Ladies and gentlemen, thanks for standing by and welcome to the Marchex Third Quarter Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference over to Mr. Trevor Caldwell. Please go ahead.

Thank you. Good afternoon, everyone and welcome to Marchex’ business update and third quarter 2019 conference call. Joining us today are Michael Arends; and Russell Horowitz. Before we get started, I’d like to take this opportunity to remind you that our remarks today will include forward-looking statements, including references to our financial and operating 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 assumptions as of today and we take 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 would like to turn the call to Mike Arends.

Thank you, Trevor. Good afternoon and thank you, everyone for joining us today. Today we will update you on our progress in the third queerer and how Marchex has rapidly evolving to meet the growing needs of our customers who are just beginning to understand the power of unlocking consumer intent with AI-driven technologies. Our innovations, some of which we just recently launched, are key to accelerating our customer’s sales process and driving more revenue. They’re also driving the evolution of Marchex from a leading call analytics company to a leading conversational analytics and solutions company. The insights we’ve delivered for years through our call analytics and speech technology platforms have us uniquely positioned to attach a wider array of critical problems for our customers through AI and automated solutions. These problems go well beyond measuring media performance. We are seeing our customers implement our sweetest solutions across the broadening scope of their customer conversations and interactions from inbound calls to outbound calls to text messaging and beyond. This year we achieved a series of important milestones. We launched a new AI-based platform that was the focus of significant investment over the last 18 months. It reflects our growing scale and gives us the ability to provide real-time insights that are using to develop new AI-driven signals which are fuel for our future product roadmap. In August, we announced a new suite of predictive AI models featuring 230 initial signals that bring powerful conversational insights for businesses then engaged with customers over the phone and via text. This is a significant step toward unlocking the power of more than 1 billion minutes of conversational data and cracking the code of consumer intent. We recently announced advancements with our Clean Call technology to bring the power of AI and adaptive learning…

Thank you, Mike. Marchex is becoming more mission critical to our customers than ever before. In many ways, our customers are just beginning to understand how AI-driven capabilities and solutions can help them improve their sales process, sales outcomes and customer experiences. At the same time, our clients are asking us to solve increasingly complex problems to help them capitalize on the high impact opportunities in their business. We done a lot over the last couple of years, but in many respects, we’re also just getting started. The problems we can help our customers address is growing meaningfully, along with the market opportunities that Marchex is addressing. We will continue to look for ways to focus our product pipeline to meet this growing demand, while opportunistically creating ways to accelerate our emergence as a leader in conversational analytics and solutions. And with that, I’ll hand the call back to Mike.

Thank you, Russ. For the third quarter, revenues were $24.8 million. During the quarter, we continued to see growth year-over-year growth from both our analytics and marketplace products. Looking at the product areas, core analytics revenue was $13.5 million representing meaningful year-over-year growth. Revenues from our core analytics products comprised more than 50% of our total revenue. Similar to last quarter, this had an aggregate benefit on service costs as a percentage of revenue given the higher gross margin characteristics from this revenue stream. On an annual basis, we continue to see progress, particularly in verticals like auto, where we have benefited from the rollout with customers we’ve had in trials and early integrations. In addition, the e recently launch of our Sales Rescue product is meeting with favorable early interest and represents an opportunity to further build our pipeline as we cross-sell existing customers and continue to expand our product suite into new dynamic markets. Given the initial interests, we are continuing to invest in our growing conversational analytics and solution suite, and as mentioned, Sales Rescue represents the first of our Sales Edge products and we are seeing favorable feedback from the trials. We expect to launch additional products within the suite of sales acceleration solutions we can offer our clients in the coming quarters. Looking at the marketplace, third quarter revenue grew on a year-over-year basis largely from budget increases from certain large customers as well as some contribution from new customers as compared to the year ago period. During the quarter, we also saw a progress in our Thrive relationship on a year-over-year basis, with growth driven by increases in marketplace initiatives, offsetting the decline in the legacy Local Leads product. We continue to anticipate local leads consistent with past commentary, will transition towards the end…

[Operator Instructions] We have a question from the line of Mike Latimore.

Yeah, hi this is [Vijay Devar] [ph] for Mike Latimore. First on the industry verticals. Could you generally comment on the auto vertical, how has the growth from autos especially on sequential basis? And any other vertical which you think is growing faster than expected?

So Vijay, this is Mike. Thank you for the question. The auto vertical again we saw sequential growth, we also saw some year-over-year growth in the automotive vertical, particularly on the analytics side of the equation. I think it’s also an area we believe there some fairly fruitful opportunities on a go-forward basis and also some opportunities for the product and the Sales Rescue opportunities as they lie and not just for the manufacturer level, for the OEM level, but also at the dealer side solution. Some of the other areas that we saw some progress then include home services, and we also saw uptick in our pipeline with the hospitality vertical this past quarter.

Great and have their acquisitions perform as expected?

Vijay, I think as I understood the question, you were asking about the acquisitions?

Yes, of course.

So if you go back to the end of 2018, we did couple of acquisitions and as part of the acquisitions, some of the customer revenue was in line with what we have been communicating over the past number of quarters. There are some differences there, they do have some differences in the vertical focus, but in terms of what we were expecting, one of them there has been some decline in the revenue stream and the other one has had some modest uptick in the revenue stream. It is very challenging to break out the different customer revenues precisely given some of the work that we’ve done with the different customer arrangements, but if we were to break out anything that would be the level of compartmentalization that we could do.

Okay. And lastly, I think if you can comment on your Clean Call solution and how much revenue it could contribute for this fiscal year?

Sure. In terms of Clean Call, it’s been a core part of our overall analytics offering for a period of time. And so when we think about kind of the enhancements to it, it’s a catalyst for our analytics relationships generally and also as a foundational piece of our perspective products. So we don’t specifically break it out on the basis of its own kind of revenue contributions, but it is a core part of our differential value proposition with analytics customers and it ends up being a key ingredient in helping to drive how we’re innovating and differentiating performance on a perspective basis.

Okay. If I can ask one more. You have any – how’s the product pipeline for the rest of the year – for the next year and how many products you have plan to come out with and what are the areas where that such products could be impact?

The primary focus right now is this continued growing launch of our Sales Edge suite, with Sales Rescue being the first of those products and so for us, it really highlights where we think we are at an inflection point in terms of our opportunity, and meaningfully expanding our addressable market. Historically our analytics products have been geared towards insights, making sure that we’re delivering strategic insights to our customers, but what the Sales Edge suite is doing now, is taking those insights and moving I think much more deeply into not just servicing where their highest impact opportunities are by providing the tools and automation to act on those opportunities and harvest them. And so for us, that’s really what’s driving an increase and what we think as a strategic opportunity and our addressable market. So that Sales Edge suite is going to be a key driver and a key focus. And as we mentioned, Sales Rescue is a catalyst right now, and we think the subsequent releases will build on that over the next few quarters.

Okay and finally on what’s your current headcount and the hiring plan for the next six months?

So we’ve got a number of FTEs it’s still close to around 300 total FTE equivalents as we said here today and we think particularly in sales and the account management there maybe some opportunity to continue to grow the team in those areas as we progress with the revenue streams over the course of 2020.

Okay, thank you.

Thank you.

[Operator Instructions] And with no audio questions pending, I’ll hand it back for closing remarks.

Thank you, everyone for joining us today and we look forward to updating you on our next quarterly conference call. Thank you.

Thank you. Thanks again.

This does conclude today’s conference call. We thank you for your participation and ask that you please disconnect your line.