SOURCE: Interactive Data

Interactive Data

October 23, 2014 16:05 ET

Interactive Data Reports Third Quarter 2014 Results

NEW YORK, NY--(Marketwired - Oct 23, 2014) - Interactive Data Corporation today reported its financial results for the third quarter ended September 30, 2014. Interactive Data's third quarter 2014 revenue was $233.5 million, a 4.1% increase from $224.3 million in the third quarter of 2013. Excluding the impact of changes in foreign exchange rates, Interactive Data's organic (non-GAAP) revenue for the third quarter of 2014 grew by 2.8% from the same quarter last year. 

Interactive Data's third quarter 2014 income from operations was $58.1 million, compared with $41.2 million in the third 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 third quarter of 2014 was $93.5 million, compared with $88.5 million in the same period one year ago. 

"During the third quarter we continued to produce revenue growth even as market conditions remained challenging," stated Stephen Daffron, Interactive Data's president and CEO. "Our organic revenue growth in the quarter was driven by continued growth in our Pricing and Reference Data segment, as well as expansion within our 7ticks trading infrastructure managed services area. We generated adjusted EBITDA growth of 5.6% in the quarter as we continue to take steps to prudently manage our cost structure." 

Segment Reporting and Related Operating Highlights

Pricing and Reference Data Segment:

  • Interactive Data's Pricing and Reference Data segment reported third quarter 2014 revenue of $166.9 million, a 4.8% increase over $159.2 million in the third quarter of 2013. Excluding the impact of changes in foreign exchange rates, third quarter 2014 organic (non-GAAP) revenue for this segment increased by 3.8% from the same period last year. The segment's performance reflects continued growth in the Company's evaluated pricing and reference data services in North America. In August, the Company launched its Continuous Fixed Income Evaluated Pricing Service, which provides clients with greater pre-trade transparency support and price discovery capabilities on a continuous basis throughout the trading day. We believe this is a unique capability in the industry.

Trading Solutions Segment:

  • Interactive Data's Trading Solutions segment generated third quarter 2014 revenue of $66.6 million, an increase of 2.2% over $65.2 million in the same period one year ago. Excluding the impact of changes in foreign exchange rates, third quarter 2014 organic (non-GAAP) revenue for this segment increased 0.5% from the same period last year as growth in the 7ticks trading infrastructure managed services product area was mostly offset by declines in our other Trading Solutions product areas. We are continuing our investment in the coverage, quality, features, and functionality of our real-time Consolidated Feed offering. 

Other Third Quarter 2014 Financial and Operating Highlights

Effects of Foreign Exchange:

  • The net effect of changes in foreign exchange rates increased third quarter 2014 income from operations by $0.7 million.

Refinancing Activity; Adjusted EBITDA:

  • As previously announced, in early May Interactive Data refinanced its debt and entered into a new $2.1 billion senior secured credit facility, consisting of a five-year $160 million Revolver (currently unfunded) and a seven year $1.9 billion Term Loan. Additionally, the Company completed the offering of $350 million in aggregate principal amount 5.875% Senior Notes due 2019.

    As previously disclosed, the new credit agreement contains modified definitions that impact both Adjusted EBITDA and Covenant EBITDA. In order to provide consistency, we have reported Adjusted EBITDA for all periods presented, calculated under the new definitions within the new senior secured credit facility. The Company expects to be in a position to report on Covenant EBITDA when fourth quarter and full-year results are made available.

Balance Sheet Highlights:

  • As of September 30, 2014, Interactive Data had cash, cash equivalents and short-term investments of $304.6 million, compared with $254.8 million last quarter, $313.6 million at the same time last year and $360.2 million at the end of 2013. The Company's cash position as of September 30, 2014 reflects the 2014 use of approximately $94 million in cash, which together with the net proceeds of the new debt described above, was used to refinance the Company's existing debt and fund a dividend to Igloo Holdings Corporation, our parent entity, who in turn paid a dividend to its equity holders. The Company's total debt outstanding as of September 30, 2014 was approximately $2.25 billion compared to approximately $2.0 billion as of the same time last year. 

Results for the Nine Months Ended September 30, 2014

  • For the nine months ended September 30, 2014, Interactive Data reported revenue of $699.9 million, an increase of $27.0 million, or 4.0%, from $672.9 million in the same period last year. Excluding the effects of foreign exchange, organic revenue growth was 2.7% during the first nine months of 2014. 

  • For the nine months ended September 30, 2014, Interactive Data reported income from operations of $126.9 million, compared with $134.2 million in the same period one year ago. For the first nine months of 2014, 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 $264.1 million, compared with $262.1 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 2014 results on Friday, October 24, 2014 at 8:30 a.m. ET. The dial-in number for the conference call is (785) 424-1827 and the related access code is IDCQ314. For those who cannot listen to this broadcast, a replay of the call will be available from October 24 at 12:00 p.m. until Friday, October 31, 2014 at 12:00 p.m., and it can be accessed by dialing (402) 220-2156 or (800) 753-5207.

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, 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, other income, income taxes, depreciation and amortization (EBITDA) and adjusted EBITDA. Adjusted EBITDA is defined as earnings before interest, other income, income taxes, depreciation and amortization, stock-based compensation expense, and other non-cash, non-operational or non-recurring items, in each case as applicable for the underlying periods. Management considers adjusted EBITDA to be an important indicator 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 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.

  • 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.

  • 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 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     Nine Months Ended  
    September 30,     September 30,  
    2014     2013     2014     2013  
REVENUE   $ 233,451     $ 224,330     $ 699,930     $ 672,944  
                                 
COSTS AND EXPENSES:                                
    Cost of services     78,084       73,559       243,730       220,352  
    Selling, general and administrative     60,171       71,752       218,599       197,753  
    Depreciation     11,630       10,015       33,498       31,854  
    Amortization     25,476       27,844       77,197       88,820  
  Total costs and expenses     175,361       183,170       573,024       538,779  
                                 
INCOME FROM OPERATIONS     58,090       41,160       126,906       134,165  
                                 
    Interest expense, net     (30,118 )     (34,198 )     (96,171 )     (103,617 )
    Other income, net     18       -       672       347  
    Loss on extinguishment of debt     -       -       (82,060 )     (10,213 )
                                 
INCOME (LOSS) BEFORE INCOME TAXES     27,990       6,962       (50,653 )     20,682  
                                 
    Income tax expense (benefit)     6,289       (7,170 )     (33,695 )     (7,617 )
                                 
NET INCOME (LOSS)   $ 21,701     $ 14,132     $ (16,958 )   $ 28,299  
                                 
 
INTERACTIVE DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(In thousands)
             
    September 30,     December 31,  
    2014     2013  
ASSETS   (Unaudited)        
Assets:                
Cash and cash equivalents   $ 304,607     $ 356,733  
Short-term investments     -       3,445  
Accounts receivable, net     147,817       133,997  
Prepaid expenses and other current assets     26,413       25,733  
Income tax receivable     -       6,804  
Deferred tax assets     4,433       10,711  
                 
Total current assets     483,270       537,423  
                 
Property and equipment, net     210,240       185,552  
Goodwill     1,624,394       1,637,202  
Intangible assets, net     1,479,927       1,569,903  
Deferred financing costs, net     26,544       32,737  
Other assets     6,359       5,541  
                 
Total Assets   $ 3,830,734     $ 3,968,358  
                 
LIABILITIES AND EQUITY                
                 
Liabilities:                
Accounts payable, trade   $ 23,201     $ 20,282  
Accrued liabilities     88,038       105,842  
Borrowings, current     19,000       25,356  
Interest payable     8,914       30,233  
Income taxes payable     4,996       3,057  
Deferred revenue     28,965       19,639  
                 
Total current liabilities     173,114       204,409  
                 
Income taxes payable     3,367       13,566  
Deferred tax liabilities     531,406       573,780  
Other liabilities     57,393       57,547  
Borrowings, net of current portion and original issue discount     2,198,286       1,940,150  
                 
Total Liabilities     2,963,566       2,789,452  
                 
Equity:                
Common stock     -       -  
Additional paid-in-capital     969,344       1,237,766  
Accumulated loss     (106,014 )     (89,056 )
Accumulated other comprehensive income     3,838       30,196  
                 
Total Equity     867,168       1,178,906  
                 
Total Liabilities and Equity   $ 3,830,734     $ 3,968,358  
                 
 
INTERACTIVE DATA CORPORATION AND SUBSIDIARIES 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 
Unaudited 
(In thousands) 
   
    Nine Months Ended
September 30,
 
    2014     2013  
                 
Cash flows from operating activities:                
Net (loss) income   $ (16,958 )   $ 28,299  
Adjustments to reconcile net (loss) income to net cash provided by operating activities:                
  Depreciation and amortization     110,695       120,674  
  Amortization of deferred financing costs and accretion of debt discounts     9,436       12,101  
  Deferred income taxes     (33,136 )     (12,188 )
  Non-cash stock-based compensation     9,148       2,793  
  Non-cash interest expense     1,130       1,130  
  Provision for doubtful accounts and sales credits     4,821       1,428  
  Asset abandonment     3,275       -  
  Loss on dispositions of fixed assets     30       11  
  Loss on extinguishment of debt     82,060       10,213  
  Portion of insurance settlement related to property and equipment     -       (2,485 )
  Changes in operating assets and liabilities, net     (43,491 )     (18,411 )
NET CASH PROVIDED BY OPERATING ACTIVITIES     127,010       143,565  
                 
Cash flows from investing activities:                
  Purchase of property and equipment     (64,654 )     (54,056 )
  Proceeds of insurance settlement related to property and equipment     -       2,485  
  Purchase of short-term investments     -       (3,335 )
  Proceeds from maturities and sales of short-term investments     3,410       20,112  
NET CASH USED IN INVESTING ACTIVITIES     (61,244 )     (34,794 )
                 
Cash flows from financing activities:                
  Principal payments on long-term debt     (1,999,963 )     (6,525 )
  Proceeds from issuance of long-term debt, net of issuance costs     2,166,442       -  
  Payment of long-term debt issuance costs, net of proceeds     -       (1,009 )
  Principal payments on capital leases     (382 )     (297 )
  Payment of interest rate cap     (1,247 )     (1,247 )
  Capital contribution resulting from exercise of parent company stock options     1,963       -  
  Capital contribution from parent company     9,715       -  
  Return of capital to parent company     (272,895 )     -  
  Dividend to parent company     (14,438 )     (14,277 )
  Capital reduction resulting from cash distribution to option holders     (2,928 )     (650 )
NET CASH USED IN FINANCING ACTIVITIES     (113,733 )     (24,005 )
                 
  Effect of change in exchange rates on cash and cash equivalents     (4,159 )     (1,811 )
                 
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS     (52,126 )     82,955  
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD     356,733       224,597  
                 
CASH AND CASH EQUIVALENTS AT END OF PERIOD   $ 304,607     $ 307,552  
                 
 
RECONCILIATION OF NON-GAAP MEASURES
 
Total Organic (Non-GAAP) Revenue
(Revenue before Effects of Foreign Exchange)
(In thousands)
   
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2014     2013   Change     2014     2013   Change  
                                         
Total revenue   $ 233,451     $ 224,330   4.1 %   $ 699,930     $ 672,944   4.0 %
  Total effects of foreign exchange     (2,798 )     -   -       (9,010 )     -   -  
Total organic (non-GAAP) revenue   $ 230,653     $ 224,330   2.8 %   $ 690,920     $ 672,944   2.7 %
                                         
 
Interactive Data Pricing and Reference Data Segment
Organic (Non-GAAP) Revenue
(Revenue before Effects of Foreign Exchange)
(In thousands)
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2014     2013   Change     2014     2013   Change  
                                         
Pricing and Reference Data revenue   $ 166,862     $ 159,158   4.8 %   $ 495,635     $ 476,737   4.0 %
  Effects of foreign exchange     (1,722 )     -   -       (5,008 )     -   -  
Total organic (non-GAAP) revenue   $ 165,140     $ 159,158   3.8 %   $ 490,627     $ 476,737   2.9 %
                                         
 
Interactive Data Trading Solutions Segment
Organic (Non-GAAP) Revenue
(Revenue before Effects of Foreign Exchange)
(In thousands)
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2014     2013   Change     2014     2013   Change  
Trading Solutions revenue                                
  Real-Time Feeds and Trading Infrastructure Services   $ 30,519     $ 27,456   11.2 %   $ 92,598     $ 82,092   12.8 %
  Hosted Web Applications and Workstations     36,070       37,716   -4.4 %     111,697       114,115   -2.1 %
Total Trading Solutions revenue   $ 66,589     $ 65,172   2.2 %   $ 204,295     $ 196,207   4.1 %
  Effects of foreign exchange     (1,076 )     -   -       (4,002 )     -   -  
Total organic (non-GAAP) revenue   $ 65,513     $ 65,172   0.5 %   $ 200,293     $ 196,207   2.1 %
                                         
 
RECONCILIATION OF NON-GAAP MEASURES (CONTINUED)
 
Non-GAAP Adjusted EBITDA 1
(In thousands, except margin data)
   
 
 
 
 
 
 

Three Months Ended
September 30,
 
 
 
 
 
 

Nine Months Ended
September 30,
 
 
 
 
 
 
Trailing Twelve
Months Ended
September 30,
 
 
 
    2014     2013     2014     2013     2014  
Net income (loss)   $ 21,701     $ 14,132     $ (16,958 )   $ 28,299     $ (11,751 )
  Interest expense, net     30,118       34,198       96,171       103,617       130,182  
  Other income, net     (18 )     -       (672 )     (347 )     (672 )
  Income tax expense (benefit)     6,289       (7,170 )     (33,695 )     (7,617 )     (31,090 )
  Depreciation and amortization     37,106       37,859       110,695       120,674       149,434  
EBITDA   $ 95,196     $ 79,019     $ 155,541     $ 244,626     $ 236,103  
                                         
Adjustments:                                        
  Non-cash stock-based compensation     681       1,067       9,148       2,793       10,301  
  Other non-recurring charges2     1,716       448       92,759       13,021       93,408  
  Other (income) charges 3     (4,095 )     8,005       6,685       1,673       13,758  
    Total Adjustments     (1,698 )     9,520       108,592       17,487       117,467  
                                         
Adjusted EBITDA   $ 93,498     $ 88,539     $ 264,133     $ 262,113     $ 353,570  
                                         
Adjusted EBITDA Margin4     40.1 %     39.5 %     37.7 %     39.0 %     37.9 %
                                         
1 Our presentation of Adjusted EBITDA has been determined by reference to certain defined terms in our new credit agreement entered into in May 2014 (the "May 2014 Credit Agreement"), which terms differ from similar defined terms used in our prior credit agreement. In particular, the adjustments made to derive Adjusted EBITDA were determined by reference to the new definitions. Consequently, Adjusted EBITDA for the three and nine months ended September 30, 2013 differs from previously reported amounts as a result of the changes to the related credit agreement definitions. Adjusted EBITDA reflects adjustments permitted under the May 2014 Credit Agreement and excludes items that are either not part of our ongoing core operations, do not require a cash outlay or are not otherwise expected to recur in the ordinary course. 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 loss on extinguishment of debt ($82.1 million in the nine months ended September 30, 2014 and $10.2 million in the nine months ended September 30, 2013), facility consolidation costs, retention expenses and certain other non-recurring charges that are permitted as adjustments under the terms of the May 2014 Credit Agreement.  
 
3 Other (income) charges, net, include, as applicable, severance, management fees, non-cash foreign currency gain/loss, acquisition-related adjustments, certain professional fees and certain other adjustments permitted under the terms of the May 2014 Credit Agreement. 
 
4 Adjusted EBITDA margin is calculated by dividing adjusted EBITDA by total revenue.  
 
 
Non-GAAP Free Cash Flow
(In thousands)
   
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2014   2013   Change     2014   2013   Change  
Adjusted EBITDA   $ 93,498   $ 88,539   5.6 %   $ 264,133   $ 262,113   0.8 %
  Capital Expenditures     20,857     20,175   3.4 %     64,654     54,056   19.6 %
Free Cash Flow   $ 72,641   $ 68,364   6.3 %   $ 199,479   $ 208,057   -4.1 %
                                     
                                     

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