LookSmart (Nasdaq:LOOK) Q4 2009 Results

SAN FRANCISCO, Mar 18, 2010 -- LookSmart, Ltd. (Nasdaq:LOOK), an online search advertising network solutions company, today announced financial results for the fourth quarter ended December 31, 2009.

Revenues for the fourth quarter of 2009 were $12.8 million, compared to $14.9 million in the fourth quarter of 2008 and a 2% increase from $12.5 million in the third quarter of 2009.

Net loss for the fourth quarter of 2009 was $0.9 million, or ($0.05) per diluted share. This compares to a net loss for the fourth quarter of 2008 of $12.4 million, or ($0.73) per diluted share. Included in fourth quarter 2008 net loss is a non-cash impairment charge of $9.8 million, a $1.0 million asset impairment charge related to the decision to wind down Furl and a $0.6 million legal settlement charge. Net loss for the third quarter of 2009 was $1.9 million, or ($0.11) per diluted share.

Loss from continuing operations for the fourth quarter of 2009 was $1.0 million, which includes $0.2 million of severance expense offset by $0.2 million of income tax benefit. This compares to a loss from continuing operations in the fourth quarter of 2008 of $11.4 million, which includes the non-cash impairment charge of $9.8 million and the $0.6 million legal settlement charge. Loss from continuing operations for the third quarter of 2009 was $2.1 million, which includes $0.3 million of severance expense and $0.1 million of expenses related to the evaluation of strategic growth alternatives.

Commenting on the results, Dr. Jean-Yves Dexmier, Executive Chairman and Chief Executive Officer, said: "Although we are pleased with the expense improvements from our restructuring efforts, we are dissatisfied with fourth quarter top and bottom line results. We offer very strong customizable performance solutions to clients and our core asset continues to be the AdCenter platform, but we must improve our ability to optimize the delivery of traffic to our customers as well as the quality and consistency of our traffic to capitalize on the increasing demand in the search advertising market."

Revenues from the Company's Advertiser Network were $11.9 million in the fourth quarter of 2009, a decrease of 12% from $13.5 million in the fourth quarter of 2008, and an increase of 1% from $11.8 million in the third quarter of 2009. Revenues from the Company's Publisher Solutions were $0.8 million in the fourth quarter of 2009, a decrease of 43% from $1.5 million in the fourth quarter of 2008 and an increase of 14% from $0.7 million in the third quarter of 2009. The sequential increase in Publisher Solutions revenues is primarily attributable to an increase from the Company's largest Publisher Solutions client.

Gross margins from continuing operations decreased to 33% in the fourth quarter of 2009 from 36% in the fourth quarter of 2008 and increased from 31% in the third quarter of 2009. The year-over-year decrease in gross margins reflects higher traffic acquisition costs (TAC) as compared to the fourth quarter of 2008. The sequential increase in gross margin reflects the lower average TAC on the Advertiser Network in the fourth quarter of 2009 as compared to the third quarter of 2009, as well as the sequential increase in the Company's Publisher Solutions revenues.

Total operating expenses in the fourth quarter of 2009 decreased to $5.3 million, which includes $0.2 million of non-cash, share-based compensation charges, $0.2 million of severance expense and $0.1 million of non-cash impairment charges. Operating expenses for the fourth quarter of 2008 were $16.9 million, which includes $0.5 million of non-cash, share-based compensation charges, a non-cash impairment charge of $9.8 million and a $0.6 million legal settlement charge. Operating expenses for the third quarter of 2009 were $6.0 million, which includes $0.4 million of non-cash, share-based compensation charges, $0.3 million of severance expense and $0.1 million of expense related to the evaluation of strategic growth alternatives. The Company's improved operating expenses on a year-over-year and sequential basis include the benefit of relocated headquarters for the month of December. The Company will continue to benefit from lower costs associated with its headquarters in 2010 when compared to 2009.

Non-GAAP net loss (net loss before discontinued operations and excluding stock based compensation and impairment charges) for the fourth quarter of 2009 was $0.7 million compared to a loss of $1.1 million in the fourth quarter of 2008. Non-GAAP net loss for the third quarter of 2009 was $1.7 million.

An explanation of LookSmart's use of non-GAAP financial measures, including the limitations of such measures relative to GAAP measures and reconciliation between GAAP and non-GAAP measures where appropriate, is included later in this release.

Capital expenditures, including capitalization of internally developed software, in the fourth quarter of 2009 were $0.7 million, compared to $1.0 million in the fourth quarter of 2008, and $0.6 million in the third quarter of 2009. Depreciation and amortization from continuing operations in the fourth quarter of 2009 was $0.7 million, flat compared to $0.7 million in the fourth quarter of 2008 and the third quarter of 2009.

The Company ended the quarter with $27.7 million in cash, cash equivalents, and investments, an increase of $0.6 million from $27.1 million at September 30, 2009. Net cash provided by operating activities for the three months ended December 31, 2009 was approximately $1.2 million.

As previously announced, in the third quarter of 2009, the Company launched post-pay terms to its smaller self service advertisers, whereby these customers will pay for clicks after they occur rather than the previous practice of being billed in advance. The adoption of post-pay terms reflects the Company's objective to align its business practices with industry standards and to encourage more self-service advertisers to use the LookSmart Advertiser Network in their campaigns. As a result of this change, the Company reported a $0.3 million decline in deferred revenues on its Balance Sheet at December 31, 2009 as compared to September 30, 2009.

Q4 2009 Key Metrics Performance

-- Total paid clicks for the fourth quarter of 2009 were 243 million,
compared to 201 million for the fourth quarter of 2008 and 219 million
for the third quarter of 2009.
-- Average Advertising Network revenue per click (RPC) for the fourth
quarter of 2009 was $0.049, a decrease from $0.067 in the fourth quarter
of 2008 and $0.054 in the third quarter of 2009.
-- Traffic acquisition costs (TAC) of 67.3% for LookSmart's Ad Network
increased from the 66.9% rate in the fourth quarter of 2008 and
decreased from the 68.8% rate in the third quarter of 2009.

Source: LookSmart, Ltd. (Nasdaq:LOOK)