Information Services Corporation (TSX:ISV) (“ISC” or the “Company”)
today reported on the Company’s financial results for the first
quarter ended March 31, 2022.
2022 First Quarter
Highlights
- Revenue was
$44.2 million, an increase of $5.0 million or 13 per cent compared
to the first quarter of 2021. The increase in revenue during the
quarter was due to continued organic growth in Services, increased
revenue from Recovery Solutions as well as new revenue from the
acquisition of UPLevel mid-way through the first quarter. Registry
Operations also contributed to increased revenues due to strong
activity in the real estate sector including record high-value
transactions revenues and higher average land values transacted
through the Land Registry.
- Net income was $7.4 million or $0.42 per basic and $0.41
diluted share, an increase of $1.9 million compared to the first
quarter of 2021 when net income was $5.5 million or $0.32 per basic
and $0.31 per diluted share. The increase is due to the increased
revenue in Registry Operations and Services, reductions in
share-based compensation, and continued effective cost
management.
- EBITDA
(earnings before interest, taxes, depreciation and amortization
expense) was $13.8 million compared to $11.9 million in the same
quarter last year, an increase of $2.0 million or 17 per cent. The
increase was again due to increased revenue accompanied by
reductions in share-based compensation expense, resulting in strong
margins across all segments. The EBITDA margin for the first
quarter of 2022 was 31.3 per cent compared to 30.3 per cent in the
same quarter in 2021.
- Adjusted EBITDA
was $14.6 million for the quarter compared to $14.8 million in the
same quarter last year, with an adjusted EBITDA margin of 33 per
cent for the quarter compared to 37.8 per cent in the first quarter
of 2021.
- Free cash flow
of $11.0 million compared to $8.9 million in Q1 2021. The increase
was due to higher results of operations and is a reminder of the
unique nature of our business and its ability to consistently
generate strong free cash flow.
Financial Position as at March 31,
2022
- Cash of $23.4 million compared to
$40.1 million as at December 31, 2021.
- Total debt of $41.0 million
compared to $41.0 million as at December 31, 2021.
Commenting on ISC’s results, Shawn Peters,
President and CEO stated, “After an outstanding year in 2021, we
have continued to deliver excellent results for the first three
months of 2022. Most notably, our Services segment exceeded our
Registry Operations segment for the first time ever on a revenue
basis while Registry Operations continues to make a significant
contribution on an EBITDA basis.” Peters continued, “As the year
continues, we will be making investments in people and technology
to further strengthen our overall business. In Services, we are
enhancing our technology for our Recovery Solutions customers that
will complement our Registry Complete offering, which has been very
well received since it officially launched last year. We will of
course, continue to actively explore appropriate acquisition
targets that complement or add value to our existing lines of
business or provide new key service offerings that will also drive
value.”
Management’s Discussion of ISC’s Summary
of 2022 First Quarter Financial Results
(thousands of CAD dollars; except earnings
per shareand where noted) |
Three MonthsEnded March 31,
2022 |
|
Three MonthsEnded March 31, 2021
(restated)2 |
|
Revenue |
|
|
Registry Operations |
$ |
19,612 |
|
$ |
19,200 |
|
Services |
|
22,723 |
|
|
16,237 |
|
Technology Solutions |
|
1,817 |
|
|
3,711 |
|
Corporate and other |
|
1 |
|
- |
|
Consolidated revenue |
$ |
44,153 |
|
$ |
39,148 |
|
Consolidated expenses |
$ |
33,463 |
|
|
30,954 |
|
Consolidated EBITDA1 |
$ |
13,835 |
|
$ |
11,869 |
|
Consolidated EBITDA margin1 (% of revenue) |
|
31.3 |
% |
|
30.3 |
% |
Consolidated adjusted EBITDA1 |
$ |
14,586 |
|
$ |
14,786 |
|
Consolidated adjusted EBITDA margin1 |
|
33.0 |
% |
|
37.8 |
% |
Consolidated net income |
$ |
7,407 |
|
$ |
5,548 |
|
Earnings per share (basic)1 |
$ |
0.42 |
|
$ |
0.32 |
|
Earnings per share (diluted)1 |
$ |
0.41 |
|
$ |
0.31 |
|
Free cash flow1 |
$ |
10,985 |
|
$ |
8,878 |
|
1EBITDA, 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,
they may not be comparable to similar measures reported by other
companies; refer to section 8.8 “Non-IFRS financial measures”.
Refer to section 2 “Consolidated Financial Analysis” for a
reconciliation of EBITDA and adjusted EBITDA to net income and to
section 6.1 “Cash flow” for a reconciliation of free cash flow in
Management’s Discussion & Analysis for the quarter ended March
31, 2022.2 In the fourth quarter of 2021, the Company revised its
accounting policy related to the configuration and customization
costs incurred in implementing Software‐as‐a‐service (“SaaS”)
arrangements in response to the International Financial Reporting
Interpretations Committee agenda decision released in April 2021.
This accounting policy change resulted in the expense of formerly
capitalized financial system implementation costs incurred in 2018
through 2021. This change resulted in a retroactive adjustment to
expense these costs effective January 1, 2020.
2022 First Quarter Results of
Operations
- Total revenue
was $44.2 million, up $5.0 million compared to Q1 2021.
- Registry
Operations segment revenue was $19.6 million, up $0.4 million
compared to $19.2 million in Q1 2021. The first-quarter increase of
Land Registry revenue was due to record high-value transaction
revenue, and an increase in the average land values transacted
through the registry.
- Land Registry
revenue was $13.9 million, compared to $13.3 million in Q1
2021.
- Personal
Property Registry was $2.6 million, compared to $2.7 million in Q1
2021.
- Corporate
Registry revenue was $3.1 million, compared to $3.2 million in Q1
2021.
- Services segment
revenue was $22.7 million, up $6.5 million compared to $16.2
million in Q1 2021. This increase was driven by continued organic
growth in Regulatory, Corporate and Recovery Solutions, as well as
the addition of new revenue from the acquisition of UPLevel mid-way
through the first quarter.
- Regulatory
Solutions revenue was $15.4 million compared to $12.5 million in Q1
2021.
- Recovery
Solutions revenue was $3.0 million compared to $2.1 million in Q1
2021.
- Corporate
Solutions revenue was $4.3 million compared to $1.6 million in Q1
2021.
- Technology
Solutions segment revenue was $4.4 million, compared to $6.0
million in Q1 2021.
- Consolidated
expenses (all segments) were $33.5 million compared to $31.0
million in Q1 2021.
- Net income was
$7.4 million or $0.42 per basic and $0.41 per diluted share,
compared to $5.5 million or $0.32 per basic and $0.31 per diluted
share for Q1 2021.
OutlookThe following section
includes forward-looking information, including statements related
to the industries in which we operate, growth opportunities, our
future financial position and results of operations, capital and
operating expectations and the impact of COVID-19. Refer to
“Cautionary Note Regarding Forward-Looking Information”.
Over the past two years, our business has
continued to prosper despite adversity, showcasing its
resilience.
Following the remarkable results of 2021, the
robust real estate sector in Saskatchewan continues to contribute
to strong revenue during the first quarter of 2022. As mentioned in
our last reporting period, we expect 2022 will exceed pre‐pandemic
levels, even though we do not expect to see the same level of
economic activity we saw in 2021. In some cases, registry
transactions have begun to return to more normalized, pre-pandemic
levels while the Land Registry is anticipated to begin to return to
more normalized levels midway through 2022.
Registry Operations will remain a healthy
contributor to our results in 2022, due to the strong cash flow
this business generates on a consistent basis. Additional
investments during 2022 related to people and technology will be
made within this segment to ensure continued high levels of service
as well as secure and efficient systems.
We expect Services to continue to deliver
organic growth in 2022, fueled by continuous technology
advancements driving operational efficiency and new product
innovation. We are deliberate in growing our business with existing
customers and the acquisition and onboarding of new customers,
particularly with our leading cloud-based Registry Complete
software. During the course of the year, we expect to deploy new
technology to support our Recovery Solutions business aimed at
providing improved customer performance reporting and operational
efficiencies as well as complimenting our leading Regulatory
Solutions cloud based solution, Registry Complete. Similar to
Registry Operations, a focus on investments in people and
technology to advance our growth will be important. This will allow
us to expand our offering to existing customers and facilitate the
acquisition of new customers throughout the year.
In Technology Solutions, we expect to see
completion of a number of solution delivery projects where
milestones previously set for 2021 were deferred to 2022.
Governments are expected to continue directing their efforts to
managing COVID-19, but we are seeing the re-commencement of
early-stage procurement activity, which could translate into
additional projects. An investment in our sales and technology
development teams will be necessary to support these activities, as
well as provide support across the organization on our technology
initiatives. The recruitment process for a leader for our
Dublin-based subsidiary to support and drive the growth of this
segment is expected to be completed by the end of the second
quarter.
It is based on the foregoing that we continue to
expect revenue to be between $168.0 million and $173.0 million, net
income to be between $23.0 million and $27.0 million, and EBITDA1
to be between $48.0 million and $53.0 million in 2022.
The Company’s diversified range of services,
pursuit of growth opportunities, and strong core offerings have
positioned us well for continued success. In keeping with our
strategy, the Company will continue to actively explore appropriate
acquisition targets in 2022 that complement or add value to our
existing lines of business or provide new key service offerings
that will also drive value.
Note to ReadersThe Board of
Directors (“Board”) carries out its responsibility for review of
this disclosure primarily through the Audit Committee, which is
comprised exclusively of independent directors. The Audit Committee
reviews and approves the fiscal year-end Management’s Discussion
and Analysis (“MD&A”) and financial statements and recommends
both to the Board for approval. The interim financial statements
and MD&A are reviewed and approved by the Audit Committee.
This news release provides a general summary of
ISC’s results for the quarters ended March 31, 2022, and 2021.
Readers are encouraged to download the Company’s complete financial
disclosures. Links to ISC’s financial statements and related notes
and MD&A for the period are available on our website in the
Investor Relations section at www.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 WebcastWe
will hold an investor conference call on Thursday, May 5, 2022 at
11:00 a.m. ET (9:00 a.m. MDT) to discuss the results. Participants
may join the call by dialing toll-free (844) 419-1765 or (216)
562-0470 for calls outside North America. Simultaneously, an audio
webcast of the conference call will also be available at the
following link www.company.isc.ca/investor-relations/events. The
audio file with a replay of the webcast will be available about 24
hours after the event on our website at the link above. We invite
media to attend on a listen-only basis.
About ISCHeadquartered 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 Operations, Services and Technology Solutions 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 InformationThis news release contains
forward-looking information within the meaning of applicable
Canadian securities legislation including, without limitation,
those contained in the “Outlook” section hereof and statements
related to the industries in which we operate, growth opportunities
and our future financial position and results of operations and the
expected impact of COVID-19. 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. Important
factors that could cause actual results to differ materially from
the Company's plans or expectations include risks relating to
changes in the condition of the economy, including those arising
from public health concerns such as COVID-19, reliance on key
customers and licences, dependence on key projects and clients,
securing new business and fixed-price contracts, identification of
viable growth opportunities, implementation of our growth strategy,
competition and other risks detailed from time to time in the
filings made by the Company includingthose detailed in ISC’s Annual
Information Form for the year ended December 31, 2021 and ISC’s
unaudited Condensed Consolidated Interim Financial Statements and
Notes and Management’s Discussion and Analysis for the first
quarter ended March 31, 2022, copies of which are filed on SEDAR at
www.sedar.com.
The forward-looking information in this release
is made as of the date hereof and, except as required under
applicable securities laws, ISC assumes no obligation to update or
revise such information to reflect new events or circumstances.
Non-GAAP Performance
MeasuresIncluded within this news release is reference to
the following non-GAAP performance measures. These measures are
reviewed regularly by management and the Board of Directors in
assessing our performance and making decisions regarding the
ongoing operations of our business and its ability to generate
returns. These measures may also be used by external parties in
decision making related to ISC’s performance. They are not
recognized measures under GAAP and do not have a standardized
meaning under IFRS, so may not be reliable ways to compare us to
other companies.
Non-GAAP Performance Measure |
Why we use it |
How we calculate it |
Most comparable IFRS financial measure |
EBITDAEBITDA Margin |
- To evaluate performance and profitability of segments and
subsidiaries as well as conversion of revenues.
- We believe that certain investors and analysts use EBITDA to
measure our ability to service debt and meet other performance
obligations.
- EBITDA is also used as a component of determining short-term
incentive compensation for employees.
|
EBITDA:Net income add Depreciation and amortization, net finance
expense, income tax expenseEBITDA Margin:EBITDA divided
by Total revenue |
Net income |
Adjusted EBITDAAdjusted EBITDA Margin |
- To evaluate performance and profitability of segments and
subsidiaries as well as the conversion of revenue while excluding
non-operational and share-based volatility.
- We believe that certain investors and analysts use Adjusted
EBITDA to measure our ability to service debt and meet other
performance obligations.
|
Adjusted EBITDA:EBITDA Add (remove)Share-based compensation
expense, stock option expense, acquisition and integration costs,
gain on disposal of property, plant and equipment assetsAdjusted
EBITDA Margin:Adjusted EBITDADivided by Total revenue |
Net income |
Free Cash Flow |
- To show cash available for debt repayment and reinvestment into
the Company.
- We believe that certain investors and analysts use this measure
to value a business and its underlying assets.
|
Net cash flow provided by operating activities Deduct (add)Net
change in non-cash working capital, cash additions to property,
plant and equipment, cash additions to intangible assets |
Net cash flow provided by operating activities |
Investor & Media Contact
Jonathan HackshawSenior Director, Investor Relations &
Capital MarketsToll Free: 1-855-341-8363 in North America or
1-306-798-1137investor.relations@isc.ca
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