REGINA, May 5, 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 first quarter ended March 31, 2015.
First Quarter 2015 Highlights
- Revenue of $16.0 million
- EBITDA (earnings before interest, taxes, depreciation and
amortization) of $3.8 million
- EBITDA margin of 23.5 per cent
- Net income of $1.7 million or
$0.10 per share
Financial Position as at March 31,
2015
- Cash of $37.0 million
- Free cash flow of $2.1
million
- Total debt of $9.9 million
Commenting on the Company's results, Jeff Stusek, President and CEO stated, "As one
might expect, our first quarter results were impacted by the
slowing economic conditions in Saskatchewan for the first three months of
2015. The first quarter is typically our slowest quarter but
results are down year-over-year as compared to 2014 and the impact
early in the quarter was more than expected. Ours is not a business
that should be viewed quarter over quarter, but rather is a
long-term business with a solid foundation in Saskatchewan. I am confident that our business
has the right balance of financial strength and prudent expense
management to deal with quarterly fluctuations. That does not mean
we are immune to the impact and while there is still upside
potential in the real estate market, we do expect our year-end
EBITDA margin to be about 2 percent lower than previously
forecasted. In the long term, we remain committed to protecting the
stability of our results and will continue to pay close attention
to the economic outlook."
Management's Discussion of ISC's Summary of First Quarter
2015 Financial Results
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(Thousands of CAD
dollars,
except earnings
per share and where noted)
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Three
Months
Ended
March 31,
2015
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Three
Months
Ended
March 31,
2014
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Revenue
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Land Titles Registry,
Land Surveys Directory and Geomatics
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$11,704
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$13,026
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Personal Property
Registry
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$2,108
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$2,112
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Corporate
Registry
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$2,198
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$2,264
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Other
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$1
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$3
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Total
revenue
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$ 16,011
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$ 17,405
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EBITDA1
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$ 3,763
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$ 4,983
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EBITDA
margin1 (% of Revenues)
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23.5%
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28.6%
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Adjusted
EBITDA1
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$ 3,781
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$ 5,371
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Adjusted EBITDA
margin2
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23.6%
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30.9%
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Net income and total
comprehensive income
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$ 1,720
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$ 2,799
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Earnings per
share3
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$0.10
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$0.16
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Free cash
flow1
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$ 2,053
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$ 1,858
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Expenses
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$13,568
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$13,636
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1.
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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 months ended March 31, 2015.
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The Company has
updated its calculation of adjusted EBITDA. Previous adjustments
related to the costs of the Company's IPO and normalization
adjustments related to the transfer of the Government of
Saskatchewan's Vital Statistics Registry are no longer applicable.
Instead, EBITDA was adjusted for stock-based compensation expense
or income, equity settled employee benefit reserve, transactional
gains and losses, asset impairment charges, and acquisition and
integration costs. Refer to section name "Non-IFRS Measures" in the
Management's Discussion & Analysis for the three months ended
March 31, 2015 for further information and for reconciliations of
EBITDA and adjusted EBITDA, refer to section name "Financial
Measures and Key Performance Indicators".
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2.
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Adjusted EBITDA
margin for 2014, which previously mirrored the EBITDA margin, has
been adjusted to conform to the new calculation of adjusted EBITDA
margin outlined in the section name "Non-IFRS Measures" in the
Management's Discussion & Analysis for the three months ended
March 31, 2015.
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3.
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The calculation of
earnings per share is based on net income after tax and the
weighted average number of shares outstanding during the
period.
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- Revenue for the Land Titles Registry, Land Surveys Directory
and Geomatics was $11.7 million for
the three months ended March 31,
2015; a decrease of $1.3
million, or 10.2 per cent, compared to the three months
ended March 31, 2014. Results were
weaker in the first quarter of 2015, as compared to the same period
in 2014, largely due to the slowing of the Saskatchewan economy.
- Revenue for Personal Property Registry for the three months
ended March 31, 2015 was flat at
$2.1 million, when compared to the
same period in 2014. Overall transaction volume was down for the
first quarter of 2015 by 2.4 per cent compared to the same period
last year. The main driver of revenue for this registry, personal
property security registration setups, has shown a decrease in
volume of 10.2 per cent. However, revenue was flat when compared to
the same period last year due to increases in the average price per
setup as a result of registry fee increases and longer term
registrations.
- Revenue for the Corporate Registry for the three months ended
March 31, 2015 was $2.2 million, a decrease of 2.9 per cent when
compared to the three months ended March 31,
2014. Revenue from the incorporation of new businesses,
included in registrations, declined by 14.8 per cent in the same
period; however, this was partially offset by an increase in
revenue of 1.2 per cent from the filing of annual returns, which is
included in maintenance.
- Expenses were flat at $13.6
million for the three months ended March 31, 2015 compared to the three months ended
March 31, 2014.
- Capital expenditures for the three months ended March 31, 2015 were $1.0
million, compared to $0.7
million for the same period in 2014. Capital expenditures
for the first quarter in 2015 were focused on the enhancement of
technology supporting the Corporate Registry and general office
improvements.
- As at March 31, 2015 the Company
held $37.0 million in cash compared
to $33.6 million as at December 31, 2014, an increase of $3.4 million.
- The Company had $9.9 million of
long-term debt and no short-term borrowings as at March 31, 2015.
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. We
anticipate variability in quarterly revenue due to increased
volatility in the housing and mortgage markets. This is based on a
period of moderate economic uncertainty for the Saskatchewan economy in 2015, 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 1.0 per cent in 2015, revised downward from 1.9 per cent
at the end of February 2015.
The Company expects the housing market, which is a key revenue
driver of the Land Registry, to be impacted. Canada Mortgage and
Housing Corporation Housing ("CMHC") Market Outlook currently
forecasts a decrease of 1.9 per cent in existing home sales volume
in Saskatchewan for 2015. CMHC
also currently forecasts average home resale prices to increase by
1.4 per cent in 20152, down from their 2014
fourth quarter forecast of 2.1 percent.
Saskatchewan housing starts for
the three months ended March 31, 2015
were down 25.2 per cent compared to same period in 2014, while the
number of completions was up 11.2 per cent3.
This increase in completions has contributed to a buyers' market in
certain parts of the province. The extra inventory may have, and
may continue to, impact average sales prices in 2015, resulting in
softer year-over-year growth.
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. High value property
registrations have started to return to a normalized level in 2015
and we expect this trend to continue for the rest of 2015, which
directly impacts revenue.
For the PPR, new vehicle sales are an indicator for registration
activity. 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.
In 2015, given uncertain economic conditions described above,
ISC expects its EBITDA margin to be about 2.0 per cent lower than
previously forecasted. 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.
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1 BMO Capital Markets Economics – Provincial Economic
Outlook – April 17, 2015 and
February 27, 2015.
2 CMHC Housing Market Outlook – Canadian Edition – First
Quarter 2015.
3 Statistics Canada Table 027-0001: Canada Mortgage and
Housing Corporation, housing starts, under construction,
completions in centres 10,000 and over, CANSIM (database), accessed
April 10, 2015.
4 Statistics Canada Table 079-0003: New motor vehicle
sales, Canada, provinces and
territories, CAMSIM (database), accessed April 16, 2015.
5 Scotiabank Global Economics – Global Forecast Update –
March 31, 2015.
Note to Readers:
This news release provides a general summary of Information
Services Corporation's results for the first quarters ended
March 31, 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.investorroom.com/quarterly-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
May 6, 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
June 6, 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.
SOURCE Information Services Corporation