Interactive Data Corporation (NYSE: IDC) today reported its financial results for the third quarter ended September 30, 2007.
Third-quarter 2007 revenue increased 11.7% to $175.0 million from $156.7 million in the third quarter of 2006. Net income for the third quarter of 2007 was $39.3 million, or $0.40 per diluted share, a 46.7% increase from $26.8 million, or $0.28 per diluted share, in the same quarter last year.
"We delivered another strong operating performance in the third quarter, plus our results benefited from a significant decrease in our effective quarterly tax rate," stated Stuart Clark, Interactive Data's president and chief executive officer. "Our revenue growth continues to be driven primarily by our two largest institutionally oriented businesses, Pricing and Reference Data, and Real-Time Services, both of which produced very good revenue growth and new sales in the third quarter. Our third-quarter 2007 net income growth was noteworthy for two reasons. First, we generated improved profitability as a result of our top-line growth and, second, our effective quarterly tax rate decreased substantially to 21.7%. By comparison with the effective tax rate for our first-half 2007 results, the reduction in our third-quarter 2007 effective tax rate contributed over $7 million, or approximately $0.07 per diluted share, to our third-quarter 2007 net income."
Clark commented, "Our organic revenue growth in the third quarter of 2007 was 8.0% due in large part to the strong results posted by our Pricing and Reference Data, and Real-Time Services businesses. In particular, Real-Time Services has become our fastest-growing business during 2007, producing its highest organic growth rates since we acquired this business in 2003. Renewal rates at our institutionally oriented businesses remained at approximately 95%. We also continued to bring innovative new services to the marketplace by taking advantage of the collective capabilities, content and expertise resident across our organization."
"Our third-quarter 2007 effective tax rate and revised outlook for our full-year effecur ear effecur full-year effective tax rate reflects favorable changes in German tax rates, the impact of a recently completed R&D tax credit initiative spanning both 2006 and 2007, the release of certain tax reserves associated with the expiration of the statute of limitations in various tax jurisdictions and other discrete items," commented Andrew Hajducky, Interactive Data's executive vice president and chief financial officer. "Our net cash provided by operating activities of $63.4 million in the third quarter of 2007 was outstanding. As a result, our cash position at the end of the third quarter increased by nearly $37 million from the prior quarter even as we returned $27.4 million to stockholders through our regular quarterly dividend and stock repurchase activities."
"We are continuing to see the benefits resulting from collaboration across all key areas of our global organization," Clark concluded. "Looking ahead, we are positioning our Pricing and Reference Data and Real-Time Services businesses to more effectively support the enterprise-wide needs of our clients. We have changed our organizational structure to unify these two institutionally oriented businesses under a single management structure such that we can accelerate innovation, strengthen and expand strategic customer relationships, and respond decisively to emerging market opportunities."
Other Third-quarter and Recent Operating and Financial Highlights Effects of Foreign Exchange
Interactive Data's third-quarter 2007 revenue was positively impacted by $3.8 million due to the effects of foreign exchange. Third-quarter 2007 revenue before the effects of foreign exchange grew by $14.5 million, or 9.3%, over the comparable period in 2006. Total costs and expenses in the third quarter of 2007 were negatively impacted by $3.0 million due to the effects of foreign exchange. Third-quarter 2007 total costs and expenses before the effects of foreign exchange increased by $7.4 million, or 6.4%, over the third quarter of 2006. Institutional Services Segment
Interactive Data Pricing and Reference Data reported third-quarter 2007 revenue of $109.5 million, a 13.3% increase over the prior year's third quarter (or an increase of 11.1% before the effects of foreign exchange). Excluding the $2.1 million contribution from the recently acquired Xcitek market data business, intercompany eliminations resulting from the Xcitek acquisition and the effects of foreign exchange, third-quarter 2007 revenue increased 9.0% over the same period last year. In the third-quarter of 2007, North American revenue, including the contribution of Xcitek, increased 11.2% over the third quarter of 2006. Third-quarter 2007 European revenue increased by 20.1% (or increased by 11.4% before the effects of foreign exchange) from the third quarter of last year. Interactive Data Pricing and Reference Data's Asia-Pacific third-quarter 2007 revenue increased 18.7% (or increased 8.0% before the effects of foreign exchange) compared with the prior year's third quarter. Interactive Data Pricing and Reference Data's growth in the third quarter reflects sustained demand for its broad range of services, particularly in the areas of evaluated pricing and reference data content. During the third quarter, this business introduced the Basket Calculation Service(SM), a new web-based offering that is designed to provide clients with the indicative optimized portfolio value for equity and fixed income exchange traded funds.
Interactive Data Real-Time Services generated third-quarter 2007 revenue of $35.4 million, an increase of 16.1% over the same quarter last year (or an increase of 10.8% before the effects of foreign exchange). The increase reflects the fifth-consecutive quarter of accelerated growth in the real-time datafeed business and continued expansion of the Managed Solutions business in Europe. During the third quarter, this business announced that more than 50 hedge fund customers in the US and Europe subscribe its low latency data service and that it is working with InfoDyne to simplify access to a broad range of global low latency data. Third-quarter highlights for the Interactive Data Managed Solutions business included enhancements to its PrimeTerminal workstation for financial market professionals.
Interactive Data Fixed Income Analytics reported revenue for the third quarter of 2007 of $8.0 million, which was essentially unchanged from last year's third quarter. During the third quarter of 2007, this business completed 5 new BondEdge(R) installations and continued development of its next-generation BondEdge platform. Active Trader Services Segment
eSignal's third-quarter 2007 revenue of $22.1 million increased 3.0% from the same quarter last year (or an increase of 2.3% before the effects of foreign exchange). This increase reflects modest growth in the eSignal direct subscriber base. eSignal ended the third quarter of 2007 with nearly 63,200 direct subscription terminals. Third-quarter 2007 highlights included a number of new product introductions and enhancements to its existing offerings. Nine-Month Results
For the nine months ended September 30, 2007, Interactive Data reported revenue of $507.5 million versus $451.3 million for the comparable period in 2006, an increase of $56.3 million, or 12.5%. Total costs and expenses rose 9.5%, or $32.8 million, to $376.9 million in the first nine months of 2007. Net income for the first nine months of 2007 increased 37.2% to $94.1 million, or $0.97 per diluted share, from $68.6 million, or $0.72 per diluted share, in the comparable period of 2006. The tax rate for the first nine months of 2007 was 31.3% compared with 38.4% in the same period last year and 38.1% for the full year 2006. Cash Position, Stock Buyback Activities, and Quarterly Cash Dividend
As of September 30, 2007, Interactive Data had no outstanding debt and had cash, cash equivalents and marketable securities of $251.8 million. During the third quarter of 2007, Interactive Data spent $15.6 million to repurchase 571,100 shares of common stock at an average purchase price of $27.28 per share as part of its existing October 2006 share buyback program. Entering the fourth quarter of 2007, 911,100 shares remained available for repurchase under the existing October 2006 share buyback program.
During the third quarter of 2007, Interactive Data spent $11.8 million to pay its third-consecutive quarterly cash dividend of $0.125 per share of common stock to stockholders of record on September 6, 2007. New Senior Management Responsibilities and Board Appointment
On September 20, 2007, Interactive Data announced a series of new executive responsibilities that are designed to align the Company's two largest institutionally-oriented businesses under a single management structure from a business and product strategy, sales management and operational perspective (see full announcement for all relevant details).
On September 21, 2007, Interactive Data announced that Rona Fairhead was appointed chairman of Interactive Data's Board of Directors. 2007 Outlook
We anticipate that market conditions for the remainder of 2007 will be similar to those experienced thus far in 2007 and during 2006. We expect that institutional spending on financial market data and related services in 2007 will increase modestly over 2006 levels as customers spend prudently on such services. Based on our results to date, we are updating our outlook for 2007 from prior guidance that was issued in July 2007.
- 2007 revenue growth over 2006 on a percentage basis is expected to be in the range of 11% to 12% versus July 2007 guidance for revenue growth in the 10% to 12% range.
- Our 2007 effective tax rate is now expected to be in the range of 32% to 34% versus July 2007 guidance for an annual effective tax rate in the range of 37% to 38%.
- On a percentage basis, 2007 net income is now expected to grow in the range of 29% to 31%, compared with prior guidance that called for net income growth to be in the range of 20% to 24%.
- Capital expenditures in 2007 are still expected to be in the range of $35 million to $37 million.