Interactive Data Corporation (NYSE: IDC) today reported its financial results for the first quarter ended March 31, 2007.
Interactive Data's first-quarter 2007 revenue grew 13.3% to $162.5 million from $143.4 million in the first quarter of 2006. Net income for the first quarter of 2007 was $25.6 million, or $0.27 per diluted share, a 29.2% increase over net income of $19.8 million, or $0.21 per diluted share, in the first quarter of 2006.
"Our first-quarter 2007 results represent a good start to the year," stated Stuart Clark, Interactive Data's president and chief executive officer. "Our revenue growth in the first quarter of 2007 primarily reflects expansion within our Pricing and Reference Data, Real-Time Services and eSignal businesses. Our first-quarter 2007 net income increased mainly as a result of our revenue growth and prudent spending. Other factors contributing to the net income increase in the first quarter were higher interest income and a lower effective tax rate. In addition, our revenue and profit growth in the first quarter was impacted by the deferral of $1.6 million in Managed Solutions revenue during the first quarter of 2006 that we recognized in subsequent quarters last year."
Clark continued, "We were pleased that our overall organic revenue growth for the first quarter of 2007 was 8.9%, which primarily reflects strong performances at both our Pricing and Reference Data, and Real-Time Services businesses. In our Real-Time Services business, we are seeing that the investments that we have made to strengthen our offerings and enhance the sales organization are translating into improved results. Renewal rates at our institutionally oriented businesses remained at approximately 95%."
Andrew Hajducky, Interactive Data's executive vice president and chief financial officer, commented, "Interactive Data generated $38.1 million in net cash provided by operating activities in the first quarter of 2007, a 30.8% increase over the same period in 2006 primarily as a result of our strong quarterly operating performance. After spending $5.9 million to repurchase n hase n to repurchase our common stock and paying $11.7 million to stockholders in connection with our first-ever quarterly dividend, we ended the first quarter of 2007 with cash, cash equivalents and short-term marketable securities of $220.3 million and no outstanding debt. We move forward with the requisite financial strength to implement the key elements of our growth strategy."
Clark concluded, "Customers are responding favorably to the sales, marketing and product development activities now underway across our organization. We believe that acquiring the assets comprising Xcitek's market data business, which we announced on April 4, will bring valuable new corporate actions-related services and domain expertise to our Pricing and Reference Data business. In addition to pursuing strategic acquisitions, we plan to continue enhancing our capabilities and offerings through internal investment aligned with key industry trends impacting customers such as the proliferation of highly complex securities, regulation and the desire to continue automating key workflow processes. A number of the development programs we have planned will be phased in throughout the remainder of this year and into 2008. We remain enthusiastic about Interactive Data's ability to assist its customers in addressing a number of the time-sensitive and mission-critical financial information challenges they now face." Other First-Quarter 2007 and Recent Financial and Operating Highlights
Effects of Foreign Exchange:
Interactive Data's first-quarter 2007 revenue was positively impacted by $4.4 million due to the effects of foreign exchange. First-quarter 2007 revenue before the effects of foreign exchange grew by $14.7 million, or 10.2%, over the comparable period in 2006. Total costs and expenses in the first quarter of 2007 were negatively impacted by $3.5 million due to the effects of foreign exchange. First-quarter 2007 total costs and expenses before the effects of foreign exchange increased by $8.7 million, or 7.8%, over the first quarter of 2006.
Institutional Services Segment:
Interactive Data Pricing and Reference Data reported first-quarter 2007 revenue of $100.0 million, an 11.4% increase over the prior year's first quarter (or an increase of 8.7% before the effects of foreign exchange). North American revenue for the first quarter of 2007 increased 8.8% over the first quarter of 2006. First-quarter 2007 European revenue increased by 19.4% (or increased by 7.2% before the effects of foreign exchange) from the first quarter of last year. First-quarter 2007 revenue growth in both North America and Europe was driven primarily by higher usage-related revenue and new sales to institutional customers for evaluated pricing and reference data services during the second half of 2006. Interactive Data Pricing and Reference Data's Asia-Pacific first-quarter 2007 revenue increased 26.3% (or increased 19.8% before the effects of foreign exchange) compared with the prior year's first quarter.
Interactive Data Real-Time Services generated first-quarter 2007 revenue of $32.4 million, an increase of 21.5% over the same quarter last year (or an increase of 14.7% before the effects of foreign exchange). The increase reflects continued growth in the Managed Solutions and real-time datafeed businesses, combined with the previously mentioned first-quarter 2006 deferral of $1.6 million in Managed Solutions revenue. In March 2007, our Real-Time Services business announced DirectPlus, a new ultra-low latency direct exchange data service that is planned for release later this quarter. In April 2007, Interactive Data Managed Solutions, which is managed as part of the Real-Time Services business, announced that it has added 20 new customers in North America during the past year.
Interactive Data Fixed Income Analytics reported revenue for the first quarter of 2007 of $8.1 million, which was essentially flat with last year's first quarter. New sales and increased business with existing customers were offset by the impact of cancellations primarily caused by client consolidation activities. Highlights for this business in the first quarter of 2007 included eight new BondEdge installations and the addition of two new customers for its new fixed income analytic datafeed service, bringing the total number of customers for this service to 15.
Active Trader Services Segment:
eSignal's first-quarter 2007 revenue of $22.0 million increased 16.4% from the same quarter last year (or an increase of 15.6% before the effects of foreign exchange). Quote.com, which was acquired in March 2006, contributed $3.2 million and $0.8 million in revenue to the first quarter of 2007 and 2006, respectively. Excluding the contribution from Quote.com and the effects of foreign exchange, eSignal's underlying revenue growth in the first quarter of 2007 was 3.2%. eSignal ended the first quarter of 2007 with over 62,250 direct subscription terminals, which includes approximately 11,800 direct subscription terminals for Quote.com-related services. eSignal continued to make progress with the integration of the Quote.com operation during the first quarter of 2007. In recent months, eSignal has received recognition from three leading financial industry trade publications and organizations: Technical Analysis of Stocks & Commodities, Trade2Win and Shares magazine.
Cash Position, Stock Buyback Activities, and Quarterly Cash Dividend:
As of March 31, 2007, Interactive Data had no outstanding debt and had cash, cash equivalents and marketable securities of $220.3 million. During the first quarter of 2007, Interactive Data spent $5.9 million to repurchase 244,000 shares of common stock at an average purchase price of $24.02 per share as part of its existing October 2006 share buyback program. Entering the second quarter of 2007, 1,704,000 shares remained available for repurchase under the existing October 2006 share buyback program.
During the first quarter of 2007, Interactive Data spent $11.7 million to pay its first-ever quarterly cash dividend of $0.125 per share of common stock to stockholders of record on March 1, 2007.
Acquisition of Xcitek Market Data
On April 4, 2007, Interactive Data announced that it signed an agreement to acquire the assets comprising the market data division of Xcitek LLC, as well as the market data assets of its affiliate Xcitax LLC, for $25.3 million in cash. This acquisition represents an important element in Interactive Data's strategy to expand its reference data services and support enterprise-wide financial applications. We believe that the addition of Xcitek Market Data's corporate actions data covering North American securities will augment the corporate actions content that Interactive Data Pricing and Reference Data collects, processes and delivers to thousands of financial institutions and redistribution partners around the world. The transaction is expected to be completed during the second quarter of 2007, after which Xcitek's market data business will be integrated into Interactive Data Pricing and Reference Data.
We anticipate that market conditions in 2007 will be similar to those experienced in 2006. We expect that, although institutional spending on financial market data and related services in 2007 may again increase modestly over 2006 levels, customers will continue to remain focused on controlling spending on such services. Based on our results to date, our outlook for 2007, which excludes any impact associated with the planned acquisition of the assets comprising Xcitek's market data business, is unchanged from the original guidance we issued in February 2007:
- 2007 revenue growth is expected to be in the range of 6% to 9%
- Our 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