Exhibit 99.01
ReachLocal Reports Second Quarter 2012 Results
Raises Full Year Guidance Based on Strong First Half of 2012
(WOODLAND HILLS, CA) – July 31, 2012 - ReachLocal, Inc. (NASDAQ:RLOC), a leader in local online marketing solutions for small- and medium-sized businesses (SMBs), today reported financial results for the second quarter ended June 30, 2012.
| | · | Revenue growth of 21% over the second quarter of 2011, highlighted by 43% growth in international markets and 23% growth in the direct local channel |
| | · | International revenue expanded to 26% of revenue from 22% for the prior year period. On a constant foreign exchange basis, international revenue grew 50% from the prior year period and consolidated revenue grew 23% |
| | · | Adjusted EBITDA grew 34% to $5.9 million, compared to $4.4 million for the prior year period |
| | · | Active Advertisers grew 17% to 21,300 and Active Campaigns grew 24% to 31,500 from the prior year period |
| | · | Repurchased $1.2 million or 134,000 shares of stock ($10.7 million or 1,410,000 shares to date) under the company’s $20 million buy-back authorization |
Management Commentary
“Significant growth across all of our geographies and sales channels, combined with solid gains in advertisers and campaigns over the prior year period resulted in a strong second quarter for ReachLocal,” said Zorik Gordon, CEO. “Looking ahead to the second half of 2012 we intend to expand our global footprint, both in terms of entering new markets and expanding our salesforce in existing foreign markets to further leverage the solid productivity trends of our international IMCs. We also plan to introducenew products in the areas of online advertising, mobile and local commercein the second half of 2012.”
Quarterly Results at a Glance
(Table amounts in 000’s except key metrics and per share amounts)
| | | | Q2 2012 | | | | Q2 2011 | | | % Change |
| Revenue | | $ | 112,212 | | | $ | 92,752 | | | | 21 | % |
| Net Income (Loss) from Continuing Operations | | $ | 332 | | | $ | (276 | ) | | | 220 | % |
| Net Income (Loss) from Continuing Operations per Diluted Share | | $ | 0.01 | | | $ | (0.01 | ) | | | 200 | % |
| Net Income (Loss) | | $ | 332 | | | $ | (949 | ) | | | 135 | % |
| Net Income (Loss) per Diluted Share | | $ | 0.01 | | | $ | (0.03 | ) | | | 133 | % |
| Non-GAAP Net Income | | $ | 3,402 | | | $ | 3,023 | | | | 13 | % |
| Non-GAAP Net Income per Diluted Share | | $ | 0.12 | | | $ | 0.10 | | | | 20 | % |
| Adjusted EBITDA | | $ | 5,947 | | | $ | 4,446 | | | | 34 | % |
| Underclassmen Expense | | $ | 11,328 | | | $ | 10,728 | | | | 6 | % |
| Cash Flow from Continuing Operations | | $ | 9,203 | | | $ | 9,139 | | | | 1 | % |
| Cash Flow from Operating Activities | | $ | 9,161 | | | $ | 8,835 | | | | 4 | % |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Revenue by Channel and Geography: | | | | | | | | | | |
| Direct Local Revenue | | $ | 88,246 | | | $ | 71,839 | | | | 23 | % |
| National Brands, Agencies and Resellers (NBAR) Revenue | | $ | 23,966 | | | $ | 20,913 | | | | 15 | % |
| International Revenue (included above) | | $ | 29,536 | | | $ | 20,670 | | | | 43 | % |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Key Metrics (at period end): | | | | | | | | | | | | |
| Active Advertisers | | | 21,300 | | | | 18,200 | | | | 17 | % |
| Active Campaigns | | | 31,500 | | | | 25,500 | | | | 24 | % |
| Total Upperclassmen | | | 397 | | | | 330 | | | | 20 | % |
| Total Underclassmen | | | 431 | | | | 439 | | | | (2 | )% |
| Total IMCs | | | 828 | | | | 769 | | | | 8 | % |
“Based on a strong first half of the year, we are raising our 2012 full year guidance,” said Ross Landsbaum, Chief Financial Officer. “We expect 2012 revenue to be in the range of $445 million to $454 million, and Adjusted EBITDA to be in the range of $19 million to $22 million.”
The Company’s outlook is as follows:
Third Quarter 2012
| | · | Revenues in the range of $115.1 million to $117.1 million |
| | · | Adjusted EBITDA in the range of $5.0 million to $6.0 million |
| | · | Ending Upperclassmen headcount of 400 to 420 |
| | · | Ending Underclassmen headcount of 440 to 460 |
| | · | Ending total IMC headcount of 840 to 880 |
| | · | Revenues in the range of $445 million to $454 million |
| | · | Adjusted EBITDA in the range of $19 million to $22 million |
| | · | Ending Upperclassmen headcount of 420 to 450 |
| | · | Ending Underclassmen headcount of 400 to 430 |
| | · | Ending total IMC headcount of 820 to 880 |
Conference Call and Webcast Information
The ReachLocal second quarter 2012 teleconference and webcast is scheduled to begin at 2:00 p.m., Pacific Time, on Tuesday, July 31, 2012. 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) the Company’s ability to purchase media and receive rebates from Google, Yahoo! and Microsoft under commercially reasonable terms; (ii) the Company’s ability to recruit, train and retain its Internet Marketing Consultants; (iii) the Company’s ability to attract and retain customers; (iv) the Company’s ability to successfully enter new markets and manage its international expansion; (v) the Company’s ability to successfully develop and offer new products and services in the highly competitive online advertising industry; (vi) the impact of worldwide economic conditions, including the resulting effect on advertising budgets; and (vii) 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.'s (NASDAQ: RLOC) mission is to help small- and medium-sized businesses (SMBs) acquire, maintain and retain customers via the Internet. ReachLocal offers a comprehensive suite of online marketing solutions, including search engine marketing (ReachSearch™), Web presence (ReachCast™), display advertising and remarketing (ReachDisplay™), online marketing analytics (TotalTrack®), and assisted chat service (TotalLiveChat™), each targeted to the SMB market. ReachLocal delivers this suite of services to SMBs through a combination of its proprietary technology platform and its direct, "feet-on-the-street" sales force of Internet Marketing Consultants and select third-party agencies and resellers. ReachLocal is headquartered in Woodland Hills, CA, with offices throughout North America and in Australia, the United Kingdom, Germany, the Netherlands and Japan. Subscribe to the company's free newsletter to receive news, tips, and other marketing insights.
Investor Relations:
Alex Wellins
The Blueshirt Group
(415) 217-5861
alex@blueshirtgroup.com
Media Contact:
Jason Treu
Vice President of Public Relations
ReachLocal, Inc.
(214) 294-0307
jason.treu@reachlocal.com
(Tables to follow)
(in thousands, except per share data)
| | | | | | | |
| Assets | | | | | | |
| Current assets: | | | | | | |
| Cash and cash equivalents | | $ | 94,339 | | | $ | 84,525 | |
| Short-term investments | | | 259 | | | | 644 | |
| Accounts receivable, net | | | 4,407 | | | | 4,240 | |
| Other receivables and prepaid expenses | | | 8,661 | | | | 9,226 | |
| Total current assets | | | 107,666 | | | | 98,635 | |
| | | | | | | | | |
| Property and equipment, net | | | 11,097 | | | | 9,885 | |
| Capitalized software development costs, net | | | 12,792 | | | | 10,942 | |
| Restricted certificates of deposit | | | 969 | | | | 1,286 | |
| Intangible assets, net | | | 1,031 | | | | 1,957 | |
| Goodwill | | | 41,766 | | | | 41,766 | |
| Other assets | | | 1,934 | | | | 1,966 | |
| Total assets | | $ | 177,255 | | | $ | 166,437 | |
| | | | | | | | | |
| Liabilities and Stockholders’ Equity | | | | | | | | |
| | | | | | | | | |
| Current Liabilities: | | | | | | | | |
| Accounts payable | | $ | 32,158 | | | $ | 29,831 | |
| Accrued expenses | | | 23,730 | | | | 19,537 | |
| Deferred revenue and other liabilities | | | 35,413 | | | | 30,747 | |
| Liabilities of discontinued operations, net | | | 818 | | | | 996 | |
| Total current liabilities | | | 92,119 | | | | 81,111 | |
| | | | | | | | | |
| | | | | | | | | |
| Deferred rent and deferred payment obligations | | | 2,887 | | | | 3,039 | |
| Total liabilities | | | 95,006 | | | | 84,150 | |
| | | | | | | | | |
| Stockholders’ Equity: | | | | | | | | |
| Common stock | | | - | | | | - | |
| Receivable from stockholder | | | (87 | ) | | | (87 | ) |
| Additional paid-in capital | | | 109,767 | | | | 108,883 | |
| Accumulated deficit | | | (26,908 | ) | | | (26,234 | ) |
| Accumulated other comprehensive loss | | | (523 | ) | | | (275 | ) |
| Total stockholders’ equity | | | 82,249 | | | | 82,287 | |
| Total liabilities and stockholders’ equity | | $ | 177,255 | | | $ | 166,437 | |
Note: During the year ended December 31, 2011, the Company recorded the results of operations and financial position of its Bizzy subsidiary as discontinued operations.
UNAUDITED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
| | | Three Months EndedJune 30, | | | | |
| | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
| | | | | | | | | | | | | |
| Revenue | | $ | 112,212 | | | $ | 92,752 | | | $ | 216,215 | | | $ | 176,810 | |
| Cost of revenue | | | 55,656 | | | | 46,598 | | | | 108,046 | | | | 91,098 | |
| Operating expenses: | | | | | | | | | | | | | | | | |
| Selling and marketing | | | 41,176 | | | | 34,527 | | | | 79,719 | | | | 66,688 | |
| Product and technology | | | 4,399 | | | | 3,521 | | | | 8,732 | | | | 6,543 | |
| General and administrative | | | 10,468 | | | | 8,572 | | | | 20,275 | | | | 15,649 | |
| | | | | | | | | | | | | | | | | |
| Total operating expenses | | | 56,043 | | | | 46,620 | | | | 108,726 | | | | 88,880 | |
| | | | | | | | | | | | | | | | | |
| Income (loss) from continuing operations | | | 513 | | | | (466 | ) | | | (557 | ) | | | (3,168 | ) |
| Other income, net | | | 102 | | | | 221 | | | | 305 | | | | 417 | |
| | | | | | | | | | | | | | | | | |
| Income (loss) from continuing operations before provision for income taxes | | | 615 | | | | (245 | ) | | | (252 | ) | | | (2,751 | ) |
| Provision for income taxes | | | 283 | | | | 31 | | | | 422 | | | | 197 | |
| | | | - | | | | | | | | | | | | | |
| Income (loss) from continuing operations, net of income taxes | | | 332 | | | | (276 | ) | | | (674 | ) | | | (2,948 | ) |
| Loss from discontinued operations, net of income taxes | | | - | | | | (673 | ) | | | - | | | | (1,448 | ) |
| Net income (loss) | | $ | 332 | | | $ | (949 | ) | | $ | (674 | ) | | $ | (4,396 | ) |
| | | | | | | | | | | | | | | | | |
| Net income (loss) per share available to common stockholders | | | | | | | | | | | | | | | | |
| Basic income (loss) per share from continuing operations | | $ | 0.01 | | | $ | (0.01 | ) | | $ | (0.02 | ) | | $ | (0.10 | ) |
| Basic loss per share from discontinued operations | | | - | | | | (0.02 | ) | | | - | | | | (0.05 | ) |
| Basic net income (loss) per share | | $ | 0.01 | | | $ | (0.03 | ) | | $ | (0.02 | ) | | $ | (0.15 | ) |
| | | | | | | | | | | | | | | | | |
| Diluted income (loss) per share from continuing operations | | $ | 0.01 | | | $ | (0.01 | ) | | $ | (0.02 | ) | | $ | (0.10 | ) |
| Diluted loss per share from discontinued operations | | | - | | | | (0.02 | ) | | | - | | | | (0.05 | ) |
| Diluted net income (loss) per share | | $ | 0.01 | | | $ | (0.03 | ) | | $ | (0.02 | ) | | $ | (0.15 | ) |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Weighted average common shares used in computation of net income (loss) per share | | | | | | | | | | | | | | | | |
| Basic | | | 28,431 | | | | 29,043 | | | | 28,771 | | | | 28,752 | |
| Diluted | | | 28,961 | | | | 29,043 | | | | 28,771 | | | | 28,752 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Stock-based compensation, net of capitalization, and depreciation and amortization included in above line items: | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Stock-based compensation: | | | | | | | | | | | | | | | | |
| Cost of revenue | | $ | 71 | | | $ | 65 | | | $ | 125 | | | $ | 116 | |
| Selling and marketing | | | 385 | | | | 373 | | | | 685 | | | | 742 | |
| Product and technology | | | 131 | | | | 326 | | | | 380 | | | | 556 | |
| General and administrative | | | 1,651 | | | | 1,481 | | | | 3,144 | | | | 2,571 | |
| | | $ | 2,238 | | | $ | 2,245 | | | $ | 4,334 | | | $ | 3,985 | |
| | | | | | | | | | | | | | | | | |
Depreciation and amortization: | | | | | | | | | | | | | | | | |
| Cost of revenue | | $ | 148 | | | $ | 201 | | | $ | 270 | | | $ | 357 | |
| Selling and marketing | | | 601 | | | | 342 | | | | 1,119 | | | | 667 | |
| Product and technology | | | 2,081 | | | | 1,704 | | | | 4,050 | | | | 3,171 | |
| General and administrative | | | 366 | | | | 314 | | | | 721 | | | | 612 | |
| | | $ | 3,196 | | | $ | 2,561 | | | $ | 6,160 | | | $ | 4,807 | |
Note: During the year ended December 31, 2011, the Company recorded the results of operations and financial position of its Bizzy subsidiary as discontinued operations.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except per share data)
| | | Six Months Ended June 30, | |
| | | 2012 | | | 2011 | |
| Cash flow from operating activities: | | | | | | |
| Net loss from continuing operations, net of income taxes | | $ | (674 | ) | | $ | (2,948 | ) |
Adjustments to reconcile net loss from continuing operations, net of income taxes to net cash provided by operating activities: | | | | | | | | |
| Depreciation and amortization | | | 6,160 | | | | 4,807 | |
| Stock-based compensation, net | | | 4,334 | | | | 3,985 | |
| Provision for doubtful accounts | | | 78 | | | | 111 | |
| Accrual of interest on deferred payment obligations | | | - | | | | - | |
| Changes in operating assets and liabilities: | | | | | | | | |
| Accounts receivable | | | (246 | ) | | | 189 | |
| Other receivables and prepaid expenses | | | 568 | | | | (1,415 | ) |
| Other assets | | | 9 | | | | 143 | |
| Accounts payable and accrued expenses | | | 6,677 | | | | 5,316 | |
| Deferred revenue, rent and other liabilities | | | 5,651 | | | | 3,519 | |
| Net cash provided by operating activities, continuing operations | | | 22,557 | | | | 13,707 | |
| Net cash provided by operating activities , discontinued operations | | | (178 | ) | | | (843 | ) |
| Net cash provided by operating activities | | | 22,379 | | | | 12,864 | |
| | | | | | | | | |
| Cash flow from investing activities: | | | | | | | | |
| Additions to property, equipment and software | | | (8,195 | ) | | | (6,003 | ) |
| Acquisitions, net of acquired cash | | | (1,074 | ) | | | (5,958 | ) |
| Maturities of certificates of deposits and short-term investments | | | 701 | | | | - | |
| Purchases of certificates of deposit and short term investments | | | - | | | | (142 | ) |
| Net cash used in investing activities, continuing operations | | | (8,568 | ) | | | (12,103 | ) |
| Net cash used in investing activities, discontinued operations | | | - | | | | (809 | ) |
| Net cash used in investing activities | | | (8,568 | ) | | | (12,912 | ) |
| | | | | | | | | |
| Cash flow from financing activities: | | | | | | | | |
| Proceeds from exercise of stock options | | | 336 | | | | 4,909 | |
| Common stock repurchases | | | (4,025 | ) | | | - | |
| Net cash provided by (used in) financing activities | | | (3,689 | ) | | | 4,909 | |
| | | | | | | | | |
| Effect of exchange rates on cash | | | (308 | ) | | | 656 | |
| | | | | | | | | |
| Net change in cash and cash equivalents | | | 9,814 | | | | 5,517 | |
| Cash and cash equivalents—beginning of period | | | 84,525 | | | | 79,906 | |
| | | | | | | | | |
| Cash and cash equivalents—end of period | | $ | 94,339 | | | $ | 85,423 | |
Note: During the year ended December 31, 2011, the Company recorded discontinued operations related to its Bizzy subsidiary.
| | | Three Months EndedJune 30, | | | | |
| | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
| Reconciliation of Adjusted EBITDA to income (loss) from continuing operations | | | | | | | | | | | | |
| (in thousands) | | | | | | | | | | | | |
| Income (loss) from continuing operations | | $ | 513 | | | $ | (466 | ) | | $ | (557 | ) | | $ | (3,168 | ) |
| Add: | | | | | | | | | | | | | | | | |
| Depreciation and amortization | | | 3,196 | | | | 2,561 | | | | 6,160 | | | | 4,807 | |
| Stock-based compensation, net | | | 2,238 | | | | 2,245 | | | | 4,334 | | | | 3,985 | |
| Acquisition and integration costs | | | - | | | | 106 | | | | 32 | | | | 520 | |
| Adjusted EBITDA (1) | | $ | 5,947 | | | $ | 4,446 | | | $ | 9,969 | | | $ | 6,144 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Underclassmen Expense (2) | | $ | 11,328 | | | $ | 10,728 | | | $ | 22,383 | | | $ | 21,124 | |
Note: During the year ended December 31, 2011, the Company recorded the results of operations and financial position of its Bizzy subsidiary as discontinued operations.
Reconciliation of GAAP to Non-GAAP Operating Results for Three Months Ended June 30, 2012 and 2011
(in thousands, except per share amounts)
| | | Three Months Ended June 30, 2012 | | | Three Months Ended June 30, 2011 | |
| | | | | | Adjustments: | | | | | | | | | Adjustments: | | | | |
| | | GAAP Continuing Operations | | | | | | | | | | | | GAAP Continuing Operations | | | | | | | | | | |
| Revenue | | $ | 112,212 | | | | - | | | | - | | | $ | 112,212 | | | $ | 92,752 | | | | - | | | | - | | | $ | 92,752 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cost of revenue | | | 55,656 | | | | (71 | ) | | | (11 | ) | | | 55,574 | | | | 46,598 | | | | (65 | ) | | | (92 | ) | | | 46,441 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Operating expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Sales and marketing | | | 41,176 | | | | (385 | ) | | | - | | | | 40,791 | | | | 34,527 | | | | (373 | ) | | | - | | | | 34,154 | |
| Product and technology | | | 4,399 | | | | (465 | ) | | | (238 | ) | | | 3,696 | | | | 3,521 | | | | (633 | ) | | | (416 | ) | | | 2,472 | |
| General and administrative | | | 10,468 | | | | (1,651 | ) | | | (192 | ) | | | 8,625 | | | | 8,572 | | | | (1,481 | ) | | | (225 | ) | | | 6,866 | |
| Total Operating expenses | | | 56,043 | | | | (2,501 | ) | | | (430 | ) | | | 53,112 | | | | 46,620 | | | | (2,487 | ) | | | (641 | ) | | | 43,492 | |
| Income (Loss) from continuing operations | | | 513 | | | | 2,572 | | | | 441 | | | | 3,526 | | | | (466 | ) | | | 2,552 | | | | 733 | | | | 2,819 | |
| Other income, net | | | 102 | | | | - | | | | - | | | | 102 | | | | 221 | | | | - | | | | 14 | | | | 235 | |
| Income (Loss) from continuing operations before provision for income taxes | | | 615 | | | | 2,572 | | | | 441 | | | | 3,628 | | | | (245 | ) | | | 2,552 | | | | 747 | | | | 3,054 | |
| Provision for income taxes | | | 283 | | | | - | | | | (57 | ) | | | 226 | | | | 31 | | | | - | | | | - | | | | 31 | |
| Net income (loss) from continuing operations | | $ | 332 | | | | 2,572 | | | | 498 | | | $ | 3,402 | | | $ | (276 | ) | | | 2,552 | | | | 747 | | | $ | 3,023 | |
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Net income (loss) per share from continuing operations available to common stockholders | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic income (loss) per share from continuing operations | | $ | 0.01 | | | | | | | | | | | $ | 0.12 | | | $ | (0.01 | ) | | | | | | | | | | $ | 0.10 | |
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| Diluted income (loss) per share from continuing operations | | $ | 0.01 | | | | | | | | | | | $ | 0.12 | | | $ | (0.01 | ) | | | | | | | | | | $ | 0.10 | |
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| Weighted average shares outstanding | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic | | | 28,431 | | | | | | | | | | | | 28,431 | | | | 29,043 | | | | | | | | | | | | 29,043 | |
| Diluted | | | 28,961 | | | | | | | | | | | | 28,961 | | | | 29,043 | | | | | | | | | | | | 31,289 | |
Note: During the year ended December 31, 2011, the Company recorded the results of operations and financial position of its Bizzy subsidiary as discontinued operations. Accordingly, related prior-period amounts have been reclassified to conform to the current period presentation.
Reconciliation of GAAP to Non-GAAP Operating Results for Six Months Ended June 30, 2012 and 2011
(in thousands, except per share amounts)
| | | Six Months Ended June 30, 2012 | | | Six Months Ended June 30, 2011 | |
| | | | | | Adjustments: | | | | | | | | | Adjustments: | | | | |
| | | GAAP Continuing Operations | | | | | | | | | | | | GAAP Continuing Operations | | | | | | | | | | |
| Revenue | | $ | 216,215 | | | | - | | | | - | | | $ | 216,215 | | | $ | 176,810 | | | | - | | | | - | | | $ | 176,810 | |
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| Cost of revenue | | | 108,046 | | | | (125 | ) | | | (22 | ) | | | 107,899 | | | | 91,098 | | | | (116 | ) | | | (144 | ) | | | 90,838 | |
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| Operating expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Sales and marketing | | | 79,719 | | | | (685 | ) | | | - | | | | 79,034 | | | | 66,688 | | | | (742 | ) | | | - | | | | 65,946 | |
| Product and technology | | | 8,732 | | | | (1,049 | ) | | | (553 | ) | | | 7,130 | | | | 6,543 | | | | (1,137 | ) | | | (730 | ) | | | 4,676 | |
| General and administrative | | | 20,275 | | | | (3,144 | ) | | | (384 | ) | | | 16,747 | | | | 15,649 | | | | (2,572 | ) | | | (795 | ) | | | 12,282 | |
| Total Operating expenses | | | 108,726 | | | | (4,878 | ) | | | (937 | ) | | | 102,911 | | | | 88,880 | | | | (4,451 | ) | | | (1,525 | ) | | | 82,904 | |
| Income (Loss) from continuing operations | | | (557 | ) | | | 5,003 | | | | 959 | | | | 5,405 | | | | (3,168 | ) | | | 4,567 | | | | 1,669 | | | | 3,068 | |
| Other income, net | | | 305 | | | | - | | | | - | | | | 305 | | | | 417 | | | | - | | | | 14 | | | | 431 | |
| Income (Loss) from continuing operations before provision for income taxes | | | (252 | ) | | | 5,003 | | | | 959 | | | | 5,710 | | | | (2,751 | ) | | | 4,567 | | | | 1,683 | | | | 3,499 | |
| Provision (benefit) for income taxes | | | 422 | | | | - | | | | (73 | ) | | | 349 | | | | 197 | | | | - | | | | - | | | | 197 | |
| Net income (loss) from continuing operations | | $ | (674 | ) | | | 5,003 | | | | 1,032 | | | $ | 5,361 | | | $ | (2,948 | ) | | $ | 4,567 | | | $ | 1,683 | | | $ | 3,302 | |
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Net income (loss) per share from continuing operations available to common stockholders | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic income (loss) per share from continuing operations | | $ | (0.02 | ) | | | | | | | | | | $ | 0.19 | | | $ | (0.10 | ) | | | | | | | | | | $ | 0.11 | |
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| Diluted income (loss) per share from continuing operations | | $ | (0.02 | ) | | | | | | | | | | $ | 0.18 | | | $ | (0.10 | ) | | | | | | | | | | $ | 0.11 | |
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| Weighted average shares outstanding | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic | | | 28,771 | | | | | | | | | | | | 28,771 | | | | 28,752 | | | | | | | | | | | | 28,752 | |
| Diluted | | | 28,771 | | | | | | | | | | | | 29,297 | | | | 28,752 | | | | | | | | | | | | 31,365 | |
Note: During the year ended December 31, 2011, the Company recorded the results of operations and financial position of its Bizzy subsidiary as discontinued operations. Accordingly, related prior-period amounts have been reclassified to conform to the current period presentation.
(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. |
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| (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. |
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| (3) Stock-based Compensation Related Expense: Includes stock-based compensation expense and the related adjustment to amortization of capitalized software development costs. |
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| (4) 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. |
