The acquisition of Interactive Data by Silver Lake and Warburg Pincus is imminent, but it seems the private equity firms may have a job on their hands to rationalise costs and pull the data vendor back into the black. Following a disappointing first quarter, with a net income decrease of 7.6% from the previous year’s figures, Interactive Data’s second quarter has also been tough in terms of income and the vendor has experienced a 31.4% drop in net income on 2009’s figures for the same quarter. The vendor’s Pricing and Reference Data business however, has seen healthy revenue growth of 1.5%, contributing to the overall revenue growth of 4.9% across its business lines.
So, revenues are up on the previous year, with the vendor bringing in US$194.0 million for the quarter in comparison to the US$185.0 million in the second quarter of 2009, but income is down. Income from operations in the second quarter of 2010 was US$35.5 million, compared with US$50.6 million in the same period one year ago. Net income attributable to Interactive Data for the second quarter of 2010 was US$25.2 million, or US$0.26 per diluted share, compared with net income of US$33.1 million, or US$0.34 per diluted share, in the second quarter of 2009.
Of course, the acquisition has impacted the income equation, along with a recent spate of hires to support the vendor’s push in the evaluated pricing space. Costs related to the acquisition are cited as US$11.9 million for the quarter. A costly manoeuvre then, but one that all parties are hoping will pay off, once the Ts are crossed and the Is are dotted in a few of weeks’ time.
Ray D’Arcy, Interactive Data’s president and CEO, indicates that the parties have made “substantial progress” towards signing the deal off once and for all. Once this has happened, he is hoping to leverage the vendor’s new ownership structure to become much more competitive in the market and tackle some of the much needed systems rationalisations across the business lines it has acquired over the years. Even though Interactive Data is number three in the market at the moment, D’Arcy is keen to catch up to arch rivals Thomson Reuters and Bloomberg.
To this end, the vendor’s Pricing and Reference Data business has performed well so far this year; last quarter it achieved a 3.8% increase in revenue for the business line over the previous year’s figures. This quarter has seen slightly more modest growth for the business, with a revenue increase of 1.5% to US$125.0 million over the previous year’s second quarter.
D’Arcy is, unsurprisingly, pleased that the division has continued to grow: “We continue to be pleased with the ongoing strength displayed within our fixed income evaluations and reference data services, particularly in the US.”
The vendor has been steadily adding to its evaluated pricing offerings over the last quarter and has broadened the capabilities for its interest rate swap (IRS) service, and introduced new technology and internal workflows to enhance its corporate actions service. Interactive Data is also working towards expanding its customer base for its new Options Volatility Service and for its complex OTC derivatives and structured products valuations. To this end, last month it announced that it had bagged six new financial institution clients for the service, including online broker SogoTrade.