ModusLink Global Solutions, Inc. (formerly known as CMGI, Inc.)
(NASDAQ: CMGI) today reported preliminary financial results for its
2008 fourth quarter and fiscal year ended July 31, 2008. Results
for the fourth quarter and full fiscal year are preliminary based
on the inclusion of an estimated non-cash goodwill impairment
charge of $12 million related to its European segment. The amount
of the non-cash charge will be finalized in conjunction with the
completion of the Company�s Form 10-K filing. As announced in a
separate press release issued today, the Company has changed its
name from CMGI, Inc. to ModusLink Global Solutions, Inc. Its common
stock will trade under the Nasdaq Global Select Market symbol
�MLNK� effective at the opening of trading on September 30, 2008.
Preliminary Fourth Quarter Financial Summary Net revenue of $276.3
million, an increase of 9.4% from the fourth quarter of fiscal 2007
Gross margin, as a percentage of revenue, of 10.4% compared with
12.1% in the same period during the prior year Selling, General and
Administrative expense of $44.1 million. Excluding the estimated
goodwill impairment charge, SG&A expense was $32.1 million or
11.6% of revenue, compared to SG&A expense of $33.0 million or
13.1% of revenue in the fourth quarter of the prior year Operating
loss of $15.4 million, compared with an operating loss of $2.4
million in the fourth quarter of fiscal 2007 Net loss from
continuing operations of $18.6 million or $0.39 per share, compared
to a net loss from continuing operations of $6.2 million, or $0.13
per share, in the same period last year Net loss of $22.7 million,
or $0.48 per share, compared to a net loss of $6.2 million, or
$0.13 per share, in the same period last year Non-GAAP operating
income of $6.3 million compared with $7.2 million in the fourth
quarter of 2007 Preliminary Fourth Quarter Consolidated Financial
Results �During the fourth quarter, we grew our business and
concluded a challenging but successful year in the transformation
of our company,� said Joseph C. Lawler, Chairman, President and
Chief Executive Officer of CMGI, now ModusLink Global Solutions.
�In the fourth quarter, we continued to build the Company�s sales
pipeline, driven by the introduction of new solutions,
implementation of targeted lead generation programs and improved
penetration of our targeted vertical markets. Despite the
challenges of the current economic environment that resulted in
lower volumes in some existing accounts, ModusLink Global Solutions
is very well positioned for long-term growth as we continue to
execute our strategy and fulfill the vision of the company.� The
Company reported net revenue of $276.3 million for the fourth
quarter of fiscal 2008, an increase of 9.4% compared with net
revenue of $252.6 million reported for the same period one year
ago. The increase in revenue was attributed to organic growth,
primarily driven by new client engagements, and contributions of
$13.7 million from the recently acquired companies Open Channel
Solutions and PTS Electronics. Adjusted for two previously
announced discontinued programs, net revenue of $276.3 million
would have compared with net revenue of $240.2 million in the prior
year period. Gross margin was $28.7 million, or 10.4% of revenue,
in the fourth quarter of fiscal 2008, compared with $30.5 million,
or 12.1% of revenue, in the fourth quarter of fiscal 2007. The
decrease in gross margin as a percentage of revenue was due to
increased start-up costs related to new business engagements and
lower volumes from some existing clients. Selling, General and
Administrative expense for the fourth quarter was $44.1 million.
Excluding the goodwill impairment charge, SG&A expense was
$32.1 million, or 11.6% of revenue, compared to $33.0 million, or
13.1% of revenue, in the fourth quarter of the prior year. The
decrease in SG&A expenses excluding the goodwill impairment
charge was primarily due to lower restructuring and lower
compensation related costs, partially offset by increases
attributable to the inclusion of the selling, general and
administrative costs of the recently acquired companies. The
estimated non-cash goodwill impairment charge of $12 million is
related to the Company�s European operations for which the goodwill
balance had been $30.7 million. The goodwill subject to impairment
was recorded upon the 2004 acquisition of Modus Media, Inc. In
accordance with FASB Statement No. 142 "Goodwill and Other
Intangible Assets� and the Company�s practice, the carrying value
of the goodwill is tested for impairment annually in the fourth
quarter. The finalization of the estimated charge, and consequently
the Company�s fourth quarter and full year operating results, is
subject to change pending the completion of the Company�s valuation
procedures and analysis, which it expects to complete in
conjunction with the preparation and filing of its Annual Report on
Form 10-K. �The Company�s European operations and related financial
results did not show the level of improvement in fiscal 2008 that
management had expected,� said Steven G. Crane, Chief Financial
Officer. �Based on this, the Company in connection with the
preparation of its annual financial statements determined that it
was required to take a non-cash goodwill impairment charge. While
this goodwill impairment charge is required by accounting rules, we
retain our long term positive view of our European operations, as
Europe represents an important part of our overall strategy and we
remain committed to continuing to grow our business in the region.�
Net loss from continuing operations for the fourth quarter was
$18.6 million, or $0.39 per share, compared to net loss from
continuing operations of $6.2 million, or $0.13 per share, for the
same period in fiscal 2007. Net loss for the fourth quarter of 2008
was $22.7 million or $0.48 per share, compared to net loss of $6.2
million or $0.13 per share for the same period in the prior year.
Fiscal 2008 fourth quarter results included a loss from
discontinued operations of $4.2 million, or $0.09 per share,
primarily due to updated sublease assumptions for a facility no
longer being utilized for operations by the Company. Excluding net
charges related to depreciation, amortization of intangibles,
stock-based compensation, restructuring and the impact of the
estimated non-cash goodwill impairment charge, the Company reported
non-GAAP operating income of $6.3 million for the fourth quarter of
fiscal 2008 versus non-GAAP operating income of $7.2 million for
the same period in fiscal 2007. Preliminary Fiscal Year 2008
Financial Summary Net revenue of $1,068 million, compared to net
revenue of $1,143 million in fiscal 2007 Gross margin, as a
percentage of revenue, increased to 12.9% from 11.5% in the
previous year Selling, General and Administrative expense of $135.2
million. Excluding the estimated goodwill impairment charge,
SG&A expense was $123.2 million, or 11.5% of revenue, compared
to $116.3 million, or 10.2% of revenue, in fiscal 2007 Operating
income of $2.4 million, compared to operating income of $14.8
million in the prior fiscal year Net income from continuing
operations of $15.3 million, or $0.32 per diluted share, compared
to net income from continuing operations of $49.1 million, or $1.00
per diluted share, in fiscal 2007 Net income was $11.1 million, or
$0.23 per diluted share, compared to $49.4 million, or $1.01 per
diluted share, in fiscal 2007 Non-GAAP operating income was $46.2
million compared with non-GAAP operating income of $44.4 million
for the prior fiscal year Preliminary Fiscal Year Consolidated
Financial Results The Company reported net revenue of $1,068
million for the fiscal year ended July 31, 2008, compared to $1,143
million reported for the 2007 fiscal year. Adjusted for two
previously announced discontinued programs, net revenue of $1,068
million would have compared with net revenue of $1,005 million in
the prior year period on the same basis. Gross margin was $137.6
million, or 12.9% of revenue for fiscal 2008, compared with $131.1
million, or 11.5% of revenue for fiscal 2007. As a percentage of
revenue, gross margin improvement was attributed to revenue from
engagements in target vertical markets and higher margin services,
as well as the realization of operating efficiencies. Selling,
General and Administrative expense for fiscal 2008 was $135.2
million. Excluding the estimated goodwill impairment charge,
SG&A expense for the year was $123.2 million, or 11.5% of
revenue, compared to $116.3 million, or 10.2% of revenue, in fiscal
2007. The increase in SG&A during the period primarily reflects
continued investment in the Company�s ERP system and the additional
Selling, General and Administrative expenses associated with Open
Channel Solutions, PTS Electronics (each of which was acquired
during fiscal 2008) and the Company�s Japan operations (which were
acquired at the end of the third quarter of fiscal 2007). Net
income from continuing operations for fiscal 2008 was $15.3
million, or $0.32 per diluted share, compared to net income from
continuing operations of $49.1 million, or $1.00 per diluted share,
for fiscal 2007. Net income for fiscal 2008 was $11.1 million, or
$0.23 per diluted share, compared to net income of $49.4 million,
or $1.01 per diluted share, for the prior year. Fiscal 2008 results
included a loss from discontinued operations of $4.2 million, or
$0.09 per share, compared with income from discontinued operations
of $0.3 million, or $0.01 per diluted share, in fiscal 2007. Net
income for fiscal 2008 included $19.1 million of investment gains
from liquidity events from @Ventures, compared with gains of $35.0
million in fiscal 2007. Excluding the effects of charges related to
depreciation, amortization of intangibles, stock-based
compensation, restructuring and the impact of the estimated
non-cash goodwill impairment charge, the Company reported non-GAAP
operating income of $46.2 million for the 2008 fiscal year compared
with non-GAAP operating income of $44.4 million for the prior
fiscal year. As of July 31, 2008, the Company had working capital
of approximately $238.7 million compared with $320.2 million at
July 31, 2007. Included in working capital as of July 31, 2008 were
cash, cash equivalents and marketable securities totaling $162.1
million compared to $282.3 million at July 31, 2007. The Company
concluded the year with no outstanding bank debt. "Our balance
sheet continues to be very strong and provides a solid foundation
for growth," said Crane. "During the year, we utilized cash to make
strategic acquisitions, reduce our debt and return $35 million to
the shareholders through a stock buyback program." �We are
positioned for growth in fiscal 2009,� continued Lawler. �Our sales
pipeline is the strongest we have seen at the company. However, we
remain cognizant of the uncertain global economic condition and its
impact on consumer demand in the technology markets we serve. As we
enter the new fiscal year, we continue to be focused on revenue
growth, expanding existing client relationships through the
introduction of new solutions and improving operational
efficiencies. We are optimistic that our strategy will create
significant long-term value for our shareholders.� Outlook Based on
the strength of its sales pipeline and expectations for increasing
demand for the Company�s services, and given the uncertain economic
environment, the Company currently expects revenue in fiscal 2009
to grow in the range of 10% to 12% over fiscal year 2008 revenue.
The Company expects this revenue growth to be weighted toward the
second, third and fourth quarters of fiscal 2009. Conference Call
Information As previously announced, ModusLink Global Solutions,
Inc. will hold a conference call to discuss its 2008 fourth quarter
and fiscal year preliminary results at 5:00 p.m. ET on September
29, 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, ModusLink 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 ModusLink�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 ModusLink Global Solutions, Inc. ModusLink Global
Solutions, Inc. (formerly known as CMGI, Inc.), is a leader in
global supply chain business process management. The Company
executes critical processes for clients in the high technology and
communications industries to provide competitive differentiation
and enable new channel and new market opportunities. ModusLink
Global Solutions� integrated portfolio of supply chain outsourcing
and technology solutions span four core competencies: supply chain,
aftermarket, e-Business and entitlement management. The Company has
headquarters in Waltham, Massachusetts and more than 30 facilities
in 13 countries � giving it the largest global footprint in the
industry. In addition, ModusLink Global Solutions� venture capital
business, @Ventures, invests in a variety of technology ventures.
For additional information, visit www.moduslink.com. ModusLink is a
registered trademark of ModusLink Corporation and CMGI and
ModusLink Global Solutions are registered trademarks of ModusLink
Global Solutions, Inc. All other company names and products are
trademarks or registered trademarks of their respective companies.
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 revenue to be achieved in
fiscal 2009, expected increase in demand for the Company�s
services, future sales growth, the further execution of the
Company�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 Open
Channel Solutions 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 the Company�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: the Company�s success, including its ability to improve
its cash position, expand its operations and revenue, 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; the
Company's management may face strain on managerial and operational
resources as they try to oversee the expanded operations; the
Company may not be able to expand its operations in accordance with
its business strategy; the Company�s cash balances may not be
sufficient to allow the Company to meet all of its business and
investment goals; the Company may experience difficulties
integrating technologies, operations and personnel in accordance
with its business strategy; the Company derives a significant
portion of its revenue from a small number of customers and the
loss of any of those customers could significantly damage the
Company�s financial condition and results of operations; the
Company 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 the Company competes. The preliminary estimates included in
this press release and accompanying tables are based on the
Company�s current estimate of the fourth quarter and full fiscal
year financial results and the non-cash goodwill impairment charge
associated with its European operations, and are subject to change
upon the finalization of such impairment charge and the completion
of the Company�s financial audit for fiscal year 2008. For a
detailed discussion of cautionary statements that may affect the
Company�s future results of operations and financial results,
please refer to the Company's filings with the Securities and
Exchange Commission, including the Company'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
(Preliminary) (In thousands) (Unaudited) � � � July 31, July 31, �
2008 � 2007 � Assets: Cash and cash equivalents $ 160,585 $ 169,481
Available-for-sale securities 1,517 959 Short-term investments -
111,850 Trade accounts receivable, net 213,096 185,574 Inventories,
net 85,897 60,945 Prepaid and other current assets 12,820 11,659
Current assets of discontinued operations � - � 91 Total current
assets � 473,915 � 540,559 � Property and equipment, net 74,889
55,107 Investments in affiliates 34,558 30,460 Goodwill 192,012
178,276 Intangible assets, net 29,292 11,719 Other assets � 7,894 �
3,007 $ 812,560 $ 819,128 � Liabilities: Current portion of capital
lease obligations $ 349 $ 459 Accounts payable 168,190 151,233
Current portion of accrued restructuring 6,297 5,342 Accrued income
taxes 1,027 7,288 Accrued expenses 52,817 50,710 Other current
liabilities 3,653 2,539 Current liabilities of discontinued
operations � 2,840 � 2,782 Total current liabilities � 235,173 �
220,353 � Revolving line of credit - 24,786 Long-term portion of
accrued restructuring 3,871 5,136 Long-term portion of capital
leases obligations 55 329 Other long-term liabilities 21,648 11,757
Non-current liabilities of discontinued operations � 3,839 � 1,698
29,413 43,706 Stockholders' equity � 547,974 � 555,069 $ 812,560 $
819,128 CMGI, Inc. and Subsidiaries Condensed Consolidated
Statements of Operations (Preliminary) (In thousands, except per
share data) � � � � � � (Unaudited) � Three months ended Twelve
months ended July 31, July 31, � � � � � � � � � � � 2008 2007
Change 2008 2007 Change � � � � � � � � � � � Net revenue $ 276,292
$ 252,560 9.4 % $ 1,068,207 $ 1,143,026 (6.5 %) Cost of revenue
247,572 222,038 11.5 % 930,629 1,011,961 (8.0 %) � � � � � � Gross
margin � 28,720 � � 30,522 � (5.9 %) � 137,578 � � 131,065 � 5.0 %
10.4 % 12.1 % (1.7 %) 12.9 % 11.5 % 1.4 % Operating expenses:
Selling, general and administrative 28,597 29,291 (2.4 %) 113,969
106,836 6.7 % Impairment of goodwill 12,000 - 100.0 % 12,000 -
100.0 % Amortization of intangibles 1,379 1,203 14.6 % 3,773 4,821
(21.7 %) Restructuring, net � 2,123 � � 2,462 � (13.8 %) � 5,465 �
� 4,643 � 17.7 % Total operating expenses � 44,099 � � 32,956 �
33.8 % � 135,207 � � 116,300 � 16.3 % � Operating income (loss)
(15,379 ) (2,434 ) 531.8 % 2,371 14,765 (83.9 %) � Other income
(loss) � (202 ) � (16 ) 1162.5 % � 23,333 � � 41,505 � (43.8 %) �
Income (loss) from continuing operations before taxes (15,581 )
(2,450 ) 536.0 % 25,704 56,270 (54.3 %) Income tax expense � 3,033
� � 3,757 � (19.3 %) � 10,425 � � 7,135 � 46.1 % Income (loss) from
continuing operations (18,614 ) (6,207 ) 199.9 % 15,279 49,135
(68.9 %) � Discontinued operations, net of income taxes: Income
(loss) from discontinued operations � (4,113 ) � 3 � - � � (4,151 )
� 276 � (1604.0 %) � � Net Income (loss) $ (22,727 ) $ (6,204 )
266.3 % $ 11,128 � $ 49,411 � (77.5 %) � � Basic and Diluted
earnings (loss) per share: � Earnings (loss) from continuing
operations $ (0.39 ) $ (0.13 ) 200.0 % $ 0.32 $ 1.00 (68.0 %) �
Income (loss) from discontinued operations $ (0.09 ) $ 0.00 �
(100.0 %) $ (0.09 ) $ 0.01 � (1000.0 %) � Net earnings (loss) $
(0.48 ) $ (0.13 ) 269.2 % $ 0.23 � $ 1.01 � (77.2 %) � � Shares
used in computing basic earnings (loss) per share � 46,994 � �
48,544 � (3.2 %) � 47,747 � � 48,455 � (1.5 %) � Shares used in
computing diluted earnings (loss) per share � 46,994 � � 48,544 �
(3.2 %) � 47,901 � � 48,833 � (1.9 %) CMGI, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations Information
(Preliminary) (In thousands) � � � � (Unaudited) � � Three months
ended Twelve months ended � July 31, July 31, July 31, July 31, �
2008 � � � 2007 � � � 2008 � � � 2007 � � Net revenue: � Americas $
96,005 $ 80,296 $ 348,817 $ 395,084 Asia 74,715 69,021 316,739
288,936 Europe � 105,572 � � 103,243 � � 402,651 � � 459,006 � $
276,292 � $ 252,560 � $ 1,068,207 � $ 1,143,026 � � Operating
income (loss): � Americas $ (5,619 ) $ (1,969 ) $ (1,078 ) $ 11,455
Asia 8,742 4,396 41,334 29,808 Europe � (14,794 ) � (2,052 ) �
(20,284 ) � (10,126 ) (11,671 ) 375 19,972 31,137 Other � (3,708 )
� (2,809 ) � (17,601 ) � (16,372 ) $ (15,379 ) $ (2,434 ) $ 2,371 �
$ 14,765 � � Non-GAAP operating income (loss): � Americas $ (852 )
$ 2,638 $ 12,314 $ 22,249 Asia 11,086 6,906 49,580 38,234 Europe �
(1,036 ) � (344 ) � (1,376 ) � (2,572 ) 9,198 9,200 60,518 57,911
Other � (2,937 ) � (1,998 ) � (14,302 ) � (13,470 ) $ 6,261 � $
7,202 � $ 46,216 � $ 44,441 � � Note: Non-GAAP operating income
represents total operating income (loss), excluding net charges
related to depreciation, goodwill impairment, amortization of
intangible assets, stock-based compensation and restructuring. � �
TABLE RECONCILING NON-GAAP OPERATING INCOME TO GAAP OPERATING
INCOME (LOSS) AND NET INCOME (LOSS) � NON-GAAP Operating income $
6,261 $ 7,202 $ 46,216 $ 44,441 � Adjustments: Depreciation (4,906
) (4,576 ) (17,008 ) (15,028 ) Impairment of goodwill (12,000 ) -
(12,000 ) - Amortization of intangible assets (1,379 ) (1,203 )
(3,773 ) (4,821 ) Stock-based compensation (1,232 ) (1,395 ) (5,599
) (5,184 ) Restructuring, net � (2,123 ) � (2,462 ) � (5,465 ) �
(4,643 ) GAAP Operating income (loss) $ (15,379 ) $ (2,434 ) $
2,371 � $ 14,765 � � Other income (loss), net (202 ) (16 ) 23,333
41,505 Income tax expense 3,033 3,757 10,425 7,135 Income (loss)
from discontinued operations � (4,113 ) � 3 � � (4,151 ) � 276 �
Net income (loss) $ (22,727 ) $ (6,204 ) $ 11,128 � $ 49,411 � � �
Revenue (GAAP) $ 276,292 $ 252,560 $ 1,068,207 $ 1,143,026 Less
revenue from two previously announced discontinued programs � - � �
(12,322 ) � - � � (137,888 ) Adjusted Revenue $ 276,292 � $ 240,238
� $ 1,068,207 � $ 1,005,138 � � Fiscal 2008 vs. Fiscal 2007 GAAP
change in revenue 9 % (7 %) Adjusted change in revenue 15 % 6 %
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