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CMGI Reports Financial Results for First Quarter of Fiscal 2008

Company Reports Improved Operating Income

WALTHAM, Mass.--(BUSINESS WIRE)--Dec. 3, 2007--CMGI, Inc. (Nasdaq: CMGI) today reported financial results for its first quarter of fiscal year 2008, ended October 31, 2007.

    Financial Summary

    --  Net revenue of $274.7, a decrease of 3.1% compared to the
        first quarter of fiscal 2007

    --  Operating income of $9.1 million, an increase of 80.9%
        compared to operating income in the year ago period

    --  Income from continuing operations of $9.2 million, 5.1% lower
        than income from continuing operations in the same period last
        year

    --  Net income of $8.6 million, 16.6% lower than net income in the
        same period last year

    --  Non-GAAP operating income of $17.1 million, an increase of
        66.4% from non-GAAP operating income in the first quarter of
        the prior year

    --  Diluted earnings per share from continuing operations of
        $0.19, compared to diluted earnings per share from continuing
        operations of $0.20 for the same period in the prior fiscal
        year (in each case, adjusted for the recent reverse stock
        split)

    --  Diluted earnings per share including discontinued operations
        of $0.18, compared to diluted earnings per share including
        discontinued operations of $0.21 for the same period in the
        prior fiscal year (in each case, adjusted for the recent
        reverse stock split)

    --  Cash, cash equivalents and marketable securities at October
        31, 2007 increased to $261.2 million from $222.2 million at
        October 31, 2006

    First Quarter Consolidated Financial Results

"We reported good financial results in the quarter with revenue and profitability in line with or better than our expectations," said Joseph C. Lawler, Chairman, President and Chief Executive Officer of CMGI. "Revenue was expectedly lower compared with last year due to two specific previously announced client programs that were discontinued, however we are very pleased with the growth we are seeing from other client engagements. Excluding those discontinued programs, revenue grew by approximately 15% compared to the year ago period. Gross margin performance was higher than expected, driven by work mix, continuous improvement initiatives and higher volumes for certain client programs."

"In addition, we continued to make operational progress this quarter," added Lawler. "Our sales and marketing efforts are progressing, our shared services model is having an impact and the implementation of our IT platform is on track. We continued to make planned investments in our business that should enable us to reach our long-term objectives."

CMGI reported net revenue of $274.7 million for the first quarter of fiscal 2007, a 3.1% decrease compared to net revenue of $283.6 million for the same period one year ago. Gross profit for the quarter increased 30.0% to $39.1 million from $30.0 million in the first quarter of fiscal 2007, primarily due to favorable product mix especially within the company's Europe and Asia operations as well as efficiencies from continuous improvement initiatives and higher volumes for certain client programs. Gross margin increased to 14.2% in the first quarter of fiscal 2008, compared to 10.6% in the first quarter of fiscal 2007.

Selling, General and Administrative expense, including restructuring and amortization of stock compensation for the first quarter was $29.9 million compared to $25.0 million in the first quarter of the prior period. The increase in SG&A was primarily due to planned investment in the company's IT infrastructure and restructuring related expense of $1.6 million in the quarter associated with a restructuring action taken in North America.

Operating income was $9.1 million for the first quarter of fiscal 2008 compared to operating income of $5.1 million in the prior period, an improvement of 80.9%. The operating income improvement for the first quarter of 2008 was a result of improved gross margins during the quarter.

For the first quarter, CMGI reported income from continuing operations of $9.2 million, or $0.19 diluted earnings per share, compared to income from continuing operations of $9.7 million, or $0.20 diluted earnings per share, for the same period in the prior fiscal year (in each case, adjusted for the recent reverse stock split).

Including income (losses) from discontinued operations, CMGI reported net income of $8.6 million or $0.18 diluted earnings per share (after giving effect to the recent reverse stock split), compared to net income of $10.3 million or $0.21 diluted earnings per share (after giving effect to the recent reverse stock split) for the same period in the prior fiscal year. Net income for the quarter reflects improved operating income performance primarily offset by an increase in income tax expense. Income tax expense for the first quarter of 2008 was $2.1 million. This compares to a tax benefit of $1.4 million in the first quarter of 2007, which was primarily a result of a reduction in valuation allowance for certain net operating losses in Europe.

Excluding net charges related to depreciation, restructuring and amortization of intangibles and stock-based compensation, non-GAAP operating income was $17.1 million for the first quarter of fiscal 2008, a 66.4% improvement compared with non-GAAP operating income of $10.2 million for the same period in fiscal 2007.

As of October 31, 2007, CMGI had working capital of approximately $294.9 million compared with $282.5 million at October 31, 2006. Included in working capital as of October 31, 2007 were cash, cash equivalents and marketable securities totaling $261.2 million compared to $222.2 million at October 31, 2006.

"The transformation of our business into a global leader in supply chain services is ongoing and our long-term goals are unchanged," continued Lawler. "Looking forward, the market for supply chain services is strong and we continue to focus on our target vertical markets as well as expansion of new higher margin solutions. We also continue to invest in our business to drive operational improvements and increase long-term profitability. As we move forward, we are prepared for the work ahead of us to complete our transformation and have our business running optimally."

Outlook

The Company continues to expect revenue of $1.10 billion to $1.15 billion and operating income to be approximately 2.0% to 2.5% of revenue in fiscal 2008, before any restructuring. Restructuring for fiscal 2008 is expected to be $5 million to $8 million.

Stock Repurchase Program Update

The Company also announced that during the first quarter ended October 31, 2007, it repurchased 568,000 shares (after giving effect to the recent reverse stock split) for aggregate consideration of $8.0 million. These purchases were made in open market transactions under the Company's stock repurchase program which was announced on September 25, 2007 and pursuant to which the Company has authorized the repurchase of up to $50 million of common stock over an 18-month period.

Conference Call Information

CMGI will hold a conference call to discuss its fiscal 2008 first quarter results at 5:00 PM Eastern Time on December 3, 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, gross margins to be achieved and restructuring charges to be incurred in fiscal 2008, 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, sustain profitability, reach its long-term objectives and operate optimally, depends on its ability to execute on its business strategy and the continued and increased demand for and market acceptance of its services; global economic conditions, especially in the technology sector; demand for our clients' products; 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. 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)

                             (Unaudited)


                                                     October  October
                                                        31,      31,
                                                       2007     2006
                                                     -------- --------

  Assets:
          Cash and cash equivalents                  $202,464 $130,280
          Available-for-sale securities                   990    1,756
          Short-term investments                       57,750   90,200
          Trade accounts receivable, net              212,214  201,602
          Inventories, net                             70,999   93,832
          Prepaid and other current assets             12,151   14,323
          Current assets of discontinued operations        50      103
                                                     -------- --------
  Total current assets                                556,618  532,096
                                                     -------- --------

  Property and equipment, net                          58,255   50,003
  Investments in affiliates                            35,191   24,461
  Goodwill                                            178,077  181,388
  Intangible assets, net                               10,970   15,334
  Other assets                                          9,604    2,981
  Non-current assets of discontinued operations             -       14
                                                     -------- --------
                                                     $848,715 $806,277
                                                     -------- --------

  Liabilities:
          Current portion of capital lease
           obligations                               $    477 $    341
          Revolving line of credit                     24,786        -
          Accounts payable                            175,066  181,509
          Current portion of accrued restructuring      5,601    4,679
          Accrued income taxes                          1,950    6,328
          Accrued expenses                             47,710   50,593
          Other current liabilities                     2,667    2,775
          Current liabilities of discontinued
           operations                                   3,472    3,326
                                                     -------- --------
  Total current liabilities                           261,729  249,551
                                                     -------- --------

           Revolving line of credit                         -   24,786
           Long-term portion of accrued
            restructuring                               4,863    5,755
           Long-term portion of capital leases
            obligations                                   202      488
           Other long-term liabilities                 21,661   13,010
           Non-current liabilities of discontinued
            operations                                  1,035    3,315
                                                     -------- --------
                                                       27,761   47,354
  Stockholders' equity                                559,225  509,372
                                                     -------- --------
                                                     $848,715 $806,277
                                                     -------- --------
                     CMGI, Inc. and Subsidiaries
           Condensed Consolidated Statements of Operations
                (In thousands, except per share data)

                             (Unaudited)



                                               Three months ended
                                                  October 31,

                                          ----------------------------

                                            2007      2006     Change

                                          ----------------------------

Net revenue                               $274,740  $283,636    (3.1%)
Cost of revenue                            235,676   253,593    (7.1%)

                                          --------- --------- --------
    Gross profit                            39,064    30,043    30.0%
                                          --------- --------- --------
    Gross margin                              14.2%     10.6%

Operating expenses:
    Selling                                  3,885     3,765     3.2%
    General and administrative              23,655    20,206    17.1%
    Amortization of intangibles                762     1,206   (36.8%)
    Restructuring, net                       1,623      (187) (967.9%)
                                          --------- --------- --------
       Total operating expenses             29,925    24,990    19.7%
                                          --------- --------- --------

    Operating income                         9,139     5,053    80.9%

Other income (expenses):
    Interest income                          2,988     2,192    36.3%
    Interest expense                          (614)     (604)    1.7%
    Other gains (losses), net                 (365)      922  (139.6%)
    Equity in income of affiliates             231       736   (68.6%)
                                          --------- --------- --------
       Total other income                    2,240     3,246   (31.0%)
                                          --------- --------- --------


Income from continuing operations before
 taxes                                      11,379     8,299    37.1%
Income tax expense (benefit)                 2,139    (1,440) (248.5%)
                                          --------- --------- --------
       Income from continuing operations     9,240     9,739    (5.1%)

Discontinued operations, net of income
 taxes:
   Income (loss) from discontinued
    operations                                (630)      588  (207.1%)
                                          --------- --------- --------


Net Income                                $  8,610  $ 10,327   (16.6%)
                                          ========= ========= ========


Basic and diluted earnings (loss) per
 share:

   Earnings from continuing operations    $   0.19  $   0.20    (5.0%)

   Income (loss) from discontinued
    operations                            $  (0.01) $   0.01  (200.0%)
                                          --------- --------- --------

   Net earnings                           $   0.18  $   0.21   (14.3%)
                                          ========= ========= ========


Shares used in computing basic earnings
 (loss) per share                           48,052    48,438
                                          ========= =========

Shares used in computing diluted earnings
 (loss) per share                           48,313    48,572
                                          ========= =========
                     CMGI, Inc. and Subsidiaries
     Condensed Consolidated Statements of Operations Information
                            (In thousands)

                             (Unaudited)


                                                   Three months ended

                                                   October   October
                                                      31,       31,
                                                     2007      2006
                                                  --------------------

Net revenue:
-------------------------------------------------

       Americas                                   $ 84,183   $106,165
       Asia                                         86,712     66,447
       Europe                                      103,845    111,024
                                                  ---------- ---------
                                                  $274,740   $283,636
                                                  ========== =========

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

       Americas                                   $  3,216   $  5,446
       Asia                                         13,016      6,973
       Europe                                       (2,181)    (3,427)
                                                  ---------- ---------
                                                    14,051      8,992
       Other                                        (4,912)    (3,939)
                                                  ---------- ---------
                                                  $  9,139   $  5,053
                                                  ========== =========

Non-GAAP operating income (loss):
-------------------------------------------------

       Americas                                   $  6,356   $  6,770
       Asia                                         15,342      8,807
       Europe                                         (565)    (2,081)
                                                  ---------- ---------
                                                    21,133     13,496
       Other                                        (4,081)    (3,251)
                                                  ---------- ---------
                                                  $ 17,052   $ 10,245
                                                  ========== =========

Note: Non-GAAP operating income represents total operating income,
 excluding net charges related to depreciation, amortization of
 intangible assets, stock-based compensation and restructuring.

Reconciliations of Non-GAAP measures:

TABLE RECONCILING NON-GAAP OPERATING INCOME TO GAAP OPERATING INCOME
 AND NET INCOME

NON-GAAP Operating income                         $ 17,052   $ 10,245

Adjustments:
Depreciation                                        (4,151)    (2,903)
Amortization of intangible assets                     (762)    (1,206)
Stock-based compensation                            (1,377)    (1,270)
Restructuring, net                                  (1,623)       187
                                                  ---------- ---------
GAAP Operating income                             $  9,139   $  5,053
                                                  ---------- ---------

Other income, net                                    2,240      3,246
Income tax expense (benefit)                         2,139     (1,440)
Income (loss) from discontinued operations            (630)       588
                                                  ---------- ---------
Net income                                        $  8,610   $ 10,327
                                                  ---------- ---------

TABLE RECONCILING ADJUSTED REVENUE GROWTH

Revenue (GAAP)                                    $274,740   $283,636
   Less revenue from two previously announced
    discontinued programs                           (1,607)   (46,569)
                                                  ---------- ---------
Adjusted Revenue                                  $273,133   $237,067
                                                  ========== =========

Q1 Fiscal 2008 vs. Q1 Fiscal 2007
GAAP change in revenue                                (3.1%)
Adjusted change in revenue                            15.2%

    CONTACT: CMGI, Inc.
             Investors-Financial
             Steven G. Crane, 781-663-5012
             Chief Financial Officer
             ir@cmgi.com
             or
             Media
             Financial Dynamics
             Bob Joyce, 617-747-3620
             bob.joyce@fd.com

    SOURCE: CMGI, Inc.