Company Description
Internet Capital Group Inc. is a principal investment firm specializing in on-demand Internet software companies that deliver software and service applications to customers worldwide via the Internet. The firm primarily invests in technologies, service, and industries working to streamline and automate business processes both within the enterprise and across the value supply chain. It seeks to invest between $10 million and $30 million in companies with revenues between $5 million and $50 million. The firm targets ownership of 35 percent to 100 percent in its portfolio companies. Internet Capital Group Inc. was founded by Mr. Walter W. Buckley III in 1996 and is based in Wayne, Pennsylvania. (Yahoo)
(MM)Price (As of Close (8/7) $11.69 Cash 85M Revenue $64.8Shrs Outstanding 38.3M Cash Per Share $2.20 Gross Profit $22.0Market Cap 443.7M Debt (D) 0.5M EBIT $24.6Avg. Volume 340,975 Equity (E) $31152 week High $12.54 D/E N/A52 week Low $7.57 Inst. % Ownership 90% Net Income $15.6Beta 3.58
Key Data
Valuation We used a sum of the parts valuation model to determine a fair market NAV for shares of Internet Capital. Using comparable companies and industry averages as a gauge, we believe shares of Internet Capital are currently undervalued and believe a value of $15.00 per share is a current fair market value. Please read our valuation section to understand how we calculated our sum of the parts model and obtained NAV.
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Key Investment Considerations he sum of the parts model we believe shares apital (ICGE) are undervalued and that a .00 per share is a better reflection of its
ut our hesitation on the volatile private ts makes takes $1 off $16 to leave our price
ue to believe, despite recent volatility that economic environment is favorable for ompanies that operate in the on-demand
e operational efficiencies, and create enue opportunity.
ue to believe the private equity market, the and merger and acquisition activity will rong, and support shares of ICGE later in 008.
ntly raised their guidance from a 25% pro h rate for its 8 core companies in 2007 to
nt noted that the backlog at ICG as increased substantially in 2Q07 and we watching if ICG can fully acquire their iness.
Please see important disclosures on pages 17 & 18 of this report
(800) 753
1290 Reckson Plaza Uniondale, NY 11556 -8688 Toll Free (516) 794-5520 Main (516) 794-6207 Fax
Member FINRA/MSRB/ SIPC
Research Report - August 8, 2007 Rating: Internet Capital Group, Inc. (ICGE) Buy Sector: Technology
Analyst: Alan Weinfeld (212) 675-4100 [email protected]
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Page 2 of 18
Business Description
Internet Capital Group, Inc. (Nasdaq Global Market: ICGE) is a principal investment firm that owns, builds, and acquires on-demand Internet software and service companies. The company consists of two components: corporate and its partner companies. The corporate component maintains the cash, short-term investments, marketable securities, and ownership interests in its partner companies. ICGE’s partner companies are broken into two further components: core and other holdings. Internet Capital Group, Inc. provides direction and management assistance to the core investment companies, while providing minimal operational support to their other holding companies. To date, ICGE’s partner company network is composed of about 22 companies. ICGE primarily invests in technologies, service, and industries working to drive business productivity and reduce transaction costs between firms. The company invests between ten and thirty million dollars to acquire ownership of 35 to 100 percent in its partner company. ICGE core investments include StarCite, Marketron, ICG Commerce, Go Industry, Freeborders, Investor Force, CreditX, and VCommerce. Below are a list and description of each partner company, the percentage Internet Capital owns, the accounting methods* used for reporting purposes, and other key data. (*Please refer to the bottom of the report for definition of the accounting methods)
ICGE Investments Consolidated Companies:
Partner Company Partner Since Location Industry Focus
ICG Commerce
1999
PA Procurement Services
ICG Owns Accounting Method
79% Consolidated
Description
ICG Commerce is a procurement services provider committed to reducing procurement costs for its customers. The company has a comprehensive range of offerings - supported by exceptional people, superior technology and service excellence - to deliver significant savings.
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Consolidated Companies Continued:
Partner Company Partner Since Location Industry Focus
Investor Force
1999
PA Institutional investment
management ICG Owns Accounting Method
80% Consolidated
Description
Investor Force is a software technology company specializing in the delivery of revenue and efficiency generating business solutions to the institutional investment community. Investor Force has been a leader in the development of online applications for the financial services industry since recognizing the need to collect, aggregate and disseminate institutional performance information. This web-based information and technology platform offers a comprehensive range of online services that enable the institutional investment community to manage existing clients more efficiently. Investor Force serves a wide range of institutional investment clients, including money managers, consultants, plan sponsors, and institutional investors.
Partner Company Partner Since Location Industry Focus
StarCite
1999
PA Corporate Meetings and
Events
ICG Owns Accounting Method
61% Consolidated
Description
StarCite is the leading provider of on demand global meeting solutions. The company provides a suite of software applications and services to the meeting and events industry. StarCite provides internet-enabled technologies and services that allow corporations to implement more effective buying and vendor management on a companywide and global basis. As the world’s leading provider of innovative meetings tools and enabling technologies, StarCite offers suppliers (hotels, hotel chains, airlines, cruise lines, convention and visitors’ bureaus, and destination management companies) innovative marketing opportunities, the ability to electronically respond to and manage leads, as well as advanced technology solutions to improve existing business processes.
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Core Equity Companies:
Partner Company Partner Since Location Industry Focus
Freeborders 2000 CA International Trade
ICG Owns Accounting Method
33% Equity
Description
Freeborders is a provider of technology solutions and outsourcing from China to North American and European companies in the financial services, technology, retail/consumer goods, manufacturing and transportation & logistics markets. The company also provides product lifecycle management software and services to retailers and their suppliers, enabling brands to manage the complexity of their supply chains.
Partner Company Partner Since Location Industry Focus
Marketron 2000 DE Media
ICG Owns Accounting Method
38% Equity
Description
Martketron International and its subsidiaries (TvScan, REP-PAK, Marketron brands and Professional Services Organization) are the provider of mission critical software to more than 2,000 radio stations, TV stations, and cable systems throughout the United States and Canada. Marketron International provides integrated Sales, Traffic and Business Intelligence solutions to help broadcasters transform their sales and traffic departments into strategic profit centers and fine-tune their operational effectiveness. The company’s multi-station and multi-market solutions automate workflow from proposal to billing, enabling groups to increase revenues while decreasing operating costs.
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Page 5 of 18
Core Equity Companies (Continued):
Partner Company Partner Since Location Industry Focus
Metastorm 2005 MD BPM Solutions
ICG Owns Accounting Method
41% Equity
Description
Metastorm is an enterprise software and service provider that enables its customers to map their business integration strategies into business processes by integrating the work that people do with software systems that optimize business performance. The software suite provides a highly-scalable enterprise platform on which solutions can be quickly and easily deployed and customized to meet the unique and dynamic process needs of any organization. The company delivers a set of scalable business process management solutions that leverage existing information technology investments to unite people, processes and technology in a service-based architecture.
Partner Company Partner Since Location Industry Focus
Vcommerce
2006
AZ E-commerce and fulfillment
management
ICG Owns Accounting Method 41% Equity Description
Since 1997, Vcommerce has pioneered innovation in eCommerce solutions for retailers - in effect mastering the technology of online selling so retailers could master the art. Because of that investment of time, resources and years of client service, many leading online retail brands today are Powered by Vcommerce.
Partner Company Partner Since Location Industry Focus
White Fence 2005 TX Residential Services
ICG Owns Accounting Method
39% Equity Description
White Fence is an online one-stop comparison shopping marketplace for consumers looking to compare and order essential home services. The company connects consumers with the services that power their lives-from phones to high-speed Internet to electricity.
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Page 6 of 18
Publicly Traded Companies:
Partner Company Partner Since Location Industry Focus
Blackboard 1998 DC e-Education
ICG Owns Accounting Method
2,187,060 common shares Cost
Description
Founded in 1997, Blackboard is a leading provider of e-Education enterprise software applications and services. Offering these online educational software and tools, Blackboard has helped bring education to a globalized level. Their ‘off-campus’ format allows students to access relevant course material anywhere with an active internet connection. Their services extend into all aspects of student-life including vending and laundry services, as well as identification and commerce systems. The company offers its tools throughout all levels of education as well as textbook publishers and educational merchants.
Partner Company Partner Since Location Industry Focus
Go Industry 2000 UK Surplus Equipment ICG Owns Accounting Method
54% Cost
Description
Go Industry is the global leader in auction sales and valuations of used industrial machinery & equipment. The company provides a range of services, which include onsite and online auctions, private treaty, appraisals and valuations, consulting, trading, and going concern sales, webcast technology, and an industrial asset marketplace. The company combines traditional asset sales experience with eCommerce technology and advanced direct marketing to service the needs of multi-national corporations, insolvency practitioners, dealers and asset based lenders around the world.
Partner Company Partner Since Location Industry Focus
Traffic.com 1999 PA Traffic Information
ICG Owns Accounting Method
655,901 common shares Cost Description
Traffic.com is a leading provider of accurate, real-time traffic information in the U.S., based on quality data and extensive coverage. Up-to-the minute personalized traffic reports can be viewed through traffic feeds along with city-wide Hotspot alerts. Traffic may also be obtained away from the computer through text message and mobile web systems
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Page 7 of 18
Other Companies:
Partner Company Partner Since Location Industry Focus
ComputerJobs.com 1998 GA Technology Employment ICG Owns Accounting Method
46% Equity Description
ComputerJobs.com is the Internet’s leading IT employment Web site. Founded in 1995 by and for information technology professionals, the company provides its visitors with high quality computer-related job opportunities and career-related content organized into 18 vertical skill sets and 19+ major metropolitan markets.
Partner Company Partner Since Location Industry Focus
eCredit 2000 MA Financial Services
ICG Owns Accounting Method
29% Equity Description
eCredit is the leading provider of online solutions for credit and collections professionals. Its award-winning on-demand software supports the mission critical processes of granting credit, monitoring portfolio risk, and collecting accounts receivables. eCredit also offers a comprehensive industry specific credit reporting and scoring solution that includes tens of millions of trade experiences on millions of companies.
Partner Company Partner Since Location Industry Focus
Anthem Venture 2000 NY Incubation, United States
ICG Owns Accounting Method
9% Cost Description
Anthem Venture Partners provides the necessary resources to enhance the development of emerging technology companies by providing financial investment, operational and management advice, and access to their network of professional relationships. Anthem’s greatest strengths are in the company’s operational and entrepreneurial experience, as well as in their dedication and commitment to working closely with portfolio companies throughout every stage of development.
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Page 8 of 18
Other Companies Continued:
Partner Company Partner Since Location Industry Focus Captive Capital 2000 PA Commercial Lease Financing
ICG Owns Accounting Method 5% Cost Description
Captive Capital creates and manages turnkey, multi-lender financing under the customer's brand name. Working with more than 50 financing sources, Captive Capital accommodates a wide variety of customers with the appeal of fast approvals and competitive offerings.
Partner Company Partner Since Location Industry Focus CreditX 2000 UK Credit Products
ICG Owns Accounting Method 15% Equity Description
CreditX is the global leader in e-trading credit derivatives and is the first to introduce such a platform. CreditX is used by over 800 traders around the world and has electronically transacted over $1 trillion in traders. The company merged with CreditTrade in late 2006 and the host of complimentary products and synergies between the two companies has made it the leaders in this space. CreditTrade provides transaction, data, and information services to the credit markets. The company is focused exclusively on credit, specializing in credit default swaps and secondary loans. Credit Trade introduced the electronic trading platforms in the credit markets and is on the verge of developing a hybrid (voice and electronic) broking system. The company clients include major investment and commercial banks as well as many of the worlds leading financial institutions.
Partner Company Partner Since Location Industry Focus
Emptoris 2000 MA E-commerce Sourcing ICG Owns Accounting Method
5% Cost Description
Emptoris integrates spend analysis, sourcing, contract management, compliance, supplier performance management, and program management solutions in an integrated suite that helps customers optimize their business to quickly and successfully drive ongoing total cost reductions, increase revenue, and manage compliance and mitigate risk.
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Page 9 of 18
Other Companies Continued:
Partner Company Partner Since Location Industry Focus
Entegrity Solutions 1996 CA Application Security Software and
Services ICG Owns Accounting Method 61% Equity Description
Entegrity Solutions is a provider of Application Security for Java-based web, portal and web services applications. Its security products include AssureAccess, access management software that provides authentication, single-sign-on, authorization, audit and security policy administration, and AssureDelivery, file content security for all types of files sent over trusted or un-trusted networks.
Partner Company Partner Since Location Industry Focus
Jamcracker 1999 CA
Enabling Technologies, Strategic Consulting, and Systems
Integration ICG Owns Accounting Method 2% Cost Description
Jamcracker provides software solutions and expertise that Software Companies and Service Providers need to efficiently deliver and manage their On Demand, or Software-as-a-Service Solutions.
Partner Company Partner Since Location Industry Focus
Tibersoft 2000 MA Food
ICG Owns Accounting Method
5% Cost Description
Tibersoft enables foodservice operators, manufacturers, and distributors to share real-time product purchase, sales, and contract data. By supporting all supply chain participants, Tibersoft helps them form tighter, more transparent relationships with one another, resulting in substantial benefits to each.
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Partner Company Partner Since Location Industry Focus
Channel Intelligence 2006 FL E-commerce Solutions ICG Owns Accounting Method 40% Equity Description
Channel Intelligence provides manufacturers, retailers and shopping destination sites with robust data optimization solutions that make it easier for consumers to find products on the Web for purchase either online or in local retail stores. CI's patented technology also offers e-commerce marketers with essential reporting and analytics tools enabling them to better manage their online marketing and merchandising channels.
Evaluation Considerations Our positive outlook on shares of ICGE • We like that Internet Capital is trading at a discount to our NAV of $16.1, and the any price in the low to mid $11.00 range made it particularly attractive. Given the stocks recent close at $11.69, this would represent over 30% discount to our $15 current price target, discounting $1 for current market turmoil. • Internet Capital continues to be an excellent way to play the private equity market. Private equity investments have been “hot” for some time, but may be cooling. Small investors oftentimes don’t have access or necessarily have the resources to put at risk due to liquidity, time and financial requirements. We believe an investment in Internet Capital bypasses these issues since anyone can trade shares in the open market. • Given this access, investors also have an opportunity to indirectly participate in the IPO market. We believe that Internet Capital has a few partner companies capable of going public and one company capable of becoming a “hot issue” in the near future. In particular ICGE has improved through M&A activity its leadership position for tow of its major holding in StarCite and CreditX. • We also anticipate an Initial Public Offering (IPO) from Internet Capital in the next 6 to 12 months. This would be extremely positive for its share price as more valuation can be unlocked. It would also alert investors to the power of its “acquire, build, and capture value” model. Under such circumstances we feel it’s possible that an additional 20% to 25% of value could be assigned to any given “part” that goes public in an offering. Additionally, there has been plenty of liquidity in today’s market that should return with a high level of private equity deals, M&A activity and health of the IPO market. • The macro economic environment is favorable for technology companies that operate in the on-demand space, drive operational efficiencies, and create recurring revenue opportunity. We believe 2007 will continue to be a solid economic backdrop for the technology sector. While recent stock market performance has been volatile, we continue to believe the US economy will grow at a moderate rate, and anticipate stronger relative growth prospects from the technology sector.
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Page 11 of 18
• In particular, we are impressed with the trend of globalization and adoption of the internet. We believe these trends will continue to merge and this will bring opportunity to Internet Capital’s partner companies. It is now an exciting and a strategic time for Internet Capital. After having met or exceeded many of their 2006 corporate growth initiatives, we expect more of the same in 2H07 and 2008. The “downside” at Internet Capital • The lack of financial disclosure regarding many of the private partner companies is a risk. The lack of disclosure is often acknowledged as a key risk factor since an investor can’t tell which company is struggling and which is succeeding. One can think of a retail chain where one stores’ performance is either supporting or hurting the overall performance of the chain. Given this risk, trust is transferred on to management and their ability to navigate and make prudent decisions. • The “buy one buy all” incubator story remains risky since it is difficult to know the impact any one investment may have on the total portfolio. What makes private equity exciting also makes it risky. Unless Internet Capital can monetize its investments and has access to solid deal flow, investor money will be trapped. This is especially true in the technology sector since the market is dynamic and ever changing. • If Internet Capital doesn’t grow its revenue and efficiently begin to generate greater cash flows, it may be difficult for them to unlock additional valuation visa vie the public market or through M&A. • CreditX is doing well now, but if there is a true credit crunch or credit derivatives debacle, that would hurt ICGE.
Valuations
Net Asset Value (NAV) Explained: We based our valuation of Internet Capital using the sum of the parts model, while incorporating various valuation techniques to derive the value of each of the parts. The parts in this case are the various partner companies Internet Capital owns a percentage as outlined above. Each company is also broken out into the three categories of Consolidated, Equity and Cost Method. It is important to note that each of these categories carry a specific discount relative to its value. While we don’t want to belabor this issue we do want to point out that Equity companies are the most discounted, while the consolidated companies are next, and the cost method companies are marked to market. We believe this is a fair methodology given the lack of liquidity associated with private companies. Given the above statement, we then used a variety of valuation metrics to first derive a value of each part. In all cases we calculated a Price to Sales, a Price to Cash Flow, a Price to EBITDA, and a Discounted Cash Flow (DCF) analysis based on certain assumptions. While there is no scientific way to guarantee the accuracy of our forecast, or weigh the significance of each metric, we did attempt to “logically” triangulate and “massage” a partner company value. In each case we based our valuation of the “part” on a comparable industry competitor or the closest “twin” company we could find. We also used the median industry average in an effort to tweak our assumptions further. In all cases we analyzed the industry, the comparable or twin company, each multiple, and a DCF to calculate a weighted average value for each part.
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Page 12 of 18
Net Asset Value (NAV)
Cash Position
Cash $85,000,000
ICGE Market Cap Consolidated Companies Partner Since ICG Owns
1999 ICG Commerce Holdings, Inc
Net Asset Value (NAV) Per Share: Based on our valuation we believe shares of Internet Capital are undervalued and should be trading closer to its NAV of $16.1 per share.
Sum of the Parts NAV Percent Shares Out NAV Per Share
Cash $85,000,000 na $2.20 Consol. & Equity Companies $429,000,000 78% $11.1
Public Partner Company $108,700,000 21% $2.81
Total Sum $622,700,000 100.0% 38,600,000 $16.1
.Investor Forc s, Inc.
79% 1999 80%e Holding
StarCite, Inc. 1999 61%
Total Value $108,700,000
ICGE Market Cap Partner Since Equity Companies ICG Owns
1999 C editX 15%r
. 2000 Freeborders, In c.
Metastorm, Inc. 33%
2005 41%
WhiteFence 2005 2006 39%
Vcommerce 36%
Total Value of both Consolidated and Equity parts
$320,300,000
Public Partner Company Partner Since ICG Ownership ICGE Valuation
Blackboard (BBBB) 1998 2000 2,187,060
69,177,30 GoIndustry (GOI.L) 0
665,901 1999 Traffic.com (TRFC)
Total ICGE Valuation of Public Companies
Total ICGE Valuation $622,700,000
108,700,000
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Page 13 of 18
Historical ICG Financials
FY2005 FY2006 FY2007 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07E 4Q07E
Revenue 47,568,000 64,749,000 67,696,400 15,896,000 15,986,000 16,576,000 17,012,000 11,782,000 12,250,000 21,548,800 22,115,600COGS 28,460,000 42,439,000 47,719,760 9,232,000 9,996,000 10,452,000 12,756,000 9,025,000 10,381,000 12,751,440 15,562,320
Gross Profit 19,108,000 22,310,000 19,976,640 6,664,000 5,990,000 6,124,000 4,256,000 2,757,000 1,869,000 8,797,360 6,553,280Amt of Intangible and Goodwill 2,123,000 1,695,000 136,000 557,000 558,000 293,000 287,000 32,000 34,000 34,000 36,000Research and Development 12,276,000 8,755,000 6,292,000 2,431,000 2,465,000 2,112,000 1,747,000 1,568,000 1,562,000 1,562,000 1,600,000Selling General Administrative 40,795,000 42,108,000 33,871,000 10,957,000 10,039,000 11,317,000 10,638,000 9,115,000 7,756,000 8,000,000 9,000,000Restructuring and Impairment Chg 3,448,000 178,000 80,000 35,000 32,000 24,000 29,000 20,000 20,000 20,000 20,000
Operating Expenses 58,642,000 52,736,000 49,240,000 13,388,000 13,094,000 13,746,000 12,701,000 19,760,000 9,318,000 9,562,000 10,600,000
Total Operating and COGS 87,102,000 95,175,000 96,959,760 22,620,000 23,090,000 24,198,000 25,457,000 28,785,000 19,699,000 22,313,440 26,162,320
EBIT (39,534,000) (30,426,000) (29,263,360) (6,724,000) (7,104,000) (7,622,000) (8,445,000) (7,978,000) (7,449,000) (764,640) (4,046,720)
Interest & Other Expense / (Income):Interest Expense 3,367,000 2,174,000 645,978 654,000 579,000 431,000 510,000 246,000 (22) 200,000 200,000Interest Income 3,890,000 9,519,000 16,554,000 2,532,000 1,913,000 2,444,000 2,630,000 1,478,000 4,826,000 5,000,000 5,250,000Net Interest 523,000 7,345,000 16,707,978 1,878,000 1,334,000 2,013,000 2,120,000 1,232,000 4,825,978 5,200,000 5,450,000
Non-Operating Gain/(Loss (5,418,000) 0 (1,806,000) (1,806,000) (1,806,000)Non-Operating Income/(Expense) 135,489,000 34,605,000 (8,653,382) 98,000 (1,953,000) 15,671,000 20,789,000 (11,869,000) (2,623,022) 4,435,360 1,403,280
Total Non-Operating Income/(Expense) 136,012,000 41,950,000 (19,943,360) (1,780,000) (619,000) 17,684,000 22,909,000 (10,637,000) (5,643,000) 1,041,360 (2,240,720)
Total Income/(Loss) from cont. Operations 96,478,000 11,524,000 (4,751,000) (7,723,000) 10,062,000 14,464,000 (18,615,000)
Provision for Taxes 18,640,000 (40,000) (604,000) (643,000) (1,004,000) 1,607,000 0 (2,148,000) 494,000 500,000 550,000
Minority Interest and Investment P/L) (4,190,000) (4,229,000) (7,128,019) (1,690,000) (2,212,000) 472,000 (3,128,000) (19) (2,000,000) (2,000,000)Minority Interest Tax (2,513,000) (1,232,000) (47,000) (440,000) (808,000) (388,000)
Income(loss) Discontinued Operations Net o (1,130,000) 8,289,000 (660,000) 639,000 7,120,000 3,000 0 (220,000) (220,000) (220,000)
Net Income 72,518,000 15,624,000 (19,999,360) (4,908,000) (7,770,000) 13,363,000 14,939,000 (19,595,000) (6,357,000) 321,360 (3,010,720) Shares Outstanding 37,109,000 37,570,000 37,470,000 37,535,000 37,570,000 Shares Outstanding Diluted 43,670,000 38,106,000 38,012,250 37,401,000 37,470,000 41,037,000 38,106,000 37,803,000 37,846,000 38,100,000 38,300,000 Earnings per Share (EPS) 1.95 0.42 (0.21) 0.36 0.40 Earnings per Share Diluted (EPS) 1.73 0.41 (0.53) (0.13) (0.21) 0.34 0.39 (0.52) (0.17) 0.01 (0.08)
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FY2005 FY2006 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 ASSETS:Cash 147,659,000 120,808,000 139,380,000 122,525,000 127,124,000 120,808,000 66,314,000 94,616,000Short Term Investments Accounts Receivable 9,223,000 6,273,000 9,964,000 10,097,000 10,176,000 6,273,000 11,928,000Inventory Prepaid Expenses 15,399,000 2,557,000 5,771,000 6,268,000 5,718,000 2,557,000
Current Assets 184,445,000 129,671,000 155,364,000 142,992,000 157,660,000 129,671,000 77,634,000 106,544,000
PP&E - Gross 1,886,000 1,847,000 2,336,000 2,291,000 2,415,000 1,847,000 1,947,000 2,056,000Less: Accum. Depn.
Net PP&E 1,886,000 1,847,000 2,336,000 2,291,000 2,415,000 1,847,000 1,947,000 2,056,000
Total Intangibles 3,407,000 182,000 23,575,000 19,904,000 20,507,000 182,000 167,000 186,000Goodwill 17,794,000 17,084,000 20,859,000 17,743,000 18,641,000 17,084,000 17,084,000 17,084,000Intangibles excluding goodwill
Marketable Securities (non-current) 63,425,000 66,075,000 67,433,000 67,384,000 62,619,000 66,075,000 73,551,000 92,118,000Defered Tax Assets Other Non-Current Assets 4,122,000 1,657,000 3,735,000 2,491,000 2,189,000 1,657,000 1,827,000 121,374,000Cap. Financing Costs 2,771,000
Total Assets 346,532,000 354,427,000 336,212,000 322,499,000 330,110,000 354,427,000 311,667,000 342,133,000
LIABILITIES & EQUITY:Accounts Payable 6,181,000 4,123,000 6,241,000 6,214,000 5,255,000 4,123,000Accrued Expenses 9,533,000 4,420,000 9,758,000 7,979,000 6,973,000 4,420,000 19,072,000Deffered Revenue 9,508,000 5,430,000 12,257,000 10,126,000 9,726,000 5,430,000Restructuring Reserve
Current Liabilities 43,941,000 50,732,000 36,080,000 31,395,000 29,118,000 50,732,000 17,695,000 19,072,000
Other Debt 4,407,000 544,000 4,255,000 4,135,000 4,213,000 544,000 4,919,000Convertible Debt 37,000,000 0 33,500,000 26,590,000 26,590,000 0 7,119,000Sr. Sub. Notes
Total Debt 12,038,000
Restructuring Reserve Other non-current liabilities 640,000 333,000 838,000 598,000 395,000 333,000
Total Non-Current Liabilities 90,287,000 55,889,000 42,469,000 34,400,000 62,899,000 55,889,000 5,731,000 12,038,000
Total Liabilities 134,228,000 106,621,000 78,549,000 65,795,000 92,017,000 106,621,000 23,426,000 31,110,000
Common Equity 39,000 39,000 39,000 39,000 39,000 39,000Additional Paid in Capital 3,535,646,000 3,552,681,000 3,531,279,000 3,538,670,000 3,540,579,000 3,552,681,000Accum. Comprehensive Income 60,263,000 62,913,000 64,271,000 63,692,000 58,927,000 62,913,000Deffered Compensation 6,684,000 0 0 0 0 0Retained Earnings (3,332,719,000) (3,317,095,000) (3,337,626,000) (3,345,397,000) (3,332,034,000) (3,317,095,000)
Stockholders Equity 256,245,000 298,538,000 257,663,000 256,704,000 267,211,000 298,538,000 288,241,000 311,023,000 Liabilities & Equity 346,532,000 354,427,000 336,212,000 322,499,000 330,110,000 354,427,000 311,667,000 342,133,000
Henley & Company LLC · 1290 Reckson Plaza · Uniondale, NY 11556 Toll Free 800-753-8688 · Phone 516-794-5520 · Fax 516-794-6207
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*Principles of Accounting for Ownership Interests in Partner Companies: The various interests that ICGE acquired in its Partner Companies are accounted for under three methods:1) Consolidated, 2) Equity Method, and 3) Cost Method. The applicable accounting method is generally determined based on the Company’s voting interest in a Partner Company.
1) 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 Sheet 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.
2) 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 ownership level, which is generally a 20% to 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 “Equity income (loss)” line item in the Consolidated Statements of Operations. The carrying value of equity method Partner Companies is reflected in the “Ownership interests in Partner Companies” line item 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.
3) 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 ICGE’s share of the earnings or losses of such companies is not included in the Consolidated Balance Sheet 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.”
*Source is ICGE’s 11/09/2006 SEC Edgar filling (10-Q) **Off-Balance Sheet Arrangements ICGE is not involved in any off-balance sheet arrangements that have or are reasonably likely to have a material future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
**Source 11/09/2006 SEC Edgar filling (10-Q)
Henley & Company LLC · 1290 Reckson Plaza · Uniondale, NY 11556 Toll Free 800-753-8688 · Phone 516-794-5520 · Fax 516-794-6207
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Consolidated Equity CostICG Commerce (79%) Freeborders (33%) (none)Investor Force (80%) Metastorm (41%)StarCite (61%) Vcommerce (36%)
WhiteFence (39%)
Consolidated Equity Cost(none) ComputerJobs.com (46%) Anthem Ventures Fund, L.P. (9%)
CreditX (15%) BlackboardeCredit (29%) Captive Capital Corporation (5%)GoIndustry (35%) Emptoris, Inc. (5%)
Entegrity Solutions Corporation (2%)Jamcracker, Inc. (2%)Tibersoft Corporation (5%)Traffic.com
(10-Q)
below based on segment and method of accounting.
CORE PARTNER COMPANIES (% Voting Interest)
OTHER HOLDINGS COMPANIES (% Voting Interest)
As of September 30, 2006, INCE owned interests in 20 partner companies that are categorized
Publicly Traded Companies Mentioned in Report (All prices a/o 4:00 PM EDT August 7, 2007):
Blackboard (BBBB) – NasdaqGS $39.19 Traffic.com (TRFC) – NasdaqGM TRFC ceased trading 3/6/07 due to expected merger
Foreign Exchange Traded Companies Mentioned in Report (All prices a/o 4:00 PM EDT August 7, 2007):
Go Industry (GOI.L) – LSE £15.25
Henley & Company LLC · 1290 Reckson Plaza · Uniondale, NY 11556 Toll Free 800-753-8688 · Phone 516-794-5520 · Fax 516-794-6207
Page 17 of 18
Market Making and Investment Banking Disclosures
At the time this report was published, Henley and Company, LLC did not make a market in Internet Capital Group. (ICGE), or any other company mentioned in this report.
Stock Rating System
Henley and Company’s stock rating system is designed to reflect the type of investment decisions customers make on a regular basis. The language of the rating system used is a specific action Henley and Company would take in regard to the specific stocks we cover. Below, are an overview and an explanation of each of the types of recommendations Henley and Company would assign to stocks covered. Please understand that the rating system and the assigned definitions are predicated purely based on the total return of the individual stock in absolute dollar terms and not based on a relative value to a specific index or industry group.
Henley & Company’s Stock Rating system Buy: Indicates stocks we believe have a market capitalization that is comparably undervalued to its market peers and offers a greater relative performance to the market. We believe stocks in this category offer excellent risk reward potential and we recommend purchase based on its current relative value. Note, as with all equities there is always downside risk. Speculative Buy: Indicates stocks we believe should be purchased based on its growth potential and long term outlook of its industry. We believe stocks in this category offer excellent reward potential but have a greater specific investment risk and are subject to greater volatility then our normal buy recommendation. Neutral: Indicates stocks we will not advocate a buy or sell recommendation based on current conditions. Under-Perform: Indicates stocks we believe are currently fairly valued and offer limited upside reward relative to its specific investment risk. Sell: Indicates stocks we believe are currently overvalued relative to its market peers, and/or is experiencing major operational challenges. We believe stocks in this category should be avoided and the specific investment risk outweighs any potential reward.
Henley & Company LLC Current Ratings Distribution
Henley & Company LLC · 1290 Reckson Plaza · Uniondale, NY 11556 Toll Free 800-753-8688 · Phone 516-794-5520 · Fax 516-794-6207
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Further Disclosures
The information and statistical data contained herein have been obtained from sources, which we believe to be reliable but in no way are warranted by us as to accuracy or completeness. We do no undertake to advise you as to changes in figures or our views. This is not a solicitation of any order to buy or sell. Henley and Company is fully disclosed with its clearing firm, Pershing LLC, is not a market maker and does not sell to or buy from customers on a principle basis. The above statement is the opinion of Henley and Company and is not a guarantee that the price target for the stock will be met or that the predicted business results of the company will occur. There may be situations when fundamentals, technically, and quantitative opinions are not met. We, our affiliates, any officer, director or stockholder or any other member of their family may from time to time purchase or sell any of the above mentioned or related securities. Analyst or members of the Research Department are prohibited from buying or selling securities issued by the companies that Henley and Company has a research relationship with, except if ownership of such securities was prior to the start of such relationship, then the analyst or member of the research Department may sell such securities after obtaining expressed written permission from the Director of Research. No affiliates of Henley & Company maintain a position in the common stock of the company mentioned. At the publication of our most recent Research Report, Henley & Company officers, directors, stockholders, or their family members, may have held a long position in the common stock of the company mentioned. All research issued by Henley and Company is based on public information. Henley and Company does not currently have an Investment Banking relationship with the company mentioned in this report, and was not a manager or co-manager of any offering for the company within the last three years. The company mentioned in this report also does not pay for Henley and Company to disseminate any research reports.
I, Alan Weinfeld, the research analyst of this report, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities and issues, and that no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or views contained in the report.