âWe are pleased with Interactive Dataâs second-quarter 2008 results, particularly in light of the turbulent market conditions,â stated Stuart Clark, president and chief executive officer. âOur strong second-quarter 2008 revenue growth of 9.5%, combined with disciplined spending, produced a 13.6% increase in income from operations and 15.1% net income growth. In addition, we enjoyed another quarter of significant cash generation. Organic revenue growth of 7.7% during the second quarter of 2008 reflects an outstanding performance at our Pricing and Reference Data business as well as continued momentum with our real-time datafeeds business.â
âDuring the second quarter of 2008, new sales activity was robust and renewal rates across our institutional businesses remained at approximately 95%,â Clark continued. âWe believe that our success in the marketplace and strong standing with our customers reflects the mission-critical nature of our core products and services, and our ability to help them address important trends that are affecting their businesses. An important highlight during the quarter was our agreement to acquire Klerâs Financial Data Service, a leading provider of reference data to the Italian financial industry. This acquisition will enable us to increase our presence in Italy and further expand the breadth and depth of valuable reference data that we collect and deliver to our clients worldwide.â
Andrew Hajducky, Interactive Dataâs executive vice president and chief financial officer, commented, âWe ended the second quarter with $254.8 million in cash, cash equivalents and marketable securities and no debt. Upcoming uses of cash include funding our recently approved regular quarterly dividend and the acquisition of Klerâs, which we anticipate will close within the next several weeks. With another good quarter of cash generation behind us and an array of exciting growth opportunities in front of us, we also plan to modestly accelerate our capital spending during the second half of 2008 against our original plan as we further fortify our technical infrastructure.â
Clark concluded, âWe have continued to implement key elements of our growth strategy aimed at delivering high-value services and expanding our business internationally. As a result of our recent acquisitions, strategic alliances and internal development activities, we are delivering compelling new services, adding innovative capabilities to our existing offerings, broadening our market coverage and scaling our infrastructure. We move forward well positioned to continue expanding our business with customers worldwide, and are on pace to deliver another year of solid financial results.â
Other Second-Quarter 2008 and Recent Financial and Operating Highlights
Effects of Foreign Exchange:
â¢ Interactive Data's second-quarter 2008 revenue was positively impacted by $2.3 million due to the effects of foreign exchange. Second-quarter 2008 revenue before the effects of foreign exchange grew by $13.9 million, or 8.2%, over the comparable period in 2007. Total costs and expenses in the second quarter of 2008 were negatively impacted by $2.4 million due to the effects of foreign exchange. Second-quarter 2008 total costs and expenses before the effects of foreign exchange increased by $7.8 million, or 6.2%, over the second quarter of 2007.
Revenue by Geography:
â¢ Interactive Dataâs total second-quarter 2008 revenue in North America grew 8.5% to $131.5 million from $121.3 million in the same period last year primarily due to growth within its Pricing and Reference Data business and continued institutional adoption of its real-time datafeed services. The Companyâs second-quarter 2008 revenue in Europe increased 10.9% to $49.9 million from $45.0 million in the comparable period one year ago (or increased by 6.7% before the effects of foreign exchange) due to strong results within its European Pricing and Reference Data business. Interactive Dataâs Asia-Pacific revenue of $4.7 million in the second quarter of 2008 was up 27.0% from $3.7 million in the second quarter of 2007 (or increased by 15.7% before the effects of foreign exchange) due primarily to strength in Australia.
â¢ A table summarizing revenue by geography, including the impact of foreign exchange and each major geographic region as a percentage of total revenue, has been included on page 12 of this press release.
Institutional Services Segment:
â¢ Interactive Data Pricing and Reference Data reported second-quarter 2008 revenue of $117.8 million, an 11.5% increase over the prior yearâs second quarter (or an increase of 11.2% before the effects of foreign exchange). Xcitek, which was acquired in May 2007, contributed incremental revenue of $0.8 million to the second quarter of 2008. Excluding the contributions from the Xcitek market data business that was acquired in May 2007, intercompany eliminations resulting from the Xcitek acquisition and the effects of foreign exchange, second-quarter 2008 revenue increased 10.5% over the same period last year. Revenue growth for this business in the second quarter of 2008 primarily reflects the expansion of business with existing customers in both North America and Europe. Recent highlights for this business included the agreement to acquire Klerâs and the introduction of enhanced valuation and reference data services.
â¢ Interactive Data Real-Time Services generated second-quarter 2008 revenue of $37.9 million, an increase of 11.3% over the same quarter last year (or an increase of 5.8% before the effects of foreign exchange). The revenue increase was driven by strong growth in the real-time datafeeds business and continued expansion of the Managed Solutions business in the United States. On July 1, 2008, Interactive Data Real-Time Services launched its new-generation, high-speed data distribution network, which is designed to effectively manage the anticipated rapid growth of data volumes.
â¢ Interactive Data Fixed Income Analytics reported revenue for the second quarter of 2008 of $8.1 million, which declined by 1.2% from last yearâs second quarter. New sales and one-time consulting project revenue were essentially offset by the impact of cancellations primarily caused by client consolidation activities.
Active Trader Services Segment:
â¢ eSignalâs second-quarter 2008 revenue of $22.3 million increased 1.2% from the same quarter last year (or an increase of 0.9% before the effects of foreign exchange). eSignal ended the second quarter of 2008 with nearly 62,000 direct subscription terminals, which is essentially unchanged from the same period one year ago. At the end of June, eSignal released eSignalÂ®10.1, an upgrade to its award-winning flagship software, and extended the enhancements in this upgrade across the eSignal ProÂ® and eSignal, Advanced GETÂ® Edition product lines.
â¢ For the six months ended June 30, 2008, Interactive Data reported revenue of $367.9 million, an increase of $35.4 million, or 10.6%, from $332.5 million for the comparable period in 2007. Total costs and expenses rose 7.7%, or $19.2 million, to $268.9 million in the first six months of 2008. Net income for the first six months of 2008 increased 20.2% to $65.8 million, or $0.68 per diluted share, from $54.8 million, or $0.57 per diluted share, in the comparable period of 2007. The tax rate for the first six months of 2008 was 36.2% compared with 36.9% in the same period last year and 31.8% for the full year 2007.
Cash Position, Stock Buyback Activities, and Quarterly Cash Dividend:
â¢ As of June 30, 2008, Interactive Data had no outstanding debt and had cash, cash equivalents and marketable securities of $254.8 million. During the second quarter of 2008, Interactive Data spent $14.2 million to repurchase 512,000 shares of common stock at an average purchase price of $27.74 per share as part of its existing stock buyback program. Entering the third quarter of 2008, more than 1.8 million shares remained available for repurchase under the existing stock buyback program. During the second quarter of 2008, Interactive Data paid $14.1 million to stockholders in connection with its regular quarterly dividend of $0.15 per share to stockholders. On July 16, 2008, Interactive Data announced that its Board of Directors declared a quarterly cash dividend of $0.15 per share of Interactive Data common stock payable on September 26, 2008 to stockholders of record on September 5, 2008.
Klerâs Financial Data Service S.r.l. Acquisition:
â¢ On June 26, 2008, Interactive Data announced an agreement to acquire Klerâs Financial Data Service S.r.l., a leading provider of reference data to the Italian financial industry, for a purchase price of â¬19.0 million (or approximately $29.9 million based on current exchange rates) in cash. The transaction is expected to be completed early in the third quarter of 2008, contingent upon customary closing conditions. This acquisition represents an important element in Interactive Dataâs strategy to expand its reference data services and to continue increasing its direct presence across continental Europe.
CEO Succession Plan
â¢ On May 21, 2008, Interactive Data announced that its Board of Directors initiated a CEO succession process after Stuart J. Clark informed the Board that he intends to retire as president and chief executive officer during 2009. Clark's current role as president and chief executive officer will remain unchanged through the succession process. Once his successor has been appointed by the Board, Clark plans to work closely with this executive to ensure an orderly, seamless transition of leadership before retiring.
â¢ We are updating our outlook for 2008 from prior guidance that was issued in February 2008 and reaffirmed in April 2008.
o 2008 revenue growth over 2007 on a percentage basis is now expected to be in the range of 8% to 10% compared with original guidance that called for revenue growth in the 7% to 9% range.
o Income from operations is now expected to grow in the range of 11% to 13% versus original guidance for income from operations growth in the 9% to 11% range.
o Our 2008 effective tax rate is still expected to be in the range of 36% to 38%.
o As a result of the anticipated increase in our 2008 effective tax rate over our 2007 effective tax rate and the expected impact of lower interest rates on interest income, we still anticipate that net income growth in 2008 on a percentage basis will be in the range of 3% to 6%.
o Due to the anticipated acceleration of investments aimed at enhancing the Companyâs technical infrastructure, capital expenditures in 2008 are now expected to be approximately $49 million, which exceeds original guidance in the range of $45 million to $47 million.
â¢ The Companyâs updated 2008 outlook does not include the impact of the Klerâs acquisition, which is expected to be completed within the next several weeks. Once completed, the contribution from Klerâs is not anticipated to have a material affect on the Companyâs updated 2008 outlook.