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(June 2001)

Engage Announces Fiscal 2001 Third Quarter Results

ANDOVER, Mass.--(BUSINESS WIRE)--June 11, 2001--Engage, Inc., (Nasdaq: ENGA) a leading enterprise marketing software and interactive media company, and a majority-owned operating company of CMGI, Inc., today announced operating and financial results for its fiscal third quarter ended April 30, 2001 and provided guidance for its fiscal fourth quarter.

Revenue for the third quarter of fiscal 2001 was $25.4 million, in line with the Company's previous guidance. This compares to revenue of $28.1 million for the second quarter of fiscal 2001 and $58.7 million for last year's third quarter. As anticipated, the sequential revenue decline was attributable to continued softness in the broader media market.

Gross margin for the third quarter of fiscal 2001, excluding non-cash amortization, was $7.8 million, or 31% of revenue. Gross margin dollar contributions in the period reflect a 69% increase sequentially from gross margin of $4.6 million in the second quarter of fiscal 2001. Gross margin for the third quarter of fiscal 2000 was $13.5 million. Including non-cash amortization, gross margin was 25% for the third quarter of fiscal 2001, compared to gross margin of 11% for the second quarter of fiscal 2001 and 23% for the third quarter of fiscal 2000.

On a cash basis, Engage's net loss before amortization, impairment write-offs, stock compensation, and restructuring costs was $23.4 million, or $0.12 per share, using a weighted average share count of 196.9 million, reflecting a 43% sequential improvement from the prior quarter. Net loss for the period was $76.6 million, or $0.39 per share, compared to a net loss of $695.6 million, or $3.53 per share, for the second quarter of fiscal 2001, which included a non-recurring impairment charge of $521.8 million related to previously recorded goodwill and other intangible assets within Engage's Media segment.

Tony Nuzzo, Engage's President and CEO commented, ``Given the current market conditions and Engage's in-process restructuring, we are pleased with the third quarter's financial results. Revenues and earnings met Company targets and our cash burn from operations continues to trend downward. Despite turbulent markets, Engage has made significant progress over the last six months through effective management and responsible cost controls. Worldwide headcount now numbers 534, a 54% reduction from November, 2000. We have successfully rationalized operations in many areas, including our ad-serving systems; divested the I/Pro business; and are very pleased with the results of the site-renegotiation initiatives previously announced. The bulk of our streamlining efforts are complete and we expect to see the full impact on our business in the coming quarters.''

    Revenue and Gross Margin by Segment

Segment      Q3 01 Revenue  % of Total  Q3 01 Gross
             (millions)      Revenue     Margin*
& Services      $12.6         50%         43%
Media           $12.8         50%         19%
Total           $25.4        100%         31%

    Q2 01 Revenue   % of Total   Q2 01 Gross
    (millions)      Revenue       Margin*
      $8.3           30%           30%
     $19.8           70%           11%
     $28.1           100%          16%

   * Excludes non-cash amortization of $1.5 million.

Improvements in Engage's overall gross margin during the quarter were fueled by progress in software and services margins, and media segment margin contributions. Engage also experienced a more favorable software license-to-services revenue mix. Business changes, platform rationalization and site-renegotiation initiatives were the primary catalysts to the improvement in media segment margins.


Software and Services Segment

Engage welcomed StarMedia Network, a leading Latin/South-American portal provider to its client list. StarMedia, which represents a strategic competitive win, licensed Engage's AdManager product. Fuji - a global film/photo/imaging company - recently debuted its myfujifilm.com website, powered by Engage's workflow and asset management software. Engage continues to support the marketing tools and services needs of traditional and online publishers, retailers and catalogers such as L.L. Bean.

Media Segment

Engage boasts a media network with the second broadest reach on the Internet (Source: comScore), and added marketing and advertising customers, such as SC Johnson, in the quarter. The Company is continuing to expand upon the capabilities of its media segment with the recent launch of a targeting optimization-by-action service and by providing advertisers access to a research solution to measure the brand-building effectiveness of their online campaigns. In addition, through a recent agreement with Verizon's SuperPages.com, the Company is expanding its local channel sales initiative to reach small- to medium-sized businesses.


Engage has revised fiscal fourth-quarter guidance to reflect current and expected market conditions. For the fourth quarter of fiscal 2001, Engage's total revenues are expected to be approximately $20 to $22 million. On a percentage basis, revenue contributions from the Software and Services and Media segments are expected to approximate results from the just completed quarter.

Excluding amortization, blended gross margin targets have been revised to 30% - 34%. At the high end of the range, this would reflect a 10% improvement sequentially. Engage expects to achieve a cash loss per share of $0.08 - $0.11 before amortization, impairment write-offs, stock compensation, and restructuring costs.

Our objective remains: achieving cash-earnings break-even by the end of our first fiscal quarter 2002 (October 31, 2001). As of April 30, 2001, Engage had approximately $55 million in cash and equivalents. In addition, CMGI has committed to make available to Engage up to $50 million in consideration of debt, equity or a combination thereof to fund Engage's working capital requirements, subject to negotiation of mutually acceptable terms and conditions and approval of both companies' respective Boards of Directors. The Company believes that its current capital resources are sufficient to support operations through the date of expected break-even.

Nuzzo concluded, ``Engage remains focused on meeting the product and service needs of a diverse set of marketing and media professionals. We continue our restructuring efforts to create a streamlined organization that adapts to market conditions, while providing the ability to capitalize when the markets return to strength. As illustrated by our fiscal third quarter results, we have made significant progress towards reaching a successful, long-term operating model.''

Metric                         Q3 FY 2001         Q2 FY 2001


Total Revenue ($M)             $25.4 million      $28.1 million

Customers                      9,300              9,400

Employees                      537                940

Sales Force (Quota)            92                 95


Int'l Customers                313                410

Int'l Revenue as a % of Total  29.4%              30.3%


Customers                      470                580


Customers (direct)             830                1,200

Sites Within Network           3,448              4,430

Ad Impressions                 22.9 billion       28.3 billion

Potential Reach (month         52.7%**            59.7%*

Actual Reach (month ending)    48.3%****          52.3%***

Actionable Profiles            93 million         88 million

B2B Network Sites              248                285

  • Potential Reach number as calculated by Media Metrix from January, 2001
  • Potential Reach number as calculated by Media Metrix from April, 2001 which reflects some pruning of Engage's media network
  • Actual Reach number as calculated by Media Metrix from December, 2000
  • Actual Reach number as calculated by Media Metrix from January, 2001 which reflects some pruning of Engage's media network

All third quarter fiscal 2000 results of operations in the accompanying table have been retroactively adjusted to reflect the results of Adsmart Corporation and Flycast Communications Corporation in a manner similar to a pooling of interests.

Engage will conduct a conference call and simultaneous Web cast today at 5:00 p.m. EST to discuss the Q3 2001 results. The call can be accessed via the investor section of Engage's corporate Web site at www.engage.com.

About Engage®

Engage, Inc. (Nasdaq: ENGA - news) is a leading enterprise marketing software and interactive media company. A majority-owned operating company of CMGI, Inc., Engage enables companies to harness the power of interactive marketing to create more loyal customers, maximize revenue, and increase their brand's visibility and recognition. Based in Andover, Massachusetts, Engage has European headquarters in London and offices worldwide. For more information on Engage please call 877-U-ENGAGE or visit www.engage.com.

Engage is a registered trademark of Engage, Inc. All other products and services mentioned may be trademarks or service marks of their respective owners.

Engage Statement Under the Private Securities Litigation Reform Act

This press release includes forward-looking information. All statements other than statements of historical fact, including without limitation, statements regarding the effects of the Company's restructuring, the Company's expectation that its business will be fully impacted by its streamlining efforts in subsequent quarters, the Company's projected revenue, loss per share and gross margins for the fourth fiscal quarter of 2001, the Company's expectation of reaching cash-earnings break-even by the end of the first quarter of fiscal 2002 and the Company's belief that its cash position is sufficient to support its operations through its expected break-even date, are forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties which could cause Engage's future results of operations to differ materially from those anticipated. These risks include our ability to reduce expenses and improve gross margins, growth in online advertising, our ability to increase sales of our software and media offerings, the impact of competition within our industry, our ability to enter into additional strategic relationships, and other risks detailed in Engage's 2000 Annual Report on Form 10-K and from time to time in Engage's other reports filed with the SEC. In addition, any forward-looking statements represent the Company's estimates only as of the day the report was filed with the SEC and should not be relied upon as representing the Company's estimates as of any subsequent date. While the Company may select to update forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so, even if its estimates change.

                               Engage, Inc.
                        Consolidated Operating Results
                      (In thousands, except per share data)

                                     Three months ended
                             April 30,      Jan. 31,     April 30,
                                 2001          2001        2000 (a)

Revenue.........             $ 25,395      $ 28,121      $ 58,682

Cost of revenue............... 17,612        23,515        45,221
Amortization of
 developed technology........   1,458         1,458             -
      Total cost of
       revenue................ 19,070        24,973        45,221

      Gross profit............  6,325         3,148        13,461

Operating expenses:
      research and
      development............       -             -        29,300
     Research and
      development............   7,957        10,153         8,613
     Selling and
      marketing..............  15,615        26,302        32,837
     General and
      administrative.........   7,908        11,623        10,189
     Amortization and
      impairment of
      goodwill and
      other intangibles......  41,124       628,251        87,003
     Acquisition costs.......      -            -           4,951
     Restructuring costs.....   5,584        16,791            -
     Stock compensation......   5,103         5,718        36,948

      Total operating
       expenses..............  83,291       698,838       209,841

Loss from operations......... (76,966)     (695,690)     (196,380)

Other income (expense):
     Interest income.........     845         1,594         1,498
     Interest expense........    (249)         (278)       (1,235)
     Equity in loss of
      joint venture..........      -            -            (315)
     Minority interest
      in loss of subsidiary..     260           312             -
     Other expense...........    (527)       (1,501)          (73)

Net loss................... $ (76,637)   $ (695,563)   $ (196,505)

Basic and diluted
 net loss per share.........$   (0.39)   $    (3.53)

Weighted average
 number of basic
 and diluted
 shares outstanding........   196,943       196,774

Pro forma basic and
 diluted net loss per
 share (b)(c)..............                               $ (1.14)

Pro forma weighted
 average number of basic
 and diluted
 shares outstanding
 (b)(c).....................                              172,408

(a) All amounts for the quarter ended April 30, 2000, including the
    share and per share amounts, have been retroactively adjusted to
    reflect the financial results of Flycast from January 13, 2000 and
    of Adsmart for all periods presented in a manner similar to a
    pooling of interests.

(b) Historical basic and diluted net loss per share have not been
    presented for the three months ended April 30, 2000 because they
    are irrelevant due to the issuance of shares in the Flycast
    acquisition on January 13, 2000 and the impact of the conversion
    of debt to CMGI and preferred stock for Adsmart, after adjustment
    for the Engage exchange ratio, as of the date of the beginning of
    each period, or date of issuance, if later, using the if-converted

(c) The share and per share amounts herein have been adjusted to
    reflect the two-for-one stock split on April 3, 2000 to
    stockholders of record at the close of business on March 20, 2000.

                        Engage, Inc.
                 Consolidated Balance Sheets
                       (In thousands)

                                  April 30, 2001        July 31, 2000
                                -----------------     ----------------
Current assets:
 Cash and cash equivalents          $ 54,900             $ 119,809
 Available-for-sale securities             -                16,147
 Accounts receivable, net             24,273                79,799
 Prepaid expenses and other
  current assets                       2,759                 2,570
                                -----------------     ----------------
     Total current assets             81,932               218,325
                                -----------------     ----------------

Property and equipment, net           20,495                31,334
Intangible assets, net               350,200               873,323
Other assets                           8,104                 9,915
                                -----------------     ----------------
     Total assets                  $ 460,731           $ 1,132,897
                                =================     ================

Liabilities and Stockholders' Equity
Current liabilities:
 Current portion of obligation
  under capital lease                $ 3,371               $ 4,650
 Current portion of long-term
  debt                                 1,544                 2,010
 Accounts payable                      9,285                33,365
 Due to CMGI and affiliates           37,575                27,287
 Accrued expenses                     38,496                24,599
 Deferred revenue                      7,872                 7,604
                                -----------------     ----------------
     Total current liabilities        98,143                99,515
                                -----------------     ----------------
Deferred revenue                         463                   651
Obligation under capital lease,
 less current portion                    886                 2,905
Long-term debt, less current
 portion                                 655                 1,843
Other long-term liabilities              408                   843
                                -----------------     ----------------
     Total liabilities               100,555               105,757
                                -----------------     ----------------
Minority interest                      7,002                 8,812

Stockholders' equity:
 Common stock                          1,964                 1,789
 Additional paid-in capital        3,798,066             3,650,059
 Deferred compensation                (8,885)               (1,234)
 Accumulated other
  comprehensive loss                    (281)                 (260)
 Accumulated deficit              (3,437,690)           (2,632,026)
                                -----------------     ----------------
     Total stockholders' equity      353,174             1,018,328
                                -----------------     ----------------
                                -----------------     ----------------
     Total liabilities and
      stockholders' equity         $ 460,731           $ 1,132,897
                                =================     ================


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