Interactive Data Corporation (NYSE: IDC) today reported its financial results for the second quarter ended June 30, 2005.
Second-quarter 2005 service revenue grew 11.9% to $133.0 million from $118.9 million in the second quarter of 2004. Net income for the second quarter of 2005 increased by 17.6% to $22.4 million, or $0.23 per diluted share, from $19.1 million, or $0.20 per diluted share, in the same quarter last year.
"The second quarter of 2005 was marked by good progress in many key areas of the business," stated Stuart Clark, president and chief executive officer. "The increase in Interactive Data's second-quarter 2005 service revenue reflects growth in each of our core businesses as well as the contribution resulting from last year's acquisition of the FutureSource assets. Excluding the FutureSource contribution and the effects of foreign exchange, we generated organic service revenue growth of 7.2%. Our net income growth was primarily driven by the combination of higher service revenue, prudent spending and higher other income."
Clark commented, "Within our Institutional Services segment, overall renewal rates remained at or above 95%. Market conditions were unchanged during the second quarter of 2005 compared with recent quarters as customers continued to control spending on market data and related services. FT Interactive Data's business experienced good growth in North America during the second quarter of 2005 and reported its third consecutive quarter of service revenue growth in Europe. Both ComStock and CMS BondEdge generated modest growth while making progress with important product and business development initiatives. In our Active Trader Services segment, eSignal continued expanding its customer base while also integrating FutureSource into its operations."
"Interactive Data ended the second quarter of 2005 with cash and marketable securities of $238.1 million with no debt. Our strong financial position enabled us to declare a special dividend of $0.80 per common share, which was paid on July 7, 2005, and implement a new one million share repurchase program. As we move forward, we are well positioned to continue growing as we invest in new product development initiatives and pursue strategic alliances and acquisitions," Clark concluded.
Other Second-Quarter Operating and Financial Highlights
Effects of Foreign Exchange:
Interactive Data's second-quarter 2005 service revenue was positively impacted by $0.9 million due to the effects of foreign exchange. Second-quarter 2005 service revenue before the effects of foreign exchange grew by $13.2 million, or 11.1%, over the comparable period in 2004. Total costs and expenses in the second quarter of 2005 were negatively impacted by $0.8 million due to the effects of foreign exchange. Second-quarter 2005 total costs and expenses before the effects of foreign exchange increased by $8.5 million, or 9.7%, over the second quarter of last year. The net effect of foreign exchange in the second quarter of 2005 was a $0.1 million increase in income from operations.
Institutional Services Segment:
FT Interactive Data's second-quarter 2005 service revenue of $87.7 million grew 9.7% over the prior year's second quarter (or an increase of 8.9% before the effects of foreign exchange). North American service revenue for the second quarter of 2005 increased 10.0% over the prior year's second quarter, driven by significant new sales that occurred during the fourth quarter of 2004 combined with sustained high demand for evaluated pricing and descriptive data services. Second-quarter 2005 European service revenue increased by 8.4% (or an increase of 5.2% before the effects of foreign exchange) from the second quarter of last year. FT Interactive Data's second-quarter 2005 highlights included the introduction of a new European Union Savings Directive data module that assists firms in addressing recently enacted tax legislation. FT Interactive Data's Asia-Pacific second-quarter 2005 service revenue increased 11.8% (or an increase of 5.2% before the effects of foreign exchange) compared with the prior year's second quarter.
ComStock generated second-quarter 2005 service revenue of $19.7 million, an increase of 4.0% over the same quarter last year (or an increase of 2.8% before the effects of foreign exchange) due to progress in winning new business. In late June 2005, ComStock unveiled two new strategic product introductions designed to further enhance client support and ease of use. ComStock's new Application Programming Interface for its real-time datafeed service is designed to simplify and expedite integration of the datafeed into client applications, and its new market data server allows clients to catalog and retrieve value-added content such as detailed time and sales information, and historical data.
CMS BondEdge's service revenue for the second quarter of 2005 increased by 3.2% over last year's second quarter to $8.1 million. CMS BondEdge's second-quarter performance was highlighted by a reduction in client cancellations compared with the first quarter of 2005, 10 new client installations and a new sales distribution partnership with Thomson Financial, which will market the BondEdge analytics system in tandem with its own solutions in Europe.
Active Trader Services Segment:
eSignal's second-quarter 2005 service revenue grew 45.4% over 2004's second quarter service revenue to $17.4 million due to the contribution of FutureSource and the continued expansion of eSignal's direct subscriber base. FutureSource, whose assets were acquired in September 2004, generated $4.6 million in second-quarter 2005 service revenue, or 26.6% of eSignal's second-quarter service revenue. eSignal ended the second quarter of 2005 with approximately 46,200 direct subscription terminals, which includes approximately 7,050 FutureSource terminals. During the second quarter of 2005, eSignal announced alliances with the New York Mercantile Exchange and HotSpot FX that further expand delivery of eSignal services and broaden the content available on its market data and news platforms.
Costs and Expenses:
Total second-quarter 2005 costs and expenses increased by 10.5% to $97.8 million from $88.5 million in the second quarter of 2004. Total costs and expenses for the second quarter of 2005 increased by $4.5 million, or 5.1%, before total costs and expenses associated with businesses acquired or closed in the past twelve months, and the effects of foreign exchange. Interactive Data spent approximately $1.9 million to advance its data center consolidation initiative. Unlike recent quarters, spending associated with the data center consolidation initiative has not been included as part of the analysis of total costs and expenses in the reconciliation of non-GAAP financial measures table on page 10 because the Company's East Coast data center is now fully operational, and these costs are not currently anticipated to change significantly going forward.
During the second quarter of 2005, regulatory compliance initiatives such as those related to the Investment Advisers Act and Section 404 of the Sarbanes-Oxley Act remained an important area of investment.
Six Month Results
For the six months ended June 30, 2005, Interactive Data reported revenue of $272.7 million versus $236.5 million for the comparable period in 2004, an increase of 15.3%. Total costs and expenses for the first six months of 2005 rose 13.9%, or $24.5 million, to $201.3 million versus the comparable period in 2004. Income from operations increased 19.5% from $59.7 million in the first six months of 2004 to $71.3 million for the comparable period in 2005. Net income for the first six months of 2005 increased 23.1% to $46.1 million, or $0.48 per diluted share, from $37.4 million, or $0.39 per diluted share, for the comparable period in 2004.
As of June 30, 2005, Interactive Data had no outstanding debt and had cash, cash equivalents and marketable securities of $238.1 million. On June 1, 2005, Interactive Data's Board of Directors declared a special dividend of $0.80 per common share, which was paid on July 7, 2005 to stockholders of record on June 15, 2005. In addition, the Company completed its one million share buyback program initiated in September 2004 by repurchasing a total of 465,400 shares during the second quarter of 2005 at an average price of $21.08 per share. The average price of all shares repurchased under this program was $21.06 per share. Following the completion of this most recent program, Interactive Data's Board of Directors authorized a new buyback program for the repurchase of up to one million shares of its common stock. Under this new plan, Interactive Data repurchased a total of 44,000 shares at an average price of $20.57 per share through June 30, 2005.
We anticipate business conditions during the second half 2005 will be similar to those that we experienced during the past several quarters. We believe customers in the financial services sector will remain focused on cost containment initiatives. Based on our results to date, combined with our plans and opportunities going forward, we now expect to deliver 2005 service revenue and net income growth at the high end of prior guidance that ranged from high single digit to low double digit growth. The effective tax rate for 2005 is now expected to be in the range of 39.0% to 39.5% due to the anticipated tax law changes in the United Kingdom. Capital expenditures for 2005 are expected to remain in the range of $24.0 million to $26.0 million.Download the document now 43.5 kb (Adobe Acrobat Document)