SOURCE: Interactive Data Corporation

Interactive Data Corporation

May 08, 2014 16:35 ET

Interactive Data Reports First-Quarter 2014 Results

NEW YORK, NY--(Marketwired - May 8, 2014) - Interactive Data Corporation today reported its financial results for the first quarter ended March 31, 2014. Interactive Data's first-quarter 2014 revenue was a record $234.4 million, a 4.9% increase from $223.5 million in the first quarter of 2013. Excluding the impact of changes in foreign exchange rates, Interactive Data's organic (non-GAAP) revenue for the first quarter of 2014 grew by 3.9% from the first quarter in 2013. 

Interactive Data's first-quarter 2014 income from operations was $40.9 million, compared with $43.4 million in the first quarter of 2013. Non-GAAP adjusted EBITDA (which excludes items that are either not part of the Company's ongoing core operations, or do not require a cash outlay, or are not otherwise expected to recur in the ordinary course) for the first quarter of 2014 was $81.7 million, compared with $83.1 million in the same period one year ago.

"Interactive Data continued to grow despite the challenging spending environment," stated Stephen Daffron, Interactive Data's president and CEO. "Our organic revenue growth of 3.9% was primarily driven by the combination of continued expansion of our Pricing and Reference Data segment and a large customer implementation of our 7ticks trading infrastructure managed services. Our adjusted EBITDA performance reflected continued investment in key product and technology development initiatives, and hardware-related costs related to the 7ticks customer implementation. In early May, we completed a refinancing of the Company's debt obligations, which resulted in both extended maturities and reduced cash interest expense. We believe this reflects positively on our outlook as well as the progress we have made to improve the fundamental operating performance of our Company over the past several years."

Segment Reporting and Related Operating Highlights

Pricing and Reference Data Segment:

  • Interactive Data's Pricing and Reference Data segment reported first-quarter 2014 revenue of $162.9 million, a 3.5% increase over the first quarter of 2013. Excluding the impact of changes in foreign exchange rates, first-quarter 2014 organic (non-GAAP) revenue for this segment increased by 2.8% from the same period last year. The segment's performance reflects growth in the Company's evaluated pricing and reference data services in North America, and, to a lesser extent, improved results in its BondEdge fixed income analytics product area. During the first quarter, Interactive Data announced reference data collaborations with Bloomberg, Microsoft and SAP that are aimed at making the Company's reference data content easier to integrate and use across a broad range of information technology and business intelligence systems. The segment has also continued to advance key development initiatives including the APEX(SM) suite of reference data delivery services, continuous evaluated pricing and Vantage(SM). 

Trading Solutions Segment:

  • Interactive Data's Trading Solutions segment generated first-quarter 2014 revenue of $71.5 million, an increase of 8.2% over $66.0 million in the same period one year ago. Excluding the impact of changes in foreign exchange rates, first-quarter 2014 organic (non-GAAP) revenue for this segment increased by 6.5% from the same period last year primarily as a result of a large customer implementation in the 7ticks trading infrastructure managed services product area. First-quarter 2014 highlights for the segment included launching a new version of a TREP feed handler, which enables integration of the Interactive Data Consolidated Feed with a customer's market data platform. In addition, the segment also continued to invest in enhancing and expanding the content and analytics across its range of hosted web applications and workstation offerings. 

Other First-quarter 2014 Financial and Operating Highlights

Effects of Foreign Exchange:

  • The net effect of changes in foreign exchange rates increased first-quarter 2014 income from operations by $0.5 million. 

Balance Sheet Highlights:

  • As of March 31, 2014, Interactive Data had cash, cash equivalents and short-term investments of $326.9 million, compared with $360.2 million at the end of 2013 and $235.9 million at the same time last year. The Company's cash position reflected debt-related payments in the first quarter of 2014 of $48.0 million associated with its senior notes and term loan, and a mandatory term loan prepayment of $7.9 million tied to 2013 excess cash flow. The Company's total debt outstanding as of March 31, 2014 was approximately $2.0 billion. 

Refinancing Activity

  • On May 2, 2014, Interactive Data completed a new $2.1 billion senior secured credit facility, consisting of a 5-year $160 million Revolver (unfunded at close) and a 7-year $1.9 billion term loan. Additionally, the Company completed the offering of $350 million in aggregate principal amount of 5.875% Senior Notes due 2019. Net proceeds from these activities, along with approximately $90 million in cash were used to refinance its $1.3 billion existing term loan, redeem the $700 million 10.25% Senior Notes due 2018, pay related fees and expenses, and fund a $273 million dividend payment to its parent entities, which in turn paid a distribution of approximately $273 million to their equity holders. As a result of the refinancing activity, the Company expects to reduce its annual cash interest expense by approximately $6 million in 2014, and, assuming our current interest rates and principal balance remain in place (subject to scheduled amortization), by over $10 million annually thereafter, versus full-year 2013 cash interest expense.

  • The Company's total debt outstanding as of May 2, 2014 was approximately $2.3 billion. 

Conference Call Information

Interactive Data Corporation will host a conference call to discuss the Company's first-quarter 2014 results on Friday, May 9, 2014 at 8:30 a.m. ET. The dial-in number for the conference call is (785) 424-1826 and the related access code is IDCQ114. For those who cannot listen to this broadcast, a replay of the call will be available from May 9 at 12:00 p.m. until Friday, May 16, 2014 at 12:00 p.m., and it can be accessed by dialing (402) 220-7230 or (800) 839-2670.

Non-GAAP Information

In addition to presenting our results in accordance with generally accepted accounting principles (GAAP) in this press release, we also disclose the following non-GAAP information:

  • Management includes information regarding organic revenue. Organic revenue excludes the impact of foreign exchange rate fluctuations, as well as, if applicable, adjustments related to the amortization of acquisition-related deferred revenue, and the contribution of businesses recently acquired (and related intercompany eliminations). Management believes reporting organic revenue is useful information for stakeholders as it facilitates a fuller understanding of period-to-period changes in revenue and underlying business trends. 

  • Management includes organic revenue for our Pricing and Reference Data, and Trading Solutions segments because management believes this additional level of detail provides further insight into underlying performance trends. 

  • Management includes information regarding earnings before interest, income taxes, depreciation and amortization (EBITDA) and adjusted EBITDA. Adjusted EBITDA is defined as earnings before interest, income taxes, depreciation and amortization, stock-based compensation expense, restructuring charges and benefits, adjustments related to the amortization of acquisition-related deferred revenue, and other non-cash, non-operational or non-recurring items, in each case as applicable for the underlying periods. In addition, management also includes information regarding pro forma adjusted EBITDA. Pro forma adjusted EBITDA is defined as earnings, excluding all of the above factors, as well as other adjustments permitted under the Company's senior secured credit facilities. Management considers these non-GAAP measures to be important indicators of the Company's operational profitability and cash generation strength. Management also believes these metrics provide transparency into and useful information regarding the Company's historical operating results because items that are either not part of the Company's ongoing core operating expenses, do not require a cash outlay, or are not otherwise expected to recur in the ordinary course of business are eliminated. The Company's pro forma adjusted EBITDA measure is based on the definition of Consolidated EBITDA set forth in the agreements governing the Company's senior secured credit facilities.

  • Management includes information regarding free cash flow, which we define as adjusted EBITDA less capital expenditures. Management considers free cash flow to be an important measure of the Company's cash generation strength that supports the Company's ability to repay its debt obligations and invest in future growth through new business development activities or acquisitions.

  • Management uses these non-GAAP financial measures, in addition to GAAP financial measures, as the basis for measuring the Company's core operating performance and comparing current period performance to that of prior periods, and to the performance of our competitors. Such measures are also used by management in their financial and operating decision-making, and for forecasting and planning purposes. In addition, pro forma adjusted EBITDA is an important indicator of the Company's current compliance (and future ability to comply) with the financial covenants set forth in the Company's senior secured credit facilities.

  • The non-GAAP financial measures of the Company's results of operations included in this press release should not be considered in isolation from comparable measures determined in accordance with GAAP. The non-GAAP financial measures should not be considered to be superior to or a substitute for the Company's results of operations prepared in accordance with GAAP. Reconciliations of such non-GAAP financial measures to the comparable GAAP financial measures are set forth in the accompanying tables. The non-GAAP measures presented may not be comparable to similarly titled measures reported by other companies.

Forward-looking and Cautionary Statements

This press release may contain forward-looking statements. Forward-looking statements include all statements that are not historical statements and include our statements regarding reduction of our annual interest expense and other statements discussing the Company's goals, beliefs, strategies, objectives, plans, future financial conditions, future challenges and opportunities. Forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those indicated by such forward-looking statements. Important factors that could cause actual results to differ materially from those indicated by forward-looking statements include risks and uncertainties relating to: (i) the implementation of strategies designed to improve revenue and profit growth; (ii) the impact of cost-cutting pressures across the industries the Company serves; (iii) general worldwide economic conditions and related uncertainties; (iv) consolidation of financial services companies, within and across industries; (v) a decline in activity levels in the securities markets, weak or declining financial performance of market participants or the failure of market participants; (vi) the intensity of competition the Company faces; (vii) a prolonged outage at one of the Company's data centers or other major disruptions of the Company's computer operations or those of the Company's suppliers, including outages or disruptions that result in the failure to timely deliver services or otherwise adversely impact the quality of the Company's services; (viii) the Company's ability to maintain relationships with its key suppliers and providers of market data; (ix) the Company's ability to maintain relationships with service bureaus and custodian banks; (x) the need to develop new products and services, and to adapt to legal, regulatory, technology or other changes or new competitive offerings; (xi) the Company's cost and operational optimization plans may not be effective or yield the expected efficiencies or may take longer than anticipated, including the Company's unified technology platform project; (xii) risks related to the Company's substantial leverage, including the Company's ability to raise additional capital to fund operations or react to changes in the economy or the Company's industry and market sectors, and the Company's exposure to interest rate risk on its variable rate debt (to the extent the risk is not mitigated by any interest rate hedge and cap arrangements that may be in place from time to time); (xiii) the Company is subject to regulatory oversight and it provides services to financial institutions who are subject to regulatory oversight, and enforcement actions by regulatory agencies can be time-consuming, costly and could harm our Company's reputation; (xiv) the Company's ability to maintain its registered investment adviser status; (xv) the risks of doing business internationally; (xvi) intellectual property related risks, including any allegations that the Company infringes the intellectual property rights of others; (xvii) the Company's ability to attract and retain qualified management and other key personnel; (xviii) the Company's ability to negotiate and enter into any strategic acquisitions or alliance on favorable terms, if at all; and (xix) the Company's ability to realize the anticipated benefits from any strategic acquisitions or alliances that it may be a party to. While the Company may elect to update forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so, even if management estimates change and, therefore, you should not rely on these forward-looking statements as representing the Company's views as of any date subsequent to today.

About Interactive Data Corporation

Interactive Data Corporation is a trusted leader in financial information. Thousands of financial institutions and active traders, as well as hundreds of software and service providers, subscribe to our fixed income evaluations, reference data, real-time market data, trading infrastructure services, fixed income analytics, desktop solutions and web-based solutions. Interactive Data's offerings support clients around the world with mission-critical functions, including portfolio valuation, regulatory compliance, risk management, electronic trading and wealth management. Interactive Data has over 2,500 employees in offices worldwide.

For more information, please visit www.interactivedata.com.

   
INTERACTIVE DATA CORPORATION AND SUBSIDIARIES  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
Unaudited  
(In thousands)  
   
   
       
    Three Months Ended  
    March 31,  
    2014     2013  
REVENUE   $ 234,398     $ 223,504  
                 
COSTS AND EXPENSES:                
    Cost of services     84,505       73,890  
    Selling, general and administrative     72,358       63,733  
    Depreciation     10,835       11,046  
    Amortization     25,803       31,430  
  Total costs and expenses     193,501       180,099  
                 
INCOME FROM OPERATIONS     40,897       43,405  
                 
    Interest expense, net     (33,583 )     (35,209 )
    Other income, net     640       333  
    Loss on extinguishment of debt     -       (10,213 )
                 
INCOME (LOSS) BEFORE INCOME TAXES     7,954       (1,684 )
                 
    Income tax benefit     (7,135 )     (816 )
                 
NET INCOME (LOSS)   $ 15,089     $ (868 )
                 
                 
   
INTERACTIVE DATA CORPORATION AND SUBSIDIARIES  
CONDENSED CONSOLIDATED BALANCE SHEETS  
Unaudited  
(In thousands)  
             
    March 31,     December 31,  
    2014     2013  
ASSETS   (Unaudited)        
Assets:                
Cash and cash equivalents   $ 326,923     $ 356,733  
Short-term investments     -       3,445  
Accounts receivable, net     159,436       133,997  
Prepaid expenses and other current assets     22,293       25,733  
Income tax receivable     4,059       6,804  
Deferred tax assets     4,429       10,711  
                 
Total current assets     517,140       537,423  
                 
Property and equipment, net     193,855       185,552  
Goodwill     1,640,568       1,637,202  
Intangible assets, net     1,547,599       1,569,903  
Deferred financing costs, net     30,535       32,737  
Other assets     6,052       5,541  
                 
Total Assets   $ 3,935,749     $ 3,968,358  
                 
LIABILITIES AND EQUITY                
                 
Liabilities:                
Accounts payable, trade   $ 19,787     $ 20,282  
Accrued liabilities     82,168       105,842  
Borrowings, current     8,422       25,356  
Interest payable     12,306       30,233  
Income taxes payable     1,312       3,057  
Deferred revenue     29,258       19,639  
                 
Total current liabilities     153,253       204,409  
                 
Income taxes payable     3,309       13,566  
Deferred tax liabilities     567,129       573,780  
Other liabilities     57,259       57,547  
Borrowings, net of current portion and original issue discount     1,950,947       1,940,150  
                 
Total Liabilities     2,731,897       2,789,452  
                 
Equity:                
Common stock     -       -  
Additional paid-in-capital     1,239,652       1,237,766  
Accumulated loss     (73,967 )     (89,056 )
Accumulated other comprehensive income     38,167       30,196  
                 
Total Equity     1,203,852       1,178,906  
                 
Total Liabilities and Equity   $ 3,935,749     $ 3,968,358  
                 
                 
   
INTERACTIVE DATA CORPORATION AND SUBSIDIARIES  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
Unaudited  
(In thousands)  
             
    Three Months Ended
March 31,
 
    2014     2013  
                 
Cash flows from operating activities:                
Net income (loss)   $ 15,089     $ (868 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:                
    Depreciation and amortization     36,638       42,476  
    Amortization of deferred financing costs and accretion of debt discounts     3,955       4,184  
    Deferred income taxes     (1,331 )     (5,312 )
    Non-cash stock-based compensation     1,142       852  
    Non-cash interest expense     376       376  
    Provision for doubtful accounts and sales credits     1,931       939  
    Loss on extinguishment of debt     -       10,213  
    Portion of insurance settlement related to property and equipment     -       (350 )
    Changes in operating assets and liabilities, net     (64,048 )     (34,159 )
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES     (6,248 )     18,351  
                 
Cash flows from investing activities:                
    Purchase of property and equipment     (20,829 )     (16,354 )
    Proceeds of insurance settlement related to property and equipment     -       350  
    Purchase of short-term investments     -       (3,335 )
    Proceeds from maturities and sales of short-term investments     3,410       14,236  
NET CASH USED IN INVESTING ACTIVITIES     (17,419 )     (5,103 )
                 
Cash flows from financing activities:                
    Payment of long-term debt issuance costs, net of proceeds     -       (1,009 )
    Principal payments on long-term debt     (7,891 )     (3,649 )
    Principal payments on capital leases     (125 )     (98 )
    Payment of interest rate cap     (416 )     (416 )
    Capital contribution resulting from exercise of parent company stock options     685       -  
    Capital contribution from parent company     26       -  
    Capital reduction resulting from cash distribution to option holders     (295 )     -  
NET CASH USED IN FINANCING ACTIVITIES     (8,016 )     (5,172 )
                 
    Effect of change in exchange rates on cash and cash equivalents     1,873       (9,439 )
                 
NET DECREASE IN CASH AND CASH EQUIVALENTS     (29,810 )     (1,363 )
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD     356,733       224,597  
                 
CASH AND CASH EQUIVALENTS AT END OF PERIOD   $ 326,923     $ 223,234  
                 
                 
   
RECONCILIATION OF NON-GAAP MEASURES  
   
   
Total Organic (Non-GAAP) Revenue  
(Revenue before Effects of Deferred Revenue Adjustment and Foreign Exchange)  
(In thousands)  
       
    Three Months Ended  
    March 31,  
    2014     2013   Change  
                     
Total revenue   $ 234,398     $ 223,504   4.9 %
  Total effects of foreign exchange     (2,242 )     -   -  
Total organic (non-GAAP) revenue   $ 232,156     $ 223,504   3.9 %
                     
                     
 
Interactive Data Pricing and Reference Data Segment
Organic (Non-GAAP) Revenue
(Revenue before Effects of Deferred Revenue Adjustment and Foreign Exchange)
(In thousands)
 
     Three Months Ended 
     March 31, 
    2014   2013   Change
Pricing and Reference Data Revenue   $ 162,943   $ 157,476   3.5%
  Effects of foreign exchange   (1,080)   -   -
Total organic (non-GAAP) revenue   $ 161,863   $ 157,476   2.8%
             
             
   
Interactive Data Trading Solutions Segment  
Organic (Non-GAAP) Revenue  
(Revenue before Effects of Deferred Revenue Adjustment and Foreign Exchange)  
(In thousands)  
   
    Three Months Ended  
    March 31,  
    2014     2013   Change  
Trading Solutions Revenue                    
  Real-Time Feeds and Trading Infrastructure Services   $ 33,015     $ 27,603   19.6 %
  Hosted Web Applications and Workstations     38,440       38,425   0.0 %
Total Trading Solutions Revenue   $ 71,455     $ 66,028   8.2 %
  Effects of foreign exchange     (1,162 )     -   -  
Total organic (non-GAAP) revenue   $ 70,293     $ 66,028   6.5 %
                     
                     
   
RECONCILIATION OF NON-GAAP MEASURES (CONTINUED)  
   
Non-GAAP Adjusted EBITDA and Non-GAAP Pro Forma Adjusted EBITDA1  
(In thousands, except margin data)  
       
    Three Months Ended  
    March 31,  
    2014     2013  
Net Income (Loss)   $ 15,089     $ (868 )
  Interest expense, net     33,583       35,209  
  Other income, net     (640 )     (333 )
  Income tax benefit     (7,135 )     (816 )
  Depreciation and amortization     36,638       42,476  
EBITDA   $ 77,535     $ 75,668  
                 
Adjustments:                
  Non-cash stock-based compensation     1,142       852  
  Other non-recurring charges2     530       11,782  
  Other charges (income)3     2,472       (5,162 )
    Total Adjustments     4,144       7,472  
                 
Adjusted EBITDA   $ 81,679     $ 83,140  
                 
Adjusted EBITDA Margin4     34.8 %     37.2 %
                 
Other Adjustments                
  Pro forma cost savings5     7,500       7,500  
Pro Forma Adjusted EBITDA   $ 89,179     $ 90,640  
                 
Pro Forma Adjusted EBITDA Margin4     38.0 %     40.6 %
 
1 Interactive Data's adjusted EBITDA excludes items that are either not part of the Company's ongoing core operations, do not require a cash outlay or are not otherwise expected to recur in the ordinary course. In addition to excluding the aforementioned items, Interactive Data's pro forma adjusted EBITDA also reflects other adjustments permitted under the Company's senior secured credit facilities. The Company's pro forma adjusted EBITDA measure is based on the definition of EBITDA set forth in the agreements governing the Company's senior secured credit facilities. Please note that the sum of certain amounts may not equal the total due to rounding.
 
2 Other non-recurring charges include, as applicable, the impact of the deferred revenue adjustment, the loss on extinguishment of debt, facility consolidation costs, and certain severance and retention expenses.
 
3 Other charges (income) include, as applicable, insurance recoveries, management fees, earn-out revaluation expense, non-cash foreign exchange expense, acquisition-related adjustments, certain professional fees and other costs.
 
4 Adjusted EBITDA margin and pro forma adjusted EBITDA margin are calculated by dividing each EBITDA measure by total revenue.
 
5 Pro forma cost savings of up to a maximum of $30 million annually is an adjustment permitted under the Company's credit agreements for activities that may include, but are not limited to, the consolidation of a number of legacy organizational silos, technology platforms and content databases.
 
 
   
RECONCILIATION OF NON-GAAP MEASURES (CONTINUED)  
   
Trailing Four Quarters and Trailing Twelve Months  
Quarterly Non-GAAP Adjusted EBITDA and Non-GAAP Pro Forma Adjusted EBITDA1  
(In thousands, except margin data)  
                   
    Three Months Ended
             
   

June 30,
   

September 30,
   

December 31,
   

March 31,
    Trailing Twelve
Months Ended

March 31,
 
    2013     2013     2013     2014     2014  
Net Income   $ 15,035     $ 14,132     $ 5,207     $ 15,089     $ 49,463  
  Interest expense, net     34,210       34,198       34,011       33,583       136,002  
  Other income, net     (14 )     -       -       (640 )     (654 )
  Income tax expense (benefit)     369       (7,170 )     2,605       (7,135 )     (11,331 )
  Depreciation and amortization     40,339       37,859       38,739       36,638       153,575  
EBITDA   $ 89,939     $ 79,019     $ 80,562     $ 77,535     $ 327,055  
                                         
Adjustments:                                        
  Non-cash stock-based compensation     874       1,067       1,153       1,142       4,236  
  Other non-recurring charges2     818       435       5,143       530       6,926  
  Other (income) charges3     (3,335 )     7,343       2,237       2,472       8,717  
    Total Adjustments     (1,643 )     8,845       8,533       4,144       19,879  
                                         
Adjusted EBITDA   $ 88,296     $ 87,864     $ 89,095     $ 81,679     $ 346,934  
                                         
Adjusted EBITDA Margin4     39.2 %     39.2 %     38.4 %     34.8 %     37.9 %
                                         
Other Adjustments                                        
  Pro forma cost savings5     7,500       7,500       7,500       7,500       30,000  
Pro Forma Adjusted EBITDA   $ 95,796     $ 95,364     $ 96,595     $ 89,179     $ 376,934  
                                         
Pro Forma Adjusted EBITDA Margin4     42.6 %     42.5 %     41.6 %     38.0 %     41.1 %
                                         
1 Interactive Data's adjusted EBITDA excludes items that are either not part of the Company's ongoing core operations, do not require a cash outlay or are not otherwise expected to recur in the ordinary course. In addition to excluding the aforementioned items, Interactive Data's pro forma adjusted EBITDA also reflects other adjustments permitted under the Company's senior secured credit facilities. The Company's pro forma adjusted EBITDA measure is based on the definition of EBITDA set forth in the agreements governing the Company's senior secured credit facilities. Please note that the sum of certain amounts may not equal the total due to rounding.
 
2 Other non-recurring charges include, as applicable, the impact of the deferred revenue adjustment, the loss on extinguishment of debt, facility consolidation costs, and certain severance and retention expenses.
 
3 Other (income) charges include, as applicable, insurance recoveries, management fees, earn-out revaluation expense, non-cash foreign exchange expense, acquisition-related adjustments, certain professional fees and other costs.
 
4 Adjusted EBITDA margin and pro forma adjusted EBITDA margin are calculated by dividing each EBITDA measure by total revenue.
 
5 Pro forma cost savings of up to a maximum of $30 million annually is an adjustment permitted under the Company's credit agreements for activities that may include, but are not limited to, the consolidation of a number of legacy organizational silos, technology platforms and content databases.
   
   
   
Non-GAAP Free Cash Flow  
(In thousands)  
       
    Three Months Ended  
    March 31,  
    2014   2013   Change  
Adjusted EBITDA   $ 81,679   $ 83,140   -1.8 %
  Capital Expenditures     20,829     16,354   27.4 %
Free Cash Flow   $ 60,850   $ 66,786   -8.9 %
                   

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