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�
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