ReachLocal Earnings: Shrinking Violent

ReachLocalis still struggling to get its turnaround plan on track. The provider of online marketing solutions for local businesses posted quarterly results after Tuesday's market close. Revenue plunged 18% to $109 million for the fourth quarter, and a small deficit a year earlier widened to an adjusted loss of $0.52 a share this time around.

This would be horrendous news if the market wasn't already braced for ReachLocal's sloppy performance. Analysts were holding out for $110.2 million in revenue, but they were also expecting an adjusted deficit of $0.57 a share.

This wasn't the first time the profitless ReachLocal came through with a narrower deficit than what the Wall Street pros were expecting. In fact, it happened during each and every quarter of 2014.

Source: Thomson Reuters.

That doesn't mean the market has rewarded ReachLocal for coming through with less red ink. The stock was battered last year, shedding 73% of its value. Losses are still losses, and ReachLocal's overall business continues to shrink.

It's hard to find a bright spot in Tuesday afternoon's report. Direct local revenue -- accounting for 78% of total revenue -- plunged 20%. National brands, agencies, and resellers revenue -- accounting for the balance -- slumped 12%. International revenue growth that had been positive earlier in the year also experienced a double-digit percentage decline for the quarter.

Customers are leaving. ReachLocal's client list is getting thinner, with the number of active clients sliding 13% over the past year. Local businesses still want to get noticed, but they're turning to other outlets.

ReachLocal shook things up last year, tapping Sharon Rowland as its new CEO. She stepped in after a poorly executed salesforce realignment in late 2013 alienated accounts. The emphasis on offering incentives to its staff for bringing in new clients had a negative effect on retaining existing customers. Rowland began addressing some of those problems last year after she arrived, but "execution issues and challenges" remain. She has at least addressed the way ReachLocal's software is offered, also improving the company's platforms that customers use to manage online presence and customer convention.

Things aren't going to get better right away. ReachLocal's guidance calls for another sequential slide. It sees $100 million to $105 million in revenue with another small adjusted EBITDA loss. Analysts were perched on $107.9 million. Last year Rowland argued that it would take as long as a year to turn the North American business around, and we're now 10 months into her tenure. After the stock's brutal performance last year, shareholders hoping to catch a break will have to wait at least another quarter for a turnaround.

The article ReachLocal Earnings: Shrinking Violent originally appeared on Fool.com.

Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends ReachLocal. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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