Interactive Data Corporation (NYSE: IDC) today reported its financial results for the fourth quarter and full year ended December 31, 2007. Interactive Data’s fourth-quarter 2007 revenue of $182.1 million grew 13.0% over $161.1 million in the fourth quarter of 2006. The Company reported net income for the fourth quarter of 2007 of $31.9 million, or $0.33 per diluted share, a 28.7% increase from $24.8 million, or $0.26 per diluted share, in the same quarter last year.
“We reported very strong fourth-quarter 2007 revenue growth due to outstanding results at our Pricing and Reference Data business and sustained expansion at our Real-Time Services business,” stated Stuart Clark, Interactive Data’s president and chief executive officer. “Overall, our organic revenue growth in the fourth quarter of 2007 was 9.1%. New sales were robust in the fourth quarter of 2007 and renewal rates across our institutionally focused businesses remained at approximately 95%. As a result, we move into 2008 with good momentum for our broad range of evaluated pricing services, reference data, real-time datafeeds and managed solutions.”
Clark continued, “Our fourth-quarter results represent a strong finish to a highly successful 2007. We generated a revenue increase of 12.6% for the full year largely as a result of accelerated organic growth within our Pricing and Reference Data, and Real-Time Services businesses. Our 2007 organic revenue growth rate of 8.8% was our highest level of annual organic revenue growth in many years. Our net income growth of 34.9% in 2007 reflects improved operating profitability, higher interest income and a significant decrease in our effective annual tax rate. Our progress and accomplishments in key areas of our business during the past year helped us generate our record results, elevated our visibility in the marketplace, and positioned us to better meet the enterprise needs of our customers for mission-critical, specialist financial data, analytics and related solutions.”
Andrew Hajducky, Interactive Data’s executive vice president and chief financial officer, commented, “Strong operating results in our business translated into another year of significant cash generation, enabling us to end the year with $278.9 million in cash, cash equivalents and marketable securities, and no debt. Our solid financial foundation has enabled us to take meaningful action to increase shareholder returns in 2008. We paid approximately $47 million associated with our special dividend of $0.50 per share in late January 2008, have announced a 20% increase in our regular quarterly dividend to $0.15 per share and expanded our stock buyback program by an additional two million shares.”
Clark concluded, “In a dynamic marketplace highlighted by significant consolidation activity among large financial information vendors, Interactive Data’s standing in the industry has continued to grow with customers worldwide. We believe that the steps we took during the past year to unify the management structure of our two largest businesses will play an important role in enabling us to accelerate innovation, move faster and more decisively to address near-term customer needs, and further expand upon our position as a trusted industry leader. As we look ahead, we remain confident in our strategic direction and in our ability to bring compelling value to our customers and other key stakeholders.”
Other Fourth-quarter and Recent Operating and Financial Highlights
Effects of Foreign Exchange:
Interactive Data's fourth-quarter 2007 revenue was positively impacted by $4.3 million due to the effects of foreign exchange. Fourth-quarter 2007 revenue before the effects of foreign exchange grew by $16.6 million, or 10.3%, over the comparable period in 2006. Total costs and expenses of $137.1 million in the fourth quarter of 2007 were negatively impacted by $3.5 million due to the effects of foreign exchange. Fourth-quarter 2007 total costs and expenses before the effects of foreign exchange increased by $9.9 million, or 8.0%, over the fourth quarter of 2006.
Institutional Services Segment:
Interactive Data Pricing and Reference Data reported fourth-quarter 2007 revenue of $114.3 million, a 15.8% increase over the prior year’s fourth quarter (or an increase of 13.7% before the effects of foreign exchange). Excluding the $2.1 million contribution from the recently acquired Xcitek market data business, intercompany eliminations resulting from the Xcitek acquisition and the effects of foreign exchange, fourth-quarter 2007 revenue increased 11.7% over the same period last year. The growth of this business during the fourth quarter of 2007 was driven primarily by increased demand across its global customer base for evaluated pricing and reference data services and higher usage fees. The fourth quarter of 2007 was highlighted by ongoing adoption of the Company’s Basket Calculation ServiceSM for intraday indicative valuations of equity and fixed income exchange traded funds. In the fourth-quarter of 2007, North American revenue, including the contribution of Xcitek, increased 13.7% over the fourth quarter of 2006. Fourth-quarter 2007 European revenue increased by 22.5% (or increased by 14.5% before the effects of foreign exchange) from the fourth quarter of last year. Interactive Data Pricing and Reference Data’s Asia-Pacific fourth-quarter 2007 revenue increased 22.3% (or increased 8.1% before the effects of foreign exchange) compared with the prior year’s fourth quarter.
Interactive Data Real-Time Services generated fourth-quarter 2007 revenue of $37.5 million, an increase of 15.0% over the same quarter last year (or an increase of 8.4% before the effects of foreign exchange) due to another quarter of solid growth within its two core product areas of real-time datafeeds and managed solutions. During the fourth quarter of 2007, this business continued to expand its business with both existing and new institutional customers. In January 2008, this business went live with its new London-based real-time processing facility to improve latency for its customers in Europe.
Interactive Data Fixed Income Analytics reported revenue for the fourth quarter of 2007 of $8.1 million, which decreased slightly from the prior year’s fourth quarter. Cancellations, the majority of which resulted from client consolidation activities, offset new sales and increased business with existing customers. During the fourth quarter of 2007, this business completed 8 new BondEdge® installations and advanced development of its next-generation BondEdge platform.
Active Trader Services Segment:
eSignal’s fourth-quarter 2007 revenue of $22.1 million increased 2.7% from the same quarter last year (or an increase of 1.9% before the effects of foreign exchange). This increase primarily reflects modest growth in the eSignal direct subscriber base. eSignal ended 2007 with more than 63,500 direct subscription terminals. eSignal’s highlights in the fourth quarter of 2007 included enhancing its FutureSource and eSignal offerings, and launching an upgraded version of its Quote.com financial portal.
Full-Year 2007 Results
For the full year ended December 31, 2007, Interactive Data reported revenue of $689.6 million versus $612.4 million in 2006, an increase of $77.2 million, or 12.6%. Foreign exchange contributed $16.5 million to full-year 2007 revenue. Total costs and expenses increased $46.2 million, or 9.9%, to $514.0 million in 2007. Net income in 2007 increased 34.9% to $126.0 million, or $1.30 per diluted share, from $93.4 million, or $0.98 per diluted share, in 2006. The effective tax rate for 2007 was 31.8% compared with 38.1% for 2006, a decrease of 6.3 percentage points primarily due to favorable changes in German tax rates (1.3 percentage points), the impact of an R&D tax credit initiative spanning both 2006 and 2007 (1.3 percentage points), the release of certain tax reserves associated with the expiration of the statute of limitations in various tax jurisdictions (0.7 percentage points), interest expense deduction in Germany spanning both 2006 and 2007 (1.3 percentage points), and other items (1.7 percentage points).
Cash Position, Stock Buyback Activities, and Quarterly Cash Dividend:
As of December 31, 2007, Interactive Data had no outstanding debt and had cash, cash equivalents and marketable securities of $278.9 million. During the fourth quarter of 2007, Interactive Data spent $4.2 million to repurchase 140,200 shares of common stock at an average purchase price of $30.17 per share. In December 2007, Interactive Data’s Board of Directors authorized the expansion of the existing stock buyback program by an additional two million shares. Entering 2008, 2,770,900 shares remained available for repurchase under the existing buyback program.
During the fourth quarter of 2007, Interactive Data spent $11.8 million to pay its fourth consecutive quarterly cash dividend of $0.125 per share to stockholders.
In December 2007, Interactive Data’s Board of Directors declared a special dividend of $0.50 per share, which was paid on January 24, 2008 to stockholders of record on January 4, 2008. The Company's Board of Directors also approved a 20 percent increase in the regular quarterly cash dividend to $0.15 per share, commencing with the dividend that will be paid on March 31, 2008 to stockholders of record on March 3, 2008.
Our outlook for 2008 is as follows:
o 2008 revenue growth over 2007 on a percentage basis is expected to be in the range of 7% to 9%.
o Income from operations is expected to grow in the range of 9% to 11%.
o Our 2008 effective tax rate is expected to be in the range of 36% to 38%.
o As a result of the anticipated increase in the 2008 effective tax rate, net income growth in 2008 on a percentage basis is expected to be in the range of 3% to 6%.
o Capital expenditures in 2008 are expected to be in the range of $45 million to $47 million with investments mainly focused on scaling the Company’s real-time datafeed and managed solutions infrastructures.