InfoGroup generated $738.3 million in sales during 2008, up from $688.8 million in 2007, and well above any level previously seen by the data and data services company. But a spike in selling, general and administrative expenses pulled its net income down to $4.8 million, well below the $40.9 million it realized in 2007. The fiscal year ended on Dec. 31.
At $356.5 million, the company’s selling, general and administrative expenses amounted to 48.2% of its revenue, compared with 41.7% in 2007. The increase was due in part to litigation-related charges.
Additionally, when founder and former CEO Vinod Gupta resigned from the company in August, he was granted $10 million in severance payments, of which $5 million was paid to him in October. But Gupta agreed to pay the company $9 million incrementally over four years. He made the first payment, for $2.2 million, in January of this year, according to Securities and Exchange Commission papers.
The company also incurred writedowns, facility closure charges and, separately, severance costs associated with its acquisitions of list firm Direct Media and Guideline.
All in all, operating costs and expenses amounted to 96% of the firm’s 2008 revenue. In 2007, operating costs and expenses were equivalent to 87% of its revenue.
Within its segments, net sales of the Data Group for 2008 were $309.5 million, down 6% from $330.5 million for 2007. Operating income in 2008 was $65.2 million. In 2007, the Data Group’s results included $9.9 million received from a final settlement from Naviant, Inc. (now known as BERJ, LLP) regarding a breach of database license agreement. Additionally, 2007 included revenue from two license agreements with First Data Resources, which were not renewed in 2008, of $13.3 million. The Data Group includes National Accounts; OneSource; Database Licenses and the Small and Medium Sized Business Group.
An additional decrease occurred in 2008 due to a decline in demand for the traditional direct marketing products, according to the company. These decreases were offset partly by an increase in the Data Group due to the acquisitions of expresscopy.com, acquired in June 2007, and SECO Financial, acquired in October 2007, according to the company’s S.E.C. filings.
The Services Group generated $163.3 million in 2008, a 19% increase from $136.8 million for 2007. The majority of the increase in the Services Group is related to the acquisition in January 2008 of Direct Media, Inc., as well as growth in the Yesmail division as e-mail marketing is becoming a bigger part of corporate advertising, according to the company’s S.E.C. filings. The Services Group provides e-mail marketing solutions, list brokerage and list management services and online interactive marketing services to large companies in the United States, Canada and globally. This unit’s operating income was $29.6 million.
Net sales of the Marketing Research Group for 2008 were $265.5 million, up 20% from $221.5 million for 2007. The majority of the increase in the Marketing Research Group is related to the acquisitions of NWC Research in July 2007, Guideline Inc., in August 2007 and Northwest Research Group in October 2007, as well as an increase in net sales of the Macro International division as a result of increases in direct labor and other direct costs from new business generation, according to the company’s filings. Its operating income was $14.9 million.
Selected notes from the company’s S.E.C. filings follow.
In 2007, InfoGroup reported 150 contracts with the federal government. By 2008, the total number had increased to 200, although in neither case did the company give a sense of the contracts’ scope.
During the year, the company incurred approximately $23.6 million in fees related to a variety of internal and external investigations stemming from a failed attempt by former CEO Vinod Gupta to take the company over (in which it was alleged the company did not fully solicit outside bids). These fees are in addition to $3 million in similar charges incurred in 2007. The SEC’s investigation is ongoing, and the company expects to generate additional charges in 2009.
The company’s advertising expenses, which stood at $46.1 million in 2007, slipped down to $42.6 million in 2008.
The 4,771 full-time equivalent employees the company reported as of Dec. 31, 2008, aren’t far off from the 4,815 workers it employed a year ago.
The company is expanding internationally, through a variety of initiatives in the Asia-Pacific region, Western Europe, Australia and South America. In 2007, it announced plans to compile a database in the United Kingdom. It currently contains 1.3 million U.K. businesses, and expects to eventually reach 2.2 million.
The Luddite’s Take: Nestled within InfoGroup’s sales and marketing strategy notes is the tidbit that, in addition to its direct mail, print, telemarketing, radio, search, online advertising, television and event sponsorships, the company had “introduced a long-format TV spot, an infomercial, which we tested during the last three months of 2008 for Salesgenie.com.” Now, some may remember the company’s Super Bowl ads, which generated buzz (largely about either the poor production values, or the questionable taste of the cartoons) and, according to former CEO Vin Gupta, a hell of a lot of leads for the company. Haven't seen the new long-format infomercial, but I'll bet it isn’t nearly as fun as the spots Gupta wrote…
