SOURCE: Interactive Data

Interactive Data

October 25, 2012 16:30 ET

Interactive Data Reports Third-Quarter 2012 Results

BEDFORD, MA--(Marketwire - Oct 25, 2012) - Interactive Data Corporation today reported its financial results for the third quarter ended September 30, 2012. Interactive Data's third-quarter 2012 revenue was $218.1 million compared with $217.9 million in the third quarter of 2011. Excluding the impact of changes in foreign exchange rates, Interactive Data's organic (non-GAAP) revenue for the third quarter of 2012 grew by 1.4% from the third quarter in 2011. 

Interactive Data's third-quarter 2012 income from operations was $36.7 million, compared with income from operations of $30.8 million in same period one year ago. 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 third quarter of 2012 was $86.8 million versus $87.4 million in the same period one year ago. 

"We continued to navigate our business through a challenging operating environment," stated Mason Slaine, Interactive Data's president and chief executive officer. "Despite the difficult backdrop, we made progress expanding several key product areas during the quarter. At the same time, we have continued to invest in the new product development and related technology infrastructure initiatives that we believe are fundamental for generating long-term, sustainable growth. Nevertheless, we remained disciplined with respect to managing our overall cost structure, which enabled us to produce another quarter of solid adjusted EBITDA margins and strong free cash flow." 

Segment Reporting and Related Operating Highlights

As previously disclosed, effective for the fourth quarter of 2011, Interactive Data's two reportable segments were reorganized as Pricing and Reference Data, and Trading Solutions. The change was made in response to operational and organizational initiatives undertaken during the preceding year and completed in the fourth quarter of 2011, and reflects the way the Company currently approaches the market and analyzes operating performance. The Pricing and Reference Data segment represents the Company's evaluated pricing, reference data and fixed income analytics product areas. The Trading Solutions segment represents the Company's real-time data feeds, ultra low latency infrastructure services, hosted web applications and workstations. Historical financial results have been reclassified to reflect this change.

Pricing and Reference Data Segment:

  • Interactive Data's Pricing and Reference Data segment reported third-quarter 2012 revenue of $153.2 million, a 2.6% increase over the third quarter of 2011. Excluding the effects of foreign exchange, third-quarter 2012 organic (non-GAAP) revenue for this business increased by 3.2% from the same period last year. The segment's performance benefited from continued expansion of the Company's evaluated pricing and reference data services in the North American and Asia-Pacific regions, as well as improved results in its fixed income analytics area. During the quarter, Interactive Data launched its Fair Value Information Services for international corporate and sovereign bonds, and introduced a new service designed to support cross-asset data management and reporting requirements under the European Union's Solvency II Directive. Earlier today, Interactive Data announced the launch of Apex(SM), an innovative suite of fully-hosted and managed reference data services.

Trading Solutions Segment:

  • Interactive Data's Trading Solutions segment generated third-quarter 2012 revenue of $64.9 million, a 5.3% decrease from the same quarter last year. Excluding the impact of changes in foreign exchange rates, third-quarter 2012 organic (non-GAAP) revenue for this segment declined by 2.6% from the third quarter of 2011. Continued growth in the Interactive Data 7ticks trading infrastructure services area was more than offset by softness in the segment's other primary product areas. During the past several months, Interactive Data announced Saxo Bank and Konkyl as new 7ticks clients in Europe, added a new point-of-presence for the 7ticks network in the Toronto, Canada area and continued to make new market sources available on the 7ticks network. In addition, eSignal launched a new integrated marketing campaign targeting active traders during the quarter.

Other Third-Quarter 2012 Financial and Operating Highlights

Effects of Foreign Exchange:

  • The net effect of foreign exchange increased third-quarter 2012 income from operations by $0.4 million. 

Balance Sheet Highlights:

  • As of September 30, 2012, Interactive Data had cash, cash equivalents and short-term investments of $289.4 million, compared with $266.1 last quarter, $217.2 million at the same time last year and $262.2 million at the end of 2011. The Company's total debt outstanding as of September 30, 2012 was approximately $2.0 billion.

Results for the Nine Months Ended September 30, 2012

  • For the nine months ended September 30, 2012, Interactive Data reported revenue of $655.9 million, an increase of $10.2 million, or 1.6%, from $645.7 million in the same period last year. Excluding the effects of foreign exchange, organic revenue grew by 2.5% during the first nine months of 2012. 

  • Interactive Data's income from operations for the first nine months of 2012 was $104.1 million, compared with income from operations of $68.5 million in the same period one year ago. For the first nine months of 2012, non-GAAP adjusted EBITDA (which excludes items that are 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) was $249.0 million, up by 1.3% from $245.9 million in the same period one year ago. 

Conference Call Information

Interactive Data Corporation will host a conference call to discuss the Company's third-quarter 2012 results on Friday, October 26, 2012 at 8:30 a.m. ET. The dial-in number for the conference call is (785) 424-1057 and the related access code is IDCQ312. For those who cannot listen to this broadcast, a replay of the call will be available from October 26 at 12:00 p.m. until Friday, November 2, 2012 at 12:00 p.m., and it can be accessed by dialing (402) 220-7214 or (800) 756-8809 (no access code is required).

Non-GAAP Information

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

  • Management includes information regarding organic revenue. Organic revenue excludes the effects of foreign currency exchange rates, adjustments related to the amortization of acquisition-related deferred revenue, and, if applicable, the contribution of businesses recently acquired (and related intercompany eliminations as appropriate). Management believes reporting organic revenue facilitates period-to-period comparisons, and provides a better understanding of underlying business trends and our future revenue growth prospects. 

  • 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). We also include information regarding adjusted EBITDA, which we define 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 addition, management also includes information regarding pro forma adjusted EBITDA. We define this metric 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 measures to be important indicators of the Company's operational profitability and cash generation strength and a good measure of the Company's historical operating trend because it eliminates 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 of business. In addition, 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.

  • Management includes information regarding free cash flow, which we define as adjusted EBITDA less capital expenditures. Management considers free cash flow as another 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 such 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, management also considers pro forma adjusted EBITDA to be an important indicator which can be used for the purpose of analyzing covenant compliance under 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 are not meant to be considered 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 may not be comparable to similarly titled measures reported by other companies.

Forward-looking and Cautionary Statements

The following constitutes a "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995: This press release contains forward-looking statements that involve a number of risks and uncertainties. Forward-looking statements include all statements that are not historical statements and include our statements discussing our goals, beliefs, strategies, objectives, plans, future financial conditions, future challenges and opportunities, including our statements about our investments in new product development and related technology infrastructure initiatives that we believe are fundamental for generating long-term, sustainable growth. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2011, under the caption "Risk Factors." The Company's Annual Report on Form 10-K is on file with the Securities and Exchange Commission and available in the "Investors" section of our Website under the heading "SEC Filings." 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 we serve; (iii) general worldwide economic conditions and related uncertainties; (iv) consolidation of financial services companies, within and across industries, or the failure of financial institutions; (v) 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 we face; (vii) a prolonged outage at one of our data centers or other major disruptions of our computer operations or those of our suppliers; (viii) our ability to maintain relationships with our key suppliers and providers of market data; (ix) our ability to maintain our relationships with service bureaus and custodian banks and our other customers; (x) the need to develop new products and adapt to legal, regulatory, technology or other change; (xi) our cost-savings plans may not be effective or yield the expected efficiencies or may take longer than anticipated; (xii) risks related to our substantial leverage, including our ability to raise additional capital to fund operations or react to changes in the economy or our industry, and our exposure to interest rate risk on our variable rate debt (to the extent the risk is not mitigated by the interest rate hedge and cap arrangements that we may have in place from time to time); (xiii) our ability to negotiate and enter into strategic acquisitions or alliances on favorable terms, if at all, (xiv) our ability to realize the anticipated benefits from any strategic acquisitions or alliances that we enter into; (xv) we are subject to regulatory oversight and we provide services to financial institutions that are subject to regulatory oversight; (xvi) certain of our subsidiaries are subject to complex regulations and licensing requirements; (xvii) the risks of doing business internationally; (xviii) intellectual property related risks, including any allegations that we infringe the intellectual property rights of others; and (xix) our ability to attract and retain qualified management and other key personnel. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change and, therefore, you should not rely on these forward-looking statements as representing our 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 is headquartered in Bedford, Massachusetts and 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     Nine Months Ended  
    September 30,     September 30,  
    2012     2011     2012     2011  
REVENUE   $ 218,073     $ 217,850     $ 655,848     $ 645,650  
                 
COSTS AND EXPENSES:                                
    Cost of services     72,912       72,081       221,375       219,030  
    Selling, general and administrative     63,621       63,853       196,704       190,089  
    Depreciation     10,318       9,601       30,122       30,193  
    Amortization     34,494       41,540       103,568       137,855  
  Total costs and expenses     181,345       187,075       551,769       577,167  
                                 
INCOME FROM OPERATIONS     36,728       30,775       104,079       68,483  
                                 
  Interest expense, net     (37,372 )     (38,390 )     (112,364 )     (119,025 )
  Other income (expense), net     329       30       604       (2,708 )
  Loss on extinguishment of debt     -       -       -       (25,450 )
                                 
LOSS BEFORE INCOME TAXES     (315 )     (7,585 )     (7,681 )     (78,700 )
                                 
  Income tax benefit     (18,357 )     (17,433 )     (17,038 )     (51,295 )
                                 
NET INCOME (LOSS)   $ 18,042     $ 9,848     $ 9,357     $ (27,405 )
             
             
INTERACTIVE DATA CORPORATION AND SUBSIDIARIES  
CONDENSED CONSOLIDATED BALANCE SHEETS  
(In thousands)  
             
    September 30,     December 31,  
    2012     2011  
ASSETS   (Unaudited)        
Assets:                
Cash and cash equivalents   $ 265,809     $ 262,152  
Short-term investments     23,594       -  
Accounts receivable, net     132,183       118,248  
Prepaid expenses and other current assets     24,612       27,419  
Income tax receivable     6,249       6,251  
Deferred income taxes     29,554       42,281  
                 
Total current assets     482,001       456,351  
                 
Property and equipment, net     138,398       122,289  
Goodwill     1,646,431       1,637,126  
Intangible assets, net     1,726,004       1,818,117  
Deferred financing costs, net     47,228       54,478  
Other assets     4,974       5,310  
                 
Total Assets   $ 4,045,036     $ 4,093,671  
                 
LIABILITIES AND EQUITY                
                 
Liabilities:                
Accounts payable, trade   $ 16,213     $ 17,911  
Accrued liabilities     81,780       89,214  
Borrowings, current     -       56,417  
Interest payable     12,700       30,584  
Income taxes payable     9,323       7,008  
Deferred revenue     29,633       24,944  
                 
Total current liabilities     149,649       226,078  
                 
Income taxes payable     7,218       10,906  
Deferred tax liabilities     615,478       647,090  
Other liabilities     55,977       59,908  
Borrowings, net of current portion and original issue discount     1,960,186       1,929,784  
                 
Total Liabilities     2,788,508       2,873,766  
                 
Equity:                
Common stock     -       -  
Additional paid-in-capital     1,337,305       1,333,344  
Accumulated loss     (114,222 )     (123,579 )
Accumulated other comprehensive income     33,445       10,140  
                 
Total Equity     1,256,528       1,219,905  
                 
Total Liabilities and Equity   $ 4,045,036     $ 4,093,671  
   
   
INTERACTIVE DATA CORPORATION AND SUBSIDIARIES  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Unaudited)  
(In thousands)  
             
    Nine Months Ended  
    September 30,  
    2012     2011  
                 
Cash flows from operating activities:                
Net income (loss)   $ 9,357     $ (27,405 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:                
  Depreciation and amortization     133,690       168,048  
  Amortization of deferred financing costs and accretion of notes discounts     13,264       13,386  
  Deferred income taxes     (21,135 )     (54,586 )
  Stock-based compensation     2,580       2,740  
  Non-cash interest expense     1,130       -  
  Provision (recovery) for doubtful accounts and sales credits     19       (7 )
  Loss on dispositions of fixed assets     28       124  
  Loss on extinguishment of debt     -       25,450  
Changes in operating assets and liabilities, net     (36,464 )     (8,576 )
NET CASH PROVIDED BY OPERATING ACTIVITIES     102,469       119,174  
                 
Cash flows from investing activities:                
  Purchase of property and equipment     (45,960 )     (30,803 )
  Business and asset acquisitions, net of acquired cash     -       19  
  Purchase of short-term investments     (23,540 )     -  
NET CASH USED IN INVESTING ACTIVITIES     (69,500 )     (30,784 )
                 
Cash flows from financing activities:                
  Proceeds from issuance of long-term debt, net of issuance costs     -       1,358  
  Principal payments on long-term debt     (32,029 )     (6,726 )
  Principal payments on capital leases     (279 )     -  
  Proceeds from issuance of restricted parent company common stock     -       11,850  
  Capital contribution resulting from exercise of parent company stock options     787       -  
  Payment of interest rate cap     (1,248 )     -  
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES     (32,769 )     6,482  
                 
  Effect of change in exchange rates on cash and cash equivalents     3,457       (1,385 )
NET INCREASE IN CASH AND CASH EQUIVALENTS     3,657       93,487  
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD     262,152       123,704  
                 
CASH AND CASH EQUIVALENTS AT END OF PERIOD   $ 265,809     $ 217,191  
   
   
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     Nine Months Ended  
    September 30,     September 30,  
    2012   2011   Change     2012   2011   Change  
                                     
Revenue   $ 218,073   $ 217,850   0.1 %   $ 655,848   $ 645,650   1.6 %
  Total deferred revenue adjustment     -     -   -       -     902   -  
Non-GAAP revenue before total deferred revenue adjustment     218,073     217,850   0.1 %     655,848     646,552   1.4 %
  Total effects of foreign exchange     2,754     -   -       6,834     -   -  
Total organic (non-GAAP) revenue   $ 220,827   $ 217,850   1.4 %   $ 662,682   $ 646,552   2.5 %
                                     
                                     
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     Nine Months Ended  
    September 30,     September 30,  
    2012   2011   Change     2012   2011   Change  
Pricing and Reference Data Revenue   $ 153,189   $ 149,326   2.6 %   $ 457,186   $ 441,230   3.6 %
  Effects of deferred revenue adjustment     -     -   -       -     600   -  
Non-GAAP revenue before effects of deferred revenue adjustment     153,189     149,326   2.6 %     457,186     441,830   3.5 %
  Effects of foreign exchange     899     -   -       2,454     -   -  
Total organic (non-GAAP) revenue   $ 154,088   $ 149,326   3.2 %   $ 459,640   $ 441,830   4.0 %
                                     
   
Interactive Data Trading Solutions Segment  
Organic (Non-GAAP) Revenue  
(Revenue before Effects of Deferred Revenue Adjustment and Foreign Exchange)  
(In thousands)  
   
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2012   2011   Change     2012   2011   Change  
Trading Solutions Revenue                                    
  Real-Time Feeds and Trading Infrastructure Services   $ 27,290   $ 27,689   -1.4 %   $ 82,154   $ 84,087   -2.3 %
  Hosted Web Applications and Workstations     37,594     40,835   -7.9 %     116,508     120,333   -3.2 %
Total Trading Solutions Revenue   $ 64,884   $ 68,524   -5.3 %   $ 198,662   $ 204,420   -2.8 %
  Effects of deferred revenue adjustment     -     -   -       -     302   -  
Non-GAAP revenue before effects of deferred revenue adjustment   $ 64,884   $ 68,524   -5.3 %   $ 198,662   $ 204,722   -3.0 %
  Effects of foreign exchange     1,855     -   -       4,380     -   -  
Total organic (non-GAAP) revenue   $ 66,739   $ 68,524   -2.6 %   $ 203,042   $ 204,722   -0.8 %
   
   
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     Nine Months Ended  
    September 30,     September 30,  
    2012     2011     2012     2011  
Net Income (Loss)   $ 18,042     $ 9,848     $ 9,357     $ (27,405 )
  Interest expense     37,372       38,390       112,364       119,025  
  Other expense (income)     (329 )     (30 )     (604 )     2,708  
  Income tax expense (benefit)     (18,357 )     (17,433 )     (17,038 )     (51,295 )
  Depreciation and amortization     44,812       51,141       133,690       168,048  
EBITDA   $ 81,540     $ 81,916     $ 237,769     $ 211,081  
                                 
Adjustments:                                
  Stock-based compensation     875       952       2,580       2,740  
  Other non-recurring charges2     1,067       2,679       2,227       29,335  
  Other charges3     3,335       1,814       6,401       2,727  
    Total Adjustments     5,277       5,445       11,208       34,802  
                                 
Adjusted EBITDA   $ 86,817     $ 87,361     $ 248,977     $ 245,883  
                                 
Adjusted EBITDA Margin4     39.8 %     40.1 %     38.0 %     38.0 %
                                 
Other Adjustments                                
  Pro forma cost savings5     7,500       7,500       22,500       22,500  
Pro Forma Adjusted EBITDA   $ 94,317     $ 94,861     $ 271,477     $ 268,383  
                                 
Pro Forma Adjusted EBITDA Margin4     43.3 %     43.5 %     41.4 %     41.5 %
                                 
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 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 include management fees, earnout-related expense, non-cash foreign exchange expense, acquisition-related adjustments, professional fees related to the registration of the Company's debt securities, and other costs.  
   
4 Adjusted EBITDA margin and pro forma adjusted EBITDA margin are calculated by dividing each EBITDA measure by non-GAAP revenue (total revenue less deferred revenue adjustment).  
   
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     Trailing Twelve Months Ended  
    December 31,     March 31,     June 30,     September 30,     September 30,  
    2011     2012     2012     2012     2012  
Net Income (Loss)   $ (1,911 )   $ (8,792 )   $ 107     $ 18,042     $ 7,446  
  Interest expense     38,095       37,824       37,168       37,372       150,459  
  Other (income) expense     1,011       (247 )     (28 )     (329 )     407  
  Income tax expense (benefit)     (3,960 )     264       1,055       (18,357 )     (20,998 )
  Depreciation and amortization     46,420       44,201       44,677       44,812       180,110  
EBITDA   $ 79,655     $ 73,250     $ 82,979       81,540     $ 317,424  
                                         
Adjustments:                                        
  Stock-based compensation     1,489       831       874       875       4,069  
  Other non-recurring charges2     557       809       351       1,067       2,784  
  Other charges3     1,756       1,531       1,534       3,335       8,156  
    Total Adjustments     3,802       3,171       2,759       5,277       15,009  
                                         
Adjusted EBITDA   $ 83,457     $ 76,421     $ 85,738     $ 86,817     $ 332,433  
                                         
Adjusted EBITDA Margin4     37.6 %     35.3 %     38.8 %     39.8 %     37.9 %
                                         
Other Adjustments                                        
  Pro forma cost savings5     7,500       7,500       7,500       7,500       30,000  
Pro Forma Adjusted EBITDA   $ 90,957     $ 83,921     $ 93,238     $ 94,317     $ 362,433  
                                         
Pro Forma Adjusted EBITDA Margin4     41.0 %     38.8 %     42.1 %     43.3 %     41.3 %
                                         
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 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 include management fees, earnout-related expense, non-cash foreign exchange expense, acquisition-related adjustments, professional fees related to the registration of the Company's debt securities, and other costs.  
                                         
4 Adjusted EBITDA margin and pro forma adjusted EBITDA margin are calculated by dividing each EBITDA measure by non-GAAP revenue (total revenue less deferred revenue adjustment).  
                                         
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     Nine Months Ended  
    September 30,     September 30,  
    2012   2011   Change     2012   2011   Change  
Adjusted EBITDA   $ 86,817   $ 87,361   -0.6 %   $ 248,977   $ 245,883   1.3 %
  Capital Expenditures     14,070     12,918   8.9 %     45,960     30,803   49.2 %
Free Cash Flow   $ 72,747   $ 74,443   -2.3 %   $ 203,017   $ 215,080   -5.6 %
                                     

Contact Information