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Internet Capital Group, Inc. (ICGE)

Q4 2008 Earnings Call

February 25, 2009 10:00 AM ET


Karen Greene - Vice President, Investor Relations and Corporate Communications

Walter W. Buckley, III - Co-Founder, Chief Executive Officer and Chairman

Kirk Morgan - Chief Financial Officer


Jeff Van Rhee - Craig-Hallum



Good day, ladies and gentlemen and welcome to Fourth Quarter 2008 Internet Capital Group's Earnings Conference Call. My name is Francine and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (Operator Instructions).

I would now like to turn the presentation over to your host for today's call, Ms. Karen Greene, Vice President of Investor Relations. Please proceed ma'am.

Karen Greene

Thank you. Good morning. This is Karen Greene with Investor Relations and I want to welcome you to Internet Capital Group's fourth quarter conference call.

I would like to remind everyone that we're going to use presentation slides to accompany our prepared remarks today. These slides can be found at our website at Go to the Investor Information tab and you'll see an icon for our fourth 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 measure, 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 February 25th 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 on 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.

Now let me turn the call over to Walter Buckley, ICG's Chairman and CEO.

Walter W. Buckley, III

Thanks Karen and welcome and thank you for joining us this morning.

I'll begin by providing you with an update on ICG and its partner companies for 2008 including fourth quarter highlights and Kirk Morgan, our Chief Financial Officer, will follow with ICG's financial results and a review of partner company performance for the fourth quarter and year end.

Against the backdrop of a very challenging economic environment, ICG and its partner companies demonstrated solid progress on both the top and bottom lines in the fourth quarter.

Turning to slides four through six, let me share with you some of the following highlights.

In the fourth quarter, our partner companies were in aggregate EBITDA positive exclusive of stock-based comp and unusual items. This significant improvement in Q4 EBITDA was led by ICG Commerce, Channel Intelligence and Freeborders. We achieved core company aggregate revenue growth of 16% in Q4 and annual aggregate revenue growth of 23%. In addition, a number of our companies enter 2009 with strong backlog of booked business.

Regarding additional 2008 activity, we ended 2008 in a strong financial position. As we reported earlier, we sold Creditex to IntercontinentalExchange or ICE and realized over $60 million in cash proceeds as a result of that transaction. And during the year, we reinvested in ICG and our partner companies, demonstrating our confidence in the value they can deliver.

We completed three major financings: First, in Channel Intelligence, a $6 million funding, increasing ownership from 40 to 47%; secondly, StarCite, a $14 million financing, increasing ownership from 26 to 34% and finally, GoIndustry, a $10.5 million funding to help facilitate its acquisition of DoveBid, the number two player in the used equipment auction market.

We also repurchased 1.9 million shares of our common stock for $9.3 million, pursuant to our $25 million share repurchase program. We continue to increase our deal flow both in quality and quantity, but remain prudent and disciplined regarding valuation expectations.

And finally, our partner companies hired three outstanding executives during the year, Greg Dukat, our new CEO of StarCite; Bob Tuttle, the CEO of Vcommerce and John Gregitis, President of Investor Force, significantly enhancing the potential of all three companies.

Now slide seven through 14 reflect partner company highlights from all our core companies, and I'll hit on a few of them, starting with Channel Intelligence.

Channel Intelligence, a provider of enterprise e-commerce solutions for manufacturers and online retailers reported strong fourth quarter growth with revenues up 46% and full year revenues up 36%. The company accomplished this growth despite a very challenging economic environment, a slow holiday season and poor consumer sentiment.

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