IDC Interactive Data Corp.

Interactive Data Corporation (NYSE: IDC) today reported its financial results for the third quarter ended September 30, 2005. Third-quarter 2005 service revenue grew 9.2% to $134.2 million from $122.9 million in the third quarter of 2004. Net income for the third quarter of 2005 increased by 6.3% to $23.1 million, or $0.24 per diluted share, from $21.8 million, or $0.23 per diluted share, in the same quarter last year. "Interactive Data's third-quarter 2005 results reflect another quarter of steady growth," stated Stuart Clark, president and chief executive officer. "Our third-quarter 2005 net income performance was influenced by two unusual factors. First, as expected, our tax rate for the third quarter of 2005 was higher than in the first two quarters of 2005. The increase reflected a year-to-date catch-up in our effective annual tax rate due to a UK tax law that was enacted in the third quarter of 2005 and is applicable from March 16, 2005. Second, our third-quarter 2004 expenses included a $1.8 million net benefit associated with a renegotiated supplier contract. The Company's third-quarter service revenue growth was driven by continuing strong performance within FT Interactive Data, our largest business, and the contribution of the FutureSource assets we acquired in September 2004. Excluding FutureSource and the impact of foreign exchange, we generated organic service revenue growth of 7.4%." Clark commented, "Within our Institutional Services segment, overall renewal rates remained at or above 95%. Although our institutional customers remain focused on containing costs, we are successfully expanding our business in existing accounts. Within our Active Trader Services segment, eSignal continued to make progress with initiatives aimed at expanding its business by introducing enhanced services and establishing new alliances." "Our cash position remains very strong even after paying a special dividend to stockholders totaling $74.5 million and repurchasing $5.6 million of our common stock as part of our current stock buyback program. We ended the third quarter of 2005 with cash, cash equivalents and marketable securities totaling $196.6 million with no debt. We believe that Interactive Data has the requisite financial strength to continue investing in developing new services, establishing strategic alliances and pursuing acquisitions. Each of these areas is an important element in our growth strategy," Clark concluded. Other Third-Quarter Operating and Financial Highlights Effects of Foreign Exchange: -- Interactive Data's third-quarter 2005 service revenue was negatively impacted by $0.3 million due to the effects of foreign exchange. Third-quarter 2005 service revenue before the effects of foreign exchange grew by $11.6 million, or 9.5%, over the comparable period in 2004. Total costs and expenses in the third quarter of 2005 were positively impacted by $0.3 million due to the effects of foreign exchange. Third-quarter 2005 total costs and expenses before the effects of foreign exchange increased by $8.3 million, or 9.3%, over the third quarter of last year. Institutional Services Segment: -- FT Interactive Data's third-quarter 2005 service revenue of $90.0 million grew 9.4% over the prior year's third quarter (or an increase of 9.6% before the effects of foreign exchange). North American service revenue for the third quarter of 2005 increased 11.1% over the prior year's third quarter, driven by new sales throughout the year, strong client retention and higher usage-related activity among redistribution clients. Third-quarter 2005 European service revenue increased by 2.0% (or an increase of 3.8% before the effects of foreign exchange) from the third quarter of last year. During the third quarter of 2005, FT Interactive Data won new business for its new European Union Savings Directive data module with customers in Europe and announced the availability of its Fair Value Information Service for European domiciled funds. FT Interactive Data's Asia-Pacific third-quarter 2005 service revenue increased 26.2% (or an increase of 19.1% before the effects of foreign exchange) compared with the prior year's third quarter. -- ComStock generated third-quarter 2005 service revenue of $19.0 million, an increase of 1.5% over the same quarter last year (or an increase of 2.1% before the effects of foreign exchange). ComStock's third-quarter 2005 growth in Europe and North America was partly offset by cancellations associated with the final integration of HyperFeed customers onto the ComStock platform. -- CMS BondEdge's service revenue for the third quarter of 2005 increased by 2.3% over last year's third quarter to $8.1 million. CMS BondEdge's third-quarter performance was highlighted by five new client installations and additional purchases by existing customers. Active Trader Services Segment: -- eSignal's third-quarter 2005 service revenue grew 22.6% over 2004's third-quarter service revenue to $17.1 million primarily due to the contribution of FutureSource and the expansion of eSignal's direct subscriber base. FutureSource, whose assets were acquired in September 2004, generated $4.5 million in third-quarter 2005 service revenue, or 26.5% of eSignal's third-quarter service revenue. eSignal ended the third quarter of 2005 with approximately 46,000 direct subscription terminals, which includes over 7,000 FutureSource terminals. During the third quarter of 2005, eSignal announced alliances with the Chicago Board Options Exchange and Dow Jones Newswires that further expand delivery of eSignal services and broaden the content available on its market data and news platforms. Costs and Expenses: -- Total third-quarter 2005 costs and expenses increased by 9.0% to $97.3 million from $89.3 million in the third quarter of 2004. Total costs and expenses for the third quarter of 2005 increased by $6.1 million, or 7.0%, before total costs and expenses associated with businesses acquired in the past twelve months, and the effects of foreign exchange. Executive Appointments: -- In late September, Interactive Data announced a series of executive appointments within its existing senior management team as part of a new corporate organizational structure designed to better support and facilitate its long-term growth. Nine Month Results For the nine months ended September 30, 2005, Interactive Data reported service revenue of $406.8 million versus $359.4 million for the comparable period in 2004, an increase of $47.4 million or 13.2%. Total costs and expenses for the first nine months of 2005 rose 12.2%, or $32.5 million, to $298.6 million versus the comparable period in 2004. Income from operations increased 16.0% from $93.3 million in the first nine months of 2004 to $108.2 million for the comparable period in 2005. Net income for the first nine months of 2005 increased 17.0% to $69.2 million, or $0.72 per diluted share, from $59.2 million, or $0.62 per diluted share, for the comparable period in 2004. As of September 30, 2005, Interactive Data had no outstanding debt and had cash, cash equivalents and marketable securities of $196.6 million. On July 7, 2005, Interactive Data paid a special dividend of $0.80 per share to stockholders of record on June 15, 2005, which totaled $74.5 million. As part of the Company's current one million share stock buyback program, Interactive Data repurchased a total of 256,000 shares at an average price of $21.84 per share during the third quarter of 2005, totaling $5.6 million. Entering the fourth quarter of 2005, 700,000 shares of common stock remained available for repurchase under the Company's current stock buyback program. Outlook We anticipate no significant change in business conditions during the fourth quarter of 2005 in comparison with the third quarter of 2005. 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 expect to deliver 2005 service revenue and net income growth in the low double digit range. The effective tax rate for 2005 is now expected to be in the range of 38.0% to 39.0%. Capital expenditures for 2005 are expected to remain in the range of $24.0 million to $26.0 million. Conference Call Information Interactive Data Corporation's management will conduct a conference call Thursday, October 27, 2005 at 11:00 a.m. Eastern Time to discuss the third-quarter 2005 results, related financial and statistical information, and additional business matters. The dial-in number for the conference call is (706) 679-4631; no access code is required. Investors and interested parties may also listen to the call via a live web broadcast available through the Investor Relations section of the Company's web site at www.interactivedata.com and through www.StreetEvents.com. To listen, please register and download audio software at the site at least 15 minutes prior to the call. For those who cannot listen to the live broadcast, a replay of the call will be available from Thursday, October 27, 2005 at 2:00 p.m. through Thursday, November 10, 2005 at 2:00 p.m., and can be accessed by dialing (706) 645-9291 or (800) 642-1687, using access code 7483083. This press release and other financial and statistical information to be presented on the conference call will be accessible on the Investor Relations section of the Company's web site at www.interactivedata.com. The web site is not incorporated by reference into this press release. Non-GAAP Information In an effort to provide investors with additional information regarding our results as determined by generally accepted accounting principles (GAAP), we also disclose the following non-GAAP information, which management believes provides the following useful information to investors: -- Management refers to growth rates at constant foreign currency exchange rates so that business results can be viewed without the impact of changing foreign currency exchange rates, thereby facilitating period-to-period comparisons of our underlying business. Generally, when the U.S. dollar either strengthens or weakens against other currencies, the growth at constant currency rates will be higher or lower than growth reported at actual exchange rates. -- Management refers to organic growth, which excludes the contribution of businesses acquired or closed during the past 12 months, and the effects of foreign currency exchange rates because management believes that facilitating period-to-period comparisons of our organic revenue growth on a constant dollar basis better reflects actual trends. As part of determining organic growth, management refers to service revenue for our FT Interactive Data, ComStock, CMS BondEdge, and eSignal businesses. Management uses such information for evaluating its business, and for forecasting and planning purposes. In addition, since we have historically reported service revenue for these businesses to the investment community as part of our reports on Form 10-K and Form 10-Q, we believe that continuing to offer such information provides consistency in our financial reporting. -- Management includes information regarding total costs and expenses excluding total costs and expenses associated with businesses acquired or closed during the past 12 months, and the effects of foreign exchange, because management believes changes in our core total costs and expenses on a constant dollar basis better reflect actual trends. The above measures are non-GAAP financial measures and should not be considered in isolation from, and are not intended to represent an alternative measure of, revenue, total costs and expenses, earnings or cash flows provided by operating activities, each as determined in accordance with GAAP. In addition, the above measures may not be comparable to similarly titled measures reported by other companies. Forward-looking and Cautionary Statements This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and federal securities laws, and is subject to the safe-harbor created by such Act and laws. Forward-looking statements include our statements discussing future financial conditions, results or projections, including those appearing under the heading "Outlook," those statements about expected market conditions and our expected growth and product and service developments, and potential alliances and acquisitions. These statements are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause actual results to be materially different from those contemplated by the forward-looking statements. Such factors include, but are not limited to: (i) the presence of competitors with greater financial resources than ours and their strategic response to our services and products; (ii) the possibility of a prolonged outage or other major unexpected operational difficulty at any of our key facilities; (iii) our ability to maintain relationships with our key suppliers and providers of market data; (iv) our ability to maintain our relationships with service bureaus and custodian banks; (v) a decline in activity levels in the securities markets; (vi) consolidation of financial services companies, both within an industry and across industries; (vii) the continuing impact of cost cutting pressures across the industries we serve; (viii) new offerings by competitors or new technologies that could cause our products or services to become less competitive or obsolete; (ix) our ability to negotiate and enter into strategic alliances or acquisitions on favorable terms, if at all; (x) our ability to derive the anticipated benefits from our strategic alliances or acquisitions in the desired time frame, if at all; (xi) potential regulatory investigations of us or our customers relating to our services; (xii) the regulatory requirements applicable to our business, including our FT Interactive Data Corporation subsidiary, which is a registered investment adviser; (xiii) our ability to attract and retain key personnel; (xiv) the ability of our majority shareholder to exert influence over our affairs, including the ability to approve or disapprove any corporate actions submitted to a vote of our stockholders; (xv) our ability to successfully and effectively complete the consolidation of our data centers, ticker plants and production systems and achieve anticipated benefits in the desired time frame, if at all; (xvi) our ability to develop new and enhanced service offerings and our ability to market and sell those new and enhanced offerings successfully to new and existing customers; (xvii) our ability to comply on an ongoing basis with the rules and regulations set forth in and/or adopted pursuant to the Sarbanes-Oxley Act and related Securities and Exchange Commission and New York Stock Exchange rules and regulations; and (xviii) other factors identified in our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission. We undertake no obligation to update these forward-looking statements. About Interactive Data Corporation Interactive Data Corporation is a leading global provider of securities pricing, financial information, and analytic tools to institutional and individual investors. The Company supplies time-sensitive pricing (including evaluated pricing), dividend, corporate action, and descriptive information for more than 3.5 million securities traded around the world, including hard-to-value instruments. Many of the world's best-known financial services and software companies subscribe to the Company's services in support of their trading, analysis, portfolio management, and valuation activities. Interactive Data Corporation is headquartered in Bedford, Massachusetts. Through its branded businesses, FT Interactive Data, ComStock, CMS BondEdge, and eSignal, Interactive Data Corporation has approximately 1,800 employees in offices located throughout North America, Europe, Asia, and Australia. Pearson plc (NYSE: PSO), an international media company, whose businesses include the Financial Times Group, Pearson Education, and the Penguin Group, owns approximately 60 percent of the outstanding common stock of Interactive Data Corporation. The FT Interactive Data business includes FT Interactive Data Corporation, a Delaware corporation. The ComStock business includes ComStock, Inc., a New York corporation. -0- *T INTERACTIVE DATA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands except per share data) Three Months Ended Nine Months Ended September 30, September 30, -------------------------------------------------- 2005 2004 Change 2005 2004 Change ------------------------- ----------------------- SERVICE REVENUE $134,198 $122,884 9.2% $406,848 $359,389 13.2% COSTS & EXPENSES Cost of Services 40,463 38,058 6.3% 124,133 114,382 8.5% Selling, general & administrative 46,752 40,958 14.1% 144,665 121,352 19.2% Depreciation 4,773 4,689 1.8% 13,916 13,728 1.4% Amortization 5,293 5,555 -4.7% 15,905 16,617 -4.3% ----------------------- ----------------------- Total costs & expenses 97,281 89,260 9.0% 298,619 266,079 12.2% ----------------------- ----------------------- INCOME FROM OPERATIONS 36,917 33,624 9.8% 108,229 93,310 16.0% Other income, net 1,212 622 94.9% 3,391 1,554 118.2% ----------------------- ----------------------- INCOME BEFORE INCOME TAXES 38,129 34,246 11.3% 111,620 94,864 17.7% Income Tax expense 14,985 12,482 20.1% 42,381 35,669 18.8% ----------------------- ----------------------- NET INCOME $ 23,144 $ 21,764 6.3% $ 69,239 $ 59,195 17.0% NET INCOME PER SHARE Basic $ 0.25 $ 0.23 8.7% $ 0.74 $ 0.64 15.6% Diluted $ 0.24 $ 0.23 4.3% $ 0.72 $ 0.62 16.1% Cash dividends paid per common share $ 0.80 $ - - $ 0.80 $ - - WEIGHTED AVERAGE COMMON SHARES OUTSTANDING Basic 93,196 93,149 0.1% 93,186 93,173 0.0% Diluted 95,983 95,442 0.6% 95,965 95,396 0.6% INTERACTIVE DATA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) September 30, December 31, 2005 2004 ------------------------- ASSETS Unaudited Current Assets: Cash and cash equivalents $ 147,360 $ 207,908 Marketable securities 49,214 2,371 Accounts receivable, net 90,164 88,295 Interest receivable 1,578 - Prepaid expenses and other current assets 10,158 15,809 Deferred income taxes 8,244 5,838 ------------------------- Total current assets 306,718 320,221 ------------------------- Property and equipment, net 56,896 54,854 Goodwill 465,966 480,444 Other intangible assets, net 153,523 169,338 Other assets 662 816 ------------------------- Total Assets $ 983,765 $ 1,025,673 ========================= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable, trade $ 14,203 $ 15,943 Payable to affiliates 2,085 1,552 Accrued liabilities 58,785 67,276 Income taxes payable 6,167 10,672 Deferred revenue 34,155 40,774 ------------------------- Total current liabilities 115,395 136,217 Deferred tax liabilities 32,556 29,583 Other liabilities 1,227 2,117 ------------------------- Total Liabilities $ 149,178 $ 167,917 ------------------------- Stockholders' Equity: Preferred stock - - Common stock 975 963 Additional paid-in capital 841,445 821,590 Treasury stock, at cost (68,940) (44,308) Accumulated earnings 52,824 58,074 Accumulated other comprehensive income 8,283 21,437 ------------------------- Total Stockholders' Equity $ 834,587 $ 857,756 ------------------------- Total Liabilities and Stockholders' Equity $ 983,765 $ 1,025,673 ========================= INTERACTIVE DATA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Nine Months Ended September 30, (Unaudited) 2005 2004 ------------------ Cash flows provided by (used in) operating activities: Net income $ 69,239 $ 59,195 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 29,821 30,345 Tax benefit from exercise of stock options 3,217 2,567 Deferred income taxes 269 2,015 Amortization of discounts and premiums on marketable securities, net 1,704 - Other non-cash items, net 1,371 503 Changes in operating assets and liabilities, net (13,590) (10,727) ------------------ NET CASH PROVIDED BY OPERATING ACTIVITIES 92,031 83,898 Cash flows provided by (used in) investing activities: Purchase of fixed assets (16,605) (17,723) Acquisition of business (237) (17,676) Purchase and sale of marketable securities (48,547) - Other investing activities 170 - ------------------ NET CASH USED IN INVESTING ACTIVITIES (65,219) (35,399) Cash flows provided by (used in) financing activities: Purchase of treasury stock (24,632) (14,346) Proceeds from exercise of stock options and employee stock purchase plan 15,286 9,334 Common stock cash dividends (74,489) - ------------------ NET CASH USED IN FINANCING ACTIVITIES (83,835) (5,012) Effect of exchange rate on cash (3,525) (9) ------------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (60,548) 43,478 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 207,908 131,639 ------------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $147,360 $175,117 ================== RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Service Revenue Before Effects of Foreign Exchange and FutureSource Service Revenue (In thousands) ($ in Thousands) Q3 2005 Q3 2004 Change -------- -------- ------ Service Revenue Institutional Services FT Interactive Data $ 89,978 $ 82,279 9.4% ComStock 19,015 18,725 1.5% CMS BondEdge 8,145 7,964 2.3% -------- -------- ------ Institutional Services Total 117,138 108,968 7.5% Active Trader Services eSignal 17,060 13,916 22.6% -------- -------- ------ Active Trader Services Total 17,060 13,916 22.6% Total Service Revenue 134,198 122,884 9.2% Effects of Foreign Exchange 327 - -------- -------- ------ Service Revenue before Effects of Foreign Exchange 134,525 122,884 9.5% Service Revenue - FutureSource (4,527) (1,845) -------- -------- ------ Service Revenue before Effects of Foreign Exchange and FutureSouce Service Revenue $129,998 $121,039 7.4% RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (CONTINUED) Total Costs and Expenses Before Effect of FutureSource Total Costs and Expenses, and Effects of Foreign Exchange (In thousands) ($ in Thousands) Q3 2005 Q3 2004 Change --------- --------- ------ Total Costs & Expenses $ 97,281 $ 89,260 9.0% Total Costs & Expenses - FutureSource (3,981) (1,774) Effects of Foreign Exchange 282 - --------- --------- ------ Total Costs & Expenses before above factors $ 93,582 $ 87,486 7.0% *T