lok - q1 report , page-3

re: lok - q1 report - nice!! LookSmart Reports First Quarter 2006 Results
Thursday May 4, 4:15 pm ET

SAN FRANCISCO, May 4 /PRNewswire-FirstCall/ -- LookSmart (Nasdaq: LOOK - News; ASX: LOK - News), an online media and search technology company, today announced financial results for the first quarter ended March 31, 2006.


David Hills, Chief Executive Officer, stated, "We posted another solid quarter, and the LookSmart team is encouraged by the results delivered in our core advertising business and early signs of progress from our newer revenue streams. During the quarter our ad network continued to increase in volume, our proprietary audience grew by over 30% demonstrating interest in our vertical search properties, and our technology continued to perform well for both LookSmart and our publishing customers. While we are still in the early stages of implementing our strategic initiatives, this quarter's performance highlighted our initial accomplishments and the longer term potential of our strategy."

Quarterly Highlights

The Company's GAAP results of operations include the impact of expensing stock options resulting from the adoption of Statement of Financial Accounting Standards No. 123®, "Share Based Payment." The Company is using the modified prospective method under SFAS No. 123®, and accordingly, has not restated the consolidated statements of operations for prior periods.

Revenue: Total revenue of $10.5 million in the first quarter of 2006 grew 5% from $10.0 million in the fourth quarter of 2005, at the upper end of the Company's prior guidance range of 3% to 5%.

Key Advertising Metrics: Total paid clicks increased to 74 million for the first quarter compared to 72 million in the preceding quarter. Average revenue per click (RPC) excluding run of site advertising was $0.15 compared to $0.16 in the fourth quarter of 2005. Including run of site advertising, RPC was $0.12, unchanged from the previous quarter.

Key Audience Metrics: Total unique visitors to the Company's network of owned sites increased to 12 million at the end of the first quarter from nine million at the end of the prior quarter.

Cost of Revenue: Traffic acquisition costs (TAC) were within the Company's guidance range at approximately 59% of total advertising revenue in the first quarter, up from 57% in the fourth quarter of 2005. Additionally, TAC excluding the advertising impact of owned sites was 65%, compared to 63% in the fourth quarter of 2005. The Company continues to focus on its overall traffic optimization process with the primary objective of increased advertiser performance.

Gross Margin: As a result of higher TAC, gross margin was 33% in the first quarter of 2006 compared to 34% in the fourth quarter of 2005. The higher TAC was partially offset by the growing contribution of advertising on our owned sites and publisher services revenue.

Operating Expenses: Total operating expenses in the first quarter were $8.5 million, which includes $0.3 million of non-cash, share-based compensation charges. This compares to total operating expenses of $7.6 million in the fourth quarter of 2005, which included a restructuring benefit of $0.6 million.

Net Loss: Net loss for the first quarter of 2006, which includes $0.3 million of non-cash, share-based compensation charges, was $4.5 million, or $0.20 per share. This compares to net loss in the preceding quarter of $3.8 million, or $0.17 per share, which included a restructuring benefit of $0.6 million.

Cash: Total cash, cash equivalents and investments were $45.9 million at March 31, 2006 compared to $51.3 million at December 31, 2005.

John Simonelli, Chief Financial Officer, stated, "As our new revenue streams develop initial momentum, we are refining our metrics, providing more detail on Average Revenue per Click and Traffic Acquisition Costs, allowing greater insight into our business and added visibility for investors. In addition, we will be providing gross margin guidance going forward."

Financial Outlook

LookSmart is providing the following outlook on a GAAP basis, including the impact of the adoption of SFAS No.123®. For the second quarter ending June 30, 2006:


-- The Company's revenue is expected to increase 6% to 8% from the first
quarter of 2006.
-- Ad Network TAC is expected to remain relatively consistent at 63% to
66%. The Company plans to adopt this treatment of TAC going forward.
-- Gross margin is expected to increase throughout 2006 with second
quarter gross margin expected to reach 35%. The expected improvement
in gross margin is primarily due to continued revenue growth from our
owned sites.
-- Operating expenses are expected to be approximately 5% higher in the
second quarter due to increased sales and marketing efforts to
support revenue growth as well as product development resources for
improvements to the Company's technology platforms.
-- Second quarter net loss is expected to improve slightly from the
first quarter of 2006.
-- Quarterly non-cash, share-based compensation for the remainder of the
year is expected to be consistent with the first quarter.

Conference Call
LookSmart will host a conference call today at 5:00 p.m. ET (7:00 a.m. Australian ET, May 5, 2006) to discuss its financial results. To listen to the call from the U.S., dial 1-800-257-6566; from Australia, dial 1-800-730-220. The call will also be available live by webcast on LookSmart's Investor Relations Web site at http://www.shareholder.com/looksmart/.

That's a nice improvement. Well done Looksmart. It's only a matter of time, I've no doubt at all.

:)
LC