Interactive Data Corporation (NYSE: IDC) today reported its financial results for the fourth quarter and full year ended December 31, 2005.
Fourth-quarter 2005 service revenue grew 8.7% to $136.0 million from $125.2 million in the fourth quarter of 2004. Net income for the fourth quarter of 2005 increased by 16.8% to $24.6 million, or $0.26 per diluted share, from $21.1 million, or $0.22 per diluted share, in the same quarter last year.
"Interactive Data posted excellent 2005 financial results," stated Stuart Clark, president and chief executive officer. "In 2005, we surpassed the $500 million milestone in annual service revenue, an achievement that reflects the organic expansion of each core business as well as the contributions from our acquisitions."
Clark continued, "Interactive Data's 8.7% service revenue growth in the fourth quarter of 2005 was in line with our expectations and a good finish to the year. However, comparisons with the fourth quarter of 2004 are complicated due to a number of unusual factors. First, our fourth-quarter 2005 service revenue includes a modest contribution from the IS.Teledata business we acquired in mid-December 2005. Second, our fourth-quarter 2004 service revenue reflects the previously disclosed reversal and deferral of $8.1 million in service revenue primarily associated with an international customer. Third, our FT Interactive Data business reported an exceptionally strong 2004 fourth quarter, which included certain one-time revenue items in Europe. Fourth, eSignal's fourth-quarter 2004 results included service revenue associated with a FutureSource distribution partner who terminated the relationship as expected in early 2005. Our 16.8% fourth-quarter 2005 net income growth primarily reflects higher service revenue, disciplined spending, higher interest income, and a decrease in our effective annual tax rate."
Clark commented, "Overall renewal rates for businesses within the Institutional Services segment remained approximately 95% during the fourth quarter of 2005. We move forward into 2006 with considerable activity underway. In mid-December 2005, we completed our acquisition of IS.Teledata, which moves us into the growing managed market data solutions sector, extends our geographic reach further into continental Europe and enhances our new product development capabilities in Europe. In early January 2006, we announced an alliance between FT Interactive Data and Markit Group that we believe will enable us to broaden our coverage of complex derivative securities and enhance certain areas of our fixed income evaluations. In addition, on February 1, 2006, we announced the acquisition of Quote.com® and related assets. We believe this transaction will enable eSignal to market a more complete range of services to active traders and financial professionals, as well as position this business to build a growing new revenue stream through online advertising across a larger family of financial portals."
Clark concluded, "Interactive Data's strong cash flow from operations throughout the year enabled us to end 2005 with cash, cash equivalents and marketable securities totaling $172.4 million and no debt. During 2005, we used approximately $75 million for a special dividend in July 2005, spent approximately $50 million to acquire IS.Teledata in mid-December 2005 and purchased approximately $30 million of our common stock under our current stock buyback program."
Other Fourth-Quarter and Recent Financial and Operating Highlights
Effects of Foreign Exchange:
Interactive Data's fourth-quarter 2005 service revenue was negatively impacted by $1.9 million due to the effects of foreign exchange. Fourth-quarter 2005 service revenue before the effects of foreign exchange grew by $12.7 million, or 10.2%, over the comparable period in 2004. Total costs and expenses in the fourth quarter of 2005 were positively impacted by $1.5 million due to the effects of foreign exchange. Fourth-quarter 2005 total costs and expenses before the effects of foreign exchange increased by $9.0 million, or 9.7%, over the fourth quarter of last year.
Institutional Services Segment:
FT Interactive Data's fourth-quarter 2005 service revenue of $89.2 million grew 1.6% over the prior year's fourth quarter (or an increase of 3.1% before the effects of foreign exchange). North American service revenue for the fourth quarter of 2005 increased 3.8% over the prior year's fourth quarter primarily as a result of new sales closed throughout the course of 2005. Fourth-quarter 2005 European service revenue decreased by 5.7% (or an increase of 0.9% before the effects of foreign exchange) from the fourth quarter of last year as the fourth-quarter 2004 European service revenue included certain one-time revenue items. FT Interactive Data's new sales in both North America and Europe were strong during the fourth quarter of 2005. FT Interactive Data's Asia-Pacific fourth-quarter 2005 service revenue increased 3.7% (or an increase of 5.4% before the effects of foreign exchange) compared with the prior year's fourth quarter.
ComStock generated fourth-quarter 2005 service revenue of $19.2 million, an increase of 70.2% over the same quarter last year (or an increase of 74.4% before the effects of foreign exchange). The increase includes the previously mentioned reversal and deferral of $8.1 million in service revenue, $6.7 million in direct selling, general and administrative (SG&A) costs and an associated reduction of $1.4 million in income from operations. These amounts were related to ComStock's services that were delivered to one international customer who paid for these services without a definitive contract in place. These amounts were subsequently recognized in the first quarter of 2005 following the execution of a definitive contract. If these amounts had been recognized in the fourth quarter of 2004, ComStock's service revenue growth would have increased by 1.1% (before the effects of foreign exchange) due primarily to new sales closed throughout the year mostly offset by the impact of cancellations associated with the final migration of HyperFeed clients onto the ComStock platform in mid-2005.
CMS BondEdge's service revenue for the fourth quarter of 2005 increased by 1.4% over last year's fourth quarter to $8.2 million. CMS BondEdge's fourth-quarter performance was highlighted by seven new client installations and additional purchases by existing customers.
Acquisition of IS.Teledata AG:
On December 13, 2005, Interactive Data acquired IS.Teledata AG and its subsidiaries. As of February 14, 2006, Interactive Data has acquired approximately 98% of IS.Teledata for $50.7 million, net of cash acquired, of which $49.4 million was paid during the fourth quarter of 2005. IS.Teledata provides financial institutions with managed market data solutions that aggregate and customize the display of financial content from multiple sources. Following the completion of the acquisition, IS.Teledata contributed fourth-quarter 2005 service revenue of $2.0 million.
Active Trader Services Segment:
eSignal's fourth-quarter 2005 service revenue of $17.4 million declined 3.2% over 2004's fourth-quarter service revenue (or a decline of 2.8% before the effects of foreign exchange). The decline in 2005 service revenue from 2004 was primarily due to the expected cancellation of a distribution relationship for FutureSource-related services, which offset growth in eSignal's direct subscriber base. eSignal ended the fourth quarter of 2005 with approximately 45,800 direct subscription terminals. During the fourth quarter of 2005, eSignal launched MarketCenter.com, a financial web portal that provides free quotes, charts and news data from around the world.
Acquisition of Quote.com:
On February 1, 2006, Interactive Data announced a definitive agreement to acquire the assets of Quote.com and certain other related assets from Lycos, Inc. for $30.0 million in cash. The acquired assets will include the subscription-based QCharts and LiveCharts services that provide real-time streaming data and decision support tools that help active traders formulate investment strategies, as well as Quote.com, a financial news and analysis website, and RagingBull, an online investment community and message board site. Following the completion of the transaction, which is expected to occur by the end of March 2006, Quote's assets will be operated as part of eSignal. The completion of this transaction remains subject to customary closing conditions, including governmental approvals.
Costs and Expenses:
Total fourth-quarter 2005 costs and expenses increased by 8.1% to $100.1 million from $92.6 million in the fourth quarter of 2004 due primarily to the previously mentioned reversal and deferral of $6.7 million in direct SG&A expenses in the fourth quarter of 2004. Total costs and expenses for the fourth quarter of 2005 increased by $7.1 million, or 7.7%, before total costs and expenses associated with businesses acquired in the past twelve months, and the effects of foreign exchange.
Twelve Month Results
For the twelve months ended December 31, 2005, Interactive Data reported service revenue of $542.9 million versus $484.6 million for the comparable period in 2004, an increase of $58.3 million, or 12.0%. Total costs and expenses rose 11.2%, or $40.0 million, to $398.7 million in 2005. Income from operations increased 14.5% from $125.9 million in 2004 to $144.1 million in 2005. Net income for 2005 increased 16.9% to $93.9 million, or $0.98 per diluted share, from $80.3 million, or $0.84 per diluted share, in 2004.
As of December 31, 2005, Interactive Data had no outstanding debt and had cash, cash equivalents and marketable securities of $172.4 million. During the fourth quarter of 2005, Interactive Data paid $49.4 million in cash to acquire IS.Teledata, net of cash acquired. As part of the Company's current one million share stock buyback program, Interactive Data repurchased a total of 252,000 shares at an average price of $22.33 per share during the fourth quarter of 2005, totaling $5.6 million. Entering the first quarter of 2006, 448,000 shares of common stock remained available for repurchase under the Company's current stock buyback program.
We anticipate similar business conditions during 2006 to those we experienced in 2005. We believe that spending on market data and related services by customers in the financial services industry will be balanced by their continued focus on cost containment initiatives. As a result of both the organic expansion of our business and the impact of acquisitions, we currently expect that 2006 service revenue growth will be in the mid-teens. We expect that 2006 net income on a GAAP basis will decline slightly versus 2005 as a result of $8.0 million to $10.0 million of anticipated after-tax stock-based compensation expenses associated with the adoption of Financial Accounting Standards Board Statement No. 123, "Share-Based Payment." The effective tax rate for 2006 is expected to be in the range of 38.0% to 39.5%. We anticipate that non-GAAP income from operations, which excludes the impact of Financial Accounting Standards Board Statement No. 123, will grow in the high single-digit to low double-digit range in 2006.
2006 capital expenditures are expected to be in the range of $40.0 million to $43.0 million. This includes capital expenditures of approximately $10.0 million to $12.0 million associated with the planned relocation of Interactive Data's corporate headquarters in Bedford, Massachusetts and ComStock's Harrison, New York facility during the year. Approximately 50% of the capital expenditures associated with these facility activities will be reimbursed by the landlords of these facilities during 2006.Download the document now 43 kb (Adobe Acrobat Document)