ReachLocal Reports First Quarter 2013 Results International Growth of 41%; Expanding to Austria and Russia ClubLocal San Francisco Launch; ReachCommerce Beta On Track for Q2 WOODLAND HILLS, Calif., May 7, 2013 (GLOBE NEWSWIRE) -- ReachLocal, Inc. (Nasdaq:RLOC), a leader in local online marketing solutions for small- and medium-sized businesses (SMBs), today reported financial results for the first quarter ended March 31, 2013. Q1 Highlights *Year-over-year revenue growth of 17%, highlighted by 41% growth in international markets and 19% growth in the Direct Local channel *International revenue expanded to 32% of revenue, up from 26% a year ago *Adjusted EBITDA grew 72% to $6.9 million, compared to $4.0 million a year ago *Year-over-year Active Advertisers grew 12% to 22,800 and Active Campaigns grew 13% to 34,000 *Launched Direct Local operations in Austria *Repurchased 384,000 shares of stock for $5.4 million during the quarter under an expanded buy-back authorization, bringing the total repurchased to 2,507,000 shares for $24.9 million Management Commentary "ReachLocal posted solid first quarter results, highlighted by strong international revenue which grew to 32% of our total revenue for the quarter," said Zorik Gordon, Chief Executive Officer. "The new initiatives we announced at our analyst day on February 21, 2013 are all on track, with ClubLocal scheduled to open in the San Francisco Bay Area in the current quarter, the beta introduction of our ReachCommerce SaaS platform also set for this quarter, and the launch of ReachEdge, our SaaS-based sites and marketing automation solution, set to launch in the second half of 2013." Quarterly Results at a Glance (Table amounts in 000's except key metrics and per share amounts) Q1 2013 Q1 2012 % Change Revenue $121,820 $104,003 17% Net Loss $(635) $(1,006) 37% Net Loss per Diluted Share $(0.02) $(0.03) 33% Non-GAAP Net Income $2,859 $1,959 46% Non-GAAP Net Income per Diluted Share $0.10 $0.07 43% Adjusted EBITDA $6,918 $4,022 72% Underclassmen Expense $11,494 $11,055 4% Cash Flow from Continuing Operations $4,704 $13,354 (65)% Cash Flow from Operating Activities $4,698 $13,218 (64)% Revenue by Channel and Geography: Direct Local Revenue $97,606 $81,740 19% National Brands, Agencies and Resellers (NBAR) $24,214 $22,263 9% Revenue International Revenue (included above) $38,687 $27,527 41% Key Metrics (at period end): Active Advertisers 22,800 20,400 12% Active Campaigns 34,000 30,100 13% Total Upperclassmen 419 381 10% Total Underclassmen 412 417 (1)% Total IMCs 831 798 4% Business Outlook "We are maintaining our full-year guidance, and our second quarter outlook reflects continued strong international performance, our planned change in timing and mix of our Underclassmen hiring, and near-term macro-economic challenges in the North American market," said Ross Landsbaum, Chief Financial Officer. "We continue to invest in both the marketing services business and our new commerce and SaaS initiatives, while also focusing on further enhancing salesforce performance." The Company's outlook is as follows: Second Quarter 2013 *Revenues in the range of $124 million to $126 million *Adjusted EBITDA in the range of $5 million to $6 million *Ending Upperclassmen headcount of 440 to 460 *Ending Underclassmen headcount of 420 to 440 *Ending total IMC headcount of 860 to 900 Fiscal Year 2013 *Revenues in the range of $530 million to $540 million *Adjusted EBITDA in the range of $29.5 million to $31.5 million *Ending Upperclassmen headcount of 470 to 510 *Ending Underclassmen headcount of 300 to 340 *Ending total IMC headcount of 770 to 850 Conference Call and Webcast Information The ReachLocal first quarter 2013 teleconference and webcast is scheduled to begin at 2:00 p.m., Pacific Time on Tuesday, May 7, 2013. To participate on the live call, analysts and investors should dial 877-941-2068 at least ten 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 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 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 on Underclassmen Expense, Active Advertisers, Active Campaigns and the total number of Internet Marketing Consultants (IMCs), as management believes that these metrics are important gauges of the progress of the Company's performance. The 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, in the case of the acquisition of SMB:LIVE, the deferred cash consideration) and amounts included in 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 have 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. Underclassmen Expense is a number the Company calculates to approximate its investment in Underclassmen and is comprised of the selling and marketing expenses allocated to Underclassmen during a reporting period. The amount includes the direct salaries and allocated benefits of the Underclassmen (excluding commissions), training and sales organization expenses including depreciation allocated based on relative headcount and marketing expenses allocated based on relative revenue. While management believes that Underclassmen Expense provides useful information regarding the Company's approximated investment in Underclassmen, the methodology used to arrive at the estimated Underclassmen Expense was developed internally by the Company, is not a concept or method recognized by GAAP and other companies may use different methodologies to calculate or approximate measures similar to Underclassmen Expense. Accordingly, the calculation of Underclassmen Expense may not be comparable to similar measures used by other companies. Management refers to sales through its sales force of Internet Marketing Consultants as its Direct Local channel.As the sale to agencies, resellers and national brands involves negotiations with businesses that generally represent an aggregated group of SMB advertisers, management groups them together as the National Brands, Agencies and Resellers (NBAR) channel. Active Advertisers 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 Advertisers by adjusting the number of Active Campaigns to combine clients with more than one Active Campaign as a single Active Advertiser. Clients with more than one location are generally reflected as multiple Active Advertisers. Because this number includes clients served through the National Brands, Agencies and Resellers channel, Active Advertisers includes entities with which we do not have a direct client relationship. Numbers are rounded to the nearest hundred. Active Campaigns is a number we calculate to approximate the number of individual products or services we are managing under contract for Active Advertisers. For example, if we were performing both ReachSearch and ReachDisplay campaigns for a client, we consider that two Active Campaigns. Similarly, if a client purchased ReachSearch campaigns for two different products or purposes, we consider that two Active Campaigns. Numbers are rounded to the nearest hundred. Caution Concerning Forward-Looking Statements Statements in this press release regarding the Company's guidance 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) our success indevelopingand offering new products and services in the highly competitive online advertising industry, (ii) our ability to expand our product suite into software-related products, (iii) our ability to expand into consumer-facing products; (iv) our ability to purchase media and receive rebates from Google, Yahoo! and Microsoft under commercially reasonable terms; (v) our ability to recruit, train and retain our Internet Marketing Consultants; (vi) our ability to attract and retain customers; (vii) our ability to successfully enter new markets and manage its international expansion; (viii) the impact of worldwide economic conditions, including the resulting effect on advertising budgets; and (ix) our 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) develops online marketing and transaction solutions that power local commerce for SMBs, from lead generation and lead conversion to booking and buying. Our global distribution network includes local Internet marketing consultants and service professionals, along with select third-party agencies and resellers throughout the United States, Australia, Austria, Brazil, Canada, Czech Republic, Germany, Japan, Netherlands, New Zealand, Slovakia, Poland, Russia and the United Kingdom. ReachLocal is headquartered in Woodland Hills, Calif. Subscribe to ReachLocal's free newsletter to receive news, tips, and other online marketing insights. REACHLOCAL, INC. UNAUDITED BALANCE SHEETS (in thousands, except per share data) March 31, December 31, 2013 2012 Assets Current assets: Cash and cash equivalents $87,649 $92,336 Short-term investments 574 3,149 Accounts receivable, net 5,563 5,689 Other receivables and prepaid expenses 9,951 8,957 Total current assets 103,737 110,131 Property and equipment, net 11,686 11,066 Capitalized software development costs, net 15,569 14,704 Restricted certificates of deposit 1,257 1,226 Intangible assets, net 2,047 2,442 Otherassets 6,862 4,044 Goodwill 42,083 42,083 Total assets $183,241 $185,696 Liabilities and Stockholders' Equity Current Liabilities: Accounts payable $36,462 $35,297 Accrued expenses 25,115 27,422 Deferred revenue and other current liabilities 36,472 36,304 Liabilities of discontinued operations, net 762 767 Total current liabilities 98,811 99,790 Deferred rent and other liabilities 3,629 4,020 Total liabilities 102,440 103,810 Stockholders' Equity: Common stock -- -- Receivable from stockholder (90) (89) Additional paid-in capital 110,112 110,573 Accumulated deficit (27,711) (27,076) Accumulated other comprehensive loss (1,510) (1,522) Total stockholders' equity 80,801 81,886 Total liabilities and stockholders' equity $183,241 $185,696 REACHLOCAL, INC. UNAUDITED STATEMENTS OF OPERATIONS (in thousands, except per share data) ThreeMonths Ended March 31, 2013 2012 Revenue $121,820 $104,003 Cost of revenue 61,553 52,390 Operating expenses: Selling and marketing 44,699 38,543 Product and technology 6,176 4,333 General and administrative 9,225 9,807 Total operating expenses 60,100 52,683 Income (loss) from operations 167 (1,070) Other income, net 227 203 Income (loss) before provision for (benefit from) income 394 (867) taxes Provision for income taxes 1,029 139 Net loss $(635) $(1,006) Net loss per share, basic and diluted $(0.02) $(0.03) Weighted average common shares used in computation of 28,112 29,111 net loss per share, basic and diluted Stock-based compensation, net of capitalization, and depreciation and amortization included in above line items: Stock-based compensation: Cost of revenue $136 $54 Selling and marketing 830 300 Product and technology 229 249 Generaland administrative 1,525 1,493 $2,720 $2,096 Depreciation and amortization: Cost of revenue $219 $122 Selling and marketing 979 518 Product and technology 2,725 1,969 General and administrative 108 355 $4,031 $2,964 REACHLOCAL, INC. UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands, except per share data) Three Months Ended March 31, 2013 2012 Cash flow from operating activities: Net loss $(635) $(1,006) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 4,031 2,964 Stock-based compensation 2,720 2,096 Excess tax benefits from stock-based awards (576) -- Provision for doubtful accounts 215 78 Changes in operating assets and liabilities: Accounts receivable (122) (222) Other receivables and prepaid expenses (1,024) 836 Other assets (373) (30) Accounts payable and accrued expenses (48) 3,530 Deferred revenue, rent and other liabilities 516 5,108 Net cash provided by operating activities, 4,704 13,354 continuing operations Net cash used for operating activities , (6) (136) discontinued operations Net cash provided by operating activities 4,698 13,218 Cash flow from investing activities: Additions to property, equipment and software (5,153) (4,490) Acquisitions, net of acquired cash (363) (1,035) Investment in partnership (2,500) -- Purchases of certificates of deposit and short (29) -- term investments Maturities ofcertificates of deposits and 2,578 383 short-term investments Net cash used in investing activities (5,467) (5,142) Cash flow from financing activities: Proceeds from exercise of stock options 1,441 11 Excess tax benefits from stock-based awards 576 -- Common stock repurchases (5,397) (2,786) Net cash used in financing activities (3,380) (2,775) Effect of exchange rate changes on cash and cash (538) 510 equivalents Net change in cash and cash equivalents (4,687) 5,811 Cash and cash equivalents—beginning of period 92,336 84,525 Cash and cash equivalents—end of period $87,649 $90,336 Three Months Ended March 31, 2013 2012 Reconciliation of Adjusted EBITDA to income (loss) from operations (in thousands) Income (loss) from operations $167 $(1,070) Add: Depreciation and amortization 4,031 2,964 Stock-based compensation 2,720 2,096 Acquisition and integration costs -- 32 Adjusted EBITDA (1) $6,918 $4,022 Underclassmen Expense (2) $11,494 $11,055 REACHLOCAL, Inc. Reconciliation of GAAP to Non-GAAP Operating Results for Three Months Ended March 31, 2013 and 2012 (in thousands, except per share amounts) Three Months Ended March 31, 2013 Three Months Ended March 31, 2012 Adjustments: Adjustments: Stock-based Stock-based GAAP Compensation Acquisition Non-GAAP GAAP Compensation Acquisition Non-GAAP Continuing Related Related Operating Continuing Related Related Operating Operations Operations "As Expense (3) Costs (4) Results "As Expense (3) Costs (4) Results Reported" Reported" Revenue $121,820 $121,820 $104,003 -- -- $104,003 Cost of 61,553 (136) (8) 61,409 52,390 (54) (11) 52,325 revenue Operating expenses: Sales and 44,699 (830) -- 43,869 38,543 (300) -- 38,243 marketing Product and 6,176 (555) (391) 5,230 4,333 (584) (315) 3,434 technology General and administrative 9,225 (1,525) 7,700 9,807 (1,493) (192) 8,122 (5) Total Operating 60,100 (2,910) (391) 56,799 52,683 (2,377) (507) 49,799 expenses Income (loss) from 167 3,046 399 3,612 (1,070) 2,431 518 1,879 operations Other income, 227 227 203 -- -- 203 net Income (loss) before provision for 394 3,046 399 3,839 (867) 2,431 518 2,082 (benefit from) income taxes Provision for (benefit from) 1,029 (49) 980 139 -- (16) 123 income taxes Net income $(635) 3,046 448 $2,859 $(1,006) 2,431 534 $1,959 (loss) Net income (loss) per share Basic income (loss) per $(0.02) $0.10 $(0.03) $0.07 share Diluted income (loss) per $(0.02) $0.10 $(0.03) $0.07 share Weighted average shares outstanding Basic 28,112 28,112 29,111 29,111 Diluted 28,112 29,534 29,111 29,612 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 and, in the case of the acquisition of SMB:LIVE, the deferred cash consideration) and amounts included in other non-operating income or expense. (2) Underclassmen Expense is a number the Company calculates to approximate its investment in Underclassmen and is comprised of the selling and marketing expenses allocated to Underclassmen during a reporting period. The amount includes the direct salaries and allocated benefits of the Underclassmen (excluding commissions), training and sales organization expenses including depreciation allocated based on relative headcount and marketing expenses allocated based on relative revenue. (3) Stock-based Compensation Related Expense:Includes stock-based compensation expense and the related adjustment to amortization of capitalized software development costs. (4) 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. CONTACT: Investor Relations: Alex Wellins The Blueshirt Group (415) 217-5861 firstname.lastname@example.org Media Contact: Jason Treu Vice President of Public Relations ReachLocal, Inc. (214) 294-0307 email@example.com ReachLocal, Inc. Logo (UPDATED)
ReachLocal Reports First Quarter 2013 Results
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