REGINA, Saskatchewan, Nov. 07, 2023 (GLOBE NEWSWIRE) -- Information Services Corporation (TSX:ISV) ("ISC" or the "Company") today reported on the Company's financial results for the third quarter ended September 30, 2023.
Capitalized terms that are used but not defined in this news release have the meaning ascribed to those terms in Management's Discussion & Analysis for the period ended September 30, 2023
2023 Third Quarter Highlights
Financial Position as at September 30, 2023
Subsequent Event
Commenting on ISC's results, Shawn Peters, President and CEO stated, "The big news of the quarter and year-to-date was our milestone announcement regarding the extension of the term of ISC's exclusive Master Service Agreement with the Province of Saskatchewan to manage and operate the Saskatchewan Registries until 2053. This Extension has been an important priority for us and immediately enhanced the Company's scale and financial profile." Peters continued, "With respect to our three segments, both Registry Operations and Services performed well in difficult economic conditions with Services proving once again to be our driver of organic growth. ISC continues to prove that it can produce sustained, positive performances regardless of economic conditions and although not currently recognized by the market, ISC's fundamentals remain stronger than ever, especially with the extension completed and a solid plan to de-lever the balance sheet in the near-term."
Management's Discussion of ISC's Summary of 2023 Third Quarter Consolidated Financial Results
(thousands of CAD; except earnings per share, adjusted earnings per share and where noted) | Three Months Ended September 30, 2023 | Three Months Ended September 30, 2022 | ||||
Revenue | ||||||
Registry Operations | $ | 27,419 | $ | 25,025 | ||
Services | 25,551 | 22,248 | ||||
Technology Solutions Corporate and other | 1,635 5 | 1,492 3 | ||||
Total Revenue | $ | 54,610 | $ | 48,768 | ||
Expenses | $ | 43,334 | $ | 36,922 | ||
Adjusted EBITDA1 | $ | 19,209 | $ | 17,037 | ||
Adjusted EBITDA margin1 | 35.2 | % | 34.9 | % | ||
Net income | $ | 4,234 | $ | 7,756 | ||
Adjusted net income1 | $ | 8,357 | $ | 8,625 | ||
Earnings per share (basic) | $ | 0.24 | $ | 0.44 | ||
Earnings per share (diluted) | $ | 0.23 | $ | 0.43 | ||
Adjusted earnings per share (basic)1 | $ | 0.47 | $ | 0.49 | ||
Adjusted earnings per share (diluted)1 | $ | 0.46 | $ | 0.48 | ||
Adjusted free cash flow1 | $ | 14,444 | $ | 11,357 |
1Adjusted net income, adjusted earnings per share, basic, adjusted earnings per share, diluted, adjusted EBITDA, adjusted EBITDA margin 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. See also a description of these non-IFRS measures and reconciliations of adjusted net income and adjusted EBITDA to net income and adjusted free cash flow to net cash flow provided by operating activities presented in the section of this news release titled "Non-IFRS Performance Measures".
2023 Third Quarter Results of Operations
Outlook
The 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 nine months ended September 30, 2023.
For For the balance of 2023, we expect continued organic growth in our Services segment, while the Registry Operations segment will continue to be a strong contributor to adjusted EBITDA and free cash flow generation. Our year-to-date results continue our history of positive quarter-after-quarter performance and stability; we expect that to continue.
We also expect to execute on our plan to de-lever the balance sheet to realize a long-term net leverage target of 2.0x ? 2.5x; a plan which commenced immediately following the announcement of the Extension in July, as evidenced by our third quarter 2023 payment against our outstanding debt.
At the end of October, the Bank of Canada held interest rates at 5 per cent, noting that it was prepared to raise interest rates again if inflation remains high. We therefore expect economic conditions in Canada to remain in line with our expectations for the remainder of 2023. As a result, we expect volumes in the Saskatchewan Land Registry within Registry Operations to remain at current (seasonally adjusted) levels, as well as a continuing positive impact in the Regulatory and Recovery Solutions divisions in Services due to increased due diligence searches and Asset Recovery revenue, respectively. Overall, we believe our performance will remain strong for the balance of the year, being steady in our core products and services, well positioned with certain counter-cyclical businesses and ready to benefit positively from any improvements to market conditions in the future.
With the above factors in mind, we are pleased to reiterate our updated annual guidance provided in August 2023 with revenue for 2023 expected to be between $207.0 million and $212.0 million and adjusted EBITDA1 to be between $71.0 million and $76.0 million. Given the strength of the business to date, we expect revenue to be at the top end of our guidance range and adjusted EBITDA to be towards the lower end of the guidance range, as we continue to invest in people and technology to position ourselves for the growth ahead.
In summary, we are proud of the year-to-date work we have done in 2023 to realize our short-term objectives for the year while pursuing our long-term goals for growth. Although the capital markets are currently challenging, and are presently not recognizing ISC's extremely strong fundamentals, the Company is stronger than ever, especially with the Extension completed, a robust plan to de-lever in the near term and a management team focused on long-term growth.
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" in the MD&A. Refer to section 2 "Consolidated Financial Analysis" in the MD&A for a reconciliation of historical adjusted EBITDA to net income.
Note to Readers
The 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 September 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 [email protected].
All figures are in Canadian dollars unless otherwise noted.
Conference Call and Webcast
We will hold an investor conference call on Wednesday, November 8, 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/BI4f3923462cbc454c9aa5458ff6b3a7eb
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 ISC
Headquartered 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 Information
This 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 third quarter ended September 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 Measures
Included within this news release are certain measures that have not been prepared in accordance with IFRS, such as adjusted net income, adjusted earnings per share, basic, adjusted earnings per share, diluted, EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, free cash flow and adjusted free cash flow. These measures are provided as additional information to complement those IFRS measures by providing further understanding of our financial performance from management's perspective, to provide investors with supplemental measures of our operating performance and, thus, highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS financial measures.
Management also uses non-IFRS measures to facilitate operating performance comparisons from period to period, prepare annual operating budgets and assess our ability to meet future capital expenditure and working capital requirements.
Accordingly, these non-IFRS measures should not be considered in isolation or as a substitute for analysis of our financial information reported under IFRS. Such measures do not have any standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other companies.
Non-IFRS Performance Measure | Why we use it | How we calculate it | Most comparable IFRS financial measure |
Adjusted net income Adjusted earnings per share, basic Adjusted earnings per share, diluted |
| Adjusted net income; Net income Add Share-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, interest on the vendor concession liability 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 outstanding Adjusted earnings per share, diluted; Adjusted net income divided by diluted weighted average number of common shares outstanding | Net income Earnings per share, basic Earnings per share, diluted |
EBITDA EBITDA Margin |
| EBITDA: Net income add (remove) Depreciation and amortization, net finance expense, income tax expense EBITDA Margin: EBITDA divided by Total revenue | Net income |
Adjusted EBITDA Adjusted EBITDA Margin |
| Adjusted EBITDA: EBITDA add (remove) share-based compensation expense, acquisition, integration and other costs, gain/loss on disposal of assets if significant Adjusted EBITDA Margin: Adjusted EBITDA divided by Total revenue | Net income |
Free Cash Flow |
| 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 |
| 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 September 30, | ||||||||
(thousands of CAD) | 2023 | 2022 | ||||||
Adjusted net income | $ | 8,357 | $ | 8,652 | ||||
Add (subtract): | ||||||||
Share-based compensation expense | (1,513 | ) | (1,081 | ) | ||||
Acquisition, integration and other costs | (796 | ) | (127 | ) | ||||
Effective interest component of interest expense | (64 | ) | (18 | ) | ||||
Interest on vendor concession liability | (1,733 | ) | - | |||||
Amortization of right to operate the Saskatchewan Registries | (1,543 | ) | - | |||||
Tax effect on above adjustments1 | 1,526 | 330 | ||||||
Net income | $ | 4,234 | $ | 7,756 |
1Calculated at ISC's statutory tax rate of 27.0 per cent.
Reconciliation of Adjusted EBITDA to EBITDA to Net Income
Three Months Ended September 30, | ||||||||
(thousands of CAD) | 2023 | 2022 | ||||||
Adjusted EBITDA | $ | 19,209 | $ | 17,037 | ||||
Add (subtract): | ||||||||
Share-based compensation expense | (1,513 | ) | (1,081 | ) | ||||
Acquisition, integration and other costs | (796 | ) | (127 | ) | ||||
EBITDA | $ | 16,900 | $ | 15,829 | ||||
Add (subtract): | ||||||||
Depreciation and amortization | (5,624 | ) | (3,983 | ) | ||||
Net finance expense | (5,171 | ) | (1,038 | ) | ||||
Income tax expense | (1,871 | ) | (3,052 | ) | ||||
Net income | $ | 4,234 | $ | 7,756 |
Reconciliation of Adjusted Free Cash Flow to Free Cash Flow to Net Cash Flow Provided by Operating Activities
Three Months Ended September 30, | ||||||||
(thousands of CAD) | 2023 | 20222 | ||||||
Adjusted Free Cash Flow | $ | 14,444 | $ | 11,357 | ||||
Add (subtract): | ||||||||
Share-based compensation expense | (1,513 | ) | (1,081 | ) | ||||
Acquisition, integration, and other costs | (796 | ) | (127 | ) | ||||
Registry enhancement capital expenditures | (157 | ) | - | |||||
Free cash flow2 | $ | 11,978 | $ | 10,149 | ||||
Add (subtract): | ||||||||
Cash additions to property, plant and equipment | 71 | 183 | ||||||
Cash additions to intangible assets3 | 382 | 122 | ||||||
Interest received | (347 | ) | (130 | ) | ||||
Interest paid | 2,498 | 949 | ||||||
Interest paid on lease obligations | 88 | 107 | ||||||
Principal repayment on lease obligations | 579 | 516 | ||||||
Net change in non-cash working capital1 | (676 | ) | 3,162 | |||||
Net cash flow provided by operating activities | $ | 14,573 | $ | 15,058 |
1 Refer to Note 16 of ISC's Consolidated Financial Statements for the three and nine months ended September 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 $1.4 million decrease for the three months ended September 30, 2022.
3 During the third quarter of 2023, ISC entered into the Extension Agreement which resulted in the acquisition of an intangible asset related to the right to manage and operate the Saskatchewan Registries. While this material transaction has been excluded from the above free cash flow calculation, the asset has been presented in Section 6.2 "Capital expenditures" of the MD&A.
Investor Contact
Jonathan Hackshaw
Senior Director, Investor Relations & Capital Markets
Toll Free: 1-855-341-8363 in North America or 1-306-798-1137
[email protected]
Media Contact
Jodi Bosnjak
External Communications Specialist
Toll Free: 1-855-341-8363 in North America or 1-306-798-1137
[email protected]
These press releases may also interest you
|