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8-K - FORM 8-K - LOOKSMART LTD | d8k.htm |
Jean-Yves
Dexmier Executive Chairman & CEO
Steve Markowski, CFO
August 2010
1
Exhibit 99.1 |
This
presentation contains forward-looking statements, such as references to our
business prospects.
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 our efforts to control
expenses may not be successful, that our efforts to increase revenue and improve gross
margin may not succeed, that we may be unable to gain or maintain customer
acceptance of our publisher solutions or ad backfill products, that existing and potential
customers for our products may opt to work with, or favor the products of, others due
to more favorable products or pricing terms, that we may be limited in our ability or
unable to retain and grow our ad and customer base, and that we may be limited in our
ability to,
or
be
unable
to,
enhance
our
products
or
our
network
of
distribution
partners.
Additional risks that could cause actual results to differ materially from those projected
are discussed in our Quarterly Report on Form 10-Q for the quarter ended June 30,
2010, our Annual Report on Form 10-K for the year ended December 31, 2009, and
other documents we file with the Securities and Exchange Commission from time to
time (available at www.sec.gov).
The statements presented in this presentation speak only as of todays date. Please
note that except as required by applicable law we undertake no obligation to revise or
update publicly any forward-looking statements for any reason.
2
Safe Harbor |
3
Non-GAAP Information
This presentation includes non-GAAP financial information. LookSmart provides
non-GAAP net income (loss), and Operating Expense excluding
impairment charges, which are non-GAAP financial measures. Non-GAAP net
income (loss) consists of net income (loss) before (a) income (loss) from discontinued
operations; (b) impairment charges; and (c) share-based compensation expense.
Non-GAAP Operating Expenses exclude impairment charges, as noted on Slide
14. The Company believes these non-GAAP financial measures provide important supplemental
information to management and investors. These non-GAAP financial measures reflects
an additional way of viewing aspects of the Companys operations that the Company
believes, when viewed with the GAAP results and the accompanying reconciliation to
corresponding GAAP financial measures, provides useful information regarding factors and trends
affecting the Companys business and results of operations.
For the non-GAAP financial measures non-GAAP net income (loss) and non-GAAP
operating expenses, the adjustments provide management with information about
LookSmarts operating performance that enables comparison of its operating
financial results in different reporting periods. Additionally, our management uses
non-GAAP net income (loss) and non-GAAP operating expenses as supplemental measures in
the evaluation of our business, and believes that non-GAAP net income (loss) and
non-GAAP operating expenses provide visibility into our ability to meet our future
capital expenditures and working capital requirements.
These non-GAAP financial measures are used in addition to, and in conjunction with,
results presented in accordance with GAAP and should not be relied upon to the
exclusion of GAAP financial measures. Management strongly encourages investors to
review the Companys consolidated financial statements in their entirety and to
not rely on any single financial measure. Because non-GAAP financial measures are not
standardized, it may not be possible to compare these financial measures with other
companies non-GAAP financial measures having the same or similar names. In
addition, the Company expects to continue to incur expenses similar to the non-GAAP
adjustments described above, in particular stock based compensation expense, and exclusion of
these items from the Companys non-GAAP measures should not be construed as an
inference that these costs are unusual, infrequent or non-recurring.
Reconciliations of Non-GAAP information to GAAP information are provided elsewhere in this
presentation. |
4
Company Overview
LookSmart
is an online search advertising network
solutions company
Operates in the Tier 2 segment of the online paid search
advertising market
Aggregates traffic from large number of publishers
Delivers traffic to a large number of advertisers
LookSmart
at a glance
Founded in 1997; IPO in 1999
2009 Revenues: $52M
Employees: 65
Headquarters in San Francisco; sales in NYC
Market capitalization: $26M (as of August 9
, 2010)
th |
5
Focus on Fundamentals
Strong Market Opportunity
Diversified customer base
Needs further expansion
Significant competitive advantage: AdCenter Platform
Must improve Traffic Delivery and Optimization
Must expand distribution network |
US Online
Advertising Spend, 2008-2014 .
Source: eMarketer, December 2009
6
We believe search advertising will grow as the largest segment in online
advertising.
$23.6B
$22.4B
$25.2B
$28.3B
$31.0B
$34.0B
$23.4B |
7
A Diversified Customer Base
Intermediaries
Our Largest Category
Search Arbitrage reselling to large search engines
Backfill Customers with direct and arbitrage accounts
Direct Advertisers and Agencies
Transaction-based: CPA (cost-per-acquisition)
Page view-based: CPV (cost-per-view)
Self-service
Search Arbitrage
Transaction-based advertisers
Page view-based advertisers |
8
The Ad Center Platform
A Competitive Advantage
Long-standing technology investment
Operating platform since 2002
Developed with MSN and Ask.com until in-sourcing
Currently available for licensing on an opportunistic basis
A very strong feature set
Granular campaign setting similar to large search engine platforms
Unique granular setting of traffic selection within the network
Considered as a leading platform in the Tier 2 network segment
Self-service
Increased processing capability without degradation of latency
Linear scalability, currently processing about 2B queries/day |
9
Optimizing Traffic Acquisition Costs (TAC)
Quest for quality drives focus on high quality traffic
High quality traffic can be acquired at higher TAC
Effort undertaken over the past year resulted in significant
increase of TAC and resulting lower Gross Margin
Continuing focus on traffic quality
Separate LookSmart from the rest of the Tier 2 network market
Click rating techniques to measure individual click quality
Implementing these techniques in the Ad Center platform to
automate click filtering and improve real time quality
Recently released quality streaming
TAC optimization algorithms
Implemented algorithms to optimize Traffic Acquisition Cost at the
individual click level
Ad Network Gross Margin grew from 32% in Q1 to 42% in Q2 |
10
Increasing Throughput
Will Drive Revenues
Traffic Optimization
Deliver the right
traffic at the right
price to Search Arbitrage
clients, CPA advertisers and Impression advertisers
As traffic delivery meets client performance, increase volume until
reaching traffic limits
Stability and predictability are paramount
Methods
Developing data analytic techniques dedicated to each type of traffic
Real-time traffic selection based on specific account requirements
Price/volume optimization to deliver to customer performance
metrics (profitability, CPA, unique page views,
)
Techniques under development
Further integration in the Ad Center platform
Human capital focused on analytics and traffic optimization |
11
Planning Distribution Network Expansion
Focus on quality and customer requirements
Continuing quest for quality drives search for premium traffic
Optimize traffic for both page view and CPA customers
Traffic optimization will test distribution Network limits
Developing leading Distribution Network group
Requires dedicated human capital
Evaluating diversified traffic sources and media |
12
Targeting Sustainable Profitability
Sustainable profitability will result from:
Continuing tight control of operating expenses
Continuing focus on Traffic Acquisition Costs (TAC) optimization
in order to maintain Gross Margin levels
Controlled Revenue Growth through implementation of data
analytic techniques under development |
13
GAAP Operating Expenses *
*Includes impairment charges of $9.8M in Q408, $0.2M in Q209, and $0.1M in Q409
|
14
Non-GAAP Operating Expenses *
*Excludes impairment charges of $9.8M in Q408, $0.2M in Q209, and $0.1M in Q409
Tight Control of Operating Expenses |
15
Gross Margin and TAC
Optimizing TAC to materially improve Gross Margin |
16
Revenue |
17
GAAP Net Income (Loss)
* Dec-08 not drawn to scale ($12.45M loss)
* |
18
Non-GAAP Net Income (Loss) *
* Without FAS 123R, impairment and discontinued operations
Targeting Sustainable Non-GAAP Net
Income |
19
GAAP to Non-GAAP Reconciliations
Operating Expenses
Mar-08
Jun-08
Sep-08
Dec-08
FY2008
Mar-09
Jun-09
Sep-09
Dec-09
FY2009
Mar-10
Jun-10
GAAP Operating expenses
7,993
7,054
8,146
16,892
40,085
7,347
6,671
5,972
5,330
25,320
4,837
4,945
Less: Impairment charges
-
-
-
9,810
9,810
-
180
-
100
280
-
-
Non-GAAP operating
expenses
7,993
$7,054
$8,146
$7,082
$30,275
$7,347
$6,491
$5,972
$5,230
$25,040
$4,837
$4,945
Net Income
Mar-08
Jun-08
Sep-08
Dec-08
FY2008
Mar-09
Jun-09
Sep-09
Dec-09
FY2009
Mar-10
Jun-10
GAAP net income (loss)
(488)
(176)
(1,721)
(12,449)
(14,834)
(2,040)
(1,286)
(1,941)
(935)
(6,202)
(517)
652
Add: Stock based
compensation from continuing
operations
1,013
559
683
479
2,734
517
515
359
226
1,618
169
163
Add: (Income) loss from
discontinued operations
307
136
5
1,073
1,521
(109)
(130)
(132)
(93)
(464)
(93)
(85)
Add: Impairment charges
-
-
-
9,810
9,810
-
180
-
100
280
-
-
Non-GAAP net income (loss)
832
$519
($1,033)
($1,087)
($769)
($1,632)
($721)
($1,714)
($702)
($4,768)
($441)
$730 |
20
Tangible Net Worth
TANGIBLE NET WORTH PER SHARE
$1.43
June 30, 2010
Tangible
Net Worth
ASSETS
Current assets:
Cash and cash equivalents
$ 24,457
Short-term investments
1,000
Total cash, cash equivalents and short-term investments
25,457
Trade accounts receivable, net
4,929
Prepaid expenses and other current assets
756
Total current assets
31,142
31,142
Property and equipment, net
3,873
3,873
Capitalized software and other assets, net
1,990
142
Total assets
$ 37,005
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable
$ 2,821
Accrued liabilities
4,088
Deferred revenue and customer deposits
1,022
Current portion of long-term obligations
1,267
Total current liabilities
9,198
Capital lease and other obligations, net of current portion
1,398
Total liabilities
10,596
(10,596)
Stockholders' equity:
Common stock
17
Additional paid-in capital
261,337
Accumulated other comprehensive gain
-
Accumulated deficit
(234,945)
Total stockholders' equity
26,409
Total liabilities and stockholders' equity
$ 37,005
Tangible net worth
24,561
Fully diluted shares outstanding at June 30, 2010
17,192 |
21
Summary
PPC Search Advertising is a growing market
We are improving the business fundamentals to
fully leverage our market opportunity
We have returned to profitability through a
combination of tight expense control and gross
margin improvement
We are now targeting sustained profitability |
Questions
22 |