Interactive Data Reports Second Quarter 2014 Results

NEW YORK, NY–(Marketwired – Jul 24, 2014) – Interactive Data Corporation today reported its financial results for the second quarter ended June 30, 2014. Interactive Data’s second quarter 2014 revenue was $232.1 million, a 3.1% increase from $225.1 million in the second quarter of 2013. Excluding the impact of changes in foreign exchange rates, Interactive Data’s organic (non-GAAP) revenue for the second quarter of 2014 grew by 1.3% from the same quarter last year. 

Interactive Data’s second quarter 2014 income from operations was $27.9 million, compared with $49.6 million in the second 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 second quarter of 2014 was $86.9 million, compared with $88.3 million in the same period one year ago. 

“Our second quarter results reflect our ability to navigate the relatively sluggish spending environment that has persisted into 2014,” stated Stephen Daffron, Interactive Data’s president and CEO. “We have continued to produce organic revenue growth due to the combination of modest growth in our Pricing and Reference Data segment in North America and solid expansion within our 7ticks trading infrastructure managed services area. Our adjusted EBITDA results reflect our efforts to remain vigilant in controlling costs while continuing to direct investment into the product development and technology infrastructure initiatives that we believe will help us accelerate our top-line and bottom-line expansion over the long term.” 

Segment Reporting and Related Operating Highlights

Pricing and Reference Data Segment:

• Interactive Data’s Pricing and Reference Data segment reported second-quarter 2014 revenue of $165.8 million, a 3.6% increase over $160.1 million in the second quarter of 2013. Excluding the impact of changes in foreign exchange rates, second quarter 2014 organic (non-GAAP) revenue for this segment increased by 2.2% 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. Key highlights during the second quarter of 2014 included Interactive Data’s continued progress expanding its services in support of leading index providers such as Barclays Risk Analytics and Index Solutions and MSCI. In May, Interactive Data expanded its NY Close International Fixed Income Evaluation Services to include coverage of sovereign and corporate bonds issued in the Asia‐Pacific region. In addition, BondEdge Solutions announced a new suite of equity analysis and reporting tools and also launched BondEdge Advance, a web-based solution that enables broker dealers and asset managers to easily and cost-effectively perform comprehensive fixed income analysis functions for their clients.

Trading Solutions Segment:

• Interactive Data’s Trading Solutions segment generated second quarter 2014 revenue of $66.3 million, an increase of 1.9% over $65.0 million in the same period one year ago. Excluding the impact of changes in foreign exchange rates, second quarter 2014 organic (non-GAAP) revenue for this segment declined 0.8% from the same period last year as growth in the 7ticks trading infrastructure managed services product area was more than offset by a modest decline in other key product areas. In May 2014, Interactive Data announced that Joachim Lauterbach, an experienced financial technology industry executive, was appointed as president and global head of its Managed Solutions business which develops, operates, and hosts customized financial portals and mobile solutions as well as desktop terminals designed for retail and private banks, investment companies, online brokers, exchanges, and media portals. Other recent highlights for the segment included continued enhancement of the Company’s range of workstation platforms, including the launch of a new version of eSignal and a related alliance that allows eSignal users to directly access social media sentiment indicators from industry leaders such as Market Prophit. 

Other Second Quarter 2014 Financial and Operating Highlights

Effects of Foreign Exchange:

• The net effect of changes in foreign exchange rates increased second quarter 2014 income from operations by $0.6 million. 

Refinancing Activity:

• As previously announced, in early May Interactive Data 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. Net proceeds from these activities, along with approximately $94 million in cash, were used to refinance its $1.3 billion existing Term Loan, redeem Interactive Data’s $700 million 10.25% Senior Notes due 2018, pay related fees and expenses, and fund a $273 million dividend payment to Igloo Holdings Corporation, its parent entity, which in turn paid a dividend to its equity holders. 

  The Company is not reporting Pro Forma Adjusted EBITDA (also referred to as Covenant EBITDA) within this second quarter earnings release. The new senior secured credit facility contains a definition of Covenant EBITDA that differs from the definition of Covenant EBITDA in the previous senior secured credit facility. The Company is currently evaluating Covenant EBITDA under the new definition and will report on Covenant EBITDA in connection with its third quarter earnings release.

Balance Sheet Highlights:

• As of June 30, 2014, Interactive Data had cash, cash equivalents and short-term investments of $254.8 million, compared with $326.9 million last quarter, $289.3 million at the same time last year and $360.2 million at the end of 2013. The Company’s cash position reflected the aforementioned use of $94 million as part of the May 2014 financing activity. The Company’s total debt outstanding as of June 30, 2014 was approximately $2.25 billion compared to approximately $2.0 billion as of the same time last year. 

First Half 2014 Results

• For the first six months ended June 30, 2014, Interactive Data reported revenue of $466.5 million, an increase of $17.9 million, or 4.0%, from $448.6 million in the same period last year. Excluding the effects of foreign exchange, organic revenue grew by 2.6% during the first half of 2014.
• Interactive Data’s first half 2014 income from operations was $68.8 million, compared with $93.0 million in the same period one year ago. For the first half 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 $168.6 million, compared with $171.4 million in the same period one year ago. 

Conference Call Information

Interactive Data Corporation will host a conference call to discuss the Company’s second quarter 2014 results on Friday, July 25, 2014 at 8:30 a.m. ET. The dial-in number for the conference call is (785) 424-1827 and the related access code is IDCQ214. For those who cannot listen to this broadcast, a replay of the call will be available from July 25 at 12:00 p.m. until Friday, August 1, 2014 at 12:00 p.m., and it can be accessed by dialing (402) 220-2672 or (800) 753-0348.

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, 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, 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. 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. 
• 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 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 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							Six Months Ended
			June 30,							June 30,
			2014			2013				2014			2013
REVENUE			$	232,081		$	225,110			$	466,479		$	448,614
COSTS AND EXPENSES:
		Cost of services		81,141			72,903				165,646			146,793
		Selling, general and administrative		86,070			62,268				158,428			126,001
		Depreciation		11,033			10,793				21,868			21,839
		Amortization		25,918			29,546				51,721			60,976
	Total costs and expenses			204,162			175,510				397,663			355,609
INCOME FROM OPERATIONS				27,919			49,600				68,816			93,005
		Interest expense, net		(32,470	)		(34,210	)			(66,053	)		(69,419	)
		Other income, net		14			14				654			347
		Loss on extinguishment of debt		(82,060	)		–				(82,060	)		(10,213	)
(LOSS) INCOME BEFORE INCOME TAXES				(86,597	)		15,404				(78,643	)		13,720
		Income tax (benefit) expense		(32,849	)		369				(39,984	)		(447	)
NET (LOSS) INCOME			$	(53,748	)	$	15,035			$	(38,659	)	$	14,167

INTERACTIVE DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(In thousands)
		June 30,				December 31,
		2014				2013
ASSETS		(Unaudited)
Assets:
Cash and cash equivalents		$	254,798			$	356,733
Short-term investments			–				3,445
Accounts receivable, net			159,821				133,997
Prepaid expenses and other current assets			27,535				25,733
Income tax receivable			–				6,804
Deferred tax assets			4,522				10,711
Total current assets			446,676				537,423
Property and equipment, net			203,208				185,552
Goodwill			1,648,069				1,637,202
Intangible assets, net			1,529,688				1,569,903
Deferred financing costs, net			27,723				32,737
Other assets			6,753				5,541
Total Assets		$	3,862,117			$	3,968,358
LIABILITIES AND EQUITY
Liabilities:
Accounts payable, trade		$	20,477			$	20,282
Accrued liabilities			85,929				105,842
Borrowings, current			19,000				25,356
Interest payable			3,452				30,233
Income taxes payable			1,405				3,057
Deferred revenue			32,204				19,639
Total current liabilities			162,467				204,409
Income taxes payable			3,427				13,566
Deferred tax liabilities			537,497				573,780
Other liabilities			57,971				57,547
Borrowings, net of current portion and original issue discount			2,201,771				1,940,150
Total Liabilities			2,963,133				2,789,452
Equity:
Common stock			–				–
Additional paid-in-capital			968,465				1,237,766
Accumulated loss			(127,715	)			(89,056	)
Accumulated other comprehensive income			58,234				30,196
Total Equity			898,984				1,178,906
Total Liabilities and Equity		$	3,862,117			$	3,968,358

INTERACTIVE DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In thousands)
			Six Months Ended June 30,
			2014				2013
Cash flows from operating activities:
Net (loss) income			$	(38,659	)		$	14,167
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
	Depreciation and amortization			73,589				82,815
	Amortization of deferred financing costs and accretion of debt discounts			6,991				8,140
	Deferred income taxes			(32,864	)			(2,944	)
	Non-cash stock-based compensation			8,467				1,726
	Non-cash interest expense			1,130				753
	Provision for doubtful accounts and sales credits			3,279				1,364
	Asset abandonment			3,275				–
	Loss on dispositions of fixed assets			7				9
	Loss on extinguishment of debt			82,060				10,213
	Portion of insurance settlement related to property and equipment			–				(2,485	)
	Changes in operating assets and liabilities, net			(67,423	)			(8,411	)
NET CASH PROVIDED BY OPERATING ACTIVITIES				39,852				105,347
Cash flows from investing activities:
	Purchase of property and equipment			(43,797	)			(33,881	)
	Proceeds of insurance settlement related to property and equipment			–				2,485
	Purchase of short-term investments			–				(3,335	)
	Proceeds from the sales of short-term investments			3,410				14,236
NET CASH USED IN INVESTING ACTIVITIES				(40,387	)			(20,495	)
Cash flows from financing activities:
	Principal payments on long-term debt			(1,995,213	)			(3,649	)
	Proceeds from issuance of long-term debt, net of issuance costs			2,166,442				–
	Payment of long-term debt issuance costs, net of proceeds			–				(1,009	)
	Principal payments on capital leases			(253	)			(198	)
	Payment of interest rate cap			(831	)			(831	)
	Capital contribution resulting from exercise of parent company stock options			1,963				–
	Capital contribution from parent company			9,715				–
	Return of capital to parent company			(272,895	)			–
	Dividend to parent company			(14,438	)			(14,277	)
	Capital reduction resulting from cash distribution to option holders			(2,928	)			(322	)
NET CASH USED IN FINANCING ACTIVITIES				(108,438	)			(20,286	)
	Effect of change in exchange rates on cash and cash equivalents			7,038				(11,496	)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS				(101,935	)			53,070
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD				356,733				224,597
CASH AND CASH EQUIVALENTS AT END OF PERIOD			$	254,798			$	277,667

RECONCILIATION OF NON-GAAP MEASURES
Total Organic (Non-GAAP) Revenue
(Revenue before Effects ofForeign Exchange)
(In thousands)
			Three Months Ended										Six Months Ended
			June 30,										June 30,
			2014				2013			Change			2014   2013  Change
Total revenue			$	232,081			$	225,110		3.1	%		$	466,479			$	448,614		4.0	%
	Total effects of foreign exchange			(3,970	)			–		–				(6,212	)			–		–
Total organic (non-GAAP) revenue			$	228,111			$	225,110		1.3	%		$	460,267			$	448,614		2.6	%

Interactive Data Pricing and Reference Data Segment
Organic (Non-GAAP) Revenue
(Revenue before Effects ofForeign Exchange)
(In thousands)
		Three Months Ended										Six Months Ended
		June 30,										June 30,
		2014				2013			Change			2014				2013			Change
Pricing and Reference Data revenue		$	165,830			$	160,103		3.6	%		$	328,773			$	317,579		3.5	%
	Effects of foreign exchange		(2,207	)			–		–				(3,286	)			–		–
Total organic (non-GAAP) revenue		$	163,623			$	160,103		2.2	%		$	325,487			$	317,579		2.5	%

Interactive Data Trading Solutions Segment
Organic (Non-GAAP) Revenue
(Revenue before Effects ofForeign Exchange)
(In thousands)
			Three Months Ended										Six Months Ended
			June 30,										June 30,
			2014				2013			Change			2014				2013			Change
Trading Solutions revenue
	Real-Time Feeds and Trading Infrastructure Services		$	29,065			$	27,034		7.5	%		$	62,079			$	54,636		13.6	%
	Hosted Web Applications and Workstations			37,186				37,973		-2.1	%			75,627				76,399		-1.0	%
Total Trading Solutions revenue			$	66,251			$	65,007		1.9	%		$	137,706			$	131,035		5.1	%
	Effects of foreign exchange			(1,763	)			–		–				(2,926	)			–		–
Total organic (non-GAAP) revenue			$	64,488			$	65,007		-0.8	%		$	134,780			$	131,035		2.9	%

RECONCILIATION OF NON-GAAP MEASURES (CONTINUED)
Non-GAAP Adjusted EBITDA1
(In thousands, except margin data)
			Three Months Ended								Six Months Ended
			June 30,								June 30,
			2014				2013				2014				2013
Net (loss) income			$	(53,748	)		$	15,035			$	(38,659	)		$	14,167
	Interest expense, net			32,470				34,210				66,053				69,419
	Other income, net			(14	)			(14	)			(654	)			(347	)
	Income tax (benefit) expense			(32,849	)			369				(39,984	)			(447	)
	Depreciation and amortization			36,951				40,339				73,589				82,815
EBITDA			$	(17,190	)		$	89,939			$	60,345			$	165,607
Adjustments:
	Non-cash stock-based compensation			7,325				874				8,467				1,726
	Other non-recurring charges2			90,663				818				91,193				12,600
	Other charges (income)3			6,110				(3,335	)			8,582				(8,497	)
		Total Adjustments		104,098				(1,643	)			108,242				5,829
Adjusted EBITDA			$	86,908			$	88,296			$	168,587			$	171,436
Adjusted EBITDA Margin4				37.4	%			39.2	%			36.1	%			38.2	%

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. 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 loss on extinguishment of debt ($82.1 million in the six months ended June 30, 2014 and $10.2 million in the six months ended June 30, 2013), facility consolidation costs, and certain severance and retention expenses.

3 Other charges (income) include, as applicable, insurance recoveries, management fees, non-cash foreign exchange expense, acquisition-related adjustments, certain professional fees and other costs.

4 Adjusted EBITDA margin is calculated by dividing adjusted EBITDA by total revenue.

RECONCILIATION OF NON-GAAP MEASURES (CONTINUED)
Trailing Four Quarters and Trailing Twelve Months
Quarterly Non-GAAP Adjusted EBITDA1
(In thousands, except margin data)
																				Trailing Twelve
				Three Months Ended																Months Ended
				September 30,				December 31,				March 31,				June 30,				June 30,
				2013				2013				2014				2014				2014
Net income (loss)				$	14,132			$	5,207			$	15,089			$	(53,748	)		$	(19,320	)
	Interest expense, net				34,198				34,011				33,583				32,470				134,262
	Other income, net				–				–				(640	)			(14	)			(654	)
	Income tax (benefit) expense				(7,170	)			2,605				(7,135	)			(32,849	)			(44,549	)
Depreciation and amortization					37,859				38,739				36,638				36,951				150,187
EBITDA				$	79,019			$	80,562			$	77,535			$	(17,190	)		$	219,926
Adjustments:
	Non-cash stock-based compensation				1,067				1,153				1,142				7,325				10,687
	Other non-recurring charges2				435				5,143				530				90,663				96,771
	Other charges3				7,343				2,237				2,472				6,110				18,162
		Total Adjustments			8,845				8,533				4,144				104,098				125,620
Adjusted EBITDA				$	87,864			$	89,095			$	81,679			$	86,908			$	345,546
Adjusted EBITDA Margin4					39.2	%			38.4	%			34.8	%			37.4	%			37.4	%

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. Please note that the sum of certain amounts may note equal the total due to rounding.

2 Other non-recurring charges include, as applicable, the loss on extinguishment of debt ($82.1 million in the six months ended June 30, 2014), facility consolidation costs, and certain severance and retention expenses.

3 Other charges include, as applicable, insurance recoveries, management fees, non-cash foreign exchange expense, acquisition-related adjustments, certain professional fees and other costs.

4 Adjusted EBITDA margin is calculated by dividing adjusted EBITDA by total revenue.

Non-GAAP Free Cash Flow
(In thousands)
		Three Months Ended									Six Months Ended
		June 30,									June 30,
		2014			2013			Change			2014			2013			Change
Adjusted EBITDA		$	86,908		$	88,296		-1.6	%		$	168,587		$	171,436		-1.7	%
	Capital Expenditures		22,968			17,527		31.0	%			43,797			33,881		29.3	%
Free Cash Flow		$	63,940		$	70,769		-9.6	%		$	124,790		$	137,555		-9.3	%