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CMGI Reports Financial Results for First Quarter of Fiscal 2008
Business Wire News Release
CMGI
CMGI Inc
2007-12-03T16:39:00-05:00
WALTHAM, Mass.--(BUSINESS WIRE)--
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
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CMGI
CMGI Inc
$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
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CMGI
CMGI Inc
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
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CMGI
CMGI Inc
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
-------- --------
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Business Wire News Release
CMGI
CMGI Inc
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%
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CMGI
CMGI Inc
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:
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CMGI
CMGI Inc
-------------------------------------------------
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
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CMGI
CMGI Inc
GAAP change in revenue (3.1%)
Adjusted change in revenue 15.2%
Source: CMGI, Inc.
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