SAN FRANCISCO, Feb 28, 2008 -- LookSmart, Ltd. (NASDAQ: LOOK), an online advertising networks and technology solutions company, today announced financial results for the fourth quarter and year ended December 31, 2007.
For the fourth quarter of 2007, LookSmart reported total revenue of $15.7 million, which represents a 6% increase from $14.9 million in the fourth quarter of 2006, and a 24% increase from $12.6 million in the third quarter of 2007. The Company`s fourth quarter 2007 revenue results reflect a partial quarter contribution of $0.7 million from certain consumer assets, which the Company sold or retired in 2007, versus a full quarter contribution of $1.5 million from those assets in the Company`s fourth quarter of 2006 revenue results. GAAP net income for the fourth quarter of 2007 was $13.2 million, or $0.58 per share, which includes a gain of approximately $14.5 million resulting from the sale of certain consumer assets of the Company. This compares to a GAAP net loss in the fourth quarter of 2006 of $0.9 million, or $0.04 per share, and to a GAAP net loss in the third quarter of 2007 of $4.3 million, or $0.19 per share. The EPS amounts above are based on 22.9, 22.8 and 22.9 million weighted average shares outstanding in the quarters ended December 31, 2007, December 31, 2006, and September 30, 2007, respectively.
"We are pleased with our fourth quarter financial results as we restored revenue growth in our core business through the focus on both online search Advertiser Networks and Publisher Solutions," commented Ted West, President and Chief Executive Officer.
Mr. West continued, "During the fourth quarter, we executed a more efficient and effective operating plan serving our Advertiser Networks customers. In order to expand and diversify our advertiser base for organic growth in our ad network, we strengthened the sales organization, to bring new paid search customers and budgets to the network; we stepped up existing large account service to maximize budget utilization; and we improved traffic management to optimize search advertising results for advertisers on the network. Our Publisher Solutions customers benefited from additional product offerings and enhancements to our Ad Center platform, as well as investment in our sales and account management personnel as compared to the third quarter of 2007. The Publisher Solutions sales team continued to build a solid pipeline of new private-label clients for 2008, where we remain intensely focused on accelerating implementation cycles, driving conversion rates, and growing revenues across our open search advertising marketplace."
Mr. West concluded, "Looking to 2008, we continue to execute our strategic plan to best position LookSmart for significant revenue growth and progress towards profitability in online search advertising. Core to our growth strategy will be investing in the development and extension of our Ad Center technology platform, marketing it and selling it to online search advertisers through Advertiser Networks, and to Publishers through private-labeled online search advertising solutions."
Gross margins declined slightly to 41% in the fourth quarter of 2007 versus 42% in the fourth quarter of 2006. The decline is due to a deliberate operating decision to accept higher traffic acquisition costs (TAC) in order to drive higher top-line advertising revenues and bottom-line profit contribution in the Advertiser Network.
Total operating expenses in the fourth quarter of 2007 were $8.1 million, which is inclusive of $0.5 million of non-cash, share-based compensation charges. This compares to total operating expenses of $7.8 million in the fourth quarter of 2006, which is inclusive of $0.5 million of non-cash, share-based compensation charges, and $10.9 million in the third quarter of 2007, which is inclusive of $0.6 million of non-cash, share-based compensation charges.
LookSmart reported income from operations of $13.0 million in the fourth quarter of 2007, as compared to a loss from operations of $1.6 million in the same period a year ago. Income from operations for the fourth quarter of 2007 includes a gain of approximately $14.5 million resulting from the sale of certain consumer assets of the Company.
On a non-GAAP basis, for the fourth quarter of 2007, Adjusted EBITDA (earnings before interest income, net, taxes, depreciation and amortization excluding stock based compensation) was $14.5 million compared to $0.4 million in the fourth quarter of 2006. Adjusted EBITDA includes a gain of $14.5 million from the sale of certain consumer assets of the Company.
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, were $0.9 million in the fourth quarter of 2007, compared to $1.1 million in the prior year period. Depreciation and amortization was $1.0 million in the fourth quarter of 2007 compared to $1.5 million in the fourth quarter of 2006, reflecting lower levels of capital investment.
The Company ended the quarter with $56.2 million in cash, cash equivalents, and short-term investments, an $18.8 million increase from $37.4 million on September 30, 2007. The increase in cash for the quarter is primarily due to the receipt of net proceeds on the sale of certain consumer assets of the Company.
Q4 2007 Key Metrics Performance
-- Total paid clicks increased to approximately 117 million for the fourth quarter of 2007 compared to approximately 105 million for the fourth quarter of 2006 and 84 million for the third quarter of 2007.
-- Average revenue per click (RPC) for the fourth quarter of 2007 was approximately $0.12, an increase from approximately $0.11 in the fourth quarter of 2006, and flat from the third quarter of 2007 at approximately $0.12.
-- Traffic acquisition costs (TAC) of 63% for LookSmart`s Ad Network increased from the 61% rate in the fourth quarter of 2006, and the 59% rate in the third quarter of 2007.
Self-Tender and Stock Repurchase Program for LookSmart Common Stock