Engage Inc. Exceeds Profit Forecast

ANDOVER, Mass. — Online-marketing company Engage Inc. reported a fiscal second-quarter loss from operations that was smaller than expected.

For the quarter ended Jan. 31, Engage (ENGA), which is majority owned by CMGI Inc. (CMGI), said revenue fell 10% to $28.1 million.

CMGI, the once high-flying Internet investment concern that has been battered by the downturn in technology stocks, has been retrenching amid a general downturn in the Internet sector and has vowed to reduce operating losses at its myriad units as quickly as possible.

In January, Engage said it was cutting half of its 1,100 employees and shifting its focus in order to lessen the company’s dependence on Internet advertising.

As for second-quarter results, Engage reported a net loss of $695.6 million, or $3.53 a share. Excluding $628.3 million in acquisition-related costs; $16.8 million in restructuring costs, and $5.7 million in stock compensation, the company would have posted a loss of $41.3 million, or 21 cents a share.

The mean estimate of analysts surveyed by First Call/Thomson Financial was for a loss of 26 cents a share.
Last month, Engage said it expected second-quarter revenue to exceed its previous guidance of $25 million and reaffirmed earlier guidance that its cash loss would be no more than 28 cents a share for the quarter.

Results in the latest quarter, meanwhile, compare with a year-earlier net loss of $51.2 million, which included $2.3 million in in-process research and development costs, $27.6 million in costs for amortization of goodwill and other intangibles, and $224,000 in stock compensation.

Looking ahead, Engage expects a third-quarter loss from operations in the range of 12 cents to 15 cents a share on revenue of $24 million to $26 million. The fourth-quarter loss from operations is expected to be 7 cents to 10 cents a share on revenue of $25 million to $28 million.

The mean estimates of four analysts surveyed by First Call/Thomson Financial was for a third-quarter loss of 19 cents a share and a fourth-quarter loss of 16 cents a share.

Engage expects to reach break-even cash earnings by the end of its first quarter, fiscal 2002, or Oct. 31, 2001.
As of Jan. 31, Engage had about $77 million in cash and short-term investments, and CMGI has committed to provide it with $50 million in debt, equity or a combination of both.

As of Nov. 30, the company had $100 million in cash and cash equivalents.

Engage said Monday that its cash and the commitment should provide enough to fund operations through its expected break-even.

Copyright (c) 2001 Dow Jones & Company, Inc.