CMGI Announces Financial Results for Third Quarter of Fiscal 2006
Monday June 5, 4:11 pm ET
Company Reports 11% Growth in Net Income
WALTHAM, Mass.--(BUSINESS WIRE)--June 5, 2006--CMGI, Inc. (Nasdaq: CMGI - News) today reported financial results for its fiscal 2006 third quarter ended April 30, 2006.
Financial Highlights
* Net Income up 11% from Q3 of fiscal 2005, to $21.7 million
* Operating Loss of $1.7 million includes restructuring of $2.6 million
* Non-GAAP Operating Income increased 53% to $7.0 million versus last year
* Gross Margins increased to 10.9% compared to 10.3% in prior year period
* Generated $24.2 million in cash from operations
Business Highlights
ModusLink:
* Awarded 32 new customer engagements, with expected annualized revenue of $73 million
* Reported 56% of new engagements and 44% of expected annualized revenue from new target markets - Communications, Storage and Consumer Electronics
* Expanded footprint in Singapore with opening of third solution center
* Advanced vertical market services strategy as first supply chain services provider to deliver a new wireless activation service for laptop hardware manufacturers and a full-cycle logistics solution for the hard disk drive market
@Ventures:
* Liquidity event for e-learning systems provider, WebCT, through merger with Blackboard, resulting in proceeds to CMGI of $21.2 million
* Liquidity event for Realm Business Solutions, a software developer for the commercial real estate industry, with proceeds to CMGI of $6.9 million
Third Quarter Consolidated Financial Results
CMGI reported net revenue of $264.7 million for its third quarter ended April 30, 2006. This compares to net revenue of $260.8 million for the same period one year ago, a $3.9 million or 1.5% increase year over year.
CMGI reported an operating loss of $1.7 million for the third quarter, the same as the operating loss for the third quarter of fiscal 2005. Compared with the prior year, operating results were affected by an increase in gross margins offset by $1.1 million of higher restructuring expenses and $2.7 million of planned investment in the Company's strategic initiatives. Gross margins increased by $1.9 million due to $3.9 million of higher revenues and benefited from productivity gains. The $2.6 million of restructuring expenses during the quarter primarily reflects actions taken in Europe to consolidate certain operations in order to better leverage infrastructure and to drive operational efficiencies.
During the third quarter, CMGI continued to invest in its strategic initiatives focused on penetrating new target verticals, expanding service offerings, deploying a new ERP technology platform and advancing global hub and spoke initiatives, such as consolidating IT and finance infrastructures. These actions resulted in incremental operating expenses during the quarter of $2.7 million versus the same period in the prior year.
"During the quarter, we continued to successfully execute on our strategic initiatives which drove increased productivity and efficiency throughout the organization," said Joseph C. Lawler, President and Chief Executive Officer. "We have made significant progress penetrating our key target vertical markets by leveraging the strength of our global operating infrastructure and have introduced new, customized solutions tailored to our clients' needs. In addition, we expanded our global reach with the opening of a third solution center in Singapore, strengthening our position as the leading global provider of outsourced supply chain services."
Excluding the effects of charges related to depreciation, amortization of intangibles, stock-based compensation and restructuring, CMGI reported non-GAAP operating income of $7.0 million for the third quarter of fiscal 2006 versus non-GAAP operating income of $4.6 million for the same period in the prior fiscal year. The year over year increase in non-GAAP operating income primarily reflects the impact of improved gross margins and continued cost reduction actions within our general and administrative expenses.
For the quarter, CMGI reported net income of $21.7 million compared to net income of $19.6 million for the same period in the prior fiscal year. Net income primarily reflects gains from two liquidity events within the @Ventures portfolio. These gains included a $19.4 million gain from the acquisition of WebCT, an e-learning systems provider, on proceeds to CMGI of $21.2 million, and a $3.2 million gain from the acquisition of Realm Business Solutions, a software developer for the commercial real estate industry, on proceeds to CMGI of $6.9 million.
"We had good results this quarter attributable, in part, to recent @Ventures activity, including two liquidity events which contribute significantly to our track record of success in this area. We remain optimistic about the prospects of our portfolio, especially those in the clean energy sector," continued Lawler.
"As we look ahead, we continue to be excited about new opportunities for growth and market leadership in the supply chain management marketplace. We are increasingly seeing multi-national companies seeking to leverage the benefits of outsourcing for the delivery of global solutions that span all three of our primary regions. This quarter, ModusLink continued to secure large-scale engagements with major technology companies seeking ModusLink's expertise in delivering high-value services across the globe to reduce their supply chain costs and improve time to market and customer satisfaction. With globalization on the rise and the trend toward outsourcing continuing, ModusLink has significant opportunities to capture new market share, deliver higher margin services and increase revenue," concluded Lawler.
As of April 30, 2006, CMGI had working capital of approximately $291.6 million compared with $224.6 million at July 31, 2005 and $259.7 million at January 31, 2006. The increase in working capital this quarter primarily reflects the proceeds received from the @Ventures liquidity events noted above. Included in the working capital position at the end of the third quarter were cash and marketable securities totaling $213.0 million. CMGI generated $24.2 million of cash from operating activities of continuing operations during the third quarter.
Conference Call Information
CMGI will hold a conference call to discuss its fiscal 2006 third quarter results at 5:00 PM Eastern Time on June 5, 2006. 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 - News), 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. |
