INTERACTIVE DATA REPORTS FOURTH-QUARTER AND FULL- YEAR 2014 RESULTS

Transcription

1 Press Release INTERACTIVE DATA REPORTS FOURTH-QUARTER AND FULL- YEAR 2014 RESULTS New York February 12, 2015 Interactive Data Corporation today reported its financial results for the fourth quarter and full year ended December 31, Interactive Data s fourth quarter 2014 revenue was $239.3 million, a 3.1% increase from $232.2 million in the fourth quarter of Excluding the impact of changes in foreign exchange rates, Interactive Data s organic (non-gaap) revenue for the fourth quarter of 2014 grew by 4.3% from the same quarter last year. Interactive Data s fourth quarter 2014 income from operations was $41.2 million compared to income from operations of $41.8 million in the fourth quarter of 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 fourth quarter of 2014 was $98.2 million, compared with $89.4 million in the same period one year ago. Interactive Data finished 2014 with strong operating performance and we are well positioned to generate continued revenue and profit growth in 2015, stated Stephen Daffron, Interactive Data s president and CEO. Our fourth quarter organic revenue growth of 4.3% was driven by a combination of growth in our Pricing and Reference Data segment and growth in our real-time feeds and 7ticks trading infrastructure businesses. We generated Adjusted EBITDA of $98.2 million during the quarter, reflecting our continued commitment to cost containment and driving operating efficiencies. Segment Reporting and Related Operating Highlights Pricing and Reference Data Segment: Interactive Data s Pricing and Reference Data segment reported fourth quarter 2014 revenue of $167.3 million, a 2.7% increase over $162.9 million in the fourth quarter of Excluding the impact of changes in foreign exchange rates, fourth quarter 2014 organic (non-gaap) revenue for this segment increased by 3.5% from the same period last year. The segment s performance reflects growth in the Company s evaluated pricing and reference data services across all geographic regions. Trading Solutions Segment: Interactive Data s Trading Solutions segment generated fourth quarter 2014 revenue of $72.0 million, an increase of 3.9% over $69.3 million in the same period one year ago. Excluding the impact of changes in foreign exchange rates, fourth quarter 2014 organic (non-gaap) revenue for this segment increased by 6.3% from the same period last year. Organic revenue growth was driven by recognition of both recurring and non-recurring revenue in the Company s 7ticks trading infrastructure services and real-time feeds product areas in connection with large client implementations. This growth was partially offset by declines in the segment s customized hosted web applications and workstations product areas.

2 Other Fourth Quarter 2014 Financial and Operating Highlights Operating Expenses: During the fourth quarter of 2014, the Company recorded $11.0 million of non-cash impairment expense related to previously capitalized development costs, and recorded $10.3 million of severance expense. Partially offsetting these charges was the positive impact of transactional foreign exchange on operating activities of $5.3 million and realized savings from other on-going cost cutting initiatives. Refinancing Activity; Adjusted EBITDA: As previously announced, in May 2014, 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 To facilitate period over period comparisons, the Company is reporting Adjusted EBITDA for all periods presented, as determined by reference to its May 2014 credit agreement. Accordingly, Adjusted EBITDA amounts reported for 2013 periods differ from previously reported Adjusted EBITDA amounts. Pro Forma Adjusted EBITDA is being reported only for the year ended December 31, Balance Sheet Highlights: As of December 31, 2014, Interactive Data had cash and cash equivalents of $319.7 million, compared with $304.6 million last quarter and $360.2 million of cash, cash equivalents and short term investments at the end of The Company s cash position as of December 31, 2014 reflects the 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, pay related costs and expenses, and fund a $272.9 million cash dividend to Igloo Holdings Corporation, our parent entity, who in turn made a cash distribution to its equity holders. The Company s total debt outstanding as of December 31, 2014 was approximately $2.2 billion compared to approximately $2.0 billion as of the same time last year. Full Year 2014 Results For the full year ended December 31, 2014, Interactive Data reported revenue of $939.2 million, an increase of $34.1 million, or 3.8%, from $905.1 million in the same period last year. Excluding the effects of foreign exchange, organic revenue growth was 3.1% during 2014 due largely to continued expansion throughout the year within the Company s Pricing and Reference Data segment, as well as the Company s 7ticks trading solutions infrastructure services and real-time feeds product areas. For the full year ended December 31, 2014, Interactive Data reported income from operations of $168.1 million, compared with $176.0 million in 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 $362.4 million in 2014, compared with $351.6 million in For the year ended December 31, 2014, Pro Forma Adjusted EBITDA (which represents Adjusted EBITDA plus an additional adjustment related to the expected pro forma impact of certain 2

3 planned cost savings initiatives) was $388.1 million. While this balance includes expected 12 month pro-forma run rate impact of cost savings initiatives currently quantified, additional cost savings initiatives are being actively explored. Conference Call Information Interactive Data Corporation will host a conference call to discuss the Company s fourth quarter 2014 results on Friday, February 13, 2015 at 8:30 a.m. ET. The dial-in number for the conference call is (785) and the related access code is IDCQ414. For those who cannot listen to this broadcast, a replay of the call will be available from February 13 at 12:00 p.m. until Friday, February 20, 2015 at 11:59 p.m., and it can be accessed by dialing (402) or (800) 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), Adjusted EBITDA and Pro Forma Adjusted EBITDA. Adjusted EBIDTA and Pro Forma Adjusted EBITDA are determined by reference to defined terms in the Company s May 2014 Credit Agreement. 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. Pro Forma Adjusted EBTIDA is defined as Adjusted EBITDA plus an additional adjustment related to the expected pro forma impact of certain planned cost savings initiatives. Management considers Adjusted EBITDA to be an important indicator of the Company's operational profitability and cash generation strength. Further, Management also believes reporting Adjusted EBITDA provides 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. Pro Forma Adjusted EBITDA is a metric that is used as a basis for determining certain leverage ratios under the Company s debt agreements. The leverage ratios are used in various ways, including determining the amount of any required excess cash flow payments. For this reason, management believes it is useful for investors to have information on this metric. 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 3

4 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 effectiveness of strategies designed to improve revenue and profit results; (ii) the impact of cost-cutting and cost containment 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, including unanticipated costs and expenses that may arise as the result of unfavourable resolution of third party data use audits conducted by such suppliers from time to time; (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 existing services to legal, regulatory, technology or other changes or new competitive offerings; (xi) the Company s cost and operational optimization plans may not yield the expected efficiencies or cost savings or may take longer than anticipated, including the Company s [unified technology platform project]; (xii) risks related to the Company s substantial leverage, including, without limitation, the need to dedicate substantial cash flow to pay interest and principal thereby reducing cash flow available to fund operations, capital expenditures and potential business opportunities and the Company s ability to raise additional capital (if required) to react to unexpected adverse changes in the economy, the Company s industry, or to repay the Company s Senior Notes due 2019; (xiii) risks related to the Sponsor control of the Company, including the power to cause the Company to dividend cash to service the Senior Notes Due 2017 issued by our parent company; (xiv) 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 the Company s reputation; (xv) the Company s ability to maintain its registered investment adviser status; (xvi) the risks of doing business internationally; (xvii) intellectual property related risks, including any allegations 4

5 that the Company infringes the intellectual property rights of others; (xviii) the Company s ability to attract and retain qualified management and other key personnel; (xix) the Company s ability to negotiate and enter into any strategic acquisitions or alliances on favorable terms, if at all; and (xx) 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 these forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so, even if current management estimates change or assumptions prove invalid 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 COMPANY CONTACTS Investors: Media: Vincent Chippari, Senior Vice President Anne O Brien, Senior Vice President, Marketing and Chief Financial Officer anne.obrien@interactivedata.com vincent.chippari@interactivedata.com 5

6 INTERACTIVE DATA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Unaudited December 31, December 31, REVENUE $ 239,271 $ 232,169 $ 939,201 $ 905,113 COSTS AND EXPENSES: Cost of services 92,903 77, , ,423 Selling, general and administrative 67,890 74, , ,289 Depreciation 12,426 10,683 45,924 42,537 Amortization 24,894 28, , ,876 Total costs and expenses 198, , , ,125 INCOME FROM OPERATIONS 41,158 41, , ,988 Interest expense, net (29,678) (34,011) (125,849) (137,628) Other income, net 961-1, Loss on extinguishment of debt - - (82,060) (10,213) INCOME (LOSS) BEFORE INCOME TAXES 12,441 7,812 (38,212) 28,494 Income tax expense (benefit) 12,468 2,605 (21,227) (5,012) NET (LOSS) INCOME $ (27) $ 5,207 $ (16,985) $ 33,506 6

7 INTERACTIVE DATA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS Unaudited ASSETS (Unaudited) Assets: Cash and cash equivalents $ 319,666 $ 356,733 Short-term investments - 3,445 Accounts receivable, net 143, ,997 Prepaid expenses and other current assets 17,809 25,733 Income tax receivable - 6,804 Deferred tax assets 30,856 10,711 Total current assets 511, ,423 Property and equipment, net 206, ,552 Goodwill 1,607,690 1,637,202 Intangible assets, net 1,438,138 1,569,903 Deferred financing costs, net 25,366 32,737 Other assets 6,752 5,541 Total Assets $ 3,796,513 $ 3,968,358 LIABILITIES AND EQUITY Liabilities: Accounts payable, trade $ 13,780 $ 20,282 Accrued liabilities 99, ,842 Borrowings, current 19,000 25,356 Interest payable 4,713 30,233 Income taxes payable 5,084 3,057 Deferred revenue 20,282 19,639 Total current liabilities 162, ,409 Income taxes payable 2,477 13,566 Deferred tax liabilities 561, ,780 Other liabilities 57,464 57,547 Borrowings, net of current portion and original issue discount 2,194,801 1,940,150 Total Liabilities 2,978,573 2,789,452 Equity: Common stock - - Additional paid-in-capital 959,082 1,237,766 Accumulated loss (106,041) (89,056) Accumulated other comprehensive (loss) income (35,101) 30,196 Total Equity 817,940 1,178,906 Total Liabilities and Equity $ 3,796,513 $ 3,968,358 7

8 INTERACTIVE DATA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Unaudited December 31, Cash flows from operating activities: Net (loss) income $ (16,985) $ 33,506 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization 148, ,413 Amortization of deferred financing costs and accretion of debt discounts 11,878 16,059 Deferred income taxes (25,940) (17,461) Non-cash stock-based compensation 13,916 3,946 Non-cash interest expense 1,130 1,507 Provision for doubtful accounts and sales credits 4,743 1,866 Asset impairment 14,265 - Loss on dispositions of fixed assets 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 Accounts receivable (17,000) (605) Prepaid expenses and other assets 5,536 (424) Accounts payable, interest payable and income taxes payable and receivable, net (33,230) 2,631 Accrued liabilities and other liabilities (1,475) 17,795 Deferred revenue 2, NET CASH PROVIDED BY OPERATING ACTIVITIES 189, ,232 Cash flows from investing activities: Purchase of property and equipment (84,152) (81,852) 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 22,857 NET CASH USED IN INVESTING ACTIVITIES (80,742) (59,845) Cash flows from financing activities: Principal payments on long-term debt (2,004,715) (9,786) 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 (499) (402) Payment of interest rate cap (1,247) (1,663) Capital contribution resulting from exercise of parent company stock options 2, Capital contribution from parent company 5,482 7,676 Return of capital to parent company (272,895) - Dividend to parent company (28,876) (28,715) Capital reduction resulting from cash distribution to option holders - (935) NET CASH USED IN FINANCING ACTIVITIES (133,881) (34,320) Effect of change in exchange rates on cash and cash equivalents (11,844) 69 NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (37,067) 132,136 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 356, ,597 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 319,666 $ 356,733 8

9 RECONCILIATION OF NON-GAAP MEASURES Total Organic (Non-GAAP) Revenue (Revenue before Effects of Foreign Exchange) Change Change Total revenue $ 239,271 $ 232, % $ 939,201 $ 905, % Total effects of foreign exchange 2, (6,017) - - Total organic (non-gaap) revenue $ 242,264 $ 232, % $ 933,184 $ 905, % Interactive Data Pricing and Reference Data Segment Organic (Non-GAAP) Revenue (Revenue before Effects of Foreign Exchange) Change Change Pricing and Reference Data revenue $ 167,269 $ 162, % $ 662,904 $ 639, % Effects of foreign exchange 1, (3,679) - - Total organic (non-gaap) revenue $ 168,600 $ 162, % $ 659,225 $ 639, % Interactive Data Trading Solutions Segment Organic (Non-GAAP) Revenue (Revenue before Effects of Foreign Exchange) Change Change Trading Solutions revenue Real-Time Feeds and Trading Infrastructure Services $ 35,227 $ 30, % $ 127,825 $ 112, % Hosted Web Applications and Workstations 36,775 38, % 148, , % Total Trading Solutions revenue $ 72,002 $ 69, % $ 276,297 $ 265, % Effects of foreign exchange 1, (2,340) - - Total organic (non-gaap) revenue $ 73,664 $ 69, % $ 273,957 $ 265, % 9

10 RECONCILIATION OF NON-GAAP MEASURES (CONTINUED) Non-GAAP Adjusted EBITDA and Pro Forma Adjusted EBITDA 1 (In thousands, except margin data) Net (Loss) Income $ (27) $ 5,207 $ (16,985) $ 33,506 Interest expense, net 29,678 34, , ,628 Other income, net (961) - (1,633) (347) Income tax expense (benefit) 12,468 2,605 (21,227) (5,012) Depreciation and amortization 37,320 38, , ,413 EBITDA $ 78,478 $ 80,562 $ 234,019 $ 325,188 Adjustments: Non-cash stock-based compensation 4,768 1,153 13,916 3,946 Other non-recurring charges 2 9, ,899 13,670 Other charges 3 5,848 7,073 12,534 8,746 Total Adjustments 19,756 8, ,349 26,362 Adjusted EBITDA $ 98,234 $ 89,437 $ 362,368 $ 351,550 Adjusted EBITDA Margin % 38.5% 38.6% 38.8% Other Adjustments Pro forma cost savings 25,772 Pro Forma Adjusted EBITDA $ 388,140 Pro Forma Adjusted EBITDA Margin % 1 Our presentation of Non-GAAP Adjusted EBITDA and Pro Forma Adjusted EBITDA has been determined by reference to certain defined terms in our credit agreement entered into in May 2014 (the May 2014 Credit Agreement ), w hich terms differ from similar defined terms in our prior credit agreement. Consequently, Adjusted EBITDA for the three and tw elve months ended December 31, 2013 differ from previously reported amounts. Adjusted EBITDA and Pro Forma Adjusted EBITDA reflects adjustments permitted under the May 2014 Credit Agreement and excludes items that are either not part of our ongoing core operations, do not require a cash outlay or are not otherw ise expected to recur in the ordinary course. Pro Forma Adjusted EBITDA reflects an additional adjustment related to the expected pro forma impact of certain planned cost savings initiatives. 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 tw elve months ended December 31, 2014 and $10.2 million in the tw elve months ended December 31, 2013), asset impairment charges, facility consolidation costs, retention expenses, certain professional fees, and certain other non-recurring charges that are permitted as adjustments under the terms of the May 2014 Credit Agreement. 3 Other charges include, as applicable, severance, management fees, non-cash foreign currency gain/loss, certain non-income taxes, and certain other adjustments permitted under the terms of the May 2014 Credit Agreement. 4 Adjusted EBITDA margin and Pro Forma Adjusted EBITDA margin are calculated by dividing each EBITDA measure by total revenue. 10

11 RECONCILIATION OF NON-GAAP MEASURES (CONTINUED) Non-GAAP Adjusted EBITDA and Pro Forma Adjusted EBITDA 1 (In thousands, except margin data) Trailing Twelve Months Ended March 31, June 30, September 30, Net Income $ 15,089 $ (53,748) $ 21,701 $ (27) $ (16,985) Interest expense, net 33,583 32,470 30,118 29, ,849 Other income, net (640) (14) (18) (961) (1,633) Income tax expense (benefit) (7,135) (32,849) 6,289 12,468 (21,227) Depreciation and amortization 36,638 36,951 37,106 37, ,015 EBITDA $ 77,535 $ (17,190) $ 95,196 $ 78,478 $ 234,019 Adjustments: Non-cash stock-based compensation 1,142 7, ,768 13,916 Other non-recurring charges ,513 1,716 9, ,899 Other (income) charges 3 2,856 7,925 (4,095) 5,848 12,534 Total Adjustments 4, ,762 (1,698) 19, ,349 Adjusted EBITDA $ 82,063 $ 88,572 $ 93,498 $ 98,234 $ 362,368 Adjusted EBITDA Margin % 38.2% 40.1% 41.1% 38.6% Other Adjustments Pro forma cost savings 25,772 Pro Forma Adjusted EBITDA $ 388,140 Pro Forma Adjusted EBITDA Margin % 1 Our presentation of Non-GAAP Adjusted EBITDA and Pro Forma Adjusted EBITDA has been determined by reference to certain defined terms in our credit agreement entered into in May 2014 (the May 2014 Credit Agreement ), w hich terms differ from similar defined terms in our prior credit agreement. Consequently, Adjusted EBITDA for the three months ended March 31, and June 30, 2014 differ from previously reported amounts. Adjusted EBITDA and Pro Forma Adjusted EBITDA reflects adjustments permitted under the May 2014 Credit Agreement and excludes items that are either not part of our ongoing core operations, do not require a cash outlay or are not otherw ise expected to recur in the ordinary course. Pro Forma Adjusted EBITDA reflects an additional adjustment related to the expected pro forma impact of certain planned cost savings initiatives. 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 tw elve months ended December 31, 2014), asset impairment charges, facility consolidation costs, retention expenses, certain professional fees, and certain other non-recurring charges that are permitted as adjustments under the terms of the May 2014 Credit Agreement. 3 Other charges include, as applicable, severance, management fees, non-cash foreign currency gain/loss, certain non-income taxes, and certain other adjustments permitted under the terms of the May 2014 Credit Agreement. 4 Adjusted EBITDA margin and Pro Forma Adjusted EBITDA margin are calculated by dividing each EBITDA measure by total revenue. Non-GAAP Free Cash Flow Change Change Adjusted EBITDA $ 98,234 $ 89, % $ 362,368 $ 351, % Capital Expenditures 19,498 27, % 84,152 81, % Free Cash Flow $ 78,736 $ 61, % $ 278,216 $ 269, % 11