CMG reports fourth quarter and fiscal 1996 year-end operating results.

WILMINGTON, Mass.--(BUSINESS WIRE)--Sept. 16, 1996--CMG Information Services, Inc. (NASDAQ:CMGI) today reported a net loss of $8,625,000 or ($0.94) per common share for its fourth quarter ended July 31, 1996, compared to net income of $40,000 for the fourth quarter ended July 31, 1995. For the fiscal year ended July 31, 1996, the company earned net income of $14,322,000, or $1.48 per common share, compared to $28,215,000 net income, or $3.00 per common share, in fiscal 1995. Last year's results included $23,453,000 of net income, or $2.49 per common share, from discontinued operations.

Sales jumped 77% to $9,061,000 in the quarter just ended from $5,112,000 in the quarter ended July 31, 1995. For the month of July 1996, sales were $3,500,000. For the year ended July 31,1996, sales increased 28% to $28,485,000 from $22,293,000 for the year ended July 31, 1995. The growth for the quarter and year largely reflects sales from the company's consolidated Internet investment companies. Operating expenses increased to $20,532,000 in the fourth quarter of 1996, from $4,945,000 in the year-ago quarter; operating expenses for fiscal 1996 were $49,059,000 vs. $19,401,000 for fiscal 1995. These increases are largely attributed to research and development, infrastructure and sales and marketing expenses for CMG Direct Interactive and CMG's majority-owned Internet investment companies. The quarterly consolidated results included operating expenses associated with FreeMark & GeoCities, due to the increase in CMG's ownership to over 50%.

Commenting on the results, CEO David Wetherell said, "We are pleased with the revenue growth and ramp rate of our investment companies in this quarter's financial results. Not only are the sales from our Internet investment companies beginning to ramp up, but we have also posted a significant sales increase in our fulfillment business. We anticipate a continued strong overall sales growth rate in the coming quarters."

Included in the quarter just ended was a one-time in process research and development charge of $2,239,000 associated with the in-process research and development portion of the purchase price of several recent Internet investments. CFO Andrew Hajducky commented, "Although these types of expenses are not anticipated due to their uncertain timing, it is the company's policy to charge off whatever portion of the investments' intangible value is attributable to in-process R&D."

Operating Segments

The company reports three operating segments: List and Database Services, Fulfillment Services, and Investment and Development.

In the List and Database Services segment, sales were down 9% to $2,461,000 in the quarter just ended from $2,695,000 in last year's fourth quarter due to consolidation in the educational publishing industry and competitive pricing pressure. The segment posted an operating loss for the quarter of $1,469,000 versus a profit of $271,000 in last year's fourth quarter. Included in the segment's operating expenses were $774,000 of research and development expenses in CMG Direct Interactive for the continued development of its data mining, access and query products/services capabilities. For the fiscal year ended July 31, 1996, the list and database services segment reported sales of $10,750,000 versus sales of $11,202,000 in fiscal 1995. The segment had an operating loss of $2,179,000 for fiscal 1996 and operating income of $1,782,000 in fiscal 1995. This year's financial performance reflects higher costs in the direct mail industry, start-up costs associated with the company's new El-High list product, and the Direct Interactive database development expenses.

In the Fulfillment Services segment, SalesLink sales were up 47% to $3,557,000 in the fourth quarter of fiscal 1996 from $2,413,000 in last year's fourth quarter, reflecting several new hi-tech and healthcare customers including IBM, BioGen and Cascade Communications. Segment operating profit improved 57% from $350,000 in last year's fourth quarter to $551,000 in this year's fourth quarter. For the year ended July 31, 1996, SalesLink reported a 9% sales increase, from $11,086,000 in fiscal 1995 to $12,070,000 in fiscal 1996. Segment operating profit of $1,566,000 in fiscal 1996 was 11% lower than operating profit of $1,755,000 in fiscal 1995 due to product mix and new customer start-up costs in fiscal 1996.

The Investment and Development segment results reflect the consolidated performance of majority-owned Internet companies, which include Lycos, NetCarta, Black Sun, FreeMark, GeoCities, Planet Direct, ADSmart and infoMation. Prior to this quarter, FreeMark and GeoCities were accounted for on the equity accounting method. Planet Direct, ADSmart and infoMation are new 100%-owned start-ups within the CMG family. The investment and development segment reported sales of $3,044,000 in the quarter ended July 31, 1996 vs. $5,000 in last year's fourth quarter. Operating loss was $10,553,000 in the quarter just ended versus a loss of $454,000 in the quarter ended July 31, 1995. Included in losses for this quarter was the one-time in-process research and development expense of $2,239,000 related to recent @Ventures investments, the consolidated operating expenses of GeoCities and FreeMark, increased operating expenses for Lycos, increased sales and marketing expenses associated with various product launches from the @Ventures investment companies, and personnel and development expenses for the start-up companies. For the year ended July 31, 1996, segment sales increased from $5,000 in fiscal 1995 to $5,665,000 and operating losses increased from $645,000 to $19,961,000. In fiscal 1995 the company had only two investments and the operating results were insignificant. The net operating performance of Ikonic, Vicinity and Telet, CMG's minority-owned investment and development companies, are reflected in Equity in loss of affiliates.

Internet Company Highlights

Lycos reported a 72% increase in revenues in the quarter just ended versus the third quarter ended April 30, 1996 and a 32% traffic increase over the same period, as well as excellent progress on its licensing strategy.

The largest publisher of community-based content on the Web, GeoCities is now host to 120,000 homesteaders in 27 themed neighborhoods. Traffic to the site continues to increase by over 30% every month. The company secured its first major advertising contracts this summer.

Vicinity Corporation launched several core services during the recent quarter including MapBlast! interactive mapping, YourTown, and GeoTag specification services in its mission to "geo-enable" the Web. Direct Interactive's development efforts for new VLDB products and services are proceeding on schedule with releases scheduled during the second and third quarters of fiscal 1997.

In August 1996, @Ventures made its ninth investment in Parable LLC, an early-stage software firm developing creative, easy-to-use multimedia story-telling tools and technologies.

In closing, Mr. Wetherell stated that, "The company's Internet portfolio companies have accomplished a great deal in the last several months. More than twenty new products and services were introduced and dozens of new licensee and strategic partners were secured. We are very excited about the prospects for continued revenue growth in fiscal 1997 and potential opportunities for investment liquidations."

CMG Information Services, Inc. is a leading provider of direct marketing services investing in and integrating advanced Internet, interactive media and database management technologies.

Forward looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act. Investors are cautioned that actual results could differ materially from those anticipated by such statements and are advised to consult CMG's current SEC filings for additional information concerning risk factors that affect the company's business.

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        CMG Information Services Inc. and Subsidiaries
                Report Fourth Quarter Earnings
            (In thousands except per share amounts)

                          Three months ended        Year ended
                                July 31,              July 31,
                            1996      1995       1996       1995

Net sales                 $ 9,061   $ 5,112    $28,485    $22,293

Operating income (loss)  (11,471)       167   (20,574)      2,892

Other income (expense):
  Gain on sale of available
   for sale securities        ---       ---     30,049      4,781
  Gain on issuance of stock
   by subsidiary              ---       ---     19,575        ---
  Minority interest         1,352        14      2,169         14
  Equity in loss of
   affiliates                (963)     (258)    (2,915)      (306)
  Interest income           1,149       156      2,691        225

    Total                   1,538      (88)     51,569      4,714

Income (loss) from continuing
 operations before income
 taxes                    (9,933)        79     30,995      7,606
Income tax benefit (expense)1,308      (39)   (16,673)     (2,844)

  Income (loss) from continuing
   operations             (8,625)        40     14,322      4,762

Loss from discontinued
 operations of BookLink
 Technologies Inc., net
 of income tax benefits       ---       ---       ---       (690)

Gain on disposal of BookLink
 Technologies Inc., net of
 income tax expense           ---       ---      ---       24,143

    Net income (loss)     $(8,625)  $    40    $14,322    $28,215

Earnings (loss) per share:
  Income (loss) from continuing
   operations             $ (0.94)  $   ---     $  1.48    $  0.51
  Loss from discontinued
   operations of BookLink     ---       ---         ---     (0.07)
  Gain on disposal of
   BookLink                   ---       ---         ---       2.56

    Total                 $ (0.94)   $  ---      $  1.48    $ 3.00

Weighted average common and
 common equivalent shares
 outstanding                 9,163     9,419      9,682     9,391

CONTACT: Andrew J. Hajducky

Chief Financial Officer

508/657-7000 ext 3005

[e-mail]

or

Kathryn D. Cadigan

Director, Investor Relations

508/657-7000 ext 3036

[e-mail]