Interactive Data Corporation reports first quarter results and reaffirms 2004 outlook
29 April 2004 | 559 views | 0
Interactive Data Corporation (NYSE: IDC) today reported first-quarter revenue of $117.6 million, reflecting revenue growth over the comparable period in 2003 of 18.2% (or 15.3% before the effects of foreign exchange). First-quarter net income was $18.4 million, or $0.19 per diluted share, compared with $18.2 million, or $0.19 per diluted share, in the same quarter last year.
"During the first quarter, we made progress on a number of important fronts as we operated in a challenging but improving market," said Stuart Clark, president and chief executive officer.
"Excluding the contributions of businesses we acquired in 2003 and the effects of foreign exchange, we generated organic revenue growth of 2.2%. We achieved this growth in spite of a high level of cancellations. This had been expected in the first quarter due to the timing of a number of consolidations within our customer base. In addition, our growth was impacted by ongoing cost containment
initiatives by clients, and the previously announced closure of the Index Services business in Europe at the end of 2003. At the same time, we maintained cost controls while making prudent investments in the business. As a result, our underlying costs increased 1.1%, excluding costs associated with ComStock and HyperFeed which were both acquired in 2003, the increase in non-cash-related depreciation and amortization expenses associated with the ComStock acquisition and the HyperFeed customer base acquisition, the effects of foreign exchange, and costs associated with the consolidation initiative relative to our data centers and ticker plants."
Clark added, "We continue to successfully expand our reach across back, middle and front office applications. This expansion helped drive strong growth in new sales across the company. Spending by institutional customers has improved from last year at this time, and renewal rates remained at or above the 95% level. These positive trends are balanced by a continued focus on cost containment by our institutional customers."
"During the quarter, we continued to invest in our new data center in Boxborough, Massachusetts," Clark commented. "We completed the facility's build-out in January, and have since installed the equipment and network infrastructure, with plans to bring the facility online in its initial phase later this spring. Our goal of consolidating six data centers and ticker plants in the United States to two primary facilities is an important initiative. This will enable us to respond faster and more effectively to changing customer needs, provide sufficient business continuity and disaster recovery capabilities, and reduce overall costs. Just as important, across our businesses, we continued to invest resources aimed at enhancing the breadth and depth of the services we provide to our customers."
"We generated $30.1 million in net cash this quarter, ending the quarter with over $161 million in cash and cash equivalents. Our balance sheet strength enables us to continue investing in the development of both new and enhanced services. In addition, it allows us to pursue strategic acquisitions that have the potential to expand our position in key geographic markets, complement our existing offerings or enter attractive adjacent market segments," concluded Clark.
Other First Quarter Operating and Financial Highlights
- The FT Interactive Data business generated first-quarter revenue of $79.3 million, a 5.8% increase (or 2.3% before the effect of foreign exchange) over the prior year's first quarter. Business in North America remained active as revenue increased 7.8%, primarily due to the addition of new customers, growing acceptance of new services among existing customers, and strong renewals. The Fair Value Information Service closed the first quarter with a total of 52 customers, up from 29 in the fourth quarter. In Europe, revenue declined 1.1% (13.7% before the effect of foreign exchange) as a result of market conditions as well as the closure of the Index Services business at the end of 2003. Asia-Pacific revenue was roughly flat in absolute dollars with the prior year. This region achieved an important milestone during the quarter with the addition of new customers in two new geographic regions, Korea and Taiwan.
- CMS BondEdge revenue increased 7.3% over last year's first quarter to $8.1 million, driven primarily by new client installations, which nearly doubled in number over the same period last year. In addition, the new business pipeline for the core BondEdge product remained strong.
- ComStock generated quarterly revenue of $18.2 million, an increase of $13.1 million over the same quarter last year, which primarily reflects the timing of the ComStock acquisition at the end of February 2003 and the acquisition of the HyperFeed Technologies customer base in November 2003. We continued to be successful in bringing ComStock's real-time market data to both new customers and existing FT Interactive Data customers in both North America and Europe.
- eSignal first-quarter 2004 Internet revenue of $10.9 million represents a 4.0% increase over 2003's first quarter. eSignal's Internet subscriber base continued to grow strongly through both direct and indirect channels. eSignal's new QuoTrek offering, which delivers streaming, real-time quotes, charts and news to mobile, hand-held devices, was launched in February and subscriptions to this service are growing. As expected, Broadcast revenue of approximately $263,000 in the first quarter of 2004 declined from last year and last quarter as this service is expected to be phased out by the end of the second quarter of 2004.
- Due to the ComStock and HyperFeed costs and expenses, the increase in amortization and depreciation associated with the ComStock and HyperFeed acquisitions, the effects of foreign exchange, and increased spending associated with the data center consolidation initiative, total costs and expenses rose by $17.9 million, or 25.5% compared with the first quarter of 2003. Excluding those factors, total costs and expenses in the first quarter of 2004 increased 1.1% from the same period last year.
As of March 31, 2004, Interactive Data Corporation had no outstanding debt and had cash and cash equivalents of $161.8 million. During the quarter, the company did not repurchase additional shares under its existing buyback program.
Our assumptions for 2004 remain unchanged. We continue to anticipate modest improvement in business conditions throughout the year, although we expect that customers in the financial services sector will continue to emphasize cost containment. Excluding the effect of any future acquisitions, we remain on target to deliver mid-to-high single digit revenue growth in 2004. In terms of 2004 net income, we expect to deliver growth of mid-single digits. The tax rate for 2004 is expected to remain at 38-39% and capital expenditures are expected to be in the range of $20.0-$23.0 million.