RiskMetrics Group Reports Third Quarter 2009 Results
NEW YORK--(BUSINESS WIRE)--Nov. 3, 2009-- RiskMetrics Group Inc. (NYSE:RMG), a leading provider of risk management and corporate governance products and services to participants in the global financial markets, today announced its financial results for the third quarter ended
Earnings Highlights: See Tables C, D and H through K for a reconciliation of GAAP and Non-GAAP financial measures.
(Note: Percentage changes are referenced to the comparable period in fiscal year 2008, unless otherwise noted.)
- Third quarter 2009 revenues decreased 2.1% to
$74.0 million and revenue for the nine months endedSeptember 30, 2009 increased 2.7% to$226.9 million . - Third quarter 2009 Adjusted EBITDA increased 2.9% to
$25.8 million , with an Adjusted EBITDA margin of 34.8%. Adjusted EBITDA for the nine months endedSeptember 30, 2009 increased 14.3% to$82.3 million with an Adjusted EBITDA margin of 36.3%. - GAAP EPS for third quarter 2009 was
$0.11 , up from$0.09 in the prior year. - Adjusted EPS (before amortization of intangibles, one-time costs, and stock-based compensation) for the third quarter 2009 was
$0.19 , up from$0.16 in the prior year.
“Due to the decline in new sales and renewal rates during the first part of 2009, revenue growth has flattened compared to the prior year,” said
Selected Financial Information (unaudited)
All amounts (except share and per share information) are in thousands, unless indicated otherwise.
| TABLE A | Three Months Ended | ||||||||
| September 30, | |||||||||
| % | |||||||||
| 2009 | 2008 | Change | |||||||
| Revenues: | |||||||||
| Risk | $39,487 | $40,846 | (3.3 | )% | |||||
| ISS | 34,493 | 34,708 | (0.6 | )% | |||||
| Total Revenues | 73,980 | $75,554 | (2.1 | )% | |||||
| Operating Cost and Expenses: | |||||||||
| Adjusted EBITDA expenses (1) | 48,219 | 50,514 | (4.5 | )% | |||||
| Other operating expenses (2) | 10,566 | 9,853 | 7.2 | % | |||||
| Total operating costs and expenses | 58,785 | 60,367 | (2.6 | )% | |||||
| Income from operations | 15,195 | 15,187 | 0.1 | % | |||||
| Other expense | (4,986 | ) | (4,860 | ) | (2.6 | )% | |||
| Income before income taxes | 10,209 | 10,327 | (1.1 | )% | |||||
| Provision for income taxes | 2,426 | 4,045 | (40.0 | )% | |||||
| Net income – GAAP | $7,783 | $6,282 | 23.9 | % | |||||
| EPS (diluted) – GAAP | $0.11 | $0.09 | |||||||
| Adjusted Net income (3) | $13,030 | $10,937 | 19.1 | % | |||||
| Adjusted EPS (diluted) (3) | $0.19 | $0.16 | |||||||
| Adjusted EBITDA (4) | $25,761 | $25,040 | 2.9 | % | |||||
| Adjusted EBITDA margin | 34.8 | % | 33.1 | % | |||||
| Nine Months Ended | |||||||||
| September 30, | |||||||||
| % | |||||||||
| 2009 | 2008 | Change | |||||||
| Revenues: | |||||||||
| Risk | $119,102 | $114,110 | 4.4 | % | |||||
| ISS | 107,787 | 106,790 | 0.9 | % | |||||
| Total Revenues | 226,889 | $220,900 | 2.7 | % | |||||
| Operating Cost and Expenses: | |||||||||
| Adjusted EBITDA expenses (1) | 144,639 | 148,914 | (2.9 | )% | |||||
| Other operating expenses (2) | 31,808 | 30,646 | 3.8 | % | |||||
| Total operating costs and expenses | 176,447 | 179,560 | (1.7 | )% | |||||
| Income from operations | 50,442 | 41,340 | 22.0 | % | |||||
| Other expense | (15,252 | ) | (21,337 | ) | 28.5 | % | |||
| Income before income taxes | 35,190 | 20,003 | 75.9 | % | |||||
| Provision for income taxes | 11,669 | 7,828 | 49.1 | % | |||||
| Net income - GAAP | $23,521 | $12,175 | 93.2 | % | |||||
| EPS (diluted) - GAAP | $0.35 | $0.18 | |||||||
| Adjusted Net income (3) | $39,681 | $29,789 | 33.2 | % | |||||
| Adjusted EPS (diluted) (3) | $0.58 | $0.44 | |||||||
| Adjusted EBITDA (4) | $82,250 | $71,986 | 14.3 | % | |||||
| Adjusted EBITDA margin | 36.3 | % | 32.6 | % | |||||
* Exceeds 100%
(1) Represents cost of revenues, research and development, selling and marketing and general and administrative expenses, excluding stock-based compensation and one time charges. Refer to tables H through K for a reconciliation to the comparable GAAP measure.
(2) Represents depreciation and amortization of property and equipment, amortization of intangible assets, one-time costs, loss on disposal of property and equipment, and stock-based compensation. Refer to tables H through K for a reconciliation to the comparable GAAP measure.
(3) Represents net income and EPS before amortization of intangible assets, one-time costs, and stock-based compensation. Refer to table D for a reconciliation to the comparable GAAP measure.
(4) Represents net income before interest expense, interest income, income tax expense, depreciation, amortization, non-cash stock based compensation expense and one-time costs. Refer to table C for a reconciliation to the comparable GAAP measure.
Third Quarter 2009 Results Compared to Third Quarter 2008 Results
Third Quarter 2009 Revenues
Total revenues for the third quarter of 2009 (“Q3 2009”) were
Changes in foreign currency exchange rates (principally the strengthening of the US dollar) in Q3 2009 compared to Q3 2008 had a negative impact on consolidated revenue of
On a business segment level, Q3 2009 Risk revenues were
ISS revenues were
Third Quarter 2009 Adjusted EBITDA Expenses
Adjusted EBITDA expenses, which exclude depreciation and amortization of property and equipment, amortization of intangible assets, one-time costs, non-cash stock-based compensation expense, interest, dividend and investment income (expense) and income tax expense, of
Q3 2009 Adjusted EBITDA expenses of
Compensation expense, which accounted for 71.7% of total Adjusted EBITDA expenses, increased by 1.2% to
Non-compensation expenses decreased to
Adjusted EBITDA expenses represented approximately 65.2% of total revenues during Q3 2009, compared with 66.9% in Q3 2008.
Third Quarter 2009 Adjusted EBITDA
Consolidated Adjusted EBITDA increased 2.9% to
The Adjusted EBITDA margin expanded 170 basis points to 34.8% in Q3 2009, compared with 33.1% in Q3 2008 as Adjusted EBITDA expenses decreased 4.5%.
On a segment level, the Risk business generated Adjusted EBITDA of
ISS generated Adjusted EBITDA of
Third Quarter 2009 Other Operating Expenses and Income from Operations
Consolidated Q3 2009 income from operations of
Third Quarter 2009 Interest, Dividend, Investment and Other Income (Expense), Net
Net interest, dividend, investment and other expense of
Third Quarter 2009 Net Income and EPS
Net income for Q3 2009 of
Adjusted net income, as defined in Table D, increased to
Nine Months ended
Nine months 2009 Revenues
Total revenues for the nine months ended
On a business segment level, Risk revenues for the nine months ended
ISS revenues were
Nine months 2009 Adjusted EBITDA Expenses
Adjusted EBITDA expenses of
Compensation expense, which accounted for 70.8% of total Adjusted EBITDA expenses, increased by 1.7% to
Non-compensation expenses decreased to
Adjusted EBITDA expenses represented approximately 63.7% of total revenues during the nine months ended
Nine months 2009 Adjusted EBITDA
Consolidated Adjusted EBITDA increased 14.3% to
EBITDA, including stock based compensation expense of
The Adjusted EBITDA margin increased to 36.3% in the nine months ended
On a segment level, the Risk business generated Adjusted EBITDA of
ISS generated Adjusted EBITDA of
Nine months 2009 Other Operating Expenses and Income from Operations
Consolidated nine months 2009 income from operations was
Nine months 2009 Interest, Dividend, Investment and Other Income (Expense), Net
Net interest, dividend, investment and other expense decreased to
Nine months 2009 Net Income and EPS
Net Income increased to
The effective tax rate for the nine months ended
Adjusted net income, as defined in Table D, increased to
Selected Operating Data
The Company believes that the following supplemental consolidated financial information is helpful to understanding the Company’s overall financial results.
|
TABLE B | ||||
|
As of and for the | ||||
| Operating Data | 2009 | 2008 | ||
| Annualized Contract Value (1) | ||||
| Risk | $153,713 | $159,603 | ||
| % Decline | (3.7)% | |||
| ISS (2) | $122,929 | $128,486 | ||
| % Decline | (4.3)% | |||
| Annualized Contract Value |
$276,642 |
$288,089 | ||
| % Decline | (4.0)% | |||
| Recurring Revenue as a % of total revenue (3) | ||||
| Risk | 98.4% | 98.6% | ||
| ISS | 86.3% | 88.4% | ||
| Recurring Revenue as a % of total revenue. | 92.7% | 93.6% | ||
| Renewal Rate | ||||
| Risk | 81.3% | 88.9% | ||
| ISS | 81.8% | 88.0% | ||
| Renewal Rate | 81.5% | 88.5% | ||
Notes to Operating Data Table:
| (1) | We define annualized contract value (“ACV”) as the aggregate value, on an annualized basis, of all recurring subscription contracts in effect on a reporting date. | ||||
| (2) | Innovest was acquired on March 2, 2009 with $5.2 million of ACV, which is not included in ISS ACV as of September 30, 2008. Innovest ACV does not include any contracts where fees are based on the clients’ asset under management, which currently as of September 30, 2009 approximated $0.8 million of annual revenue. | ||||
| (3) | We define recurring revenue as a percentage of total revenue as revenue from subscription contracts divided by total revenue during the applicable period. | ||||
Overall, renewal rates were 81.5% for the nine months ended
The Risk renewal rate declined mainly due to higher non-renewals rates in the alternative investment segment. The ISS renewal rate declined primarily due to a decline in the proxy business renewal rate driven by budget constraints of clients, as well as significantly lower renewal rates in Corporate Services and CFRA products.
Mr. Berman added, “Renewal rates for Risk and ISS have improved in the third quarter over the first half of the year due to improvements in our end markets. We expect the trend of increased renewal rates to continue for the remainder of 2009 and into 2010.”
Annualized Contract Value as of
On a consolidated basis, the Company had
One times sales were
Discussion of Cash Flow
As of
Free Cash Flow (operating cash flow minus capital expenditures) for the nine months ended
Capital expenditures decreased to
Our cash flow tends to be lower in the beginning of each year due to year end bonuses and commissions paid during this period. As a result, we typically generate more cash flows from operations during the second half of the year than during the first half of the year.
Conference Call Information
The Company will hold a conference call to discuss results for the third quarter of 2009 today at
US Toll free dial-in: 800.659.1942
International dial-in: 617.614.2710
Passcode: 48899607
In addition, investors can access the conference call (as well as a replay of the call) directly from the RiskMetrics Group Investor Relations Web Site at http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Finvestor.riskmetrics.com&esheet=6089832&lan=en_US&anchor=http%3A%2F%2Finvestor.riskmetrics.com&index=1&md5=ee5814e943602aa5e534430ba0c31026.
About
Forward-Looking Statements
This release contains forward-looking statements. These statements relate to future events or to future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by the use of words such as "may," "could," "expect," "intend," "plan," "seek," "anticipate," "believe," "estimate," "predict," "potential," or "continue" or the negative of these terms or other comparable terminology. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond our control and that could materially affect actual results, levels of activity, performance, or achievements.
Other factors that could materially affect actual results, levels of activity, performance or achievements can be found in the Company’s
Notes Regarding the Use of Non-GAAP Financial Measures
Adjusted EBITDA
The table below sets forth a reconciliation of Net Income to Adjusted EBITDA on our historical results:
|
TABLE C | ||||||||||||||
|
|
||||||||||||||
|
Three months ended |
Nine months ended |
|||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||
| Net income | $ | 7,783 | $ | 6,282 | $ | 23,521 | $ | 12,175 | ||||||
| Interest, other expense, net | 4,986 | 4,860 | 15,252 | 21,337 | ||||||||||
| Income tax expense | 2,426 | 4,045 | 11,669 | 7,828 | ||||||||||
| Depreciation and amortization of property and equipment | 2,189 | 2,153 | 6,253 | 6,433 | ||||||||||
| Amortization of intangible assets | 5,876 | 5,398 | 17,351 | 16,310 | ||||||||||
| Stock-based compensation | 2,323 | 2,245 | 6,406 | 7,622 | ||||||||||
| Non-recurring expenses | - | - | 1,493 | (a) | 198 |
(b) | ||||||||
| Loss on disposal of property and equipment | 178 | 57 | 305 | 83 | ||||||||||
| Adjusted EBITDA | $ | 25,761 | $ | 25,040 | $ | 82,250 | $ | 71,986 | ||||||
(a) Represents employee severance, acquisition costs, and lease exit costs incurred.
(b) Represents lease exist costs.
Adjusted EBITDA, as defined in our credit facility, represents net income (loss) before interest expense, interest income, income tax expense (benefit), depreciation and amortization of property and equipment, amortization of intangible assets, impairment of goodwill and intangible assets, non-cash stock-based compensation expense and extraordinary or non-recurring charges or expenses. It is a material metric used by our lenders in evaluating compliance with the maximum consolidated leverage ratio covenant in our credit facility. The maximum consolidated leverage ratio covenant, as defined in our credit facilities, represents the ratio of total indebtedness as compared to Adjusted EBITDA, and can not exceed a maximum ratio range which declines from 8.50 to 3.00 over the life of the credit facilities. Non-compliance with this covenant could result in us being required to immediately repay our outstanding indebtedness under our credit facility. Adjusted EBITDA is also a metric used by management to measure operating performance and for planning, including preparation of annual budgets, analyzing investment decisions and evaluating profitability.
We also present Adjusted EBITDA as a supplemental performance measure because we believe that this measure provides our board of directors, management and investors with additional information to measure our performance, provide more consistent comparisons from period to period by excluding potential differences caused by variations in capital structure (affecting interest expense), tax position (such as the impact on periods of changes in effective tax rates or net operating losses), the age and book depreciation of fixed assets (affecting relative depreciation expense), acquisitions (affecting amortization expense) and compensation plans (affecting stock-based compensation expense).
Adjusted EBITDA is not a measurement of our financial performance under U.S. GAAP and should not be considered as an alternative to net income, operating income or any other performance measures derived in accordance with U.S. GAAP or as an alternative to cash flow from operating activities as a measure of our profitability or liquidity.
Adjusted EBITDA Expenses
Adjusted EBITDA expenses represent cost of revenues, research and development, selling and marketing and general administrative expenses, excluding stock-based compensation. Adjusted EBITDA expenses represent expenses which are classified as reductions to Adjusted EBITDA, as defined in our credit facility. Adjusted EBITDA is also a metric used by management to measure operating performance and for planning, including preparation of annual budgets, analyzing investment decisions and evaluating profitability.
Other Operating Expenses
Other operating expenses represent stock-based compensation, depreciation and amortization of property and equipment, amortization of intangible assets and loss on disposal of property and equipment. Other operating expenses represent expenses which are classified as reductions to Adjusted EBITDA, as defined in our credit facility.
Adjusted Net Income and EPS
We define adjusted net income and adjusted EPS as net income (earnings per share) before amortization of intangibles, one-time costs, impairment charges and stock-based compensation. A reconciliation from net income and EPS to Adjusted net income and EPS is set forth below:
|
TABLE D |
||||||
| Three months ended September 30, | ||||||
| 2009 | 2008 | |||||
| $ Amount | $ Amount | |||||
| GAAP - Net Income | $7,783 | $6,282 | ||||
| Plus: One-time Costs | - | - | ||||
| Plus: Stock-Based Compensation | 2,323 | 2,245 | ||||
| Plus: Amortization of Intangible Assets | 5,876 | 5,398 | ||||
| Income tax effect | (2,952) | (2,988) | ||||
| Adjusted Net income before, stock-based compensation, amortization of intangibles and one-time costs | $13,030 | $10,937 | ||||
| Adjusted EPS – diluted | $0.19 | $0.16 | ||||
| Diluted Shares | 68,168,896 | 68,409,343 | ||||
| Nine months ended September 30, | ||||||
| 2009 | 2008 | |||||
| $ Amount | $ Amount | |||||
| GAAP - Net Income | $23,521 | $12,175 | ||||
| Plus: One-time Costs | 1,493 | (1) | 6,348 | (2) | ||
| Plus: Non IPO Stock-Based Compensation | 6,406 | 6,265 | ||||
| Plus: Amortization of Intangible Assets | 17,351 | 16,310 | ||||
| Income tax effect | (9,090) | (11,309) | ||||
| Adjusted Net income before, stock-based compensation, amortization of intangibles and one-time costs | $39,681 | $29,789 | ||||
| Adjusted EPS – diluted | $0.58 | $0.44 | ||||
| Diluted Shares | 67,838,520 | 67,040,711 | ||||
(1) Includes one-time expenses which include employee severance costs of
(2) Includes one-time expenses incurred as a result of the IPO, which include
Free Cash Flow
We define free cash flow as net cash provided by operating activities from continuing operations minus capital expenditures. We believe free cash flow is an important non-GAAP measure as it provides useful cash flow information regarding our ability to service, incur or pay down indebtedness. We use free cash flow as a measure to reflect cash available to service our debt as well as to fund our expenditures. A limitation of using free cash flow versus the GAAP measure of net cash provided by operating activities is that free cash flow does not represent the total increase or decrease in the cash balance from operations for the period since it excludes cash used for capital expenditures during the period.
Historical GAAP Financial Statements
Tables E through G presents the historical GAAP financial statements of
|
TABLE E | ||||||||||||
|
RISKMETRICS GROUP, INC. | ||||||||||||
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||
|
FOR THE THREE AND NINE MONTHS SEPTEMBER 30, 2009 AND 2008 | ||||||||||||
|
(UNAUDITED) | ||||||||||||
|
(In thousands, except share and per share amounts) | ||||||||||||
| Three months ended | Nine Months ended | |||||||||||
| September 30, | September 30, | |||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||
| REVENUES | $ | 73,980 | $ | 75,554 | $ | 226,889 | $ | 220,900 | ||||
| OPERATING COSTS AND EXPENSES: | ||||||||||||
| Cost of revenues | 22,002 | 23,507 | 68,259 | 69,387 | ||||||||
| Research and development | 11,302 | 11,248 | 32,610 | 32,114 | ||||||||
| Selling and marketing | 7,487 | 9,045 | 22,055 | 27,531 | ||||||||
| General and administrative | 9,751 | 8,959 | 29,614 | 27,702 | ||||||||
|
Depreciation and amortization of property and equipment |
2,189 | 2,153 | 6,253 | 6,433 | ||||||||
| Amortization of intangible assets | 5,876 | 5,398 | 17,351 | 16,310 | ||||||||
| Loss on disposal of property and equipment | 178 | 57 | 305 | 83 | ||||||||
| Total operating costs and expenses (1) | 58,785 | 60,367 | 176,447 | 179,560 | ||||||||
| INCOME FROM OPERATIONS | 15,195 | 15,187 | 50,442 | 41,340 | ||||||||
|
INTEREST, DIVIDEND, INVESTMENT, AND OTHER INCOME (EXPENSE), NET: |
||||||||||||
| Interest, dividend and investment income | 168 | 686 | 461 | 1,927 | ||||||||
| Interest expense | (5,154) | (5,546) | (15,713) | (20,651) | ||||||||
| Other expenses | - | - | - | (2,613) | ||||||||
|
Total interest, dividend, investment, and other income (expense), net |
(4,986) | (4,860) | (15,252) | (21,337) | ||||||||
|
INCOME BEFORE PROVISION FOR INCOME TAXES |
10,209 | 10,327 | 35,190 | 20,003 | ||||||||
| PROVISION FOR INCOME TAXES | 2,426 | 4,045 | 11,669 | 7,828 | ||||||||
| NET INCOME | $ | 7,783 | $ | 6,282 | $ | 23,521 | $ | 12,175 | ||||
| NET INCOME PER SHARE: | ||||||||||||
| Basic | $ | 0.13 | $ | 0.10 | $ | 0.38 | $ | 0.20 | ||||
| Diluted | $ | 0.11 | $ | 0.09 | $ | 0.35 | $ | 0.18 | ||||
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING: | ||||||||||||
| 62,097,967 | 60,780,651 | 61,745,222 | 59,493,052 | |||||||||
| Basic | 68,168,896 | 68,409,343 | 67,838,520 | 67,040,711 | ||||||||
| Diluted | ||||||||||||
(1) Includes stock-based compensation expense of
|
TABLE F | ||||||
| RISKMETRICS GROUP, INC. | ||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||
| (UNAUDITED) | ||||||
| (In thousands, except share amounts) | ||||||
|
September 30, |
December 31, | |||||
| ASSETS | ||||||
| CURRENT ASSETS: | ||||||
| Cash and cash equivalents | $ | 198,626 | $ | 170,799 | ||
| Accounts receivable, net | 37,175 | 42,319 | ||||
| Deferred tax assets | 2,459 | 2,092 | ||||
| Income taxes receivable | 3,423 | 4,562 | ||||
| Other receivables and prepaid expenses | 8,986 | 5,666 | ||||
| Total current assets | 250,669 | 225,438 | ||||
| Intangibles—net | 136,769 | 148,340 | ||||
| Goodwill | 318,592 | 308,613 | ||||
| Property and equipment—net | 14,887 | 15,400 | ||||
| Deferred financing costs | 4,448 | 5,227 | ||||
| Other assets | 2,351 | 1,995 | ||||
| TOTAL ASSETS | $ | 727,716 | $ | 705,013 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
| CURRENT LIABILITIES: | ||||||
| Trade accounts payable | $ | 4,812 | $ | 1,981 | ||
| Accrued expenses | 35,365 | 40,174 | ||||
| Debt, current portion | 2,966 | 2,224 | ||||
| Deferred revenue, current portion | 105,385 | 109,525 | ||||
| Other current liabilities | 221 | 211 | ||||
| Total current liabilities | 148,749 | 154,115 | ||||
| LONG-TERM LIABILITIES | ||||||
| Debt | 286,171 | 288,395 | ||||
| Deferred tax liabilities | 24,902 | 31,405 | ||||
| Deferred revenue | 595 | 1,364 | ||||
| Other long-term liabilities | 20,623 | 26,567 | ||||
| Total liabilities | $ | 481,040 | $ | 501,846 | ||
| COMMITMENTS AND CONTINGENCIES | ||||||
| STOCKHOLDERS’ EQUITY: | ||||||
|
Common stock, $.01 par value—200,000,000 authorized; 62,723,667 and 61,673,960 issued and 62,480,513 and 61,430,806 outstanding at September 30, 2009 and December 31, 2008, respectively |
$ | 627 | $ | 617 | ||
| Treasury stock—243,154 shares | (579) | (579) | ||||
| Additional paid-in capital | 445,739 | 431,781 | ||||
| Accumulated other comprehensive loss | (11,235) | (17,255) | ||||
| Accumulated deficit | (187,876) | (211,397) | ||||
| Total stockholders’ equity | 246,676 | 203,167 | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 727,716 | $ | 705,013 | ||
|
TABLE G | ||||||
| RISKMETRICS GROUP, INC. | ||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||
| FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 | ||||||
| (UNAUDITED) | ||||||
| (Amounts in thousands) | ||||||
| 2009 | 2008 | |||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||
| Net income | $ | 23,521 | $ | 12,175 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
| Depreciation and amortization of property and equipment | 6,253 | 6,433 | ||||
| Provision for bad debts | 471 | 713 | ||||
| Amortization of intangible assets | 17,351 | 16,310 | ||||
| Amortization of debt issuance costs | 780 | 3,190 | ||||
| Stock-based compensation | 6,406 | 7,622 | ||||
| Tax benefit associated with exercise of stock options | (2,957) | (5,075) | ||||
| Loss on disposal of property and equipment | 305 | 83 | ||||
| Changes in assets and liabilities (net of assets and liabilities acquired): | ||||||
| Decrease (increase) in accounts receivable | 6,861 | (12,507) | ||||
| (Increase) decrease in income and deferred taxes | (5,128 | ) | 11,330 | |||
| (Increase) decrease in other receivables and prepaid expenses | (3,081) | 72 | ||||
| Increase in other assets | (347) | (136) | ||||
| (Decrease) increase in deferred revenue | (6,141) | 14,258 | ||||
| Increase (decrease) in trade accounts payable | 2,727 | (2,875) | ||||
| Decrease (increase) in accrued expenses and other liabilities | (6,507) | 7,217 | ||||
| Net cash provided by operating activities | 40,514 | 58,810 | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||
| Purchases of property and equipment | (5,537) | (5,804) | ||||
| Cash refunded from CFRA acquisition | - | 223 | ||||
| Payment for intangible asset | - | (1,000) | ||||
| Payment of deferred purchase price | (159) | (127) | ||||
| Cash paid to acquire Innovest (net of cash acquired of $1,190) | (14,806) | - | ||||
| Net cash used in investing activities | (20,502) | (6,708) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||
| Repayment of debt | (1,482) | (132,131) | ||||
| Gross proceeds from equity offering | - | 197,400 | ||||
| Equity offering expenses | - | (1,581) | ||||
| Excess tax benefit associated with exercise of stock options | 2,957 | 5,075 | ||||
| Proceeds from exercise of stock options | 4,605 | 5,679 | ||||
| Net cash provided by financing activities | 6,080 | 74,442 | ||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH | 1,735 | (2,338) | ||||
| NET INCREASE IN CASH AND CASH EQUIVALENTS | 27,827 | 124,206 | ||||
| CASH AND CASH EQUIVALENTS—Beginning of period | 170,799 | 27,455 | ||||
| CASH AND CASH EQUIVALENTS—End of period | $ | 198,626 | $ | 151,661 | ||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||
| Cash paid for interest | $ | 14,802 | $ | 17,215 | ||
| Cash paid (refunded) for taxes | $ | 16,064 | $ | (4,907) | ||
| NON CASH INVESTING AND FINANCING ACTIVITIES: | ||||||
| Tax benefit associated with exercise of ISS stock options | $ | 183 | $ | 616 | ||
| Recovery of common stock issued to purchase CFRA | $ | - | $ | (577) | ||
Supplemental Information and Non-GAAP Reconciliations
The tables below set forth a reconciliation of GAAP costs of revenues, research and development, selling and marketing and general and administrative expenses to Adjusted EBITDA expenses and other operating expenses:
|
TABLE H | ||||||
| RISKMETRICS GROUP, INC. | ||||||
| UNAUDITED AS ADJUSTED STATEMENT OF INCOME | ||||||
| FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2009 | ||||||
| (AMOUNTS IN THOUSANDS) | ||||||
|
RISKMETRICS 2009 |
ADJUSTMENTS | AS ADJUSTED | ||||
| Revenues | $73,980 | $73,980 | ||||
| Operating cost and expenses: | ||||||
| Cost of revenues | 22,002 | (733) | (A) | 21,269 | ||
| Research and development | 11,302 | (595) | (A) | 10,707 | ||
| Selling and marketing | 7,487 | (302) | (A) | 7,185 | ||
| General and administrative | 9,751 | (693) | (A) | 9,058 | ||
| Total adjusted EBITDA expenses | 50,542 | (2,323) | 48,219 | |||
| Depreciation and amortization of property and equipment | 2,189 | 2,189 | ||||
| Amortization of intangible assets | 5,876 | 5,876 | ||||
| Loss on disposal of property and equipment | 178 | 178 | ||||
| Total other operating expenses | 8,243 | 2,323 | 10,566 | |||
| Total operating expenses | 58,785 | 58,785 | ||||
| Income from operations | 15,195 | 15,195 | ||||
| Interest, dividend, investment and other income (expense), net | ||||||
| Interest, dividend and investment income | 168 | 168 | ||||
| Interest expense | (5,154) | (5,154) | ||||
| Other expenses | - | - | ||||
| Interest, dividend, investment and other income (expense), net | (4,986) | (4,986) | ||||
| Income before provision for income taxes | 10,209 | 10,209 | ||||
| Provision for income taxes | 2,426 | ,2,426 | ||||
| Net income | $7,783 | $ | $7,783 | |||
The following adjustments are included in the preparation of the statement of income:
(A) Reclassification of stock-based compensation from adjusted EBITDA expenses to other operating expenses.
|
TABLE I | ||||||
| RISKMETRICS GROUP, INC. | ||||||
| UNAUDITED AS ADJUSTED STATEMENT OF INCOME | ||||||
| FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 | ||||||
| (AMOUNTS IN THOUSANDS) | ||||||
|
RISKMETRICS |
ADJUSTMENTS | AS ADJUSTED | ||||
| Revenues | $226,889 | $226,889 | ||||
| Operating cost and expenses: | ||||||
| Cost of revenues | 68,259 | (2,104) | (A) | 66,155 | ||
| Research and development | 32,610 | (1,724) | (A) | 30,886 | ||
| Selling and marketing | 22,055 | (1,065) | (A) | 20,990 | ||
| General and administrative | 29,614 | (1,513) | (A) | 26,608 | ||
| (1,493) | (B) | |||||
| Total adjusted EBITDA expenses | 152,538 | (7,899) | 144,639 | |||
| Depreciation and amortization of property and equipment | 6,253 | 6,253 | ||||
| Amortization of intangible assets | 17,351 | 17,351 | ||||
| Loss on disposal of property and equipment | 305 | 305 | ||||
| Total other operating expenses | 23,909 | 7,899 | 31,808 | |||
| Total operating expenses | 176,447 | 176,447 | ||||
| Income from operations | 50,442 | 50,442 | ||||
| Interest, dividend, investment and other income (expense), net | ||||||
| Interest, dividend and investment income | 461 | 461 | ||||
| Interest expense | (15,713) | (15,713) | ||||
| Other expenses | - | - | ||||
| Interest, dividend, investment and other income (expense), net | (15,252) | (15,252) | ||||
| Income before provision for income taxes | 35,190 | 35,190 | ||||
| Provision for income taxes | 11,669 | 11,669 | ||||
| Net income | $23,521 | $ | $23,521 | |||
|
The following adjustments are included in the preparation of the statement of income: | ||
| (A) | Reclassification of stock-based compensation from adjusted EBITDA expenses to other operating expenses. | |
| (B) | Reclassification of non-recurring employee severance, lease exit costs, and transactions costs from adjusted EBITDA expenses to other operating expenses. | |
|
TABLE J | ||||||
| RISKMETRICS GROUP, INC. | ||||||
| UNAUDITED AS ADJUSTED STATEMENT OF INCOME | ||||||
| FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008 | ||||||
| (AMOUNTS IN THOUSANDS) | ||||||
|
RISKMETRICS |
ADJUSTMENTS | AS ADJUSTED | ||||
| Revenues | $75,554 | $75,554 | ||||
| Operating cost and expenses: | ||||||
| Cost of revenues | 23,507 | (721) | (A) | 22,786 | ||
| Research and development | 11,248 | (608) | (A) | 10,640 | ||
| Selling and marketing | 9,045 | (422) | (A) | 8,623 | ||
| General and administrative | 8,959 | (494) | (A) | 8,465 | ||
| Total adjusted EBITDA expenses | 52,759 | (2,245) | 50,514 | |||
| Depreciation and amortization of property and equipment | 2,153 | 2,153 | ||||
| Amortization of intangible assets | 5,398 | 5,398 | ||||
| Loss on disposal of property and equipment | 57 | 57 | ||||
| Total other operating expenses | 7,608 | 2,245 | 9,853 | |||
| Total operating expenses | 60,367 | 60,367 | ||||
| Income from operations | 15,187 | 15,187 | ||||
| Interest, dividend, investment and other income (expense), net | ||||||
| Interest, dividend and investment income | 686 | 686 | ||||
| Interest expense | (5,546) | (5,546) | ||||
| Other expenses | - | - | ||||
| Interest, dividend, investment and other income (expense), net | (4,860) | (4,860) | ||||
| Income before provision for income taxes | 10,327 | 10,327 | ||||
| Provision for income taxes | 4,045 | 4,045 | ||||
| Net income | $6,282 | $ | $6,282 | |||
The following adjustments are included in the preparation of the statement of income:
(A) Reclassification of stock-based compensation from adjusted EBITDA expenses to other operating expenses.
|
TABLE K | ||||||
| RISKMETRICS GROUP, INC. | ||||||
| UNAUDITED AS ADJUSTED STATEMENT OF INCOME | ||||||
| FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 | ||||||
| (AMOUNTS IN THOUSANDS) | ||||||
|
RISKMETRICS |
ADJUSTMENTS | AS ADJUSTED | ||||
| Revenues | $220,900 | $220,900 | ||||
| Operating cost and expenses: | ||||||
| Cost of revenues | 69,387 | (2,719) | (A) | 66,668 | ||
| Research and development | 32,114 | (2,060) | (A) | 30,054 | ||
| Selling and marketing | 27,531 | (1,375) | (A) | 26,156 | ||
| General and administrative | 27,702 | (1,468) | (A) | 26,036 | ||
| (198) | (B) | |||||
| Total adjusted EBITDA expenses | 156,734 | (7,820) | 148,914 | |||
| Depreciation and amortization of property and equipment | 6,433 | 6,433 | ||||
| Amortization of intangible assets | 16,310 | 16,310 | ||||
| Loss on disposal of property and equipment | 83 | 83 | ||||
| Total other operating expenses | 22,826 | 7,820 | 30,646 | |||
| Total operating expenses | 179,560 | 179,560 | ||||
| Income from operations | 41,340 | 41,340 | ||||
| Interest, dividend, investment and other income (expense), net | ||||||
| Interest, dividend and investment income | 1,927 | 1,927 | ||||
| Interest expense | (20,651) | (20,651) | ||||
| Other expenses | (2,613) | (2,613) | ||||
| Interest, dividend, investment and other income (expense), net | (21,337) | (21,337) | ||||
| Income before provision for income taxes | 20,003 | 20,003 | ||||
| Provision for income taxes | 7,828 | 7,828 | ||||
| Net income | $12,175 | $ | $12,175 | |||
| The following adjustments are included in the preparation of the statement of income: | ||
| (A) | Reclassification of stock-based compensation from adjusted EBITDA expenses to other operating expenses. | |
| (B) | Reclassification of lease exit costs from adjusted EBITDA expenses to other operating expenses. | |
Source:
RiskMetrics Group
Sarah Cohn, 212-354-4643
sarah.cohn@riskmetrics.com