Internet Capital Group Announces Q3 Financial Results
Core partner companies report strong Aggregate EBITDA results
ICG Commerce reports 40% quarterly revenue growth from 2008
WAYNE, Pa. -- Internet Capital Group, Inc. (NASDAQ: ICGE) today announced that its consolidated revenue in the third quarter ended September 30, 2009 was $22.6 million compared to $17.1 million in the comparable 2008 period. ICG's consolidated net income in the third quarter was $3.1 million, or $0.08 per diluted share, compared to net income of $22.5 million, or $0.58 per diluted share, in the same period of 2008. Results for the third quarter of 2009 include $8.5 million of net gains, which primarily relate to gains on sales of marketable securities, compared to $34.1 million of net gains in the comparable 2008 period, which primarily relate to the gain on the sale of Creditex. Results for the third quarter of 2009 include the results of Vcommerce up to the date of its acquisition by Channel Intelligence on August 28, 2009.
"Our partner companies continued to report strong aggregate EBITDA results while the challenging economic environment continued to impact revenue growth during the third quarter," said Walter Buckley, ICG's Chief Executive Officer. "We are pleased with the exceptional performance at ICG Commerce, as well as healthy growth at Channel Intelligence, Freeborders and Investor Force."
Aggregate Revenue of ICG's seven core companies declined 2% year-over-year, to $67.0 million in the 2009 third quarter from $68.1 million in the same period of 2008. Aggregate EBITDA in the third quarter improved to $1.8 million from $(5.3) million in the comparable 2008 quarter. Excluding the impact of stock-based compensation and unusual items, Aggregate EBITDA for the seven core companies was $3.2 million in the third quarter compared to $(1.2) million in the 2008 quarter.
Through the nine months of 2009, Aggregate Revenue of ICG's seven core companies improved 6% year-over-year, to $199.9 million from $188.7 million through the same period of 2008. Aggregate EBITDA through the nine months of 2009 improved to breakeven, from $(25.0) million through the comparable 2008 period. Excluding the impact of stock-based compensation and unusual items, Aggregate EBITDA for the seven core companies was $6.9 million through the nine months of 2009, compared to $(13.8) million through the comparable 2008 period, an improvement of over $20.0 million.
"Our stated goals at the beginning of 2009 were to significantly improve Aggregate EBITDA, exclusive of stock-based compensation and unusual items, while growing revenues," said Kirk Morgan, ICG's Chief Financial Officer. "Given our strong EBITDA performance combined with Aggregate Revenue growth year-to-date, we expect to meet those goals."
ICG Corporate
At September 30, 2009, ICG's corporate cash balance was $56.2 million, and the value of its holdings related to Blackboard (Nasdaq: BBBB) was $73.8 million, including its hedges and other related receivables. The value of ICG's equity holdings in GoIndustry (LSE.AIM: GOI) at September 30, 2009 was $9.8 million.
Highlighted Partner Companies
ICG Commerce
ICG Commerce is an outsourced procurement services provider. In the third quarter of 2009, ICG Commerce's revenue grew to $20.5 million, compared to $14.7 million in the same 2008 period. ICG Commerce's EBITDA improved to $2.6 million in the third quarter, compared to $0.3 million in the comparable 2008 period. ICG Commerce's cash balance at September 30, 2009 was approximately $20.6 million. ICG has a 64% ownership position in ICG Commerce.
Metastorm
Metastorm is an enterprise software and services provider that enables its customers to turn business strategies into business processes. Metastorm's revenue declined to $16.5 million in the third quarter of 2009 from $21.6 million in the comparable 2008 period. Metastorm's EBITDA declined to $1.1 million in the third quarter compared to $1.5 million in the comparable 2008 period. Metastorm's cash balance at September 30, 2009 was approximately $8.5 million. ICG has a 33% ownership position in Metastorm.
ICG will host a webcast at 10:00 a.m. ET today to discuss its financial results. As part of the live webcast for this call, ICG will post a slide presentation to accompany the prepared remarks. To access the webcast, go to
http://www.internetcapital.com/investorinfo-p... and click on the link for the third quarter conference call webcast. Please log on to the website approximately ten minutes prior to the call to register and download and install any necessary audio software. The conference call is also accessible through listen-only mode at 866-578-5771. The international dial-in number is 617-213-8055. The passcode is 99528174.
For those unable to participate in the conference call, a replay will be available from November 5, 2009 at 1:00 p.m. ET until November 12, 2009 at 11:59 p.m. ET. To access the replay, dial 888-286-8010 (domestic) or 617-801-6888 (international). The pass code is 87331373. The replay and slide presentation also can be accessed on the Internet Capital Group web site at
http://www.internetcapital.com/investorinfo-p....
About Internet Capital Group
Internet Capital Group (www.internetcapital.com) acquires and builds Internet software and services companies that drive business productivity and reduce transaction costs between firms. Founded in 1996, ICG devotes its expertise and capital to maximizing the success of these platform companies, which are delivering software and service applications to customers worldwide.
INTERNET CAPITAL GROUP, INC.
September 30, 2009
Description of Terms
Consolidated Statements of Operations
Effect of Various Accounting Methods on our Results of Operations
The various interests that the Company acquires in its partner companies are accounted for under three methods: the consolidation method, the equity method and the cost method. The applicable accounting method is generally determined based on the Company's voting interest in a partner company.
Consolidation. Partner companies in which the Company directly or indirectly owns more than 50% of the outstanding voting securities and for which other stockholders do not possess the right to affect significant management decisions are accounted for under the consolidation method of accounting. Under this method, a partner company's balance sheet and results of operations are reflected within the Company's Consolidated Financial Statements. All significant intercompany accounts and transactions are eliminated. Participation of other partner company stockholders in the net assets and in the earnings or losses of a consolidated partner company is reflected in the caption "Noncontrolling interest" in the Company's Consolidated Balance Sheets and "Net income (loss) attributable to the noncontrolling interest" on the Company's Consolidated Statements of Operations. Noncontrolling interest adjusts the Company's consolidated results of operations to reflect only the Company's share of the earnings or losses of the consolidated partner company. The results of operations and cash flows of a consolidated partner company are included through the latest interim period in which the Company owned a greater than 50% direct or indirect voting interest for the entire interim period or otherwise exercised control over the partner company. Upon dilution of control below 50%, the accounting method is adjusted to the equity or cost method of accounting, as appropriate, for subsequent periods.
During the three months ended September 30, 2009, the Company accounted for the following three partner companies under this method: ICG Commerce, Investor Force and Vcommerce (substantially all assets were sold on August 28, 2009). During the three months ended September 30, 2008, the Company accounted for the following three partner companies under this method: ICG Commerce, Investor Force and Vcommerce.
Equity Method. Partner companies that are not consolidated, but over which the Company exercises significant influence, are accounted for under the equity method of accounting. Whether or not the Company exercises significant influence with respect to a partner company depends on an evaluation of several factors, including, among others, representation on the partner company's board of directors and the Company's ownership level, which is generally between a 20% and 50% interest in the voting securities of the partner company, including voting rights associated with the Company's holdings in common stock, preferred stock and other convertible instruments in the partner company. Under the equity method of accounting, a partner company's accounts are not reflected within the Company's Consolidated Balance Sheets and Statements of Operations; however, the Company's share of the earnings or losses of the partner company is reflected in the caption "Equity loss" in the Consolidated Statements of Operations. The carrying value of equity method partner companies is reflected in "Ownership interests in partner companies" in the Company's Consolidated Balance Sheets. When the Company's interest in an equity method partner company is reduced to zero, no further losses are recorded in the Company's Consolidated Financial Statements unless the Company has guaranteed obligations of the partner company or has committed to additional funding. When the partner company subsequently reports income, the Company will not record its share of such income until it equals the amount of its share of losses not previously recognized.
During the three months ended September 30, 2009, the Company accounted for eight of its partner companies under this method.
Cost Method. Partner companies not accounted for under the consolidation or the equity method of accounting are accounted for under the cost method of accounting. Under this method, the Company's share of the earnings or losses of such companies is not included in the Consolidated Balance Sheets or Consolidated Statements of Operations. However, cost method partner company impairment charges are recognized in the Consolidated Statements of Operations. If circumstances suggest that the value of the partner company has subsequently recovered, such recovery is not recorded.
When a cost method partner company qualifies for use of the equity method, the Company's interest is adjusted retroactively for its share of the past results of its operations. Therefore, prior losses could significantly decrease the Company's carrying value at that time.
The Company records its ownership interest in equity securities of partner companies accounted for under the cost method at cost, unless these securities have readily determinable fair values based on quoted market prices, in which case these interests are valued at fair value and classified as marketable securities or some other classification in accordance with Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities."