Interactive Data Reports First-Quarter 2014 Results

NEW YORK, NY–(Marketwired – May 8, 2014) – Interactive Data Corporation today reported its financial results for the first quarter ended March 31, 2014. Interactive Data’s first-quarter 2014 revenue was a record $234.4 million, a 4.9% increase from $223.5 million in the first quarter of 2013. Excluding the impact of changes in foreign exchange rates, Interactive Data’s organic (non-GAAP) revenue for the first quarter of 2014 grew by 3.9% from the first quarter in 2013. 

Interactive Data’s first-quarter 2014 income from operations was $40.9 million, compared with $43.4 million in the first 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 first quarter of 2014 was $81.7 million, compared with $83.1 million in the same period one year ago.

“Interactive Data continued to grow despite the challenging spending environment,” stated Stephen Daffron, Interactive Data’s president and CEO. “Our organic revenue growth of 3.9% was primarily driven by the combination of continued expansion of our Pricing and Reference Data segment and a large customer implementation of our 7ticks trading infrastructure managed services. Our adjusted EBITDA performance reflected continued investment in key product and technology development initiatives, and hardware-related costs related to the 7ticks customer implementation. In early May, we completed a refinancing of the Company’s debt obligations, which resulted in both extended maturities and reduced cash interest expense. We believe this reflects positively on our outlook as well as the progress we have made to improve the fundamental operating performance of our Company over the past several years.”

Segment Reporting and Related Operating Highlights

Pricing and Reference Data Segment:

• Interactive Data’s Pricing and Reference Data segment reported first-quarter 2014 revenue of $162.9 million, a 3.5% increase over the first quarter of 2013. Excluding the impact of changes in foreign exchange rates, first-quarter 2014 organic (non-GAAP) revenue for this segment increased by 2.8% from the same period last year. The segment’s performance reflects growth in the Company’s evaluated pricing and reference data services in North America, and, to a lesser extent, improved results in its BondEdge fixed income analytics product area. During the first quarter, Interactive Data announced reference data collaborations with Bloomberg, Microsoft and SAP that are aimed at making the Company’s reference data content easier to integrate and use across a broad range of information technology and business intelligence systems. The segment has also continued to advance key development initiatives including the APEX(SM) suite of reference data delivery services, continuous evaluated pricing and Vantage(SM). 

Trading Solutions Segment:

• Interactive Data’s Trading Solutions segment generated first-quarter 2014 revenue of $71.5 million, an increase of 8.2% over $66.0 million in the same period one year ago. Excluding the impact of changes in foreign exchange rates, first-quarter 2014 organic (non-GAAP) revenue for this segment increased by 6.5% from the same period last year primarily as a result of a large customer implementation in the 7ticks trading infrastructure managed services product area. First-quarter 2014 highlights for the segment included launching a new version of a TREP feed handler, which enables integration of the Interactive Data Consolidated Feed with a customer’s market data platform. In addition, the segment also continued to invest in enhancing and expanding the content and analytics across its range of hosted web applications and workstation offerings. 

Other First-quarter 2014 Financial and Operating Highlights

Effects of Foreign Exchange:

• The net effect of changes in foreign exchange rates increased first-quarter 2014 income from operations by $0.5 million. 

Balance Sheet Highlights:

• As of March 31, 2014, Interactive Data had cash, cash equivalents and short-term investments of $326.9 million, compared with $360.2 million at the end of 2013 and $235.9 million at the same time last year. The Company’s cash position reflected debt-related payments in the first quarter of 2014 of $48.0 million associated with its senior notes and term loan, and a mandatory term loan prepayment of $7.9 million tied to 2013 excess cash flow. The Company’s total debt outstanding as of March 31, 2014 was approximately $2.0 billion. 

Refinancing Activity

• On May 2, 2014, Interactive Data completed a new $2.1 billion senior secured credit facility, consisting of a 5-year $160 million Revolver (unfunded at close) and a 7-year $1.9 billion term loan. Additionally, the Company completed the offering of $350 million in aggregate principal amount of 5.875% Senior Notes due 2019. Net proceeds from these activities, along with approximately $90 million in cash were used to refinance its $1.3 billion existing term loan, redeem the $700 million 10.25% Senior Notes due 2018, pay related fees and expenses, and fund a $273 million dividend payment to its parent entities, which in turn paid a distribution of approximately $273 million to their equity holders. As a result of the refinancing activity, the Company expects to reduce its annual cash interest expense by approximately $6 million in 2014, and, assuming our current interest rates and principal balance remain in place (subject to scheduled amortization), by over $10 million annually thereafter, versus full-year 2013 cash interest expense.
• The Company’s total debt outstanding as of May 2, 2014 was approximately $2.3 billion. 

Conference Call Information

Interactive Data Corporation will host a conference call to discuss the Company’s first-quarter 2014 results on Friday, May 9, 2014 at 8:30 a.m. ET. The dial-in number for the conference call is (785) 424-1826 and the related access code is IDCQ114. For those who cannot listen to this broadcast, a replay of the call will be available from May 9 at 12:00 p.m. until Friday, May 16, 2014 at 12:00 p.m., and it can be accessed by dialing (402) 220-7230 or (800) 839-2670.

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, adjustments related to the amortization of acquisition-related deferred revenue, and 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, income taxes, depreciation and amortization (EBITDA) and adjusted EBITDA. Adjusted EBITDA is defined as earnings before interest, income taxes, depreciation and amortization, stock-based compensation expense, restructuring charges and benefits, adjustments related to the amortization of acquisition-related deferred revenue, and other non-cash, non-operational or non-recurring items, in each case as applicable for the underlying periods. In addition, management also includes information regarding pro forma adjusted EBITDA. Pro forma adjusted EBITDA is defined as earnings, excluding all of the above factors, as well as other adjustments permitted under the Company’s senior secured credit facilities. Management considers these non-GAAP measures to be important indicators 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 historical 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. The Company’s pro forma adjusted EBITDA measure is based on the definition of Consolidated EBITDA set forth in the agreements governing the Company’s senior secured credit facilities.
• 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. In addition, pro forma adjusted EBITDA is an important indicator of the Company’s current compliance (and future ability to comply) with the financial covenants set forth in the Company’s senior secured credit facilities.
• 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 financial 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.

Forward-looking and Cautionary Statements

This press release may contain forward-looking statements. Forward-looking statements include all statements that are not historical statements and include our statements regarding reduction of our annual interest expense and other statements discussing the Company’s goals, beliefs, strategies, objectives, plans, future financial conditions, future challenges and opportunities. Forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those indicated by such forward-looking statements. Important factors that could cause actual results to differ materially from those indicated by forward-looking statements include risks and uncertainties relating to: (i) the implementation of strategies designed to improve revenue and profit growth; (ii) the impact of cost-cutting pressures across the industries the Company serves; (iii) general worldwide economic conditions and related uncertainties; (iv) consolidation of financial services companies, within and across industries; (v) a decline in activity levels in the securities markets, weak or declining financial performance of market participants or the failure of market participants; (vi) the intensity of competition the Company faces; (vii) a prolonged outage at one of the Company’s data centers or other major disruptions of the Company’s computer operations or those of the Company’s suppliers, including outages or disruptions that result in the failure to timely deliver services or otherwise adversely impact the quality of the Company’s services; (viii) the Company’s ability to maintain relationships with its key suppliers and providers of market data; (ix) the Company’s ability to maintain relationships with service bureaus and custodian banks; (x) the need to develop new products and services, and to adapt to legal, regulatory, technology or other changes or new competitive offerings; (xi) the Company’s cost and operational optimization plans may not be effective or yield the expected efficiencies or may take longer than anticipated, including the Company’s unified technology platform project; (xii) risks related to the Company’s substantial leverage, including the Company’s ability to raise additional capital to fund operations or react to changes in the economy or the Company’s industry and market sectors, and the Company’s exposure to interest rate risk on its variable rate debt (to the extent the risk is not mitigated by any interest rate hedge and cap arrangements that may be in place from time to time); (xiii) the Company is subject to regulatory oversight and it provides services to financial institutions who are subject to regulatory oversight, and enforcement actions by regulatory agencies can be time-consuming, costly and could harm our Company’s reputation; (xiv) the Company’s ability to maintain its registered investment adviser status; (xv) the risks of doing business internationally; (xvi) intellectual property related risks, including any allegations that the Company infringes the intellectual property rights of others; (xvii) the Company’s ability to attract and retain qualified management and other key personnel; (xviii) the Company’s ability to negotiate and enter into any strategic acquisitions or alliance on favorable terms, if at all; and (xix) the Company’s ability to realize the anticipated benefits from any strategic acquisitions or alliances that it may be a party to. While the Company may elect to update forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so, even if management estimates change and, therefore, you should not rely on these forward-looking statements as representing the Company’s views as of any date subsequent to today.

About Interactive Data Corporation

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.

For more information, please visit www.interactivedata.com.

INTERACTIVE DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In thousands)
				Three Months Ended
				March 31,
				2014				2013
REVENUE				$	234,398			$	223,504
COSTS AND EXPENSES:
		Cost of services			84,505				73,890
		Selling, general and administrative			72,358				63,733
		Depreciation			10,835				11,046
		Amortization			25,803				31,430
	Total costs and expenses				193,501				180,099
INCOME FROM OPERATIONS					40,897				43,405
		Interest expense, net			(33,583	)			(35,209	)
		Other income, net			640				333
		Loss on extinguishment of debt			–				(10,213	)
INCOME (LOSS) BEFORE INCOME TAXES					7,954				(1,684	)
		Income tax benefit			(7,135	)			(816	)
NET INCOME (LOSS)				$	15,089			$	(868	)

INTERACTIVE DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(In thousands)
		March 31,				December 31,
		2014				2013
ASSETS		(Unaudited)
Assets:
Cash and cash equivalents		$	326,923			$	356,733
Short-term investments			–				3,445
Accounts receivable, net			159,436				133,997
Prepaid expenses and other current assets			22,293				25,733
Income tax receivable			4,059				6,804
Deferred tax assets			4,429				10,711
Total current assets			517,140				537,423
Property and equipment, net			193,855				185,552
Goodwill			1,640,568				1,637,202
Intangible assets, net			1,547,599				1,569,903
Deferred financing costs, net			30,535				32,737
Other assets			6,052				5,541
Total Assets		$	3,935,749			$	3,968,358
LIABILITIES AND EQUITY
Liabilities:
Accounts payable, trade		$	19,787			$	20,282
Accrued liabilities			82,168				105,842
Borrowings, current			8,422				25,356
Interest payable			12,306				30,233
Income taxes payable			1,312				3,057
Deferred revenue			29,258				19,639
Total current liabilities			153,253				204,409
Income taxes payable			3,309				13,566
Deferred tax liabilities			567,129				573,780
Other liabilities			57,259				57,547
Borrowings, net of current portion and original issue discount			1,950,947				1,940,150
Total Liabilities			2,731,897				2,789,452
Equity:
Common stock			–				–
Additional paid-in-capital			1,239,652				1,237,766
Accumulated loss			(73,967	)			(89,056	)
Accumulated other comprehensive income			38,167				30,196
Total Equity			1,203,852				1,178,906
Total Liabilities and Equity		$	3,935,749			$	3,968,358

INTERACTIVE DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In thousands)
				Three Months Ended March 31,
				2014				2013
Cash flows from operating activities:
Net income (loss)				$	15,089			$	(868	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
		Depreciation and amortization			36,638				42,476
		Amortization of deferred financing costs and accretion of debt discounts			3,955				4,184
		Deferred income taxes			(1,331	)			(5,312	)
		Non-cash stock-based compensation			1,142				852
		Non-cash interest expense			376				376
		Provision for doubtful accounts and sales credits			1,931				939
		Loss on extinguishment of debt			–				10,213
		Portion of insurance settlement related to property and equipment			–				(350	)
		Changes in operating assets and liabilities, net			(64,048	)			(34,159	)
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES					(6,248	)			18,351
Cash flows from investing activities:
		Purchase of property and equipment			(20,829	)			(16,354	)
		Proceeds of insurance settlement related to property and equipment			–				350
		Purchase of short-term investments			–				(3,335	)
		Proceeds from maturities and sales of short-term investments			3,410				14,236
NET CASH USED IN INVESTING ACTIVITIES					(17,419	)			(5,103	)
Cash flows from financing activities:
		Payment of long-term debt issuance costs, net of proceeds			–				(1,009	)
		Principal payments on long-term debt			(7,891	)			(3,649	)
		Principal payments on capital leases			(125	)			(98	)
		Payment of interest rate cap			(416	)			(416	)
		Capital contribution resulting from exercise of parent company stock options			685				–
		Capital contribution from parent company			26				–
		Capital reduction resulting from cash distribution to option holders			(295	)			–
NET CASH USED IN FINANCING ACTIVITIES					(8,016	)			(5,172	)
		Effect of change in exchange rates on cash and cash equivalents			1,873				(9,439	)
NET DECREASE IN CASH AND CASH EQUIVALENTS					(29,810	)			(1,363	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD					356,733				224,597
CASH AND CASH EQUIVALENTS AT END OF PERIOD				$	326,923			$	223,234

RECONCILIATION OF NON-GAAP MEASURES
Total Organic (Non-GAAP) Revenue
(Revenue before Effects of Deferred Revenue Adjustment and Foreign Exchange)
(In thousands)
			Three Months Ended
			March 31,
			2014				2013			Change
Total revenue			$	234,398			$	223,504		4.9	%
	Total effects of foreign exchange			(2,242	)			–		–
Total organic (non-GAAP) revenue			$	232,156			$	223,504		3.9	%

Interactive Data Pricing and Reference Data Segment
Organic (Non-GAAP) Revenue
(Revenue before Effects of Deferred Revenue Adjustment and Foreign Exchange)
(In thousands)
			Three Months Ended
			March 31,
			2014		2013		Change
Pricing and Reference Data Revenue			$ 162,943		$ 157,476		3.5%
	Effects of foreign exchange		(1,080)		–		–
Total organic (non-GAAP) revenue			$ 161,863		$ 157,476		2.8%

Interactive Data Trading Solutions Segment
Organic (Non-GAAP) Revenue
(Revenue before Effects of Deferred Revenue Adjustment and Foreign Exchange)
(In thousands)
			Three Months Ended
			March 31,
			2014				2013			Change
Trading Solutions Revenue
	Real-Time Feeds and Trading Infrastructure Services		$	33,015			$	27,603		19.6	%
	Hosted Web Applications and Workstations			38,440				38,425		0.0	%
Total Trading Solutions Revenue			$	71,455			$	66,028		8.2	%
	Effects of foreign exchange			(1,162	)			–		–
Total organic (non-GAAP) revenue			$	70,293			$	66,028		6.5	%

RECONCILIATION OF NON-GAAP MEASURES (CONTINUED)
Non-GAAP Adjusted EBITDA and Non-GAAP Pro Forma Adjusted EBITDA1
(In thousands, except margin data)
				Three Months Ended
				March 31,
				2014				2013
Net Income (Loss)				$	15,089			$	(868	)
	Interest expense, net				33,583				35,209
	Other income, net				(640	)			(333	)
	Income tax benefit				(7,135	)			(816	)
	Depreciation and amortization				36,638				42,476
EBITDA				$	77,535			$	75,668
Adjustments:
	Non-cash stock-based compensation				1,142				852
	Other non-recurring charges2				530				11,782
	Other charges (income)3				2,472				(5,162	)
		Total Adjustments			4,144				7,472
Adjusted EBITDA				$	81,679			$	83,140
Adjusted EBITDA Margin4					34.8	%			37.2	%
Other Adjustments
	Pro forma cost savings5				7,500				7,500
Pro Forma Adjusted EBITDA				$	89,179			$	90,640
Pro Forma Adjusted EBITDA Margin4					38.0	%			40.6	%

1	Interactive Data’s adjusted EBITDA excludes items that are either not part of the Company’s ongoing core operations, do not require a cash outlay or are not otherwise expected to recur in the ordinary course. In addition to excluding the aforementioned items, Interactive Data’s pro forma adjusted EBITDA also reflects other adjustments permitted under the Company’s senior secured credit facilities. The Company’s pro forma adjusted EBITDA measure is based on the definition of EBITDA set forth in the agreements governing the Company’s senior secured credit facilities. Please note that the sum of certain amounts may not equal the total due to rounding.
2	Other non-recurring charges include, as applicable, the impact of the deferred revenue adjustment, the loss on extinguishment of debt, facility consolidation costs, and certain severance and retention expenses.
3	Other charges (income) include, as applicable, insurance recoveries, management fees, earn-out revaluation expense, non-cash foreign exchange expense, acquisition-related adjustments, certain professional fees and other costs.
4	Adjusted EBITDA margin and pro forma adjusted EBITDA margin are calculated by dividing each EBITDA measure by total revenue.
5	Pro forma cost savings of up to a maximum of $30 million annually is an adjustment permitted under the Company’s credit agreements for activities that may include, but are not limited to, the consolidation of a number of legacy organizational silos, technology platforms and content databases.

RECONCILIATION OF NON-GAAP MEASURES (CONTINUED)
Trailing Four Quarters and Trailing Twelve Months
Quarterly Non-GAAP Adjusted EBITDA and Non-GAAP Pro Forma Adjusted EBITDA1
(In thousands, except margin data)
				Three Months Ended
				June 30,				September 30,				December 31,				March 31,				Trailing Twelve Months Ended March 31,
				2013				2013				2013				2014				2014
Net Income				$	15,035			$	14,132			$	5,207			$	15,089			$	49,463
	Interest expense, net				34,210				34,198				34,011				33,583				136,002
	Other income, net				(14	)			–				–				(640	)			(654	)
	Income tax expense (benefit)				369				(7,170	)			2,605				(7,135	)			(11,331	)
	Depreciation and amortization				40,339				37,859				38,739				36,638				153,575
EBITDA				$	89,939			$	79,019			$	80,562			$	77,535			$	327,055
Adjustments:
	Non-cash stock-based compensation				874				1,067				1,153				1,142				4,236
	Other non-recurring charges2				818				435				5,143				530				6,926
	Other (income) charges3				(3,335	)			7,343				2,237				2,472				8,717
		Total Adjustments			(1,643	)			8,845				8,533				4,144				19,879
Adjusted EBITDA				$	88,296			$	87,864			$	89,095			$	81,679			$	346,934
Adjusted EBITDA Margin4					39.2	%			39.2	%			38.4	%			34.8	%			37.9	%
Other Adjustments
	Pro forma cost savings5				7,500				7,500				7,500				7,500				30,000
Pro Forma Adjusted EBITDA				$	95,796			$	95,364			$	96,595			$	89,179			$	376,934
Pro Forma Adjusted EBITDA Margin4					42.6	%			42.5	%			41.6	%			38.0	%			41.1	%

1	Interactive Data’s adjusted EBITDA excludes items that are either not part of the Company’s ongoing core operations, do not require a cash outlay or are not otherwise expected to recur in the ordinary course. In addition to excluding the aforementioned items, Interactive Data’s pro forma adjusted EBITDA also reflects other adjustments permitted under the Company’s senior secured credit facilities. The Company’s pro forma adjusted EBITDA measure is based on the definition of EBITDA set forth in the agreements governing the Company’s senior secured credit facilities. Please note that the sum of certain amounts may not equal the total due to rounding.
2	Other non-recurring charges include, as applicable, the impact of the deferred revenue adjustment, the loss on extinguishment of debt, facility consolidation costs, and certain severance and retention expenses.
3	Other (income) charges include, as applicable, insurance recoveries, management fees, earn-out revaluation expense, non-cash foreign exchange expense, acquisition-related adjustments, certain professional fees and other costs.
4	Adjusted EBITDA margin and pro forma adjusted EBITDA margin are calculated by dividing each EBITDA measure by total revenue.
5	Pro forma cost savings of up to a maximum of $30 million annually is an adjustment permitted under the Company’s credit agreements for activities that may include, but are not limited to, the consolidation of a number of legacy organizational silos, technology platforms and content databases.

Non-GAAP Free Cash Flow
(In thousands)
			Three Months Ended
			March 31,
			2014			2013			Change
Adjusted EBITDA			$	81,679		$	83,140		-1.8	%
	Capital Expenditures			20,829			16,354		27.4	%
Free Cash Flow			$	60,850		$	66,786		-8.9	%