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Subject: LookSmart Reports Record Fourth Quarter Earnings And Achieves Net Profitability




Date: Tue, 28 Jan 2003 13:15:53 -0800



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LookSmart Reports Record Fourth Quarter Earnings And Achieves Net Profitability


Revenues Up 65%; Net Income of $3.4 Million Excluding Net Gain Related to
BT LookSmart Settlement

SAN FRANCISCO, Jan 28, 2003 /PRNewswire-FirstCall via COMTEX/ -- LookSmart
(Nasdaq: LOOK; ASX: LOK), a global leader in search, today announced financial
results for the fourth quarter and fiscal year ended December 31, 2002.

Financial Highlights:

Revenue Grows 65%: LookSmart reported fourth quarter 2002 revenue of $31.3
million, a 65 percent increase from the fourth quarter 2001, a 31 percent
sequential increase over revenues of $23.8 in the third quarter 2002, and
significantly higher than the Company's expectation of $27.0 million.

Company Reaches Net Profitability: Under GAAP, LookSmart's net income for
the fourth quarter 2002 was $34.6 million or $0.33 per diluted share, which
includes a net gain of $32.6 million for the retirement of the debt related
to the BT LookSmart joint venture and $1.4 million of costs incurred for
the restructuring of joint venture operations. Without these two items,
LookSmart's net income for the fourth quarter 2002 was $3.4 million or $0.03
per diluted share. This is the first quarter of GAAP profitability in the
Company's history. This compares to a net loss of ($11.1) million, which
includes an asset impairment charge of $4.1 million, or ($0.12) per share
for the fourth quarter 2001, and a net loss of ($0.5) million or ($0.00)
per share for the third quarter 2002.

Modified EBITDA Increases 119%: LookSmart's Modified EBITDA (earnings before
interest, tax, depreciation, amortization and certain other items) was a
record $6.0 million or $0.06 per diluted share in the fourth quarter, exceeding
the Company's expectations of $0.05 per share. Modified EBITDA increased
119 percent from $2.7 million or $0.03 per share for the comparable year
ago quarter, and increased 59 percent from $3.8 million or $0.04 per share
for the third quarter 2002. Modified EBITDA for the year was $14.4 million,
or $0.14 per diluted share, compared to ($7.1) million or a loss of ($0.08)
per share for fiscal 2001.

Listings Revenue Up 126%: Listings revenue of $27.3 million grew 126 percent
from the fourth quarter 2001, and increased 45 percent sequentially from
the third quarter 2002. Large business listings revenue increased to $23.3
million in the fourth quarter, a 147 percent increase from the comparable
year ago quarter and a 46 percent increase over $15.9 million for the third
quarter 2002. Small business listings rose to $4.0 million, a 40 percent
sequential increase from $2.8 million in the third quarter 2002. Listings
revenue now represents 87 percent of LookSmart's total revenue.

Paid Clicks Rise 155%: During the fourth quarter paid clicks grew to 160
million, up 155 percent from the year-ago period and up 33 percent from the
prior quarter's 120 million clicks. Average revenue per click, or the average
cost-per-click to advertisers, was $0.17, consistent with the prior quarter.


Successful Settlement of BT LookSmart Debt: On December 4, 2002 LookSmart
and BT Group (BT, formerly British Telecommunications, plc) agreed to restructure
their joint venture, BT LookSmart. LookSmart agreed to pay BT $3.5 million
from its unrestricted cash and one million shares of LookSmart common stock
in exchange for the complete resolution of the joint venture and the related
debt of $40.2 million. In addition, LookSmart returned $1.5 million in restricted
cash to BT (the remaining proceeds of the loan), and LookSmart and BT will
share equally any restructuring costs. The net impact of this transaction
was a gain of $32.6 million.

Continued Strong Cash Balance: Cash and short-term investments were $51.3
million as of December 31, 2002. This is the result of $3.1 million of cash
generated during the quarter, less the $3.5 million cash payment made to
BT.

"LookSmart's rapid financial growth over the past several quarters is a strong
validation of the value of the paid inclusion model for merchants and distribution
partners, and of LookSmart's leadership in this sector," said Dianne Dubois
LookSmart's chief financial officer. "The successful resolution of the BT
LookSmart debt leaves us with a very strong balance sheet, and we are pleased
to continue to report significant top line revenue growth, a tight control
on expenses, and for the first time in the company's history, a net profit."


Business Highlights:

"This was a strong quarter for LookSmart on all fronts, driven by exceptional
new customer acquisition rates, increased spend levels by existing customers,
and an overall up tick in the adoption level of paid inclusion among online
advertisers," said Jason Kellerman, chief executive officer of LookSmart.
"LookSmart continues to make strategic investments in its search and paid
inclusion platforms. These investments are already paying off, given our
recent financial results, and are positioning us well for future growth."


Listings Growth

LookSmart's listings revenue growth in both the large and small business
segments was highlighted by the addition of 131 new large businesses and
approximately 7000 new small business listings. A strong holiday season
for online merchants also contributed to LookSmart's revenue growth this
quarter, as an ever-increasing number of consumers continue to find products
and services through search.

In the large business segment, significant new customers for the quarter
include Toyota, Hyatt, Nexium and Nautilus Group. These businesses join
existing blue-chip customers such as Amazon.com, Banana Republic, Bank of
America, eBay, Federal Express, Lands' End, Motorola, Nestle USA, Patagonia,
Radio Shack, REI, Staples and Wal-Mart.

In the small business segment, the Company now has more than 33,000 active,
paying small business listings, up 26 percent from the prior quarter.

Product Development

Since acquiring the WiseNut technology, LookSmart has made significant improvements
to the relevancy of its search results. Since April 2002, the Company has
expanded the number of Web documents crawled to more than 2.5 billion documents
and has grown the index by 33 percent to approximately 1.1 billion documents.
LookSmart also improved the rate at which the WiseNut index is refreshed
by more than 40 percent.

In addition, the Company added several important features and functionality
to its Japanese search engine (WiseNut Japan). These improvements include:
a 50 percent faster refresh rate for the entire index, with daily updates
of key documents; 20 percent growth in the number of documents indexed; and
algorithm improvements, including improved proximity matching.

International Expansion

LookSmart announced that it would assume control of the BT LookSmart international
operations in the United Kingdom and Japan, beginning in the first quarter
of 2003. These operations will mirror the Company's business model in the
US. LookSmart's management will provide more details on its international
strategy as well as positive guidance for growth and profitability in fiscal
2003 on its conference call later today.

Conference Call

LookSmart will host a conference call at 5:00 p.m. ET today (9:00 a.m. Australian
ET, January 29, 2003) to discuss the results. To listen to the call from
the U.S., dial 1-800-219-6110; from Australia, dial 1-800-730-220. A replay
of the call will be available until Thursday, January 30, 2003, 11:59 p.m.
PT. To access the replay from the U.S., dial 1-800-405-2236 and enter passcode
520146#; from outside the U.S., dial 1-303-590-3000 and enter passcode 520146#.
The call will also be available live by webcast on LookSmart's Investor
Relations Web site at http://www.shareholder.com/looksmart/ .

About LookSmart

LookSmart helps businesses of all sizes harness the power of search to generate
cost-effective sales leads. LookSmart search listings enable businesses to
reach 77 percent* or nearly four out of five U.S. Internet users, through
top portals and ISPs including Microsoft's MSN, About.com, AltaVista, Netscape
Netcenter, Road Runner, Cox Interactive Media, InfoSpace (Excite, Dogpile,
MetaCrawler, WebCrawler), CNET's Search.com and search services such as Inktomi.
LookSmart is based in San Francisco, California, with offices in New York,
Los Angeles, Detroit, Montreal, London, Tokyo, Melbourne and Sydney. For
more information, please visit www.LookSmart.com.


*Media Metrix, July 2002 Digital Media Audience Ratings


Forward-Looking Statements

This press release contains forward-looking statements, such as references
to future plans for restructuring of our international joint venture, expansion
into new markets and product areas, future growth rates and financial results,
industry projections or other characterizations of future events or circumstances.
These statements, including their underlying assumptions, are subject to
risks and uncertainties and are not guarantees of future performance. Results
may differ due to various factors, such as the possibility that we will not
complete the restructuring of our international joint venture in a timely
manner, that we may not maintain profitability in future quarters, we may
fail to derive sufficient revenues from new and existing products to meet
our financial goals; that our customers or distribution partners may decide
to modify or terminate their relationships with us; or that we may have an
unexpected increase in costs, expenses or other factors contributing to our
burn rate. In addition, you should read the risk factors detailed in our
Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with
the Securities and Exchange Commission.

The statements presented in this press release speak only as of the date
of the release. Please note that we undertake no obligation to revise or
update publicly any forward-looking statements for any reason.

NOTE: "LookSmart" is a trademark of LookSmart, Ltd., and/or its subsidiaries
in the U.S. and other countries. All other trademarks mentioned are the
property of their respective owners.

CONTACT: Liz Haggerty, Vice President, Investor Relations of LookSmart,
Ltd., +1-415-348-7185, or [email protected]; or Jennifer Jarman of The Blueshirt
Group, +1-415-217-7722, or [email protected], for LookSmart, Ltd.



LOOKSMART, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS - GAAP BASIS
(In thousands, except per share amounts)
Three Months Ended Twelve Months
Ended
31-Dec 31-Dec
2001 2002 2001 2002
Revenues:
Listings $12,063 $27,256 $35,714 $74,659
Advertising 3,009 432 22,855 6,097
Licensing 3,398 3,564 14,868 14,699
Ecommerce 528 -- 9,523
573
Total revenues 18,998 31,252 82,960 96,028
Cost of revenues:
Listings 3,331 13,068 8,869 31,723
Advertising 1,182 1,348 5,116 5,598
Ecommerce 240 -- 5,799
64
Total cost of revenues 4,753 14,416 19,784 37,385
Gross profit 14,245 16,836 63,176 58,643
Operating expenses:
Sales and marketing 6,318 4,986 40,822 20,786
Product development 5,841 5,851 30,124 23,139
General and administrative 1,867 2,477 10,698 10,261
Amortization of goodwill 905 -- 4,630
--
Asset impairment and
restructuring charges 4,049 -- 15,840
--
Total operating expenses 18,980 13,314 102,114 54,186
Income/(Loss) from
operations (4,735) 3,522 (38,938) 4,457
Non-operating income (expenses) (3,974) 30,944 (17,521) 24,367
Income/(Loss) from
continuing operations
before income taxes (8,709) 34,466 (56,459) 28,824
Income taxes & minority interest (78) 103 (133)
80
Income/(Loss) from
continuing operations (8,787) 34,569 (56,592) 28,904
Loss on discontinued operations (2,297) -- (2,975)
(972)
Net income/(loss) (11,084) 34,569 (59,567) 27,932
Add back to calculate Modified
EBITDA:
Depreciation ** 1,729 1,431 6,633 6,056
Amortization of goodwill and
intangibles 1,080 426 6,113 1,474
Amortization of deferred stock
compensation ** 608 233 3,236 1,838
Stock compensation related to
variable options ** -- 372 --
538
Non-operating (income)expenses 3,974 (30,944) 17,521 (24,367)
Asset impairment and
restructuring charges 4,049 -- 15,840
--
Income taxes & minority interest 78 (103) 133
(80)
Loss on discontinued operations 2,297 -- 2,975
972
13,815 (28,585) 52,451 (13,569)
Modified EBITDA $2,731 $5,984 ($7,116) $14,363
** Refer to next page for breakdown by operating expense category
LOOKSMART, LTD.
CONSOLIDATED STATEMENTS OF
OPERATIONS - GAAP BASIS
(In thousands, except per share
amounts)
Three Months Ended Twelve Months
Ended
31-Dec 31-Dec
2001 2002 2001 2002
Net income/ (loss) per common share:
Modified EBITDA income /(loss)
per share - Basic $0.03 $0.06 ($0.08) $0.15
Modified EBITDA income /(loss)
per share - Diluted $0.03 $0.06 ($0.08) $0.14
Basic net income(loss) per share
Income/(Loss) from
continuing operations ($0.10) $0.35 ($0.62) $0.30
Loss from discontinued
operations ($0.02) $0.00 ($0.03) ($0.01)
Net income/(loss) ($0.12) $0.35 ($0.65) $0.29
Diluted net income(loss) per
share
Income/(Loss) from
continuing operations ($0.10) $0.33 ($0.62) $0.28
Loss from discontinued
operations ($0.02) $0.00 ($0.03) ($0.01)
Net income/(loss) ($0.12) $0.33 ($0.65) $0.27
Weighted average shares outstanding
- Basic 92,313 98,603 91,815 96,874
Weighted average shares outstanding
- Diluted 92,313 105,212 91,815 103,197
Depreciation detail
Cost of revenues $503 $299 $2,026 $1,716
Sales and marketing 166 127 664
542
Product development 977 948 3,571 3,546
General and administrative 83 57 372
252
Total depreciation $1,729 $1,431 $6,633 $6,056
Amortization of deferred stock
compensation detail
Cost of revenues -- -- --
--
Sales and marketing 290 95 1,652
833
Product development 267 123 1,170
901
General and administrative 51 15 414
104
Total amortization of
deferred stock compensation $608 $233 $3,236 $1,838
Stock compensation related to
variable options
Cost of revenues -- ($6) --
($5)
Sales and marketing -- 116 --
170
Product development -- 155 --
232
General and administrative -- 107 --
141
Total stock compensation
related to variable options -- $372 -- $538
Net income (loss) ($11,084) $34,569 ($59,567) $27,932
Less specific items:
Asset impairment and restructuring
charges 4,049 -- 15,840
--
Looksmart share of joint venture
restructuring charges -- 1,430 -- 1,430
Gain on debt extinguishment -- (32,558) -- (32,558)
Net income (loss) excluding
specific items ($7,035) $3,441 ($43,727) ($3,196)
Note: In accordance with generally accepted accounting principles,
the
three and twelve months ended December 31, 2001 have been
restated to reflect the results of the Futurecorp subsidiary,
which was disposed of on March 13, 2002, as discontinued
operations.
LOOKSMART, LTD
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
31-Dec-01 31-Dec-02
ASSETS
Cash $29,766 $47,696
Short-Term Investments 14,346 3,568
Total Unrestricted Cash and
Short-Term Investments 44,112 51,264
Restricted Cash 3,728
--
Accounts Receivable, net 9,294 15,852
Other Current Assets 3,667 3,914
Total Current Assets 60,801 71,030
Property, Plant and Equipment, net 10,272 9,404
Goodwill and Intangibles, net 9,969 15,034
Other Assets 5,060 5,086
Total Assets $86,102 $100,554
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $0
$104
Accounts Payable 2,323 3,333
Deferred Revenue - current portion 9,152 7,798
Other Current Liabilities 14,647 19,513
Total Current Liabilities 26,122 30,748
Long Term Liabilities 36,336 1,904
Total Liabilities 62,458 32,652
Total Equity 23,644 67,902
Total Liabilities and Stockholders'
Equity $86,102 $100,554


SOURCE LookSmart, Ltd.

Liz Haggerty, Vice President, Investor Relations of LookSmart,
Ltd., +1-415-348-7185, or [email protected]; or Jennifer Jarman of The
Blueshirt Group, +1-415-217-7722, or [email protected], for
LookSmart, Ltd.