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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended April 30, 2004

OR

For the transition period from                      to                     

Commission File Number 000-23262

CMGI, INC.

(Exact name of registrant as specified in its charter)

(617) 886-4500

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨

As of June 7, 2004, there were 401,315,770 shares of the registrant’s Common Stock, $.01 par value per share, outstanding.

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CMGI, INC.

FORM 10-Q

INDEX

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CMGI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

(Unaudited)

See accompanying notes to interim unaudited condensed consolidated financial statements

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CMGI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)

See accompanying notes to interim unaudited condensed consolidated financial statements

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CMGI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

See accompanying notes to interim unaudited condensed consolidated financial statements

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CMGI, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The accompanying unaudited condensed consolidated financial statements have been prepared by CMGI, Inc. (together with its consolidated subsidiaries, “CMGI” or the “Company”) in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments, consisting only of those of a normal recurring nature, necessary for a fair presentation of the Company’s financial position, results of operations and cash flows at the dates and for the periods indicated. While the Company believes that the disclosures presented are adequate to make the information not misleading, these condensed consolidated financial statements should be read in conjunction with the audited financial statements and related notes for the year ended July 31, 2003 which are contained in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on October 20, 2003. The results for the three and nine-month periods ended April 30, 2004 are not necessarily indicative of the results to be expected for the full fiscal year. Certain prior year amounts in the condensed consolidated financial statements have been reclassified in accordance with US GAAP to conform to the current year presentation. Discontinued operations reporting has been applied for certain of the Company’s subsidiaries that have been disposed of (see note F).

Marketable securities held by the Company, which meet the criteria for classification as trading securities, are carried at fair value. Unrealized holding gains and losses on securities classified as trading are recorded as a component of “Other gains (losses), net” in the accompanying condensed consolidated statements of operations.

In January 2003, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation (“FIN”) No. 46 “Consolidation of Variable Interest Entities” (“FIN 46”) and, in December 2003, issued a revision to that interpretation (“FIN 46R”). FIN 46R further explains how to identify variable interest entities (“VIE”) and how to determine when a business enterprise should include the assets, liabilities, noncontrolling interest and results of a VIE in its financial statements. The Company adopted FIN 46R as of April 30, 2004. The adoption of the provisions of FIN 46R did not have a material impact on the Company’s financial position or results of operations.

In December 2003, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. (“SAB”) 104, “Revenue Recognition,” which supersedes SAB 101, “Revenue Recognition in Financial Statements.” SAB 104’s primary purpose is to rescind accounting guidance contained in SAB 101 related to multiple element revenue arrangements, superseded as a result of the issuance of EITF 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables.” The issuance of SAB 104 reflects the concepts contained in EITF 00-21; the other revenue recognition concepts contained in SAB 101 remain largely unchanged. The application of SAB 104 did not have a material impact on the Company’s financial position or results of operations.

In May 2003, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 150, “Accounting For Certain Financial Instruments with Characteristics of Both Liabilities and Equity”, which establishes standards for how an issuer of financial instruments classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances) if, at inception, the monetary value of the obligation is based solely or predominantly on a fixed monetary amount known at inception, variations in something other than the fair value of the issuer’s equity shares or variations inversely related to changes in the fair value of the issuer’s equity shares. This Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. On November 7, 2003, the FASB deferred the classification and measurement provisions of SFAS No. 150 as they apply to certain mandatory redeemable non-controlling interests. This deferral is expected to remain in effect while these provisions are further evaluated by the FASB. The Company has not entered into or modified any financial instruments covered by this statement after May 31, 2003 and the application of this standard is not expected to have a material impact on the Company’s financial position or results of operations.

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CMGI, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company accounts for its stock compensation plans under the provisions of FASB Statement No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”). As permitted by SFAS No. 123, the Company measures compensation cost in accordance with Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations. Accordingly, no accounting recognition is given to stock options granted at fair market value until they are exercised. Upon exercise, net proceeds, including tax benefits realized, are credited to equity. The following table illustrates the pro forma effect on net income/(loss) and earnings/(loss) per share if the Company had applied the fair value recognition provisions of SFAS No. 123.

The fair value of each stock option is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

The following table reflects the components of “Other gains (losses), net”:

During the three and nine months ended April 30, 2004, the Company sold marketable securities for total proceeds of approximately $0.7 million and $79.5 million, respectively, and recorded net pre-tax gains of approximately $0.7 million and $44.5 million, respectively, on these sales. The shares sold during the three months ended April 30, 2004 consisted of approximately 0.2 million shares of NaviSite, Inc. common stock for total proceeds of approximately $0.7 million. The shares sold during the nine

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CMGI, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

months ended April 30, 2004 also included approximately 1.0 million shares of Loudeye Corp. common stock sold for proceeds of approximately $2.3 million, approximately 3.2 million shares of Overture Services, Inc. common stock sold by the Company’s AltaVista subsidiary for total proceeds of approximately $75.4 million and approximately 0.2 million shares of Primus Knowledge Solutions common stock for proceeds of approximately $1.0 million. The Company also recorded impairment charges of approximately $0.9 and $1.6 million for the three and nine months ended April 30, 2004, respectively, for other than temporary declines in the carrying value of certain investments in affiliates. These charges were primarily associated with investments made by CMGI@Ventures IV, LLC.

During the three months ended April 30, 2003, the Company recorded impairment charges of approximately $11.9 million for other-than-temporary declines in the carrying value of certain investments in affiliates. These charges were primarily associated with investments made by CMGI@Ventures IV, LLC and CMG@Ventures II, LLC.

During the nine months ended April 30, 2003, the Company recorded a loss of approximately $6.3 million on the mark-to-market adjustment of a trading security. The Company also recorded impairment charges of approximately $26.0 million for other-than-temporary declines in the carrying value of certain investments in affiliates. These charges were primarily associated with investments made by CMGI@Ventures IV, LLC. Additionally, the Company recorded a gain on the sale of marketable securities of approximately $7.4 million in connection with the acquisition of Vicinity by Microsoft. During the period, the Company also recorded a $14.1 million impairment charge in connection with the divestiture of its investment in Signatures SNI, Inc. (“Signatures”), and sold its interests in its majority-owned subsidiary Equilibrium Technologies, Inc. (“Equilibrium”) to a group led by the management of Equilibrium and recorded a pre-tax loss of approximately $3.5 million.

The following tables summarize the activity in the restructuring accrual from July 31, 2003 through April 30, 2004:

It is expected that the payments of employee-related expenses will be substantially completed by July 31, 2005. The remaining contractual obligations primarily relate to facility lease obligations for vacant space resulting from the cessation of operations of certain of the Company’s subsidiaries in prior periods and the restructuring of excess plant capacity within the U.S. operations of the Company’s SalesLink subsidiary, which the Company anticipates will be settled by May 2012.

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CMGI, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The net restructuring charges for the three and nine months ended April 30, 2004 and 2003, respectively, would have been allocated as follows had the Company recorded the expense and adjustments within the functional department of the restructured activities:

The Company’s restructuring initiatives during the nine months ended April 30, 2004 and 2003, respectively, consisted primarily of costs to exit facility leases, severance charges, and equipment charges. The Company does not expect to realize any future economic benefit in connection with the contractual obligations for which restructuring charges were recorded. The restructuring charges were incurred in connection with the cessation of operations of certain of the Company’s subsidiaries in prior periods, the restructuring of excess plant capacity within the U.S. operations of the Company’s SalesLink subsidiary, and a Company-wide effort to reduce costs through the elimination and/or consolidation of services and facilities.

During the three months ended April 30, 2004, the Company recorded net restructuring charges of approximately $2.8 million. The restructuring charge primarily reflects adjustments of $0.2 million at iCAST and $2.8 million at SalesLink to previously recorded estimates for facility lease obligations as the facilities are expected to be vacant for longer than originally estimated. These charges were partially offset by a $0.1 million adjustment to reduce a previously recorded restructuring accrual for a facility lease obligation of the Company, based on the actual terms of a sublease signed during the period.

During the nine months ended April 30, 2004, the Company recorded net restructuring charges of approximately $5.6 million. In addition to the items noted in the quarter ended April 30, 2004, the Company recorded a $0.6 million charge related to a hosting services contract that the Company is no longer utilizing, as it represented excess capacity. The reduction in hosting services required to support the business is primarily the result of the divestiture of several subsidiaries in fiscal 2003. Also during the period, the Company recorded a charge of $0.3 million related to a workforce reduction of 17 employees, a charge of $0.5 million to write-off certain software and hardware related assets no longer being utilized by the Company, a $0.4 million charge related to equipment and facility lease obligations under which the Company expects to realize no future economic benefit, and adjustments to previously recorded restructuring estimates for facility lease obligations based on changes to the underlying assumption relating to the estimated length of time to sublet vacant space. These charges were partially offset by an adjustment to a previously recorded facility lease obligation as a result of the Company exercising a lease termination option.

During the three months ended April 30, 2003, the Company recorded net restructuring charges of approximately $19.9 million. The charges primarily related to restructuring initiatives at the Company’s SalesLink subsidiary, which recorded charges of approximately $15.5 million during the period, as a result of the implementation of a restructuring plan designed to reduce overhead costs in response to continued weak demand for U.S.-based supply chain management services. The restructuring charges related primarily to an unoccupied facility in Newark, California ($2.6 million), vacant partitioned space in SalesLink’s Memphis facility ($3.3 million), unutilized fixed assets in these facilities ($7.8 million), and a work force reduction of 120 employees ($0.7 million). Additionally, during the quarter the Company recorded restructuring charges totaling approximately $4.1 million at its corporate headquarters. These charges primarily included the termination of certain operating equipment lease obligations ($1.9 million), the restructuring of the Company’s hosting services arrangements ($0.9 million) in response to the divestiture of several subsidiaries, and the reduced overall hosting services required to support the ongoing business operations of the Company, and a work force reduction of 31 employees ($1.1 million) as part of the Company’s continued focus on cost savings.

During the nine months ended April 30, 2003, the Company recorded net restructuring charges of approximately $29.1 million. In addition to the items noted in the quarter ended April 30, 2003, the Company recorded a $5.0 million charge related to the recognition of the cumulative translation component of equity as a result of the substantial completion of the shutdown of the Company’s European operations, a $1.2 million charge for the write-off of certain software related assets, and a $3.2 million charge related to facility lease obligations beyond the Company’s previous estimates. These charges were partially offset by a $1.5 million adjustment for the settlement of certain facility lease obligations related to the Company’s European operations for amounts less than originally anticipated.

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CMGI, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

During fiscal year 2003, the Company’s divestitures of Engage, NaviSite, Yesmail and Tallán, the asset sales by uBid and AltaVista, and the cessation of operations by ProvisionSoft met the criteria for discontinued operations accounting. Accordingly, uBid, which was previously included in the eBusiness and Fulfillment segment, Tallán, Yesmail, AltaVista, ProvisionSoft and Engage, which were previously included in the Enterprise Software and Services segment and NaviSite, which was previously included in the Managed Application Services segment, have been reported as discontinued operations in the condensed consolidated financial statements for all periods presented.

During the nine months ended April 30, 2004, the Company recorded losses from discontinued operations of $1.0 million. These losses were primarily attributable to residual costs associated with the discontinued operations of AltaVista, Yesmail and uBid subsequent to divestiture.

Summarized financial information for the discontinued operations of Engage, NaviSite, Yesmail, Tallán, uBid, AltaVista and ProvisionSoft are as follows:

Based on the information provided to the Company’s chief operating decision-maker for purposes of making decisions about allocating resources and assessing performance, the Company now reports one operating segment, eBusiness and Fulfillment, which includes the results of operations of the Company’s SalesLink and SL Supply Chain Services International Corp. subsidiaries.

In addition to its one current operating segment, the Company reported an Enterprise Software and Services segment (that consists of the operations of Equilibrium, CMGI Solutions and Nascent), a Portals segment (that consists of the operations of MyWay and iCAST) and a Managed Application Services segment (that consists of the operations of NaviPath, ExchangePath, 1stUp, and Activate), as these entities did not meet the aggregation criteria under SFAS No. 131 with respect to the Company’s current reporting segments. The historical results of these companies will continue to be reported in the Enterprise Software and Services, Portals and Managed Application Services segments, respectively, as will any residual results from operations that exist through the cessation of operations of these entities, each of which have been divested or substantially wound down.

Management evaluates segment performance based on segment net revenue, operating income/(loss) and “Non-GAAP operating income/(loss)”, which is defined as the operating income/(loss) excluding net charges related to depreciation, long-lived asset impairment, restructuring, and amortization of stock-based compensation. The Company believes that its Non-GAAP operating income/(loss) measure provides investors with a useful supplemental measure of the Company’s operating performance by excluding

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

the impact of non-cash charges, and restructuring activities. Historically, the Company has recorded significant impairment and restructuring charges and therefore management uses Non-GAAP operating income/(loss) to assist in evaluating the Company’s actual and expected operating performance. Non-GAAP operating income/(loss) is not a recognized measure for financial statement presentation under U.S. GAAP. Non-GAAP operating income/(loss) does not have any standardized definition and therefore may not be comparable to similar measures presented by other reporting companies. These non-GAAP results should not be evaluated in isolation of, or as a substitute for, the Company’s financial results prepared in accordance with U.S. GAAP.

“Other” includes certain corporate infrastructure expenses which are not identifiable to the operations of the Company’s operating business segments. “Other” primarily consists of directors and officer’s insurance costs; costs associated with maintaining certain of the Company’s information technology systems and certain corporate administrative functions such as legal and finance, as well as certain administrative costs related to the Company’s venture capital entities.

One customer based in the U.S. accounted for approximately 69% and 78% of the Company’s consolidated net revenue for the three months ended April 30, 2004 and 2003, respectively, and approximately 72% and 76% of the Company’s consolidated net revenue for the nine months ended April 30, 2004 and 2003, respectively. Accounts receivable from this customer amounted to approximately 66% and 73% of total trade accounts receivable at April 30, 2004 and July 31, 2003, respectively.

Summarized financial information of the Company’s continuing operations by business segment is as follows: