CMGI�, Inc. (NASDAQ: CMGI) today reported financial results for its
third quarter of fiscal year 2008, ended April 30, 2008. Financial
Summary Net revenue of $239.2 million, a decrease of 15.2% compared
to the third quarter of fiscal 2007 Gross margins improved 230
basis points to 12.9% of revenue compared with 10.6% in the prior
year period Operating income of $10 thousand compared to operating
income of $877 thousand in the third quarter of 2007 Net loss of
$2.6 million, or ($0.05) per share, compared with net income of
$9.4 million, or $0.19 per share, in the same period last year
Non-GAAP operating income of $7.6 million, an increase of 1.5% from
non-GAAP operating income in the third quarter of the prior year
Consolidated Financial Results �During the third quarter, we
continued to execute our strategy and position our business for
growth,� said Joseph C. Lawler, Chairman, President and Chief
Executive Officer of CMGI. �We made very good progress with our
sales and marketing initiatives, which are enabling us to introduce
new solutions, secure new engagements and build our sales pipeline.
In addition, we made progress with the implementation of our ERP
platform and continued to execute our acquisition strategy. The
recently announced acquisitions of Open Channel Solutions� and PTS
Electronics strengthen our market position and will also help
improve the growth and profitability of our company.� �We expected
revenue for the third quarter of fiscal 2008 to be lower than the
third quarter of fiscal 2007 due to two previously announced
discontinued programs,� continued Lawler. �In addition, we
experienced volume declines in some client programs and delays in
the startup of some new engagements. As a percentage of revenue,
gross margins improved by 230 basis points, which resulted in an
increase in non-GAAP operating income despite the lower revenue in
the quarter. The continuous improvement we�ve been showing in gross
margins is the result of executing our long-term strategy,� added
Lawler. CMGI reported net revenue of $239.2 million for the third
quarter of fiscal 2008, a 15.2% decrease compared to net revenue of
$282.1 million for the same period one year ago. As a percentage of
revenue, gross margins improved to 12.9% for the third quarter of
fiscal 2008, from 10.6% in the third quarter of fiscal 2007. The
improvement in gross margin was attributed to work and geography
mix as well as continuous improvement initiatives. Selling, General
and Administrative expense (SG&A), including restructuring and
amortization of stock compensation for the third quarter of 2008
was $30.9 million compared to $29.1 million in the third quarter of
fiscal 2007. The increase in SG&A was primarily due to higher
restructuring costs, planned IT investments and SG&A expenses
related to Open Channel Solutions, which was acquired during the
quarter. As a result of the factors noted above, operating income
was $10 thousand for the third quarter of fiscal 2008, compared to
$877 thousand for the prior year period. Net loss for the third
quarter of 2008 was $2.6 million, or ($0.05) per share, compared to
net income of $9.4 million, or $0.19 earnings per share, for the
same period in the prior fiscal year. Net results include a change
in other income (loss) from $7.8 million in the third quarter of
fiscal 2007 to a loss of $70 thousand in the third quarter of
fiscal 2008. This change was primarily due to a decline in interest
income of approximately $1.1 million and a decline of $4.6 million
related to @Ventures liquidity events. Net loss for the third
quarter of 2008 also includes a tax expense of $3.2 million,
compared with a tax benefit of $900 thousand in the prior year
period due to a shift in the geographic distribution of income, an
increase in the tax rate in China and some discrete tax-related
items. Excluding net charges related to depreciation, restructuring
and amortization of intangibles and stock-based compensation,
non-GAAP operating income was $7.6 million for the third quarter of
fiscal 2008, a 1.5% increase compared with non-GAAP operating
income of $7.5 million for the same period in fiscal 2007. As of
April 30, 2008, CMGI had working capital of approximately $300.7
million compared with $326.8 million at April 30, 2007. Included in
working capital as of April 30, 2008 were cash, cash equivalents
and available-for-sale securities totaling $248.6 million compared
to $250.3 million at April 30, 2007. During the third quarter of
2008, the Company repurchased approximately 114,000 shares of its
common stock for aggregate consideration of approximately $1.3
million, as part of the Company�s stock repurchase program. The
Company repurchased fewer shares than in prior quarters as it
managed its cash needs leading up to the acquisition of PTS
Electronics on May 2, 2008. "Our balance sheet continues to be
extremely strong and provides a solid foundation for future
growth," said Steven G. Crane, CMGI's Chief Financial Officer. "We
had cash and cash equivalents and available-for-sale securities of
$248.6 million at the end of the third quarter and continued to
have no outstanding bank debt. During the third quarter we used
cash for the purchase of Open Channel Solutions, made planned
investments in our operations, and continued our stock repurchase
program." �As we enter the fourth quarter of fiscal 2008, we are
encouraged with the amount of new engagements we have secured and
the size and make-up of our sales pipeline. We do remain cognizant
of the effects of the uncertain economic environment on our
existing business and the expenses needed for the startup of the
new business secured over the past few months. Based on these
factors, we are revising our financial guidance ranges for fiscal
2008,� concluded Crane. Outlook The Company now expects revenue of
approximately $1.05 billion to $1.10 billion, compared with its
previous range of $1.10 billion to $1.15 billion and operating
income, before any restructuring expenses, to be at the low end of
its previous guidance of 2.0% to 2.5% of revenue in fiscal 2008.
Restructuring expenses for fiscal 2008 are expected to be $5
million to $8 million. Conference Call Information CMGI will hold a
conference call to discuss its fiscal 2008 third quarter results at
5:00 p.m. EDT on June 9, 2008. Investors can listen to the
conference call on the Internet at www.ir.cmgi.com. To listen to
the live call, go to the website 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 it 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 subsidiaries ModusLink�, Open Channel Solutions and PTS
Electronics, 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, visit
www.cmgi.com. CMGI is a registered trademark of CMGI, Inc.,
ModusLink is a registered trademark of ModusLink Corporation, Open
Channel Solutions is a registered trademark of Open Channel
Solutions, Inc. and PTS Electronics is a trademark of PTS, Inc..
All share and per share data for the prior year period which
appears in this press release and the accompanying tables has been
adjusted to reflect the 1-for-10 reverse stock split of the
Company�s common stock effective October 31, 2007. 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, future sales growth, the further execution of CMGI�s
strategic business plan and impact of that plan, prospects for
growth, the strength of the Company�s sales momentum and pipeline,
the expected impact of strategic initiatives and financial
performance, the expected benefits and impact of the OCS and PTS
transactions and the expansion of capabilities expected to occur as
a result of the transactions. 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 are
uncertain and subject to volatility; demand for our clients�
products may decline or may not achieve the levels anticipated by
our clients; 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 and the amount of projected
revenue that is actually realized are subject to demand
variability; risks inherent with conducting international
operations; tax rate expectations are based on current tax law and
current expected income and may be affected by the jurisdictions in
which profits are determined to be earned and taxed, changes in
estimates of credits, benefits and deductions, the resolution of
issues arising from tax audits with various tax authorities,
including payment of interest and penalties and the ability to
realize deferred tax assets; 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) � (Unaudited) � � April 30, April 30, � 2008 � 2007 �
Assets: Cash and cash equivalents $ 247,918 $ 137,325
Available-for-sale securities 674 848 Short-term investments -
112,100 Trade accounts receivable, net 184,888 211,953 Inventories,
net 68,898 67,566 Prepaid and other current assets 10,698 13,243
Current assets of discontinued operations � 17 � - Total current
assets � 513,093 � 543,035 � Property and equipment, net 65,500
53,162 Investments in affiliates 35,442 26,736 Goodwill 184,159
181,376 Intangible assets, net 16,258 12,922 Other assets � 12,188
� 3,020 $ 826,640 $ 820,251 � Liabilities: Current portion of
capital lease obligations $ 461 $ 456 Accounts payable 142,995
142,530 Current portion of accrued restructuring 5,584 4,461
Accrued income taxes 1,729 6,993 Accrued expenses 56,828 55,747
Other current liabilities 2,774 3,022 Current liabilities of
discontinued operations � 2,053 � 3,057 Total current liabilities �
212,424 � 216,266 � Revolving line of credit - 24,786 Long-term
portion of accrued restructuring 3,997 5,354 Long-term portion of
capital leases obligations 78 446 Other long-term liabilities
22,783 13,211 Non-current liabilities of discontinued operations �
1,136 � 2,256 27,994 46,053 Stockholders' equity � 586,222 �
557,932 $ 826,640 $ 820,251 � CMGI, Inc. and Subsidiaries Condensed
Consolidated Statements of Operations (In thousands, except per
share data) � (Unaudited) � Three months ended Nine months ended
April 30, April 30, � � � � � � � 2008 2007 Change 2008 2007 Change
� � � � � � � Net revenue $ 239,203 $ 282,078 (15.2 %) $ 791,915 $
890,466 (11.1 %) Cost of revenue 208,318 252,111 (17.4 %) 683,057
789,923 (13.5 %) � � � � � � Gross margin � 30,885 � � 29,967 � 3.1
% � 108,858 � � 100,543 � 8.3 % 12.9 % 10.6 % 13.7 % 11.3 %
Operating expenses: Selling 3,874 3,404 13.8 % 12,169 10,489 16.0 %
General and administrative 25,140 24,494 2.6 % 73,202 67,056 9.2 %
Amortization of intangibles 887 1,206 (26.5 %) 2,395 3,618 (33.8 %)
Restructuring, net � 974 � � (14 ) (7057.1 %) � 3,342 � � 2,181 �
53.2 % Total operating expenses � 30,875 � � 29,090 � 6.1 % �
91,108 � � 83,344 � 9.3 % � Operating income 10 877 (98.9 %) 17,750
17,199 3.2 % � Other income (expenses): Interest income 1,464 2,551
(42.6 %) 7,129 7,395 (3.6 %) Interest expense (190 ) (660 ) (71.2
%) (1,276 ) (1,901 ) (32.9 %) Other gains (losses), net (1,815 )
5,073 (135.8 %) 16,348 34,025 (52.0 %) Equity in income of
affiliates � 471 � � 868 � (45.7 %) � 1,334 � � 2,002 � (33.4 %)
Total other income (loss) � (70 ) � 7,832 � (100.9 %) � 23,535 � �
41,521 � (43.3 %) � � Income (loss) from continuing operations
before taxes (60 ) 8,709 (100.7 %) 41,285 58,720 (29.7 %) Income
tax expense (benefit) � 3,176 � � (909 ) (449.4 %) � 7,392 � �
3,378 � 118.8 % Income (loss) from continuing operations (3,236 )
9,618 (133.6 %) 33,893 55,342 (38.8 %) � Discontinued operations,
net of income taxes: Income (loss) from discontinued operations �
677 � � (203 ) (433.5 %) � (39 ) � 273 � (114.3 %) � � Net Income
(loss) $ (2,559 ) $ 9,415 � (127.2 %) $ 33,854 � $ 55,615 � (39.1
%) � � Basic and diluted earnings (loss) per share: � Earnings
(loss) from continuing operations $ (0.06 ) $ 0.20 (130.0 %) $ 0.71
$ 1.14 (37.7 %) � Income (loss) from discontinued operations $ 0.01
� $ (0.01 ) (200.0 %) $ (0.00 ) $ 0.01 � (100.0 %) � Net earnings
(loss) $ (0.05 ) $ 0.19 � (126.3 %) $ 0.71 � $ 1.15 � (38.3 %) � �
Shares used in computing basic earnings (loss) per share � 48,493 �
� 48,476 � � 47,449 � � 48,452 � � Shares used in computing diluted
earnings (loss) per share � 48,493 � � 49,055 � � 47,628 � � 48,717
� CMGI, Inc. and Subsidiaries Condensed Consolidated Statements of
Operations Information (In thousands) � � � � (Unaudited) � � Three
months ended Nine months ended � April 30, April 30, April 30,
April 30, � 2008 � � � 2007 � � � 2008 � � � 2007 � � Net revenue:
� Americas $ 76,037 $ 87,331 $ 252,812 $ 314,788 Asia 70,929 76,352
242,024 219,915 Europe � 92,237 � � 118,395 � � 297,079 � � 355,763
� $ 239,203 � $ 282,078 � $ 791,915 � $ 890,466 � � Operating
income (loss): � Americas $ (2,908 ) $ 608 $ 5,300 $ 13,424 Asia
9,057 7,660 32,234 25,412 Europe � (1,964 ) � (2,734 ) � (5,891 ) �
(8,074 ) 4,185 5,534 31,643 30,762 Other � (4,175 ) � (4,657 ) �
(13,893 ) � (13,563 ) $ 10 � $ 877 � $ 17,750 � $ 17,199 � �
Non-GAAP operating income (loss): � Americas $ 10 $ 2,243 $ 13,751
$ 19,611 Asia 10,926 9,800 38,226 31,328 Europe � (49 ) � (645 ) �
(657 ) � (2,228 ) 10,887 11,398 51,320 48,711 Other � (3,311 ) �
(3,935 ) � (11,365 ) � (11,472 ) $ 7,576 � $ 7,463 � $ 39,955 � $
37,239 � � 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 AND NET INCOME (LOSS) � NON-GAAP Operating
income $ 7,576 $ 7,463 $ 39,955 $ 37,239 � Adjustments:
Depreciation (4,204 ) (4,107 ) (12,101 ) (10,452 ) Amortization of
intangible assets (887 ) (1,206 ) (2,395 ) (3,618 ) Stock-based
compensation (1,501 ) (1,287 ) (4,367 ) (3,789 ) Restructuring, net
� (974 ) � 14 � � (3,342 ) � (2,181 ) GAAP Operating income $ 10 �
$ 877 � $ 17,750 � $ 17,199 � � Other income, net (70 ) 7,832
23,535 41,521 Income tax expense (benefit) 3,176 (909 ) 7,392 3,378
Income (loss) from discontinued operations � 677 � � (203 ) � (39 )
� 273 � Net income (loss) $ (2,559 ) $ 9,415 � $ 33,854 � $ 55,615
� � TABLE RECONCILING ADJUSTED REVENUE GROWTH � Revenue (GAAP) $
239,203 $ 282,078 Less revenue from two previously announced
discontinued programs � - � � (33,288 ) Adjusted Revenue $ 239,203
� $ 248,790 � � Q3 Fiscal 2008 vs. Q3 Fiscal 2007 GAAP change in
revenue (15.2 %) Adjusted change in revenue (3.9 %)
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