ReachLocal Shares Jump 60 Percent on New Strategy Announcement

ReachLocal Inc. announced Friday that it will implement a series of strategic actions to spur future growth, sparking a significant run-up in the company’s share price. The Woodland Hills company, which helps small businesses market online, has entered into a financing agreement with affiliates of its largest shareholder, VantagePoint Capital Partners in San Bruno, for the purchase of $5 million in shares with the option of purchasing an additional $5 million. Also, lender Hercules Technology Growth Capital in Palo Alto has agreed to reduce ReachLocal’s restricted cash in a loan agreement to $15 million, compared to the previous restriction on $17.5 million. It is expected this change will provide ReachLocal with more flexible access to capital. The company also anticipates operating expenses for 2015 to be 25 percent lower than a year prior and plans on decreasing it by an additional 15 percent in 2016. Additionally, ReachLocal will phase out sales in the U.K., which accounts for $1.8 million in annual losses for the company. “Our revised outlook is driven primarily by more aggressive expense management and business optimization initiatives and incremental upside expected from recently revised publisher rebate agreements,” Sharon Rowlands, chief executive, said in a statement. ReachLocal shares closed up 69 cents or 61 percent to $1.82 on the Nasdaq.