ReachLocal Reports Third Quarter 2011 Results

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International Revenue Grows 76% Year-over-Year

Direct Local Revenue Increases 34% Year-over-Year

Launches In the Netherlands, Announces Q1 Launch into Japan

WOODLAND HILLS, Calif.--(BUSINESS WIRE)-- ReachLocal, Inc. (NASDAQ: RLOC), a leader in local online marketing solutions for small- and medium-sized businesses (SMBs), today reported financial results for the third quarter ended September 30, 2011.

• Total year-over-year revenue growth of 28%, highlighted by 76% growth in international revenue and 34% growth in direct local channel revenue
• Adjusted EBITDA* of $4.5 million, as compared to $1.3 million for the prior year period
• Launched offices in Amsterdam, the Netherlands; Dusseldorf, Germany; Newcastle, Australia and Columbus, Ohio
• Target Q1 launch into Tokyo, Japan

Management Commentary

“ReachLocal posted solid revenue and Adjusted EBITDA gains despite an environment of continued economic weakness, particularly in North America,” said Zorik Gordon, President and CEO of ReachLocal. “In view of ongoing strong sales productivity from our international IMCs, we continued our international expansion strategy by launching in the Netherlands and opening new offices in Germany and Australia, and our plans to launch in Tokyo early next year are on track.”

“We remain bullish on the long-term prospects for the business based on the continued shift of offline advertising dollars to online on a global basis,” said Gordon. “We plan to continue executing on our investment strategy of deploying IMCs and developing innovative products to capture new markets and to increase market share,” he added.

Quarterly Results at a Glance*

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

		Q3 2011				Q3 2010				% Change
Revenue		$98,629				$77,121				28	%
Net Loss from Continuing Operations		$(1,203		)		$(1,832		)		34	%
Net Loss from Continuing Operations per Dilluted Share		$(0.05		)		$(0.07		)		29	%
Net Loss		$(4,601		)		$(2,871		)		(60	)%
Net Loss per Diluted Share		$(0.16		)		$(0.10		)		(60	)%
Adjusted EBITDA*		$4,530				$1,286				252	%
Underclassmen Expense		$11,591				$9,540				21	%
Cash Flow from Continuing Operations*		$6,187				$(2,557		)		342	%
Non-GAAP Net Income*		$2,757				$187				1,374	%
Non-GAAP Net Income per Diluted Share*		$0.09				$0.01				800	%
*ReachLocal’s Bizzy operations were determined to be discontinued operations during the third quarter of 2011 and the Company recorded a loss of $3.3 million from those discontinued operations. The Net Loss from Continuing Operations includes an impairment of $764,000 related to the intangible asset for customer relationships acquired with DealOn in February 2011. The definitions for Adjusted EBITDA and Non-GAAP Net Income, as set forth in full below, have been revised in the third quarter of 2011 to exclude discontinued operations and the impairment of acquired assets.
Revenue by Channel and Geography:
Direct Local Revenue		$76,814				$57,245				34	%
National Brands, Agencies and Resellers (NBAR) Revenue		$21,815				$19,877				10	%
International Revenue (included above)		$23,561				$13,396				76	%
Key Metrics (at period end):
Active Advertisers**		18,700				17,100				9	%
Active Campaigns**		27,000				22,500				20	%
Total Upperclassmen		344				264				30	%
Total Underclassmen		464				432				7	%
Total IMCs		808				696				16	%

**These numbers reflect the exclusion in the nine months ended September 30, 2011 of the Active Advertisers and Active Campaigns sold by the Company’s dedicated deal marketing consultants due to the elimination of those positions. The second quarter of 2011 was the only other quarter in which the Company included campaigns sold by its dedicated deal marketing consultants in the counts for Active Advertisers and Active Campaigns. If during the second quarter of 2011 the numbers of Active Advertisers and Active Campaigns were calculated in the foregoing manner, they would have been 18,200 and 25,500, respectively.

Business Outlook

“We’re pleased that we were able to deliver solid third quarter results, driven by 76% growth in international revenue and 34% growth in direct local channel revenue,” said Ross Landsbaum, Chief Financial Officer. He added, “Our fourth quarter revenue outlook reflects 20-plus percent revenue growth tempered by seasonality and the continuation of the challenging macroeconomic environment that we saw in the third quarter. In the near-term, we don’t expect any sustained improvement in the macroeconomic environment, and until our international expansion efforts reach scale, we would expect levels of revenue growth similar to our fourth quarter outlook and modest Adjusted EBITDA growth.”

The Company’s outlook for the fourth quarter of 2011 is as follows:

• Revenues in the range of $98.6 to $100.6 million
• Adjusted EBITDA in the range of $3.5 to $4.5 million
• Ending Upperclassmen headcount of 350 to 370
• Ending Underclassmen headcount of 380 to 400
• Ending total IMC headcount of 730 to 770

The Company updated its outlook for fiscal year 2011 as follows:

• Revenues in the range of $374 to $376 million
• Adjusted EBITDA in the range of $14 to $15 million***

***Reflecting the classification of Bizzy as a discontinued operation.

Conference Call and Webcast Information

The ReachLocal third quarter 2011 teleconference and webcast is scheduled to begin at 2:00 p.m., Pacific Time, on Tuesday, November 1, 2011, during which the Company will provide forward-looking information. To participate on the live call, analysts and investors should dial 877-941-1427 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.

ReachLocal will also make available supplemental information showing the pro forma effect of classifying Bizzy to discontinued operations for other historical periods, accessible from the "Investors" section of ReachLocal’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 net income (loss), 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 each of 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. This definition excludes the effect of Bizzy as a discontinued operation and the impairment of certain intangibles acquired in the DealOn acquisition.

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. This definition excludes the effect of the impairment of certain intangibles acquired in the DealOn acquisition.

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 but excludes advertisers sold by the Company’s dedicated deal marketing consultants. 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 but excludes campaigns sold by the Company’s dedicated deal marketing consultants. 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 (ReachDisplay™) and remarketing, deal commerce (ReachDeals™), 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 and the Netherlands.

REACHLOCAL, INC.
UNAUDITED BALANCE SHEETS
(in thousands, except per share data)
		September 30,				December 31,
		2011				2010
Assets
Current assets:
Cash and cash equivalents		$	93,593			$	79,906
Short-term investments			627				8,208
Accounts receivable, net			4,052				3,295
Prepaid expenses and other current assets			2,097				2,372
Assets of discontinued operations, net			-				2,026
Total current assets			100,369				95,807
Property and equipment, net			8,854				6,531
Capitalized software development costs, net			11,139				8,829
Restricted certificates of deposit			964				801
Intangible assets, net			2,503				2,963
Goodwill			41,766				34,118
Other assets			1,159				1,339
Total assets		$	166,754			$	150,388
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable		$	28,307			$	27,471
Accrued expenses			17,649				14,042
Deferred payment obligations			1,939				530
Deferred revenue and other liabilities			28,630				24,656
Total current liabilities			76,525				66,699
Deferred rent and deferred payment obligations			2,461				1,673
Total liabilities			78,986				68,372
Stockholders’ Equity:
Common stock			-				-
Receivable from stockholder			(87	)			(87	)
Additional paid-in capital			113,209				98,140
Accumulated deficit			(25,041	)			(16,044	)
Accumulated other comprehensive loss			(313	)			7
Total stockholders’ equity			87,768				82,016
Total liabilities and stockholders’ equity		$	166,754			$	150,388
Note: During the three months ended September 30, 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.

REACHLOCAL, INC.
UNAUDITED STATEMENT OF OPERATIONS
(in thousands, except per share data)
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2011				2010				2011				2010
Revenue		$	98,629			$	77,121			$	275,439			$	211,109
Cost of revenue			50,265				42,172				141,363				115,458
Operating expenses:
Selling and marketing			36,769				28,343				103,457				78,046
Product and technology			4,257				2,623				10,800				7,034
General and administrative			8,821				5,970				24,470				16,940
Total operating expenses			49,847				36,936				138,727				102,020
Loss from continuing operations			(1,483	)			(1,987	)			(4,651	)			(6,369	)
Other income (expense), net			280				155				697				410
Loss from continuing operations before provision for income taxes			(1,203	)			(1,832	)			(3,954	)			(5,959	)
Provision (benefit) for income taxes			126				83				323				(462	)
Loss from continuing operations, net of income taxes			(1,329	)			(1,915	)			(4,277	)			(5,497	)
Loss from discontinued operations, net of income taxes			(3,272	)			(956	)			(4,720	)			(2,022	)
Net loss		$	(4,601	)		$	(2,871	)		$	(8,997	)		$	(7,519	)
Net loss per share available to common stockholders
Basic loss per share from continuing operations		$	(0.05	)		$	(0.07	)		$	(0.15	)		$	(0.21	)
Basic loss per share from discontinued operations			(0.11	)			(0.03	)			(0.16	)			(0.08	)
Basic net loss per share		$	(0.16	)		$	(0.10	)		$	(0.31	)		$	(0.29	)
Diluted loss per share from continuing operations		$	(0.05	)		$	(0.07	)		$	(0.15	)		$	(0.21	)
Diluted loss per share from discontinued operations			(0.11	)			(0.03	)			(0.16	)			(0.08	)
Diluted net loss per share		$	(0.16	)		$	(0.10	)		$	(0.31	)		$	(0.29	)
Weighted average common shares used in computation of net loss per share (5)
Basic			29,302				27,848				28,936				25,728
Diluted			29,302				27,848				28,936				25,728
Stock-based compensation, net of capitalization, and depreciation and amortization included in above line items:
Stock-based compensation:
Cost of revenue		$	60			$	51			$	176			$	212
Selling and marketing			325				318				1,068				757
Product and technology			421				284				976				766
General and administrative			1,525				871				4,096				2,231
		$	2,331			$	1,524			$	6,316			$	3,966
Depreciation and amortization:
Cost of revenue		$	194			$	97			$	551			$	267
Selling and marketing			413				257				1,080				745
Product and technology			1,862				1,084				5,033				2,555
General and administrative			359				278				971				787
		$	2,828			$	1,716			$	7,635			$	4,354
Note: During the three months ended September 30, 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.

REACHLOCAL, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except per share data)
		Nine Months Ended September 30,
		2011				2010
Cash flow from operating activities:
Net loss from continuing operations		$	(4,277	)		$	(5,497	)
Adjustments to reconcile net loss from continuing operations to net cash provided by operating activities:
Depreciation and amortization			7,635				4,354
Stock-based compensation, net			6,316				3,966
Provision for doubtful accounts			180				234
Impairment of intangible assets			764				-
Provision for deferred income taxes			-				(702	)
Accrual of interest on deferred payment obligations			25				(102	)
Changes in operating assets and liabilities:
Accounts receivable			(903	)			(318	)
Prepaid expenses and other current assets			273				(673	)
Other assets			163				(368	)
Accounts payable and accrued liabilities			4,734				(50	)
Deferred revenue and deferred payment obligations			4,984				7,008
Net cash provided by operating activities, continuing operations			19,894				7,852
Net cash provided by operating activities , discontinued operations			(1,307	)			(1,683	)
Net cash provided by operating activities			18,587				6,169
Cash flow from investing activities:
Additions to property, equipment and software			(9,547	)			(5,899	)
Purchase of DealOn, net of acquired cash			(5,793	)			-
Purchase of SMB:LIVE, net of acquired cash			-				(2,759	)
Payment of deferred obligation			(417	)			(5,853	)
Proceeds from maturity of certificates of deposits			7,666				-
Purchases of certificates of deposit			(195	)			371
Purchases of short term investments			(85	)			(136	)
Net cash used in investing activities, continuing operations			(8,371	)			(14,276	)
Net cash used in investing activities, discontinued operations			(1,244	)			(1,033	)
Net cash used in investing activities			(9,615	)			(15,309	)
Cash flow from financing activities:
Proceeds from exercise of stock options			5,515				428
Proceeds from initial public offering			-				47,648
Deferred offering costs			-				(4,620	)
Net cash provided by (used in) financing activities			5,515				43,456
Effect of exchange rates on cash			(800	)			460
Net change in cash and cash equivalents			13,687				34,776
Cash and cash equivalents—beginning of period			79,906				35,379
Cash and cash equivalents—end of period		$	93,593			$	70,155
Note: During the three months ended September 30, 2011, the Company recorded discontinued operations related to its Bizzy subsidiary. Accordingly, certain prior-period amounts have been reclassified to conform to current period presentation.

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2011				2010				2011				2010
Reconciliation of Adjusted EBITDA to Loss from continuing operations
(in thousands)
Loss from continuing operations		$	(1,483	)		$	(1,987	)		$	(4,651	)		$	(6,369	)
Add:
Depreciation and amortization			2,828				1,716				7,635				4,354
Stock-based compensation, net			2,331				1,524				6,316				3,966
Acquisition and integration costs			854				33				1,374				542
Adjusted EBITDA (1)		$	4,530			$	1,286			$	10,674			$	2,493
Underclassmen Expense (2)		$	11,591			$	9,540			$	32,714			$	26,025
Note: During the three months ended September 30, 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.

REACHLOCAL, Inc.
Reconciliation of GAAP to Non-GAAP Operating Results for Three Months Ended September 30, 2011 and 2010
(in thousands, except per share amounts)
		Three Months Ended September 30, 2011														Three Months Ended September 30, 2010
						Adjustments:														Adjustments:
						Stock-based														Stock-based
		GAAP				Compensation			Acquisition			Non-GAAP				GAAP				Compensation			Acquisition			Non-GAAP
		Continuing Operations				Related			Related			Operating				Continuing Operations				Related			Related			Operating
		"As Reported"				Expense (3)			Costs (4)			Results				"As Reported"				Expense (3)			Costs (4)			Results
Revenue		$	98,629			-			-			$	98,629			$	77,121									$	77,121
Cost of revenue			50,265			(55	)		(856	)			49,354				42,172			(51	)		-				42,121
Operating expenses:
Sales and marketing			36,769			(331	)		-				36,438				28,343			(318	)		-				28,025
Product and technology			4,257			(694	)		(386	)			3,177				2,623			(445	)		(225	)			1,953
General and administrative			8,821			(1,525	)		(239	)			7,057				5,970			(871	)		(192	)			4,907
Total Operating expenses			49,847			(2,550	)		(625	)			46,672				36,936			(1,634	)		(417	)			34,885
Income (Loss) from continuing operations			(1,483	)		2,605			1,481				2,603				(1,987	)		1,685			417				115
Other income, net			280			-			-				280				155			-			-				155
Income (Loss) from continuing operations before provision for income taxes			(1,203	)		2,605			1,481				2,883				(1,832	)		1,685			417				270
Provision for income taxes			126			-			-				126				83			-			-				83
Net income (loss)		$	(1,329	)		2,605			1,481			$	2,757			$	(1,915	)		1,685			417			$	187
Net loss per share available to common stockholders
Basic income (loss) per share		$	(0.05	)								$	0.09			$	(0.07	)								$	0.01
Diluted income (loss) per share		$	(0.05	)								$	0.09			$	(0.07	)								$	0.01
Weighted average shares outstanding (5)
Basic			29,302										29,302				27,848										27,848
Diluted			29,302										30,767				27,848										29,852
Note: During the three months ended September 30, 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.

REACHLOCAL, Inc.
Reconciliation of GAAP to Non-GAAP Operating Results for Nine Months Ended September 30, 2011 and 2010
(in thousands, except per share amounts)
		Nine Months Ended September 30, 2011														Nine Months Ended September 30, 2010
						Adjustments:														Adjustments:
						Stock-based														Stock-based
		GAAP				Compensation			Acquisition			Non-GAAP				GAAP				Compensation			Acquisition			Non-GAAP
		Continuing Operations				Related			Related			Operating				Continuing Operations				Related			Related			Operating
		"As Reported"				Expense (3)			Costs (4)			Results				"As Reported"				Expense (3)			Costs (4)			Results
Revenue		$	275,439			-			-			$	275,439			$	211,109			-			-			$	211,109
Cost of revenue			141,363			(169	)		(1,000	)			140,194				115,458			(212	)		-				115,246
Operating expenses:
Sales and marketing			103,457			(1,075	)		-				102,382				78,046			(758	)		(7	)			77,281
Product and technology			10,800			(1,885	)		(1,116	)			7,799				7,034			(1,020	)		(697	)			5,317
General and administrative			24,470			(4,096	)		(1,034	)			19,340				16,940			(2,231	)		(862	)			13,847
Total Operating expenses			138,727			(7,056	)		(2,150	)			129,521				102,020			(4,009	)		(1,566	)			96,445
Income (Loss) from continuing operations			(4,651	)		7,225			3,150				5,724				(6,369	)		4,221			1,566				(582	)
Other income, net			697			-			14				711				410			-			-				410
Income (Loss) from continuing operations before provision for income taxes			(3,954	)		7,225			3,164				6,435				(5,959	)		4,221			1,566				(172	)
Provision (benefit) for income taxes			323			-			-				323				(462	)		-			701				239
Net income (loss)		$	(4,277	)		7,225			3,164			$	6,112			$	(5,497	)		4,221			865			$	(411	)
Net loss per share available to common stockholders
Basic income (loss) per share		$	(0.15	)								$	0.21			$	(0.21	)								$	(0.02	)
Diluted income (loss) per share		$	(0.15	)								$	0.19			$	(0.21	)								$	(0.02	)
Weighted average shares outstanding (5)
Basic			28,936										28,936				25,728										25,728
Diluted			28,936										31,374				25,728										25,728
Note: During the three months ended September 30, 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.

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 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.

(5) Weighted average shares outstanding: The weighted average shares outstanding prior to the initial public offering date of May 19, 2010 have been retroactively adjusted to reflect the conversion of the Company's preferred stock into common stock. The periods after the initial public offering reflect the actual shares outstanding.

Investor Relations:The Blueshirt GroupAlex Wellins, 415-217-5861[email protected]orMedia Contact:ReachLocal, Inc.David Glaubke, 818-936-9908Director of Corporate Communications[email protected]

Source: ReachLocal, Inc.

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