LookSmart Reports First Quarter 2008 Results

Business Wire, May 5, 2008

-- Revenue increased 47% to $17.5 million versus Q1 2007

-- Total paid clicks increased 62% to 152 million versus Q1 2007

-- Repurchased 6.0 million shares of common stock during Q1 2008

SAN FRANCISCO -- LookSmart, Ltd. (NASDAQ:LOOK), an online search advertising network and technology solutions company, today announced financial results for the first quarter ended March 31, 2008.

Revenues for the first quarter of 2008 were $17.5 million, a 47% increase from $11.9 million in the first quarter of 2007 and a 17% increase from $15.0 million in the fourth quarter of 2007. Net loss for the first quarter of 2008 was $0.5 million, or $0.02 per share based on approximately 20.5 million weighted average shares outstanding, compared to a net loss of $3.4 million, or $0.15 per share based on approximately 22.9 million weighted average shares outstanding in the first quarter of 2007. Net income for the fourth quarter of 2007 was $13.2 million, or $0.58 per share based on 22.9 million weighted average shares outstanding, which included a gain of approximately $14.5 million resulting from the sale of certain consumer assets of the Company.

The Company's first quarter 2008 results reflect the continued focus on its proprietary Ad Center platform which runs the LookSmart Advertiser Network and serves third-party Publisher customers through the licensing of the platform technology. During the first quarter, the company classified certain consumer assets as Assets Held for Sale on the Consolidated Balance Sheet, and have accounted for them in discontinued operations.

Loss for the first quarter of 2008 from continuing operations was $0.2 million, or $0.01 per share based on 20.5 million weighted average shares outstanding, compared to loss from continuing operations in the first quarter of 2007 of $2.5 million, or $0.11 per share based on 22.9 million weighted average shares outstanding. Loss from continuing operations in the fourth quarter of 2007 was $0.5 million, or $0.02 per share based on 22.9 million weighted average shares outstanding.

"We made considerable progress during the first quarter on our goals to achieve strong sequential revenue growth as well as to approach profitability," commented Ted West, President and Chief Executive Officer. "We believe our performance is the result of actions taken to optimize the performance of our search advertiser network, to deploy the search network platform to other publishers and networks, to control contribution margins, and to rationalize expense."

Mr. West continued, "Our revenue results directly reflect our long-standing commitment to delivering quality for search advertisers on the Ad Center platform. We have executed quality improvements within our Advertiser Network in recent years, and have delivered quality outcomes through network optimization and managed services to our search advertisers. We believe that we are now rewarded by advertisers, as they bring a greater share of their ad budgets to the Advertiser Network; and by new Publisher clients, as we create a more valuable open auction for search advertising placements on their third-party advertiser networks and sites. Overall, the result is a more scalable Ad Center platform, which enhances both our operating leverage and revenue productivity as we work to increase our market share in total paid clicks."

Revenues from the Company's Advertiser Network were $15.8 million in the first quarter of 2008, an increase of 48% from $10.7 million in the first quarter of 2007. Revenues from the Company's Publisher Solutions were $1.7 million in the first quarter of 2008, an increase of 41% from $1.2 million in the first quarter of 2007.

Gross margins from continuing operations were 42% in the first quarter of 2008 versus 43% in the first quarter of 2007, and 40% in the fourth quarter of 2007. Slightly higher traffic acquisition costs (TAC) on the advertiser network in the first quarter of 2008 as compared to the first quarter of 2007 were offset by increased contribution from the publisher solutions business. During the first quarter of 2008, the Company continued to manage TAC slightly higher in order to drive higher top-line advertising revenues and bottom-line profit contribution in the Advertiser Network.

Total operating expenses in the first quarter of 2008 were $8.0 million, which included $1.0 million of non-cash, share-based compensation charges. This compares to total operating expenses of $8.2 million in the first quarter of 2007, which included $0.5 million of non-cash, share-based compensation charges, and $7.4 million in the fourth quarter of 2007, which included $0.5 million of non-cash, share-based compensation charges.

On a non-GAAP basis, for the first quarter of 2008, Adjusted EBITDA (net income (loss) before interest income, net, taxes, depreciation and amortization excluding stock based compensation charges and income (loss) from discontinued operations) was $1.2 million compared to an Adjusted EBITDA loss of $2.1 million in the first quarter of 2007.