Form 8-K ReachLocal Inc For: Feb 10

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM 8-K

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CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

�

Date of Report (Date of earliest event reported): February 10, 2015

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�

REACHLOCAL, INC.

(Exact name of Registrant as specified in its charter)

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�	�	�	�	�
Delaware	�	001-34749	�	20-0498783
(State or other jurisdiction of incorporation)	�	(Commission File No.)	�	(I.R.S. Employer Identification No.)

�

�	�	�
21700 Oxnard Street, Suite 1600, Woodland Hills, California	�	91367
(Address of principal executive offices)	�	(Zip Code)

�

Registrants telephone number, including area code: (818) 274-0260

�

Not Applicable

(Former name or former address if changed since last report)

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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

�

	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

�

	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

�

	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

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	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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� Item 2.02

� Results of Operations and Financial Condition.

�

On February 10, 2015, ReachLocal, Inc. publicly disseminated a press release announcing financial results for the fourth quarter and full year ended December 31, 2014.

�

The foregoing description is qualified in its entirety by reference to ReachLocals press release, dated February 10, 2015, a copy of which is attached hereto as Exhibit 99.01 and incorporated herein by reference.��Such information shall not be deemed filed for purposes of Section�18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

�

� Item 9.01

� Financial Statements and Exhibits.

�

(d)�����Exhibits

�

Exhibit No.	�	Description of Exhibit
99.01	�	Press Release dated February 10, 2015

�

�

�

SIGNATURES

�

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

�

�	�	�	�	�				�
Date: February 10, 2015	�				REACHLOCAL, INC.
�	�				�	�	�
�	�				�	�	�
�	�				By:	�	/s/ Ross G. Landsbaum
�	�				Name:	�	Ross G. Landsbaum
�	�				Title:	�	Chief Financial Officer

�

Exhibit 99.01

ReachLocal Reports Fourth Quarter and 2014 Results

�

�

(WOODLAND HILLS, CA)  February 10, 2015 - ReachLocal, Inc. (NASDAQ: RLOC), a leader in powering online marketing for local businesses, today reported financial results for the fourth quarter and 2014.

�

Since I joined ReachLocal in April, we have aggressively moved to reposition our sales organization to focus on profitable growth and to revitalize our product portfolio. Our software-based solutions including ReachEdge and Kickserv, together with our award-winning online media and web presence capabilities, move us towards our goal of delivering a total digital marketing system for local businesses, said Sharon Rowlands, chief executive officer. We expect that our financial results will begin to improve as we move through 2015 due to our focus on driving sales to the right audiences and delivering operational efficiencies that will enhance stockholder value.

�

2014 Business Highlights

�

�

�

Expanded ReachLocals global footprint and increased international revenue 6% during 2014 as compared to 2013

�

�

Achieved 92% year-over-year growth of active ReachEdge units, with approximately 1,800 active units at December 31, 2014, including licenses in the UK and Australia, which are new territories for the product

�

�

Acquired Kickserv, a provider of cloud-based business management software in November 2014. Kickserv enhances the Companys software capabilities and ReachLocal ended 2014 with approximately 800 Kickserv clients

�

Quarterly Results at a Glance*

�

(Table amounts in 000s except key metrics and per share amounts)

�

�	�	Q4 2014		�	�	Q4 2013		�
Revenue	�	$	109,009	�	�	$	132,893	�
Net Income (Loss) from Continuing Operations	�	$	(17,737	)	�	$	728	�
Net Income (Loss) from Continuing Operations per Diluted Share	�	$	(0.62	)	�	$	0.03	�
Net Loss	�	$	(17,458	)	�	$	(585	)
Net Loss per Diluted Share	�	$	(0.61	)	�	$	(0.02	)
Non-GAAP Net Loss	�	$	(15,000	)	�	$	(546	)
Non-GAAP Net Loss per Diluted Share	�	$	(0.52	)	�	$	(0.02	)
Adjusted EBITDA	�	$	(5,924	)	�	$	5,991	�
Cash Flow from Continuing Operations	�	$	4,364	�	�	$	2,789	�
Cash Flow from Operating Activities	�	$	4,851	�	�	$	2,287	�

�

*The amounts reflect that ClubLocal operations were determined to be discontinued operations during the fourth quarter of 2013. The definitions for Adjusted EBITDA and Non-GAAP Net Income, as set forth in full below, exclude discontinued operations.

�

�

�

�

�

Q4 2014

�

�

Q4 2013

�

�

% Change

�

Revenue by Channel:

�

�

�

�

�

�

�

�

�

�

�

�

Direct Local Revenue

�

$

85,179

�

�

$

105,957

�

�

�

(20

)%

National Brands, Agencies and Resellers (NBAR) Revenue

�

$

23,830

�

�

$

26,936

�

�

�

(12

)%

�

�

�

�

�

�

�

�

�

�

�

�

�

Revenue by Geography (as reported):

�

�

�

�

�

�

�

�

�

�

�

�

North America

�

$

67,760

�

�

$

84,641

�

�

�

(20

)%

International Revenue

�

$

41,249

�

�

$

48,252

�

�

�

(15

)%

�

2014 Annual Results and Key Metrics at a Glance*

�

(Table amounts in 000s except key metrics and per share amounts)

�

�	�	FY 2014		�	�	FY 2013		�
Revenue	�	$	474,921	�	�	$	514,070	�
Net Income (Loss) from Continuing Operations	�	$	(45,660	)	�	$	3,051	�
Net Income (Loss) from Continuing Operations per Diluted Share	�	$	(1.60	)	�	$	0.11	�
Net Loss	�	$	(45,010	)	�	$	(2,483	)
Net Loss per Diluted Share	�	$	(1.58	)	�	$	(0.09	)
Non-GAAP Net Income (Loss)	�	$	(32,558	)	�	$	11,880	�
Non-GAAP Net Income (Loss) per Diluted Share	�	$	(1.14	)	�	$	0.41	�
Adjusted EBITDA	�	$	(9,410	)	�	$	32,801	�
Cash Flow from Continuing Operations	�	$	(1,403	)	�	$	30,687	�
Cash Flow from Operating Activities	�	$	(2,318	)	�	$	26,686	�

�

*See note above regarding the classification of ClubLocal as a discontinued operation.�

�

�

�

�

�

FY 2014

�

�

FY 2013

�

�

% Change

�

Revenue by Channel:

�

�

�

�

�

�

�

�

�

�

�

�

Direct Local Revenue

�

$

372,822

�

�

$

410,278

�

�

�

(9

)%

National Brands, Agencies and Resellers (NBAR) Revenue

�

$

102,099

�

�

$

103,792

�

�

�

(2

)%

�

�

�

�

�

�

�

�

�

�

�

�

�

Revenue by Geography:

�

�

�

�

�

�

�

�

�

�

�

�

North America

�

$

293,096

�

�

$

341,737

�

�

�

(14

)%

International Revenue

�

$

181,825

�

�

$

172,333

�

�

�

6

%

�

�

�

�

�

�

�

�

�

�

�

�

�

Key Metrics (at Period End)

�

�

�

�

�

�

�

�

�

�

�

�

Active Clients

�

�

20,800

�

�

�

23,900

�

�

�

(13

)%

Active Product Units

�

�

31,400

�

�

�

35,200

�

�

�

(11

)%

�

Potential Goodwill Charge

�

The Company performs its annual goodwill impairment assessment during the fourth quarter following the methodology required by Accounting Standards Codification (ASC) 350, IntangiblesGoodwill and Other. As a result of the decline in the Companys operating results and market capitalization, the Company is performing the ASC 350 quantitative assessment for 2014. If the Company determines that any of its goodwill is impaired, the Company would recognize a non-cash goodwill impairment charge that would increase net loss from continuing operations, and increase net loss and net loss per share, net of the effect on its provision for income taxes, for the fiscal fourth quarter of 2014 and for the year then ended. The Companys total goodwill at September 30, 2014 is $44.2 million, which is subject to assessment. Any impairment of goodwill would not impact the non-GAAP financial information presented in this press release. The Company expects to complete its assessment prior to the timely filing of its Annual Report on Form 10-K.

�

Business Outlook

�

We have made great progress in reducing expenses and continue to work aggressively in that regard as part of our plan to achieve a positive Adjusted EBITDA run-rate by year-end, said Ross Landsbaum, chief financial officer. At the same time, we believe our new product initiatives, in combination with refinements to our go-to-market strategy will drive revenue improvement. However, we face headwinds in the first quarter resulting from the fact that there are two less days relative to the fourth quarter of 2014 and from the significant strengthening of the US dollar. Our guidance reflects both these factors as well as the positive impact of expected continued operational savings.

�

The Companys outlook for the first quarter of 2015 is as follows:

�

�

�

Revenue in the range of�$100�to�$105 million.

�

�

�

Adjusted EBITDA loss in the range of�$5�to�$7 million.

�

�

�

Conference Call and Webcast Information

�

The ReachLocal fourth quarter and fiscal year 2014 teleconference and webcast is scheduled to begin at 2:00 p.m., Pacific Time on Tuesday, February 10, 2015. To participate on the live call, analysts and investors should dial 1-888-427-9419, or outside the U.S. 719-457-2661, at least 10 minutes prior to the call. ReachLocal will also offer a live and archived webcast of the conference call, accessible from the Investors section of the Companys Web site at www.reachlocal.com.

�

Use of Non-GAAP Measures�

�

ReachLocal management evaluates and makes operating decisions using various financial and operational metrics. In addition to the Companys GAAP results, management also considers non-GAAP measures of non-GAAP net income (loss), non-GAAP net income (loss) per share, and Adjusted EBITDA. Management believes that these non-GAAP measures provide useful information about the Company's core operating results and thus are appropriate to enhance the overall understanding of the Company's past financial performance and its prospects for the future. The attached tables provide a reconciliation of these non-GAAP financial measures with the most directly comparable GAAP financial measures. Management also tracks and reports Active Clients and Active Product Units, as management believes that these metrics are important gauges of the progress of the Companys performance.

�

Non-GAAP net income is defined as net income (loss) from continuing operations before (a) stock-based compensation related expense (including the related adjustment to amortization of capitalized software development costs) and (b) acquisition related costs. Adjusted EBITDA is defined as net income (loss) from continuing operations before interest, income taxes, depreciation and amortization expenses, excluding, when applicable, stock-based compensation, the effects of accounting for business combinations (including any impairment of acquired intangibles), restructuring charges, and other non-operating income or expense.

�

Acquisition Related Costs: Acquisition related costs, including the amortization and any impairment of acquired intangibles and the deferred cash consideration for the SMB:LIVE acquisition, are excluded from the non-GAAP operating results as these are non-recurring charges which the Company would not have incurred as part of continuing operations.

�

Each of these non-GAAP measures, while having utility, also has limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of the Companys results as reported under GAAP. Some of these limitations are:

�

�

�

Adjusted EBITDA does not reflect the Companys cash expenditures for capital equipment or other contractual commitments;

�

�

�

Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect capital expenditure requirements for such replacements;

�

�

�

Adjusted EBITDA does not reflect changes in, or cash requirements for, the Companys working capital needs;

�

�

�

Adjusted EBITDA and non-GAAP net income (loss) do not consider the potentially dilutive impact of issuing equity-based compensation to the Companys management and other employees;

�

�

�

Adjusted EBITDA does not reflect the potentially significant interest expense or the cash requirements necessary to service interest or principal payments on indebtedness that the Company may incur in the future;

�

�

�

Adjusted EBITDA does not reflect income and expense items that relate to the Companys financing and investing activities, any of which could significantly affect the Companys results of operations or be a significant use of cash;

�

�

�

Adjusted EBITDA and non-GAAP net income (loss) do not reflect costs or expenses associated with accounting for business combinations;

�

�

�

Adjusted EBITDA does not reflect certain tax payments that may represent a reduction in cash available to the Company; and

�

�

�

Other companies, including companies in the same industry, calculate Adjusted EBITDA and non-GAAP net income (loss) measures differently, which reduces their usefulness as a comparative measure.

�

�

�

Adjusted EBITDA is not intended to replace operating income (loss), net income (loss) and other measures of financial performance reported in accordance with GAAP. Rather, Adjusted EBITDA is a measure of operating performance that may be considered in addition to those measures. Because of these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to the Company to invest in the growth of the business.

�

Active Clients is a number the Company calculates to approximate the number of clients directly served through our Direct Local channel as well as clients served through our National Brands, Agencies and Resellers channel. We calculate Active Clients by adjusting the number of Active Product Units to combine clients with more than one Active Product Unit as a single Active Client. Clients with more than one location are generally reflected as multiple Active Clients. Because this number includes clients served through the National Brands, Agencies and Resellers channel, Active Clients includes entities with which we do not have a direct client relationship. Numbers are rounded to the nearest hundred.

�

Active Product Units is a number we calculate to approximate the number of individual products, licenses or services we are providing to Active Clients. For example, if we were performing both ReachSearch and ReachDisplay campaigns for a client who also licenses ReachEdge, we consider that three Active Product Units. Similarly, if a client purchases ReachSearch campaigns for two different products or purposes, we consider that two Active Product Units. Numbers are rounded to the nearest hundred.

�

Caution Concerning Forward-Looking Statements

�

Statements in this press release regarding the Companys outlook for future periods and the quotes from management constitute forward-looking statements within the meaning of the Securities Exchange Act of 1934. These statements reflect the Companys current views about future events and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievement to materially differ from those expressed or implied by the forward-looking statements. Actual events or results could differ materially from those expressed or implied by these forward-looking statements as a result of various factors, including: (i) the Companys ability to rectify the challenges associated with its North American sales operations; (ii) the Companys ability to obtain the cost savings contemplated by its cost reduction initiatives; (iii) the Companys ability to purchase media and receive rebates from Google, Yahoo! and Microsoft under commercially reasonable terms; (iv) the Companys ability to recruit, train and retain its salespeople; (v) the Companys ability to attract and retain customers and compete with a wide range of competitors on both price and product offering; (vi) the Companys ability to successfully enter new markets and manage its international expansion; (vii) the Companys ability to successfully develop and offer new products and services in the highly competitive online advertising industry; (viii) the impact of worldwide economic conditions, including the resulting effect on advertising budgets; and (ix) the Companys ability to comply with government regulation affecting our business, including regulations or policies governing consumer privacy. More information about these factors and other potential factors that could affect the Company's business and financial results is contained in its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K. The Company does not intend, and undertakes no duty, to update this information to reflect future events or circumstances.

�

About ReachLocal, Inc.

ReachLocal, Inc. (NASDAQ: RLOC) helps local businesses grow and operate their business better with leading technology and expert service for our clients lead generation and conversion. ReachLocals services provide customers with a total digital marketing system.�ReachLocal�is headquartered in�Woodland Hills, Calif.�and operates in four regions:�Asia-Pacific,�Europe,�Latin America�and�North America. For more information please visit ReachLocal at www.reachlocal.com, follow us at www.reachlocal.com/social or email [email protected].

�

�

�

�

Investor Relations: Alex Wellins The Blueshirt Group (415) 217-5861 [email protected]

Media Contact: Amber Seikaly� Vice President Corporate Communications (214) 294-0242 [email protected]

�

�

�

REACHLOCAL, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

�

�	�	December 31,		�	�	December 31,		�
�	�	2014		�	�	2013		�
Assets	�	�	�	�	�	�	�	�
Current Assets:	�	�	�	�	�	�	�	�
Cash and cash equivalents	�	$	43,720	�	�	$	77,514	�
Short-term investments	�	�	904	�	�	�	260	�
Accounts receivable, net	�	�	7,844	�	�	�	9,699	�
Prepaid expenses and other current assets	�	�	9,620	�	�	�	9,996	�
Assets of discontinued operations	�	�	-	�	�	�	3,415	�
Total current assets	�	�	62,088	�	�	�	100,884	�
�	�	�	�	�	�	�	�	�
Property and equipment, net	�	�	19,639	�	�	�	12,903	�
Capitalized software development costs, net	�	�	21,555	�	�	�	17,300	�
Restricted deposits	�	�	3,589	�	�	�	3,654	�
Intangible assets, net	�	�	5,492	�	�	�	1,270	�
Non-marketable investments	�	�	9,000	�	�	�	2,500	�
Other assets	�	�	3,518	�	�	�	5,415	�
Goodwill	�	�	48,189	�	�	�	42,083	�
Total assets	�	$	173,070	�	�	$	186,009	�
�	�	�	�	�	�	�	�	�
Liabilities and Stockholders Equity	�	�	�	�	�	�	�	�
Current Liabilities:	�	�	�	�	�	�	�	�
Accounts payable	�	$	44,874	�	�	$	36,970	�
Accrued compensation and benefits	�	�	15,972	�	�	�	17,280	�
Deferred revenue	�	�	29,016	�	�	�	33,013	�
Accrued restructuring	�	�	3,196	�	�	�	-	�
Capital lease	�	�	624	�	�	�	-	�
Other current liabilities	�	�	12,316	�	�	�	15,089	�
Liabilities of discontinued operations	�	�	850	�	�	�	1,324	�
Total current liabilities	�	�	106,848	�	�	�	103,676	�
Capital lease	�	�	1,103	�	�	�	-	�
Deferred rent and other liabilities	�	�	12,195	�	�	�	3,965	�
Total liabilities	�	�	120,146	�	�	�	107,641	�
�	�	�	�	�	�	�	�	�
Stockholders Equity:	�	�	�	�	�	�	�	�
Common stock	�	�	-	�	�	�	-	�
Receivable from stockholder	�	�	(65	)	�	�	(73	)
Additional paid-in capital	�	�	132,080	�	�	�	111,934	�
Accumulated deficit	�	�	(74,569	)	�	�	(29,559	)
Accumulated other comprehensive loss	�	�	(4,522	)	�	�	(3,934	)
Total stockholders equity	�	�	52,924	�	�	�	78,368	�
Total liabilities and stockholders equity	�	$	173,070	�	�	$	186,009	�

�

�

�

REACHLOCAL, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

�

�

�

Three Months Ended

�

�

Twelve Months Ended

�

�

�

December 31,

�

�

�

�

�

�

December 31,

�

�

�

�

�

�

�

2014

�

�

2013

�

�

2014

�

�

2013

�

Revenue

�

$

109,009

�

�

$

132,893

�

�

$

474,921

�

�

$

514,070

�

Cost of revenue

�

�

61,708

�

�

�

65,662

�

�

�

252,721

�

�

�

256,450

�

Operating expenses:

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Selling and marketing

�

�

42,334

�

�

�

46,833

�

�

�

182,720

�

�

�

182,854

�

Product and technology

�

�

6,989

�

�

�

5,512

�

�

�

27,510

�

�

�

22,240

�

General and administrative

�

�

11,278

�

�

�

15,957

�

�

�

52,155

�

�

�

46,362

�

Restructuring charges

�

�

1,360

�

�

�

-

�

�

�

5,927

�

�

�

-

�

Total operating expenses

�

�

61,961

�

�

�

68,302

�

�

�

268,312

�

�

�

251,456

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Operating income (loss)

�

�

(14,660

)

�

�

(1,071

)

�

�

(46,112

)

�

�

6,164

�

Other income, net

�

�

345

�

�

�

64

�

�

�

936

�

�

�

586

�

Income (loss) from continuing operations before income taxes

�

�

(14,315

)

�

�

(1,007

)

�

�

(45,176

)

�

�

6,750

�

Income tax provision (benefit)

�

�

3,422

�

�

�

(1,735

)

�

�

484

�

�

�

3,699

�

Income (loss) from continuing operations

�

�

(17,737

)

�

�

728

�

�

�

(45,660

)

�

�

3,051

�

Gain (loss) from discontinued operations, net of income taxes

�

�

279

�

�

�

(1,313

)

�

�

650

�

�

�

(5,534

)

Net loss

�

$�

(17,458

)

�

$�

(585

)

�

$�

(45,010

)

�

$�

(2,483

)

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Net income (loss) per share:

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Basic:

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Income (loss) from continuing operations

�

$

(0.62

)

�

$

0.03

�

�

$

(1.60

)

�

$

0.11

�

Income (loss) from discontinued operations, net of income taxes

�

�

0.01

�

�

�

(0.05

)

�

�

0.02

�

�

�

(0.20

)

Net loss per share

�

$

(0.61

)

�

$

(0.02

)

�

$

(1.58

)

�

$

(0.09

)

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Diluted:

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Income (loss) from continuing operations

�

$

(0.62

)

�

$

0.03

�

�

$

(1.60

)

�

$

0.11

�

Income (loss) from discontinued operations, net of income taxes

�

�

0.01

�

�

�

(0.05

)

�

�

0.02

�

�

�

(0.20

)

Net loss per share

�

$

(0.61

)

�

$

(0.02

)

�

$

(1.58

)

�

$

(0.09

)

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Weighted average common shares used in the computation of income (loss) per share:

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Basic

�

�

28,765

�

�

�

27,527

�

�

�

28,461

�

�

�

27,764

�

Diluted

�

�

28,765

�

�

�

28,520

�

�

�

28,461

�

�

�

29,051

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Stock-based compensation, net of capitalization, and depreciation and amortization included in above line items:

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Stock-based compensation:

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Cost of revenue

�

$

197

�

�

$�

255

�

�

$

932

�

�

$

697

�

Selling and marketing

�

�

607

�

�

�

826

�

�

�

2,959

�

�

�

3,040

�

Product and technology

�

�

217

�

�

�

200

�

�

�

825

�

�

�

627

�

General and administrative

�

�

1,521

�

�

�

2,023

�

�

�

8,544

�

�

�

7,141

�

�

�

$

2,542

�

�

$

3,304

�

�

$

13,260

�

�

$

11,505

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Depreciation and amortization:

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Cost of revenue

�

$

167

�

�

$

182

�

�

$

674

�

�

$

761

�

Selling and marketing

�

�

986

�

�

�

625

�

�

�

3,041

�

�

�

2,925

�

Product and technology

�

�

3,184

�

�

�

2,472

�

�

�

11,730

�

�

�

10,214

�

General and administrative

�

�

462

�

�

�

443

�

�

�

1,949

�

�

�

1,196

�

�

�

$

4,799

�

�

$

3,722

�

�

$

17,394

�

�

$

15,096

�

�

�

�

REACHLOCAL, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, except per share data)

�

�	�	Year Ended December 31,						�
�	�	2014		�	�	2013		�
Cash flows from operating activities:	�	�	�	�	�	�	�	�
Income (loss) from continuing operations	�	$	(45,660	)	�	$	3,051	�
Adjustments to reconcile income (loss) from continuing operations to net cash provided by operating activities:	�	�	�	�	�	�	�	�
Depreciation and amortization	�	�	17,394	�	�	�	15,096	�
Stock-based compensation	�	�	13,260	�	�	�	11,505	�
Restructuring charges	�	�	5,927	�	�	�	-	�
Excess tax benefits from stock-based awards	�	�	-	�	�	�	(1,185	)
Provision for doubtful accounts	�	�	1,649	�	�	�	2,304	�
Contingent consideration fair value adjustment	�	�	(416	)	�	�	-	�
Non-cash interest expense	�	�	17	�	�	�	-	�
Impairment of loan to franchisee	�	�	-	�	�	�	3,279	�
Deferred taxes, net	�	�	873	�	�	�	(3,500	)
Changes in operating assets and liabilities:	�	�	�	�	�	�	�	�
Accounts receivable	�	�	(460	)	�	�	(6,317	)
Prepaid expenses and other current assets	�	�	701	�	�	�	121	�
Other assets	�	�	(669	)	�	�	(1,175	)
Accounts payable	�	�	9,081	�	�	�	2,906	�
Accrued compensation and benefits	�	�	(557	)	�	�	3,292	�
Deferred revenue	�	�	(3,400	)	�	�	(255	)
Accrued restructuring	�	�	(2,564	)	�	�	-	�
Deferred rent and other liabilities	�	�	3,421	�	�	�	1,565	�
Net cash provided by (used in) operating activities, continuing operations	�	�	(1,403	)	�	�	30,687	�
Net cash used in operating activities, discontinued operations	�	�	(915	)	�	�	(4,001	)
Net cash provided by (used in) operating activities	�	�	(2,318	)	�	�	26,686	�
�	�	�	�	�	�	�	�	�
Cash flows from investing activities:	�	�	�	�	�	�	�	�
Additions to property, equipment and software	�	�	(25,735	)	�	�	(19,748	)
Acquisitions, net of acquired cash	�	�	(7,089	)	�	�	(363	)
Loan to franchisee	�	�	-	�	�	�	(1,221	)
Investments in non-marketable investments	�	�	(2,000	)	�	�	(2,500	)
Investments in non-marketable investments	�	�	(474	)	�	�	(2,578	)
Maturities of certificates of deposits and short-term investments	�	�	-	�	�	�	2,561	�
Net cash used in investing activities, continuing operations	�	�	(35,298	)	�	�	(23,849	)
Net cash used in investing activities, discontinued operations	�	�	-	�	�	�	(3,180	)
Net cash used in investing activities	�	�	(35,298	)	�	�	(27,029	)
�	�	�	�	�	�	�	�	�
Cash flows from financing activities:	�	�	�	�	�	�	�	�
Proceeds from exercise of stock options	�	�	6,438	�	�	�	6,681	�
Excess tax benefits from stock-based awards	�	�	-	�	�	�	1,185	�
Common stock repurchases	�	�	(69	)	�	�	(18,963	)
Principal payments on capital lease obligations	�	�	(259	)	�	�	-	�
Net cash provided by (used in) financing activities	�	�	6,110	�	�	�	(11,097	)
�	�	�	�	�	�	�	�	�
Effect of exchange rate changes on cash and cash equivalents	�	�	(2,288	)	�	�	(3,366	)
�	�	�	�	�	�	�	�	�
Net change in cash and cash equivalents	�	�	(33,794	)	�	�	(14,806	)
Cash and cash equivalentsbeginning of period	�	�	77,514	�	�	�	92,320	�
Cash and cash equivalentsend of period	�	$	43,720	�	�	$	77,514	�

�

�

�

REACHLOCAL, INC.

Reconciliation of Adjusted EBITDA to Operating Income (Loss)

(in thousands)

�

�

�

Three Months Ended

�

�

Twelve Months Ended

�

�

�

December 31,

�

�

December 31,

�

�

�

2014

�

�

2013

�

�

2014

�

�

2013

�

Operating income (loss)

�

$

(14,660

)

�

$

(1,071

)

�

$

(46,112

)

�

$

6,164

�

Add:

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Depreciation and amortization

�

�

4,799

�

�

�

3,722

�

�

�

17,394

�

�

�

15,096

�

Stock-based compensation

�

�

2,542

�

�

�

3,304

�

�

�

13,260

�

�

�

11,505

�

Acquisition and integration costs

�

�

35

�

�

�

36

�

�

�

121

�

�

�

36

�

Restructuring charges

�

�

1,360

�

�

�

-

�

�

�

5,927

�

�

�

-

�

Adjusted EBITDA (1)

�

$

(5,924

)

�

$

5,991

�

�

$

(9,410

)

�

$

32,801

�

�

�

�

REACHLOCAL, Inc.

Reconciliation of GAAP to Non-GAAP Operating Results for Three Months Ended December 31, 2014 and 2013

(in thousands, except per share amounts)

�

�

�

Three Months Ended December 31, 2014

�

�

Three Months Ended December 31, 2013

�

�

�

�

�

�

�

Adjustments:

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Adjustments:

�

�

�

�

�

�

�

�

�

�

�

GAAP Operating Results As Reported�

�

�

Stock-based Compensation Related Expense (2)

�

�

Acquisition �Related Costs (3)

�

�

Restructuring Related Costs (4)

�

�

Non-GAAP Operating Results

�

�

GAAP Operating Results As Reported

�

�

Stock-based Compensation Related Expense (2)

�

�

Acquisition Related Costs (3)

�

�

Restructuring Related Costs (4)

�

�

Non-GAAP Operating Results

�

Revenue

�

$

109,009

�

�

�

-

�

�

�

-

�

�

�

-

�

�

$

109,009

�

�

$

132,893

�

�

�

-

�

�

�

-

�

�

�

-

�

�

$

132,893

�

Cost of revenue

�

�

61,708

�

�

�

(197

)

�

�

-

�

�

�

-

�

�

�

61,511

�

�

�

65,662

�

�

�

(255

)

�

�

-

�

�

�

-

�

�

�

65,407

�

Operating expenses:

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Sales and marketing

�

�

42,334

�

�

�

(607

)

�

�

-

�

�

�

-

�

�

�

41,727

�

�

�

46,833

�

�

�

(826

)

�

�

-

�

�

�

-

�

�

�

46,007

�

Product and technology

�

�

6,989

�

�

�

(312

)

�

�

(283

)

�

�

-

�

�

�

6,394

�

�

�

5,512

�

�

�

(359

)

�

�

(258

)

�

�

-

�

�

�

4,895

�

General and administrative

�

�

11,278

�

�

�

(1,521

)

�

�

(99

)

�

�

-

�

�

�

9,658

�

�

�

15,957

�

�

�

(2,023

)

�

�

(36

)

�

�

-

�

�

�

13,898

�

Restructuring charges

�

�

1,360

�

�

�

-

�

�

�

-

�

�

�

(1,360

)

�

�

-

�

�

�

-

�

�

�

-

�

�

�

-

�

�

�

-

�

�

�

-

�

Total operating expenses

�

�

61,961

�

�

�

(2,440

)

�

�

(382

)

�

�

(1,360

)

�

�

57,779

�

�

�

68,302

�

�

�

(3,208

)

�

�

(294

)

�

�

-

�

�

�

64,800

�

Operating income (loss)

�

�

(14,660

)

�

�

2,637

�

�

�

382

�

�

�

1,360

�

�

�

(10,281

)

�

�

(1,071

)

�

�

3,463

�

�

�

294

�

�

�

-

�

�

�

2,686

�

Other income, net

�

�

345

�

�

�

-

�

�

�

-

�

�

�

-

�

�

�

345

�

�

�

64

�

�

�

-

�

�

�

-

�

�

�

-

�

�

�

64

�

Income (loss) from continuing operations before income taxes

�

�

(14,315

)

�

�

2,637

�

�

�

382

�

�

�

1,360

�

�

�

(9,936

)

�

�

(1,007

)

�

�

3,463

�

�

�

294

�

�

�

-

�

�

�

2,750

�

Income tax provision (benefit) (6)

�

�

3,422

�

�

�

989

�

�

�

143

�

�

�

510

�

�

�

5,064

�

�

�

(1,735

)

�

�

4,445

�

�

�

586

�

�

�

-

�

�

�

3,296

�

Income (loss) from continuing operations

�

$

(17,737

)

�

�

1,648

�

�

�

239

�

�

�

850

�

�

$

(15,000

)

�

$

728

�

�

�

(982

)

�

�

(292

)

�

�

-

�

�

$

(546

)

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Net income (loss) per share

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Basic income (loss) per share

�

$

(0.62

)

�

�

�

�

�

�

�

�

�

�

�

�

�

$

(0.52

)

�

$

0.03

�

�

�

�

�

�

�

�

�

�

�

�

�

�

$

(0.02

)

Diluted income (loss) per share

�

$

(0.62

)

�

�

�

�

�

�

�

�

�

�

�

�

�

$

(0.52

)

�

$

0.03

�

�

�

�

�

�

�

�

�

�

�

�

�

�

$

(0.02

)

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Weighted average shares outstanding

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Basic

�

�

28,765

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

28,765

�

�

�

27,527

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

27,527

�

Diluted

�

�

28,765

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

28,765

�

�

�

28,520

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

28,520

�

�

�

�

REACHLOCAL, Inc.

Reconciliation of GAAP to Non-GAAP Operating Results for Twelve Months Ended December 31, 2014 and 2013

(in thousands, except per share amounts)

�

�

�

Twelve Months Ended December 31, 2014

�

�

Twelve Months Ended December 31, 2013

�

�

�

�

�

�

�

Adjustments:

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Adjustments:

�

�

�

�

�

�

�

�

�

�

�

GAAP Operating Results As Reported

�

�

Stock-based Compensation Related Expense (2)

�

�

Acquisition Related Costs (3)

�

�

Restructuring �Related Costs (4)

�

�

Non-GAAP Operating Results

�

�

GAAP� Operating Results As Reported

�

�

Stock-based Compensation Related Expense (2)

�

�

Acquisition Related Costs (3)

�

�

Restructuring Related Costs (4)

�

�

Non-GAAP Operating Results

�

Revenue

�

$

474,921

�

�

�

-

�

�

�

-

�

�

�

-

�

�

$

474,921

�

�

$

514,070

�

�

�

-

�

�

�

-

�

�

�

-

�

�

$

514,070

�

Cost of revenue

�

�

252,721

�

�

�

(932

)

�

�

-

�

�

�

-

�

�

�

251,789

�

�

�

256,450

�

�

�

(697

)

�

�

(21

)

�

�

-

�

�

�

255,732

�

Operating expenses:

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Sales and marketing

�

�

182,720

�

�

�

(2,959

)

�

�

-

�

�

�

-

�

�

�

179,761

�

�

�

182,854

�

�

�

(3,040

)

�

�

-

�

�

�

-

�

�

�

179,814

�

Product and technology

�

�

27,510

�

�

�

(1,235

)

�

�

(939

)

�

�

-

�

�

�

25,336

�

�

�

22,240

�

�

�

(1,618

)

�

�

(1,166

)

�

�

-

�

�

�

19,456

�

General and administrative

�

�

52,155

�

�

�

(8,544

)

�

�

(428

)

�

�

-

�

�

�

43,183

�

�

�

46,362

�

�

�

(7,141

)

�

�

(36

)

�

�

-

�

�

�

39,185

�

Restructuring charges

�

�

5,927

�

�

�

-

�

�

�

-

�

�

�

(5,927

)

�

�

-

�

�

�

-

�

�

�

-

�

�

�

-

�

�

�

-

�

�

�

-

�

Total operating expenses

�

�

268,312

�

�

�

(12,738

)

�

�

(1,367

)

�

�

(5,927

)

�

�

248,280

�

�

�

251,456

�

�

�

(11,799

)

�

�

(1,202

)

�

�

-

�

�

�

238,455

�

Operating income (loss)

�

�

(46,112

)

�

�

13,670

�

�

�

1,367

�

�

�

5,927

�

�

�

(25,148

)

�

�

6,164

�

�

�

12,496

�

�

�

1,223

�

�

�

-

�

�

�

19,883

�

Other income, net

�

�

936

�

�

�

-

�

�

�

-

�

�

�

-

�

�

�

936

�

�

�

586

�

�

�

-

�

�

�

-

�

�

�

-

�

�

�

586

�

Income (loss) from continuing operations before income taxes

�

�

(45,176

)

�

�

13,670

�

�

�

1,367

�

�

�

5,927

�

�

�

(24,212

)

�

�

6,750

�

�

�

12,496

�

�

�

1,223

�

�

�

-

�

�

�

20,469

�

Income tax provision (6)

�

�

484

�

�

�

5,126

�

�

�

513

�

�

�

2,223

�

�

�

8,346

�

�

�

3,699

�

�

�

4,445

�

�

�

445

�

�

�

-

�

�

�

8,589

�

Income (loss) from continuing operations

�

$

(45,660

)

�

�

8,544

�

�

�

854

�

�

�

3,704

�

�

$

(32,558

)

�

$

3,051

�

�

�

8,051

�

�

�

778

�

�

�

-

�

�

$

11,880

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Net income (loss) per share

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Basic income (loss) per share

�

$

(1.60

)

�

�

�

�

�

�

�

�

�

�

�

�

�

$

(1.14

)

�

$

0.11

�

�

�

�

�

�

�

�

�

�

�

�

�

�

$

0.43

�

Diluted income (loss) per share

�

$

(1.60

)

�

�

�

�

�

�

�

�

�

�

�

�

�

$

(1.14

)

�

$

0.11

�

�

�

�

�

�

�

�

�

�

�

�

�

�

$

0.41

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Weighted average shares outstanding

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Basic

�

�

28,461

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

28,461

�

�

�

27,764

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

27,764

�

Diluted

�

�

28,461

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

28,461

�

�

�

29,051

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

29,051

�

�

�

�

REACHLOCAL, INC.

Reconciliation of GAAP to Constant Currency Revenue

(in thousands)

�

�

�

December 31,

�

�

December 31,

�

�

�

2014

�

�

2013

�

�

2014

�

�

2013

�

North American GAAP Revenue

�

$

67,760

�

�

$

84,641

�

�

$

293,096

�

�

$

341,737

�

Constant Currency Adjustment

�

�

284

�

�

�

-

�

�

�

1,017

�

�

�

-

�

North American Revenue at Constant Currency (5)

�

$

68,044

�

�

$

84,641

�

�

$

294,113

�

�

$

341,737

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

As Reported Growth Rates

�

�

(19.9

%)

�

�

0.8

%

�

�

(14.2

%)

�

�

4.5

%

Constant Currency Growth Rates

�

�

(19.6

%)

�

�

1.1

%

�

�

(13.9

%)

�

�

4.6

%

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

International GAAP Revenue

�

$�

41,249

�

�

$

48,252

�

�

$

181,825

�

�

$

172,333

�

Constant Currency Adjustment

�

�

3,065

�

�

�

-

�

�

�

4,738

�

�

�

-

�

International Revenue at Constant Currency (5)

�

$

44,314

�

�

$

48,252

�

�

$

186,563

�

�

$

172,333

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

As Reported Growth Rates

�

�

(14.5

%)

�

�

33.7

%

�

�

5.5

%

�

�

34.8

%

Constant Currency Growth Rates

�

�

(8.2

%)

�

�

41.3

%

�

�

8.3

%

�

�

40.8

%

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

Consolidated GAAP Revenue

�

$

109,009

�

�

$

132,893

�

�

$

474,921

�

�

$

514,070

�

Constant Currency Adjustment

�

�

3,349

�

�

�

-

�

�

�

5,755

�

�

�

-

�

Consolidated Revenue at Constant Currency (5)

�

$

112,358

�

�

$

132,893

�

�

$

480,676

�

�

$

514,070

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

As Reported Growth Rates

�

�

(18.0

%)

�

�

10.7

%

�

�

(7.6

%)

�

�

13.0

%

Constant Currency Growth Rates

�

�

(15.5

%)

�

�

12.7

%

�

�

(6.5

%)

�

�

14.5

%

�

�

�

Footnotes

�

(1) Adjusted EBITDA is defined as net income (loss) from continuing operations before interest, income taxes, depreciation and amortization expenses, excluding, when applicable, stock-based compensation, the effects of accounting for business combinations (including any impairment of acquired intangibles), restructuring charges, and other non-operating income or expense.

�

(2) Stock-based Compensation Related Expense: Includes stock-based compensation expense and the related adjustment to amortization of capitalized software development costs.

�

(3) Acquisition Related Costs, including the amortization and any impairment of acquired intangibles, are excluded from the non-GAAP operating results as these are non-recurring charges which the Company would not have incurred as part of continuing operations.

�

(4) Restructuring Related Costs are excluded from the non-GAAP operating results as these are non-recurring charges with the Company would not have incurred as part of continuing operations.

�

(5) Constant currency revenues are determined by recalculating net revenues denominated in currencies other than U.S. Dollars in the current fiscal period using average exchange rates for that particular currency during the corresponding financial period of the prior year. The company uses this non-GAAP measure to evaluate performance on a comparable basis excluding the impact of foreign currency fluctuations. Where constant currency revenue is presented for a period longer than one fiscal quarter, it is computed as the sum of the amount separately calculated for each quarter during that period.

�

(6) The income tax provision (benefit) for the Non-GAAP adjustments is estimated using the effective statutory rate for those jurisdictions.

�