CMGI Conference Call Notes (June 5, 2007)
You can access the CMGI, Inc. (CMGI-NASDAQ) summary of the full earnings here, and there are more notes as follows:
Market is growing double-digits, and CMGI expects to ultimately reach that same rate……higher margin services and other factors will help CMGI reach targets…coming quarter will have higher expenses and more seasonality…aiming for gross margins 12-14% longer-term….targeting lower SG&A expenses to 7% of revenues…operatiung income targets of 5% to 7%….requires a lot of work to get there…..initiatives will be complete should be by end of fiscal 2008.
The fiscal revenue guidance of $1.1 to $1.15 Billion will be close to the $1.15 Billion in 2006, same as per the press release. As fas as the @Ventures investment, CMGI bought into 5 cleantechinvestments after Powerit….Well positioned in investment environmentin the area.
There are many notes out of the “after-notes” that will show some insight for down the road, and THIS is the most important part of the call:
1) investor…Asked about website not improving very much since the company has changed to a supply chain management company….ANSWER: are in process of several months to upgrade the Supply Chain section of the site. No specific date set, but quite soon. The CMGI site is targeted but not being rapidly handled and no date is set.
2) investor (L. Disilvio)…asked abouut the $0.20 drop after earnings???? ANSWER: Company is also surprised by the drop, but they are working on business plan and will create improving returns.
3) investor, G. Mulligan….What about optimization behind the supply chain management on the website, and on cross-selling via @Ventures….ANSWER: thank you, and appreciate.
4) W.R. HAMBRECHT….as faras margins, analyst was a bit disappointed, was company surprised on the costs and margins? ANSWER: 10.6% versus 10.9%, but smoothing out it was flat. This was the low seasonal quarter for the year, but they expect an inmprovement in Q4 versus Q3 and they are still targeting 12-15%. It is still in-line with plan….. As far as Kodak and H-P coming off-line, can the company talk about margins on these other companies leaving? ANSWER: an illustration showed some of the lower margins versus some of the higher margin work, but there is some churn. They are focusing on the higher and are going further into this. As far as the Americas, the Kodak business drop off affected the
quarter but it is expected to be btter.
5) investor, Carlos (?)….Asked about Advent Solar investment and cleantech….ANSWER: Company doesnt really update on portfolio companies. They committed $50 million to the fund so far, but they have committed approximately half of that so far. There is not a published document showing returns on individual funds.
6) Vincent from TriPoint…growth and market share….1) grwoth in communications and others is because growth rates are higher, needs high single-digit to low double-0digit growth to maintain current position. As far as earnings power: company is committed to completing investments, have better visibility, look for better margin areas, has to complete the IT investment to take out costs in IT & Finance. Are you are confident as the start of the year on SAP Deployment??? ANSWER: Company is as confident 9although a bit light), and then said very confident today. Implementation in Asia just went very well. Solution centers are now being standardized on a global basis. on the JOINT VENTURE??? ANSWER: Company was in the JV for 6 or 7 years, and many IT companies are based in Japan and it is a significant opportunity for ModusLink there; doesn’t want to overstate or understate. Goal is to drive revenue.
7) “George” hard to understand, asked about liquidity events and total returns?….ANSWER: as far as new liquidity events they can’t comment on timing nor on any sales. 2002 was the hardest year in the venture community. In 2004 the board made a decision to focus on clean energy because they have a good history of early investing and the activity going on can drive returns.
8) Larry S., investor….Turning the company around and he likes. Anything on reverse split? or benefiting on dollar drop? what about hedge funds or mutual funds buying, could it be a takeover target? and cash went down to $250M?….ANSWER: will have to break it up, but as far as a reverse split, they have NO PLANS at this point to do so. NO REVERSE SPLIT FOR NOW, although the board considers it sometime. As far as forex and exchange rates, it does flow through but not in a meaningful way. On institutional investors: funds and investors coming in are a good sign, but not so much th company can take its eye off quarterly performance; can’t comment on aspects of any buyout, but isn’t aware of efforts to acquire company. On iPhone, can’t comment but made some light comments. On the cash position, it was up $35 million year over year, but not on a quarter over quarter basis. The company looks at hedging the dollar based on forex changes.
Sorry, but we lost connection after the 8th question at 5:54PM EST and had to go to another call so were unable to finish the rest. Also, my apologies that this was in notation format and may contain spelling errors or summary ommissions. Thanks for reading.
Jon C. Ogg
June 5, 2007
Jon ogg can be reached at email@example.com; he does not own securities in the companies he covers.