Form 8-K ReachLocal Inc For: May 05

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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): May 5, 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)

 

Registrant’s 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))

 

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

 

 

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Item 1.01

Entry into a Material Definitive Agreement.

 

Addendum to Google Agreement

 

On May 4, 2015, ReachLocal, Inc. and certain of our affiliates entered into an Addendum to Google AdWords PSP Addendum (the “2015 Addendum”) with Google Inc. and certain of its affiliates (together, “Google”), which amends the Google AdWords PSP Addendum, effective July 1, 2014, between us and Google (the “2014 Google Agreement”). The 2014 Google Agreement provides rebates based on overall global growth of our spending with Google. The 2015 Addendum amends the 2014 Google Agreement to provide rebates based on country-by-country growth of our spending with Google during the period from April 1, 2015 to March 31, 2016.

 

Loan and Security Agreement

 

The information set forth in Item 2.03 of this Current Report on Form 8-K is incorporated herein by reference in this Item 1.01.

 

Item 2.02

Results of Operations and Financial Condition.

 

On May 5, 2015, we publicly disseminated a press release announcing financial results for the first quarter ended March 31, 2015.

 

The foregoing description is qualified in its entirety by reference to our press release, dated May 5, 2015, a copy of which is attached hereto as Exhibit 99.1 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 2.03

Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

 

On April 30, 2015 (the “closing date”), we entered into a loan and security agreement (the “credit facility”) with our direct and indirect domestic subsidiaries, as co-borrowers, Hercules Technology Growth Capital, Inc. (“Hercules”), as administrative agent, and the lenders party thereto from time to time (the “Lenders”), including Hercules, pursuant to which the Lenders agreed to make a term loan available to us for working capital and general business purposes, in a principal amount of $25 million. The entire term loan was funded on the closing date of the credit facility. Upon the entry into the credit facility, we were required to pay the Lenders a facility fee of $250,000; provided, however, that if the entire amount of the term loan remains outstanding through its scheduled maturity date, and no event of default exists on the maturity date, the remaining amount due under the credit facility will be reduced by $250,000. The credit facility is secured by substantially all of our personal property including our intellectual property.

 

The term loan bears interest at a floating annual rate equal to the greater of (i) 11.75% and (ii) the sum of (a) the prime rate as reported by The Wall Street Journal, plus (b) 8.50%. We are required to make interest-only payments on the term loan through May 1, 2016, though such payments may be extended through August 1, 2016 and November 1, 2016 if we remain in continuous compliance with the financial covenants under the credit facility through April 1, 2016 and July 1, 2016, respectively, and no default or event of default has occurred and is continuing on such dates. The term loan will begin amortizing at the end of the applicable interest-only period, with monthly payments of principal and interest being made by us to the Lenders in consecutive monthly installments following the end of such interest-only period. The term loan matures on April 1, 2018; provided, however, that if the interest-only payments are extended through November 1, 2016, the term loan will instead mature October 1, 2018. Upon repayment of the term loan, we are also required to make a final payment to the Lenders equal to $1,475,000.

 

At our option, we may prepay the outstanding principal balance of the term loan in whole, or in part in a minimum amount of $2,500,000, subject to a prepayment fee of 3% of any amount prepaid if the prepayment occurs on or prior to April 30, 2016, or 2% of the amount prepaid if the prepayment occurs after April 30, 2016 but on or prior to April 30, 2017. If the prepayment occurs after April 30, 2017, there is no prepayment fee.

 

 

The credit facility includes affirmative and negative covenants applicable to us and our subsidiaries who are co-borrowers under the credit facility, and in certain cases, to all of our subsidiaries. The affirmative covenants include, among others, covenants requiring us to maintain our legal existence and governmental approvals, deliver certain financial reports and maintain insurance coverage. The negative covenants include, among others, restrictions on our transferring collateral, incurring additional indebtedness, engaging in mergers or acquisitions, paying dividends or making other distributions, making investments, creating liens, selling assets, and suffering a change in control, in each case subject to certain exceptions, as well as financial covenants requiring us to maintain certain minimum levels of revenue and adjusted EBITDA. We are also required to maintain minimum cash and cash equivalents in accounts subject to a control agreement with Hercules, as administrative agent, in an amount equal to $17.5 million (which decreases to $12.5 million under certain circumstances) at all times.

 

The credit facility also includes events of default, the occurrence and continuation of which provide Hercules, as administrative agent, with the right to exercise remedies against us and the collateral securing the term loan under the credit facility, including foreclosure against our properties securing the credit facilities, including our cash. These events of default include, among other things, our failure to pay any amounts due under the credit facility, a breach of covenants under the credit facility, our insolvency, a material adverse effect occurring, the occurrence of certain defaults under certain other indebtedness or certain final judgments against us.

 

On the closing date of the credit facility, in connection therewith, we issued to Hercules, as the sole Lender on the closing date, a warrant to purchase up to 177,304 shares of our common stock, par value $0.00001 per share (“Common Stock”), at an exercise price of $2.82 per share. The warrant may be exercised either for cash or on a cashless basis. The warrant expires April 30, 2022.

 

The foregoing is not a complete description of the terms and conditions of the form of warrant agreement or the loan and security agreement and is qualified in its entirety by reference to those agreements, copies of which will be filed as an exhibit to ReachLocal’s next Quarterly Report on Form 10-Q.

 

Item 5.07

Submission of Matters to a Vote of Security Holders.

 

On April 29, 2015, we held our annual meeting of stockholders. At the annual meeting, 25,381,847 shares were represented in person or by proxy, constituting approximately 86.6% of our outstanding shares as of March 17, 2015, the record date for the meeting. Stockholders voted to:

 

●

reelect Jim Geiger and Habib Kairouz to the Board of Directors, each to serve as a director until the 2018 annual meeting of stockholders and until his successor has been duly elected and qualified; and

 

●

ratify the appointment of Grant Thornton LLP as our independent registered public accounting firm for the current fiscal year.

 

The final results of voting on each of the above items are as follows:

			For				Withheld/ Against				Abstentions				Broker Non- Votes
1	Election of directors:
	Jim Geiger			20,815,034				1,820,685			N/A					2,746,128
	Habib Kairouz			22,292,068				343,651			N/A					2,746,128
2	Ratification of the appointment of Grant Thornton LLP as ReachLocal’s independent registered public accounting firm for the fiscal year ending December 31, 2015			25,380,890				957			0					N/A

 

  

Item 8.01

Other Events.

 

On April 29, 2015, our Board of Directors terminated the company’s stock repurchase program in connection with entrance into the credit facility. Approximately $10.7 million remained under the $47 million repurchase program at the time it was terminated, however, we had not made any repurchases under the program since the third quarter of 2013.

 

Item 9.01

Financial Statements and Exhibits.

 

(d)     Exhibits

 

Exhibit No.		Description of Exhibit
99.1		Press Release dated May 5, 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: May 5, 2015					REACHLOCAL, INC.
					By:		/s/ Ross G. Landsbaum
					Name:		Ross G. Landsbaum
					Title:		Chief Financial Officer

 

 

Exhibit 99.1

 

 

 

ReachLocal Reports First Quarter 2015 Results

 

 

Company Strengthens Financial Position with $25 Million 3-year Term Loan

 

 

(WOODLAND HILLS, CA) – May 5, 2015 - ReachLocal, Inc. (NASDAQ: RLOC), a leader in powering online marketing for local businesses, today reported financial results for the first quarter ended March 31, 2015.

 

“ReachLocal continued to make progress during the first quarter. We feel we are seeing promising indicators from our newly implemented sales model in North America and positive receptivity from clients to our total digital marketing system for local businesses. ReachEdge was recently honored by the Local Search Association with an ‘Ad to Action’ award,” said Sharon Rowlands, Chief Executive Officer. “We also are taking a swift, proactive approach to expense management that resulted in better than previously estimated adjusted EBITDA results for the quarter. We are encouraged by these results as we continue to prioritize a return to profitability in the second half of 2015.”

 

The Company also announced today that it entered into a $25 million 3-year term loan with Hercules Technology Growth Capital to provide additional liquidity and resources to support its initiatives. Additional detail on the facility is available in the Company’s Form 8-K filed today.

 

Quarterly Results at a Glance*

 

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

 

		Q1 2015				Q1 2014
Revenue		$	99,563			$	124,736
Net Loss from Continuing Operations		$	(12,782	)		$	(6,313	)
Net Loss from Continuing Operations per Diluted Share		$	(0.44	)		$	(0.22	)
Net Loss		$	(12,782	)		$	(5,973	)
Net Loss per Diluted Share		$	(0.44	)		$	(0.21	)
Non-GAAP Net Loss		$	(10,164	)		$	(2,001	)
Non-GAAP Net Loss per Diluted Share		$	(0.35	)		$	(0.07	)
Adjusted EBITDA		$	(3,785	)		$	2,261
Cash Flow from Continuing Operations		$	(4,530	)		$	(1,061	)
Cash Flow from Operating Activities		$	(4,589	)		$	(2,455	)

 

* The amounts reflect that ClubLocal operations were determined to be discontinued operations during the fourth quarter of 2013, and fully withdrawn during the first quarter 2014. The definitions for Adjusted EBITDA and Non-GAAP Net Income, as set forth in full below, exclude discontinued operations.

 

 

The strengthening of the U.S. Dollar had a significant impact on revenue. On a constant currency basis relative to the first quarter of 2014, revenue for the first quarter of 2015 would have been $105.3 million.

 

		Q1 2015				Q1 2014
Revenue by Channel (North America):
Direct Local Revenue		$	45,926			$	56,264
National Brands, Agencies and Resellers (NBAR) Revenue		$	17,573			$	20,824
Revenue by Channel (International):
Direct Local Revenue		$	32,809			$	42,303
National Brands, Agencies and Resellers (NBAR) Revenue		$	3,255			$	5,345

 

 

Business Outlook

 

“We are driving efficiency, reducing expenses and eliminating unprofitable revenue streams while focusing on cash management across the company. We believe this focus and our new term loan facility has strengthened our financial position,” said Ross Landsbaum, Chief Financial Officer. “Further, we believe that we are well positioned to achieve our goals of sequential revenue growth and positive Adjusted EBITDA in the second half of 2015.”

 

The Company’s outlook for the second quarter of 2015 is as follows:

 

●

Revenue in the range of $97 to $101 million.

 

●

Adjusted EBITDA loss not to exceed $1 million.

 

 

Conference Call and Webcast Information

 

The ReachLocal first quarter 2015 teleconference and webcast is scheduled to begin at 2:00 p.m., Pacific Time on Tuesday, May 5, 2015. To participate on the live call, analysts and investors should dial 1-888-438-5491, or outside the U.S. 719-325-2495, 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 Company’s website 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 Company’s 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 Company’s 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 Company’s results as reported under GAAP. Some of these limitations are:

 

●

Adjusted EBITDA does not reflect the Company’s 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 Company’s 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 Company’s 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 Company’s financing and investing activities, any of which could significantly affect the Company’s 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 Company’s 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 Company’s 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 Company’s ability to rectify the challenges associated with its North American sales operations; (ii) the Company’s ability to obtain the cost savings contemplated by its cost reduction initiatives; (iii) the Company’s ability to purchase media and receive rebates from Google, Yahoo! and Microsoft under commercially reasonable terms; (iv) the Company’s ability to recruit, train and retain its salespeople; (v) the Company’s ability to attract and retain customers and compete with a wide range of competitors on both price and product offering; (vi) the Company’s ability to satisfy the covenants under its term loan; (vii) the Company’s ability to successfully enter new markets and manage its international operations; (viii) the Company’s ability to successfully develop and offer new products and services in the highly competitive online advertising industry; (ix) the impact of worldwide economic conditions, including the resulting effect on advertising budgets; and (x) the Company’s 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. ReachLocal is headquartered in Woodland Hills, Calif. and operates in four regions: Asia-Pacific, Europe, Latin America and North America. 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)

 

		March 31,				December 31,
		2015				2014
Assets
Current Assets:
Cash and cash equivalents		$	33,685			$	43,720
Short-term investments			140				904
Accounts receivable, net			5,516				7,844
Prepaid expenses and other current assets			9,938				9,620
Total current assets			49,279				62,088
Property and equipment, net			17,484				19,639
Capitalized software development costs, net			21,585				21,555
Restricted deposits			3,816				3,589
Intangible assets, net			5,000				5,492
Non-marketable investments			9,000				9,000
Other assets			3,551				3,518
Goodwill			48,114				48,189
Total assets		$	157,829			$	173,070
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable		$	41,646			$	44,874
Accrued compensation and benefits			13,667				15,972
Deferred revenue			28,733				29,016
Accrued restructuring			3,571				3,196
Capital lease			630				624
Other current liabilities			12,554				12,316
Liabilities of discontinued operations			790				850
Total current liabilities			101,591				106,848
Capital lease			940				1,103
Deferred rent and other liabilities			12,749				12,195
Total liabilities			115,280				120,146
Stockholders’ Equity:
Common stock			-				-
Receivable from stockholder			(60	)			(65	)
Additional paid-in capital			134,348				132,080
Accumulated deficit			(87,351	)			(74,569	)
Accumulated other comprehensive loss			(4,388	)			(4,522	)
Total stockholders’ equity			42,549				52,924
Total liabilities and stockholders’ equity		$	157,829			$	173,070

 

 

REACHLOCAL, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

 

		Three Months Ended
		March 31,
		2015				2014
Revenue		$	99,563			$	124,736
Cost of revenue			56,217				63,398
Operating expenses:
Selling and marketing			36,283				46,761
Product and technology			7,422				6,959
General and administrative			10,713				14,164
Restructuring charges			1,455				1,823
Total operating expenses			55,873				69,707
Operating loss			(12,527	)			(8,369	)
Other income (expense), net			(156	)			188
Loss from continuing operations before income taxes			(12,683	)			(8,181	)
Income tax provision (benefit)			99				(1,868	)
Loss from continuing operations			(12,782	)			(6,313	)
Income from discontinued operations, net of income taxes			-				340
Net loss		$	(12,782	)		$	(5,973	)
Net loss per share:
Basic:
Loss from continuing operations		$	(0.44	)		$	(0.22	)
Income from discontinued operations, net of income taxes			-				0.01
Net loss per share		$	(0.44	)		$	(0.21	)
Diluted:
Loss from continuing operations		$	(0.44	)		$	(0.22	)
Income from discontinued operations, net of income taxes			-				0.01
Net loss per share		$	(0.44	)		$	(0.21	)
Weighted average common shares used in the computation of income (loss) per share:
Basic			29,070				28,088
Diluted			29,070				28,088
Stock-based compensation, net of capitalization, and depreciation and amortization included in above line items:
Stock-based compensation:
Cost of revenue		$	156			$	275
Selling and marketing			482				877
Product and technology			168				386
General and administrative			1,340				3,033
		$	2,146			$	4,571
Depreciation and amortization:
Cost of revenue		$	132			$	177
Selling and marketing			833				635
Product and technology			3,707				2,958
General and administrative			462				452
		$	5,134			$	4,222

 

 

REACHLOCAL, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, except per share data)

 

		Three Months Ended March 31,
		2015				2014
Cash flows from operating activities:
Loss from continuing operations		$	(12,782	)		$	(6,313	)
Adjustments to reconcile loss from continuing operations to net cash used in operating activities:
Depreciation and amortization			5,134				4,222
Stock-based compensation			2,146				4,571
Restructuring charges			1,455				1,823
Loss on disposal of fixed assets			161
Excess tax benefits from stock-based awards			-				176
Provision for doubtful accounts			78				725
Non-cash interest income, net			2				-
Deferred taxes, net			-				(1,399	)
Changes in operating assets and liabilities:
Accounts receivable			2,069				130
Prepaid expenses and other current assets			(449	)			(2,021	)
Other assets			(498	)			(473	)
Accounts payable			(1,838	)			(847	)
Accrued compensation and benefits			(1,765	)			(1,310	)
Deferred revenue			333				(192	)
Accrued restructuring			(539	)			1,209
Deferred rent and other liabilities			1,963				(1,362	)
Net cash used in operating activities, continuing operations			(4,530	)			(1,061	)
Net cash used in operating activities, discontinued operations			(59	)			(1,394	)
Net cash used in operating activities			(4,589	)			(2,455	)
Cash flows from investing activities:
Additions to property, equipment and software			(4,134	)			(4,098	)
Acquisitions, net of acquired cash			-				(1,760	)
Investments in non-marketable investments			-				(2,000	)
Maturities of certificates of deposits and short-term investments			700				-
Purchases of certificates of deposits and short-term investments			(42	)			(74	)
Net cash used in investing activities			(3,476	)			(7,932	)
Cash flows from financing activities:
Proceeds from exercise of stock options			6				6,234
Excess tax benefits from stock-based awards			-				(176	)
Principal payments on capital lease obligations			(191	)			-
Debt issuance costs			(50	)			-
Common stock repurchases			(4	)			-
Net cash provided by (used in) financing activities			(239	)			6,058
Effect of exchange rate changes on cash and cash equivalents			(1,731	)			478
Net change in cash and cash equivalents			(10,035	)			(3,851	)
Cash and cash equivalents—beginning of period			43,720				77,514
Cash and cash equivalents—end of period		$	33,685			$	73,663

 

 

REACHLOCAL, INC.

Reconciliation of Adjusted EBITDA to Operating Loss

(in thousands)

 

		Three Months Ended
		March 31,
		2015				2014
Operating loss		$	(12,527	)		$	(8,369	)
Add:
Depreciation and amortization			5,134				4,222
Stock-based compensation			2,146				4,571
Acquisition and integration costs			7				14
Restructuring charges			1,455				1,823
Adjusted EBITDA (1)		$	(3,785	)		$	2,261

 

 

REACHLOCAL, Inc.

Reconciliation of GAAP to Non-GAAP Operating Results for Three Months Ended March 31, 2015 and 2014

(in thousands, except per share amounts)

 

		Three Months Ended March 31, 2015																				Three Months Ended March 31, 2014
						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		$	99,563				-				-				-			$	99,563			$	124,736				-				-				-			$	124,736
Cost of revenue			56,217				(156	)			-				-				56,061				63,398				(275	)			-				-				63,123
Operating expenses:
Sales and marketing			36,283				(482	)			-				-				35,801				46,761				(877	)			-				-				45,884
Product and technology			7,422				(279	)			(372	)			-				6,771				6,959				(506	)			(232	)			-				6,221
General and administrative			10,713				(1,345	)			(100	)			-				9,268				14,164				(3,033	)			(14	)			-				11,117
Restructuring charges			1,455				-				-				(1,455	)			-				1,823				-				-				(1,823	)			-
Total operating expenses			55,873				(2,106	)			(472	)			(1,455	)			51,840				69,707				(4,416	)			(246	)			(1,823	)			63,222
Operating income (loss)			(12,527	)			2,262				472				1,455				(8,338	)			(8,369	)			4,691				246				1,823				(1,609	)
Other income (expense), net			(156	)			-				-				-				(156	)			188				3				-				-				191
Income (loss) from continuing operations before income taxes			(12,683	)			2,262				472				1,455				(8,494	)			(8,181	)			4,694				246				1,823				(1,418	)
Income tax provision (benefit) (6)			99				848				177				546				1,670				(1,868	)			2,156				242				53				583
Income (loss) from continuing operations		$	(12,782	)			1,414				295				909			$	(10,164	)		$	(6,313	)			2,538				4				1,770			$	(2,001	)
Net loss per share
Basic loss per share		$	(0.44	)														$	(0.35	)		$	(0.22	)														$	(0.07	)
Diluted loss per share		$	(0.44	)														$	(0.35	)		$	(0.22	)														$	(0.07	)
Weighted average shares outstanding
Basic			29,070																29,070				28,088																28,088
Diluted			29,070																29,070				28,088																28,088

 

 

REACHLOCAL, INC.

Reconciliation of GAAP to Constant Currency Revenue

(in thousands)

 

		Three Months Ended
		March 31,
		2015				2014
North American GAAP Revenue		$	63,499			$	77,088
Constant Currency Adjustment			398				-
North American Revenue at Constant Currency (5)		$	63,897			$	77,088
As Reported Growth Rates			(17.6	%)			(7.0	%)
Constant Currency Growth Rates			(17.1	%)			(6.6	%)
International GAAP Revenue		$	36,064			$	47,648
Constant Currency Adjustment			5,351				-
International Revenue at Constant Currency (5)		$	41,415			$	47,648
As Reported Growth Rates			(24.3	%)			23.2	%
Constant Currency Growth Rates			(13.1	%)			29.7	%
Consolidated GAAP Revenue		$	99,563			$	124,736
Constant Currency Adjustment			5,748				-
Consolidated Revenue at Constant Currency (5)		$	105,311			$	124,736
As Reported Growth Rates			(20.2	%)			2.6	%
Constant Currency Growth Rates			(15.6	%)			4.5	%

 

 

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.

11

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