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Internet Capital Group Inc. (ICGE)

Q1 2009 Earnings Call

May 7, 2009; 10:00 am ET


Walter Buckley - Chairman & Chief Executive Officer

Kirk Morgan - Chief Financial Officer

Karen Greene - Vice President, Investor Relations


Jeff Van Rhee - Craig-Hallum

Frank Gemino - Henley & Company



Welcome to the conference Internet Capital Group first quarter earnings conference call. My name is Jen and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of today’s conference. (Operator Instructions).

I would now like to turn the presentation over to Ms. Karen Greene, Vice President of Investor Relations. Please proceed ma’am.

Karen Greene

This is Karen Greene the Investor Relations and I want to welcome you to Internet Capital Group’s first quarter conference call.

I would like to remind everyone that we are going to use presentation slides to accompany our prepared remarks today. These slides can be found on our website at Go to the Investor Information tab and you will see an icon for our first quarter conference call. The slides can be accessed through that icon. For those of you without immediate access to our website, the conference call and presentation slides will remain on our website and be available for future reference.

On the call this morning, we will be discussing certain non-GAAP financial measures. For additional information on these non-GAAP financial measures, including a reconciliation of these measures to the most comparable GAAP measures, please refer to the press release we put out this morning including the attachment to this press release. The press release is also available on our website, which again is To access the press release on our website, go to the ICG Press Release tab and select the May 7th press release. The attachments to the release can be accessed by clicking on the PDF file contained within the release itself.

Before we begin, I would like to briefly review our Safe Harbor language. The statements contained in our press release and those that we make in the conference call as well as the accompanying slide presentation 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 partner companies, the effect of economic conditions generally, capital spending by customers, development of the e-commerce and information technology markets and other 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.

With that I’ll turn the call over to Walter Buckley.

Walter Buckley

Thanks, Karen and welcome and thank you for joining us this morning. I will begin by providing you with an overview of ICG and its partner companies for the first quarter of 2009. Kirk Morgan, Chief Financial Officer, will follow with ICG’s financial results and review partner company performance for the quarter. ICG and its partner company demonstrated solid progress on both the top and bottom lines for the first quarter, in an environment that continues to be quite challenging.

Turning to slide four, here are some of the highlights of the quarter. For the second consecutive quarter, our core partner companies demonstrated strong EBITDA improvement with a $3.4 million loss in the first quarter of 2009 versus $11.4 million loss in the first quarter of 2008.

Exclusive of stock-based comp and unusual items, this group was in aggregate, essentially EBITDA breakeven in the first quarter of 2009 versus in aggregate EBITDA loss of $8 million in the first quarter of 2009. Kirk will elaborate on these results, but this EBITDA improvement is a direct result of the cost management measures that we implemented at the partner companies beginning the third quarter of 2008.

In the first quarter of 2009, our core companies achieved year-over-year aggregate revenue growth of 12%. We entered the second quarter of 2009 with a strong balance sheet, which provides us the financial flexibility that we believe is important, in this environment.

Finally, subsequent to quarter end, we hired Jack Reinelt, as the new CEO of GoIndustry-Dovebid. Jack is a very talented and experienced business executive, who mostly recently served as Chief Operating Officer at TeleAtlas a global leader in digital mapping and navigation solutions.

Under Jack’s leadership, the business grew revenues from 78 million pounds to over 217 million pounds and EBITDA from 6 million pounds to roughly 110 million pounds over a four-year period. We are excited to have Jack at the helm of this company and we believe to continue to hold significant potential going forward.

Now, slide five to eight, reflect partner company highlights from several of our core companies, starting with Channel Intelligence. Challenge Intelligence is provider of enterprise e-commerce solution for manufactures and online retailers closed the first quarter with year-over-year revenue growth of 24%. The revenue increased was achieved, while reducing our operating expenses by 13%.

CI continued strategy of moving new and existing customers, performance-based pricing, which were the significant contributor to the overall results. Despite poor retail sales and a weak environment for manufacturers, CI saw bookings increased 32% in Q1, demonstrating the value, the CI products and services provide their customers.

Freeborders, a global provider of offshore IT services deliver from China, had a very good first quarter, achieving impressive revenue growth, while increasing profitability. The company has done a good job of maintaining its existing customer relationships and has added several new large customers during the quarter including the Royal Bank of Canada.

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