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ICG Group, Inc. (ICGE)

Q3 2013 Earnings Conference Call

October 31, 2013 10:00 am ET


Walter Buckley - Chairman and Chief Executive Officer

Kirk Morgan - Chief Financial Officer

Karen Greene - Investor Relations


Scott Berg - Northland Capital Markets

Jeff Van Rhee - Craig-Hallum



Good day, ladies and gentlemen, and welcome to the Third Quarter 2013 ICG Earnings Conference Call. My name is Dominique and I’ll be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions) I would now like to turn the conference over to Ms. Karen Greene, Managing Director of Investor Relations. Please proceed.

Karen Greene

Good morning and thank you. This is Karen Greene with Investor Relations, and I want to welcome you to ICG’s third quarter conference call. I'd 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 third 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 those measures to our most comparable GAAP measures, please refer to the press release we've put out this morning, including the attachment to the press release.

Given the pending sales to Accenture, Procurian has been classified as an asset held for sale at September 30, 2013. Accordingly, Procurian's results are excluded from our continuing operations for all periods presented and instead are presented in one line item titled, 'income from discontinued operations'. On the balance sheet side, Procurian's assets and liabilities are summarised in the two line items titled, 'assets and liabilities held for sale of discontinued operations'.

The press release is also available on our website which again is To access the press release on our website, go to our home page and select the October 31, 2013 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 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 effect of economic conditions generally, capital spending by our customers, our ability to retain existing customer relationships and secure new ones, our ability to compete successfully against alternative solutions, our ability to timely and effectively respond to technological developments, our ability to retain key personnel, our ability to have continued access to capital and to deploy capital effectively and on acceptable terms, our ability to maximize value in connection with divestitures, and other risks and uncertainties detailed in ICG’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 will turn the call over to Walter Buckley, ICG’s Chairman and CEO.

Walter Buckley

Thanks, Karen, and good morning, and welcome and thank you for joining us. Today I will provide an overview of ICG’s performance for Q3 2013, and Kirk Morgan, our Chief Financial Officer, will follow up with ICG’s financial results for the third quarter.

Now turning to Slide 3, clearly the biggest event of the third quarter was the previously announced definitive agreement for the sale of Procurian to Accenture for $375 million in cash, subject to certain adjustments at closing including working capital, cash, debts and other items. ICG is expected to realize approximately $324 million in connection with the sale, which we anticipate will close in the fourth quarter.

As a result of the Procurian transaction, ICG will emerge as a high-growth, high-margin vertical pure-play cloud company, a strategic evolution we have been driving for over the last several years. We continued to achieve strong organic growth in the third quarter recording a 39% increase in revenue year-to-date compared to the same prior year period.

In addition, during the quarter, we expanded our footprint in the insurance software sector with the strategic acquisition of Superior Access for our insurance business, Bolt. This transaction enhances Bolt's network and platform which I will elaborate further on in just a few minutes.

Finally, in conjunction with the Procurian transaction, we announced expansion of ICG's existing share repurchase program from $50 million to $150 million. To date, ICG has deployed approximately $36 million leaving roughly $114 million for repurchases under this program.

Now from an operational perspective, we continue to aggressively pursue our key growth initiatives. Fuelled by positive results we are seeing in customer wins and the growth in our sales pipelines, we continue to aggressively invest in sales and marketing, spending $7.5 million for sales and marketing expenses across the businesses in the quarter, bringing year-to-date spending to $19.6 million as compared to $8.4 million for the first nine months of 2012.

To elaborate on this further, turning to Slide 4, our public sector platform, GovDelivery, continued to demonstrate strong customer momentum and revenue growth. Q3 is typically an important quarter for us because the federal government fiscal year ends on September 30. The government shutdown did not affect new signings in the quarter, as it occurred at the start of Q4 and has not had an impact on our business to-date.

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