Information Services Corporation (TSX:ISV) (“ISC” or the “Company”)
today reported on the Company’s financial results for the second
quarter ended June 30, 2023.
2023 Second Quarter
Highlights
- Revenue was $53.3
million for the quarter, an increase of 5 per cent compared to the
second quarter of 2022. This was primarily driven by increased
revenue in Services, spurred by continued transaction and customer
growth in Regulatory Solutions, and additional third-party revenue
in Technology Solutions as progress is made on both ongoing and new
contracts. Registry Operations also contributed to the increased
revenue as a result of a full three months of results from the
Ontario Property Tax Assessment Services division compared to one
month in the prior year following its acquisition on June 1, 2022.
This was offset by a decrease in Saskatchewan Land Registry revenue
due to reduced activity in the Saskatchewan real estate sector
during the quarter.
- Net income was
$8.2 million or $0.47 per basic and $0.46 per diluted share
compared to $11.7 million or $0.66 per basic share and $0.65 per
diluted share in the second quarter of 2022. The decrease in net
income compared to the prior year is the result of a decrease in
Saskatchewan Land Registry revenue, an increase in share-based
compensation, increased investments in people offset by income from
Ontario Property Tax Assessment Services for three months in the
current year compared to one month in the prior year.
- Net cash flow
provided by operating activities was $14.3 million
for the quarter, an increase of $2.0 million driven by changes in
non-cash working capital, primarily an increase in accounts payable
increasing cash flows partially offset by lower net income.
- Adjusted net
income was $9.3 million or $0.52 per basic share and $0.51
per diluted share compared to $10.8 million or $0.62 per basic
share and $0.60 per diluted share in the second quarter of 2022.
This decrease primarily relates to a decrease in Saskatchewan Land
Registry revenue, higher amortization related to intangible assets
arising from the acquisition of the Ontario Property Tax Assessment
Services division in 2022, as well as higher net finance
expense.
- Adjusted EBITDA
was $17.8 million for the quarter compared to $19.2 million in 2022
primarily due to a reduction in Saskatchewan Land Registry revenue
in the current year due to reduced activity in the Saskatchewan
real estate sector and increased personnel costs in both Technology
Solutions and Corporate segments. This was partially offset by a
full three-month adjusted EBITDA contribution from Ontario Property
Tax Assessment Services compared to one month in the prior year and
additional revenue from customer and transaction growth in
Regulatory Solutions. Adjusted EBITDA margin was 33.4 per cent
compared to 37.8 per cent in the second quarter of 2022.
- Adjusted free cash
flow for the quarter was $11.9 million, down 10 per cent
compared to $13.2 million in the second quarter of 2022 primarily
related to reduced revenue in the Saskatchewan Land Registry due to
lower activity in the Saskatchewan real estate sector accompanied
by increased interest expense resulting from higher interest rates
and borrowings outstanding during the period when compared to the
prior year.
Financial Position as at June 30,
2023
- Cash of $26.6 million compared to
$34.5 million as of December 31, 2022.
- Total debt of $51.1 million
compared to $66.0 million as of December 31, 2022.
Commenting on ISC’s results, Shawn Peters,
President and CEO stated, “Our financial performance for the second
quarter and first half of 2023 is a reflection of the robust nature
of ISC’s business segments as well as the benefit of a diverse
revenue stream. While successive increases to interest rates by the
Bank of Canada have affected activity in the Saskatchewan Land
Registry in particular, the upside to this is that the Regulatory
Solutions division in Services had a strong quarter, driven by many
of our financial institution customers implementing stronger due
diligence because of a higher interest rate environment.” Peters
continued, “We will continue to monitor the impact interest rates
could have on our business while remaining confident in the
strength and long-term potential of ISC.”
Management’s Discussion of ISC’s Summary
of 2023 Second Quarter Financial Results
(thousands of CAD; except earnings
per share and where noted) |
Three MonthsEnded June 30,
2023 |
|
Three MonthsEnded June 30,
2022 |
|
Revenue |
|
|
Registry Operations |
$24,796 |
|
$24,479 |
|
Services |
26,072 |
|
24,894 |
|
Technology SolutionsCorporate and other |
2,4207 |
|
1,4934 |
|
Consolidated revenue |
$53,295 |
|
$50,870 |
|
Consolidated expenses |
$40,965 |
|
$33,919 |
|
Consolidated adjusted EBITDA1 |
$17,824 |
|
$19,246 |
|
Consolidated adjusted EBITDA margin1 |
33.4% |
|
37.8% |
|
Consolidated net income |
$8,233 |
|
$11,657 |
|
Consolidated adjusted net income1 |
$9,256 |
|
$10,785 |
|
Earnings per share (basic)1 |
$0.47 |
|
$0.66 |
|
Earnings per share (diluted)1 |
$0.46 |
|
$0.65 |
|
Adjusted earnings per share (basic)1 |
$0.52 |
|
$0.62 |
|
Adjusted earnings per share (diluted)1 |
$0.51 |
|
$0.60 |
|
Adjusted free cash flow1,2 |
$11,900 |
|
$13,218 |
|
1Adjusted net income, , adjusted EBITDA and adjusted 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” in the MD&A.
Refer to section 2 “Consolidated Financial Analysis” in the
MD&A for a reconciliation of adjusted net income and adjusted
EBITDA to net income. Refer to section 6.1 “Cash flow” in the
MD&A for a reconciliation of adjusted free cash flow to net
cash flow provided by operating activities.
2During the second quarter of 2023, ISC has made the decision to
add adjusted net income and adjusted free cash flow as new non-IFRS
financial metrics that exclude certain items outside the normal
course of business and are believed to provide useful information
related to ISC’s performance.
2023 Second Quarter Results of
Operations
- Total revenue
was $53.3 million, up 5 per cent compared to Q2 2022.
- Registry
Operations segment revenue was $24.8 million, up compared to $24.5
million in Q2 2022:
- Land Registry
revenue was $14.7 million, down compared to $17.1 million in Q2
2022.
- Personal
Property Registry revenue was $3.3 million, up compared to $3.0
million in Q2 2022.
- Corporate
Registry revenue was $2.7 million, flat compared to the same prior
year period.
- Property Tax
Assessment Services revenue in Registry Operations was $3.9
million, up compared to $1.2 million in Q2 2022.
- Services segment
revenue was $26.1 million, up compared to $24.9 million in Q2 2022:
- Regulatory
Solutions revenue was $20.1 million, up compared to $18.7 million
in Q2 2022.
- Recovery
Solutions revenue was $2.4 million, flat compared to the same prior
year period.
- Corporate
Solutions revenue was $3.6 million, down compared to $3.7 million
in Q2 2022.
- Technology
Solutions revenue from third parties was $2.4 million, up from $1.5
million in Q2 2022.
- Consolidated
expenses (all segments) were $41.0 million, up $7.0 million
compared to $33.9 million in Q2 2022.
- Net income was
$8.2 million or $0.47 per basic share and $0.46 per diluted share,
down $3.4 million compared to $11.7 million or $0.66 per basic and
$0.65 per diluted share for Q2 2022.
OutlookThe following section
includes forward-looking information, including statements related
to our strategy, future results, including revenue and adjusted
EBITDA, segment performance, the industries in which we operate,
economic activity, growth opportunities, investments, and business
development opportunities. Refer to “Caution Regarding
Forward-Looking Information” in Management’s Discussion &
Analysis for the three and six months ended June 30, 2023.
Our long-term strategy remains centered on
delivering value for shareholders through the consistent
performance of our existing business and the execution of
appropriate growth opportunities, including acquisition targets
that are complementary to or add value to existing lines of
business.
Registry Operations has performed well for the
first half of 2023 despite successive increases to the interest
rate by the Bank of Canada since 2022, which has impacted
Saskatchewan real estate activity. The benefit of steady revenue
from Ontario Property Tax Assessment Services continues to be
positive, which is reflected in our year-to-date results. We expect
the softness of real estate activity in Saskatchewan to persist
during the last half of 2023, however, Registry Operations is
expected to remain as a strong free cash flow contributor.
For Services, we expect to see customer and
transaction growth remain strong in Regulatory Solutions, while
volumes in Recovery Solutions will likely remain at current levels
until the impact of interest rate increases begin to permeate into
this part of our business. In the Corporate Solutions division, we
expect to continue to mitigate any decline in revenue from the
Ontario Business Registry contract through the addition of new
customers across our Services divisions. Our ongoing investment in
the technology supporting our Services segment, combined with our
focus on our customers, is translating into robust organic growth
through new customer acquisition.
In Technology Solutions, implementation work
continues on existing contracts. The segment will also be
supporting the registry enhancement work that has commenced for the
Saskatchewan Registries. The new business pipeline also remains
healthy and we are actively pursuing a number of opportunities.
Following the announcement of the extension to
the MSA with the Province to 2053 on July 5, 2023, the Company
conducted a review of the annual guidance metrics it publishes to
ensure that it continues to provide the most appropriate metrics by
which to guide for ISC’s forward-looking performance. Going
forward, the Company will only be using revenue and adjusted EBITDA
and has ceased using net income and free cash flow.
As such, and as a result of the extension to the
MSA, the Company now expects revenue to be between $207.0 million
and $212.0 million and adjusted EBITDA1 to be between $71.0 million
and $76.0 million.
In summary, the Company remains confident in the
strength and long-term potential of the business.
1 Adjusted EBITDA is not recognized as a measure
under IFRS and does not have a standardized meaning prescribed by
IFRS and, therefore, 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 historical adjusted EBITDA to net
income.
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 June 30, 2023, and 2022.
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 company.isc.ca.
Copies can also be obtained SEDAR+ at www.sedarplus.ca 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, August 3, 2023
at 11:00 a.m. ET to discuss the results. Those joining the call on
a listen-only basis are encouraged to join the live audio webcast
which will be available on our website at
company.isc.ca/investor-relations/events. Participants who wish to
ask a question on the live call may do so through the ISC website
or by registering through the following live call URL:
https://register.vevent.com/register/BI69c1d6014af549099dfab3527c771c25
Once registered, participants will receive the
dial-in numbers and their unique PIN number. When dialing in,
participants will input their PIN and be placed into the call. 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 a 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 laws 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.
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,
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 including those detailed
in ISC’s Annual Information Form for the year ended December 31,
2022 and ISC’s unaudited Condensed Consolidated Interim Financial
Statements and Notes and Management’s Discussion and Analysis for
the second quarter ended June 30, 2023, copies of which are filed
on SEDAR+ at www.sedarplus.ca.
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-IFRS Performance
MeasuresIncluded within this news release is reference to
the following non-IFRS performance measures. These measures, which
are reconciled below 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 IFRS and do not have a
standardized meaning under IFRS, so may not be reliable ways to
compare us to other companies.
Non-IFRS Performance Measure |
Why we use it |
How we calculate it |
Most comparable IFRS financial measure |
Adjusted net incomeAdjusted earnings per share, basicAdjusted
earnings per share, diluted |
- To evaluate performance and profitability while excluding
non-operational and share-based volatility.
- We believe that certain investors and analysts will use
adjusted net income and adjusted earnings per share to evaluate
performance while excluding items that management believes do not
contribute to our ongoing operations.
|
Adjusted net income;Net incomeAddShare-based compensation expense,
acquisitions, integration and other costs, effective interest
component of interest expense, debt finance costs expensed to
professional and consulting, amortization of the intangible asset
related to extension of the MSA with the Province of Saskatchewan,
amortization of registry enhancements, accretion on the liability
to Government of Saskatchewan and the tax effect of these
adjustments at ISC’s statutory tax rate.Adjusted earnings per
share, basic;Adjusted net income divided by weighted average number
of common shares outstandingAdjusted earnings per share,
diluted;Adjusted net income divided by diluted weighted average
number of common shares outstanding |
Net incomeEarnings per share, basicEarnings per share, diluted |
EBITDAEBITDA Margin |
- To evaluate performance and profitability of segments and
subsidiaries as well as the conversion of revenue.
- We believe that certain investors and analysts use EBITDA to
measure our ability to service debt and meet other performance
obligations.
|
EBITDA:Net income add (remove)Depreciation and amortization,
net finance expense, income tax expenseEBITDA Margin:EBITDA
divided byTotal 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 is also used as a component of determining
short-term incentive compensation for employees.
|
Adjusted EBITDA:EBITDA add (remove)share-based compensation
expense, acquisition, integration and other costs, gain/loss on
disposal of assets if significantAdjusted EBITDA Margin:Adjusted
EBITDA divided byTotal revenue |
Net income |
Free Cash Flow |
- To show cash available for debt repayment and reinvestment into
the Company on a levered basis.
- We believe that certain investors and analysts use this measure
to value a business and its underlying assets.
- Free cash flow is also used as a component of determining
short-term incentive compensation for employees.
|
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,
interest received and paid as well as interest paid on lease
obligations and principal repayments on lease obligations |
Net cash flow provided by operating activities |
Adjusted Free Cash Flow |
- To show cash available for debt repayment and reinvestment into
the Company on a levered basis from continuing operations while
excluding non-operational and share-based volatility.
- We believe that certain investors and analysts use this measure
to value a business and its underlying assets based on continuing
operations while excluding short term non-operational items.
|
Free Cash Flow deduct (add)Share-based compensation expense,
acquisition, integration and other costs and registry enhancement
capital expenditures |
Net cash flow provided by operating activities |
|
The following presents a reconciliation of
adjusted net income to net income, a reconciliation of adjusted
EBITDA to EBITDA to net income and a reconciliation of adjusted
free cash flow to free cash flow to net cash flow from operating
activities:
Reconciliation of Adjusted Net Income to Net
Income
|
|
Three Months Ended June 30, |
|
(thousands of CAD) |
|
|
|
2023 |
|
|
2022 |
|
Adjusted net income |
|
|
$ |
9,256 |
|
$ |
10,785 |
|
Add (subtract): |
|
|
|
|
Share-based compensation expense |
|
|
|
347 |
|
|
1,900 |
|
Acquisition, integration and other costs |
|
|
|
(1,730 |
) |
|
(688 |
) |
Effective interest component of interest expense |
|
|
|
(18 |
) |
|
(18 |
) |
Tax effect on above adjustments1 |
|
|
|
378 |
|
|
(322 |
) |
Net income |
|
|
$ |
8,233 |
|
$ |
11,657 |
|
|
Reconciliation of Adjusted EBITDA to EBITDA to Net
Income
|
|
|
Three Months Ended June 30, |
|
(thousands of CAD) |
|
|
|
2023 |
|
|
2022 |
|
Adjusted EBITDA |
|
|
$ |
17,824 |
|
$ |
19,246 |
|
Add (subtract): |
|
|
|
|
Share-based compensation expense |
|
|
|
347 |
|
|
1,900 |
|
Acquisition, integration and other costs |
|
|
|
(1,730 |
) |
|
(688 |
) |
EBITDA |
|
|
$ |
16,441 |
|
$ |
20,458 |
|
Add (subtract): |
|
|
|
|
Depreciation and amortization |
|
|
|
(4,111 |
) |
|
(3,507 |
) |
Net finance expense |
|
|
|
(889 |
) |
|
(666 |
) |
Income tax expense |
|
|
|
(3,208 |
) |
|
(4,628 |
) |
Net income |
|
|
$ |
8,233 |
|
$ |
11,657 |
|
EBITDA margin (% of revenue) |
|
|
|
30.8 |
% |
|
40.2 |
% |
Adjusted EBITDA margin (% of revenue) |
|
|
|
33.4 |
% |
|
37.8 |
% |
|
Reconciliation of Adjusted Free Cash Flow to Free Cash
Flow to Net Cash Flow Provided by Operating Activities
|
|
Three Months Ended June 30, |
|
(thousands of CAD) |
|
|
|
2023 |
|
|
2022 |
|
Adjusted Free Cash Flow |
|
|
$ |
11,900 |
|
$ |
13,218 |
|
Add (subtract): |
|
|
|
|
Share-based compensation expense |
|
|
|
347 |
|
|
1,900 |
|
Acquisition, integration, and other costs |
|
|
|
(1,730 |
) |
|
(688 |
) |
Registry enhancement capital expenditures |
|
|
|
(375 |
) |
|
- |
|
Free cash flow |
|
|
$ |
10,142 |
|
$ |
14,430 |
|
Add (subtract): |
|
|
|
|
Cash additions to property, plant and equipment |
|
|
|
164 |
|
|
138 |
|
Cash additions to intangible assets |
|
|
|
1,206 |
|
|
181 |
|
Interest received |
|
|
|
(243 |
) |
|
(42 |
) |
Interest paid |
|
|
|
1,043 |
|
|
435 |
|
Interest paid on lease obligations |
|
|
|
94 |
|
|
98 |
|
Principal repayment on lease obligations |
|
|
|
574 |
|
|
536 |
|
Net change in non-cash working capital1 |
|
|
|
1,327 |
|
|
(3,439 |
) |
Net cash flow provided by operating activities |
|
|
$ |
14,307 |
|
$ |
12,337 |
|
|
1 Refer to Note 15 of ISC’s Consolidated
Financial Statements for the three and six months ended June 30,
2023 for reconciliation.2 Commencing on January 1, 2023, ISC
revised the definition of free cash flow which is a non-IFRS
measure to include interest received and paid as well as principal
repayments on lease obligations. This is further defined in the
MD&A section 8.8 “Non-IFRS financial measures”, and has been
reflected in the comparative period. The impact of the change to
free cash flow to include interest received and paid, interest paid
on lease obligations and principal repayments on lease obligations
on the previously stated prior year results was a $1.0 million
decrease for the three months ended June 30, 2022.
Investor ContactJonathan HackshawSenior
Director, Investor Relations & Capital MarketsToll Free:
1-855-341-8363 in North America or
1-306-798-1137investor.relations@isc.ca
Media ContactJodi BosnjakExternal
Communications SpecialistToll Free: 1-855-341-8363 in North America
or 1-306-798-1137corp.communications@isc.ca
Information Services (TSX:ISV)
Historical Stock Chart
Von Apr 2024 bis Mai 2024
Information Services (TSX:ISV)
Historical Stock Chart
Von Mai 2023 bis Mai 2024