customers in a timely fashion while delivering automated solutions that creates great consumer and business experiences. Because of our expertise in identifying how businesses can capture billions of dollars in lost opportunities, we've transformed the way businesses connect with their customers across both voice and text. Many solutions we have and others we are developing, measurably help our customers create better consumer experiences and…

Thanks, Mike. Over 2018, we made significant progress evolving Marchex into an industry-leading conversational analytics company. We strategically and selectively used our balance sheet to support our current internal momentum and capture more scale and opportunity in the industry. This has had a multiplier effect. We are creating the largest ever conversational data asset based on voice, expanding our leadership in core verticals, and broadening our market opportunities in ways that are highly strategic to our existing and new customers. Similarly, our investments in AI and machine learning will help our customers find, engage and nurture their most valuable customers across voice and text-based communication channels. We’re building the industry's premier conversation analytics and sales acceleration solutions business while accelerating growth and opening up new opportunities. As we move forward, we will continue to explore the various ways we can enhance our operating profile and capitalize on areas where we have increasing momentum. At the same time, we will continue to take a balanced and disciplined approach to our business and capital deployment as well. And with that, I'll hand the call back to Mike.

Thanks, Russ. For the fourth quarter, total revenues were $23.1 million. Core analytics revenue saw a strong growth on a year-over-year basis at 47%. For the quarter, on a year-over-year basis, exclusive of the acquisitions, estimated pro forma growth remained in the double-digit teen percentages, primarily driven by continued adoption of products built on our proprietary speech technology. Revenue contributions for Callcap and Telmetrics were largely consistent with our prior guidance. In the fourth quarter, we saw a sequential declines, given seasonally lower call volumes in late November and December, which is consistent with expectations and historical patterns. On an annual basis, we saw an expanding pipeline of opportunity as uptake from trials and early integrations from several new customers and verticals, like auto, contributed to accelerating revenue growth. As we work to integrate our sales and product efforts across the organization in 2019, we’re also excited about our expanding footprint of customers in valuable verticals such as home services, healthcare and with small business resellers. We continue to see favorable results from customers utilizing solutions built off of our proprietary speech technology. As previously mentioned, we’re still early in the implementation of many of the solutions built on this technology and believe we will continue to develop new solutions off of our growing proprietary conversational data set. This is a key investment focus for us, given the growth potential, margin profile and stickiness of these products. Marketplace revenue grew sequentially in the fourth quarter as we saw some budget increases from certain large customers. Q1 is typically a stronger quarter for our marketplace product, and we expect these higher budget levels may remain in place or potentially increase slightly. Regarding our relationship with DexYP, we've seen growth in our analytics relationships and some increases in new marketplace initiatives. These…

[Operator Instructions] Your first question comes from Darren Aftahi with Roth Capital Partners. Your line is open.

Just a couple if I may. Mike, could you just clarify, when you were speaking about ex-M&A growth rates for your core Marchex business, were you referring when you were saying mid-to-high teens for the analytics business during the fourth quarter and the first quarter?

That's correct. Yes.

Okay. Got it. Perfect. So, the SMS and text capabilities you guys acquired, are those able to be parlayed into things like chat features, more encompassing perhaps even email?

When we look at text as a communication channel, there are sub channels like, whether you get into messaging, chat and email, examples that you gave. We do see applicability of the analytics solution. We’re prioritizing -- you can do anything you can, do everything -- and so we think the greatest opportunities right now are focusing on applicability with messaging, but we do expect over time we’ll extend that to chat and beyond as well.

Your business a while back, perhaps as far as the company too long, but you could demonstrate a fair amount of seasonality and it still does. But as you have kind of transitioned the business and transformed it pretty quickly, with analytics, can you maybe indulge us based off Q1 guidance, how the cadence of revenue maybe moves from that $25 million or better? Because it seemed like it used to be sort of book ended -- pretty strong Q1 and then would be weaker as the year kind of went on. And I'm wondering with 50% of your business coming from analytics now, is that dynamic changed?

It does change a little bit in terms of the mix shift. So, if you think about our marketplace revenue streams, those generally are stronger in the first part of the year. And if you think about call volume-related monitoring, analytics and some of the customer base that we have, they are actually stronger and the third quarter would be our highest seasonal quarter in just in terms of volume. And the fourth quarter would generally be regarded more because of consumer-to-business conversations around the holiday timeframe dropping off as well as just spend patterns of service-based businesses, the fourth quarter in general would be our lowest seasonal quarter. So, we still have those frameworks stay consistent and they’ve stayed consistent relatively consistently over the last number of years. With that mix shift, the analytics and the pronouncement of the third quarter being our highest or strongest quarter will be more reflected, the expectation would be in 2019 in any event.

And then, just last one for me, you called out SMB on sort of vertical or group. So, I'm curious, if you go back a little while you guys made a Facebook announcement, as I believe resell [ph] for the product. How does that kind of fit in just given how pronounced Facebook and perhaps more so Instagram are in SMB business?

So. to the extent that there are things related to conversations that are happening between consumers and businesses, as those are the opportunities with Facebook or even type of social media network. And when you think about our opportunity around our phone calls, around text messaging, and any of the other engagements, Russ has already mentioned some of the other signals that you had asked about, Darren, chat as an example, email, but social media and engagement within messaging, conversations between consumers and our businesses are part of the platform of things that we think we can help businesses accelerate their sales efforts over. And those are tranches that we're going to continue to pursue in the course of not just 2019, but beyond.

Your next question comes from Mike Latimore with Northland Capital. Your line is open.

Just on the seasonality, I guess, so, first quarter call volume seasonality, should we think of that as being up a little bit sequentially then relatively to fourth quarter?

So, in general, from a seasonal perspective, the volume in terms of the units of volume would generally be higher in the first quarter than they would be in the fourth quarter, correct. Yes.

And then, in terms of the organic, the pre-Telmetrics, pre-Callcap customer base, I think, you've been working with some pretty good sized customers. Can you talk a little bit about what stage of deployment maybe those top-10 are in, are you [technical difficulty] way through just in terms of expanded deployment for that? [Ph]

Mike, sorry, I think, we missed part of the question there. If you could go restate it? I think, we lost little bit in the communication.

Sorry. Yes. In terms of the organic business, you've been working with some pretty good sized customers through analytic business. What stage of deployments they with that top-10 be in, are way half way through, less than half, more than half?

Understood. Thank you for restating it. So, if you think about the top five, I would say the top five are more robust, they are more mature in terms of rollout. But, on the bottom part of the top 10, we absolutely in at least a couple of the cases, I would say, are still in the early stages. One of them in particular is an on-boarding stage. And I think with almost all of those five and the bottom part of the top 10, we think there's more ramp to come. We should see some of that hopefully, in 2019.

And then, in terms of the acquisitions, I think part of the idea is you can bring some of your core technology to these acquired properties. Can you talk a little bit about how long that will take? And then, will the benefit be more additional EBITDA or will it be some growth acceleration for those acquired properties?

I think, our focus on the known is definitely on the synergy side with some of the communications and the cost of sales. We think that those opportunities will play out in 2019, as well into 2020, and those are more known where we think we're going to get some benefit on the cost of sales and the margins. And we've mentioned some of those thoughts before. In terms of the product and aligning the product and bringing the product availability of all the different feature sets to all of our customers, that is going to take some time. It's a little more unknown how that's going to unfold in terms of whether it impacts the revenue per se or how much it impacts just the value proposition with the customers and extending the relationship and the value being provided to those customers. We do think it will be beneficial. And that again, we think most of that is going to come not here at the beginning of 2019, but more into the end of 2019 and 2020.

Then, I guess, just the last one, maybe hard to figure it out based on all the -- based on a two acquisitions. But, can you talk sort of in terms of the pipeline perhaps organically, has that grown over the last quarter or two at least on the organic side of the business?

So, definitely, we have some right opportunities and pilots that we’re feeling good about, and those would be exclusive of some of the acquisitions. And in terms of the stage of deployment and how that pipeline is looking, we feel good about it. There's a few verticals we’re actually endeavoring into and we talked about some of them here on the call already. The health services area has not been an area where we've had a tremendous pipeline of opportunity in the past. And there's a few things that are happening right now that we look on positively. Home services and definitely because of the acquisitions we think we're in a better place in aggregate in home services with respect to the pipeline. We’ll see how that plays out.

This is Russ. Just to add, we think about which are the verticals that we are best suited to help solve some of these critical problems. And then what are we learning in the process of having success like we are -- we're having so far with auto, where we've got kind of the most applicability to replicate that. And we’re seeing it with some of these additional verticals in addition to the just the broader footprint of opportunity we have, based on the combination of our organic growth in the recent acquisitions.

[Operator Instructions] There are no further questions at this time. I turn the call back to management.

We want to thank everyone for joining us today and we’ll look forward to updating all again in the future coming quarters. Thank you.

This concludes today's conference call. You may now disconnect.