Press Release

Printer Friendly Version View printer-friendly version
<< Back
CMGI Reports Financial Results for Third Quarter of Fiscal 2007
Company Reports 6.5% Revenue Growth and Improved Year Over Year Operating Income Performance

Waltham, Mass. June 5, 2007 -- CMGI, Inc. (Nasdaq: CMGI) today reported financial results for its third quarter of fiscal year 2007, ended April 30, 2007.

Financial Summary

  • Net revenue increased 6.5% from prior year to $282.1 million
  • Operating income improved to $0.9 million from an operating loss of $1.7 million in the prior year
  • Non-GAAP operating income increased to $7.5 million from $7.0 million in the third quarter of the prior year
  • Net income decreased to $9.4 million compared to net income of $21.7 million in the same period last year
  • Cash, cash equivalents and marketable securities at April 30, 2007 increased to $250.3 million from $213.0 million at April 30, 2006

Third Quarter Consolidated Financial Results

CMGI reported net revenue of $282.1 million for the third quarter of fiscal 2007, compared to net revenue of $264.7 million for the same period one year ago, a $17.3 million or 6.5% increase. Gross margin increased from $28.9 million in the third quarter of fiscal 2006 to $30.0 million in the third quarter of fiscal 2007, an increase of $1.1 million or 3.8%. As a percentage of revenues, gross margin declined from 10.9% in the third quarter of fiscal 2006 to 10.6% in the third quarter of fiscal 2007.

Operating income was $0.9 million for the third quarter of fiscal 2007 compared to an operating loss of $1.7 million in the same period of the prior fiscal year, an improvement of $2.6 million year over year. The operating income improvement was a result of increased operational efficiencies, especially in the Company's operations in Asia and lower restructuring expenses.

During the quarter, CMGI also continued to invest in its strategic initiatives which are focused on penetrating new target vertical markets including Communications, Storage and Consumer Electronics, expanding service offerings, deploying a new Enterprise Resource Planning (ERP) technology platform and implementing a shared services model, which includes consolidating IT and finance infrastructures. These investments totaled approximately $4.6 million during the quarter, of which approximately $2.5 million was recorded as an operating expense in the period, with the remainder capitalized on the balance sheet. In comparison, the third quarter of the prior year included expense of $2.9 million related to these initiatives.

"During this quarter we continued to make meaningful progress in our supply chain business, which is resulting in improved financial performance," said Joseph C. Lawler, Chairman, President and Chief Executive Officer of CMGI. "We grew revenue 6.5% despite a $14.2 million decline in revenue related to a previously announced program change for one client. The growth was driven by improved revenue performance in both our Asian and European operations. In addition, we reported an improvement in operating income, which was supported by the steps we have taken to improve operating efficiencies."

Excluding net charges related to depreciation, amortization of intangibles, stock-based compensation and restructuring, CMGI reported non-GAAP operating income of $7.5 million for the third quarter of fiscal 2007 versus non-GAAP operating income of $7.0 million for the same period in fiscal 2006.

For the third quarter, CMGI reported net income of $9.4 million or $0.02 diluted earnings per share, compared to net income of $21.7 million or $0.04 diluted earnings per share for the same period in the prior fiscal year. The prior year period reflected gains of $22.6 million as a result of liquidity events in the Company's @Ventures business, compared with gains of $4.7 million related to @Ventures liquidity events realized in the third quarter of fiscal 2007. The current quarter gains included a $1.6 million gain from the acquisition of Mitchell International, Inc. by a third party and gains of approximately $2.5 million and $0.6 million, respectively, recorded to adjust previously recorded gains on acquisitions by third parties of WebCT, Inc. and Realm Business Solutions, Inc., two @Ventures portfolio companies, due to the release of funds held in escrow.

As of April 30, 2007, CMGI had working capital of approximately $326.8 million compared with $291.6 million at April 30, 2006. Included in working capital as of April 30, 2007 were cash, cash equivalents and marketable securities totaling $250.3 million compared to $213.0 million at April 30, 2006.

"Looking forward, our long-term goals are unchanged and we believe that executing on our overall strategy with both our supply chain and venture capital businesses will help us achieve growth and continue to improve our financial performance," added Lawler.

Outlook

The Company currently expects revenues of approximately $1.10 billion to $1.15 billion in fiscal 2007. With respect to gross margin percentage, while the Company does not expect second half gross margin levels to approximate the levels achieved in the seasonally high second quarter, the Company continues to expect full year gross margin percentage to show improvement over the prior year.

Conference Call Information

CMGI will hold a conference call to discuss its fiscal 2007 third quarter results at 5:00 PM Eastern Time on June 5, 2007. Investors can listen to the conference call on the Internet at www.cmgi.com/investor. To listen to the live call, go to the Web site at least 15 minutes prior to the start time to download and install the necessary audio software.

Non-GAAP Information

The Company believes that its non-GAAP measure of operating income/(loss) ("non-GAAP operating income/(loss)") provides investors with a useful supplemental measure of the Company's operating performance by excluding the impact of non-cash charges and restructuring activities. Each of the excluded items was excluded because they may be considered to be of a non-operational or non-cash nature. Historically, CMGI has recorded significant impairment and restructuring charges. These charges, as well as charges related to depreciation, amortization of intangible assets and stock-based compensation, have been excluded for the purpose of enhancing the understanding by both management and investors of the underlying baseline operating results and trends of the business, which management uses to evaluate our financial performance for purposes of planning and forecasting future periods. Non-GAAP operating income/(loss) does not have any standardized definition and, therefore, is unlikely to be comparable to similar measures presented by other reporting companies. Non-GAAP operating income/(loss) should not be evaluated in isolation of, or as a substitute for, the Company's financial results prepared in accordance with United States generally accepted accounting principles. The Company's usage of non-GAAP operating income/(loss), and the underlying methodology in excluding certain charges, is not necessarily an indication of the results of operations that may be expected in the future, or that the Company will not, in fact, incur such charges in future periods. A table reconciling CMGI's non-GAAP operating income/(loss) to its GAAP operating income/(loss) and its GAAP net income/(loss) is included in the statement of operations information in this release.

About CMGI

CMGI, Inc. (Nasdaq: CMGI), through its subsidiary ModusLink, provides industry-leading global supply chain management services and solutions that help businesses market, sell and distribute their products around the world. In addition, CMGI's venture capital business, @Ventures, invests in a variety of technology ventures. For additional information, see www.cmgi.com.

This release contains forward-looking statements, which address a variety of subjects including, for example, expected revenues and gross margins to be achieved in fiscal 2007, the further execution of CMGI's strategic business plan and impact of that plan, prospects for growth, the expected impact of strategic initiatives and financial performance. All statements other than statements of historical fact, including without limitation, those with respect to CMGI's goals, plans, expectations and strategies set forth herein are forward-looking statements. The following important factors and uncertainties, among others, could cause actual results to differ materially from those described in these forward-looking statements: CMGI's success, including its ability to improve its cash position, expand its operations and revenues, lower its costs, improve its gross margins and sustain profitability, depends on its ability to execute on its business strategy and the continued and increased demand for and market acceptance of its products and services; CMGI's management may face strain on managerial and operational resources as they try to oversee the expanded operations; CMGI may not be able to expand its operations in accordance with its business strategy; CMGI's cash balances may not be sufficient to allow CMGI to meet all of its business and investment goals; CMGI may experience difficulties integrating technologies, operations and personnel in accordance with its business strategy; CMGI derives a significant portion of its revenue from a small number of customers and the loss of any of those customers could significantly damage CMGI's financial condition and results of operations; ModusLink frequently sells to its supply chain management clients on a purchase order basis rather than pursuant to contracts with minimum purchase requirements, and therefore its sales are subject to demand variability; risks inherent with conducting international operations; the mergers and acquisitions and IPO markets are inherently unpredictable and liquidity events for companies in the venture capital portfolio may not occur; and increased competition and technological changes in the markets in which CMGI competes. For a detailed discussion of cautionary statements that may affect CMGI's future results of operations and financial results, please refer to CMGI's filings with the Securities and Exchange Commission, including CMGI's most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q. Forward-looking statements represent management's current expectations and are inherently uncertain. We do not undertake any obligation to update forward-looking statements made by us.

	                     CMGI, Inc. and Subsidiaries
 	        	Condensed Consolidated Balance Sheets
                       (In thousands, except per share amounts)
                                    (Unaudited)
 
                                              April 30,        July 31,         April 30,
                                                2007             2006             2006
                                             ---------        ---------        --------- 
Assets:		 		
   Cash and cash equivalents                $  137,325        $ 131,728        $ 122,497 
   Available-for-sale securities                   848            2,554            2,960
   Short-term investments                      112,100           94,450           87,500 
   Trade accounts receivable, net              211,953          175,391          188,928
   Inventories, net                             67,566           77,887           84,538
   Prepaid and other current assets             13,243           11,638           10,804
   Current assets of discontinued operations        -             1,962            3,054
                                             ---------        ---------        --------- 
Total current assets                           543,035          495,610          500,281
                                             ---------        ---------        ---------
   Property and equipment, net                  53,162           46,020           42,735
   Investments in affiliates                    26,736           20,655           22,816
   Goodwill                                    181,376          181,239          181,607 
   Intangible assets, net                       12,922           16,540           17,746 
   Other assets                                  3,020            3,139            3,128
   Non-current assets of  				
          discontinued operations                   -                -             2,417 
                                             ---------        ---------        --------- 
                                            $  820,251        $ 763,203        $ 770,730 
                                             =========        =========        =========
Liabilities:				
   Current portion of capital 
           lease obligations                $      456        $     321        $     315
   Accounts payable                            142,530          151,077          149,827
   Current portion of accrued restructuring      4,461            5,368            7,053
   Accrued income taxes                          6,993            5,502            1,720
   Accrued expenses                             55,747           43,526           44,902 
   Other current liabilities                     3,022            2,819            3,085 
   Current liabilities of 						   
          discontinued operations                3,057            4,775            1,820   
                                             ---------        ---------        ---------
Total current liabilities                      216,266          213,388          208,722
                                             ---------        ---------        ---------
   Revolving line of credit                     24,786           24,786           35,786
   Long-term portion of accrued restructuring    5,354            6,831            7,603
   Long-term portion of capital 				
          leases obligations                       446              548              619
   Other long-term liabilities                  13,211           15,629           17,909
   Non-current liabilities of 					
          discontinued operations                2,256            4,106               98 
                                             ---------        ---------        ---------
                                                46,053           51,900           62,015
Stockholders' equity                            557,932          497,915          499,993
                                             ---------        ---------        ---------
                                           $   820,251       $  763,203        $ 770,730 
                                             =========        =========        =========
     
	                      CMGI, Inc. and Subsidiaries
                     Condensed Consolidated Statements of Operations
                       (In thousands, except per share amounts)
                                    (Unaudited)
 
                             Three months ended             Nine months ended
                       April 30,  January 31,  April 30,   April 30,   April 30,
                         2007        2007        2006        2007        2006
                      ---------   ---------   ---------   ---------   ---------
Net revenue           $282,078    $324,752    $264,748	  $890,466    $887,006 


Operating expenses:
   Cost of revenue     252,111     284,219     235,886     789,923     796,768 
   Selling               3,404       3,320       5,108      10,489      15,789 
   General and
    administrative      24,494      22,356      21,710      67,056      63,103 
   Amortization of
    intangibles          1,206       1,206       1,206       3,618       3,618 
   Restructuring, net      (14)      2,382       2,582       2,181       8,885 
                      --------    --------   ---------   ---------   ---------
    Total operating
     expenses          281,201     313,483     266,492     873,267     888,163 
                      --------    --------   ---------   ---------   ---------

Operating income(loss)     877      11,269      (1,744)     17,199      (1,157) 


Other income 
 (expenses):
   Interest income       2,551       2,652       1,443       7,395       4,000 
   Interest expense       (660)       (637)       (795)     (1,901)     (2,069) 
   Other gains, net      5,073      28,030      21,976      34,025      24,093
   Equity in 
    income(losses) 
    of affiliates          868         398         325       2,002         (73)
                     ---------    ---------   ---------   ---------   ---------
      Total other       
       income            7,832      30,443      22,949      41,521      25,951 
                     ---------    ---------   ---------   ---------   ---------



Income from 
 continuing operations 
 before taxes            8,709      41,712      21,205      58,720      24,794
Income tax expense
 (benefit)                (909)      5,727        (738)      3,378         963
                     ---------    ---------   ---------   ---------   ---------
Income from 
 continuing operations   9,618      35,985      21,943      55,342      23,831 


Discontinued
 operations, net of
 income taxes:
   Income (loss) from
    discontinued
    operations            (203)       (112)       (269)        273      (6,340)
                      --------    --------   ---------   ---------   ---------
Net income            $  9,415    $ 35,873   $  21,674   $  55,615   $  17,491 
                      ========    ========   =========   =========   =========


Basic and diluted
 earnings per
 share:
   Earnings from 
    continuing
    operations        $   0.02    $   0.07   $    0.04   $    0.11   $    0.05 

   Income (loss) from 
    discontinued
    operations        $  (0.00)   $  (0.00)  $   (0.00)  $    0.00   $   (0.01)

                      --------    --------   ---------   ---------   ---------
   Net earnings       $   0.02    $   0.07   $    0.04   $    0.11   $    0.04  
                      ========    ========   =========   =========   =========

Shares used in 
 computing basic 
 earnings  
 per share             484,756     484,628     483,188     484,523     482,614
                      ========    ========   =========   =========   =========
Shares used in 
 computing diluted 
 earnings  
 per share              
                       490,553     486,683     485,927     487,169     486,868 
                      ========    ========   =========   =========   =========



                      CMGI, Inc. and Subsidiaries
           Condensed Consolidated Statements of Operations Information
                            (In thousands)

                              (Unaudited)

                            Three months ended             Nine months ended
                      April 30,  January 31,  April 30,   April 30,   April 30,
                        2007        2007        2006        2007        2006
                      --------    --------   ---------   ---------   ---------

Net revenue:
------------
           
    Americas          $ 87,331    $121,292    $107,098    $314,788    $380,538
    Asia                76,352      77,116      62,229     219,915     185,897
    Europe             118,395     126,344      95,421     355,763     320,571
                      --------    --------   ---------   ---------   ---------
                      $282,078   $ 324,752    $264,748   $ 890,466   $ 887,006
                      ========    ========   =========   =========   =========





Operating income (loss):
------------------------

    Americas          $    608    $  7,370   $   3,542   $  13,424   $  15,012   
    Asia                 7,660      10,779       2,613      25,412      13,841   
    Europe              (2,734)     (1,913)     (3,429)     (8,074)    (17,469)  
                      --------    --------   ---------   ---------   ---------
                         5,534      16,236       2,726      30,762      11,384 
    Other               (4,657)     (4,967)     (4,470)    (13,563)    (12,541)
                      --------    --------   ---------   ---------   ---------
                      $    877    $ 11,269   $  (1,744)   $ 17,199   $  (1,157) 
                      ========    ========   =========   =========   =========


Non-GAAP operating income:
---------------------------------

    Americas          $  2,243    $ 10,598   $   5,622   $  19,611   $  21,278   
    Asia                 9,800      12,721       4,637      31,328      19,102   
    Europe                (645)        498         276      (2,228)     (6,366)   
                      --------    --------   ---------   ---------   ---------
                        11,398      23,817      10,535      48,711      34,014 
          
    Other               (3,935)     (4,286)     (3,525)    (11,472)     (9,212)
                      --------    --------   ---------   ---------   ---------
                      $  7,463    $ 19,531   $   7,010   $  37,239   $  24,802
                      ========    ========   =========   =========   =========




Note: Non-GAAP operating income represents 
total operating income, excluding net charges related to		
depreciation, amortization of intangible assets, stock-based 
compensation and restructuring.					
	
TABLE RECONCILING NON-GAAP OPERATING INCOME TO
 GAAP OPERATING INCOME (LOSS) AND NET INCOME

Non-GAAP Operating 
     income           $  7,463    $ 19,531   $   7,010   $  37,239   $  24,802 
Adjustments:
Depreciation            (4,107)     (3,442)     (3,407)    (10,452)     (8,108)
Amortization of 
  intangible assets     (1,206)     (1,206)     (1,206)     (3,618)     (3,618)
Stock-based 
  compensation          (1,287)     (1,232)     (1,559)     (3,789)     (5,348)
Restructuring,net           14      (2,382)     (2,582)     (2,181)     (8,885)
                      --------    --------   ---------   ---------   ---------
GAAP Operating 
  income (loss)       $    877    $ 11,269   $  (1,744)  $  17,199   $  (1,157) 
                      --------    --------   ---------   ---------   ---------
Other income, net        7,832      30,443      22,949      41,521      25,951
Income tax 
  expense (benefit)       (909)      5,727        (738)      3,378         963 
Income (loss) from 
  discontinued 
  operations              (203)       (112)       (269)        273      (6,340)
                      --------    --------   ---------   ---------   ---------
Net income            $  9,415    $ 35,873   $  21,674   $  55,615   $  17,491 
                      ========    ========   =========   =========   =========

Contacts:
Investors-Financial
Steven G. Crane
Chief Financial Officer
781-663-5012
ir@cmgi.com  

OR

Media
Bob Joyce
Financial Dynamics
617-747-3620
bob.joyce@fd.com