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Interactive Data Reports Third Quarter 2014 Results

Interactive Data Corporation today reported its financial results for the third quarter ended September 30, 2014. Interactive Data’s third quarter 2014 revenue was $233.5 million, a 4.1% increase from $224.3 million in the third quarter of 2013. Excluding the impact of changes in foreign exchange rates, Interactive Data’s organic (non-GAAP) revenue for the third quarter of 2014 grew by 2.8% from the same quarter last year. 

Interactive Data’s third quarter 2014 income from operations was $58.1 million, compared with $41.2 million in the third quarter of 2013. Non-GAAP adjusted EBITDA (which excludes items that are either not part of the Company’s ongoing core operations, or do not require a cash outlay, or are not otherwise expected to recur in the ordinary course) for the third quarter of 2014 was $93.5 million, compared with $88.5 million in the same period one year ago. 

“During the third quarter we continued to produce revenue growth even as market conditions remained challenging,” stated Stephen Daffron, Interactive Data’s president and CEO. “Our organic revenue growth in the quarter was driven by continued growth in our Pricing and Reference Data segment, as well as expansion within our 7ticks trading infrastructure managed services area. We generated adjusted EBITDA growth of 5.6% in the quarter as we continue to take steps to prudently manage our cost structure.” 

Segment Reporting and Related Operating Highlights 

Pricing and Reference Data Segment: 
 
• Interactive Data’s Pricing and Reference Data segment reported third quarter 2014 revenue of $166.9 million, a 4.8% increase over $159.2 million in the third quarter of 2013. Excluding the impact of changes in foreign exchange rates, third quarter 2014 organic (non-GAAP) revenue for this segment increased by 3.8% from the same period last year. The segment’s performance reflects continued growth in the Company’s evaluated pricing and reference data services in North America. In August, the Company launched its Continuous Fixed Income Evaluated Pricing Service, which provides clients with greater pre-trade transparency support and price discovery capabilities on a continuous basis throughout the trading day. We believe this is a unique capability in the industry. 

Trading Solutions Segment: 

• Interactive Data’s Trading Solutions segment generated third quarter 2014 revenue of $66.6 million, an increase of 2.2% over $65.2 million in the same period one year ago. Excluding the impact of changes in foreign exchange rates, third quarter 2014 organic (non-GAAP) revenue for this segment increased 0.5% from the same period last year as growth in the 7ticks trading infrastructure managed services product area was mostly offset by declines in our other Trading Solutions product areas. We are continuing our investment in the coverage, quality, features, and functionality of our real-time Consolidated Feed offering. 

Other Third Quarter 2014 Financial and Operating Highlights 

Effects of Foreign Exchange: 

• The net effect of changes in foreign exchange rates increased third quarter 2014 income from operations by $0.7 million. 

Refinancing Activity; Adjusted EBITDA: 

• As previously announced, in early May Interactive Data refinanced its debt and entered into a new $2.1 billion senior secured credit facility, consisting of a five-year $160 million Revolver (currently unfunded) and a seven year $1.9 billion Term Loan. Additionally, the Company completed the offering of $350 million in aggregate principal amount 5.875% Senior Notes due 2019. 

As previously disclosed, the new credit agreement contains modified definitions that impact both Adjusted EBITDA and Covenant EBITDA. In order to provide consistency, we have reported Adjusted EBITDA for all periods presented, calculated under the new definitions within the new senior secured credit facility. The Company expects to be in a position to report on Covenant EBITDA when fourth quarter and full-year results are made available. 

Balance Sheet Highlights: 

• As of September 30, 2014, Interactive Data had cash, cash equivalents and short-term investments of $304.6 million, compared with $254.8 million last quarter, $313.6 million at the same time last year and $360.2 million at the end of 2013. The Company’s cash position as of September 30, 2014 reflects the 2014 use of approximately $94 million in cash, which together with the net proceeds of the new debt described above, was used to refinance the Company’s existing debt and fund a dividend to Igloo Holdings Corporation, our parent entity, who in turn paid a dividend to its equity holders. The Company’s total debt outstanding as of September 30, 2014 was approximately $2.25 billion compared to approximately $2.0 billion as of the same time last year. 

Results for the Nine Months Ended September 30, 2014 

• For the nine months ended September 30, 2014, Interactive Data reported revenue of $699.9 million, anincrease of $27.0 million, or 4.0%, from $672.9 million in the same period last year. Excluding the effects of foreign exchange, organic revenue growth was 2.7% during the first nine months of 2014. 

• For the nine months ended September 30, 2014, Interactive Data reported income from operations of $126.9 million, compared with $134.2 million in the same period one year ago. For the first nine months of 2014, non-GAAP adjusted EBITDA (which excludes items that are not part of the Company’s ongoing core operations, or do not require a cash outlay, or are not otherwise expected to recur in the ordinary course) was $264.1 million, compared with $262.1 million in the same period one year ago. 

Non-GAAP Information 

In addition to presenting our results in accordance with generally accepted accounting principles (GAAP) in this press release, we also disclose the following non-GAAP information: 

• Management includes information regarding organic revenue. Organic revenue excludes the impact of foreign exchange rate fluctuations, as well as, if applicable, the contribution of businesses recently acquired (and related intercompany eliminations). Management believes reporting organic revenue is useful information for stakeholders as it facilitates a fuller understanding of period-to-period changes in revenue and underlying business trends. 

• Management includes organic revenue for our Pricing and Reference Data and Trading Solutions segments because management believes this additional level of detail provides further insight into underlying performance trends. 

• Management includes information regarding earnings before interest, other income, income taxes, depreciation and amortization (EBITDA) and adjusted EBITDA. Adjusted EBITDA is defined as earnings before interest, other income, income taxes, depreciation and amortization, stock-based compensation expense, and other non-cash, non-operational or non-recurring items, in each case as applicable for the underlying periods. Management considers adjusted EBITDA to be an important indicator of the Company's operational profitability and cash generation strength. Management also believes these metrics provide transparency into and useful information regarding the Company's operating results, because items that are either not part of the Company's ongoing core operating expenses, do not require a cash outlay, or are not otherwise expected to recur in the ordinary course of business are eliminated. 

• Management includes information regarding free cash flow, which we define as adjusted EBITDA less capital expenditures. Management considers free cash flow to be an important measure of the Company's cash generation strength that supports the Company’s ability to repay its debt obligations and invest in future growth through new business development activities or acquisitions. 

• Management uses these non-GAAP financial measures, in addition to GAAP financial measures, as the basis for measuring the Company’s core operating performance and comparing current period performance to that of prior periods, and to the performance of our competitors. Such measures are also used by management in their financial and operating decision-making, and for forecasting and planning purposes. 

• The non-GAAP financial measures of the Company’s results of operations included in this press release should not be considered in isolation from comparable measures determined in accordance with GAAP. The non-GAAP financial measures should not be considered to be superior to, or a substitute for, the Company’s results of operations prepared in accordance with  GAAP. Reconciliations of such non-GAAP financial measures to the comparable GAAP inancial measures are set forth in the accompanying tables. The non-GAAP measures presented may not be comparable to similarly titled measures reported by other companies. 

Interactive Data Corporation is a trusted leader in financial information. Thousands of financial institutions and active traders, as well as hundreds of software and service providers, subscribe to our fixed income evaluations, reference data, real-time market data, trading infrastructure services, fixed income analytics, desktop solutions and web-based solutions. Interactive Data's offerings support clients around the world with mission-critical functions, including portfolio valuation, regulatory compliance, risk management, electronic trading and wealth management. Interactive Data has over 2,500 employees in offices worldwide.