Source: Interactive Data Corporation
Interactive Data Corporation (NYSE: IDC) today reported its financial results for the fourth quarter and full year ended December 31, 2008. Interactive Data's fourth-quarter 2008 revenue increased 6.6% to $194.1 million from $182.1 million in the fourth quarter of 2007. Income from operations grew 27.0% to $57.1 million in the fourth quarter of 2008 from $45.0 million in the same period one year ago. Net income for the fourth quarter of 2008 was $40.1 million, or $0.42 per diluted share, a 25.8% increase over net income of $31.9 million, or $0.33 per diluted share, in the fourth quarter of 2007.
"The fourth quarter of 2008 was an excellent finish to another year in which we posted record results," stated Stuart Clark, president and chief executive officer. "Our fourth-quarter 2008 revenue growth was primarily driven by strong new sales throughout the year, higher usage and the revenue contribution from acquired businesses, partially offset by the negative impact of foreign exchange. Excluding the effects of foreign exchange and acquisitions, our organic revenue growth was 12.7% in the fourth quarter of 2008 as we saw sustained global demand for our evaluated pricing, reference data and real-time services. Our net income growth in the fourth quarter reflects higher income from operations and a fourth-quarter 2008 effective tax rate that was better than expected, partially offset by lower interest income."
Clark continued, "Despite the unprecedented events across the global financial marketplace that occurred during the fourth quarter, our business remained resilient. We closed 2008 on a positive note. New sales in the fourth quarter were strong and renewal rates across our institutionally oriented business were approximately 95%. Strategically, we accomplished a number of important objectives during the year. First, we made progress with our 'One Company' initiatives, which are aimed at enabling us to operate increasingly as a single global enterprise to maximize our talent, content, infrastructure and development resources across the organization. Second, we also extended our geographic footprint through our acquisitions in Italy and Japan. Third, we continued to bring new content, capabilities and offerings to the marketplace."
Clark added, "We are nearing the completion of our previously announced CEO succession process, which began in May 2008 when I informed the Board of Directors of my intention to retire during 2009. In November 2008, the Board selected Ray D'Arcy, president of our sales and marketing organization, to succeed me as presidentrs sales and marketing organization, to succeed me as presidentrs of my intention to retire during 2009. In November 2008, the Board selected Ray D'Arcy, president of our sales and marketing organization, to succeed me as president and chief executive officer. Since then, Ray and I have been working together to advance this transition and we now expect that it will be completed in early March. After Ray becomes president and chief executive officer, I will stay on in an advisory role before retiring as planned later this summer."
Andrew Hajducky, Interactive Data's executive vice president and chief financial officer, commented, "We delivered notable growth in revenue, income from operations and net cash provided by operating activities during the fourth quarter of 2008. Our operating performance during the quarter and for the full year reflects continued positive operating leverage as our revenue growth continued to outpace operational spending. For the full year, we returned $156.1 million, or nearly 80% of the net cash provided by operating activities, to shareholders through our regular quarterly dividend, special dividend and stock repurchase activity. Even with these actions and the completion of two acquisitions totaling more than $56 million, we still moved into 2009 with nearly $230 million in cash, cash equivalents and marketable securities, and no debt. This leaves us well positioned to consider a broad range of opportunities for acquisitions and internal investments that will help further expand our business and build value in our enterprise."
Clark concluded, "Moving forward, we expect to continue encountering uncertain market conditions in 2009. Customers will likely be grappling with their need to contain or reduce costs while adapting to powerful trends affecting their businesses that may require additional market data or related services. These trends include heightened scrutiny on their valuation processes, increased regulation, the proliferation of automated trading systems and the need to differentiate their wealth management platforms. We believe that Interactive Data is well positioned to navigate the current environment by working collaboratively with customers in mission-critical areas of their operations. We plan to continue making important investments in our infrastructure and delivery platforms that we believe will enable us to increase our market share globally. Although some of our progress in 2009 may be masked by the anticipated negative impact of foreign exchange based on the rates at year end 2008, we expect to deliver another year of solid organic revenue and profit growth."
Other Fourth-Quarter 2008 and Recent Financial and Operating Highlights
Effects of Foreign Exchange:
· Interactive Data's fourth-quarter 2008 revenue was unfavorably impacted by $13.4 million due to the effects of foreign exchange resulting from a strengthening US dollar late in the year. Fourth-quarter 2008 revenue before the effects of foreign exchange grew by $25.4 million, or 13.9%, over the comparable period in 2007. Total costs and expenses in the fourth quarter of 2008 were reduced by $9.4 million as a result of the effects of foreign exchange. Fourth-quarter 2008 total costs and expenses before the effects of foreign exchange increased by $9.3 million, or 6.8%, over the fourth quarter of 2007.
Revenue by Geography:
· Interactive Data's total North American fourth-quarter 2008 revenue grew 8.2% to $138.2 million from $127.7 million in the same period last year primarily due to growth within its Pricing and Reference Data business and ongoing institutional adoption of its real-time datafeed services. The Company's fourth-quarter 2008 revenue in Europe increased 2.0% to $51.2 million from $50.2 million in the comparable period one year ago. Excluding the effects of foreign exchange and the contribution from the Kler's acquisition, fourth-quarter 2008 organic revenue in Europe grew 23.2% due primarily to an excellent performance by the Company's European Pricing and Reference Data business and the continued growth of its real-time datafeeds business. Interactive Data's Asia-Pacific revenue of $4.7 million in the fourth quarter of 2008 was up 13.0% from $4.1 million in the fourth quarter of 2007. Excluding the effects of foreign exchange and the contribution of the NTT DATA Financial (NDF) acquisition in Japan, Asia-Pacific organic revenue grew 22.7% during the fourth quarter of 2008 due primarily to higher net new business across the region and higher usage.
· A table summarizing revenue by geography, including the impact of foreign exchange as a percentage of total revenue for the three and twelve months ended December 31, 2008, for each major geographic region in which Interactive Data has operations has been included on page 13 of this press release.
Institutional Services Segment:
· Interactive Data Pricing and Reference Data reported fourth-quarter 2008 revenue of $124.5 million, a 9.0% increase over the prior year's fourth quarter (or an increase of 16.0% before the effects of foreign exchange). Kler's Financial Data Service S.r.l. (Kler's), a leading Italian provider of reference data acquired by Interactive Data in August 2008, contributed revenue of $1.8 million in the fourth quarter of 2008. An important highlight during the quarter was Interactive Data's acquisition of an 80% majority interest in NDF, a leading provider of securities pricing, reference data and related services to most of the major financial institutions in Japan. This business contributed $0.5 million in fourth-quarter 2008 revenue. Excluding the contributions from Kler's and NDF, and the effects of foreign exchange, fourth-quarter 2008 revenue for this business increased 14.0% over the same period last year primarily as a result of expanding business with existing customers in both North America and Europe, and higher usage. During the past several months, this business added key executives to its reference data organization, began offering additional informational resources to complement its fixed income evaluations services, and appointed Liz Duggan as chief operating officer for Evaluation Services.
· Interactive Data Real-Time Services generated fourth-quarter 2008 revenue of $39.0 million, an increase of 3.7% over the same quarter last year (or an increase of 16.2% before the effects of foreign exchange). The revenue increase was driven by strong growth in the real-time datafeeds business and continued expansion of the Managed Solutions business in the United States. In recent months, Interactive Data Real-Time Services added a number of new market sources including Pure Trading of Canada, BATS Trading, the Dubai Financial Market and the Dubai Gold & Commodities Exchange. The Managed Solutions business announced that it had doubled the number of clients in the United States during the past year to 80.
· Interactive Data Fixed Income Analytics reported revenue for the fourth quarter of 2008 of $8.5 million, a 4.0% increase from last year's fourth quarter (or an increase of 4.3% before the effects of foreign exchange). New sales were partially offset by the impact of cancellations primarily caused by client consolidation activities.
Active Trader Services Segment:
· eSignal's fourth-quarter 2008 revenue of $22.2 million was essentially unchanged from the same quarter last year (or an increase of 3.0% before the effects of foreign exchange) as higher average net subscription fees were offset by a decline in the number of direct subscription terminals to under 55,000. In addition, the number of direct subscription terminals also reflects the reclassification of certain product sales that had been inadvertently included as direct terminal subscriptions in prior quarters. This reclassification had no effect upon revenue in any period. An updated three-year quarterly subscription history is provided on page 15 of this news release. During the fourth quarter, eSignal introduced new offerings for the agriculture market, launched an end-of-day charting application and enhanced its FutureSource and eSignal workstations.
Full-Year 2008 Results
· For the full year ended December 31, 2008, Interactive Data reported revenue of $750.5 million, an increase of $60.9 million, or 8.8%, from $689.6 million in 2007. Foreign exchange reduced full-year 2008 revenue by $9.3 million and acquisitions contributed a net of $6.6 million to full-year 2008 revenue. Excluding the effects of foreign exchange and the net impact of acquisitions, 2008 organic revenue grew by 9.2%. Total costs and expenses increased $26.9 million, or 5.2%, to $540.9 million in 2008. Net income in 2008 increased $16.7 million, or 13.2%, to $142.6 million, or $1.48 per diluted share, from $126.0 million, or $1.30 per diluted share, in 2007. The effective tax rate for 2008 was 34.3% compared with 31.8% in 2007. The increase of 2.5 percentage points from 2007 primarily reflects the impact of various discrete tax items during 2007 such as a favorable change in German tax rates and the impact of an R&D tax credit initiative from 2006 that was applied to the 2007 rate.
Cash Position, Stock Buyback Activities, and Quarterly Cash Dividend:
· As of December 31, 2008, Interactive Data had no outstanding debt and had cash, cash equivalents and marketable securities of $228.8 million. During the fourth quarter of 2008, Interactive Data spent $7.7 million to repurchase 363,500 shares of common stock at an average purchase price of $21.26 per share as part of its existing stock buyback program. Entering the first quarter of 2009, nearly 2.8 million shares remained available for repurchase under the existing stock buyback program. During the fourth quarter of 2008, Interactive Data paid $14.1 million to stockholders in connection with its regular quarterly dividend of $0.15 per share to stockholders. On December 5, 2008, Interactive Data announced that its Board of Directors has authorized a 33.3% increase in the Company's regular quarterly dividend to $0.20 per share, commencing with the dividend to be paid on March 31, 2009 to all shareholders of record at the close of business on March 2, 2009.
· As part of the previously announced CEO succession process, Raymond L. D'Arcy, president of sales and marketing for Interactive Data, will succeed Stuart J. Clark as the Company's president and chief executive officer in early March. Following this transition, Mr. Clark will serve as an advisor to the Company before retiring as planned later this summer.
· In January 2009, Interactive Data announced that Cort J. Williams will become president of Interactive Data's institutional sales organization when Mr. D'Arcy becomes the Company's president and chief executive officer.
Acquisition of Majority Interest in NTT DATA Financial Corporation:
· In December 2008, Interactive Data acquired a majority interest in NDF. Interactive Data paid approximately 2.4 billion yen (or approximately U.S. $26.7 million based on currency exchange rate at the date of acquisition) in cash to acquire 80% of NDF, which was offset by cash acquired of 938.4 million yen (or U.S. $10.4 million based on the currency exchange rate at the date of acquisition). Of the 80% interest, 64% was purchased from NTT DATA Corporation and 16% from certain minority shareholders. Interactive Data is working with NTT DATA Corporation to provide for a smooth transition of the business in Japan and to acquire the remaining equity of NDF over the coming years.
Market conditions in 2009 will remain uncertain. We anticipate that overall spending on market data and related services by customers in the financial services industry in 2009 may be influenced by various factors including delayed sales cycles, cost-containment activities, the impact of recent mergers and acquisitions, and overall economic conditions. With this as background, we are taking a cautious approach to our outlook for 2009, which is as follows:
· 2009 organic revenue growth over 2008 (on a percentage change basis) is expected to be in the mid-single digit range.
· 2009 organic income from operations growth versus 2008 (on a percentage change basis) is expected to be in the mid-single digit range.
· 2009 revenue growth over 2008 (on a percentage change basis) is expected to be in the low single digit range.
o This forecast includes an anticipated positive impact of approximately two percentage points from acquisitions completed in 2008.
o This forecast includes a negative impact of at least five percentage points associated with changes in foreign exchange rates based on 2008 year-end rates.
· 2009 income from operations versus 2008 (on a percentage change basis) is expected to range from roughly flat to a low single digit decline.
o This forecast includes an anticipated positive impact of approximately two percentage points from acquisitions completed in 2008.
o This forecast includes a negative impact of approximately five percentage points associated with changes in foreign exchange rates based on 2008 year-end rates.
· The effective 2009 annual tax rate is expected to be in the range of 35.0% to 36.0%.
· As a result of the anticipated impact from foreign exchange, expected lower interest income and the anticipated increase in the 2009 effective annual tax rate, 2009 net income versus 2008 (on a percentage change basis) is expected to decline in the low single digit range.
· 2009 capital expenditures are expected in the range of $56.0 million to $58.0 million.
o This forecast includes expenditures of $8.0 million to $9.0 million for leasehold improvements related to the planned relocation of our midtown New York office and the refurbishment of our European headquarters in London.
o We expect that 50% of these leasehold improvements will be reimbursed by landlords during the year.