Interactive Data Corporation (NYSE: IDC) today reported its financial results for the fourth quarter and full year ended December 31, 2006.
Interactive Data's fourth-quarter 2006 revenue grew 18.5% to $161.1 million from $136.0 million in the fourth quarter of 2005. Net income for the fourth quarter of 2006 was $24.8 million, or $0.26 per diluted share, which includes $1.9 million of after-tax, stock-based compensation expense associated with the adoption of Financial Accounting Standards Board Statement No. 123 (FAS 123R). This compares with net income of $24.6 million, or $0.26 per diluted share, in the fourth quarter of 2005.
"We enjoyed a strong second half of 2006, capped by solid fourth-quarter results," stated Stuart Clark, Interactive Data's president and chief executive officer. "Our 2006 revenue grew 12.8% to $612.4 million primarily due to the contributions from the Quote.com and Managed Solutions businesses that we acquired, the consistent expansion of our FT Interactive Data business and improved second-half performances within our core ComStock and eSignal businesses. Although the impact of the first-year adoption of FAS 123R reduced our net income in 2006, we had another year of outstanding cash generation."
Commenting on the Company's fourth-quarter performance, Clark said, "We made good progress in each of our core businesses during the fourth quarter of 2006. I was particularly pleased with the new sales closed at our FT Interactive Data and ComStock businesses during the fourth quarter, which provides us with momentum moving into 2007. Our institutionally-focused businesses once again produced renewal rates of approximately 95% during the fourth quarter of 2006. In combination, our new sales activities and high retention levels helped us achieve our highest level of quarterly organic revenue growth in 2006 at 7.2%."
"Interactive Data continued to demonstrate strong cash generation characteristics in the fourth quarter of 2006," stated Andrew Hajducky, Interactive Data's executive vice president and chief financial officer. "We ended the year with $195.7 million in cash and ma ma marketable securities with no debt even after spending nearly $139 million on acquisitions, stock buybacks and a special dividend. As announced last week, we will begin paying a regular quarterly dividend of $0.125 per share later this quarter. Our priority going forward is to use our cash to expand our business through acquisition and internal investment while we return value to shareholders on a more consistent basis through our regular quarterly dividend and stock buyback program."
Clark concluded, "We were pleased with the progress we made in 2006 to fortify Interactive Data's position as a trusted leader in financial information. We see attractive opportunities to expand the business in 2007 by assisting our clients in addressing their key front, middle and back-office challenges, and we are directing our resources accordingly."
Other Fourth-Quarter and Recent Operating and Financial Highlights
Global Marketing Initiative:
- In a separate announcement today, Interactive Data launched a new branding initiative, highlighted by the renaming of its three institutionally-focused businesses. FT Interactive Data is now Interactive Data Pricing and Reference Data; ComStock is now Interactive Data Real-Time Services; and CMS BondEdge is now Interactive Data Fixed Income Analytics. The former business names were used in this press release for reporting consistency. See separate press release for more details.
Effects of Foreign Exchange:
- Interactive Data's fourth-quarter 2006 revenue was positively impacted by $2.8 million due to the effects of foreign exchange. Fourth-quarter 2006 revenue before the effects of foreign exchange grew by $22.3 million, or 16.4%, over the comparable period in 2005. Total costs and expenses in the fourth quarter of 2006 were negatively impacted by $2.2 million due to the effects of foreign exchange. Fourth-quarter 2006 total costs and expenses before the effects of foreign exchange increased by $21.4 million, or 21.4%, over the fourth quarter of 2005.
Institutional Services Segment:
- FT Interactive Data reported fourth-quarter 2006 revenue of $98.7 million, a 10.6% increase over the prior year's fourth quarter (or an increase of 8.4% before the effects of foreign exchange). North American revenue for the fourth quarter of 2006 increased 9.3% over the fourth quarter of 2005. Fourth-quarter 2006 European revenue increased by 15.4% (or increased 5.3% before the effects of foreign exchange) from the fourth quarter of last year. During the fourth quarter, this business continued to win new business primarily due to increased demand for its evaluated pricing and reference data services. FT Interactive Data's Asia-Pacific fourth-quarter 2006 revenue increased 12.4% (or increased 8.5% before the effects of foreign exhange) compared with the prior year's fourth quarter.
- ComStock generated fourth-quarter 2006 revenue of $32.6 million, an increase of 54.0% over the same quarter last year (or an increase of 50.7% before the effects of foreign exchange). Interactive Data Managed Solutions contributed $12.6 million and $2.0 million to ComStock's 2006 fourth-quarter revenue and 2005 fourth-quarter revenue, respectively. Excluding the effects of foreign exchange, the contribution of acquisitions and inter-company eliminations resulting from acquisitions, this business reported an underlying revenue increase of 5.5% primarily due to increased new business with institutions and lower levels of cancellations. During the fourth quarter of 2006, this business announced a number of new appointments to further strengthen its global sales organization. In addition, Interactive Data Managed Solutions announced that it began providing financial content to Zecco.com, a premiere online brokerage that offers free equity trading.
- CMS BondEdge reported revenue for the fourth quarter of 2006 of $8.2 million, which was essentially flat with last year's fourth quarter. New sales and increased business with existing customers were offset by the impact of cancellations primarily caused by client consolidation activities. CMS BondEdge's fourth-quarter 2006 performance was highlighted by 6 new client installations, a number of one-time consulting projects for clients, and growing interest in its new fixed income analytic datafeed service.
Active Trader Services Segment:
- eSignal's fourth-quarter 2006 revenue of $21.6 million increased 23.8% from the same quarter last year (or an increase of 23.1% before the effects of foreign exchange). The increase reflects the $3.0 million contribution of Quote.com, which was acquired during the first quarter of 2006, as well as the continued expansion of eSignal's direct subscriber base. Excluding the contribution from Quote.com and the effects of foreign exchange, eSignal's underlying revenue growth in the fourth quarter of 2006 was 5.7%. eSignal ended the fourth quarter of 2006 with over 61,700 direct subscription terminals, which includes approximately 12,100 direct subscription terminals for Quote.com-related services. Excluding the Quote.com direct subscription terminals, eSignal's base of direct subscription terminals grew 8.4% in 2006 from the prior year. eSignal continued the integration of the Quote.com business during the fourth quarter of 2006, and recently launched a mobile version of the Quote.com website as well as a UK-specific area of the site.
- Approximately $3.6 million, or 27.1%, of the $13.3 million in fourth-quarter 2006 capital expenditures were associated with facility relocation activities.
Full-Year 2006 Results:
- For the full year ended December 31, 2006, Interactive Data reported revenue of $612.4 million versus $542.9 million for 2005, an increase of $69.5 million, or 12.8%. Total costs and expenses rose 17.3%, or $69.1 million, to $467.8 million in 2006. Pre-tax stock-based compensation expense associated with the adoption of FAS 123R during 2006 was $12.9 million. Income from operations for 2006 was $144.6 million, compared with $144.1 million for the same period one year ago. The tax rate for 2006 was 38.1% compared with 36.9% for 2005. Net income for 2006 was $93.4 million, or $0.98 per diluted share, compared with $93.9 million, or $0.98 per diluted share, in 2005.
Cash Position, Stock Buyback Activities, Special Dividend and Regular Dividend:
- As of December 31, 2006, Interactive Data had no outstanding debt and had cash, cash equivalents and marketable securities of $195.7 million. On December 5, 2006, Interactive Data paid a special dividend of $0.80 per share to stockholders of record on November 9, 2006, which totaled $74.6 million. During the fourth quarter of 2006, Interactive Data spent $1.2 million to repurchase 52,000 shares of common stock at an average purchase price of $23.95 per share as part of its October 2006 two million share buyback program. Entering the first quarter of 2007, there were 1,948,000 shares available for repurchase under the existing October 2006 share buyback program.
- On February 16, 2007, Interactive Data announced that its Board of Directors authorized the initiation of a quarterly cash dividend. The Interactive Data Board of Directors declared a quarterly dividend of $0.125 per share of common stock payable on March 30, 2007 to stockholders of record on March 1, 2007. The actual declaration of future quarterly dividends, and the establishment of record and payment dates, is subject to final determination of the Board of Directors of Interactive Data.
Board of Directors:
- On February 20, 2007, Interactive Data announced that Rona Fairhead, chief executive officer of the Financial Times Group, was appointed to the Company's Board of Directors, succeeding John Fallon. In mid-December 2006, as previously announced, Myra R. Drucker was appointed to Interactive Data's Board of Directors.
- We anticipate that market conditions in 2007 will be similar to those experienced in 2006. We believe that spending on market data and related services by customers in the financial services industry will continue to be influenced by their focus on cost containment initiatives. Our outlook for 2007 is as follows:
- 2007 revenue growth is expected to be in the range of 6% to 9%
- The 2007 effective tax rate is expected to be in the range of 38.5% to 39.5%
- 2007 net income is expected to grow in the high single-digit to low double-digit range
- Capital expenditures in 2007 are expected to be in the range of $35 million to $37 million
Separately, Interactive Data Corporation (NYSE: IDC), a leading provider of financial market data, analytics and related offerings, today announced a branding initiative that includes the renaming of its three institutionally oriented businesses.
The new names for the businesses are as follows:FT Interactive Data is now Interactive Data Pricing and Reference DataComStock is now Interactive Data Real-Time ServicesCMS BondEdge is now Interactive Data Fixed Income Analytics
Due to a number of factors, including mounting regulatory requirements, the proliferation of electronic and algorithmic trading, and the massive increases in the volume and complexity of financial instruments, many global financial services companies want to work with organisations that can deliver high quality financial data, analytics and value-added services consistently across the enterprise.
By unifying its institutionally oriented businesses under the Interactive Data brand, the organisation more effectively emphasises the breadth of its comprehensive range of products and services that can help customers further automate key workflows and improve efficiency across their front, middle and back offices. These offerings, which include pricing and reference data, evaluated services, real-time data, desktop products, customised financial information portals and terminals, and fixed income analytics, are complemented by the expertise that Interactive Data, through its businesses, has developed while helping thousands of financial organisations address complex challenges.
The new branding initiative is supported by a number of programmes Interactive Data has implemented in recent years. These include the investment of considerable resources to create a world-class content and technology infrastructure, the centralisation of major account management and support for key global customers, increased collaboration amongst its various businesses aimed at accelerating time to market and innovation, and enhanced cross-selling across its sales organisations.
"Through a series of strategic acquisitions, solid organic expansion, and innovative product development, Interactive Data moves forward as a trusted industry leader with over $600 million in annual revenue and a comprehensive set of financial data, sophisticated analytics and value-added services that can meet a broad range of customer needs," said Stuart Clark, president and chief executive officer of Interactive Data Corporation. "We believe that this new branding initiative will help us to build on the strengths of our company today, support our next phases of growth and expansion, and provide us with a framework to further align our organisation from an operational, sales and marketing, and product development perspective."
"Interactive Data is a powerful, respected brand in the financial services industry, representing high quality offerings, dedicated customer service and a broad range of expertise," said Mary Ivaliotis, chief marketing officer of Interactive Data Corporation. "We believe that the new branding initiative will help us further strengthen Interactive Data's presence in the marketplace by enabling us to more effectively communicate the extent of our financial data, sophisticated analytics and value-added services, and how they can empower customers to meet ambitious business and financial goals across the front, middle and back offices."
eSignal, Interactive Data's desktop solutions division, is a leading provider of global, real-time market data and decision support tools to more than 60,000 active traders and investment community professional subscribers worldwide. This division will retain its name, which has strong brand equity within the active trader market. Interactive Data Managed Solutions, which will also keep its name, continues to be operated as part of Interactive Data Real-Time Services.
The management team of Interactive Data and its businesses will remain unchanged.
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