REGINA, SASKATCHEWAN--(Marketwired - Nov. 4, 2015) - Information Services Corporation (TSX:ISV) ("ISC" or the "Company"), Saskatchewan's exclusive provider of key registry information services, today reported on the Company's financial results for the third quarter ended September 30, 2015.
Third Quarter ended September 30, 2015 Highlights
Financial Position as at September 30, 2015
Subsequent Events
On October 1, 2015, ISC announced it had successfully completed the acquisition of all of the issued and outstanding common shares of ESC Corporate Services Ltd. ("ESC"), a leading technology-enabled corporate services provider. The Company completed the transaction through its wholly owned subsidiary, ISC Enterprise Inc., with $21.0 million of the purchase price paid on closing of the transaction and up to $7.0 million payable in the form of a performance-based, 12-month earn-out. The purchase was financed through a combination of cash and $15.0 million of debt, pursuant to the September 28, 2015 amended and restated credit facilities.
Commenting on the Company's results, Jeff Stusek, President and CEO stated, "As we look back on the first nine months of 2015, we can see the direct impact the economy has on our core registry business. However, our registry business remains solid and continues to deliver good financial results. With a strong foundation in place, I remain optimistic about the future for ISC."
Management's Discussion of ISC's Summary of Financial Results for the Three Months Ended September 30, 2015
(Thousands of CAD dollars, except earnings per share and where noted) | Three Months Ended September 30, 2015 |
Three Months Ended September 30, 2014 |
|
Revenue | |||
Land Titles Registry, Land Surveys Directory and Geomatics | $ 15,053 | $ 16,608 | |
Personal Property Registry | $ 2,769 | $ 2,742 | |
Corporate Registry | $ 1,846 | $1,927 | |
Other | $ 7 | $ 1 | |
Total revenue | $ 19,675 | $ 21,278 | |
EBITDA1 | $ 8,165 | $ 9,665 | |
EBITDA margin1 (% of Revenues) | 41.5% | 45.4% | |
Adjusted EBITDA1 | $ 9,570 | $ 9,796 | |
Adjusted EBITDA margin1 | 48.6% | 46.0% | |
Net income and total comprehensive income | $ 4,656 | $ 6,239 | |
Earnings per share2 | $ 0.27 | $ 0.36 | |
Free cash flow1 | $ 2,806 | $ 7,711 | |
Expenses | $ 12,830 | $ 12,859 |
1 | For a reconciliation of EBITDA, adjusted EBITDA and free cash flow, refer to the section "Financial Measures and Key Performance Indicators" in the Management's Discussion & Analysis for the three months ended September 30, 2015. EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin 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. Refer to the section "Non-IFRS Measures" in the Management's Discussion & Analysis for the three months ended September 30, 2015. |
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. |
Outlook
The following section includes forward-looking statements, including statements related to, the anticipated revenue outlook, the economic conditions, transaction volumes, forecasted existing home sales, average home resale prices in Saskatchewan, consumer purchasing behaviour, variability in quarterly Land Registry revenue, changes in motor vehicle sales volume, PPR registration volume and revenue, slowed growth of active business entities, expected financial results from the acquisition of ESC, including that such acquisition is expected to be immediately accretive, expected financial impact of the investment in OneMove, expected level of capital expenditures, EBITDA margin, and impact of cost management efforts, and pursuit of opportunities as part of ISC's replication growth strategy. Refer to the section "Caution Regarding Forward-Looking Statements".
The majority of the Company's revenue is linked to transaction volumes which are largely driven by economic conditions in Saskatchewan. In 2015, certain of the key drivers that contribute to the Company's volumes have slowed.
Canada Mortgage and Housing Corporation Housing Market Outlook currently forecasts a decrease of 10.6 per cent in existing home sales volume in Saskatchewan for 2015 with an increase of 1.6 per cent in 2016. Similarly, average home resale prices are forecast to decrease by 0.5 per cent in 2015 and increase by 1.3 per cent in 2016.1 In July this year, the Bank of Canada reduced the key interest rate for the third time this year. This change could impact consumer purchasing behaviour which is linked to ISC's business. As a result, we continue to anticipate variability in our quarterly Land Registry revenue.
New motor vehicle sales in Saskatchewan, one of the components of our PPR, are expected to be lower in 2015 compared to 2014 volumes.2 Overall, we expect the registration volumes in the PPR for 2015 will be slightly lower than 2014, with revenues on par with 2014.
In our Corporate Registry, steady growth of active business entities contributes to stabilized revenue of the maintenance portion of the Corporate Registry. This growth has started to slow and we expect this trend to continue for the remainder of the year.
Management continues to expect capital expenditures in 2015 to be in the range of $4.0 million to $6.0 million funded from operating cash flow. These expenditures are primarily expected to include general office improvements, enhancement and upgrades to core technology components and enterprise systems, and continued renewal and enhancement of our Corporate Registry technology.
With respect to the recently announced investment in OneMove and acquisition of ESC, the Company expects ESC to be immediately accretive following the close of the transaction. As an investment, OneMove is not expected to have a significant financial impact.
ISC continues to expect its EBITDA margin for fiscal 2015 to be between 34.0 and 36.0 per cent. ISC's key drivers of expenses will continue to be wages, salaries and information technology costs. The Company continues to manage its costs in line with reduced revenues, focussing on wages and salaries and in-year initiative spend, while still maintaining a high level of customer service.
With respect to growth, the Company continues to pursue its three areas of targeted growth, replication, enhancement and acquisition and diversification.
As recently published in the media and through official news releases from the Government of Nova Scotia, Nova Scotia has announced its intention to conduct a procurement process to consider alternative service delivery for several of its key registries. As part of its replication growth strategy, ISC continues to actively pursue opportunities such as this. However, there is no certainty that ISC will be successful with any growth initiatives in this area.
Note to Readers:
This news release provides a general summary of Information Services Corporation's results for the second quarters ended September 30, 2015 and 2014. 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 of the site at http://isc.mwnewsroom.com/Financial-Reports-Filings. All figures are in Canadian dollars unless otherwise noted.
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.
Conference Call And Webcast
An investor conference call will be held on Thursday, November 5, 2015 at 11:00 a.m. Eastern Time (10 a.m. Saskatchewan time) to discuss the results. Participants may join the call by dialing toll-free 1-866-225-0198 or1-416-340-2216 for calls outside North America. Simultaneously, an audio webcast of the conference call will also be available at the following link http://isc.mwnewsroom.com/Events. Media are invited to attend on a listen-only basis.
The webcast will be available for replay 24 hours after the event at http://isc.mwnewsroom.com/Events.
About ISC
ISC is an experienced provider of registry and information services for government, individuals and private sector business. As the exclusive provider of the land titles, surveys, personal property and corporate registries for Saskatchewan, the Company maintains and operates these registries, which are key supporters of economic activity in the province.
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 the registry services and products, its competitive landscape, the Saskatchewan economy, consumer confidence, interest rates, level of unemployment, inflation, real estate market in Saskatchewan, impact of prices for agricultural commodities, oil and potash, claim liabilities, 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 17, 2015, ISC's Consolidated Financial Statements and Notes and Management's Discussion and Analysis for the period ended September 30, 2015 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.
1 | CMHC Housing Market Outlook - Canadian Edition - Second Quarter 2015. |
2 | Scotiabank Global Economics - Provincial Forecast Update - October 5, 2015. |
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