REGINA, March 17, 2015 /CNW/
- 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 fourth quarter and year ended
December 31, 2014.
Fourth Quarter 2014 Highlights
- Revenue of $19.8 million
- EBITDA (earnings before interest, taxes, depreciation and
amortization) of $7.0 million
- EBITDA margin of 35.6 per cent
- Net income of $4.0 million or
$0.23 per share
Full-Year 2014 Highlights
- Revenue of $80.5 million
- EBITDA of $30.2 million
- EBITDA margin of 37.6 per cent
- Net income of $18.4 million or
$1.05 per share
Financial Position as at December 31,
2014
- Cash of $33.6 million
- Free cash flow of $23.9
million
- Total debt of $9.9 million
Commenting on the Company's annual results, Jeff Stusek, President and CEO stated, "I am
very pleased with our performance in 2014, our first full fiscal
year as a publicly traded company. Despite the falttening of
the markets towards the end of the year, ISC delivered a stable
performance and maintained strong free cash flow while preserving
balance sheet strength. It is because of our prudent approach
to managing our business that we were also able to sustain a
competitive dividend payment to our shareholders. As we move
into 2015, this approach will continue to serve ISC well and
deliver long-term value for our shareholders."
Management's Discussion of ISC's Summary of Fourth Quarter
and Year End 2014 Financial Results
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(Thousands of CAD
dollars,
except earnings
per share and where
noted)
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Three Months
Ended
December
31,
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Year
Ended
December
31,
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2014
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2013
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2014
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2013
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Revenue1
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Land Titles Registry,
Land Surveys Directory and Geomatics
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$15,054
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$15,688
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$61,999
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$61,141
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Personal Property
Registry
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$2,338
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$2,358
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$9,870
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$9,787
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Corporate
Registry
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$2,017
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$1,982
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$ 8,235
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$8,170
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Other
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$350
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$11
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$355
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$33
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Total
revenue1
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$ 19,759
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$ 20,039
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$ 80,459
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$ 79,131
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EBITDA2
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$ 7,035
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$ 8,330
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$ 30,240
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$ 30,554
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EBITDA
margin2 (% of Revenues)
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35.6%
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41.6%
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37.6%
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38.1%
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Adjusted
EBITDA2
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$ 7,035
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$ 8,395
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$ 30,240
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$ 34,008
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Adjusted EBITDA
margin2
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35.6%
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41.9%
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37.6%
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43.0%
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Net income and total
comprehensive income
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$ 4,014
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$ 4,743
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$ 18,360
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$ 76,981
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Earnings per
share3
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$0.23
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$0.27
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$1.05
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$4.40
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Free cash
flow2
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$ 5,866
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$ 7,652
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$ 23,914
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$ 27,862
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Expenses
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$14,059
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$12,916
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$55,308
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$53,327
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- Revenues do not include the Vital Statistics Registry.
- EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted EBITDA Margin
and Free cash flow are not recognized as a measure under IFRS and
do not have a standardized meaning prescribed by IFRS. See
section name "Non-IFRS Measures" in Management's Discussion &
Analysis for the year ended December 31,
2014.
- The calculation of earnings per share is based on net income
after tax and the weighted average number of shares outstanding
during the period.
- Revenue from the Land Registry (which includes the Land Titles
Registry, Land Surveys Directory and Geomatics) was $62.0 million for the year ended December 31, 2014, an increase of $0.9 million, or 1.4 per cent, compared to the
year ended December 31, 2013.
Increases in volume and land values drove the increase in
revenue.
- Revenue from the Personal Property Registry ("PPR") for the
year ended December 31, 2014 was
$9.9 million, which represents an
increase of 0.8 per cent from the same period in 2013.
- Revenue for the Corporate Registry for the year ended
December 31, 2014 was $8.2 million, nearly identical when compared to
the year ended December 31, 2013.
Maintenance service transactions accounted for 58.9 per cent of all
transactions in the Corporate Registry. Search volume was the
largest contributor to the increase in overall transaction volumes
year-over-year. As the fee for a search is relatively low, the
impact to revenue was small.
- Expenses for the year ended December 31,
2014 were $55.3 million, an
increase of 3.7 per cent from $53.3
million for the same period in 2013. The increase was due to
increases in wages and salaries, professional and consulting
services, information technology services costs, and
additional expenses incurred to support the full fiscal year
requirements of a publicly traded company.
- Depreciation and amortization was $5.1
million for the year ended December
31, 2014, a decrease of $0.4
million compared to the same period of 2013. The decline was
due to certain projects reaching a fully amortized state in 2013
and only moderate capital expenditures in 2014.
- Capital expenditures for the year ended December 31, 2014 were flat at $3.7 million compared to the same period in 2013.
Capital expenditures in 2014 were focused on sustaining initiatives
such as the renewal and enhancement of technology hardware and the
renewal and enhancement of technology supporting the Corporate
Registry.
Total capital expenditures for 2014, which were estimated to be
between $5.0 million and $7.0 million
were less than anticipated due to a change in timing of certain
enhancements.
- ISC's cash position as at December 31,
2014 was $33.6 million
compared to $27.6 million at the same
time in 2013, which is an indication of the Company's ability to
generate strong cash flow. As at December 31, 2014, the Company had $9.9 million of long-term debt and no short-term
borrowings.
Outlook:
In 2015, ISC expects to continue to focus on delivering stable
and predictable returns.
The MSA and related Registry Operating Agreements specify the
maximum fees allowed to be charged to the public for particular
Core Registry Services as per the MSA. The maximum fees are
adjustable on a yearly basis and are based on a formula tied to
inflation as measured by the Saskatchewan Consumer Price Index
published by Statistics Canada. These adjustment provisions do not
apply to any value-based fees. There are no restrictions on the
fees ISC may charge for non-core Ancillary Services that use
registry data. ISC expects to generally adjust prices as outlined
in the MSA.
Given that adjustments to our prices are fixed as outlined
above, and that the majority of our revenue is linked to economic
conditions in Saskatchewan, the
Company expects that revenue for 2015 will be impacted. This is
based on the Saskatchewan economy
entering 2015 during a period of some economic uncertainty, which
is supported by a number of banks reforecasting their growth
expectations downward for 2015 for the province.
For example, according to Bank of Montreal Capital
Markets1 most recent economic forecast for
Saskatchewan, the provincial
economy is expected to post real gross domestic product ("GDP")
growth of 1.9 per cent in 2015, revised downward from 2.3 per cent
at the end of November 2014.
The Company expects the housing market, which is a key driver of
our Land Registry, to be impacted. Canada Mortgage and Housing
Corporation Housing Market Outlook currently forecasts a decrease
of 1.9 per cent in existing home sales volume in Saskatchewan for 2015. Average home resale
prices are expected to increase by 1.4 per cent in
20152.
Saskatchewan housing starts for
all of 2014 were down 1.4 per cent over 2013, while the number of
completions was up 10.4 per cent3. This
increase in completions has contributed to a buyers' market in
certain parts of the province. The extra inventory may impact
average sales prices negatively in 2015.
As well, the Land Titles Registry saw a large number of high
value property registrations in 2014, which generate a high fee per
transaction. High value property registrations in 2013 and 2014
were higher than our long-term average, however, we expect high
value property registrations to drop to a more normalized level in
2015, which directly impacts revenue.
For the PPR, new vehicle sales are an indication of expected
revenue. For all of 2014, the number of units of new vehicles sold
decreased 1.2 per cent compared to the same period in
2013.4 Scotiabank revised earlier forecasts
downward, expecting annual motor vehicle sales in Saskatchewan to be 55,000 in 2015, an expected
decrease over 2014 volumes5.
There is risk that consumer behaviour will be affected depending
on the duration of this climate of uncertainty. Inactivity could
occur if consumers take a 'wait and see' approach to their larger
purchases such as homes and vehicles. Businesses could scale back
or ramp up their investments, depending on which sector they are
in. Further changes to interest rates could also impact consumer
behaviour. As provincial economic conditions change, the Company's
revenue may be impacted.
Recent cuts in interest rates by the Bank of Canada, followed by the major banks, are
intended to stimulate the economy. In addition, the outlook on
potash prices is generally positive and the strengthening of
the United States economy and the
drop in the value of the Canadian dollar could positively impact
Saskatchewan exports. These
factors could positively impact ISC's registries.
ISC has also monitored the decline in the price of oil and the
potential impact to the Company. While there is no clear link
between the price of oil and the Company's revenue, oil and gas is
one segment of the Saskatchewan
economy, and therefore could have an impact on our overall registry
business.
ISC's key drivers of expenses will continue to be wages and
salaries and information technology costs as the Company continues
to focus on efficiency and effectiveness, leveraging investment in
systems and processes while maintaining a high level of customer
service. However, inflationary impacts are expected to move these
costs marginally higher in 2015
Management expects 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 be sustaining capital expenditures which include
general office improvements, enhancement and upgrades to core
technology components and enterprise systems, and the continuation
of the renewal and enhancement of the technology supporting the
Corporate Registry.
As stated earlier, revenue in 2014 was higher than 2013, partly
due to high value transactions. Typically, high value transactions
have been approximately 4.9 per cent of total revenue. In 2014,
high value transactions were 6.7 per cent of the Company's revenue,
which directly affects EBITDA margins. Not considering these high
value transactions, ISC would have achieved an EBITDA margin of
36.7 per cent in 2014. In 2015, given the uncertain economic
conditions described above, ISC expects its EBITDA margin to remain
in the range of 36.0 per cent to 37.0 per cent.
Note to Readers:
This news release provides a general summary of Information
Services Corporation's results for the fourth quarters and years
ended December 31, 2014 and
2013. 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.investorroom.com/annual-reports. 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
The Company is hosting a conference call and webcast at
9:00 a.m. Saskatchewan Time;
11:00 a.m. Eastern Time on
March 18, 2015 to discuss these
results. Dial-in numbers for the conference call are:
1-416-764-8688 or toll-free at 1-888-390-0546.
A live audiocast of the conference call is available at the
following link: http://isc.investorroom.com/events
The webcast will be available for replay 24 hours after the
event until 11:59 p.m. EST on
April 18, 2015
at http://isc.investorroom.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 year ended December 31, 2014 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.
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1 BMO
Capital Markets Economics – Provincial Economic Outlook – February
6, 2015 and November 28, 2014.
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2 CMHC
Housing Market Outlook – Canadian Edition – First Quarter
2015.
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3
Statistics Canada CANSIM Table 027-0001: Canada Mortgage and
Housing Corporation, housing starts, under construction, and
completions in centres 10,000 and over – February 23,
2015.
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4
Statistics Canada CANSIM Table 079-0003: New motor vehicle sales,
Canada, provinces and territories – January 26, 2014.
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5
Scotiabank Global Economics – Global Forecast Update – February 3,
2015.
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SOURCE Information Services Corporation