CMGI Reports Improved Operating Results in Fourth Quarter and Second Consecutive Profitable Year.Investment in Strategic Initiatives Designed to Improve Performance of Supply Chain Management Business Continues WALTHAM, Mass. -- CMGI CMGI Commonly Maintained Grounds Infrastructures CMGI College Marketing Group Information (Services) , Inc. (Nasdaq: CMGI) today reported financial results for its fiscal fourth quarter and full year ended July 31, 2006. Fourth Quarter Financial Summary * Net revenue increased $14.5 million or 6% from prior year, to $261.9 million * Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. of $1.7 million compared to operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of $3.6 million in fourth quarter of 2005 * Non-GAAP operating income increased 145% to $7.6 million * Net loss of $2.5 million due primarily to charge to discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. , compared to net income of $0.3 million in fourth quarter of 2005 Fourth Quarter Consolidated Financial Results "Results from our fourth quarter reflect growth in revenue and operating profitability due, in part, to our ongoing success in penetrating our target vertical markets of Communications, Storage and Consumer Electronics, as well as our ability to drive greater efficiencies and cost reductions throughout the organization," said Joseph C. Lawler, Chairman, President and Chief Executive Officer of CMGI. CMGI reported net revenue of $261.9 million for the fourth quarter ended July 31, 2006, compared to net revenue of $247.4 million for the same period one year ago, a $14.5 million or 6% increase. Operating income was $1.7 million for the fourth quarter compared to an operating loss of $3.6 million for the fourth quarter of fiscal 2005, an improvement of $5.3 million or 147%. The improvement was driven by a $3.9 million increase in gross margins from higher revenues and productivity gains, as well as reductions in selling, general and administrative expenses, which were partially offset by $1.9 million of planned investment in the Company's strategic initiatives focused on penetrating new target vertical markets, expanding service offerings, deploying a new Enterprise Resource Planning See ERP. (application, business) Enterprise Resource Planning - (ERP) Any software system designed to support and automate the business processes of medium and large businesses. technology platform and advancing global hub and spoke Any architecture that uses a central connecting point. It is the same as a star topology in a network. A network hub is hardware that functions as a central hub to all nodes. See hub and full mesh.  initiatives, such as consolidating IT and
finance infrastructures.
Excluding the effects of charges related to depreciation, amortization of intangibles, stock-based compensation and restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). , CMGI reported non-GAAP operating income of $7.6 million for the fourth quarter versus non-GAAP operating income of $3.1 million for the same period in fiscal 2005, a $4.5 million or 145% improvement. The increase in non-GAAP operating income primarily reflects the aforementioned a·fore·men·tioned adj. Mentioned previously. n. The one or ones mentioned previously. aforementioned Adjective mentioned before Adj. 1. operating income improvements. Net loss for the quarter, was $2.5 million or $0.01 diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. loss per share compared to net income of $0.3 million or $0.00 diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of for the same period in the prior fiscal year. The decline in net income was primarily attributable to a $7.4 million loss from discontinued operations, net of tax, related to the previously announced divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). of the marketing distribution services business. "Although we made progress during the fourth quarter, we have a lot of work ahead of us to fully realize the effects of our strategic initiatives," continued Lawler. "Looking forward, we will remain focused on aggressively implementing our ongoing strategies including pursuing revenue opportunities in our key vertical markets, increasing our value proposition with new and innovative supply chain solutions and increasing global operational efficiencies." Fiscal Year 2006 Financial Summary * Net revenue increased $95.4 million or 9% from fiscal 2005, to $1.1 billion * Operating income of $0.6 million, including restructuring of $9.5 million, compared to operating income of $7.8 million for the prior fiscal year * Net income of $14.9 million or $0.03 per share, compared with net income of $26.5 million or $0.06 per share in 2005 * Non-GAAP operating income of $32.4 million compared with non-GAAP operating income of $33.7 million for the prior fiscal year * Increased cash and marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has by $36.0 million, year over year, and generated $16.6 million in cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses Fiscal Year 2006 Business Highlights ModusLink: * Awarded 90 new client engagements, including multiple engagements for some clients * Of the 90 new engagements, 49% were from new target markets - Communications, Storage and Consumer Electronics * Expanded capabilities in key areas with the introduction of several new innovative solutions, including: * Industry's first Wireless Activation Service * Next-generation Direct-to-Retail Service * New Online Auctions Service @Ventures: * Liquidity event for e-learning systems provider, WebCT, through merger with Blackboard (1) See Blackboard Learning System. (2) The traditional classroom presentation board that is written on with chalk and erased with a felt pad. Although originally black, "white" boards and colored chalks are also used. , with 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 * Liquidity event for Alibris Inc., an online retailer, with proceeds to CMGI of $7.9 million Fiscal Year Consolidated Financial Results "The ongoing execution of our strategic initiatives contributed to our second consecutive profitable year," said Lawler. "During fiscal 2006, ModusLink's revenue grew as our target vertical markets continued to represent a growing percentage of total revenue. We also introduced a number of new service offerings and continued to improve operating efficiency, which we expect will facilitate new opportunities and success in these markets. Operating income was lower than the prior year, due to planned investments in support of our strategic initiatives, as well as planned restructuring expenses and certain price concessions and form factor changes. Despite these investments, CMGI reported a profitable year and strong cash flow from operations." "We are also excited about the contributions @Ventures is making to our business and the opportunities we see for the future," continued Lawler. "Overall, the energy sector has experienced a significant increase in venture capital funding, as clean technology and alternative energy is gaining momentum as a source of attractive investment opportunities. We also continue to be encouraged by the prospects of our other investments, especially in light of an active M&A market." CMGI reported net revenue of $1.1 billion for the fiscal year ended July 31, 2006, an increase of $95.4 million or 9%, year over year. This increase in revenue included growth in each of its three operating segments, Americas, Europe and Asia. Operating income for the fiscal year was $0.6 million compared to operating income of $7.8 million for the fiscal year ended July 31, 2005. Compared with the prior year, operating results were affected by $2.2 million of lower gross margins, $4.3 million of higher restructuring expenses and approximately $9.4 million of planned investment in the Company's strategic initiatives, principally the deployment of its Enterprise Resource Planning system and global shared services shared services, n.pl the administrative, clinical, or other service functions that are common to two or more hospitals or their health care facilities and used jointly or cooperatively by them. initiatives which are expected to establish a strong foundation for future growth. These higher operating costs operating costs npl → gastos mpl operacionales were partially offset by over $8.0 million of lower selling, general and administrative expenses as a result of continued cost reduction actions. The gross margin decrease is primarily attributable to approximately $5.1 million of costs incurred in our second quarter to support a larger than anticipated surge in demand for a significant client's products during the holiday season, certain price concessions and form factor changes. "Form factor" relates to the simplification or elimination of components from our clients' final products. The $9.5 million of restructuring expenses during the fiscal year primarily reflects actions taken in Europe to consolidate certain operations in order to better leverage infrastructure and to drive operational efficiencies. Excluding the effects of charges related to depreciation, amortization of intangibles, stock-based compensation and restructuring, CMGI reported non-GAAP operating income of $32.4 million for the 2006 fiscal year versus non-GAAP operating income of $33.7 million for the prior fiscal year. The decrease in non-GAAP operating income primarily reflects the investment in strategic initiatives and the impact of the additional operating costs incurred in Europe. These incremental costs Costs which are additional costs to the Service appropriations that would not have been incurred absent support of the contingency operation. See also financial management. were partially offset by continued cost reduction actions during the year. For the fiscal year ended July 31, 2006, CMGI reported net income of $14.9 million or $0.03 diluted earnings per share compared to net income of $26.5 million or $0.06 diluted earnings per share for the same period in the prior fiscal year. Net income primarily reflects $27.8 million of investment gains from liquidity events from @Ventures, partially offset by a $13.7 million loss from discontinued operations related to the Company's divestiture of its marketing distribution services business and the write-off on a note receivable note receivable A debt due from borrowers and evidenced by a written promise of payment. Note receivable, an entry on the asset side of many corporate balance sheets, indicates the dollar amount of loans due to be repaid by borrowers. from a previously divested business. The gains from @Ventures included aggregate proceeds of approximately $36 million from the acquisition by third parties of WebCT, Realm Business Solutions and Alibris, Inc, during the year. The $26.5 million of net income in the prior year included a non-cash income tax benefit of approximately $24.7 million as a result of a reduction in the Company's estimate of certain income tax liabilities that had been included in accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. income taxes on the Company's balance sheet. As of July 31, 2006, CMGI had working capital of approximately $282.2 million compared with $224.6 million at July 31, 2005. Included in working capital at the end of the year were cash and marketable securities totaling $228.7 million. The increase in cash included $16.6 million of cash generated from operations and $29.7 million of net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). from @Ventures, partially offset by capital investment activities during the year. Conference Call Information CMGI will hold a conference call to discuss its fiscal 2006 fourth quarter and year end results at 5:00 PM Eastern Time on October 10, 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 Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. 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 Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. and restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. . These charges, as well as charges related to depreciation, amortization of intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible 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 standardized pertaining to data that have been submitted to standardization procedures. standardized morbidity rate see morbidity rate. standardized mortality rate see mortality rate. 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 Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting . 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 GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). operating income/(loss) and its GAAP net income/(loss) is included in the statement of operations See Income statement. 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 forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , which address a variety of subjects including, for example, the further execution of ModusLink's strategic business plan and impact of that plan, our assessment of the companies within our venture capital portfolio and their prospects, our assessment of the mergers and acquisitions market, the expected impact of strategic initiatives and restructuring actions, and our assessment of the supply chain management industry and the opportunities afforded ModusLink in that industry. 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 long-term contracts or contracts with minimum purchase requirements, and therefore its sales are subject to demand variability; risks inherent with conducting international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. ; the mergers and acquisitions and IPO (Initial Public Offering) The first time a company offers shares of stock to the public. While not a computer term per se, many founders, employees and insiders of computer companies have found this acronym more exciting than any tech term they ever heard. markets are inherently unpredictable and liquidity events for companies in the venture capital portfolio may not occur; future proceeds from liquidity events are based upon the release of escrowed funds and successful escrow escrow Instrument, such as a deed, money, or property, that constitutes evidence of obligations between two or more parties and is held by a third party. It is delivered by the third party only upon fulfillment of some condition. claims will reduce these amounts; 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 Quarterly Report on Form 10-Q Form 10-Q See 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. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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