REGINA, Aug. 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 second quarter ended June 30, 2015.
Second Quarter ended June 30, 2015
Highlights
- Revenue of $20.1 million
- EBITDA (earnings before interest, taxes, depreciation and
amortization) of $8.2 million
- EBITDA margin of 41.1 per cent
- Net income of $5.0 million or
$0.28 per share
Financial Position as at June 30,
2015
- Cash of $39.4 million
- Free cash flow of $6.6
million
- Total debt of $9.9 million
Subsequent Events
- On July 7, 2015, ISC announced
that it entered into a Subscription Agreement that will result in
ISC acquiring 30.0 per cent of the issued and outstanding voting,
common shares of OneMove Technologies Inc. on closing for
$3.3 million. The transaction is
expected to close in the third quarter of 2015, subject to standard
closing conditions and ISC obtaining clearance for the transaction
from the Commissioner of Competition.
- On July 22, 2015 ISC announced
that the Company entered into a Share Purchase Agreement pursuant
to which ISC agreed to acquire all of the issued and outstanding
common shares of ESC Corporate Services Ltd., a leading
technology-enabled corporate services provider, for up to
$28.0 million consisting of cash and
debt. The Company expects to complete the transaction through a
wholly owned subsidiary. The transaction is expected to close in
the third quarter of 2015, subject to a number of closing
conditions, including ISC obtaining clearance for the transaction
from the Commissioner of Competition.
Commenting on the Company's results, Jeff Stusek, President and CEO stated, "Despite
the recent economic slowdown, our financial performance overall
remains strong when compared to 2007 – 2014 historical averages. We
have also demonstrated progress on our growth strategy with the two
transactions announced in July
2015."
Stusek also noted that ISC's registry services business remains
key to the Company's success and through these two recently
announced transactions, ISC has begun the process of
expanding its geographic footprint.
Management's Discussion of ISC's Summary of Financial Results
For The Three Months Ended June 30,
2015
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|
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(Thousands of CAD
dollars,
except earnings
per share and where noted)
|
Three Months
Ended
June 30,
2015
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Three Months
Ended
June 30,
2014
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|
Revenue
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Land Titles Registry,
Land Surveys Directory and Geomatics
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$ 15,299
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$ 17,310
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Personal Property
Registry
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$ 2,696
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$ 2,677
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Corporate
Registry
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$ 2,050
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$2,028
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Other
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$ 8
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$ 1
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Total
revenue
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$ 20,053
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$ 22,016
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EBITDA1
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$ 8,248
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$ 8,556
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EBITDA
margin1 (% of Revenues)
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41.1%
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38.9%
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Adjusted
EBITDA1
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$ 8,411
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$ 9,353
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Adjusted EBITDA
margin2
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41.9%
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42.5%
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Net income and total
comprehensive income
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$ 4,973
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$ 5,308
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Earnings per
share3
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$ 0.28
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$ 0.30
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Free cash
flow1
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$ 6,643
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$ 8,479
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Expenses
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$ 13,112
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$ 14,696
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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 June 30, 2015.
The Company has
updated its calculation of adjusted EBITDA in 2015. 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 June 30, 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
June 30, 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 (the "Land Registry") was $15.3 million for the three months ended
June 30, 2015; a decrease of
$2.0 million, or 11.6 per cent,
compared to the three months ended June 30,
2014.
The majority of the revenue generated from the Land Registry is
from the Land Titles Registry where the bulk of the fees the
Company earns are value based. Land Titles Registry revenue for the
three months ended June 30, 2015 was
$14.4 million, a decrease of
$2.0 million, or 12.1 per cent,
compared to a record high $16.4
million in the three months ended June 30, 2014.
While average land values in the second quarter of 2015 were higher
than those in the second quarter of 2014, the volume of regular
land transfers declined by 16.4 per cent and volumes of mortgage
registration and title search declined 7.6 per cent and 7.7 per
cent respectively.
- Revenue for the Personal Property Registry was flat at
$2.7 million for the three months
ended June 30, 2015, compared to the
same period in 2014.
Overall transaction volume for the second quarter of 2015 decreased
by 1.5 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 7.0 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
June 30, 2015 was $2.1 million, an increase of 1.1 per cent
compared to the three months ended June 30,
2014. Revenue from the incorporation of new businesses,
included in registrations, declined by 0.4 per cent in the same
period, however, this was offset by an increase in revenue of 0.4
per cent from the filing of annual returns, which is included in
maintenance.
- Expenses were $13.1 million for
the three months ended June 30, 2015,
a decrease of 10.7 percent, compared to $14.7 million in the three months ended
June 30, 2014 The decreases were
attributable to an increased effort to manage costs which the
Company has been working towards over the last 12 months.
- Capital expenditures for the three months ended June 30, 2015 were $0.3
million, compared to $0.7
million for the same period in 2014. Capital expenditures
for the second quarter in 2015 were focused on the enhancement of
technology supporting the Corporate Registry and general office
improvements.
- As at June 30, 2015, the Company
held $39.4 million in cash compared
to $33.6 million as at December 31, 2014, an increase of $5.8 million.
- The Company had $9.9 million of
long-term debt and no short-term borrowings as at June 30, 2015.
Outlook
The following Outlook section includes forward-looking
statements, including statements related to expected increases in
prices charged for services, the anticipated revenue outlook, the
prevailing and anticipated economic conditions, lower transaction
volumes, forecasted existing home sales, average home resale prices
in Saskatchewan, changes in motor
vehicle sales volume, PPR registration volume and revenue,
anticipated steady growth of active business entities, consumer
purchasing behaviour, EBITDA margin, impact of cost management
efforts, expected level of capital expenditures and the financial
impact of recently announced transactions. Refer to section
entitled "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 9.8 per cent in existing home
sales volume in Saskatchewan for
2015, with average home resale prices forecast to decrease by 0.7
per cent in 2015.1 Following quarter end, the Bank of
Canada reduced the key interest
rate for the second 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
Personal Property Registry, are expected to be lower in 2015 as
compared to 2014.2 Overall, we expect the registration
volumes and revenues in our personal property registry for 2015
will be slightly lower than 2014.
With respect to the Corporate Registry, steady growth of active
business entities contributes to stabilized revenue of the
maintenance portion of the Corporate Registry, and we expect this
trend to continue throughout the year.
Applicable flat fee adjustments were implemented in July 2015 as per the MSA with the Government of
Saskatchewan. Certain ISC fees are
adjustable annually based on a formula tied to inflation as
measured by the Saskatchewan Consumer Price Index, which is 2.39
per cent in 2015; Corporate Registry fees were increased 3.84 per
cent to account for both the 2014 and 2015 adjustments, as fees for
this Registry were not increased in 2014. These increases are not
expected to offset the reduction in revenue due to lower
volumes.
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 be sustaining capital expenditures that
include general office improvements, enhancement and upgrades to
core technology components and enterprise systems, and continued
renewal and enhancement of Corporate Registry technology.
With respect to the recently announced investment in OneMove and
acquisition of ESC Corporate Services, the Company expects ESC to
impact revenue in the fourth quarter, following the close of the
transaction. As an investment, OneMove is not expected to have a
significant impact on revenue at this
time.
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.
Note to Readers:
This news release provides a general summary of Information
Services Corporation's results for the second quarters ended
June 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.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
An investor conference call will be held on Thursday, August 6, 2015 at 11:00 a.m. Eastern Time (9
a.m. Saskatchewan/MDT) to
discuss the results. Participants may join the call by dialing
toll-free 1-888-390-0546 or 1-416-764-8688 for calls outside
North America. Simultaneously, an
audio webcast of the conference call will also be available at the
following link http://isc.investorroom.com/events. Media are
invited to attend on a listen-only basis.
The webcast will be available for replay 24 hours after the
event until 11:59 p.m. EST
September 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 period ended June 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.
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1 CMHC Housing Market Outlook – Canadian Edition –
Second Quarter 2015 and First Quarter 2015.
2 Scotiabank Global Economics – Global Forecast Update –
June 26, 2015 and March 31, 2015.
SOURCE Information Services Corporation