Internet Capital Group Announces Second Quarter Financial Results
02 August 2007 - 2:30PM
Business Wire
Internet Capital Group, Inc. (Nasdaq:ICGE) today reported its
results for the second quarter ended June 30, 2007. Highlights:
Aggregate core company revenue grew 27% from the comparable 2006
period; Sold Marketron, realizing $36.7 million in proceeds, $4.8
million of which is held in escrow; ICG Commerce increased backlog
by $49 million through new and extended agreements; and Subsequent
to quarter end, Metastorm announced the acquisition of Proforma
Corporation. �During the quarter, our partner companies continued
to demonstrate solid growth,� said Walter Buckley, ICG�s chairman
and CEO. �This growth, combined with the M&A activity at a
number of our companies, reflects our progress in building value
within the core group, with the ultimate goal of capturing value
for our shareholders. To that end, the monetization of Marketron
was an important milestone in realizing our monetization goals for
2007.� ICG Financial Results ICG consolidated the results of two
partner companies, ICG Commerce and Investor Force, for the three
and six months ended June 30, 2007, versus the results of three
partner companies, ICG Commerce, Investor Force and StarCite, for
the three and six months ended June 30, 2006. ICG reported
consolidated revenue of $12.5 million for the second quarter of
2007, versus $16.0 million for the comparable 2006 period. ICG
reported consolidated revenue of $24.3 million for the six months
ended June 30, 2007, versus $31.2 million for the comparable 2006
period. ICG reported a net loss of $(4.0) million, or $(0.11) per
share, for the second quarter of 2007, versus a net loss of $(7.8)
million, or $(0.21) per share, for the comparable 2006 period.
Results for the second quarter of 2007 include $4.0 million in net
gains, driven primarily by an $8.2 million gain related to the sale
of Marketron, offset by charges of $6.0 million related to hedges
associated with a portion of our Blackboard (Nasdaq: BBBB)
holdings. Results for the second quarter of 2006 include $(0.3)
million in net charges primarily related to a loss on debt
repurchases offset by other gains and an income tax benefit. ICG
reported a net loss of $(23.6) million, or $(0.63) per share, for
the six months ended June 30, 2007, versus a net loss of $(12.7)
million, or $(0.34) per share, for the prior year period. As of
June 30, 2007, ICG�s corporate cash balance was $85.4 million and
the value of its holdings in Blackboard was $85.0 million, net of
$7.1 million in hedge positions. The value of its holdings in
GoIndustry (LSE.AIM: GOI) was $29.2 million. ICG Core Partner
Company Information Recently, Marketron was sold and Metastorm
announced the acquisition of Proforma Corporation. To aid in the
comparability of the ICG core company information, ICG is
presenting pro forma financial information assuming those events
occurred on January 1, 2006. Set forth below is pro forma
information relating to ICG�s eight core companies: Channel
Intelligence, Freeborders, ICG Commerce, Investor Force, Metastorm,
StarCite, Vcommerce and WhiteFence. Our average ownership position
in these eight companies was 45% at June 30, 2007. Please refer to
the supplemental financial data at the end of this release for a
reconciliation of such amounts to the nearest comparable GAAP
measures. In the second quarter of 2007, aggregate pro forma
revenue of ICG�s eight core companies grew 27% year-over-year, to
$57.1 million from $44.8 million in the second quarter of 2006.
Aggregate pro forma EBITDA (loss) for the core companies was $(3.9)
million in the second quarter of 2007, versus $(8.4) million in the
second quarter of 2006. In the first half of 2007, aggregate pro
forma revenue of ICG�s eight core companies grew 29%
year-over-year, to $110.9 million from $86.0 million in the first
half of 2006. Aggregate pro forma EBITDA (loss) for the core
companies improved to $(8.2) million in the first half of 2007 from
$(15.8) million in the first half of 2006. �Based on the momentum
we are seeing at our core companies, we would expect our full year
revenue growth for 2007 to be in line with the revenue growth we
have experienced in the first half of 2007,� said R. Kirk Morgan,
CFO at ICG. 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-preswebcast.htm and
click on the link for the second 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 877-407-8035. The international dial-in number
is 201-689-8035. For those unable to participate in the conference
call, a replay will be available from August 2, 2007 at 11:00 a.m.
ET until August 12, 2007 at 11:59 p.m. ET. To access the replay,
dial 877-660-6853 (domestic) or 201-612-7415 (international) and
enter the account code 286, followed by the conference ID number
248303. The replay and slide presentation also can be accessed on
the Internet Capital Group web site at
http://www.internetcapital.com/investorinfo-preswebcast.htm. 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. Safe Harbor Statement under Private
Securities Litigation Reform Act of 1995 The statements contained
in this press release that are not historical facts are
forward-looking statements that involve certain risks and
uncertainties including but not limited to risks associated with
the uncertainty of future performance of our partner companies,
acquisitions or dispositions of interests in additional partner
companies, the effect of economic conditions generally, capital
spending by customers, the development of the e-commerce and
information technology markets, and uncertainties detailed in the
Company�s filings with the Securities and Exchange Commission.
These and other factors may cause actual results to differ
materially from those projected. Internet Capital Group, Inc.
Consolidated Statements of Operations (In thousands, except per
share data) � � Three Months Ended Six Months Ended June 30, June
30, � 2007 � � 2006 � � 2007 � � 2006 � � � Revenue $ 12,520 $
15,986 $ 24,302 $ 31,161 � Operating Expenses Cost of revenue
10,381 9,996 19,406 19,231 Selling, general and administrative
7,756 10,039 16,871 20,152 Research and development 1,562 2,465
3,130 4,896 Amortization of intangibles 34 558 66 1,115 Impairment
related and other � 20 � � 32 � � 40 � � 125 � Total operating
expenses � 19,753 � � 23,090 � � 39,513 � � 45,519 � (7,233 )
(7,104 ) (15,211 ) (14,358 ) � Other income (loss), net 3,678
(1,953 ) (8,191 ) (1,855 ) Interest income 1,148 1,913 2,626 4,445
Interest expense � (22 ) � � (579 ) � (268 ) � � (1,233 ) Income
(loss) before income taxes, minority interest and equity loss
(2,429 ) (7,723 ) (21,044 ) (13,001 ) � Income tax benefit
(expense) 494 1,004 2,642 1,647 Minority interest (19 ) 47 369 (17
) Equity loss � (1,806 ) � (1,737 ) � (5,322 ) � (2,473 ) Income
(loss) from continuing operations (3,760 ) (8,409 ) (23,355 )
(13,844 ) Income (loss) on discontinued operations � (220 ) � 639 �
� (220 ) � 1,166 � Net income (loss) $ (3,980 ) $ (7,770 ) $
(23,575 ) $ (12,678 ) � Basic and diluted net income (loss) per
share: Income (loss) from continuing operations $ (0.10 ) $ (0.23 )
$ (0.62 ) $ (0.37 ) Income (loss) on discontinued operations �
(0.01 ) � 0.02 � � (0.01 ) � 0.03 � $ (0.11 ) $ (0.21 ) $ (0.63 ) $
(0.34 ) � Shares used in computation of basic and diluted income
(loss) per share � 37,846 � � 37,470 � � 37,825 � � 37,436 �
Internet Capital Group, Inc. Condensed Consolidated Balance Sheets
(In thousands) � � � June 30, December 31, 2007 2006 � ASSETS Cash,
cash equivalents and short-term investments $ 94,616 $ 120,841
Other current assets � 11,928 � 8,830 Total current assets 106,544
129,671 Marketable securities 92,118 65,718 Fixed assets, net 2,056
1,847 Ownership interests in partner companies 121,374 137,911
Goodwill 17,084 17,084 Intangibles, net 186 182 Other assets �
2,771 � 2,014 Total assets $ 342,133 $ 354,427 � � � LIABILITIES
AND STOCKHOLDERS' EQUITY Current portion of senior convertible
notes $ - $ 26,590 Other current liabilities � 19,072 � 24,142
Total current liabilities 19,072 50,732 Hedges of marketable
securities 7,119 - Minority interest and other liabilities � 4,919
� 5,157 Total liabilities 31,110 55,889 Stockholders' equity �
311,023 � 298,538 Total liabilities and stockholders' equity $
342,133 $ 354,427 Internet Capital Group 2007 Pro Forma Core
Partner Company Information � � � � � � � � � � � � � Three Months
Ended � � � � Mar 31, 2006 � Jun 30, 2006 � Sep 30, 2006 � Dec 31,
2006 � Mar 31, 2007 � Jun 30, 2007 � Aggregate Pro Forma Core
Company Information: (1) Aggregate Revenue $ 41,248 $ 44,775 $
45,818 $ 49,998 $ 53,845 $ 57,052 Aggregate EBITDA (loss) $ (7,481)
$ (8,360) $ (7,488) $ (7,431) $ (4,306) $ (3,900) Aggregate Net
Loss $ (9,194) $ (11,081) $ (10,868) $ (10,405) $ (5,983) $ (5,845)
� � Components of Aggregate Pro Forma Core Company Information �
Consolidated Core Companies (Ownership %): Revenue $ 10,023 $
10,007 $ 10,417 $ 10,255 $ 11,782 $ 12,520 ICG Commerce Holdings,
Inc. (65%) Expenses other than interest, taxes, depreciation and
amortization Investor Force Holdings, Inc. (80%) � � (11,455)
(11,151) (11,948) (12,859) (13,407) (14,009) EBITDA (loss) (1,432)
(1,144) (1,531) (2,604) (1,625) (1,489) Interest 106 113 (42) 166
118 90 Taxes - - - - - (220) Depreciation/ Amortization (500) (544)
(285) (305) (326) (347) Net loss $ (1,826) $ (1,575) $ (1,858) $
(2,743) $ (1,833) $ (1,966) � Equity Method Core Companies
(Ownership %): Revenue $ 31,225 $ 34,768 $ 35,401 $ 39,743 $ 42,063
$ 44,532 Channel Intelligence, Inc. (41%) Expenses other than
interest, taxes, depreciation and amortization Freeborders, Inc.
(33%) � (37,274) (41,984) (41,358) (44,570) (44,744) (46,943)
Metastorm Inc. (41%) EBITDA (loss) $ (6,049) $ (7,216) $ (5,957) $
(4,827) $ (2,681) $ (2,411) StarCite, Inc. (26%) Interest (127)
(105) (127) (92) 60 146 Vcommerce Inc. (46%) Taxes (309) (1,049)
(1,380) (740) (628) (617) WhiteFence (35%) Depreciation/
Amortization (883) (1,136) (1,546) (2,003) (901) (997) Net loss $
(7,368) $ (9,506) $ (9,010) $ (7,662) $ (4,150) $ (3,879) �
Reconciliation of Aggregate Pro Forma Core Company Information to
GAAP Results � � � � � � � � � � � Three Months Ended Mar 31, 2006
� Jun 30, 2006 � Sep 30, 2006 � Dec 31, 2006 � Mar 31, 2007 � Jun
30, 2007 Revenue � Aggregate Pro Forma Core Company Revenue $
41,248 $ 44,775 $ 45,818 $ 49,998 $ 53,845 $ 57,052
Non-consolidated partner companies (26,073) (28,789) (29,242)
(32,986) (42,063) (44,532) Consolidated Revenue $ 15,175 $ 15,986 $
16,576 $ 17,012 $ 11,782 $ 12,520 � � Net Income (Loss) � Aggregate
Pro Forma Core Company EBITDA (loss) $ (7,481) $ (8,360) $ (7,488)
$ (7,431) $ (4,306) $ (3,900) Interest, Taxes, Depreciation/
Amortization (1,713) (2,721) (3,380) (2,974) (1,677) (1,945)
Aggregate Pro Forma Core Company Net Income (Loss) (9,194) (11,081)
(10,868) (10,405) (5,983) (5,845) Amount attributable to other
stockholders (6,285) (7,483) (7,032) (6,889) (1,297) (1,690) ICG's
share of net income (loss) of Core Partner Companies (2,909)
(3,598) (3,836) (3,516) (4,686) (4,155) Other holdings/disposed
equity method companies 151 (10) (737) 723 (275) 584 Corporate
general and administrative (3,153) (3,284) (3,519) (3,293) (4,317)
(3,567) Corporate stock-based compensation (2,100) (1,911) (1,852)
(1,761) (1,716) (1,738) Corporate interest income (expense), net
1,797 1,243 2,074 1,972 1,114 1,036 Other
income(loss)/restructuring/ impairments 135 (1,853) 15,720 20,811
(11,863) 3,586 Income taxes 643 1,004 (1,607) - 2,148 494 Income
(loss) on discontinued operations 527 639 7,120 3 - (220)
Consolidated net income (loss) $ (4,909) $ (7,770) $ 13,363 $
14,939 $ (19,595) $ (3,980) � � � (1) The rationale for
management's use of non-GAAP measures is included in the
"Description of Terms" supplement to this release. INTERNET CAPITAL
GROUP, INC. June 30, 2007 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 have been
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 �Minority interest� in
the Company�s Consolidated Balance Sheets and Statements of
Operations. Minority 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 and six
months ended June 30, 2007, the Company accounted for two of its
partner companies under this method: ICG Commerce and Investor
Force. During the three and six months ended June 30, 2006, the
Company accounted for three of its partner companies under this
method: ICG Commerce, Investor Force and StarCite. 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 guaranteed
obligations of the partner company or has committed 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 June 30, 2007, the Company accounted for
seven 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.� During the three months ended June 30,
2007, the Company accounted for eight of its partner companies
under this method. Certain items impacting the consolidated
financial statements: ($ millions) Q2 FYTD Gains (losses): 2007
2006 2007 2006 � Other gains (losses): Loss on convertible note
repurchases $� $ (2.5) $(10.8) $ (2.5) Mark to market charge on
Blackboard hedges (6.0) � (7.1) � Sales of partner companies 8.6
0.6 8.6 0.7 Other, net 1.1 � 1.1 � Other Income (Loss) $3.7 $(1.9)
$(8.2) $(1.8) � Income tax benefit (expense) $0.5 $1.0 $2.6 $1.6 �
ICG�s share of Partner Company charges, net $� $� $(0.1) $(0.2) �
Discontinued Operations $(0.2) $0.6 $(0.2) $1.2 $4.0 $(0.3) $(5.9)
$0.8 � Stock-based compensation $(1.9) $(1.9) $(3.8) $(4.0)
Aggregate Pro Forma Core Company Information In an effort to
illustrate macro trends within its private core companies, ICG
provides an aggregation of revenue and net loss figures reflecting
100% of the pro forma revenue and aggregate pro forma EBITDA for
these companies. The Company calculates aggregate pro forma EBITDA
for these purposes as earnings (losses) before interest, tax,
depreciation and amortization and refers to it as �aggregate
EBITDA.� These non-GAAP measures are considered pro forma because
management has updated its results to include Metastorm�s
acquisition of Proforma Corporation and has removed Marketron as if
Metastorm�s acquisition of Proforma Corporation and the disposition
of Marketron occurred on January 1, 2006. The Company refers to the
aggregate pro forma revenue of its private core partner companies
as �aggregate revenue.� ICG does not own its core companies in
their entirety and, therefore, this information should be
considered in this context. Aggregate revenue and aggregate EBITDA,
in this context, represent certain of the financials measures used
by the Company�s management to evaluate the performance for core
companies. The Company�s management believes these non-GAAP
financial measures provide useful information to investors,
potential investors, securities analysts and others so each group
can evaluate private core companies� current and future prospects
in a similar manner as the Company�s management, and review results
on a comparable basis for all periods presented. ICG�s Share of Net
Loss of Core, Other Holdings and Disposed Partner Companies
Represents ICG�s share of the net loss of core, other holdings and
disposed partner companies accounted for under the consolidated and
equity method of accounting. Corporate Expenses and Interest Income
(Expense), net General and administrative expenses consist of
payroll and related expenses for executive, operational,
acquisitions, finance and administrative personnel, professional
fees and other general corporate expenses for Internet Capital
Group. Corporate expenses increased during the three months ended
June 30, 2007 versus prior periods due to increased payroll
expenses, investor relations/marketing expenses and a 401(k)
employer match program. ICG estimates that its corporate operating
expenses for the twelve months ended December 31, 2007 will be
approximately $14.5 million. Corporate interest income (expense),
net related primarily to the interest income on cash balances
during the three and six months ended June 30, 2007. Discontinued
Operations Investor Force (a consolidated partner company) sold its
database division in August 2006 for $10.0 million ($9.0 million
was received in August 2006 and $1.0 million is held in escrow
until August 2007) and has been reflected as a discontinued
operation. Accordingly, the operating results of this discontinued
operation have been presented separately from continuing operations
for all periods presented.