ReachLocal Skyrockets on Updated Outlook

ReachLocal Inc. (NASDAQ: RLOC) was leading the bulls early in Friday’s session on an upgraded outlook. The company raised its outlook for fourth-quarter 2015 adjusted EBITDA and announced a series of strategic actions to improve adjusted EBITDA and its liquidity position in order to provide a foundation for future growth.

The company raised its adjusted EBITDA guidance for the fourth quarter to a range of $2.4 million to $3.0 million from the previous range of $0.8 million to $1.4 million. As for 2016, ReachLocal expects adjusted EBITDA in the range of $15 million to $17 million.

The prior revenue outlook for the fourth quarter remains unchanged as a range of $88 million to $92 million. Cash, equivalents and restricted cash at the end of 2015 is expected to be at least $30 million.

ReachLocal will achieve this through a new financing agreement with affiliates of VantagePoint Capital Partners. The company also amended its existing agreement with Hercules Technology Growth Capital to provide additional liquidity.

The company also revised terms with its key publishers to improve its ability to earn performance bonuses following up on winning top honors with Google’s Innovator Award for its ReachEdge solution and winning Google’s Quality Score Champion Award.
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Sharon Rowlands, CEO of ReachLocal, commented:

We have taken a number of proactive, strategic steps to reduce costs and improve our cash position and are pleased to raise our Adjusted EBITDA outlook for the fourth quarter and provide an initial view of our Adjusted EBITDA for next year. One of our goals for 2015 was to progressively improve Adjusted EBITDA throughout the year, and today’s upward revision is evidence that we are moving in the right direction.  Our revised outlook is driven primarily by more aggressive expense management and business optimization initiatives and incremental upside expected from recently revised publisher rebate agreements.

She added:

Taken together, these strategic actions improve our financial position and substantially increase our liquidity as we work to return ReachLocal to growth. We are comfortable that we have the liquidity to achieve our plans and have strong confidence in getting to cash flow positive in the second half of 2016.

Shares of ReachLocal were trading up 70% at $1.93 Friday, with a consensus analyst price target $1.70 and a 52-week trading range of $0.55 to $3.74.