Information Services Corporation
TSX : ISV

Information Services Corporation

November 02, 2016 20:00 ET

ISC reports third quarter 2016 financial results

REGINA, SASKATCHEWAN--(Marketwired - Nov. 2, 2016) - Information Services Corporation (TSX:ISV) ("ISC" or the "Company") today reported on the company's financial results for the third quarter ended September 30, 2016.

Third Quarter 2016 Highlights

  • Revenue of $22.9 million compared to $19.7 million in Q3 2015. The increase was largely driven by ESC, our Services segment;

  • EBITDA (earnings before interest, taxes, depreciation and amortization) of $7.3 million compared to $8.2 million in Q3 2015;

  • EBITDA margin of 32.1 per cent compared to 41.5 per cent in Q3 2015;

  • EBITDA and EBITDA margin were reduced by a $1.0 million adjustment in the third quarter of 2016 to the contingent purchase price consideration related to the purchase of ESC Corporate Services;

  • Net income of $3.8 million or $0.22 per basic and per diluted share compared to $4.7 million or $0.27 per basic and per diluted share in Q3 2015;

  • On July 11, 2016, ISC launched its new system for the Corporate Registry, providing a more convenient service to search, register and maintain corporate entities in Saskatchewan; and

  • On July 25, 2016, ISC announced that the membership of the Saskatchewan Government and General Employees' Union Local 2214 ratified a new collective agreement with respect to its in-scope employees. The new four-year agreement, ending September 30, 2019, includes annual wage increases effective October 1 of each year, consisting of 2.0 per cent retroactive to 2015, 1.75 per cent in 2016, 1.75 per cent in 2017 and 2.0 per cent in 2018.

Financial Position as at September 30, 2016

  • Cash of $38.3 million

  • Free cash flow of $5.6 million

  • Total debt of $23.4 million

Commenting on ISC's results, Jeff Stusek, President and CEO stated, "This has been another steady quarter with continued resilience shown by our Registry business, which is supported strongly by our Services segment." Stusek continued, "I have been pleased with our performance overall and as we move towards the end of the year, I expect that we are on course to meet our EBITDA guidance for 2016."

Management's Discussion of ISC's Summary of Third Quarter 2016 Financial Results

(thousands of CAD dollars;
except earnings per share and where noted)
Three Months Ended Sep 30,
2016
Three Months Ended Sep 30,
2015
Nine Months
Ended Sep 30,
2016
Nine Months
Ended Sep 30,
2015
Revenue - Registries
Land Registry $ 15,015 $ 15,053 $ 41,882 $ 42,055
Personal Property Registry 2,670 2,769 7,675 7,574
Corporate Registry 1,860 1,846 6,828 6,095
Total $ 19,545 $ 19,668 $ 56,385 $ 55,724
Revenue - Services 3,316 - 10,211 -
Revenue - Other 33 7 578 16
TOTAL Revenue $ 22,894 $ 19,675 $ 67,174 $ 55,740
Expenses $ 16,854 $ 12,830 $ 49,681 $ 39,512
EBITDA1 $ 7,338 $ 8,165 $ 22,697 $ 20,176
EBITDA margin1 (% of revenue) 32.1 % 41.5 % 33.8 % 36.2 %
Adjusted EBITDA1 $ 9,512 $ 9,570 $ 26,117 $ 21,762
Adjusted EBITDA margin1 41.5 % 48.6 % 38.9 % 39.0 %
Net income and total comprehensive income $ 3,810 $ 4,656 $ 12,584 $ 11,350
Earnings per share (basic)2 $ 0.22 $ 0.27 $ 0.72 $ 0.65
Earnings per share, (diluted)2 $ 0.22 $ 0.27 $ 0.71 $ 0.65
Free cash flow1 $ 5,641 $ 5,606 $ 15,254 $ 14,800
  1. EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin and free cash flow are not recognized as measures under IFRS and do not have a standardized meaning prescribed by IFRS and therefore, are not comparable to similar measures by other corporations. See section name "Non-IFRS Measures" in the Management's Discussion & Analysis for the three and nine months ended September 30, 2016.
  2. The calculation of earnings per share is based on net income after tax and the weighted average number of shares outstanding during the period.

Third Quarter 2016 Results of Operations

  • Revenue was $22.9 million for the three months ended September 30, 2016, a $3.2 million increase compared to the same period in 2015. The increase was driven by ESC, which is included in our Services segment.

  • Revenue for all registries was $19.5 million for the three months ended September 30, 2016 a decrease of $0.1 million, or 0.6 per cent, compared to the three months ended September 30, 2015. Our results were higher mainly due to increased revenues from the Corporate Registry and the Personal Property Registry respectively.

    • Land Registry revenue was comparatively flat for the first three quarters of 2016. Revenue was $15.0 million for the three months ended September 30, 2016 a slight decrease of 0.2 per cent compared to the three months ended September 30, 2015.

    • Revenue for the Personal Property Registry for the three months ended September 30, 2016, was $2.7 million, which represents a decrease of 3.6 per cent or $0.1 million from the same period in 2015.

    • Revenue for the Corporate Registry for the three months ended September 30, 2016, was $1.9 million, flat compared to the third quarter 2015.

  • The revenue in our Services segment for the second quarter, which consists of revenue earned by our wholly owned subsidiary ESC, was $3.3 million. This is a decrease of $0.3 million or 8.4 per cent, compared to the second quarter of 2016.

  • For the three months ended September 30, 2016, consolidated expenses (all segments) were $16.9 million, an increase of 31.4 per cent, compared to $12.8 million for the same period of 2015.

  • Capital expenditures for the three months ended September 30, 2016, were $0.5 million compared to $1.1 million for the same period in 2015. Capital expenditures were focused on the renewal and enhancement of technology supporting the Corporate Registry.

  • As at September 30, 2016, the Company held $38.3 million in cash compared to $36.6 million as at December 31, 2015, an increase of $1.7 million.

  • The Company had $23.4 million of long-term debt as at September 30, 2016. For more details, see section named "9.3 Long-term debt" in the Management's Discussion & Analysis for the three and nine months ended September 30, 2016.

Outlook

The following section includes forward-looking statements, including statements related to prices charged for services, the anticipated revenue outlook, changes in the economic conditions in Canada and, in particular, Saskatchewan, Ontario and Quebec, real gross domestic product, economic impact of energy and resource sectors, changes in transaction volumes, changes in high-value property registrations, changes in motor vehicle sales volume, steady growth of active business entities, expected level and composition of capital expenditures, consolidated EBITDA margin, continued focus and impact of cost management efforts, key drivers of expenses, anticipated modest growth of active business entities in Saskatchewan, impact of pricing adjustment to our Core Registry Services, anticipate growth of our Services segment and maintaining margins through cost efficiencies. Refer to the section "Caution Regarding Forward-Looking Statements".

The majority of ISC's revenue is linked to registry transaction volumes and values which are driven by economic conditions in Saskatchewan. The remaining portion of our revenue is linked to overall economic conditions in Ontario and Quebec. At present, the Company continues to expect the Saskatchewan economy to be comparable to 2015, while moderate growth is anticipated for the central Canadian markets. As a result, ISC reiterates that its expected consolidated EBITDA margin for fiscal 2016 will be in the range of 32.0 to 34.0 per cent.

For the Registries segment, we expect the Saskatchewan economy to continue on a relatively flat trajectory. According to several external forecasts, Saskatchewan's 2016 real gross domestic product growth will be flat and may even dip below zero. The province continues to experience some headwinds on growth, and as such, the Company currently expects that the last quarter of 2016 and early 2017 will follow the trend observed in the first three quarters of the 2016.

We continue to expect overall transaction volumes in the Land Titles Registry for 2016 to be close to 2015 levels, with regular land transfers, mortgage registrations and title searches to be lower than compared to 2015. We predict high-value property registrations will be lower than in 2015, down to more normalized levels. For the Personal Property Registry, we forecast an overall increase, with revenues from search volumes offsetting anticipated decline from lower new motor vehicle sales in Saskatchewan and reduced property security registration setups. For the Corporate Registry, we continue to anticipate modest growth of active business entities will contribute to stabilized revenue.

Pricing for the Registries segment is outlined in the MSA and related Registry Operating Agreements which specify the maximum fees allowed to be charged to the public for particular Registry services. Consistent with 2014 and 2015, we completed pricing adjustments to our Core Registry Services, which became effective in July 2016, based on the Saskatchewan Consumer Price Index. To improve customer satisfaction, we applied adjustments differently than in past years, resulting in whole-number pricing that is easier to understand, apply and process. As a result, some fees increased while others decreased, with the overall revenue increase remaining consistent with the previous per-fee formula.

In our Services segment, we expect the growth of that business to continue in specific categories relating to the financial services and legal sectors in both its core markets of Ontario and Quebec. The expectation is that the growing base of new customers, as well as new mandates from existing customers, should continue to support overall revenue growth.

The key drivers of expenses will continue to be wages, salaries and information technology costs. The Company will continue to manage its costs prudently while balancing re-investment in the business in order to maintain or improve the customer experience. We expect a continued focus on cost efficiencies to maintain margins.

Management expects capital expenditures in 2016 to be in the range of $5.0 million to $6.0 million, funded from operating cash flow. These expenditures include the completion of the renewal and enhancement of our Corporate Registry technology, enhancement and upgrades to core technology components and enterprise systems, additions to intangible assets and general office improvements.

Note to Readers

This news release provides a general summary of Information Services Corporation's results for the nine months ended September 30, 2016 and 2015. Readers are encouraged to download the Company's complete financial disclosures. Links to ISC's financial statements and related notes and Management's Discussion and Analysis for the period are available on ISC's website in the Investor section at company.isc.ca.

Copies can also be obtained at www.sedar.com by searching Information Services Corporation's profile or by contacting Information Services Corporation at investor.relations@isc.ca. All figures are in Canadian dollars unless otherwise noted.

Conference Call and Webcast

An investor conference call will be held on Thursday, November 3, 2016 at 11 a.m. Eastern Time (9 a.m. Saskatchewan/MDT) to discuss the results. Participants may join the call by dialing toll-free 1-844- 419-1765 or 1-216-562-0470 for calls outside North America. Simultaneously, an audio webcast of the conference call will also be available at the following link http://edge.media-server.com/m/p/5ofuzc8f.

Media are invited to attend on a listen-only basis.

A recording of the webcast will be available 24 hours after the event on our website.

About ISC

Headquartered in Canada, ISC is the leading provider of registry and information management services for public data and records. Throughout our history we have delivered value to our clients by providing solutions to manage, secure and administer information through our registry and services segments. ISC is focused on sustaining its core business while pursuing new growth opportunities. The Class A Shares of ISC trade on the Toronto Stock Exchange under the symbol ISV.

Cautionary Note Regarding Forward-Looking Information

This news release contains forward-looking information within the meaning of applicable Canadian securities legislation, including management's expectations and certain assumptions with respect to our registry services and products, the other services we provide, our competitive landscape, economic conditions in Canada and in particular, Saskatchewan, Ontario and Quebec, real estate market in Saskatchewan, economic impact of energy and resource sectors, transaction volumes, statements regarding the future financial position or results of ISC, customer growth and diversification, dividend expectations, creation of shareholder value, growth opportunities, capital and operating expectations, real gross domestic product, changes that impact our registry services, such as changes in high-value property registrations, motor vehicle sales volume and the number of active business entities, consolidated EBITDA margin, income taxes, our ability to attract and retain skilled staff, the compensation and benefits that will be paid or provided to employees and our level of customer service, as well as goodwill and intangibles are material factors in preparing forward-looking statements. In addition, the words "may", "will", "would", "should", "could", "expect", "plan", "intend", "trend", "indicate", "anticipate", "believe", "estimate", "predict", "project", "targets", "strive", "strategy", "continue", "likely" or "potential" or the negative or other variations of these words or other comparable words or phrases are intended to identify forward-looking statements. Forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those expressed or implied by such forward-looking information. Although ISC believes the forward-looking information contained in this release is based upon reasonable assumptions, readers are cautioned not to place undue reliance on forward-looking information as it is inherently uncertain and no assurance can be given that the expectations reflected in such information will prove to be correct. Many factors and risks could cause our actual results to differ materially from those expressed or implied by forward-looking information including those detailed in ISC's Annual Information Form, dated March 15, 2016, ISC's Consolidated Financial Statements and Notes and Management's Discussion and Analysis for the quarter ended September 30, 2016, as well as other documents filed by ISC with Canadian securities regulators through SEDAR at www.sedar.com from time to time. Investors and others should carefully consider the above-noted factors and risks and other uncertainties and potential events. The forward-looking information in this release is made as of the date hereof and, except as required under applicable securities legislation, ISC assumes no obligation to update or revise such information to reflect new events or circumstances.

Contact Information

  • Investor Contact
    Jonathan Hackshaw
    Director, Investor Relations & Corporate Communications
    306-798-2136
    investor.relations@isc.ca

    Pamela Keck
    Manager, Investor Relations
    Toll Free: 1-855-341-8363 in North America or 1-306-798-1137
    investor.relations@isc.ca