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LookSmart Reports Third Quarter 2010 Results

Non-GAAP net income (net income before discontinued operations and excluding stock based compensation) for the third quarter of 2010 was $0.9 million compared to a non-GAAP net loss of $1.7 million in the third quarter of 2009. Non-GAAP net income for the second quarter of 2010 was $0.7 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 third quarter of 2010 were $0.2 million, compared to $0.6 million in the third quarter of 2009, and $0.3 million in the second quarter of 2010. Depreciation and amortization from continuing operations in the third quarter of 2010 was $0.7 million, compared to $0.7 million in the third quarter of 2009 and $0.8 million in the second quarter 2010.

The Company ended the quarter with $26.8 million in cash, cash equivalents, and investments, a decrease of $0.9 million from $27.7 million at December 31, 2009 and an increase of $1.3 million from $25.5 million at June 30, 2010. This sequential increase is primarily related to our positive operating results for the quarter. Net cash provided by operating activities for the three months ended September 30, 2010 was approximately $1.8 million.

Q3 2010 Key Metrics Performance

  • Total paid clicks for the third quarter of 2010 were 175 million, compared to 219 million for the third quarter of 2009 and 190 million for the second quarter of 2010.
  • Average Advertising Network revenue per click (RPC) for the third quarter of 2010 was $0.059, an increase from $0.054 in the third quarter of 2009 and a decrease from $0.064 in the second quarter of 2010.
  • Traffic acquisition costs (TAC) for LookSmart's Ad Network decreased to 56.9% from 68.8% in the third quarter of 2009 and 58.1% in the second quarter of 2010.

Conference Call

LookSmart will host a conference call today at 5:00 p.m. ET to discuss its third quarter 2010 financial results. Participating on the call will be Dr. Jean-Yves Dexmier, Executive Chairman and Chief Executive Officer and Steve Markowski, Chief Financial Officer. To listen to the call from the US, dial 1-877-407-4018; from outside the US, dial 1-201-689-8471. A telephonic replay of the call will be available until Monday, November 15, 2010, 11:59 pm ET. To access the replay from the US, dial 1-877-870-5176 and enter passcode 359678; from outside the US, dial 1-858-384-5517 and enter passcode 359678. The call will also be available live by webcast on LookSmart's Investor Relations website at http://investor.shareholder.com/looksmart/.

About LookSmart, Ltd.

LookSmart is an online search advertising network solutions company that provides performance solutions for online search advertisers and online publishers. LookSmart offers advertisers targeted, pay-per-click (PPC) search advertising and contextual search advertising via its Advertiser Networks; and an Ad Center platform for customizable private-label advertiser solutions for online publishers. LookSmart is based in San Francisco, California. For more information, visit www.looksmart.com or call 415-348-7500.

GAAP to Non-GAAP Reconciliation

We provide a reconciliation of GAAP net income (loss) to non-GAAP net income (loss) below:

  Three Months Ended
(000's) September 30, 2010 (unaudited) June 30, 2010 (unaudited) September 30, 2009 (unaudited)
GAAP net income (loss)  $ 718  $ 652  $ (1,941)
Add: Stock based compensation from continuing operations  222  163  359
Subtract: Income from discontinued operations  (89)  (85)  (132)
Non-GAAP net income (loss)  $ 851  $ 730  $ (1,714)

Use of Non-GAAP Measures

Regulation G, "Conditions for Use of Non-GAAP Financial Measures," and other provisions of the Securities Exchange Act of 1934, as amended, define and prescribe the conditions for use of certain non-GAAP financial information. LookSmart provides "non-GAAP net income (loss)," which is a non-GAAP financial measure. Non-GAAP net income (loss) consists of net income (loss) before (a) income from discontinued operations; and (b) share-based compensation expense.

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