IDC reports third quarter results and improves 2004 outlook
22 October 2004 | 950 views | 0
Source: Interactive data Corporation
Interactive Data Corporation (NYSE: IDC) today reported its financial results for the third quarter ended September 30, 2004. Third-quarter 2004 revenue of $122.9 million grew 10.4% over the comparable period in 2003. Net income for the third quarter of 2004 was $21.8 million, or $0.23 per diluted share, compared with $18.0 million, or $0.19 per diluted share, in the same quarter last year.
"The third quarter of 2004 was exceptionally strong for Interactive Data," stated Stuart Clark, president and chief executive officer. "Our top-line growth reflects the contributions of acquisitions made during the past year, combined with a strong performance in North America, particularly at FT Interactive Data and eSignal. Excluding the contributions of the businesses we acquired or closed during the past 12 months, and the effects of foreign exchange, we achieved organic revenue growth of 4.8%. We generated record quarterly profits due to a combination of higher revenue, the net benefit associated with renegotiated supplier contracts, and a lower effective annual tax rate. In September, we accomplished an important strategic objective by acquiring the assets of FutureSource, a leader in real-time futures, commodities and foreign exchange data. This acquisition complements eSignal's service offerings, customer base and geographic reach."
Clark commented, "The overall market environment was stable during the third quarter as customers balanced their spending with cost control initiatives. It is rewarding to see that our services continue to play an important role in the operations of both new and long-term institutional clients. Just as important, our clients continue to recognize the value of our offerings. During the third quarter, we generated strong institutional renewal rates at or above 95% worldwide, experienced sequentially lower levels of contract cancellations and renegotiations, and gained sales traction with new and existing customers across the organization."
"During the quarter, we focused on developing new services and delivering enhanced offerings," said Clark. "At the same time, we also invested in our infrastructure through initiatives such as our data center consolidation project, which remains on schedule. In addition, we continue to address the opportunities and challenges associated with ongoing changes in the regulatory environment."
Other Third Quarter Operating and Financial Highlights
· Before the effects of foreign exchange, third-quarter 2004 revenue grew by $8.6 million, or 7.7%, over the comparable period in 2003. Before the effects of foreign exchange, third-quarter 2004 total costs and expenses increased by $4.9 million, or 5.9%, from the third quarter of last year. The net effect of foreign exchange for the third quarter of 2004 was $0.8 million, reflecting a $2.9 million increase in revenue offset by a $2.1 million increase in total costs and expenses.
· FT Interactive Data generated third-quarter revenue of approximately $82.3 million, an 8.8% increase over the prior year's third quarter. North American revenue for the third quarter of 2004 grew 10.5% over last year's same quarter, driven by both new sales and the expansion of business within current key accounts. The number of Fair Value Information Service customers increased to 89 in the third quarter of 2004, up from 67 in the second quarter of 2004, and new sales activity for this service remains robust. Third-quarter 2004 European revenue increased by 4.1% (or a decline of 2.5% before the effect of foreign exchange and excluding the Index Services business that was closed at the end of 2003) from the same quarter last year. Asia-Pacific third-quarter 2004 revenue was roughly flat in absolute dollars compared with the prior year's third quarter.
· ComStock generated third-quarter 2004 revenue of $17.8 million, an increase of 12.1% over the same quarter last year (or 7.6% before the effects of foreign exchange). This growth is due to the acquisition of the HyperFeed Technologies customer base in November 2003. Revenue from HyperFeed customers represented nearly 14% of ComStock's third-quarter 2004 revenue. To further increase the appeal of its offerings with prospective institutional clients, ComStock continued development work and testing on key middleware interfaces, with availability of these interfaces anticipated later this year.
· CMS BondEdge revenue for the third quarter of 2004 increased 5.0% over last year's third quarter to $8.0 million. Third-quarter highlights included 13 new client installations, and ongoing development activity to add new features and functionality for BondEdge in both the U.S. and international markets.
· eSignal's third-quarter 2004 revenue grew 27.1% to $13.9 million over 2003's third quarter. FutureSource, whose assets were acquired by the Company in September 2004, represented approximately 13% of eSignal's third-quarter 2004 revenue. eSignal ended the third quarter with more than 42,000 direct subscription terminals, which includes approximately 6,500 terminals as a result of the FutureSource asset acquisition.
· As expected, other services revenue for the third quarter of 2004 decreased 28.8% from the same quarter last year to $0.9 million primarily as a result of the phase out of broadcast services in April 2004.
· Total third quarter 2004 costs and expenses increased by $7.0 million, or 8.5%, to $89.3 million from $82.3 million in the third quarter of 2003 primarily due to total costs and expenses of $2.8 million associated with the businesses acquired or closed during the past 12 months, the effects of foreign exchange totaling $2.1 million, and increased spending of $1.6 million associated with the data center consolidation initiative.
Excluding such factors, total costs and expenses in the third quarter of 2004 were roughly flat with the same period last year as modest spending increases were offset primarily by a $1.8 million net benefit resulting from renegotiated supplier contracts. Contributing to the modest spending increases were continued investments in the people, processes and programs associated with regulatory compliance, including compliance with Sarbanes-Oxley rules and regulations.
Nine Month Results
For the nine months ended September 30, 2004, Interactive Data reported revenue of $359.4 million versus $322.3 million for the comparable period in 2003, an increase of 11.5%. Total costs and expenses for the first nine months of 2004 rose 13.0%, or $30.7 million, to $266.1 million from the comparable period in 2003. Income from operations increased 7.4% from $86.9 million in the first nine months of 2003 to $93.3 million for the comparable period in 2004. For the first nine months of 2004, net income increased 9.7% to $59.2 million, or $0.62 per diluted share, from $54.0 million, or $0.57 per diluted share, for the comparable period in 2003.
As of September 30, 2004, Interactive Data had no outstanding debt and had cash and cash equivalents of $175.1 million, which reflects the use of approximately $18.0 million in cash to acquire the assets of FutureSource and approximately $14.1 million for share repurchases during the third quarter of 2004. As previously announced, Interactive Data completed its August 2002 one million share buyback program during the third quarter of 2004. As also announced, the Company's Board of Directors authorized a new one million share buyback program, although shares have not yet been repurchased under the new program.
We anticipate similar business conditions in the fourth quarter to those that we experienced in the third quarter. We believe customers in the financial services sector will continue to be focused on cost containment initiatives. Including the contribution from FutureSource, the assets of which were acquired in September 2004, we currently anticipate low double-digit revenue growth in 2004. We expect to deliver net income growth in 2004 ranging from high single-digit net income growth to low double-digit net income growth. The effective tax rate for 2004 is expected to be in the range of 37.5%-38%. Capital expenditures for 2004 are now expected to be in the range of $23.0-$25.0 million with the increase from prior guidance primarily due to the anticipated capital needs of FutureSource.
We expect to provide detailed guidance for 2005 in conjunction with the announcement of our fourth-quarter and full-year 2004 results. We anticipate announcing our fourth-quarter and full-year 2004 results in mid/late February, subject to the preparation and audit of our financial statements for the year ending December 31, 2004, as well as the timing of our compliance with applicable Sarbanes-Oxley rules and regulations.