ReachLocal Reports Fourth Quarter and 2015 Results

WOODLAND HILLS, Calif., Feb. 25, 2016 (GLOBE NEWSWIRE) -- ReachLocal, Inc. RLOC, a leader in powering online marketing for local businesses, today reported financial results for the fourth quarter and 2015.

"Returning the company to Adjusted EBITDA profitability was a stated goal for ReachLocal as we entered 2015 and I'm pleased that we delivered on that goal, both for the fourth quarter and the full year.  We continued to demonstrate strong bottom-line performance and reductions in operating expenses, resulting in $4.3 million of Adjusted EBITDA for the fourth quarter," said Sharon Rowlands, chief executive officer.  "While our return to revenue growth is taking longer than expected, we saw improved productivity metrics from our sales force, our subscription revenue is growing and we believe our web partner program will drive further adoption of our ReachEdge marketing automation software in the future."

FY 15 Business Highlights

• Undertook a company-wide cost saving initiative that resulted in a reduction of operating expenses by 27% in 2015 over 2014 and run-rate operating expenses exiting 2015 were $65 million below the end of 2014.
   
• Exited 2015 with $22.5 million of annual revenue run-rate for subscription products, including the results from 53% year-over-year growth in ReachEdge units.
   
• Made progress in improving the economics of international operations, with several markets expected to be self-sustaining during 2016, and exited direct sales in the UK market.
   
• Entered into financing agreements with affiliates of VantagePoint Capital Partners and Hercules Technology Growth Capital to provide $30 million of additional liquidity to support stability and growth initiatives and ended 2015 with cash, cash equivalents and short term investments of $34.2 million, including $15 million of restricted cash under the Hercules loan agreement.
   
• Revised terms with key publishers to improve the ability to earn performance bonuses following up on winning top honors with Google's Innovator Award for ReachEdge™ in Canada, Google's Quality Score Champion Award for North America, Australia/New Zealand and Latin America, and Highest Customer Service Satisfaction and Highest AdWords Account Performance Satisfaction in Australia/New Zealand.

Quarterly Results at a Glance

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

2015 Annual Results and Key Metrics at a Glance

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

Business Outlook

The Company's outlook for the first quarter of 2016 is as follows:

• Revenue in the range of $77 to $79 million.
• Adjusted EBITDA in the range of $1.8 to $2.8 million.

Conference Call and Webcast Information

The ReachLocal fourth quarter and 2015 results teleconference and webcast is scheduled to begin at 2:00 p.m., Pacific Time on Thursday, February 25, 2016. To participate on the live call, analysts and investors should dial 1-888-466-4462, or outside the U.S. 719-325-2472, 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 and goodwill), restructuring charges, and other non-operating income or expense. As a result, reported Adjusted EBITDA reflects that ClubLocal operations were determined to be discontinued operations during the fourth quarter of 2013, and that the Company had fully withdrawn during the first quarter 2014.

Acquisition Related Costs:  Acquisition related costs, including the amortization and any impairment of acquired intangibles and goodwill 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 increase productivity of its sales operations; (ii) the Company's ability to obtain the cost savings contemplated by its cost reduction initiatives and maintain sufficient liquidity; (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 offerings; (vi) the Company's ability to satisfy the covenants under its term loan; (vii) the availability of banking and payment processing services from financial services providers; (viii) the Company's ability to manage its international operations; (ix) the Company's ability to successfully develop and offer new products and services in the highly competitive online advertising industry; (x) the impact of worldwide economic conditions, including the resulting effect on advertising budgets; and (xi) 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. 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.

For more information please visit ReachLocal at www.reachlocal.com, follow us at www.reachlocal.com/social or email info@reachlocal.com.