10-Q

Table Of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 

For the quarterly period ended June 30, 2015

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 

For the transition period from              to            

Commission file number 001-34749

REACHLOCAL, INC.

(Exact name of registrant as specified in its charter)

Delaware	20-0498783
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

21700 Oxnard Street, Suite 1600 Woodland Hills, California	91367
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (818) 274-0260

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer. See definition of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☒
Non-accelerated filer ☐  (Do not check if a smaller reporting company)	Smaller reporting company ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):    Yes  ☐    No  ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Title of Class	Number of Shares Outstanding on July 31, 2015
Common Stock, $0.00001 par value	29,363,120

INDEX

			Page
Part I.	Financial Information
	Item 1.	Condensed Consolidated Financial Statements (unaudited)	3
		Condensed Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014	3
		Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2015 and 2014	4
		Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2015 and 2014	5
		Condensed Consolidated Statements of Cash Flows for the Six Months EndedJune 30, 2015 and 2014	6
		Notes to the Condensed Consolidated Financial Statements	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
	Item 4.	Controls and Procedures	38
Part II.	Other Information		39
	Item 1.	Legal Proceedings	39
	Item 1A.	Risk Factors	39
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
	Item 6.	Exhibits	39
		Signatures	40

PART I

FINANCIAL INFORMATION

Item 1.         FINANCIAL STATEMENTS

REACHLOCAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(Unaudited) 

	June 30, 2015			December 31, 2014
Assets
Current Assets:
Cash and cash equivalents	$	28,624		$	43,720
Short-term investments		52			904
Accounts receivable, net of allowance for doubtful accounts of $949 and $961 at June 30, 2015 and December 31, 2014, respectively		5,759			7,844
Prepaid expenses and other current assets		7,430			9,620
Total current assets		41,865			62,088
Property and equipment, net		16,615			19,639
Capitalized software development costs, net		21,470			21,555
Restricted cash—term loan (Note 10)		17,500			—
Restricted cash		3,565			3,589
Intangible assets, net		4,486			5,492
Non-marketable investments		9,000			9,000
Other assets		3,467			3,518
Goodwill		47,927			48,189
Total assets	$	165,895		$	173,070
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	35,305		$	44,874
Accrued compensation and benefits		15,043			15,972
Deferred revenue		27,226			29,016
Accrued restructuring		4,909			3,196
Term loan		2,789			—
Capital lease		684			624
Other current liabilities		10,833			12,316
Liabilities of discontinued operations		789			850
Total current liabilities		97,578			106,848
Term loan		21,619			—
Capital lease		839			1,103
Deferred rent and other liabilities		11,949			12,195
Total liabilities		131,985			120,146
Commitments and contingencies (Note 6)
Stockholders’ Equity:
Common stock, $0.00001 par value—140,000 shares authorized; 29,364 and 29,269 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively		—			—
Receivable from stockholder		(59	)		(65	)
Additional paid-in capital		136,505			132,080
Accumulated deficit		(97,944	)		(74,569	)
Accumulated other comprehensive loss		(4,592	)		(4,522	)
Total stockholders’ equity		33,910			52,924
Total liabilities and stockholders’ equity	$	165,895		$	173,070

See notes to condensed consolidated financial statements. 

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REACHLOCAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Revenue	$	98,776		$	123,553		$	198,339		$	248,289
Cost of revenue		55,390			63,461			111,607			126,859
Operating expenses:
Selling and marketing		33,046			48,146			69,329			94,907
Product and technology		7,082			6,816			14,504			13,775
General and administrative		9,910			14,530			20,623			28,694
Restructuring charges		3,133			2,226			4,588			4,049
Total operating expenses		53,171			71,718			109,044			141,425
Operating loss		(9,785	)		(11,626	)		(22,312	)		(19,995	)
Other income (expense), net		(848	)		195			(1,004	)		383
Loss from continuing operations before income taxes		(10,633	)		(11,431	)		(23,316	)		(19,612	)
Income tax provision (benefit)		(40	)		(1,105	)		59			(2,973	)
Loss from continuing operations		(10,593	)		(10,326	)		(23,375	)		(16,639	)
Income from discontinued operations, net of income tax of $18 and $222 for the three and six months ended June 30, 2014, respectively		—			31			—			371
Net loss	$	(10,593	)	$	(10,295	)	$	(23,375	)	$	(16,268	)
Net loss per share:
Basic:
Loss from continuing operations	$	(0.36	)	$	(0.36	)	$	(0.80	)	$	(0.59	)
Income from discontinued operations, net of income taxes		—			—			—			0.01
Net loss per share	$	(0.36	)	$	(0.36	)	$	(0.80	)	$	(0.58	)
Diluted:
Loss from continuing operations	$	(0.36	)	$	(0.36	)	$	(0.80	)	$	(0.59	)
Income from discontinued operations, net of income taxes		—			—			—			0.01
Net loss per share	$	(0.36	)	$	(0.36	)	$	(0.80	)	$	(0.58	)
Weighted average common shares used in the computation of income (loss) per share:
Basic		29,097			28,469			29,083			28,279
Diluted		29,097			28,469			29,083			28,279

 See notes to condensed consolidated financial statements.

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REACHLOCAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS 

(in thousands)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Net loss	$	(10,593	)	$	(10,295	)	$	(23,375	)	$	(16,268	)
Other comprehensive income (loss):
Foreign currency translation adjustments		(204	)		550			(70	)		835
Comprehensive loss	$	(10,797	)	$	(9,745	)	$	(23,445	)	$	(15,433	)

See notes to condensed consolidated financial statements.

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REACHLOCAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 

(in thousands)

(Unaudited) 

	Six Months Ended June 30,
	2015			2014
Cash flows from operating activities:
Loss from continuing operations	$	(23,375	)	$	(16,639	)
Adjustments to reconcile loss from continuing operations, net of income taxes, to net cash used in operating activities:
Depreciation and amortization		10,283			8,240
Stock-based compensation		4,360			8,047
Restructuring charges		4,588			4,049
Loss on disposal of fixed assets		135			—
Excess tax shortfalls from stock-based awards		—			568
Provision for doubtful accounts		66			1,602
Non-cash interest expense, net		173			—
Deferred taxes, net		—			(1,372	)
Changes in operating assets and liabilities:
Accounts receivable		1,859			(73	)
Prepaid expenses and other current assets		2,229			(1,890	)
Other assets		(264	)		(397	)
Accounts payable		(8,475	)		(4,204	)
Accrued compensation and benefits		(823	)		(524	)
Deferred revenue		(1,259	)		(2,129	)
Accrued restructuring		(2,358	)		(867	)
Deferred rent and other liabilities		(129	)		1,371
Net cash used in operating activities, continuing operations		(12,990	)		(4,218	)
Net cash used in operating activities, discontinued operations		(60	)		(1,262	)
Net cash used in operating activities		(13,050	)		(5,480	)
Cash flows from investing activities:
Additions to property, equipment and software		(7,748	)		(10,942	)
Maturities of certificates of deposits and short-term investments		846			—
Purchases of certificates of deposits and short-term investments		—			(73	)
Acquisitions, net of acquired cash		—			(1,760	)
Investment in non-marketable securities		—			(2,000	)
Net cash used in investing activities, continuing operations		(6,902	)		(14,775	)
Cash flows from financing activities:
Proceeds from term loan, net		24,700			—
Restricted cash—term loan		(17,500	)		—
Payment of deferred and contingent consideration		(434	)		—
Proceeds from exercise of stock options		6			6,438
Excess shortfalls from stock-based awards		—			(568	)
Principal payments on capital lease obligations		(443	)		—
Debt issuance costs		(194	)		—
Common stock repurchases		(5	)		(21	)
Net cash provided by financing activities		6,130			5,849
Effect of exchange rate changes on cash and cash equivalents		(1,274	)		1,166
Net change in cash and cash equivalents		(15,096	)		(13,240	)
Cash and cash equivalents—beginning of period		43,720			77,514
Cash and cash equivalents—end of period	$	28,624		$	64,274

See notes to condensed consolidated financial statements.

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REACHLOCAL, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  

(UNAUDITED)

1. Organization and Description of Business

ReachLocal, Inc.’s (the “Company”) operations are located in the United States, Canada, Australia, New Zealand, Japan, the United Kingdom, Germany, the Netherlands, Austria, Brazil, Mexico, and India. The Company’s mission is to provide more customers to local businesses around the world. The Company offers online marketing products and solutions in three categories: software (ReachEdge™ and Kickserv™), web presence (including ReachSite + ReachEdge™, ReachSEO™, ReachCast™, and TotalLiveChat™), and digital advertising (including ReachSearch™, ReachDisplay™, ReachRetargeting™, and ReachDisplay InApp^TM). The Company delivers its suite of products and solutions to local businesses through a combination of its proprietary technology platform, its direct inside and outside sales force, and select third-party agencies and resellers. 

2. Summary of Significant Accounting Policies

Principles of Consolidation

The condensed consolidated financial statements include the accounts of ReachLocal, Inc. and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014. The Condensed Consolidated Balance Sheet as of December 31, 2014 included herein was derived from the audited consolidated financial statements as of that date, but does not include all disclosures included in those audited consolidated financial statements.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments (consisting only of normal recurring adjustments) necessary for the fair presentation of the Company’s statement of financial position at June 30, 2015, the Company’s results of operations for the three and six months ended June 30, 2015 and 2014 and the Company’s cash flows for the six months ended June 30, 2015 and 2014. The results for the three and six months ended June 30, 2015 are not necessarily indicative of the results to be expected for the year ending December 31, 2015. All references to the three and six months ended June 30, 2015 and 2014 in the notes to the condensed consolidated financial statements are unaudited.

 Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results may differ from those estimates.

Reclassifications and Adjustments

Certain prior period amounts have been reclassified to conform to the current period presentation.

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Cash and Cash Equivalents

The Company reports all highly liquid short-term investments with original maturities of three months or less at the time of purchase as cash equivalents. As of June 30, 2015 and December 31, 2014, cash equivalents consist of demand deposits and money market accounts. Cash equivalents are stated at cost, which approximates fair value.

On April 30, 2015, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) for a $25.0 million term loan. See Note 10, Term Loan, for more information. The Company received $24.7 million of net proceeds from the term loan, $17.5 million of which is considered restricted cash. The Company's overall performance and capital expenditures more than offset the $7.2 million of unrestricted cash from the term loan, resulting in cash balances at June 30, 2015 that decreased $15.1 million from December 31, 2015. At June 30, 2015, the Company's current liabilities exceeded its current assets by $55.7 million.  The Company has taken and will continue to take steps to reduce expenses and improve its business. The Company believes that its available cash and anticipated cost reductions will together be sufficient to satisfy its operating activities, working capital and planned investing and financing activities for at least the next 12 months.

Restricted Cash—Term Loan

Under the terms of the Loan Agreement, the Company is required to maintain, at all times, cash in North America of at least $17.5 million, unless the Company achieves positive “Adjusted EBITDA” as defined in the Loan Agreement for three consecutive quarters, in which case the minimum cash balance decreases to $12.5 million.  Restricted cash—term loan represents the required minimum compensating balance to secure the term loan. See Note 10, Term Loan, for more information.

   Restricted Cash

Restricted cash represents certificates of deposit held at financial institutions that are pledged as collateral for letters of credit related to lease commitments, collateral for the Company’s merchant accounts, and cash deposits funded to a restricted account determined on a monthly basis in accordance with the Company’s employee health care self-insurance plan. The letters of credit will lapse at the end of the respective lease terms through 2024 and the certificates of deposit automatically renew for successive one-year periods over the duration of the lease term. The restrictions related to merchant accounts and the Company’s self-insurance plan will lapse upon termination of the respective underlying arrangements. At June 30, 2015 and December 31, 2014, the Company had restricted cash in the amount of $3.6 million, of which, $0.2 million, related to the employee health care self-insurance plan.

Recent Accounting Pronouncements

In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-05, Intangibles-Goodwill and Other-Internal-Use Software. The amendments in this update provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The amendments in this update are effective for the Company as of January 1, 2016. Early adoption is permitted. The Company is currently assessing the impact of this update on its consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, Interest- Imputation of Interest. The amendments in this update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the corresponding debt liability, consistent with debt discounts. The amendments in this update are effective for the Company as of January 1, 2016. Early adoption is permitted for financial statements that have not been previously issued. The Company early adopted this update in the second quarter of 2015 upon entering the Loan Agreement on April 30, 2015.

In February 2015, the FASB issued ASU No. 2015-02, Consolidation. The amendments in this update require management to reevaluate whether certain legal entities should be consolidated. Specifically, the amendments (1) modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities, (2) eliminate the presumption that a general partner should consolidate a limited partnership, (3) affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships, and (4) provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. The amendments in this update are effective for the Company as of January 1, 2016. Early adoption is permitted. The Company is currently assessing the impact of this update, and believes that its adoption on January 1, 2016 will not have a material impact on its consolidated financial statements.

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In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements – Going Concern. The amendments in this update require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this update are effective for us as of January 1, 2017. Early application is permitted. The adoption of this standard is not expected to have an impact on the Company’s consolidated financial condition and results of operations.

In June 2014, the FASB issued ASU No. 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. The amendments in this update require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Accounting Standards Codification (“ASC”) 718, Compensation – Stock Compensation, as it relates to awards with performance conditions that affect vesting to account for such awards. The amendments in this update will be effective for the Company as of January 1, 2016. Earlier adoption is permitted. Entities may apply the amendments in this update either: (a) prospectively to all awards granted or modified after the effective date; or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. If retrospective transition is adopted, the cumulative effect of applying this update as of the beginning of the earliest annual period presented in the financial statements should be recognized as an adjustment to the opening retained earnings balance at that date. In addition, if retrospective transition is adopted, an entity may use hindsight in measuring and recognizing the compensation cost. The Company is currently assessing the impact of this update, and believes that its adoption on January 1, 2016 will not have a material impact on its consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. The guidance in this update supersedes the revenue recognition requirements in ASC 605, Revenue Recognition, and most industry-specific guidance throughout the Codification. Additionally, this update supersedes some cost guidance included in ASC 605-35, Revenue Recognition - Construction-Type and Production-Type Contracts. In addition, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer (for example, assets within the scope of ASC 360, Property, Plant, and Equipment, and intangible assets, within the scope of ASC 350, Intangibles - Goodwill and Other) are amended to be consistent with the guidance on recognition and measurement in this update. The standard was to be effective for the Company as of January 1, 2017, but in April 2015, the FASB delayed the effective date of the new revenue accounting standard to January 1, 2018, and would permit early adoption as of the original effective date. Earlier adoption is not otherwise permitted for public entities. An entity can apply the revenue standard retrospectively to each prior reporting period presented (full retrospective method) or retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application in retained earnings (simplified transition method). The Company is currently assessing the impact of this update on its consolidated financial statements.

In April 2014, the FASB issued ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The amendments in this update changes the criteria for determining which disposals can be presented as discontinued operations and modifies related disclosure requirements. The guidance applies prospectively to new disposals and new classifications of disposal groups as held for sale after the effective date, and was effective for the Company as of January 1, 2015. The Company will apply this guidance to its consolidated financial statements for any new disposals or new classification as held for sale after the effective date.

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3. Fair Value of Financial Instruments

The Company applies the fair value hierarchy for its financial assets and liabilities. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last is considered unobservable, that are used to measure fair value:

• Level 1—Quoted prices in active markets for identical assets or liabilities.

• Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following table summarizes the basis used to measure certain of the Company’s financial assets and liabilities that are carried at fair value (in thousands):

			Basis of Fair Value Measurement
	Balance at June 30, 2015		Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents	$	28,624	$	28,624	$	—	$	—
Restricted cash—term loan	$	17,500	$	17,500	$	—	$	—
Short-term investments	$	52	$	52	$	—	$	—
Restricted cash	$	3,317	$	—	$	3,317	$	—

			Basis of Fair Value Measurement
	Balance at December 31, 2014		Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents	$	43,720	$	43,720	$	—	$	—
Short-term investments	$	904	$	904	$	—	$	—
Restricted cash	$	3,416	$	—	$	3,416	$	—
Liabilities:
Acquisition-related contingent consideration	$	349	$	—	$	—	$	349

The Company’s restricted cash is valued using pricing sources and models utilizing market observable inputs, as provided to the Company by its broker.

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On April 10, 2015, ReachLocal New Zealand Limited (“RL NZ”) paid NZ$0.4 million ($0.3 million) of earn-out consideration due, offset by NZ$0.2 million ($0.1 million) of additional consideration pursuant to the net working capital adjustment.

The Company also has an investment in a privately held partnership that is one of its service providers. During March 2013, the Company invested $2.5 million for a 4% equity interest in the service provider, and in March 2014, the Company invested $2.0 million for an additional 3.2% equity interest. The Company does not have significant influence over the entity. In addition, the Company has an equity interest of 14.2% in SERVIZ, Inc., the entity that acquired its former ClubLocal business, and does not have significant influence over the entity. The carrying amounts of the Company’s cost method investments were each $4.5 million at June 30, 2015, and are included in non-marketable investments in the accompanying condensed consolidated balance sheet.

 4. Acquisitions

Acquisition of Kickserv

On November 21, 2014, the Company acquired Kickserv, Inc. (“Kickserv”) as part of the Company’s continued effort to expand its product offerings. Kickserv is a provider of cloud-based business management software for service businesses.

The purchase price consisted of $6.75 million of initial consideration, subject to a holdback and certain adjustments, and up to $4.0 million of earn-out consideration. At closing, the Company paid $5.3 million in cash with the remaining balance of the initial purchase price payable after the 18-month anniversary of the closing date, subject to certain conditions. The Company also issued 250,000 restricted stock units to the hired employees, which are accounted for as stock-based compensation over the period in which they are earned. A liability was not recorded for the earn-out consideration as the financial targets, as defined in the purchase agreement, are not expected to be achieved. Any changes in the fair value of the earn-out consideration will be recorded as other income or expense. There has been no change in the fair value since the date of acquisition.

           The acquisition was accounted for using the acquisition method of accounting. The Company completed and finalized the purchase price allocation in the fourth quarter of 2014. The Company recorded assets acquired and liabilities assumed at their respective fair values. The following table summarizes the final fair value of assets acquired and liabilities assumed (in thousands):

Assets acquired:
Cash and cash equivalents	$	58
Intangible assets		4,280
Goodwill		3,985
Total assets acquired		8,323
Liabilities assumed:
Non-interest bearing liabilities		24
Long-term debt		350
Deferred tax liabilities		1,249
Total liabilities assumed		1,623
Total fair value of net assets acquired	$	6,700

Intangible assets acquired from Kickserv included software technology of $3.0 million, trade names of $0.6 million and customer relationships of $0.7 million, amortized over eight, ten, and four years, their respective estimated useful lives, using the straight-line method. The estimated useful life of the technology was determined based on assumptions of its remaining economic life. The estimated useful life of trade names was determined based on assumptions of revenue attributable to the trade name, and the estimated useful life of the customer relationships was determined based on assumptions of customer attrition rates. The fair value of the intangible assets were determined by applying the income approach and based on significant inputs that are not observable in the market. Key assumptions include estimated future revenues from acquired customers and a discount rate of 15%, comprised of an estimated internal rate of return for this transaction and a weighted average cost of capital for comparable companies. The goodwill arising from the acquisition consists largely of the synergies expected from combining the operations of Kickserv and the Company. The Company expects to grow Kickserv’s business as a result of this acquisition. The acquired goodwill is not expected to be deductible for tax purposes.

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Acquisition costs in connection with the Kickserv acquisition were immaterial. The revenues and results of operations of the acquired businesses for the post-acquisition period were included in the consolidated statements of operations and were immaterial for the period ended June 30, 2015. The pro forma results are not shown as the impact is not material.

Acquisition of SureFire

On March 21, 2014, RL NZ acquired certain assets and hired certain employees of SureFire Search Limited (“SureFire”) as part of the Company’s international expansion plan. From 2010 until the acquisition, SureFire was the Company’s exclusive reseller in New Zealand.

At closing, RL NZ paid NZ$1.7 million ($1.5 million) in cash of the estimated NZ$2.8 million ($2.4 million) purchase price. The remaining balance of the estimated purchase price was deferred subject to meeting revenue targets and an indemnity holdback, payable, if at all, after the 12-month anniversary of the closing date, and the 12- and 18-month anniversaries of the closing date, respectively. The maximum amount of contingent consideration payable was NZ$2.0 million and the fair value of the contingent consideration was recorded as an accrued expense. The fair value of the earn-out consideration under the income approach was determined at the time of acquisition by using the Black-Scholes option pricing model. This approach is based on significant inputs that are not observable in the market, which are considered Level 3 inputs. Key assumptions include forecasted first year revenue, volatility of 30% based on volatilities of selected comparable companies, and a risk-free rate of 0.14% based on a one-year U.S. treasury yield rate. The liability for the indemnity holdback was recorded based on the assumption that there would be no claims made against the holdback and that 65% ($0.2 million) of the indemnity holdback would be paid April 2015 with the remaining 35% ($0.1 million) to be paid October 2015. The fair value of the indemnity holdback at the date of acquisition was NZ$0.4 million ($0.3 million). On April 10, 2015, RL NZ paid NZ$0.6 million ($0.4 million), which included NZ $0.4 million ($0.3 million) of earn-out consideration due and NZ $0.3 million ($0.2 million) for the 12-month indemnity holdback release, offset by NZ $0.2 million ($0.1 million) of additional consideration pursuant to the net working captial adjustment.

           The acquisition was accounted for using the acquisition method of accounting. The Company completed a preliminary purchase price allocation in the first quarter of 2014 and finalized the allocation in the third quarter of 2014 with respect to the timing of certain valuation adjustments. The Company recorded acquired assets and liabilities assumed at their respective fair values. The following table summarizes the final fair value of acquired assets and liabilities assumed (in thousands):

Assets acquired:
Goodwill	$	2,350
Intangible assets		1,280
Accounts receivable		330
Property and equipment		13
Total assets acquired		3,973
Liabilities assumed:
Deferred tax liabilities		358
Deferred revenue		284
Accrued compensation and benefits		111
Other		782
Total liabilities assumed		1,535
Total fair value of net assets acquired	$	2,438

Intangible assets acquired from SureFire included customer relationships of $1.3 million which are amortized over three years, their estimated useful life, using the straight-line method. The estimated useful life was determined based on assumptions of customer attrition rates. The fair value of the intangible assets was determined by applying the income approach and based on Level 3 inputs. Key assumptions include estimated future revenues from acquired customers and a discount rate of 25%, comprised of an estimated internal rate of return for this transaction and a weighted average cost of capital for comparable companies. The goodwill arising from the acquisition consists largely of the synergies expected from combining the operations of SureFire. The Company expects to increase its presence in the Asia Pacific region as a result of this acquisition. The acquired goodwill is not expected to be deductible for tax purposes.

Acquisition costs in connection with the SureFire acquisition were immaterial. The revenues and results of operations of the acquired businesses for the periods post-acquisition were included in the consolidated statements of operations and were immaterial for the period ended June 30, 2015. The pro forma results are not shown as the impact is not material.

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RealPractice Acquisition

On January 6, 2014, the Company made the final deferred payment in connection with its 2012 RealPractice acquisition in the amount of $0.3 million.

Goodwill

The changes in the carrying amount of goodwill for the six months ended June 30, 2015 were as follows (in thousands):

	North America		Asia-Pacific			Total
Balance at December 31, 2014	$	13,680	$	34,509		$	48,189
Foreign currency translation		—		(262	)		(262	)
Balance at June 30, 2015	$	13,680	$	34,247		$	47,927

  Finite-Lived Intangible Assets

At June 30, 2015 and December 31, 2014, finite-lived intangible assets consisted of the following (in thousands):

	June 30, 2015
	Useful Life (years)		Gross Value		Accumulated Amortization			Net
Developed technology		3-8	$	5,490	$	(2,734	)	$	2,756
Customer contracts and relationships		2-4		1,732		(537	)		1,195
Trade names		10		570		(35	)		535
Total			$	7,792	$	(3,306	)	$	4,486

	December 31, 2014
	Useful Life (years)		Gross Value		Accumulated Amortization			Net
Developed technology		3-8	$	5,490	$	(2,130	)	$	3,360
Customer contracts and relationships		2-4		1,875		(306	)		1,569
Trade names		10		570		(7	)		563
Total			$	7,935	$	(2,443	)	$	5,492

Based on the current amount of intangibles subject to amortization, the estimated amortization expense over the remaining lives is as follows (in thousands):

Years Ending December 31,
Remaining 2015	$	480
2016		959
2017		680
2018		584
2019		431
Thereafter		1,352
Total	$	4,486

For the three months ended June 30, 2015 and 2014, amortization expense related to acquired intangible assets was $0.4 million and $0.3 million, respectively. For the six months ended June 30, 2015 and 2014, amortization expense related to acquired intangible assets was $0.9 million and $0.6 million, respectively

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 5. Software Development Costs

Capitalized software development costs consisted of the following (in thousands):

	June 30, 2015			December 31, 2014
Capitalized software development costs	$	62,396		$	56,498
Accumulated amortization		(40,926	)		(34,943	)
Capitalized software development costs, net	$	21,470		$	21,555

For the three months ended June 30, 2015 and 2014, the Company recorded amortization expense of $3.0 million and $2.2 million, respectively. For the six months ended June 30, 2015 and 2014, the Company recorded amortization expense of $5.8 million and $4.7 million, respectively. At June 30, 2015 and December 31, 2014, $2.3 million and $5.0 million, respectively, of capitalized software development costs were related to projects still in process.

6. Commitments and Contingencies  

Legal Matters

On May 2, 2014, a lawsuit, purporting to be a class action, was filed by one of the Company’s former clients in the United States District Court in Los Angeles. The complaint alleges breach of contract, breach of the implied covenant of good faith and fair dealing, and violation of California’s unfair competition law. The complaint seeks monetary damages, restitution and attorneys’ fees. The Company filed a motion to dismiss on June 20, 2014, which was denied on December 4, 2014. While the case is at an early stage, the Company believes that the case is substantively and procedurally without merit. The Company’s insurance carrier is providing the Company with a defense under a reservation of rights.

From time to time, the Company is involved in legal proceedings arising in the ordinary course of its business. Over the past 18 months, the Company has been involved in disputes with former customers in the United Kingdom that allege that the Company was not fully transparent in its pricing. On June 15, 2015, one of the Company’s former clients in the United Kingdom filed a lawsuit in the High Court of Justice alleging fraudulent misrepresentations and breach of contract. The Company’s insurance carrier is providing the Company with a defense under a reservation of rights. The Company resolved similar matters in 2014 and has adequately reserved for such matters based on the current estimate of outcomes.

The Company believes that there is no litigation or claims pending or threatened that are likely to have a material adverse effect on its financial position, results of operations or cash flows. 

Other Commitments

The Company has engaged a third party facilitator to provide direct support in the execution of its 2015 Restructuring Plan. In addition to fees incurred during the six months ended June 30, 2015, the Company expects to incur additional fees to be determined based on the future projected value of results achieved by the facilitator-led program. See Note 9, Restructuring Charges, for more information.

7. Stockholders’ Equity

Common Stock Repurchases

The Company’s Board of Directors previously authorized the repurchase of up to $47.0 million of the Company’s outstanding common stock. At March 31, 2015, the Company had executed repurchases of 3.4 million shares of its common stock under the program for an aggregate of $36.3 million. There were no repurchases under the program during 2015. On April 29, 2015, the Board of Directors terminated the Company’s repurchase program.

The Company is deemed to repurchase common stock surrendered by participants to cover tax withholding obligations with respect to the vesting of restricted stock and restricted stock units.

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8. Stock-Based Compensation

Stock Options

The following table summarizes stock option activity (in thousands, except years and per share amounts): 

	Number of Shares			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value
Outstanding at December 31, 2014		6,096		$	9.48
Granted		5,320		$	4.49
Exercised		(26	)	$	0.24
Forfeited		(3,741	)	$	10.40
Outstanding at June 30, 2015		7,649		$	5.60		6.6	$	—
Vested and exercisable at June 30, 2015		1,568		$	9.75		5.3	$	—
Unvested at June 30, 2015, net of estimated forfeitures		4,723		$	4.52		6.9	$	—

      The following table presents the weighted-average assumptions used to estimate the fair values of the stock options granted during the three and six months ended June 30, 2015 and 2014.

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Expected dividend yield		0	%		0	%		0	%		0	%
Risk-free interest rate		1.54	%		1.71	%		1.53	%		1.63	%
Expected life (in years)		4.99			5.32			4.93			5.09
Expected volatility		57	%		54	%		57	%		54	%

The per-share weighted average grant date fair value of options granted during the six months ended June 30, 2015 was $2.35. The aggregate intrinsic value of stock options exercised during the six months ended June 30, 2015 and 2014, were $0.1 million and $2.7 million, respectively.

Restricted Stock and Restricted Stock Units 

The following table summarizes restricted stock and restricted stock unit awards (in thousands, except per share amounts):

	Number of shares			Weighted Average Grant Date Fair Value
Unvested at December 31, 2014		912		$	5.98
Granted		—		$	—
Forfeited		(64	)	$	9.44
Vested		(140	)	$	10.07
Unvested at June 30, 2015		708		$	5.60

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Stock-Based Compensation Expense

The Company records stock-based compensation expense, net of amounts capitalized as software development costs. The following table summarizes stock-based compensation (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Stock-based compensation	$	2,314	$	3,597	$	4,579	$	8,266
Less: Capitalized stock-based compensation		100		121		219		219
Stock-based compensation expense, net	$	2,214	$	3,476	$	4,360	$	8,047

Stock-based compensation, net of capitalization, is included in the accompanying condensed consolidated statements of operations within the following captions (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Stock-based compensation expense, net
Cost of revenue	$	134	$	255	$	290	$	530
Selling and marketing		424		859		906		1,736
Product and technology		126		222		294		608
General and administrative		1,530		2,140		2,870		5,173
	$	2,214	$	3,476	$	4,360	$	8,047

At June 30, 2015, there was $13.0 million of unrecognized stock-based compensation related to restricted stock, restricted stock units and outstanding stock options, net of estimated forfeitures. This amount is expected to be recognized over a weighted average period of 1.3 years. Future stock-based compensation expense for these awards may differ to the extent actual forfeitures vary from management estimates.

Stock-based compensation for the six months ended June 30, 2014 includes $1.9 million of expense related to modification of grants to 73 option holders in March 2014, which extended the time to exercise from seven years to ten years for certain options granted during 2008 and 2009 with an exercise price of $10.91.

Commencing in 2015, 50% of the Company's annual corporate bonus plan for certain executives and senior level employees will be settled with fully vested restricted stock units, and is payable in the first quarter of the following fiscal year. The plan does not limit the number of shares that can be issued to settle the obligation. During the three and six months ended June 30, 2015, the Company has recognized stock-based compensation expense related to this plan of $0.4 million. As of June 30, 2015, 128,000 shares would be required to satisfy the obligation relating to the 2015 annual corporate bonus plan.

Stock Option Exchange

On December 2, 2014, the Company commenced an option exchange to permit employee option holders to surrender certain outstanding stock options for cancellation in exchange for the grant of new replacement options to purchase an equal number of shares having an exercise price equal to the greater of $6.00 and the fair market value of the Company’s common stock on the replacement grant date. The option exchange was completed on January 9, 2015. Exchanged options were cancelled at that time and immediately thereafter, the Company granted replacement options under the Amended and Restated ReachLocal 2008 Stock Incentive Plan with exercise prices of $6.00 per share. A total of 2.8 million options were exchanged. The Company will amortize the incremental expense of $1.5 million in addition to the remaining expense attributable to the exchanged awards over the vesting period of the new award.

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9. Restructuring Charges

The Company has implemented various restructuring plans to reduce its cost structure, align resources with its product strategy, improve operating efficiency and implement cost savings, which have resulted in workforce reductions and the consolidation of certain real estate facilities and data centers.

2015 Restructuring Plan

In accordance with the Company’s ongoing efforts to reduce expenses and improve the operating performance of its business, the Company commenced its 2015 Restructuring Plan. The initiative is focused on enhancing earnings through an analysis of opportunities to both improve revenue performance and reduce costs. Operational efficiency improvements under the 2015 Restructuring Plan are identified and implemented through strategic realignment and targeted cost reductions, including workforce costs, facility-related expenditures and other operating expenses. The charges incurred during the six months ended June 30, 2015 primarily involved down-sizing certain facilities in North America, costs to utilize a third party facilitator to aid execution of the plan, and a reduction of the Company’s North American and international workforces. The Company expects to have continued restructuring activity under this plan, including estimated additional expenses relating to facilitation and execution of the plan of $1.9 million, which are estimated to be incurred through the third quarter of 2016.

A summary of the accrued restructuring liability related to this plan, which is recorded in “Accrued restructuring” on the condensed consolidated balance sheet is as follows (in thousands):

	Workforce Reduction Costs			Facility Closures and Equipment Write-downs			Other Associated Costs			Total
Balance at December 31, 2014	$	—		$	—		$	—		$	—
Amounts accrued		865			1,144			2,768			4,777
Amounts paid		(600	)		(59	)		(1,020	)		(1,679	)
Accretion		—			11			—			11
Non-cash items		3			(574	)		—			(571	)
Balance at June 30, 2015	$	265		$	522		$	1,748		$	2,538

The Company expects the facility closures and equipment write-downs to be paid through the third quarter of 2024 and the workforce reduction costs to be paid through the third quarter of 2015.

2014 Restructuring Plans

As a result of declining performance in the Company’s North American operations during the first quarter of 2014, the Company implemented a restructuring plan which primarily involved a reduction of the Company’s North American and international workforces as well as the closure of facilities in North America and certain international markets. The Company does not expect to have continued activity under this plan.

A summary of the accrued restructuring liability related to this plan, which is recorded in “Accrued restructuring” on the condensed consolidated balance sheet is as follows (in thousands):

	Facility Closures and Equipment Write-downs			Total
Balance at December 31, 2014	$	2,519		$	2,519
Amounts paid		(401	)		(401	)
Accretion		16			16
Balance at June 30, 2015	$	2,134		$	2,134

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The Company expects the facility closures and equipment write-downs to be paid through the third quarter of 2024.

During the second quarter of 2014, the Company implemented a business restructuring plan which involved the elimination of certain senior management positions, a reduction of international workforce, as well as the closure of facilities in certain international markets. The Company does not expect to have continued activity under this plan.

A summary of the accrued restructuring liability related to this plan, which is recorded in “Accrued restructuring” on the condensed consolidated balance sheet is as follows (in thousands):

	Workforce Reduction Costs			Facility Closures			Total
Balance at December 31, 2014	$	51		$	626		$	677
Amounts accrued		—			(189	)		(189	)
Amounts paid		(50	)		(228	)		(278	)
Non-cash items		(1	)		28			27
Balance at June 30, 2015	$	—		$	237		$	237

The Company expects the facility costs to be paid through the second quarter of 2016.

 10. Term Loan

On April 30, 2015, the Company entered into the Loan Agreement with its direct and indirect domestic subsidiaries, as co-borrowers, Hercules Technology Growth Capital, Inc. (“Hercules”), as administrative agent, and the lenders party thereto from time to time (the “Lenders”), including Hercules, pursuant to which the Lenders agreed to make a term loan available to the Company for working capital and general business purposes, in a principal amount of $25.0 million. The term loan has an annual interest rate equal to the greater of (i) 11.75% and (ii) the sum of (a) the prime rate, plus (b) 8.50%. On the closing date the Company paid a fee of $0.3 million, which is to be credited against the final payment, and debt issuance costs of $0.2 million. Debt issuance costs wil be amortized over the life of the loan of 3 years and calculated using the effective interest method.    

The Company is required to make interest-only payments on the term loan through May 1, 2016, though such payments may be extended through August 1, 2016 and November 1, 2016 if the Company remains in continuous compliance with the financial covenants under the Loan Agreement through April 1, 2016 and July 1, 2016, respectively, and no default or event of default has occurred and is continuing on such dates. The term loan will begin amortizing at the end of the applicable interest-only period, with monthly payments of principal and interest to the Lenders in consecutive monthly installments following the end of such interest-only period. The term loan matures on April 1, 2018; provided, however, that if the interest-only payments are extended through November 1, 2016, the term loan will instead mature October 1, 2018. Upon repayment of the term loan, the Company is also required to make a final payment to the Lenders equal to $1.5 million, which is accrued as interest based on the effective interest method over the 3-year term of the Loan Agreement. The term loan is secured by substantially all of the Company’s personal property including its intellectual property. 

At the Company’s option, the outstanding principal balance of the term loan may be prepaid in whole, or in part in a minimum amount of $2.5 million, subject to a prepayment fee of 3% of any amount prepaid if the prepayment occurs on or prior to April 30, 2016, or 2% of the amount prepaid if the prepayment occurs after April 30, 2016 but on or prior to April 30, 2017. If the prepayment occurs after April 30, 2017, there is no prepayment fee.

The Loan Agreement includes covenants applicable to the Company and its subsidiaries, which include restrictions on transferring collateral, incurring additional indebtedness, engaging in mergers or acquisitions, paying dividends or making other distributions, making investments, creating liens, selling assets, and undergoing a change in control, in each case subject to certain exceptions, as well as financial covenant requirements to maintain certain minimum levels of revenue and earnings during each three-month period, tested monthly, during the term. The Company is also required to maintain minimum cash in North America in an amount equal to $17.5 million at all times, unless the Company achieves positive “Adjusted EBITDA” as defined in the Loan Agreement for three consecutive quarters, in which case the minimum cash balance decreases to $12.5 million. The Loan Agreement also includes events of default, the occurrence and continuation of which provide Hercules, as administrative agent, with the right to exercise remedies against the Company and the collateral securing the term loan, including potential foreclosure against the Company’s assets securing the Loan Agreement, including the Company’s cash. As of June 30, 2015, the Company was in compliance with all term loan covenants.

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On August 3, 2015, the Company entered into an amendment to the Loan Agreement with Hercules, which reduces the term loan’s covenant thresholds for revenue for the months ending September 30, 2015 through December 31, 2015.

Warrant

Concurrently with entrance into the Loan Agreement, the Company issued to Hercules, as the sole lender on the closing date, a warrant to purchase up to 177,304 shares of the Company’s common stock at an exercise price of $2.82 per share. The warrant may be exercised either for cash or on a cashless basis. The warrant expires April 30, 2022. The Company estimated the fair value of the warrant to be $0.3 million based on its relative fair value to the term loan using a Black-Sholes pricing model and accounted for the warrant as a component of additional paid-in capital. The warrant will be amortized in the income statement as a component of debt issuance cost.

11. Income Taxes

The Company provides for income taxes in interim periods based on the estimated effective income tax rate for the complete fiscal year. For the three months ended June 30, 2015, the Company recorded a benefit from income taxes totaling $40,000 and for the six months ended June 30, 2015, the Company recorded a provision for income taxes of $59,000. This is compared to a benefit from income taxes of $1.1 million for the three months ended June 30, 2014 and a benefit from income taxes of $3.0 million for the six months ended June 30, 2014. The Company’s tax provision notwithstanding pre-tax losses is due to its full valuation allowance against its net deferred tax assets in the US and certain foreign jurisdictions. Generally, a full valuation allowance will result in a zero net tax provision, since the income tax expense or benefit that would otherwise be recognized is offset by the change in the valuation allowance. However, the income tax provisions for the three and six months ended June 30, 2015 relates primarily to income taxes in the Company’s state and foreign jurisdictions and a non-cash income tax liability related to tax deductible goodwill that cannot be considered when determining a need for a valuation allowance.

The income tax provision is computed on the year to date pretax income of the consolidated entities located within each taxing jurisdiction based on current tax law. Deferred tax assets and liabilities are determined based on the future tax consequences associated with temporary differences between income and expenses reported for financial accounting and tax reporting purposes. A valuation allowance for deferred tax assets is recorded to the extent the Company determines that it is more likely than not that the deferred tax assets will not be realized.

Realization of deferred tax assets is principally dependent upon future taxable income, the estimation of which requires significant management judgment. The Company’s judgment regarding future profitability may change due to many factors, including future market conditions and the Company’s ability to successfully execute its business plans and/or tax planning strategies. These changes, if any, may require material adjustments to these deferred tax asset balances. On a quarterly basis, the Company reassesses the need for these valuation allowances based on operating results and its assessment of the likelihood of future taxable income and developments in the relevant tax jurisdictions. The Company continues to maintain a valuation allowance against its net deferred tax assets in US and various foreign jurisdictions, where the Company believes it is more likely than not that deferred tax assets will not be realized.

The Company strives to resolve open matters with each tax authority at the examination level and could reach an agreement with a tax authority at any time. While the Company has accrued for amounts it believes are the expected outcomes, the final outcome with a tax authority may result in a tax liability that is more or less than that reflected in the financial statements. In addition, the Company may later decide to challenge any assessments, if made, and may exercise its right to appeal. The liability is reviewed quarterly and adjusted as events occur that affect potential liabilities for additional taxes, such as lapsing of applicable statutes of limitations, proposed assessments by tax authorities, negotiations between tax authorities, identification of new issues, and issuance of new legislation, regulations or case law. Management believes that adequate amounts of tax and related interest, if any, have been provided for any adjustments that may result from these examinations of uncertain tax positions. Interest and penalties are included in income tax expense.

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The Company and its subsidiaries file income tax returns in the U.S. federal, various state and foreign jurisdictions. The Company has used net operating losses in recent periods, which extended the statutes of limitations with respect to a number of the Company’s tax years. Currently a majority of the Company’s tax years remain subject to audit, however, certain jurisdiction’s statutes of limitations will begin to expire in 2016. 

12. Net Loss Per Share

 Basic net income (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of common and potential dilutive shares outstanding during the period, to the extent such shares are dilutive. Potential dilutive shares are composed of incremental common shares issuable upon the exercise of stock options, warrants and unvested restricted shares using the treasury stock method. Basic income (loss) from continuing operations per share is computed by dividing income (loss) from continuing operations for the period by the weighted average number of common shares outstanding during the period. Shares of unvested restricted stock are excluded from the calculation of basic weighted average shares outstanding, but their dilutive impact is added back in the calculation of diluted weighted average shares outstanding. Diluted income (loss) from continuing operations per share is computed by dividing income (loss) from continuing operations for the period by the weighted average number of common and potentially dilutive securities outstanding during the period, to the extent such shares are dilutive. The Company had a loss from continuing operations for the three and six months ended June 30, 2015 and 2014, and therefore the number of diluted shares was equal to the number of basic shares for the period. 

The following weighted average number of potentially dilutive securities have been excluded from the calculation of diluted net income (loss) per common share as they would be anti-dilutive for the periods below (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Deferred stock consideration and unvested restricted stock		644		775		779		653
Stock options and warrant		7,189		7,163		6,721		6,258
		7,833		7,938		7,500		6,911

The following table sets forth the computation of basic and diluted income from continuing operations per share (in thousands, except per share amounts):

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Numerator:
Loss from continuing operations	$	(10,593	)	$	(10,326	)	$	(23,375	)	$	(16,639	)
Denominator:
Weighted average common shares used in computation of loss per share from continuing operations, basic		29,097			28,469			29,083			28,279
Loss per share from continuing operations, basic	$	(0.36	)	$	(0.36	)	$	(0.80	)	$	(0.59	)
Loss per share from continuing operations, diluted	$	(0.36	)	$	(0.36	)	$	(0.80	)	$	(0.59	)

 13. Segment Information

The Company operates in one operating segment. The Company’s chief operating decision maker manages the Company’s operations on a consolidated basis for purposes of evaluating financial performance and allocating resources. 

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14. Supplemental Cash Flow Information

The following table sets forth supplemental cash flow disclosures (in thousands):

	Six Months Ended June 30,
	2015			2014
Non-cash investing and financing activities:
Capitalized software development costs resulting from stock-based compensation and deferred payment obligations	$	219		$	219
Deferred payment obligation decrease	$	—		$	(290	)
Unpaid purchases of property and equipment	$	131		$	317
Assets acquired under capital leases	$	(204	)	$	—
Investment related to the ClubLocal disposition	$	—		$	4,500
Issuance of warrant	$	250		$	—

15. Discontinued Operations

ClubLocal

In the fourth quarter of 2013, the Company’s Board of Directors approved a plan to dispose of the Company’s ClubLocal business, and on February 18, 2014, the Company closed a transaction in which it transferred its ClubLocal business to SERVIZ, Inc. in exchange for a minority equity interest. The Company has an equity interest in the new entity of 14.2%, with a recorded fair value of $4.5 million. As a result of the disposition, the Company recorded a gain on disposal of $0.8 million, net of income tax of $0.4 million. This business has been accounted for as discontinued operations for all periods presented.

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Item 2.       MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   

Cautionary Notice Regarding Forward-Looking Statements

In this document, ReachLocal, Inc. and its subsidiaries are referred to as “we,” “our,” “us,” the “Company” or “ReachLocal.”

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our 2014 Annual Report on Form 10-K.

This quarterly report on Form 10-Q contains “forward-looking statements” that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “will,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would,” and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included in our 2014 Annual Report on Form 10-K and Quarterly Report on Form 10-Q for the quarter ended March 31, 2015. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

Overview

ReachLocal’s mission is to provide more customers to businesses around the world. We began in 2004 with the goal of helping local businesses move their advertising spend from traditional media and yellow pages to online search. While we have sold to a variety of local businesses and will continue to do so, our present focus is on small to medium-sized businesses (SMBs) and in particular, what we refer to as Premium SMBs. A Premium SMB generally has 10 to 30 employees, $1 to $10 million in annual revenue and spends approximately $40,000 annually on marketing. Premium SMBs have become increasingly sophisticated in their understanding of online marketing. However, we believe that Premium SMBs have not changed their desire for a single, unified solution to their marketing needs. Our goal is to provide a total digital marketing solution that will address the bulk of Premium SMBs’ online marketing needs. Our total digital marketing solution consists of products and solutions in three categories: software (ReachEdge™ and Kickserv™), digital advertising (including ReachSearch™, ReachDisplay™, ReachDisplay InApp^TM and ReachRetargeting™), and web presence (including ReachSite ™, ReachSEO™, ReachCast™ and TotalLiveChat™).

We began by offering online advertising solutions with the rollout of ReachSearch in 2005, when we pioneered the provisioning of search engine marketing services (SEM) on a mass scale for SMBs through the use of our technology platform. ReachSearch combines search engine marketing optimized across multiple publishers, call tracking and call recording services, and industry leading campaign performance transparency. ReachSearch remains a leading SEM offering for local businesses and has won numerous awards since its rollout. However, ReachSearch does not solve all of the online advertising challenges of our local business clients. We have therefore added additional elements to our platform including our display product, ReachDisplay, our behavioral targeting product, ReachRetargeting, and other products that are primarily focused on leveraging third-party media to drive leads to our clients.

To complement our online digital advertising solutions, we have also launched a number of presence solutions. These solutions include websites, social, search engine optimization (SEO), chat and other products and solutions, all focused on expanding and leveraging our clients’ web presence. Often these products are designed to work in concert with our digital advertising products with a goal of enhancing the return to our clients. These products are generally available in North America and selectively available in our international markets. We intend to continue to make more of our solutions available in more of our international markets.

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We also recognize that even successfully driving leads to our clients does not represent a complete solution to local businesses’ online marketing needs. To better respond to our clients’ online marketing needs, we expanded into lead conversion software with the introduction of ReachEdge. The launch of ReachEdge in 2013 was our first step to move beyond being a media-driven lead generation business to offer integrated solutions for our clients. ReachEdge is marketing automation and lead conversion software designed to enhance lead tracking and conversion, and includes tools for capturing web traffic information and converting leads into new customers for our clients. Initially, ReachEdge only came bundled with a responsive website. However, beginning in the first quarter of 2015, clients have been able to license ReachEdge’s lead conversion software without having to also purchase a website. ReachEdge now refers only to the lead conversion software and ReachSite + ReachEdge refers to the combination of ReachEdge with a website. We believe that this disaggregation of the solution will enable us to expand the market opportunity by enabling us to sell ReachEdge to local businesses who do not need a new website or who purchase their website from another provider.

Over time, we plan to add additional dynamic optimization functionality to ReachEdge, as well as features that create a more seamless relationship between our clients and their customers. For instance, in the fourth quarter of 2014, we acquired Kickserv, a provider of cloud-based business management software for service businesses. With this addition, we now have the ability to provide an end-to-end solution to our clients that starts with lead generation (ReachSearch, ReachDisplay and ReachSEO), includes lead conversion software (ReachEdge), and then closes and manages the business relationship (Kickserv). Local businesses already spend marketing dollars in these categories with a significant number of providers in a highly fragmented and confusing marketplace. Our integrated total marketing solution seeks to address this broad array of business needs with a simple integrated solution.

While our strategy is to expand our solution offerings, ReachSearch will, for the foreseeable future, continue to represent the significant majority of our revenue. However, we believe that the expansion of our product suite moves us closer to our goal of becoming the one-stop shop for our clients and will provide our clients with significantly greater value as our products are used together.

We sell our products and solutions directly, through our inside and outside sales forces, in what we refer to as our Direct Local channel. Each of our regional markets employs a somewhat different sales model tailored to that market. In North America we have recently transitioned our direct sales force to a new model where our sales personnel (now called Digital Marketing Consultants or DMCs) will both generate the sale and manage the relationship. However, each DMC will be paired with a Marketing Expert (or ME) that will provide day-to-day campaign management. We believe that this approach will enable clients to have an ongoing relationship with their DMC, but with the support of the ME, the DMC will be able to focus on selling and managing relationships. If the DMC model proves successful, we will apply elements of it to our international markets wherever it makes sense to do so.

We refer to our separate sales channel targeting national brands, franchises and strategic accounts with operations in multiple local markets, and select third-party agencies and resellers as our NBAR channel. The sales process for the NBAR channel typically has substantially longer lead times than in our Direct Local channel. In addition, national brand clients often involve complexity due to operational and marketing requirements that are not normally required by our Direct Local clients. Our third-party agencies and reseller partners use our technology platform in customer segments where they have sales forces with established relationships with their client bases. We currently have over 400 agencies and resellers actively selling on our technology platform. We have a team that is responsible for identifying potential agencies and resellers, training their sales forces to sell our products and services and supporting the relationships on an ongoing basis.  

We have also historically focused on international expansion. Our first expansion was in Australia in 2006. We have subsequently entered Europe (the United Kingdom, Germany, the Netherlands and Austria), Japan, Brazil, Mexico and New Zealand. However, in 2015 we are focusing on introducing more components of our total digital marketing system in our international markets and optimizing our operations in our existing large market locations including Germany, Brazil and Japan, which we believe present substantially larger market opportunities than Australia, currently our largest international market.

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Operating Metrics

We track the number of Active Clients and Active Product Units to evaluate the growth, scale and diversification of our business. We also use these metrics to determine the needs and capacity of our sales forces, our support organization, and other personnel and resources.

Active Clients is a number we calculate 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 (NBAR) 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.

At June 30, 2015, we had approximately 19,500 Active Clients and 29,600 Active Product Units, as compared to approximately 23,200 Active Clients and 34,600 Active Product Units at June 30, 2014. Active Clients decreased by 3.5% and Active Product Units decreased by 3.6%, respectively, compared to the period ended March 31, 2015. The decrease in the number of Active Clients and Active Product Units is primarily due to an overall decrease in salespeople in both the Direct Local and NBAR channel as we have decreased our salesforce size during the ongoing transition to our new sales model and tougher selling environments in certain markets partially offset by the addition of Kickserv clients and increased client retention in the Direct Local channel.

 Basis of Presentation

Sources of Revenue

We derive our revenue principally from the provision and sale of online marketing products to our clients. Revenue includes (i) the sale of our ReachSearch, ReachDisplay, ReachRetargeting and other products based on a package pricing model in which our clients commit to a fixed fee that includes the media, optimization, reporting and tracking technologies of our technology platform, and the personnel dedicated to support and manage their campaigns; (ii) the license (or sale) of ReachEdge, ReachSite, ReachSEO, TotalLiveChat, ReachCast, TotalTrack, Kickserv and other products and solutions; and (iii) set-up, management and service fees associated with these products and other solutions. We distribute our products and solutions directly through our outside and inside sales force that is focused on serving local businesses in their local markets through a consultative process, which we refer to as our Direct Local channel, as well as a separate sales force targeting our National Brands, Agencies and Resellers channel. The sales cycle for sales to our clients ranges from one day to over a month. Sales to our National Brands, Agencies and Resellers clients generally require several months. 

We typically enter into multi-month agreements for the delivery of our products. Under our agreements, our Direct Local clients typically pay, in advance, a fixed fee on a monthly basis, which includes all charges for the included technology and any media services, management, third-party content and other costs and fees. We record these prepayments as deferred revenue and only record revenue for income statement purposes as we purchase media and perform other services on behalf of clients. Certain Direct Local clients are extended credit privileges with payment generally due in 30 days. Revenue from the licensing of our products is recognized on a straight-line basis over the applicable license or service period. There were $2.6 million and $3.2 million of accounts receivable related to our Direct Local channel at June 30, 2015 and December 31, 2014, respectively.

Our National Brands, Agencies and Resellers clients enter into agreements of various lengths or that are indefinite. Our National Brands, Agencies and Resellers clients either pay in advance or are extended credit privileges with payment generally due in 30 to 60 days. There were $3.4 million and $5.0 million of accounts receivable related to our National Brands, Agencies and Resellers at June 30, 2015 and December 31, 2014, respectively.

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Cost of Revenue

Cost of revenue consists primarily of the costs of online media acquired from third-party publishers. Media cost is classified as cost of revenue in the period in which the corresponding revenue is recognized. From time to time, publishers offer us rebates based upon various factors and operating rules, including the amount of media purchased. We record these rebates in the period in which they are earned as a reduction to cost of revenue and the corresponding payable to the applicable publisher, or as an other receivable, as appropriate. Cost of revenue also includes the third-party telephone and information services costs, other third-party service provider costs, data center and third-party hosting costs, credit card processing fees, and other direct costs.

In addition, cost of revenue includes costs to manage and operate our various solutions and technology infrastructure, other than costs associated with our sales force, which are reflected as selling and marketing expenses. Cost of revenue includes salaries, benefits, bonuses and stock-based compensation for the related staff, including our marketing experts, who manage client accounts and provide client-facing support, and allocated overhead such as depreciation expense, rent and utilities. Cost of revenue also includes the amortization and impairment charges on acquired technology, customer relationships and trade names.

Operating Expenses

Selling and Marketing. Selling and marketing expenses consist primarily of personnel and related expenses for our selling and marketing staff, including salaries and wages, commissions and other variable compensation, benefits, bonuses and stock-based compensation; travel and business costs; training, recruitment, marketing and promotional events; advertising; other brand building and product marketing expenses; and occupancy, technology and other direct overhead costs. A portion of the compensation for employees in the sales organization is based on commissions. In addition, the cost of agency commissions is included in selling and marketing expenses. Generally, commissions are expensed as earned. We pay commissions to certain sales people for the acquisition of new clients. Because client contracts are generally not cancelable without a penalty, we defer those commissions and amortize them over the initial contract term.

Product and Technology. Product and technology expenses consist primarily of personnel and related expenses for our product development and engineering professionals, including salaries, benefits, bonuses and stock-based compensation, and the cost of third-party contractors and certain third-party service providers and other expenses, including occupancy, technology and other direct overhead costs. Technology operations costs, including related personnel and third-party costs, are included in product and technology expenses. We capitalize a portion of costs for software development and, accordingly, include amortization of those costs as product and technology expenses as our technology platform addresses all aspects of our activities, including supporting the selling and consultation process, online publisher integration, efficiencies and optimization, providing insight to our clients into the results and effects of their online advertising campaigns and supporting all of the financial and other back-office functions of our business.

Product and technology expenses also include the amortization of the technology obtained in acquisitions and expenses of the deferred payment obligations related to acquisitions attributable to product and technology personnel. Product and technology costs do not include the costs to deliver our solutions to clients, which are included in cost of revenue.

General and Administrative. General and administrative expenses consist primarily of personnel and related expenses for board, executive, legal, finance, human resources and corporate communications, including wages, benefits, bonuses and stock-based compensation, professional fees, insurance premiums, business taxes and other expenses, including occupancy, technology and other direct overhead, public company costs and other corporate expenses.

Restructuring Charges. Restructuring charges consist of costs associated with the realignment and reorganization of our operations. Restructuring charges include employee termination costs, facility closure and relocation costs, contract termination costs and costs associated with utilizing a third party consultant to facilitate the execution of the plan. The timing of associated cash payments is dependent upon the type of exit cost and can extend over a 12-month period or longer. We record liabilities related to restructuring charges in accrued restructuring in the condensed consolidated balance sheets. See further discussion in Note 9 of the Notes to the Condensed Consolidated Financial Statements.

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Discontinued Operations

As a result of the winding down of the operations of Bizzy and the contribution of our ClubLocal business to a new entity in exchange for a minority equity interest, we have reclassified and presented all related historical financial information with respect to Bizzy and ClubLocal as “discontinued operations” in the Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Cash Flows. In addition, we have excluded all ClubLocal and Bizzy related activities from the following discussions, unless specifically referenced.

Critical Accounting Policies and Estimates

The preparation of our condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles, or GAAP, requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses. We continually evaluate our estimates, judgments and assumptions based on available information and experience. Because the use of estimates is inherent in the financial reporting process, actual results could differ from those estimates.

There have been no material changes to our critical accounting policies. For further information on our critical and significant accounting policies, see our 2014 Annual Report on Form 10-K. 

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Results of Operations

Comparison of the Three and Six Months Ended June 30, 2015 and 2014

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
(in thousands)
Revenue	$	98,776		$	123,553		$	198,339		$	248,289
Cost of revenue (1)		55,390			63,461			111,607			126,859
Operating expenses:
Selling and marketing (1)		33,046			48,146			69,329			94,907
Product and technology (1)		7,082			6,816			14,504			13,775
General and administrative (1)		9,910			14,530			20,623			28,694
Restructuring charges		3,133			2,226			4,588			4,049
Total operating expenses		53,171			71,718			109,044			141,425
Operating loss		(9,785	)		(11,626	)		(22,312	)		(19,995	)
Other income (expense), net		(848	)		195			(1,004	)		383
Loss from continuing operations before income taxes		(10,633	)		(11,431	)		(23,316	)		(19,612	)
Income tax provision (benefit)		(40	)		(1,105	)		59			(2,973	)
Loss from continuing operations		(10,593	)		(10,326	)		(23,375	)		(16,639	)
Income from discontinued operations, net of income tax of $18 and $222 for the three and six months ended June 30,2014, respectively		—			31			—			371
Net loss	$	(10,593	)	$	(10,295	)	$	(23,375	)	$	(16,268	)

(1) Stock-based compensation, net of capitalization, and depreciation and amortization, included in the above line items (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Stock-based compensation:
Cost of revenue	$	134	$	255	$	290	$	530
Selling and marketing		424		859		906		1,736
Product and technology		126		222		294		608
General and administrative		1,530		2,140		2,870		5,173
	$	2,214	$	3,476	$	4,360	$	8,047
Depreciation and amortization:
Cost of revenue	$	219	$	169	$	351	$	346
Selling and marketing		824		674		1,657		1,309
Product and technology		3,591		2,650		7,298		5,608
General and administrative		515		525		977		977
	$	5,149	$	4,018	$	10,283	$	8,240

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Revenue

	Three Months Ended June 30,							Six Months Ended June 30,
	2015		2014		2015-2014 % Change			2015		2014		2015-2014 % Change
(in thousands)
North America (1)
Direct Local	$	46,189	$	54,944		(15.9	)%	$	92,113	$	111,208		(17.2	)%
National Brands, Agencies and Resellers		17,787		22,024		(19.2	)%		35,362		42,848		(17.5	)%
Total revenue	$	63,976	$	76,968		(16.9	)%	$	127,475	$	154,056		(17.3	)%

	Three Months Ended June 30,							Six Months Ended June 30,
	2015		2014		2015-2014 % Change			2015		2014		2015-2014 % Change
(in thousands)
International
Direct Local	$	31,085	$	42,218		(26.4	)%	$	63,894	$	84,521		(24.4	)%
National Brands, Agencies and Resellers		3,715		4,367		(14.9	)%		6,970		9,712		(28.2	)%
Total revenue	$	34,800	$	46,585		(25.3	)%	$	70,864	$	94,233		(24.8	)%

	June 30,
	2015		2014
At period end:
Active Clients (2)		19,500		23,200	(15.9	)%
Active Product Units (3)		29,600		34,600	(14.5	)%

(1) North America includes the United States and Canada. International includes all other countries.

(2) Active Clients is a number we calculate 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.

(3) Active Product Units is a number we calculate to approximate the number of individual products, licenses, or services we are providing under contract for Active Clients. For example, if we were performing both ReachSearch and ReachDisplay campaigns for a client which 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.

North America revenue decreased by $13.0 million and $26.6 million for the three and six months ended June 30, 2015, compared to the same periods in 2014. The decreases were primarily due to 15.9% and 17.2% declines in North America Direct Local revenue of $8.8 million and $19.1 million compared to the prior year periods, respectively, due to smaller client bases entering the periods and fewer new client acquisitions during the periods due to tougher selling environments in certain markets and fewer salespeople as we contracted our salesforce during the ongoing transition to our new sales model, partially offset by improvements in client retention. North America National Brands, Agencies and Resellers revenue decreased by $4.2 million and $7.5 million for the three and six months ended June 30, 2015, compared to the same periods in 2014 primarily due to decreased new client acquisitions and lower client retention.

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International revenue decreased by $11.8 million and $23.4 million for the three and six months ended June 30, 2015, compared to the same periods in 2014. International revenue was negatively impacted by foreign currency translations of $7.3 million and $13.1 million for the three and six months ended June 30, 2015, respectively, due to the substantial strengthening of the U.S. dollar compared to certain foreign currencies, particularly the euro and Australian dollar. International revenue was also negatively impacted by decreases of $6.1 million and $11.0 million for the three and six months ended June 30, 2015 in International Direct Local revenue on a constant currency basis compared to the prior year periods, due to smaller client bases entering the periods and fewer new client acquisitions during the periods due to fewer salespeople. The decrease for the six months ended June 30, 2015, was partially offset by an increase of $1.6 million of revenue from former SureFire clients being reported in the Direct Local channel rather than the National Brands, Agencies and Resellers channel as in the prior-year period. International National Brands, Agencies and Resellers revenue decreased by $0.8 million and $1.3 million on a constant currency basis for the three and six months ended June 30, 2015, compared to the same periods in 2014. The decrease for the three months ended June 30, 2015 was primarily due to a decrease in new client acquisitions, offset by an increase in client retention. The decrease for the six months ended June 30, 2015, was primarily due to $1.6 million from former SureFire clients being reported in the Direct Local channel rather than National Brands, Agencies and Resellers in 2014, offset by an increase in client retention.

Future revenue growth will depend on the success of our 2015 initiatives to improve our go-to-market approach, our salesforce headcount levels and the introduction of new products.

Cost of Revenue

	Three Months Ended June 30,									Six Months Ended June 30,
	2015			2014			2015-2014 % Change			2015			2014			2015-2014 % Change
(in thousands)
Cost of revenue	$	55,390		$	63,461			(12.7	)%	$	111,607		$	126,859			(12.0	)%
As a percentage of revenue:		56.1	%		51.4	%					56.3	%		51.1	%

The increases in our cost of revenue as a percentage of revenue for the three and six months ended June 30, 2015, compared to the same periods in 2014, were primarily due to decreases in publisher rebates, which decreased to 1.2% and 0.9% of revenue during the three and six months ended June 30, 2015, compared to 4.0% during the same periods in 2014. On June 27, 2014, we entered into a new global agreement with Google Inc. and certain of its affiliates (the “2014 Google Agreement”) that replaced our expiring Google agreement. The 2014 Google Agreement provides rebates based on overall global growth of our spending with Google. In contrast, rebates were previously determined by commitments to enter new markets and market-specific growth targets. In addition to decreased rebates, during the three and six months ended June 30, 2015, media spend increased for certain of our display products.

Our gross margins will be affected in the future by the mix and relative amount of media we purchase to fulfill service requirements, the availability and amount of publisher rebates, the cost of third-party service providers that we use as part of our solutions, the mix of products and solutions we offer, our geographic mix, our media buying efficiency, and the costs of support and delivery.

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 Operating Expenses

 Selling and Marketing 

	Three Months Ended June 30,						2015-2014			Six Months Ended June 30,						2015-2014
	2015			2014			% Change			2015			2014			% Change
(in thousands)
Salaries, benefits and other costs	$	23,737		$	37,494			(36.7	)%	$	51,140		$	73,515			(30.4	)%
Commission expense		9,309			10,652			(12.6	)%		18,189			21,392			(15.0	)%
Total selling and marketing	$	33,046		$	48,146			(31.4	)%	$	69,329		$	94,907			(27.0	)%
As a percentage of revenue:
Salaries, benefits and other costs		24.0	%		30.4	%					25.8	%		29.6	%
Commission expense		9.5			8.6						9.2			8.6
Total selling and marketing		33.5	%		39.0	%					35.0	%		38.2	%

 The decreases in selling and marketing salaries, benefits and other costs in absolute dollars for the three and six months ended June 30, 2015, compared to the same periods in 2014, were primarily due to fewer salespeople and non-sales personnel and related costs. The decrease as a percentage of revenue was primarily due to increased revenue per-salesperson as compared to the larger sales force in the prior period as we consolidated client accounts and focused on retaining higher performing sales people.

The increases in commission expense as a percentage of revenue for the three and six months ended June 30, 2015, as compared to the same periods in 2014, were primarily due to incremental commissions paid as a result of the recent transition of our North American direct sales force to our DMC model along with our global focus on retaining and rewarding our higher performing sales people.

Product and Technology

	Three Months Ended June 30,						2015-2014			Six Months Ended June 30,						2015-2014
	2015			2014			% Change			2015			2014			% Change
(in thousands)
Product and technology expenses	$	7,082		$	6,816			3.9	%	$	14,504		$	13,775			5.3	%
Capitalized software development costs from product and technology resources		2,635			3,680			(28.4	)%		5,233			7,132			(26.7	)%
Total product and technology expenses and capitalized costs	$	9,717		$	10,496			(7.4	)%	$	19,737		$	20,907			(5.6	)%
Percentage of revenue:
Product and technology expenses costs		7.2	%		5.5	%					7.3	%		5.5	%
Capitalized software development costs from product and technology resources		2.7			3.0						2.6			2.9
Total product and technology costs expensed and capitalized		9.9	%		8.5	%					10.0	%		8.4	%

 Product and technology expense increased during the three and six months ended June 30, 2015, compared to the same periods in 2014, while total product and technology expenses and capitalized costs decreased during the periods. Employee and professional services costs decreased by $2.0 million and $3.3 million, respectively, during the periods partially due to our cost savings initiatives, but were more than offset by increased amortization of software development costs of $0.7 million and $1.2 million, respectively, and a decrease in the amount of total product and technology expenses and capitalized costs during the periods of $1.0 million and $1.9 million, respectively, due to the timing of capitalizable projects. The increases in total product and technology expensed and capitalized as a percentage of revenue were primarily driven by the decrease in revenue.

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We expect our product and technology expenses to continue to increase in absolute dollars as we invest in new product initiatives to improve and expand our technology platform, and as we increase the pace of international launches of new products and solutions.

 General and Administrative

	Three Months Ended June 30,						2015-2014			Six Months Ended June 30,						2015-2014
	2015			2014			% Change			2015			2014			% Change
(in thousands)
General and administrative	$	9,910		$	14,530			(31.8	)%	$	20,623		$	28,694			(28.1	)%
As a percentage of revenue:		10.0	%		11.8	%					10.4	%		11.6	%

 The decreases in general and administrative expenses in absolute dollars and as a percentage of revenue for the three and six months ended June 30, 2015, compared to the same periods in 2014, were primarily due to the absence of certain charges that occurred in the prior period. Legal fees and contingencies decreased $1.7 million and $2.3 million, respectively, and bad debt expense decreased $0.8 million and $1.1 million, respectively, each related to our United Kingdom market. Employee costs also decreased $1.0 million and $2.5 million, respectively, when compared to the prior year period.

We are continuing to take steps to reduce general and administrative expenses, but we cannot predict if we will be successful.

Restructuring Charges

In accordance with our ongoing efforts to reduce expenses and improve the operating performance of our business, we commenced our 2015 Restructuring Plan in January 2015. The initiative is focused on enhancing earnings through an analysis of opportunities to both improve revenue performance and reduce costs. Restructuring charges for the six months ended June 30, 2015 totaled $4.8 million, consisting of $1.1 million of lease termination costs as a result of down-sizing a North American facility, $0.9 million of contract termination costs, and $2.8 million of costs associated with utilizing a third party consultant to facilitate the execution of the plan. We expect to have continued restructuring activity under this plan for at least the next 12 months as part of our effort to continue to improve the profitability of the Company.

During the first and second quarters of 2014, we implemented restructuring plans to streamline operations and increase profitability. There is no additional activity recognized within these 2014 plans. We expect the first and second quarter 2014 restructuring plans to result in operational savings, primarily in operating expenses, of approximately $9.7 million and $2.4 million, respectively, in 2015.

We are continuing to take steps to reduce expenses and improve our business, and therefore we expect additional charges under our restructuring plan during 2015.

Other Income (Expense), Net

Other expense, net of $0.8 million and $1.0 million for the three and six months ended June 30, 2015, primarily consisted of $0.8 million of interest expense related to the loan and security agreement entered into on April 30, 2015 and foreign currency fluctuations.

Provision for Income Taxes

For the three months ended June 30, 2015, the Company recorded a benefit from income taxes of $40,000 and for the six months ended June 30, 2015, the Company recorded a provision for income taxes of $59,000. This is compared to a benefit from income taxes of $1.1 million for the three months ended June 30, 2014 and a benefit from income taxes of $3.0 million for the six months ended June 30, 2014. The Company’s tax provision notwithstanding pre-tax losses is due to its full valuation allowance against its net deferred tax assets in the US and certain foreign jurisdictions. Generally, a full valuation allowance will result in a zero net tax provision, since the income tax expense or benefit that would otherwise be recognized is offset by the change in the valuation allowance. However, the income tax provisions for the three and six months ended June 30, 2015 relates primarily to income taxes in the Company’s state and foreign jurisdictions and a non-cash income tax liability related to tax deductible goodwill that cannot be considered when determining a need for a valuation allowance.

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Non-GAAP Financial Measures

In addition to our GAAP results discussed above, we believe Adjusted EBITDA is useful to investors in evaluating our operating performance. For the three and six months ended June 30, 2015 and 2014, our Adjusted EBITDA was as follows: 

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
(in thousands)
Operating income (loss)	$	(9,785	)	$	(11,626	)	$	(22,312	)	$	(19,995	)
Add:
Depreciation and amortization		5,149			4,018			10,283			8,240
Stock-based compensation, net		2,214			3,476			4,360			8,047
Acquisition and integration costs		4			2			11			16
Restructuring charges		3,133			2,226			4,588			4,049
Adjusted EBITDA	$	715		$	(1,904	)	$	(3,070	)	$	357

(1) Adjusted EBITDA. We define Adjusted EBITDA 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), restructuring charges, and other non-operating income or expense. Adjusted EBITDA reflects the reclassification of discontinued operations.

Our management uses Adjusted EBITDA because (i) it is a key basis upon which our management assesses our operating performance; (ii) it may be a factor in the evaluation of the performance of our management in determining compensation; (iii) we use it, in conjunction with GAAP measures such as revenue and income (loss) from operations, for operational decision-making purposes; and (iv) we believe it is one of the primary metrics investors use in evaluating Internet marketing companies.

We believe that Adjusted EBITDA permits an assessment of our operating performance, in addition to our performance based on our GAAP results that is useful in assessing the progress of the business. By excluding (i) the effects of accounting for business combinations and associated acquisition and integration costs, which obscure the measurable performance of the business operations; (ii) restructuring charges, which we do not consider reflective of our ongoing operating performance; (iii) depreciation and amortization and other non-operating income and expense, each of which may vary from period to period without any correlation to underlying operating performance; and (iv) stock-based compensation, which is a non-cash expense, we believe that we are able to gain a fuller view of the operating performance of the business. We provide information relating to our Adjusted EBITDA so that investors have the same data that we employ in assessing our overall operations. We believe that trends in our Adjusted EBITDA are a valuable indicator of operating performance on a consolidated basis and of our ability to produce operating cash flow to fund working capital needs, capital expenditures and investments in our sales force.

In addition, we believe that Adjusted EBITDA and similar measures are widely used by investors, securities analysts, ratings agencies and other interested parties in our industry as a measure of financial performance and debt-service capabilities. Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

• Adjusted EBITDA does not reflect our 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, our working capital needs;

• Adjusted EBITDA does not consider the potentially dilutive impact of issuing equity-based compensation to our management team and employees;

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• Adjusted EBITDA does not reflect the potentially significant interest expense or the cash requirements necessary to service interest or principal payments on indebtedness we may incur in the future;

• Adjusted EBITDA does not reflect income and expense items that relate to our financing and investing activities, any of which could significantly affect our results of operations or be a significant use of cash;

• Adjusted EBITDA does not reflect certain tax payments that may represent a reduction in cash available to us; and

• Other companies, including companies in our industry, calculate Adjusted EBITDA measures differently, which reduces its 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 you may consider in addition to those measures. Because of these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results, including cash flows provided by operating activities, and using total Adjusted EBITDA as a supplemental financial measure. 

Liquidity and Capital Resources

	Six Months Ended June 30,
Consolidated Statements of Cash Flow Data:	2015			2014
(in thousands)
Net cash used in operating activities, continuing operations	$	(12,990	)	$	(4,218	)
Net cash used in investing activities, continuing operations	$	(6,902	)	$	(14,775	)
Net cash provided by (used in) financing activities, continuing operations	$	6,130		$	5,849
Net cash used in discontinued operations	$	(60	)	$	(1,262	)

Operating Activities

During the six months ended June 30, 2015, we used $13.0 million of net cash in operating activities from continuing operations, primarily due to a loss of $23.4 million from continuing operations and a change in operating assets and liabilities of $9.2 million, partially offset by non-cash expenses of $19.6 million. The change in operating assets and liabilities included a decrease in accounts payable of $8.5 million due to the timing of payments, a decrease in deferred revenue by $1.3 million due to a decrease in sales, and a decrease in accrued restructuring of $2.4 million, offset by a decrease in accounts receivable of $1.9 million due to a decrease in sales on credit. Non-cash expenses included $10.3 million of depreciation and amortization, $4.4 million of stock-based compensation expense, and $4.6 million of restructuring charges.

Net cash used in operating activities related to continuing operations increased by $8.8 million during the six months ended June 30, 2015 compared to 2014, primarily as a result of lower operating performance, offset by a reduction in expenses. Income from continuing operations adjusted for non-cash items decreased by $8.3 million. In addition, cash flow from operating activities was unfavorably impacted by an incremental decrease in accounts payable of $4.3 million compared to 2014 due to timing of payments made and a decrease in deferred rent and other liabilities of $1.5 million due to the term loan entered into during the three months ended June 30, 2015. These unfavorable impacts to cash flow were partially offset by a decrease of $4.1 million in other receivables and prepaid expenses due to decreased media rebates receivable as a result of the 2014 Google Agreement and receipt of a $2.0 million tax refund during the three months ended June 30, 2015 related to the carryback of our 2014 federal net operating loss. Further, accounts receivable decreased $1.9 million compared to 2014 due to a decrease in sales.

Investing Activities

Our primary investing activities have consisted of capitalized software development costs, purchases of property and equipment, business acquisitions, investments in a partnership, and short-term investments. Each of these activities varies from period to period due to the timing of the expansion of our operations and our software development efforts.

We invested $6.9 million during the six months ended June 30, 2015, which was a decrease of $7.9 million compared to 2014. The decrease primarily relates to investments in the prior period which were not made in the current period, including an investment of $2.0 million in a privately held partnership and an investment of $1.8 million as part of the SureFire acquisition. Our purchases of property and equipment also decreased by $5.2 million, offset by an increase in software capitalization of $2.0 million compared to the prior-year period.

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We expect to use capital for acquisitions, purchases of property and equipment, and development of software in an amount similar to or less than 2014.

Financing Activities

Our primary financing activities have consisted of borrowing under a term loan, net proceeds from the exercise of stock options and payments for capital lease obligations.

Net cash provided by financing activities increased by $0.3 million during the six months ended June 30, 2015 compared to the same period in 2014, due to $24.7 million of net proceeds from the term loan entered into in April 2015, offset by segregation of $17.5 million of the term loan proceeds as restricted cash, and a decrease in net proceeds from the exercise of stock options of $6.4 million. In addition, on April 10, 2015 we made a payment of $0.4 million for the earn-out and indemnity holdback related to the acquisition of SureFire.

Loan Agreement

On April 30, 2015, we entered into a loan and security agreement (the “Loan Agreement”) with our direct and indirect domestic subsidiaries, as co-borrowers, Hercules Technology Growth Capital, Inc. (“Hercules”), as administrative agent, and the lenders party thereto from time to time (the “Lenders”), including Hercules, pursuant to which the Lenders agreed to make a term loan available to us for working capital and general business purposes, in a principal amount of $25.0 million. The term loan has an annual interest rate equal to the greater of (i) 11.75% and (ii) the sum of (a) the prime rate, plus (b) 8.50%. On the closing date we paid a fee of $0.3 million, which is to be credited against the final payment, and debt issuance costs of $0.2 million.

We are required to make interest-only payments on the term loan through May 1, 2016, though such payments may be extended through August 1, 2016 and November 1, 2016 if we remain in continuous compliance with the financial covenants under the Loan Agreement through April 1, 2016 and July 1, 2016, respectively, and no default or event of default has occurred and is continuing on such dates. The term loan will begin amortizing at the end of the applicable interest-only period, with monthly payments of principal and interest to the Lenders in consecutive monthly installments following the end of such interest-only period. The term loan matures on April 1, 2018; provided, however, that if the interest-only payments are extended through November 1, 2016, the term loan will instead mature October 1, 2018. Upon repayment of the term loan, we are also required to make a final payment to the Lenders equal to $1.5 million. The term loan is secured by substantially all of our personal property including our intellectual property.

At our option, the outstanding principal balance of the term loan may be prepaid in whole, or in part in a minimum amount of $2.5 million, subject to a prepayment fee of 3% of any amount prepaid if the prepayment occurs on or prior to April 30, 2016, or 2% of the amount prepaid if the prepayment occurs after April 30, 2016 but on or prior to April 30, 2017. If the prepayment occurs after April 30, 2017, there is no prepayment fee.

The Loan Agreement includes covenants applicable to us, which include restrictions on transferring collateral, incurring additional indebtedness, engaging in mergers or acquisitions, paying dividends or making other distributions, making investments, creating liens, selling assets, and undergoing a change in control, in each case subject to certain exceptions, as well as financial covenant requirements to maintain certain minimum levels of revenue and earnings during each three-month period, tested monthly, during the term. We are also required to maintain minimum cash in North America in an amount equal to $17.5 million at all times, unless we achieve positive “Adjusted EBITDA” as defined in the Loan Agreement for 3 consecutive quarters, in which case the minimum cash balance decreases to $12.5 million. The Loan Agreement also includes events of default, the occurrence and continuation of which provide Hercules, as administrative agent, with the right to exercise remedies against us and the collateral securing the term loan, including potential foreclosure against our assets securing the Loan Agreement, including the our cash. We are in compliance with all of the Loan Agreement’s covenants as of the date of this quarterly report.

On August 3, 2015, we entered into an amendment to the Loan Agreement with Hercules, which reduces the term loan’s covenant thresholds for revenue for the months ending September 30, 2015 through December 31, 2015.

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Concurrently with entrance into the Loan Agreement, we issued to Hercules, as the sole lender on the closing date, a warrant to purchase up to 177,304 shares of our common stock, at an exercise price of $2.82 per share. The warrant may be exercised either for cash or on a cashless basis. The warrant expires April 30, 2022.

Liquidity

At June 30, 2015, we had cash and cash equivalents of $28.6 million and short-term investments of $52,000. Cash and cash equivalents consist of cash, money market accounts and certificates of deposit. Short term investments consist of certificates of deposit with original maturities in excess of three months but less than 12 months. To date, we have experienced no loss of our invested cash, cash equivalents or short-term investments, although some of those balances are subject to foreign currency exchange risk (see Item 3, “Foreign Currency Exchange Risk,” for more information). We cannot, however, provide any assurances that access to our invested cash, cash equivalents and short-term investments will not be impacted by adverse conditions in the financial markets. At June 30, 2015, we had restricted cash in North America related to the minimum cash balance required to maintain under the terms of the Loan Agreement of $17.5 million, unless we achieve positive “Adjusted EBITDA” as defined in the Loan Agreement, for three consecutive quarters, in which case the minimum cash balance decreases to $12.5 million. Also, at June 30, 2015, we had restricted cash related to certificates of deposits held at financial institutions that are pledged as collateral for letters of credit related to lease commitments, collateral for merchant accounts, and cash deposits funded to a restricted account determined on a monthly basis in accordance with our employee health care self-insurance plan in the amount of $3.6 million, of which, $0.2 million relate to the employee health care self-insurance plan.

At June 30, 2015, we had significant internal product and technology resources working on projects that met the criteria for capitalization as software development costs and others that did not, although none of the projects in process were long-term projects (greater than one year). The amount capitalized for such projects in future periods will be evaluated by management and will impact the portion of costs for those internal resources that reduces net cash provided by operating activities and the portion of such costs used in investing activities.

We have financed our operations, our expansion of our sales force, the extension of our Direct Local channel into new territories, and product expansion, primarily through cash provided by operations and existing cash. Deferred revenue arising from prepayment by the great majority of our clients and vendor trade financing, principally for the purchase of media, have historically been major components of our cash flow from operations. In general, to the extent our revenue from our Direct Local channel continues to grow, we would expect both the amount of deferred revenue from customer prepayments and the amount of vendor financing for purchased media to increase.

Due to our overall performance and capital expenditures, cash balances at June 30, 2015, decreased $15.1 million from December 31, 2014. At June 30, 2015, our current liabilities exceeded our current assets by $55.7 million. We have taken and will continue to take steps to reduce expenses and improve our business. We believe that our available cash, including cash borrowed pursuant to the Loan Agreement, and anticipated cost reductions will together be sufficient to satisfy our operating activities, working capital and planned investing and financing activities for at least the next 12 months.

Off-Balance Sheet Arrangements

At June 30, 2015, we did not have any off-balance sheet arrangements.

Recent Accounting Pronouncements

In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-05, Intangibles-Goodwill and Other-Internal-Use Software. The amendments in this update provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The amendments in this update are effective for the Company as of January 1, 2016. Early adoption is permitted. We are currently assessing the impact of this update on our consolidated financial statements.

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In April 2015, the FASB issued ASU No. 2015-03, Interest- Imputation of Interest. The amendments in this update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the corresponding debt liability, consistent with debt discounts. The amendments in this update are effective for the Company as of January 1, 2016. Early adoption is permitted for financial statements that have not been previously issued. We early adopted this update in the second quarter of 2015 upon entering the Loan Agreement on April 30, 2015.

In February 2015, the FASB issued ASU No. 2015-02, Consolidation. The amendments in this update require management to reevaluate whether certain legal entities should be consolidated. Specifically, the amendments (1) modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities, (2) eliminate the presumption that a general partner should consolidate a limited partnership, (3) affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships, and (4) provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. The amendments in this update are effective for the Company as of January 1, 2016. Early adoption is permitted. We are currently assessing the impact of this update, and believe that its adoption on January 1, 2016 will not have a material impact on our consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements – Going Concern. The amendments in this update require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this update are effective for us as of January 1, 2017. Early application is permitted. The adoption of this standard is not expected to have an impact on our consolidated financial condition and results of operations.

In June 2014, the FASB issued ASU No. 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. The amendments in this update require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Accounting Standards Codification (“ASC”) 718, Compensation – Stock Compensation, as it relates to awards with performance conditions that affect vesting to account for such awards. The amendments in this update will be effective for the Company as of January 1, 2016. Earlier adoption is permitted. Entities may apply the amendments in this update either: (a) prospectively to all awards granted or modified after the effective date; or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. If retrospective transition is adopted, the cumulative effect of applying this update as of the beginning of the earliest annual period presented in the financial statements should be recognized as an adjustment to the opening retained earnings balance at that date. In addition, if retrospective transition is adopted, an entity may use hindsight in measuring and recognizing the compensation cost. We are currently assessing the impact of this update, and believe that its adoption on January 1, 2016 will not have a material impact on our consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. The guidance in this update supersedes the revenue recognition requirements in ASC 605, Revenue Recognition, and most industry-specific guidance throughout the Codification. Additionally, this update supersedes some cost guidance included in ASC 605-35, Revenue Recognition - Construction-Type and Production-Type Contracts. In addition, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer (for example, assets within the scope of ASC 360, Property, Plant, and Equipment, and intangible assets, within the scope of ASC 350, Intangibles - Goodwill and Other) are amended to be consistent with the guidance on recognition and measurement in this update. The standard was to be effective for the Company as of January 1, 2017, but in April 2015, the FASB delayed the effective date of the new revenue accounting standard to January 1, 2018, and would permit early adoption as of the original effective date. Earlier adoption is not otherwise permitted for public entities. An entity can apply the revenue standard retrospectively to each prior reporting period presented (full retrospective method) or retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application in retained earnings (simplified transition method). We are currently assessing the impact of this update on our consolidated financial statements.

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In April 2014, the FASB issued ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The amendments in this update changes the criteria for determining which disposals can be presented as discontinued operations and modifies related disclosure requirements. The guidance applies prospectively to new disposals and new classifications of disposal groups as held for sale after the effective date, and was effective for the Company as of January 1, 2015. We will apply this guidance to our consolidated financial statements for any new disposals or new classification as held for sale after the effective date.

Item 3.          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  

We are exposed to market risk in the ordinary course of our business. These risks primarily include interest rate, foreign exchange and inflation risks.

Interest Rate Fluctuation Risk

Our investments include cash, cash equivalents and short-term investments. Cash and cash equivalents and short-term investments consist of cash, money market accounts and certificates of deposit. The primary objective of our investment activities is to preserve principal while maximizing income without significantly increasing risk. We do not enter into investments for trading or speculative purposes. Our investments are exposed to market risk due to a fluctuation in interest rates, which may affect our interest income and the fair market value of our investments. Due to the short-term nature of our investment portfolio, we do not believe an immediate 10% increase in interest rates would have a material effect on the fair market value of our portfolio, and therefore we do not expect our operating results or cash flows to be materially affected to any degree by a sudden change in market interest rates.

On April 30, 2015, we entered into the Loan Agreement for a $25.0 million term loan. The term loan bears interest at the prime rate plus 8.5% (with a prime rate floor of 3.25%), which increases our risk exposure to increases in interest rates. Accordingly, a one percent increase in the prime rate above the floor would result in net additional annual interest expense on our outstanding borrowings as of June 30, 2015 of $0.5 million.

Foreign Currency Exchange Risk

We have foreign currency risks related to our investments, revenue and operating expenses denominated in currencies other than the U.S. dollar, including the Australian dollar, the British pound sterling, the Canadian dollar, the euro, the Japanese yen, the Indian rupee, and the Brazilian real. For the six months ended June 30, 2015, a 10% strengthening of the U.S. dollar relative to those foreign currencies would have resulted in a decrease in revenue of $7.6 million, but an increase in operating income of $0.6 million. A 10% weakening of the U.S. dollar relative to those foreign currencies, however, would have resulted in an increase in revenue of $7.6 million, but a decrease in operating income of $0.6 million. As exchange rates vary, sales and other operating results, when translated, may differ materially from expectations. In addition, approximately 36% of our cash balances are denominated in currencies other than the U.S. dollar, and the value of such holdings will increase or decrease along with the weakness or strength of the U.S. dollar, respectively. We continue to review potential hedging strategies that may reduce the effect of fluctuating currency rates on our business, but there can be no assurances that we will implement such a hedging strategy or that once implemented, such a strategy would accomplish our objectives or not result in losses.

 Inflation Risk

We do not believe that inflation has had a material effect on our business, financial condition or results of operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations.

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Item 4.     CONTROLS AND PROCEDURES  

Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e) as of June 30, 2015. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures were effective as of such time to provide reasonable assurance that information required to be disclosed by us in reports we file or submit under the Exchange Act is (1) recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (2) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the three and six months ended June 30, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS  

On May 2, 2014, a lawsuit, purporting to be a class action, was filed by one of our former clients in the United States District Court in Los Angeles. The complaint alleges breach of contract, breach of the implied covenant of good faith and fair dealing, and violation of California’s unfair competition law. The complaint seeks monetary damages, restitution and attorneys’ fees. We filed a motion to dismiss on June 20, 2014, which was denied on December 4, 2014. While the case is at an early stage, we believe that the case is substantively and procedurally without merit. Our insurance carrier is providing us with a defense under a reservation of rights.

From time to time, we are involved in legal proceedings arising in the ordinary course of our business. Over the past 18 months, we have been involved in disputes with former customers in the United Kingdom that allege that we were not fully transparent in our pricing. On June 15, 2015, one of our former clients in the United Kingdom filed a lawsuit in the High Court of Justice alleging fraudulent misrepresentations and breach of contract. Our insurance carrier is providing us with a defense under a reservation of rights. We resolved similar matters in 2014 and have adequately reserved for such matters based on the current estimate of outcomes.

We believe that there is no litigation or claims pending or threatened that are likely to have a material adverse effect on its financial position, results of operations or cash flows.  

Item 1A. RISK FACTORS   

Investors should carefully consider the risk factors in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2014 and the additional risk factor set forth in our quarterly report for the three months ended March 31, 2015, in addition to the other information contained in our Annual Report and in this quarterly report on Form 10-Q.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS   

Our Board of Directors previously authorized the repurchase of up to $47.0 million of our outstanding common stock. At March 31, 2015, we had repurchased $36.3 million of our common stock in total under the program, leaving $10.7 million available. There were no repurchases under the program during 2015. On April 29, 2015 our Board of Directors terminated our repurchase program.

We are deemed to repurchase common stock surrendered by participants to cover tax withholding obligations with respect to the vesting of restricted stock and restricted stock units.

Item 6. EXHIBITS 

The exhibits listed in the Exhibit Index following the signature page to this report are filed as part of, or incorporated by reference into, this report. 

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SIGNATURES 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

REACHLOCAL, INC.
By:	/s/ Sharon T. Rowlands
Name:	Sharon T. Rowlands
Title:	Chief Executive Officer
By:	/s/ Ross G. Landsbaum
Name:	Ross G. Landsbaum
Title:	Chief Financial Officer

Date: August 6, 2015

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EXHIBIT INDEX

Exhibit No	Description of Exhibit
10.1†	Addendum to Google AdWords PSP Addendum, dated May 4, 2015, among ReachLocal, Inc. and certain of its affiliates, and Google Inc. and certain of its affiliates (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 (File No. 001-34749) filed with the Securities and Exchange Commission on May 7, 2015)
10.2†	Amendment to Google AdWords PSP Addendum, effective June 1, 2015, among ReachLocal, Inc. and certain of its affiliates, and Google Inc. and certain of its affiliates
10.3	Loan and Security Agreement, dated as of April 30, 2015, by and among ReachLocal, Inc., direct and indirect domestic subsidiaries of ReachLocal, Inc., as co-borrowers, Hercules Technology Growth Capital, Inc., as administrative agent, and the lenders party thereto from time to time, including Hercules Technology Growth Capital, Inc.(incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 (File No. 001-34749) filed with the Securities and Exchange Commission on May 7, 2015)
10.4	First Amendment to Loan and Security Agreement, dated as of August 3, 2015, by and between ReachLocal, Inc., direct and indirect domestic subsidiaries of ReachLocal, Inc., as co-borrowers, Hercules Technology Growth Capital, Inc., as administrative agent, and the lenders party thereto from time to time, including Hercules Technology Growth Capital, Inc.
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

† Certain provisions of this exhibit have been omitted pursuant to a request for confidential treatment.

41

EX-10.2

Exhibit 10.2

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits information subject to the confidentiality request. Omissions are designated as [*****]. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

Amendment to Google AdWords PSP Addendum

This Amendment (“Amendment”), effective as of June 1, 2015 (the “Amendment Effective Date”), is between ReachLocal, Inc. (“Reach Local US”), ReachLocal Europe B.V. (“ReachLocal Europe”) and the ReachLocal Affiliates on behalf of themselves and their Affiliates (each a “PSP” or “Customer” and, collectively, “ReachLocal PSP”) and Google Inc, and the Google Affiliates (together, “Google”) and is an addendum to the Google AdWords PSP Addendum between the parties with an effective date of July 1, 2014 and April 1, 2015 (collectively “Addendum”), Capitalized terms not defined in this Amendment have the meanings given to those terms in the Addendum. The parties agree as follows:

1. [*****]

2. The parties may execute this Amendment in counterparts, including facsimile, PDF, or other electronic copies, which taken together will constitute one instrument.

 Confidential material redacted and filed separately with the Securities and Exchange Commission.

IN WITNESS WHEREOF, the parties have executed this Amendment by persons duly authorized.

GOOGLE INC.

By: /s/ Omid Kordestani             

Name: Omid Kordestani

Title: Authorized Signatory

Date: June 9, 2015

PREMIER SMB PARTNER: REACHLOCAL, INC.

By: /s/ Ross G. Landsbaum        

Name: Ross G. Landsbaum

Title: CFO

Date: June 5, 2015

PREMIER SMB PARTNER: ReachLocal Europe B.V.

By: /s/ Craig Harris                      

Name: Craig Harris

Title: Managing Director

Date: June 5, 2015

2

EX-10.4

Exhibit 10.4

FIRST AMENDMENT TO
LOAN AND SECURITY AGREEMENT

THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (the “Amendment”) is made and dated as of August 3, 2015, and is entered into by and between REACHLOCAL, INC., a Delaware corporation, and each of its Domestic Subsidiaries (other than any FSHCO) and each of its Eligible Foreign Subsidiaries party to the Agreement (hereinafter collectively referred to as “Borrower”), the several banks and other financial institutions or entities from time to time parties to this Agreement (collectively, referred to as “Lender”), and HERCULES TECHNOLOGY GROWTH CAPITAL, INC., a Maryland corporation, in its capacity as administrative agent for itself and the Lender (in such capacity, “Agent”).

RECITALS

A.     Borrower, Agent and Lender previously entered into that certain Loan and Security Agreement dated April 30, 2015 (as the same may be amended, restated, supplemented, or otherwise modified from time to time, the “Agreement”);

B.     Borrower desires to modify certain of the Revenue covenants set forth in Section 7.15(b) of the Agreement; and

C.     Borrower, Agent and Lender are willing to amend the Agreement as provided herein.

AGREEMENT

NOW, THEREFORE, Borrower, Agent and Lender agree as follows:

1.     Unless otherwise defined herein, all capitalized terms shall have the meaning provided in the Agreement. The recitals set forth above are hereby incorporated by reference.

2.     As of the Effective Date (defined in Section 8, below), Schedule 7.15(b) of the Agreement is amended and restated in its entirety as provided in Schedule 7.15(b) attached hereto. As of the Effective Date, each reference in the Agreement to “this Agreement” and the words “hereof,” “herein,” “hereunder,” or words of like import, shall mean and be a reference to the Agreement as amended by this Amendment.

3.     This Amendment shall not be deemed to constitute an amendment to the Agreement except as expressly provided in Section 2, and all other terms and conditions of the Agreement shall remain in full force and effect.

4.     Borrower shall pay Lender a nonrenewable facility fee of $75,000 upon execution of this Amendment, which fee shall be deemed earned as of the date hereof regardless of the early termination of the Agreement and shall be made by wire transfer in same day funds to Agent for the benefit of Lender.

5. Borrower hereby represents and warrants to Agent and Lender as follows:

(a)     Borrower has all requisite power and authority to execute this Amendment and any other agreements or instruments required hereunder and to perform all of its obligations hereunder, and this Amendment and all such other agreements and instruments have been duly executed and delivered by Borrower and constitute the legal, valid and binding obligation of Borrower, enforceable in accordance with its terms, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors’ rights generally.

1

(b)     Other than the Subsidiaries listed on Schedule 1 of the Agreement, Borrower has no other Subsidiaries.

(c)     The execution, delivery and performance by Borrower of this Amendment and any other agreements or instruments required hereunder have been duly authorized by all necessary corporate action and do not (i) require any authorization, consent or approval by any governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, (ii) violate any material provision of any law, rule or regulation or of any order, writ, injunction or decree presently in effect, having applicability to Borrower, or the certificate of incorporation or by-laws of Borrower, or (iii) result in a breach of or constitute a default under any indenture or loan or the Agreement or any other agreement, lease or instrument to which Borrower is a party or by which it or its properties may be bound or affected.

(d)     No Event of Default exists under the Agreement, and all of Borrower’s representations and warranties contained in the Agreement are correct in all material respects on and as of the date hereof as though made on and as of such date, except to the extent that such representations and warranties relate solely to an earlier date.

6.     The execution of this Amendment and all other agreements and instruments related hereto shall not be deemed to be a waiver of any Event of Default under the Agreement, if any, or a waiver of any breach or default under any of the other Loan Documents, whether or not known to Agent or Lender and whether or not existing on the date of this Amendment.

7.     Borrower hereby reaffirms its agreement under the Agreement, to pay or reimburse Agent and Lender for all costs and expenses incurred by Agent and Lender in connection with the Loan Documents, including without limitation all reasonable fees and disbursements of legal counsel. Without limiting the generality of the foregoing, Borrower specifically agrees to pay all reasonable fees and disbursements of counsel to Agent and Lender for the services performed by such counsel in connection with the preparation of this Amendment and the documents and instruments incidental hereto, which amount is $1,115.50. Payment of such amount shall be made by wire transfer in same day funds to Agent. Borrower hereby agrees that Lender may, at any time or from time to time in its sole discretion and without further authorization by Borrower, apply the proceeds of any loan, for the purpose of paying any such unpaid fees, disbursements, costs and expenses.

8.     This Agreement shall become effective on payment of the amounts specified in Sections 4 and 7 hereof (the “Effective Date”).

9.     This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original and all of which counterparts, taken together, shall constitute one and the same instrument. The provisions of Section 11 of the Agreement shall be deemed incorporated herein by reference, mutatis mutandis.

(signatures provided on the next page)

2

IN WITNESS WHEREOF, Borrower, Subsidiary, Agent and Lender have duly executed and delivered this First Amendment to Loan and Security Agreement as of the date and year first above written.

BORROWER:

ReachLocal, Inc.

Signature:        /s/ Ross G. Landsbaum          

Print Name:     Ross G. Landsbaum

Title:                Chief Financial Officer

Bizzy, Inc.

Signature:       /s/ Ross G. Landsbaum          

Print Name:     Ross G. Landsbaum

Title:                Chief Financial Officer

Kickserv, Inc.

Signature:       /s/ Ross G. Landsbaum          

Print Name:     Ross G. Landsbaum

Title:                Chief Financial Officer

ReachLocal DP, Inc.

Signature:       /s/ Ross G. Landsbaum          

Print Name:     Ross G. Landsbaum

Title:                Chief Financial Officer

ReachLocal Canada, Inc.

Signature:       /s/ Ross G. Landsbaum          

Print Name:     Ross G. Landsbaum

Title:                Chief Financial Officer

ReachLocal International, Inc.

Signature:       /s/ Ross G. Landsbaum          

Print Name:     Ross G. Landsbaum

Title:                Chief Financial Officer

DealOn, LLC

Signature:       /s/ Ross G. Landsbaum          

Print Name:     Ross G. Landsbaum

Title:                Chief Financial Officer

3

ReachLocal International GP LLC

Signature:       /s/ Ross G. Landsbaum          

Print Name:     Ross G. Landsbaum

Title:                Chief Financial Officer

Accepted in Palo Alto, California:

LENDER:

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

Signature:       /s/ Ben Bang                            

Print Name:     Ben Bang

Title:                Associate General Counsel

AGENT:

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

Signature:       /s/ Ben Bang                            

Print Name:     Ben Bang

Title:                Associate General Counsel

4

SCHEDULE 7.15(b)

Financial Covenants

1.     Initial Revenue/Adjusted EBITDA. During calendar year 2015, trailing three month Revenue and Adjusted EBITDA shall be not less than the following amounts (in ‘000s) tested monthly as of the last day of the month:

For the T3M period ending	April 30, 2015	May 31, 2015	June 30, 2015	July 31, 2015	Aug. 31, 2015	Sept. 30, 2015	Oct. 31, 2015	Nov. 30, 2015	Dec. 31, 2015
Revenue	93,168	96,161	96,375	98,094	99,195	94,521	93,168	96,161	96,375
Adjusted EBITDA	(5,713)	(3,539)	(899)	302	873	1,323	2,035	2,761	3,128

2.     Subsequent Revenue/Adjusted EBITDA. Revenue and Adjusted EBITDA for each 12 month period beginning January 2016 throughout the Term Loan Maturity Date shall be at least 90% and 80%, respectively, of the trailing three month amounts for Revenue and Adjusted EBITDA provided in the corresponding Operating Budget, tested on a monthly basis as of the last day of the month.

 5

EX-31.1

 Exhibit 31.1

I, Sharon T. Rowlands, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of ReachLocal, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Sharon T. Rowlands

Sharon T. Rowlands

Chief Executive Officer

Date: August 6, 2015

EX-31.2

Exhibit 31.2

I, Ross G. Landsbaum, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of ReachLocal, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Ross G. Landsbaum

Ross G. Landsbaum

Chief Financial Officer

Date: August 6, 2015

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2015 of ReachLocal, Inc. (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Sharon T. Rowlands, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Sharon T. Rowlands

Sharon T. Rowlands

Chief Executive Officer

(Principal Executive Officer)

Date: August 6, 2015

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2015 of ReachLocal, Inc. (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ross G. Landsbaum, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Ross G. Landsbaum

Ross G. Landsbaum

Chief Financial Officer

(Principal Financial Officer)

Date: August 6, 2015

XML

Note 5 - Software Development Costs (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Research and Development [Abstract]
Capitalized Computer Software, Amortization	$ 3.0	$ 2.2	$ 5.8	$ 4.7
Capitalized Software Development Costs For Projects In Process	$ 2.3		$ 2.3		$ 5.0

XML

Note 12 - Net Loss Per Share (Details) - Antidilutive Securities Excluded in Earnings Per Share - shares shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities	7,833	7,938	7,500	6,911
Deferred Stock Consideration and Unvested Restricted Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities	644	775	779	653
Stock Option and Warrant [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities	7,189	7,163	6,721	6,258

XML

Note 9 - Restructuring Charges (Details) $ in Millions	Jun. 30, 2015 USD ($)
Expenses Relating to Facilitation and Execution of the Plan [Member] | 2015 Restructing Plans [Member]
Note 9 - Restructuring Charges (Details) [Line Items]
Restructuring and Related Cost, Expected Cost	$ 1.9

XML

Note 12 - Net Loss Per Share (Details) - Earning Per Share - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Numerator:
Loss from continuing operations (in Dollars)	$ (10,593)	$ (10,326)	$ (23,375)	$ (16,639)
Denominator:
Weighted average common shares used in computation of loss per share from continuing operations, basic (in Shares)	29,097	28,469	29,083	28,279
Loss per share from continuing operations, basic	$ (0.36)	$ (0.36)	$ (0.80)	$ (0.59)
Loss per share from continuing operations, diluted	$ (0.36)	$ (0.36)	$ (0.80)	$ (0.59)

XML

Note 8 - Stock-based Compensation (Details) - Summary of Stock Based Compensation - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Summary of Stock Based Compensation [Abstract]
Stock-based compensation	$ 2,314	$ 3,597	$ 4,579	$ 8,266
Less: Capitalized stock-based compensation	100	121	219	219
Stock-based compensation expense, net	$ 2,214	$ 3,476	$ 4,360	$ 8,047

XML

Note 3 - Fair Value of Financial Instruments (Details) - Basis of Fair Value Measurement - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Assets:
Cash and cash equivalents	$ 28,624	$ 43,720
Restricted cash—term loan	17,500
Short-term investments	52	904
Restricted cash	3,317	3,416
Liabilities:
Acquisition-related contingent consideration		349
Fair Value, Inputs, Level 1 [Member]
Assets:
Cash and cash equivalents	28,624	43,720
Restricted cash—term loan	17,500
Short-term investments	52	904
Fair Value, Inputs, Level 2 [Member]
Assets:
Restricted cash	$ 3,317	3,416
Fair Value, Inputs, Level 3 [Member]
Liabilities:
Acquisition-related contingent consideration		$ 349

XML

Note 14 - Supplemental Cash Flow Information (Details) - Supplemental Cash Flow Disclosures - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Non-cash investing and financing activities:
Capitalized software development costs resulting from stock-based compensation and deferred payment obligations	$ 219	$ 219
Deferred payment obligation decrease		(290)
Unpaid purchases of property and equipment	131	317
Assets acquired under capital leases	(204)
Investment related to the ClubLocal disposition		$ 4,500
Issuance of warrant	$ 250

XML

Note 4 - Acquisitions (Tables)

6 Months Ended

Jun. 30, 2015

Disclosure Text Block Supplement [Abstract]

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

Assets acquired:
Cash and cash equivalents	$	58
Intangible assets		4,280
Goodwill		3,985
Total assets acquired		8,323
Liabilities assumed:
Non-interest bearing liabilities		24
Long-term debt		350
Deferred tax liabilities		1,249
Total liabilities assumed		1,623
Total fair value of net assets acquired	$	6,700

Assets acquired:
Goodwill	$	2,350
Intangible assets		1,280
Accounts receivable		330
Property and equipment		13
Total assets acquired		3,973
Liabilities assumed:
Deferred tax liabilities		358
Deferred revenue		284
Accrued compensation and benefits		111
Other		782
Total liabilities assumed		1,535
Total fair value of net assets acquired	$	2,438

Schedule of Goodwill [Table Text Block]

	North America		Asia-Pacific			Total
Balance at December 31, 2014	$	13,680	$	34,509		$	48,189
Foreign currency translation		—		(262	)		(262	)
Balance at June 30, 2015	$	13,680	$	34,247		$	47,927

Schedule of Finite-Lived Intangible Assets [Table Text Block]

	June 30, 2015
	Useful Life (years)		Gross Value		Accumulated Amortization			Net
Developed technology		3-8	$	5,490	$	(2,734	)	$	2,756
Customer contracts and relationships		2-4		1,732		(537	)		1,195
Trade names		10		570		(35	)		535
Total			$	7,792	$	(3,306	)	$	4,486

	December 31, 2014
	Useful Life (years)		Gross Value		Accumulated Amortization			Net
Developed technology		3-8	$	5,490	$	(2,130	)	$	3,360
Customer contracts and relationships		2-4		1,875		(306	)		1,569
Trade names		10		570		(7	)		563
Total			$	7,935	$	(2,443	)	$	5,492

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

Years Ending December 31,
Remaining 2015	$	480
2016		959
2017		680
2018		584
2019		431
Thereafter		1,352
Total	$	4,486

XML

Note 9 - Restructuring Charges (Details) - Summary of the 2014 Accrued Restructuring Liability $ in Thousands	6 Months Ended
	Jun. 30, 2015 USD ($)
Restructuring Cost and Reserve [Line Items]
Balance at December 31, 2014	$ 3,196
Balance at June 30, 2015	4,909
2014 Restructing Plans [Member]
Restructuring Cost and Reserve [Line Items]
Balance at December 31, 2014	2,519
Balance at June 30, 2015	2,134
Amounts paid	(401)
Accretion	16
Facility Closures and Equipment Write-downs [Member] | 2014 Restructing Plans [Member]
Restructuring Cost and Reserve [Line Items]
Balance at December 31, 2014	2,519
Balance at June 30, 2015	2,134
Amounts paid	(401)
Accretion	$ 16

XML

Note 8 - Stock-based Compensation (Details) $ / shares in Units, $ in Thousands			1 Months Ended	3 Months Ended			6 Months Ended
	Jan. 09, 2015 USD ($) $ / shares shares	Feb. 28, 2014	Mar. 31, 2014 $ / shares	Jun. 30, 2015 USD ($) shares	Mar. 31, 2015 USD ($)	Jun. 30, 2014 USD ($)	Jun. 30, 2015 USD ($) $ / shares shares	Jun. 30, 2014 USD ($)	Dec. 02, 2014 $ / shares
Note 8 - Stock-based Compensation (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value (in Dollars per share) | $ / shares							$ 2.35
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period, Intrinsic Value							$ 100	$ 2,700
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized				$ 13,000			$ 13,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition							1 year 109 days
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price (in Dollars per share) | $ / shares	$ 6.00						$ 4.49
Annual Corporate Bonus Plan, Percentage To Be Settled With Restricted Stock Units							50.00%
Allocated Share-based Compensation Expense				$ 2,214		$ 3,476	$ 4,360	8,047
Annual Corporate Bonus Plan, Shares Required to Satisfy Bonus Obligation (in Shares) | shares				128,000			128,000
Option Exchange, Share Price (in Dollars per share) | $ / shares									$ 6.00
Options Exchanged in Option Exchange (in Shares) | shares	2,800,000
Certain Options [Member]
Note 8 - Stock-based Compensation (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Plan Modification, Incremental Compensation Cost								$ 1,900
Share-based Compensation Arrangement by Share-based Payment Award, Plan Modification, Number of Employees Affected			73
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period		7 years	10 years
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price (in Dollars per share) | $ / shares			$ 10.91
Restricted Stock Units (RSUs) [Member]
Note 8 - Stock-based Compensation (Details) [Line Items]
Allocated Share-based Compensation Expense					$ 400		$ 400
Stock Option Exchange [Member]
Note 8 - Stock-based Compensation (Details) [Line Items]
Allocated Share-based Compensation Expense	$ 1,500

XML

Note 4 - Acquisitions (Details) - Intangible Assets - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Finite-Lived Intangible Assets [Line Items]
Gross Value	$ 7,792	$ 7,935
Accumulated Amortization	(3,306)	(2,443)
Net	4,486	5,492
Developed Technology Rights [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Value	5,490	5,490
Accumulated Amortization	(2,734)	(2,130)
Net	2,756	3,360
Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Value	1,732	1,875
Accumulated Amortization	(537)	(306)
Net	$ 1,195	$ 1,569
Trade Names [Member]
Finite-Lived Intangible Assets [Line Items]
Useful Life (years)	10 years	10 years
Gross Value	$ 570	$ 570
Accumulated Amortization	(35)	(7)
Net	$ 535	$ 563
Minimum [Member] | Developed Technology Rights [Member]
Finite-Lived Intangible Assets [Line Items]
Useful Life (years)	3 years	3 years
Minimum [Member] | Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Useful Life (years)	2 years	2 years
Maximum [Member] | Developed Technology Rights [Member]
Finite-Lived Intangible Assets [Line Items]
Useful Life (years)	8 years	8 years
Maximum [Member] | Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Useful Life (years)	4 years	4 years

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Note 10 - Loan Agreement (Details) - Apr. 30, 2015 - USD ($) $ / shares in Units, $ in Millions	Total
Note 10 - Loan Agreement (Details) [Line Items]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in Shares)	177,304
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)	$ 2.82
Warrants and Rights Outstanding	$ 0.3
Hercules [Member]
Note 10 - Loan Agreement (Details) [Line Items]
Debt Instrument, Face Amount	$ 25.0
Debt Instrument, Interest Rate, Effective Percentage Rate Range, Minimum	11.75%
Debt Instrument, Fee Amount	$ 0.3
Debt Issuance Cost	$ 0.2
Debt Instrument, Term	3 years
Debt Instrument, Periodic Payment Terms, Balloon Payment to be Paid	$ 1.5
Debt Instrument, Minimum Prepayment Amount	2.5
Debt Instrument, Covenant Description, Minimum Cash and Cash Equivalents	17.5
Debt Instrument, Covenant Description, Minimum Cash and Cash Equivalents, Positive Earnings Achieved	$ 12.5
Hercules [Member] | Prime Rate [Member]
Note 10 - Loan Agreement (Details) [Line Items]
Debt Instrument, Basis Spread on Variable Rate	8.50%
Hercules [Member] | If Prepayment Occurs On or Prior to April 30, 2016 [Member]
Note 10 - Loan Agreement (Details) [Line Items]
Debt Instrument, Prepayment Fee, Percentage	3.00%
Hercules [Member] | If Prepayment Occurs After April 30, 2016 But On or Prior to April 30, 2017 [Member]
Note 10 - Loan Agreement (Details) [Line Items]
Debt Instrument, Prepayment Fee, Percentage	2.00%
Hercules [Member] | If Prepayment Occurs After April 30, 2017 [Member]
Note 10 - Loan Agreement (Details) [Line Items]
Debt Instrument, Prepayment Fee, Percentage	0.00%

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Note 8 - Stock-based Compensation (Details) - Stock Based Compensation Expense, Net of Capitalization, Included in the Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Stock-based compensation expense, net
Allocated stock-based compensation expense	$ 2,214	$ 3,476	$ 4,360	$ 8,047
Cost of Sales [Member]
Stock-based compensation expense, net
Allocated stock-based compensation expense	134	255	290	530
Selling and Marketing Expense [Member]
Stock-based compensation expense, net
Allocated stock-based compensation expense	424	859	906	1,736
Product and Technology [Member]
Stock-based compensation expense, net
Allocated stock-based compensation expense	126	222	294	608
General and Administrative Expense [Member]
Stock-based compensation expense, net
Allocated stock-based compensation expense	$ 1,530	$ 2,140	$ 2,870	$ 5,173

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Note 2 - Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2015

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

2. Summary of Significant Accounting Policies

Principles of Consolidation

The condensed consolidated financial statements include the accounts of ReachLocal, Inc. and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014. The Condensed Consolidated Balance Sheet as of December 31, 2014 included herein was derived from the audited consolidated financial statements as of that date, but does not include all disclosures included in those audited consolidated financial statements.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments (consisting only of normal recurring adjustments) necessary for the fair presentation of the Company’s statement of financial position at June 30, 2015, the Company’s results of operations for the three and six months ended June 30, 2015 and 2014 and the Company’s cash flows for the six months ended June 30, 2015 and 2014. The results for the three and six months ended June 30, 2015 are not necessarily indicative of the results to be expected for the year ending December 31, 2015. All references to the three and six months ended June 30, 2015 and 2014 in the notes to the condensed consolidated financial statements are unaudited.

 Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results may differ from those estimates.

Reclassifications and Adjustments

Certain prior period amounts have been reclassified to conform to the current period presentation.

Cash and Cash Equivalents

The Company reports all highly liquid short-term investments with original maturities of three months or less at the time of purchase as cash equivalents. As of June 30, 2015 and December 31, 2014, cash equivalents consist of demand deposits and money market accounts. Cash equivalents are stated at cost, which approximates fair value.

On April 30, 2015, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) for a $25.0 million term loan. See Note 10, Term Loan, for more information. The Company received $24.7 million of net proceeds from the term loan, $17.5 million of which is considered restricted cash. The Company's overall performance and capital expenditures more than offset the $7.2 million of unrestricted cash from the term loan, resulting in cash balances at June 30, 2015 that decreased $15.1 million from December 31, 2015. At June 30, 2015, the Company's current liabilities exceeded its current assets by $55.7 million.  The Company has taken and will continue to take steps to reduce expenses and improve its business. The Company believes that its available cash and anticipated cost reductions will together be sufficient to satisfy its operating activities, working capital and planned investing and financing activities for at least the next 12 months.

Restricted Cash—Term Loan

Under the terms of the Loan Agreement, the Company is required to maintain, at all times, cash in North America of at least $17.5 million, unless the Company achieves positive “Adjusted EBITDA” as defined in the Loan Agreement for three consecutive quarters, in which case the minimum cash balance decreases to $12.5 million.  Restricted cash—term loan represents the required minimum compensating balance to secure the term loan. See Note 10, Term Loan, for more information.

   Restricted Cash

Restricted cash represents certificates of deposit held at financial institutions that are pledged as collateral for letters of credit related to lease commitments, collateral for the Company’s merchant accounts, and cash deposits funded to a restricted account determined on a monthly basis in accordance with the Company’s employee health care self-insurance plan. The letters of credit will lapse at the end of the respective lease terms through 2024 and the certificates of deposit automatically renew for successive one-year periods over the duration of the lease term. The restrictions related to merchant accounts and the Company’s self-insurance plan will lapse upon termination of the respective underlying arrangements. At June 30, 2015 and December 31, 2014, the Company had restricted cash in the amount of $3.6 million, of which, $0.2 million, related to the employee health care self-insurance plan.

Recent Accounting Pronouncements

In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-05, Intangibles-Goodwill and Other-Internal-Use Software. The amendments in this update provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The amendments in this update are effective for the Company as of January 1, 2016. Early adoption is permitted. The Company is currently assessing the impact of this update on its consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, Interest- Imputation of Interest. The amendments in this update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the corresponding debt liability, consistent with debt discounts. The amendments in this update are effective for the Company as of January 1, 2016. Early adoption is permitted for financial statements that have not been previously issued. The Company early adopted this update in the second quarter of 2015 upon entering the Loan Agreement on April 30, 2015.

In February 2015, the FASB issued ASU No. 2015-02, Consolidation. The amendments in this update require management to reevaluate whether certain legal entities should be consolidated. Specifically, the amendments (1) modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities, (2) eliminate the presumption that a general partner should consolidate a limited partnership, (3) affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships, and (4) provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. The amendments in this update are effective for the Company as of January 1, 2016. Early adoption is permitted. The Company is currently assessing the impact of this update, and believes that its adoption on January 1, 2016 will not have a material impact on its consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements – Going Concern. The amendments in this update require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this update are effective for us as of January 1, 2017. Early application is permitted. The adoption of this standard is not expected to have an impact on the Company’s consolidated financial condition and results of operations.

In June 2014, the FASB issued ASU No. 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. The amendments in this update require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Accounting Standards Codification (“ASC”) 718, Compensation – Stock Compensation, as it relates to awards with performance conditions that affect vesting to account for such awards. The amendments in this update will be effective for the Company as of January 1, 2016. Earlier adoption is permitted. Entities may apply the amendments in this update either: (a) prospectively to all awards granted or modified after the effective date; or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. If retrospective transition is adopted, the cumulative effect of applying this update as of the beginning of the earliest annual period presented in the financial statements should be recognized as an adjustment to the opening retained earnings balance at that date. In addition, if retrospective transition is adopted, an entity may use hindsight in measuring and recognizing the compensation cost. The Company is currently assessing the impact of this update, and believes that its adoption on January 1, 2016 will not have a material impact on its consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. The guidance in this update supersedes the revenue recognition requirements in ASC 605, Revenue Recognition, and most industry-specific guidance throughout the Codification. Additionally, this update supersedes some cost guidance included in ASC 605-35, Revenue Recognition - Construction-Type and Production-Type Contracts. In addition, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer (for example, assets within the scope of ASC 360, Property, Plant, and Equipment, and intangible assets, within the scope of ASC 350, Intangibles - Goodwill and Other) are amended to be consistent with the guidance on recognition and measurement in this update. The standard was to be effective for the Company as of January 1, 2017, but in April 2015, the FASB delayed the effective date of the new revenue accounting standard to January 1, 2018, and would permit early adoption as of the original effective date. Earlier adoption is not otherwise permitted for public entities. An entity can apply the revenue standard retrospectively to each prior reporting period presented (full retrospective method) or retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application in retained earnings (simplified transition method). The Company is currently assessing the impact of this update on its consolidated financial statements.

In April 2014, the FASB issued ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The amendments in this update changes the criteria for determining which disposals can be presented as discontinued operations and modifies related disclosure requirements. The guidance applies prospectively to new disposals and new classifications of disposal groups as held for sale after the effective date, and was effective for the Company as of January 1, 2015. The Company will apply this guidance to its consolidated financial statements for any new disposals or new classification as held for sale after the effective date.

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Note 8 - Stock-based Compensation (Details) - Summary of Vested and Unvested Options Activity - $ / shares shares in Thousands		6 Months Ended
	Jan. 09, 2015	Jun. 30, 2015	Dec. 31, 2014
Summary of Vested and Unvested Options Activity [Abstract]
Number of Shares		7,649
Weighted Average Exercise Price per Share		$ 5.60	$ 9.48
Weighted Average Remaining Contractual Life		6 years 219 days
Vested and exercisable at June 30, 2015		1,568
Vested and exercisable at June 30, 2015		$ 9.75
Vested and exercisable at June 30, 2015		5 years 109 days
Unvested at June 30, 2015, net of estimated forfeitures		4,723
Unvested at June 30, 2015, net of estimated forfeitures		$ 4.52
Unvested at June 30, 2015, net of estimated forfeitures		6 years 328 days
Granted		5,320
Granted	$ 6.00	$ 4.49
Exercised		(26)
Exercised		$ 0.24
Forfeited		(3,741)
Forfeited		$ 10.40

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Note 12 - Net Loss Per Share (Tables)

6 Months Ended

Jun. 30, 2015

Earnings Per Share [Abstract]

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block]

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Deferred stock consideration and unvested restricted stock		644		775		779		653
Stock options and warrant		7,189		7,163		6,721		6,258
		7,833		7,938		7,500		6,911

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Numerator:
Loss from continuing operations	$	(10,593	)	$	(10,326	)	$	(23,375	)	$	(16,639	)
Denominator:
Weighted average common shares used in computation of loss per share from continuing operations, basic		29,097			28,469			29,083			28,279
Loss per share from continuing operations, basic	$	(0.36	)	$	(0.36	)	$	(0.80	)	$	(0.59	)
Loss per share from continuing operations, diluted	$	(0.36	)	$	(0.36	)	$	(0.80	)	$	(0.59	)

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Note 9 - Restructuring Charges (Tables)

6 Months Ended

Jun. 30, 2015

Note 9 - Restructuring Charges (Tables) [Line Items]

Restructuring and Related Costs [Table Text Block]

	Workforce Reduction Costs			Facility Closures			Total
Balance at December 31, 2014	$	51		$	626		$	677
Amounts accrued		—			(189	)		(189	)
Amounts paid		(50	)		(228	)		(278	)
Non-cash items		(1	)		28			27
Balance at June 30, 2015	$	—		$	237		$	237

2015 Restructing Plans [Member]

Note 9 - Restructuring Charges (Tables) [Line Items]

Restructuring and Related Costs [Table Text Block]

	Workforce Reduction Costs			Facility Closures and Equipment Write-downs			Other Associated Costs			Total
Balance at December 31, 2014	$	—		$	—		$	—		$	—
Amounts accrued		865			1,144			2,768			4,777
Amounts paid		(600	)		(59	)		(1,020	)		(1,679	)
Accretion		—			11			—			11
Non-cash items		3			(574	)		—			(571	)
Balance at June 30, 2015	$	265		$	522		$	1,748		$	2,538

2014 Restructing Plans [Member]

Note 9 - Restructuring Charges (Tables) [Line Items]

Restructuring and Related Costs [Table Text Block]

	Facility Closures and Equipment Write-downs			Total
Balance at December 31, 2014	$	2,519		$	2,519
Amounts paid		(401	)		(401	)
Accretion		16			16
Balance at June 30, 2015	$	2,134		$	2,134

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Note 13 - Segment Information (Details)	6 Months Ended
	Jun. 30, 2015
Segment Reporting [Abstract]
Number of Operating Segments	1

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Note 8 - Stock-based Compensation (Details) - Weighted Average Assumptions Used to Estimate Fair Value of Stock Options Granted	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Weighted Average Assumptions Used to Estimate Fair Value of Stock Options Granted [Abstract]
Expected dividend yield	0.00%	0.00%	0.00%	0.00%
Risk-free interest rate	1.54%	1.71%	1.53%	1.63%
Expected life (in years)	4 years 361 days	5 years 116 days	4 years 339 days	5 years 32 days
Expected volatility	57.00%	54.00%	57.00%	54.00%

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Note 14 - Supplemental Cash Flow Information (Tables)

6 Months Ended

Jun. 30, 2015

Supplemental Cash Flow Elements [Abstract]

Schedule of Cash Flow, Supplemental Disclosures [Table Text Block]

	Six Months Ended June 30,
	2015			2014
Non-cash investing and financing activities:
Capitalized software development costs resulting from stock-based compensation and deferred payment obligations	$	219		$	219
Deferred payment obligation decrease	$	—		$	(290	)
Unpaid purchases of property and equipment	$	131		$	317
Assets acquired under capital leases	$	(204	)	$	—
Investment related to the ClubLocal disposition	$	—		$	4,500
Issuance of warrant	$	250		$	—

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Note 2 - Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands		6 Months Ended
	Apr. 30, 2015	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]
Proceeds from Issuance of Long-term Debt		$ 24,700
Cash and Cash Equivalents, Period Increase (Decrease)		(15,096)	$ (13,240)
Working Capital		(55,700)
Restricted Cash and Cash Equivalents		3,600		$ 3,600
Health Care Benefit Reserve [Member]
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]
Restricted Cash and Cash Equivalents		$ 200		$ 200
Hercules [Member]
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]
Debt Instrument, Face Amount	$ 25,000
Proceeds from Issuance of Long-term Debt	24,700
Debt Instrument, Covenant Description, Minimum Cash and Cash Equivalents	17,500
Debt Instrument, Covenant Description, Minimum Cash and Cash Equivalents, Positive Earnings Achieved	12,500
Hercules [Member] | Cash [Member]
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]
Proceeds from Issuance of Long-term Debt	17,500
Hercules [Member] | Unrestricted Cash [Member]
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]
Proceeds from Issuance of Long-term Debt	$ 7,200

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Note 1 - Organization and Description of Business

6 Months Ended

Jun. 30, 2015

Disclosure Text Block [Abstract]

Nature of Operations [Text Block]

1. Organization and Description of Business

ReachLocal, Inc.’s (the “Company”) operations are located in the United States, Canada, Australia, New Zealand, Japan, the United Kingdom, Germany, the Netherlands, Austria, Brazil, Mexico, and India. The Company’s mission is to provide more customers to local businesses around the world. The Company offers online marketing products and solutions in three categories: software (ReachEdge™ and Kickserv™), web presence (including ReachSite + ReachEdge™, ReachSEO™, ReachCast™, and TotalLiveChat™), and digital advertising (including ReachSearch™, ReachDisplay™, ReachRetargeting™, and ReachDisplay InApp^TM). The Company delivers its suite of products and solutions to local businesses through a combination of its proprietary technology platform, its direct inside and outside sales force, and select third-party agencies and resellers. 

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Note 3 - Fair Value of Financial Instruments (Details) $ in Thousands, NZD in Millions			1 Months Ended		6 Months Ended
	Apr. 10, 2015 USD ($)	Apr. 10, 2015 NZD	Mar. 31, 2014 USD ($)	Mar. 31, 2013 USD ($)	Jun. 30, 2015 USD ($)	Jun. 30, 2014 USD ($)	Dec. 31, 2014 USD ($)
Note 3 - Fair Value of Financial Instruments (Details) [Line Items]
Payments of Merger Related Costs, Financing Activities					$ 434
Payments to Acquire Other Investments						$ 2,000
Cost Method Investments					9,000		$ 9,000
Investment In Service Provider [Member]
Note 3 - Fair Value of Financial Instruments (Details) [Line Items]
Payments to Acquire Other Investments			$ 2,000	$ 2,500
Cost Method Investment, Ownership Percentage Acquired			3.20%	4.00%
Investment In Service Provider [Member] | Non-Marketable Investments [Member]
Note 3 - Fair Value of Financial Instruments (Details) [Line Items]
Cost Method Investments					$ 4,500
ClubLocal [Member]
Note 3 - Fair Value of Financial Instruments (Details) [Line Items]
Cost Method Investment Ownership Percentage					14.20%
Cost Method Investments					$ 4,500
ClubLocal [Member] | Non-Marketable Investments [Member]
Note 3 - Fair Value of Financial Instruments (Details) [Line Items]
Cost Method Investments					$ 4,500
SureFire [Member]
Note 3 - Fair Value of Financial Instruments (Details) [Line Items]
Net Working Capital Adjustments	$ 100	NZD 0.2
SureFire [Member] | Earn-out Consideration Payment [Member]
Note 3 - Fair Value of Financial Instruments (Details) [Line Items]
Payments of Merger Related Costs, Financing Activities	$ 300	NZD 0.4

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Note 5 - Software Development Costs (Details) - Capitalized Software Development Costs - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Capitalized Software Development Costs [Abstract]
Capitalized software development costs	$ 62,396	$ 56,498
Accumulated amortization	(40,926)	(34,943)
Capitalized software development costs, net	$ 21,470	$ 21,555

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Note 11 - Income Taxes (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Income Tax Disclosure [Abstract]
Income Tax Expense (Benefit)	$ (40,000)	$ (1,105,000)	$ 59,000	$ (2,973,000)

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Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Current Assets:
Cash and cash equivalents	$ 28,624	$ 43,720
Short-term investments	52	904
Accounts receivable, net of allowance for doubtful accounts of $949 and $961 at June 30, 2015 and December 31, 2014, respectively	5,759	7,844
Prepaid expenses and other current assets	7,430	9,620
Total current assets	41,865	62,088
Property and equipment, net	16,615	19,639
Capitalized software development costs, net	21,470	21,555
Restricted cash—term loan (Note 10)	17,500
Restricted cash	3,565	3,589
Intangible assets, net	4,486	5,492
Non-marketable investments	9,000	9,000
Other assets	3,467	3,518
Goodwill	47,927	48,189
Total assets	165,895	173,070
Current Liabilities:
Accounts payable	35,305	44,874
Accrued compensation and benefits	15,043	15,972
Deferred revenue	27,226	29,016
Accrued restructuring	4,909	3,196
Term loan	2,789
Capital lease	684	624
Other current liabilities	10,833	12,316
Liabilities of discontinued operations	789	850
Total current liabilities	97,578	106,848
Term loan	21,619
Capital lease	839	1,103
Deferred rent and other liabilities	11,949	12,195
Total liabilities	$ 131,985	$ 120,146
Commitments and contingencies (Note 6)
Stockholders’ Equity:
Common stock, $0.00001 par value—140,000 shares authorized; 29,364 and 29,269 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively		$ 0
Receivable from stockholder	$ (59)	(65)
Additional paid-in capital	136,505	132,080
Accumulated deficit	(97,944)	(74,569)
Accumulated other comprehensive loss	(4,592)	(4,522)
Total stockholders’ equity	33,910	52,924
Total liabilities and stockholders’ equity	$ 165,895	$ 173,070

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Note 8 - Stock-based Compensation (Details) - Summary of Restricted Stock Awards and Restricted Stock Unit Awards - 6 months ended Jun. 30, 2015 - Restricted Stock and Restricted Stock Units [Member] - $ / shares shares in Thousands	Total
Note 8 - Stock-based Compensation (Details) - Summary of Restricted Stock Awards and Restricted Stock Unit Awards [Line Items]
Unvested at December 31, 2014	912
Unvested at December 31, 2014	$ 5.98
Unvested at June 30, 2015	708
Unvested at June 30, 2015	$ 5.60
Forfeited	(64)
Forfeited	$ 9.44
Vested	(140)
Vested	$ 10.07

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Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Net loss	$ (10,593)	$ (10,295)	$ (23,375)	$ (16,268)
Other comprehensive income (loss):
Foreign currency translation adjustments	(204)	550	(70)	835
Comprehensive loss	$ (10,797)	$ (9,745)	$ (23,445)	$ (15,433)

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Note 4 - Acquisitions (Details) - Assets Acquired and Liabilities Assumed - USD ($) $ in Thousands	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014
Assets acquired:
Goodwill	$ 47,927		$ 48,189
Kickserv [Member]
Assets acquired:
Cash and cash equivalents		$ 58
Intangible assets		4,280
Goodwill		3,985
Total assets acquired		8,323
Liabilities assumed:
Non-interest bearing liabilities		24
Long-term debt		350
Deferred tax liabilities		1,249
Total liabilities assumed		1,623
Total fair value of net assets acquired		6,700
SureFire [Member]
Assets acquired:
Intangible assets		1,280
Accounts receivable		330
Property and equipment		13
Goodwill		2,350
Total assets acquired		3,973
Liabilities assumed:
Deferred tax liabilities		358
Deferred revenue		284
Accrued compensation and benefits		111
Other		782
Total liabilities assumed		1,535
Total fair value of net assets acquired		$ 2,438

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Note 15 - Discontinued Operations

6 Months Ended

Jun. 30, 2015

Discontinued Operations and Disposal Groups [Abstract]

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

15. Discontinued Operations

ClubLocal

In the fourth quarter of 2013, the Company’s Board of Directors approved a plan to dispose of the Company’s ClubLocal business, and on February 18, 2014, the Company closed a transaction in which it transferred its ClubLocal business to SERVIZ, Inc. in exchange for a minority equity interest. The Company has an equity interest in the new entity of 14.2%, with a recorded fair value of $4.5 million. As a result of the disposition, the Company recorded a gain on disposal of $0.8 million, net of income tax of $0.4 million. This business has been accounted for as discontinued operations for all periods presented.

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Note 4 - Acquisitions (Details) - Goodwill - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Goodwill [Line Items]
Balances	$ 47,927	$ 48,189
Foreign currency translation	(262)
North America [Member]
Goodwill [Line Items]
Balances	13,680	13,680
Asia Pacific [Member]
Goodwill [Line Items]
Balances	34,247	$ 34,509
Foreign currency translation	$ (262)

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Note 3 - Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2015

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

			Basis of Fair Value Measurement
	Balance at June 30, 2015		Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents	$	28,624	$	28,624	$	—	$	—
Restricted cash—term loan	$	17,500	$	17,500	$	—	$	—
Short-term investments	$	52	$	52	$	—	$	—
Restricted cash	$	3,317	$	—	$	3,317	$	—

			Basis of Fair Value Measurement
	Balance at December 31, 2014		Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents	$	43,720	$	43,720	$	—	$	—
Short-term investments	$	904	$	904	$	—	$	—
Restricted cash	$	3,416	$	—	$	3,416	$	—
Liabilities:
Acquisition-related contingent consideration	$	349	$	—	$	—	$	349

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Cash flows from operating activities:
Loss from continuing operations	$ (23,375)	$ (16,639)
Adjustments to reconcile loss from continuing operations, net of income taxes, to net cash used in operating activities:
Depreciation and amortization	10,283	8,240
Stock-based compensation	4,360	8,047
Restructuring charges	4,588	4,049
Loss on disposal of fixed assets	135
Excess tax shortfalls from stock-based awards		568
Provision for doubtful accounts	66	1,602
Non-cash interest expense, net	173
Deferred taxes, net		(1,372)
Changes in operating assets and liabilities:
Accounts receivable	1,859	(73)
Prepaid expenses and other current assets	2,229	(1,890)
Other assets	(264)	(397)
Accounts payable	(8,475)	(4,204)
Accrued compensation and benefits	(823)	(524)
Deferred revenue	(1,259)	(2,129)
Accrued restructuring	(2,358)	(867)
Deferred rent and other liabilities	(129)	1,371
Net cash used in operating activities, continuing operations	(12,990)	(4,218)
Net cash used in operating activities, discontinued operations	(60)	(1,262)
Net cash used in operating activities	(13,050)	(5,480)
Cash flows from investing activities:
Additions to property, equipment and software	(7,748)	(10,942)
Maturities of certificates of deposits and short-term investments	846
Purchases of certificates of deposits and short-term investments		(73)
Acquisitions, net of acquired cash		(1,760)
Investment in non-marketable securities		(2,000)
Net cash used in investing activities, continuing operations	(6,902)	(14,775)
Cash flows from financing activities:
Proceeds from term loan, net	24,700
Restricted cash—term loan	(17,500)
Payment of deferred and contingent consideration	(434)
Proceeds from exercise of stock options	6	6,438
Excess shortfalls from stock-based awards		(568)
Principal payments on capital lease obligations	(443)
Debt issuance costs	(194)
Common stock repurchases	(5)	(21)
Net cash provided by financing activities	6,130	5,849
Effect of exchange rate changes on cash and cash equivalents	(1,274)	1,166
Net change in cash and cash equivalents	(15,096)	(13,240)
Cash and cash equivalents—beginning of period	43,720	77,514
Cash and cash equivalents—end of period	$ 28,624	$ 64,274

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Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Allowance for doubtful accounts (in Dollars)	$ 949	$ 961
Common stock, par value (in Dollars per share)	$ 0.00001	$ 0.00001
Common stock, shares authorized	140,000	140,000
Common stock, shares issued	29,364	29,269
Common stock, shares outstanding	29,364	29,269

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Note 10 - Loan Agreement

6 Months Ended

Jun. 30, 2015

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

 10. Term Loan

On April 30, 2015, the Company entered into the Loan Agreement with its direct and indirect domestic subsidiaries, as co-borrowers, Hercules Technology Growth Capital, Inc. (“Hercules”), as administrative agent, and the lenders party thereto from time to time (the “Lenders”), including Hercules, pursuant to which the Lenders agreed to make a term loan available to the Company for working capital and general business purposes, in a principal amount of $25.0 million. The term loan has an annual interest rate equal to the greater of (i) 11.75% and (ii) the sum of (a) the prime rate, plus (b) 8.50%. On the closing date the Company paid a fee of $0.3 million, which is to be credited against the final payment, and debt issuance costs of $0.2 million. Debt issuance costs wil be amortized over the life of the loan of 3 years and calculated using the effective interest method.    

The Company is required to make interest-only payments on the term loan through May 1, 2016, though such payments may be extended through August 1, 2016 and November 1, 2016 if the Company remains in continuous compliance with the financial covenants under the Loan Agreement through April 1, 2016 and July 1, 2016, respectively, and no default or event of default has occurred and is continuing on such dates. The term loan will begin amortizing at the end of the applicable interest-only period, with monthly payments of principal and interest to the Lenders in consecutive monthly installments following the end of such interest-only period. The term loan matures on April 1, 2018; provided, however, that if the interest-only payments are extended through November 1, 2016, the term loan will instead mature October 1, 2018. Upon repayment of the term loan, the Company is also required to make a final payment to the Lenders equal to $1.5 million, which is accrued as interest based on the effective interest method over the 3-year term of the Loan Agreement. The term loan is secured by substantially all of the Company’s personal property including its intellectual property. 

At the Company’s option, the outstanding principal balance of the term loan may be prepaid in whole, or in part in a minimum amount of $2.5 million, subject to a prepayment fee of 3% of any amount prepaid if the prepayment occurs on or prior to April 30, 2016, or 2% of the amount prepaid if the prepayment occurs after April 30, 2016 but on or prior to April 30, 2017. If the prepayment occurs after April 30, 2017, there is no prepayment fee.

The Loan Agreement includes covenants applicable to the Company and its subsidiaries, which include restrictions on transferring collateral, incurring additional indebtedness, engaging in mergers or acquisitions, paying dividends or making other distributions, making investments, creating liens, selling assets, and undergoing a change in control, in each case subject to certain exceptions, as well as financial covenant requirements to maintain certain minimum levels of revenue and earnings during each three-month period, tested monthly, during the term. The Company is also required to maintain minimum cash in North America in an amount equal to $17.5 million at all times, unless the Company achieves positive “Adjusted EBITDA” as defined in the Loan Agreement for three consecutive quarters, in which case the minimum cash balance decreases to $12.5 million. The Loan Agreement also includes events of default, the occurrence and continuation of which provide Hercules, as administrative agent, with the right to exercise remedies against the Company and the collateral securing the term loan, including potential foreclosure against the Company’s assets securing the Loan Agreement, including the Company’s cash. As of June 30, 2015, the Company was in compliance with all term loan covenants.

On August 3, 2015, the Company entered into an amendment to the Loan Agreement with Hercules, which reduces the term loan’s covenant thresholds for revenue for the months ending September 30, 2015 through December 31, 2015.

Warrant

Concurrently with entrance into the Loan Agreement, the Company issued to Hercules, as the sole lender on the closing date, a warrant to purchase up to 177,304 shares of the Company’s common stock at an exercise price of $2.82 per share. The warrant may be exercised either for cash or on a cashless basis. The warrant expires April 30, 2022. The Company estimated the fair value of the warrant to be $0.3 million based on its relative fair value to the term loan using a Black-Sholes pricing model and accounted for the warrant as a component of additional paid-in capital. The warrant will be amortized in the income statement as a component of debt issuance cost.

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Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Jul. 31, 2015
Document and Entity Information [Abstract]
Entity Registrant Name	ReachLocal Inc
Trading Symbol	rloc
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		29,363,120
Amendment Flag	false
Entity Central Index Key	0001297336
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Accelerated Filer
Entity Well-known Seasoned Issuer	No
Document Period End Date	Jun. 30, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q2

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Note 11 - Income Taxes

6 Months Ended

Jun. 30, 2015

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

11. Income Taxes

The Company provides for income taxes in interim periods based on the estimated effective income tax rate for the complete fiscal year. For the three months ended June 30, 2015, the Company recorded a benefit from income taxes totaling $40,000 and for the six months ended June 30, 2015, the Company recorded a provision for income taxes of $59,000. This is compared to a benefit from income taxes of $1.1 million for the three months ended June 30, 2014 and a benefit from income taxes of $3.0 million for the six months ended June 30, 2014. The Company’s tax provision notwithstanding pre-tax losses is due to its full valuation allowance against its net deferred tax assets in the US and certain foreign jurisdictions. Generally, a full valuation allowance will result in a zero net tax provision, since the income tax expense or benefit that would otherwise be recognized is offset by the change in the valuation allowance. However, the income tax provisions for the three and six months ended June 30, 2015 relates primarily to income taxes in the Company’s state and foreign jurisdictions and a non-cash income tax liability related to tax deductible goodwill that cannot be considered when determining a need for a valuation allowance.

The income tax provision is computed on the year to date pretax income of the consolidated entities located within each taxing jurisdiction based on current tax law. Deferred tax assets and liabilities are determined based on the future tax consequences associated with temporary differences between income and expenses reported for financial accounting and tax reporting purposes. A valuation allowance for deferred tax assets is recorded to the extent the Company determines that it is more likely than not that the deferred tax assets will not be realized.

Realization of deferred tax assets is principally dependent upon future taxable income, the estimation of which requires significant management judgment. The Company’s judgment regarding future profitability may change due to many factors, including future market conditions and the Company’s ability to successfully execute its business plans and/or tax planning strategies. These changes, if any, may require material adjustments to these deferred tax asset balances. On a quarterly basis, the Company reassesses the need for these valuation allowances based on operating results and its assessment of the likelihood of future taxable income and developments in the relevant tax jurisdictions. The Company continues to maintain a valuation allowance against its net deferred tax assets in US and various foreign jurisdictions, where the Company believes it is more likely than not that deferred tax assets will not be realized.

The Company strives to resolve open matters with each tax authority at the examination level and could reach an agreement with a tax authority at any time. While the Company has accrued for amounts it believes are the expected outcomes, the final outcome with a tax authority may result in a tax liability that is more or less than that reflected in the financial statements. In addition, the Company may later decide to challenge any assessments, if made, and may exercise its right to appeal. The liability is reviewed quarterly and adjusted as events occur that affect potential liabilities for additional taxes, such as lapsing of applicable statutes of limitations, proposed assessments by tax authorities, negotiations between tax authorities, identification of new issues, and issuance of new legislation, regulations or case law. Management believes that adequate amounts of tax and related interest, if any, have been provided for any adjustments that may result from these examinations of uncertain tax positions. Interest and penalties are included in income tax expense.

The Company and its subsidiaries file income tax returns in the U.S. federal, various state and foreign jurisdictions. The Company has used net operating losses in recent periods, which extended the statutes of limitations with respect to a number of the Company’s tax years. Currently a majority of the Company’s tax years remain subject to audit, however, certain jurisdiction’s statutes of limitations will begin to expire in 2016. 

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Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Revenue	$ 98,776,000	$ 123,553,000	$ 198,339,000	$ 248,289,000
Cost of revenue	55,390,000	63,461,000	111,607,000	126,859,000
Operating expenses:
Selling and marketing	33,046,000	48,146,000	69,329,000	94,907,000
Product and technology	7,082,000	6,816,000	14,504,000	13,775,000
General and administrative	9,910,000	14,530,000	20,623,000	28,694,000
Restructuring charges	3,133,000	2,226,000	4,588,000	4,049,000
Total operating expenses	53,171,000	71,718,000	109,044,000	141,425,000
Operating loss	(9,785,000)	(11,626,000)	(22,312,000)	(19,995,000)
Other income (expense), net	(848,000)	195,000	(1,004,000)	383,000
Loss from continuing operations before income taxes	(10,633,000)	(11,431,000)	(23,316,000)	(19,612,000)
Income tax provision (benefit)	(40,000)	(1,105,000)	59,000	(2,973,000)
Loss from continuing operations	(10,593,000)	(10,326,000)	(23,375,000)	(16,639,000)
Income from discontinued operations, net of income tax of $18 and $222 for the three and six months ended June 30, 2014, respectively		31,000		371,000
Net loss	$ (10,593,000)	$ (10,295,000)	$ (23,375,000)	$ (16,268,000)
Basic:
Loss from continuing operations (in Dollars per share)	$ (0.36)	$ (0.36)	$ (0.80)	$ (0.59)
Income from discontinued operations, net of income taxes (in Dollars per share)				0.01
Net loss per share (in Dollars per share)	(0.36)	(0.36)	(0.80)	(0.58)
Diluted:
Loss from continuing operations (in Dollars per share)	(0.36)	(0.36)	(0.80)	(0.59)
Income from discontinued operations, net of income taxes (in Dollars per share)				0.01
Net loss per share (in Dollars per share)	$ (0.36)	$ (0.36)	$ (0.80)	$ (0.58)
Weighted average common shares used in the computation of income (loss) per share:
Basic (in Shares)	29,097	28,469	29,083	28,279
Diluted (in Shares)	29,097	28,469	29,083	28,279

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Note 5 - Software Development Costs

6 Months Ended

Jun. 30, 2015

Research and Development [Abstract]

Research, Development, and Computer Software Disclosure [Text Block]

 5. Software Development Costs

Capitalized software development costs consisted of the following (in thousands):

	June 30, 2015			December 31, 2014
Capitalized software development costs	$	62,396		$	56,498
Accumulated amortization		(40,926	)		(34,943	)
Capitalized software development costs, net	$	21,470		$	21,555

For the three months ended June 30, 2015 and 2014, the Company recorded amortization expense of $3.0 million and $2.2 million, respectively. For the six months ended June 30, 2015 and 2014, the Company recorded amortization expense of $5.8 million and $4.7 million, respectively. At June 30, 2015 and December 31, 2014, $2.3 million and $5.0 million, respectively, of capitalized software development costs were related to projects still in process.

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Note 4 - Acquisitions

6 Months Ended

Jun. 30, 2015

Disclosure Text Block Supplement [Abstract]

Mergers, Acquisitions and Dispositions Disclosures [Text Block]

 4. Acquisitions

Acquisition of Kickserv

On November 21, 2014, the Company acquired Kickserv, Inc. (“Kickserv”) as part of the Company’s continued effort to expand its product offerings. Kickserv is a provider of cloud-based business management software for service businesses.

The purchase price consisted of $6.75 million of initial consideration, subject to a holdback and certain adjustments, and up to $4.0 million of earn-out consideration. At closing, the Company paid $5.3 million in cash with the remaining balance of the initial purchase price payable after the 18-month anniversary of the closing date, subject to certain conditions. The Company also issued 250,000 restricted stock units to the hired employees, which are accounted for as stock-based compensation over the period in which they are earned. A liability was not recorded for the earn-out consideration as the financial targets, as defined in the purchase agreement, are not expected to be achieved. Any changes in the fair value of the earn-out consideration will be recorded as other income or expense. There has been no change in the fair value since the date of acquisition.

           The acquisition was accounted for using the acquisition method of accounting. The Company completed and finalized the purchase price allocation in the fourth quarter of 2014. The Company recorded assets acquired and liabilities assumed at their respective fair values. The following table summarizes the final fair value of assets acquired and liabilities assumed (in thousands):

Assets acquired:
Cash and cash equivalents	$	58
Intangible assets		4,280
Goodwill		3,985
Total assets acquired		8,323
Liabilities assumed:
Non-interest bearing liabilities		24
Long-term debt		350
Deferred tax liabilities		1,249
Total liabilities assumed		1,623
Total fair value of net assets acquired	$	6,700

Intangible assets acquired from Kickserv included software technology of $3.0 million, trade names of $0.6 million and customer relationships of $0.7 million, amortized over eight, ten, and four years, their respective estimated useful lives, using the straight-line method. The estimated useful life of the technology was determined based on assumptions of its remaining economic life. The estimated useful life of trade names was determined based on assumptions of revenue attributable to the trade name, and the estimated useful life of the customer relationships was determined based on assumptions of customer attrition rates. The fair value of the intangible assets were determined by applying the income approach and based on significant inputs that are not observable in the market. Key assumptions include estimated future revenues from acquired customers and a discount rate of 15%, comprised of an estimated internal rate of return for this transaction and a weighted average cost of capital for comparable companies. The goodwill arising from the acquisition consists largely of the synergies expected from combining the operations of Kickserv and the Company. The Company expects to grow Kickserv’s business as a result of this acquisition. The acquired goodwill is not expected to be deductible for tax purposes.

Acquisition costs in connection with the Kickserv acquisition were immaterial. The revenues and results of operations of the acquired businesses for the post-acquisition period were included in the consolidated statements of operations and were immaterial for the period ended June 30, 2015. The pro forma results are not shown as the impact is not material.

Acquisition of SureFire

On March 21, 2014, RL NZ acquired certain assets and hired certain employees of SureFire Search Limited (“SureFire”) as part of the Company’s international expansion plan. From 2010 until the acquisition, SureFire was the Company’s exclusive reseller in New Zealand.

At closing, RL NZ paid NZ$1.7 million ($1.5 million) in cash of the estimated NZ$2.8 million ($2.4 million) purchase price. The remaining balance of the estimated purchase price was deferred subject to meeting revenue targets and an indemnity holdback, payable, if at all, after the 12-month anniversary of the closing date, and the 12- and 18-month anniversaries of the closing date, respectively. The maximum amount of contingent consideration payable was NZ$2.0 million and the fair value of the contingent consideration was recorded as an accrued expense. The fair value of the earn-out consideration under the income approach was determined at the time of acquisition by using the Black-Scholes option pricing model. This approach is based on significant inputs that are not observable in the market, which are considered Level 3 inputs. Key assumptions include forecasted first year revenue, volatility of 30% based on volatilities of selected comparable companies, and a risk-free rate of 0.14% based on a one-year U.S. treasury yield rate. The liability for the indemnity holdback was recorded based on the assumption that there would be no claims made against the holdback and that 65% ($0.2 million) of the indemnity holdback would be paid April 2015 with the remaining 35% ($0.1 million) to be paid October 2015. The fair value of the indemnity holdback at the date of acquisition was NZ$0.4 million ($0.3 million). On April 10, 2015, RL NZ paid NZ$0.6 million ($0.4 million), which included NZ $0.4 million ($0.3 million) of earn-out consideration due and NZ $0.3 million ($0.2 million) for the 12-month indemnity holdback release, offset by NZ $0.2 million ($0.1 million) of additional consideration pursuant to the net working captial adjustment.

           The acquisition was accounted for using the acquisition method of accounting. The Company completed a preliminary purchase price allocation in the first quarter of 2014 and finalized the allocation in the third quarter of 2014 with respect to the timing of certain valuation adjustments. The Company recorded acquired assets and liabilities assumed at their respective fair values. The following table summarizes the final fair value of acquired assets and liabilities assumed (in thousands):

Assets acquired:
Goodwill	$	2,350
Intangible assets		1,280
Accounts receivable		330
Property and equipment		13
Total assets acquired		3,973
Liabilities assumed:
Deferred tax liabilities		358
Deferred revenue		284
Accrued compensation and benefits		111
Other		782
Total liabilities assumed		1,535
Total fair value of net assets acquired	$	2,438

Intangible assets acquired from SureFire included customer relationships of $1.3 million which are amortized over three years, their estimated useful life, using the straight-line method. The estimated useful life was determined based on assumptions of customer attrition rates. The fair value of the intangible assets was determined by applying the income approach and based on Level 3 inputs. Key assumptions include estimated future revenues from acquired customers and a discount rate of 25%, comprised of an estimated internal rate of return for this transaction and a weighted average cost of capital for comparable companies. The goodwill arising from the acquisition consists largely of the synergies expected from combining the operations of SureFire. The Company expects to increase its presence in the Asia Pacific region as a result of this acquisition. The acquired goodwill is not expected to be deductible for tax purposes.

Acquisition costs in connection with the SureFire acquisition were immaterial. The revenues and results of operations of the acquired businesses for the periods post-acquisition were included in the consolidated statements of operations and were immaterial for the period ended June 30, 2015. The pro forma results are not shown as the impact is not material.

RealPractice Acquisition

On January 6, 2014, the Company made the final deferred payment in connection with its 2012 RealPractice acquisition in the amount of $0.3 million.

Goodwill

The changes in the carrying amount of goodwill for the six months ended June 30, 2015 were as follows (in thousands):

	North America		Asia-Pacific			Total
Balance at December 31, 2014	$	13,680	$	34,509		$	48,189
Foreign currency translation		—		(262	)		(262	)
Balance at June 30, 2015	$	13,680	$	34,247		$	47,927

  Finite-Lived Intangible Assets

At June 30, 2015 and December 31, 2014, finite-lived intangible assets consisted of the following (in thousands):

	June 30, 2015
	Useful Life (years)		Gross Value		Accumulated Amortization			Net
Developed technology		3-8	$	5,490	$	(2,734	)	$	2,756
Customer contracts and relationships		2-4		1,732		(537	)		1,195
Trade names		10		570		(35	)		535
Total			$	7,792	$	(3,306	)	$	4,486

	December 31, 2014
	Useful Life (years)		Gross Value		Accumulated Amortization			Net
Developed technology		3-8	$	5,490	$	(2,130	)	$	3,360
Customer contracts and relationships		2-4		1,875		(306	)		1,569
Trade names		10		570		(7	)		563
Total			$	7,935	$	(2,443	)	$	5,492

Based on the current amount of intangibles subject to amortization, the estimated amortization expense over the remaining lives is as follows (in thousands):

Years Ending December 31,
Remaining 2015	$	480
2016		959
2017		680
2018		584
2019		431
Thereafter		1,352
Total	$	4,486

For the three months ended June 30, 2015 and 2014, amortization expense related to acquired intangible assets was $0.4 million and $0.3 million, respectively. For the six months ended June 30, 2015 and 2014, amortization expense related to acquired intangible assets was $0.9 million and $0.6 million, respectively

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Accounting Policies, by Policy (Policies)

6 Months Ended

Jun. 30, 2015

Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

Principles of Consolidation

The condensed consolidated financial statements include the accounts of ReachLocal, Inc. and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014. The Condensed Consolidated Balance Sheet as of December 31, 2014 included herein was derived from the audited consolidated financial statements as of that date, but does not include all disclosures included in those audited consolidated financial statements.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments (consisting only of normal recurring adjustments) necessary for the fair presentation of the Company’s statement of financial position at June 30, 2015, the Company’s results of operations for the three and six months ended June 30, 2015 and 2014 and the Company’s cash flows for the six months ended June 30, 2015 and 2014. The results for the three and six months ended June 30, 2015 are not necessarily indicative of the results to be expected for the year ending December 31, 2015. All references to the three and six months ended June 30, 2015 and 2014 in the notes to the condensed consolidated financial statements are unaudited.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results may differ from those estimates.

Reclassification, Policy [Policy Text Block]

Reclassifications and Adjustments

Certain prior period amounts have been reclassified to conform to the current period presentation.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents

The Company reports all highly liquid short-term investments with original maturities of three months or less at the time of purchase as cash equivalents. As of June 30, 2015 and December 31, 2014, cash equivalents consist of demand deposits and money market accounts. Cash equivalents are stated at cost, which approximates fair value.

On April 30, 2015, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) for a $25.0 million term loan. See Note 10, Term Loan, for more information. The Company received $24.7 million of net proceeds from the term loan, $17.5 million of which is considered restricted cash. The Company's overall performance and capital expenditures more than offset the $7.2 million of unrestricted cash from the term loan, resulting in cash balances at June 30, 2015 that decreased $15.1 million from December 31, 2015. At June 30, 2015, the Company's current liabilities exceeded its current assets by $55.7 million.  The Company has taken and will continue to take steps to reduce expenses and improve its business. The Company believes that its available cash and anticipated cost reductions will together be sufficient to satisfy its operating activities, working capital and planned investing and financing activities for at least the next 12 months.

Restricted Cash—Term Loan

Under the terms of the Loan Agreement, the Company is required to maintain, at all times, cash in North America of at least $17.5 million, unless the Company achieves positive “Adjusted EBITDA” as defined in the Loan Agreement for three consecutive quarters, in which case the minimum cash balance decreases to $12.5 million.  Restricted cash—term loan represents the required minimum compensating balance to secure the term loan. See Note 10, Term Loan, for more information.

Cash and Cash Equivalents, Restricted Cash and Cash Equivalents, Policy [Policy Text Block]

Restricted Cash—Term Loan

Under the terms of the Loan Agreement, the Company is required to maintain, at all times, cash in North America of at least $17.5 million, unless the Company achieves positive “Adjusted EBITDA” as defined in the Loan Agreement for three consecutive quarters, in which case the minimum cash balance decreases to $12.5 million.  Restricted cash—term loan represents the required minimum compensating balance to secure the term loan. See Note 10, Term Loan, for more information.

   Restricted Cash

Restricted cash represents certificates of deposit held at financial institutions that are pledged as collateral for letters of credit related to lease commitments, collateral for the Company’s merchant accounts, and cash deposits funded to a restricted account determined on a monthly basis in accordance with the Company’s employee health care self-insurance plan. The letters of credit will lapse at the end of the respective lease terms through 2024 and the certificates of deposit automatically renew for successive one-year periods over the duration of the lease term. The restrictions related to merchant accounts and the Company’s self-insurance plan will lapse upon termination of the respective underlying arrangements. At June 30, 2015 and December 31, 2014, the Company had restricted cash in the amount of $3.6 million, of which, $0.2 million, related to the employee health care self-insurance plan.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-05, Intangibles-Goodwill and Other-Internal-Use Software. The amendments in this update provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The amendments in this update are effective for the Company as of January 1, 2016. Early adoption is permitted. The Company is currently assessing the impact of this update on its consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, Interest- Imputation of Interest. The amendments in this update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the corresponding debt liability, consistent with debt discounts. The amendments in this update are effective for the Company as of January 1, 2016. Early adoption is permitted for financial statements that have not been previously issued. The Company early adopted this update in the second quarter of 2015 upon entering the Loan Agreement on April 30, 2015.

In February 2015, the FASB issued ASU No. 2015-02, Consolidation. The amendments in this update require management to reevaluate whether certain legal entities should be consolidated. Specifically, the amendments (1) modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities, (2) eliminate the presumption that a general partner should consolidate a limited partnership, (3) affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships, and (4) provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. The amendments in this update are effective for the Company as of January 1, 2016. Early adoption is permitted. The Company is currently assessing the impact of this update, and believes that its adoption on January 1, 2016 will not have a material impact on its consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements – Going Concern. The amendments in this update require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this update are effective for us as of January 1, 2017. Early application is permitted. The adoption of this standard is not expected to have an impact on the Company’s consolidated financial condition and results of operations.

In June 2014, the FASB issued ASU No. 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. The amendments in this update require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Accounting Standards Codification (“ASC”) 718, Compensation – Stock Compensation, as it relates to awards with performance conditions that affect vesting to account for such awards. The amendments in this update will be effective for the Company as of January 1, 2016. Earlier adoption is permitted. Entities may apply the amendments in this update either: (a) prospectively to all awards granted or modified after the effective date; or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. If retrospective transition is adopted, the cumulative effect of applying this update as of the beginning of the earliest annual period presented in the financial statements should be recognized as an adjustment to the opening retained earnings balance at that date. In addition, if retrospective transition is adopted, an entity may use hindsight in measuring and recognizing the compensation cost. The Company is currently assessing the impact of this update, and believes that its adoption on January 1, 2016 will not have a material impact on its consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. The guidance in this update supersedes the revenue recognition requirements in ASC 605, Revenue Recognition, and most industry-specific guidance throughout the Codification. Additionally, this update supersedes some cost guidance included in ASC 605-35, Revenue Recognition - Construction-Type and Production-Type Contracts. In addition, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer (for example, assets within the scope of ASC 360, Property, Plant, and Equipment, and intangible assets, within the scope of ASC 350, Intangibles - Goodwill and Other) are amended to be consistent with the guidance on recognition and measurement in this update. The standard was to be effective for the Company as of January 1, 2017, but in April 2015, the FASB delayed the effective date of the new revenue accounting standard to January 1, 2018, and would permit early adoption as of the original effective date. Earlier adoption is not otherwise permitted for public entities. An entity can apply the revenue standard retrospectively to each prior reporting period presented (full retrospective method) or retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application in retained earnings (simplified transition method). The Company is currently assessing the impact of this update on its consolidated financial statements.

In April 2014, the FASB issued ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The amendments in this update changes the criteria for determining which disposals can be presented as discontinued operations and modifies related disclosure requirements. The guidance applies prospectively to new disposals and new classifications of disposal groups as held for sale after the effective date, and was effective for the Company as of January 1, 2015. The Company will apply this guidance to its consolidated financial statements for any new disposals or new classification as held for sale after the effective date.

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Note 12 - Net Loss Per Share

6 Months Ended

Jun. 30, 2015

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

12. Net Loss Per Share

 Basic net income (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of common and potential dilutive shares outstanding during the period, to the extent such shares are dilutive. Potential dilutive shares are composed of incremental common shares issuable upon the exercise of stock options, warrants and unvested restricted shares using the treasury stock method. Basic income (loss) from continuing operations per share is computed by dividing income (loss) from continuing operations for the period by the weighted average number of common shares outstanding during the period. Shares of unvested restricted stock are excluded from the calculation of basic weighted average shares outstanding, but their dilutive impact is added back in the calculation of diluted weighted average shares outstanding. Diluted income (loss) from continuing operations per share is computed by dividing income (loss) from continuing operations for the period by the weighted average number of common and potentially dilutive securities outstanding during the period, to the extent such shares are dilutive. The Company had a loss from continuing operations for the three and six months ended June 30, 2015 and 2014, and therefore the number of diluted shares was equal to the number of basic shares for the period. 

The following weighted average number of potentially dilutive securities have been excluded from the calculation of diluted net income (loss) per common share as they would be anti-dilutive for the periods below (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Deferred stock consideration and unvested restricted stock		644		775		779		653
Stock options and warrant		7,189		7,163		6,721		6,258
		7,833		7,938		7,500		6,911

The following table sets forth the computation of basic and diluted income from continuing operations per share (in thousands, except per share amounts):

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Numerator:
Loss from continuing operations	$	(10,593	)	$	(10,326	)	$	(23,375	)	$	(16,639	)
Denominator:
Weighted average common shares used in computation of loss per share from continuing operations, basic		29,097			28,469			29,083			28,279
Loss per share from continuing operations, basic	$	(0.36	)	$	(0.36	)	$	(0.80	)	$	(0.59	)
Loss per share from continuing operations, diluted	$	(0.36	)	$	(0.36	)	$	(0.80	)	$	(0.59	)

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Note 8 - Stock-based Compensation

6 Months Ended

Jun. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

8. Stock-Based Compensation

Stock Options

The following table summarizes stock option activity (in thousands, except years and per share amounts): 

	Number of Shares			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value
Outstanding at December 31, 2014		6,096		$	9.48
Granted		5,320		$	4.49
Exercised		(26	)	$	0.24
Forfeited		(3,741	)	$	10.40
Outstanding at June 30, 2015		7,649		$	5.60		6.6	$	—
Vested and exercisable at June 30, 2015		1,568		$	9.75		5.3	$	—
Unvested at June 30, 2015, net of estimated forfeitures		4,723		$	4.52		6.9	$	—

      The following table presents the weighted-average assumptions used to estimate the fair values of the stock options granted during the three and six months ended June 30, 2015 and 2014.

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Expected dividend yield		0	%		0	%		0	%		0	%
Risk-free interest rate		1.54	%		1.71	%		1.53	%		1.63	%
Expected life (in years)		4.99			5.32			4.93			5.09
Expected volatility		57	%		54	%		57	%		54	%

The per-share weighted average grant date fair value of options granted during the six months ended June 30, 2015 was $2.35. The aggregate intrinsic value of stock options exercised during the six months ended June 30, 2015 and 2014, were $0.1 million and $2.7 million, respectively.

Restricted Stock and Restricted Stock Units 

The following table summarizes restricted stock and restricted stock unit awards (in thousands, except per share amounts):

	Number of shares			Weighted Average Grant Date Fair Value
Unvested at December 31, 2014		912		$	5.98
Granted		—		$	—
Forfeited		(64	)	$	9.44
Vested		(140	)	$	10.07
Unvested at June 30, 2015		708		$	5.60

Stock-Based Compensation Expense

The Company records stock-based compensation expense, net of amounts capitalized as software development costs. The following table summarizes stock-based compensation (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Stock-based compensation	$	2,314	$	3,597	$	4,579	$	8,266
Less: Capitalized stock-based compensation		100		121		219		219
Stock-based compensation expense, net	$	2,214	$	3,476	$	4,360	$	8,047

Stock-based compensation, net of capitalization, is included in the accompanying condensed consolidated statements of operations within the following captions (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Stock-based compensation expense, net
Cost of revenue	$	134	$	255	$	290	$	530
Selling and marketing		424		859		906		1,736
Product and technology		126		222		294		608
General and administrative		1,530		2,140		2,870		5,173
	$	2,214	$	3,476	$	4,360	$	8,047

At June 30, 2015, there was $13.0 million of unrecognized stock-based compensation related to restricted stock, restricted stock units and outstanding stock options, net of estimated forfeitures. This amount is expected to be recognized over a weighted average period of 1.3 years. Future stock-based compensation expense for these awards may differ to the extent actual forfeitures vary from management estimates.

Stock-based compensation for the six months ended June 30, 2014 includes $1.9 million of expense related to modification of grants to 73 option holders in March 2014, which extended the time to exercise from seven years to ten years for certain options granted during 2008 and 2009 with an exercise price of $10.91.

Commencing in 2015, 50% of the Company's annual corporate bonus plan for certain executives and senior level employees will be settled with fully vested restricted stock units, and is payable in the first quarter of the following fiscal year. The plan does not limit the number of shares that can be issued to settle the obligation. During the three and six months ended June 30, 2015, the Company has recognized stock-based compensation expense related to this plan of $0.4 million. As of June 30, 2015, 128,000 shares would be required to satisfy the obligation relating to the 2015 annual corporate bonus plan.

Stock Option Exchange

On December 2, 2014, the Company commenced an option exchange to permit employee option holders to surrender certain outstanding stock options for cancellation in exchange for the grant of new replacement options to purchase an equal number of shares having an exercise price equal to the greater of $6.00 and the fair market value of the Company’s common stock on the replacement grant date. The option exchange was completed on January 9, 2015. Exchanged options were cancelled at that time and immediately thereafter, the Company granted replacement options under the Amended and Restated ReachLocal 2008 Stock Incentive Plan with exercise prices of $6.00 per share. A total of 2.8 million options were exchanged. The Company will amortize the incremental expense of $1.5 million in addition to the remaining expense attributable to the exchanged awards over the vesting period of the new award.

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Note 6 - Commitments and Contingencies

6 Months Ended

Jun. 30, 2015

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

6. Commitments and Contingencies  

Legal Matters

On May 2, 2014, a lawsuit, purporting to be a class action, was filed by one of the Company’s former clients in the United States District Court in Los Angeles. The complaint alleges breach of contract, breach of the implied covenant of good faith and fair dealing, and violation of California’s unfair competition law. The complaint seeks monetary damages, restitution and attorneys’ fees. The Company filed a motion to dismiss on June 20, 2014, which was denied on December 4, 2014. While the case is at an early stage, the Company believes that the case is substantively and procedurally without merit. The Company’s insurance carrier is providing the Company with a defense under a reservation of rights.

From time to time, the Company is involved in legal proceedings arising in the ordinary course of its business. Over the past 18 months, the Company has been involved in disputes with former customers in the United Kingdom that allege that the Company was not fully transparent in its pricing. On June 15, 2015, one of the Company’s former clients in the United Kingdom filed a lawsuit in the High Court of Justice alleging fraudulent misrepresentations and breach of contract. The Company’s insurance carrier is providing the Company with a defense under a reservation of rights. The Company resolved similar matters in 2014 and has adequately reserved for such matters based on the current estimate of outcomes.

The Company believes that there is no litigation or claims pending or threatened that are likely to have a material adverse effect on its financial position, results of operations or cash flows. 

Other Commitments

The Company has engaged a third party facilitator to provide direct support in the execution of its 2015 Restructuring Plan. In addition to fees incurred during the six months ended June 30, 2015, the Company expects to incur additional fees to be determined based on the future projected value of results achieved by the facilitator-led program. See Note 9, Restructuring Charges, for more information.

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Note 7 - Stockholders' Equity

6 Months Ended

Jun. 30, 2015

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

7. Stockholders’ Equity

Common Stock Repurchases

The Company’s Board of Directors previously authorized the repurchase of up to $47.0 million of the Company’s outstanding common stock. At March 31, 2015, the Company had executed repurchases of 3.4 million shares of its common stock under the program for an aggregate of $36.3 million. There were no repurchases under the program during 2015. On April 29, 2015, the Board of Directors terminated the Company’s repurchase program.

The Company is deemed to repurchase common stock surrendered by participants to cover tax withholding obligations with respect to the vesting of restricted stock and restricted stock units.

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Note 9 - Restructuring Charges

6 Months Ended

Jun. 30, 2015

Restructuring and Related Activities [Abstract]

Restructuring and Related Activities Disclosure [Text Block]

9. Restructuring Charges

The Company has implemented various restructuring plans to reduce its cost structure, align resources with its product strategy, improve operating efficiency and implement cost savings, which have resulted in workforce reductions and the consolidation of certain real estate facilities and data centers.

2015 Restructuring Plan

In accordance with the Company’s ongoing efforts to reduce expenses and improve the operating performance of its business, the Company commenced its 2015 Restructuring Plan. The initiative is focused on enhancing earnings through an analysis of opportunities to both improve revenue performance and reduce costs. Operational efficiency improvements under the 2015 Restructuring Plan are identified and implemented through strategic realignment and targeted cost reductions, including workforce costs, facility-related expenditures and other operating expenses. The charges incurred during the six months ended June 30, 2015 primarily involved down-sizing certain facilities in North America, costs to utilize a third party facilitator to aid execution of the plan, and a reduction of the Company’s North American and international workforces. The Company expects to have continued restructuring activity under this plan, including estimated additional expenses relating to facilitation and execution of the plan of $1.9 million, which are estimated to be incurred through the third quarter of 2016.

A summary of the accrued restructuring liability related to this plan, which is recorded in “Accrued restructuring” on the condensed consolidated balance sheet is as follows (in thousands):

	Workforce Reduction Costs			Facility Closures and Equipment Write-downs			Other Associated Costs			Total
Balance at December 31, 2014	$	—		$	—		$	—		$	—
Amounts accrued		865			1,144			2,768			4,777
Amounts paid		(600	)		(59	)		(1,020	)		(1,679	)
Accretion		—			11			—			11
Non-cash items		3			(574	)		—			(571	)
Balance at June 30, 2015	$	265		$	522		$	1,748		$	2,538

The Company expects the facility closures and equipment write-downs to be paid through the third quarter of 2024 and the workforce reduction costs to be paid through the third quarter of 2015.

2014 Restructuring Plans

As a result of declining performance in the Company’s North American operations during the first quarter of 2014, the Company implemented a restructuring plan which primarily involved a reduction of the Company’s North American and international workforces as well as the closure of facilities in North America and certain international markets. The Company does not expect to have continued activity under this plan.

A summary of the accrued restructuring liability related to this plan, which is recorded in “Accrued restructuring” on the condensed consolidated balance sheet is as follows (in thousands):

	Facility Closures and Equipment Write-downs			Total
Balance at December 31, 2014	$	2,519		$	2,519
Amounts paid		(401	)		(401	)
Accretion		16			16
Balance at June 30, 2015	$	2,134		$	2,134

The Company expects the facility closures and equipment write-downs to be paid through the third quarter of 2024.

During the second quarter of 2014, the Company implemented a business restructuring plan which involved the elimination of certain senior management positions, a reduction of international workforce, as well as the closure of facilities in certain international markets. The Company does not expect to have continued activity under this plan.

A summary of the accrued restructuring liability related to this plan, which is recorded in “Accrued restructuring” on the condensed consolidated balance sheet is as follows (in thousands):

	Workforce Reduction Costs			Facility Closures			Total
Balance at December 31, 2014	$	51		$	626		$	677
Amounts accrued		—			(189	)		(189	)
Amounts paid		(50	)		(228	)		(278	)
Non-cash items		(1	)		28			27
Balance at June 30, 2015	$	—		$	237		$	237

The Company expects the facility costs to be paid through the second quarter of 2016.

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Note 4 - Acquisitions (Details) NZD in Millions							3 Months Ended		6 Months Ended		12 Months Ended
	Apr. 10, 2015 USD ($)	Apr. 10, 2015 NZD	Nov. 21, 2014 USD ($) shares	Mar. 21, 2014 USD ($)	Mar. 21, 2014 NZD	Jan. 06, 2014 USD ($)	Jun. 30, 2015 USD ($)	Jun. 30, 2014 USD ($)	Jun. 30, 2015 USD ($)	Jun. 30, 2014 USD ($)	Dec. 31, 2014	Mar. 31, 2015 USD ($)	Mar. 21, 2014 NZD
Note 4 - Acquisitions (Details) [Line Items]
Payments of Merger Related Costs, Financing Activities									$ 434,000
Amortization of Intangible Assets							$ 400,000	$ 300,000	$ 900,000	$ 600,000
Kickserv [Member]
Note 4 - Acquisitions (Details) [Line Items]
Business Combination, Consideration Transferred			$ 6,750,000
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High			4,000,000
Payments to Acquire Businesses, Gross			$ 5,300,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill												$ 4,280,000
Fair Value Inputs, Discount Rate			15.00%
Business Acquisition, Goodwill, Expected Tax Deductible Amount			$ 0
Kickserv [Member] | Restricted Stock Units (RSUs) [Member]
Note 4 - Acquisitions (Details) [Line Items]
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares (in Shares) | shares			250,000
SureFire [Member]
Note 4 - Acquisitions (Details) [Line Items]
Business Combination, Consideration Transferred				$ 2,400,000	NZD 2.8
Payments to Acquire Businesses, Gross				$ 1,500,000	NZD 1.7
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill												$ 1,280,000
Fair Value Inputs, Discount Rate				25.00%	25.00%
Fair Value Assumptions, Expected Volatility Rate				30.00%	30.00%
Fair Value Assumptions, Risk Free Interest Rate				0.14%	0.14%
Business Acquisition Fair Value of Indemnity Holdback				$ 300,000									NZD 0.4
Payments of Merger Related Costs	$ 400,000	NZD 0.6
Net Working Capital Adjustments	100,000	0.2
Business Acquisition, Goodwill, Expected Tax Deductible Amount			$ 0
SureFire [Member] | Paid April 2015 [Member]
Note 4 - Acquisitions (Details) [Line Items]
Business Acquisition Percentage of Indemnity Holdback				65.00%	65.00%
Business Acquisition, Indemnity Holdback, Current				$ 200,000
SureFire [Member] | Paid October 2015 [Member]
Note 4 - Acquisitions (Details) [Line Items]
Business Acquisition Percentage of Indemnity Holdback				35.00%	35.00%
Business Acquisition, Indemnity Holdback, Current				$ 100,000
RealPractice [Member]
Note 4 - Acquisitions (Details) [Line Items]
Payments to Acquire Businesses, Gross						$ 300,000
Earn-out Consideration Payment [Member] | SureFire [Member]
Note 4 - Acquisitions (Details) [Line Items]
Payments of Merger Related Costs, Financing Activities	300,000	0.4
Indemnity Holdback Release [Member] | SureFire [Member]
Note 4 - Acquisitions (Details) [Line Items]
Payments of Merger Related Costs	$ 200,000	NZD 0.3
Maximum [Member] | SureFire [Member]
Note 4 - Acquisitions (Details) [Line Items]
Business Combination, Contingent Consideration, Liability (in Dollars) | NZD													NZD 2.0
Developed Technology Rights [Member] | Kickserv [Member]
Note 4 - Acquisitions (Details) [Line Items]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill			$ 3,000,000
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life			8 years
Developed Technology Rights [Member] | Maximum [Member]
Note 4 - Acquisitions (Details) [Line Items]
Finite-Lived Intangible Asset, Useful Life									8 years		8 years
Trade Names [Member]
Note 4 - Acquisitions (Details) [Line Items]
Finite-Lived Intangible Asset, Useful Life									10 years		10 years
Trade Names [Member] | Kickserv [Member]
Note 4 - Acquisitions (Details) [Line Items]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill			$ 600,000
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life			10 years
Customer Relationships [Member] | Kickserv [Member]
Note 4 - Acquisitions (Details) [Line Items]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill			$ 700,000
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life			4 years
Customer Relationships [Member] | SureFire [Member]
Note 4 - Acquisitions (Details) [Line Items]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill				$ 1,300,000
Finite-Lived Intangible Asset, Useful Life				3 years	3 years
Customer Relationships [Member] | Maximum [Member]
Note 4 - Acquisitions (Details) [Line Items]
Finite-Lived Intangible Asset, Useful Life									4 years		4 years

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Note 9 - Restructuring Charges (Details) - Summary of the Accrued Restructuring Liability - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Restructuring Cost and Reserve [Line Items]
Balance at December 31, 2014			$ 3,196
Balance at June 30, 2015	$ 4,909		4,909
Amounts accrued	3,133	$ 2,226	4,588	$ 4,049
Q2 Restructuring Plan [Member]
Restructuring Cost and Reserve [Line Items]
Balance at December 31, 2014			677
Balance at June 30, 2015	237		237
Amounts accrued			(189)
Amounts paid			(278)
Non-cash items			27
Employee Severance [Member] | Q2 Restructuring Plan [Member]
Restructuring Cost and Reserve [Line Items]
Balance at December 31, 2014			51
Amounts paid			(50)
Non-cash items			(1)
Facility Closing [Member] | Q2 Restructuring Plan [Member]
Restructuring Cost and Reserve [Line Items]
Balance at December 31, 2014			626
Balance at June 30, 2015	$ 237		237
Amounts accrued			(189)
Amounts paid			(228)
Non-cash items			$ 28

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Note 14 - Supplemental Cash Flow Information

6 Months Ended

Jun. 30, 2015

Supplemental Cash Flow Elements [Abstract]

Cash Flow, Supplemental Disclosures [Text Block]

14. Supplemental Cash Flow Information

The following table sets forth supplemental cash flow disclosures (in thousands):

	Six Months Ended June 30,
	2015			2014
Non-cash investing and financing activities:
Capitalized software development costs resulting from stock-based compensation and deferred payment obligations	$	219		$	219
Deferred payment obligation decrease	$	—		$	(290	)
Unpaid purchases of property and equipment	$	131		$	317
Assets acquired under capital leases	$	(204	)	$	—
Investment related to the ClubLocal disposition	$	—		$	4,500
Issuance of warrant	$	250		$	—

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Note 5 - Software Development Costs (Tables)

6 Months Ended

Jun. 30, 2015

Research and Development [Abstract]

Capitalized Computer Software [Table Text Block]

	June 30, 2015			December 31, 2014
Capitalized software development costs	$	62,396		$	56,498
Accumulated amortization		(40,926	)		(34,943	)
Capitalized software development costs, net	$	21,470		$	21,555

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Note 9 - Restructuring Charges (Details) - Summary of the 2015 Accrued Restructuring Liability - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Restructuring Cost and Reserve [Line Items]
Balance at December 31, 2014			$ 3,196
Balance at June 30, 2015	$ 4,909		4,909
Amounts accrued	3,133	$ 2,226	4,588	$ 4,049
2015 Restructing Plans [Member]
Restructuring Cost and Reserve [Line Items]
Balance at December 31, 2014			0
Balance at June 30, 2015	2,538		2,538
Amounts accrued			4,777
Amounts paid			(1,679)
Accretion			11
Non-cash items			(571)
Employee Severance [Member] | 2015 Restructing Plans [Member]
Restructuring Cost and Reserve [Line Items]
Balance at December 31, 2014			0
Balance at June 30, 2015	265		265
Amounts accrued			865
Amounts paid			(600)
Non-cash items			3
Facility Closing [Member] | 2015 Restructing Plans [Member]
Restructuring Cost and Reserve [Line Items]
Balance at December 31, 2014			0
Balance at June 30, 2015	522		522
Amounts accrued			1,144
Amounts paid			(59)
Accretion			11
Non-cash items			(574)
Other Restructuring [Member] | 2015 Restructing Plans [Member]
Restructuring Cost and Reserve [Line Items]
Balance at December 31, 2014			0
Balance at June 30, 2015	$ 1,748		1,748
Amounts accrued			2,768
Amounts paid			$ (1,020)

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Note 7 - Stockholders' Equity (Details) - USD ($) shares in Millions, $ in Millions	6 Months Ended	41 Months Ended
	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014
Stockholders' Equity Note [Abstract]
Stock Repurchase Program, Authorized Amount			$ 47.0
Stock Repurchased and Retired During Period, Shares	0.0	3.4
Stock Repurchased and Retired During Period, Value		$ 36.3

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Condensed Consolidated Statements of Operations (Unaudited) (Parentheticals) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Income from discontinued operations, tax	$ 0	$ 18	$ 0	$ 222

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Note 3 - Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2015

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

3. Fair Value of Financial Instruments

The Company applies the fair value hierarchy for its financial assets and liabilities. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last is considered unobservable, that are used to measure fair value:

• Level 1—Quoted prices in active markets for identical assets or liabilities.

• Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following table summarizes the basis used to measure certain of the Company’s financial assets and liabilities that are carried at fair value (in thousands):

			Basis of Fair Value Measurement
	Balance at June 30, 2015		Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents	$	28,624	$	28,624	$	—	$	—
Restricted cash—term loan	$	17,500	$	17,500	$	—	$	—
Short-term investments	$	52	$	52	$	—	$	—
Restricted cash	$	3,317	$	—	$	3,317	$	—

			Basis of Fair Value Measurement
	Balance at December 31, 2014		Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents	$	43,720	$	43,720	$	—	$	—
Short-term investments	$	904	$	904	$	—	$	—
Restricted cash	$	3,416	$	—	$	3,416	$	—
Liabilities:
Acquisition-related contingent consideration	$	349	$	—	$	—	$	349

The Company’s restricted cash is valued using pricing sources and models utilizing market observable inputs, as provided to the Company by its broker.

On April 10, 2015, ReachLocal New Zealand Limited (“RL NZ”) paid NZ$0.4 million ($0.3 million) of earn-out consideration due, offset by NZ$0.2 million ($0.1 million) of additional consideration pursuant to the net working capital adjustment.

The Company also has an investment in a privately held partnership that is one of its service providers. During March 2013, the Company invested $2.5 million for a 4% equity interest in the service provider, and in March 2014, the Company invested $2.0 million for an additional 3.2% equity interest. The Company does not have significant influence over the entity. In addition, the Company has an equity interest of 14.2% in SERVIZ, Inc., the entity that acquired its former ClubLocal business, and does not have significant influence over the entity. The carrying amounts of the Company’s cost method investments were each $4.5 million at June 30, 2015, and are included in non-marketable investments in the accompanying condensed consolidated balance sheet.

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Note 15 - Discontinued Operations (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Note 15 - Discontinued Operations (Details) [Line Items]
Cost Method Investments		$ 9,000		$ 9,000
Discontinued Operation, Gain (Loss) on Disposal of Discontinued Operation, Net of Tax	$ 31		$ 371
ClubLocal [Member]
Note 15 - Discontinued Operations (Details) [Line Items]
Discontinued Operation, Gain (Loss) on Disposal of Discontinued Operation, Net of Tax		800
Discontinued Operation, Tax (Expense) Benefit from Provision for (Gain) Loss on Disposal		$ 400
ClubLocal [Member]
Note 15 - Discontinued Operations (Details) [Line Items]
Cost Method Investment Ownership Percentage		14.20%
Cost Method Investments		$ 4,500

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Note 8 - Stock-based Compensation (Tables)

6 Months Ended

Jun. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

	Number of Shares			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value
Outstanding at December 31, 2014		6,096		$	9.48
Granted		5,320		$	4.49
Exercised		(26	)	$	0.24
Forfeited		(3,741	)	$	10.40
Outstanding at June 30, 2015		7,649		$	5.60		6.6	$	—
Vested and exercisable at June 30, 2015		1,568		$	9.75		5.3	$	—
Unvested at June 30, 2015, net of estimated forfeitures		4,723		$	4.52		6.9	$	—

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Expected dividend yield		0	%		0	%		0	%		0	%
Risk-free interest rate		1.54	%		1.71	%		1.53	%		1.63	%
Expected life (in years)		4.99			5.32			4.93			5.09
Expected volatility		57	%		54	%		57	%		54	%

Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity [Table Text Block]

	Number of shares			Weighted Average Grant Date Fair Value
Unvested at December 31, 2014		912		$	5.98
Granted		—		$	—
Forfeited		(64	)	$	9.44
Vested		(140	)	$	10.07
Unvested at June 30, 2015		708		$	5.60

Schedule of Compensation Cost for Share-based Payment Arrangements, Allocation of Share-based Compensation Costs by Plan [Table Text Block]

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Stock-based compensation	$	2,314	$	3,597	$	4,579	$	8,266
Less: Capitalized stock-based compensation		100		121		219		219
Stock-based compensation expense, net	$	2,214	$	3,476	$	4,360	$	8,047

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table Text Block]

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Stock-based compensation expense, net
Cost of revenue	$	134	$	255	$	290	$	530
Selling and marketing		424		859		906		1,736
Product and technology		126		222		294		608
General and administrative		1,530		2,140		2,870		5,173
	$	2,214	$	3,476	$	4,360	$	8,047

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Label	Element	Value
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	us-gaap_ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingNumber	6,096

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Note 4 - Acquisitions (Details) - Estimated Amortization Expense Over the Remaining Lives - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Estimated Amortization Expense Over the Remaining Lives [Abstract]
Remaining 2015	$ 480
2016	959
2017	680
2018	584
2019	431
Thereafter	1,352
Total	$ 4,486	$ 5,492

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Note 13 - Segment Information

6 Months Ended

Jun. 30, 2015

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

 13. Segment Information

The Company operates in one operating segment. The Company’s chief operating decision maker manages the Company’s operations on a consolidated basis for purposes of evaluating financial performance and allocating resources.