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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Information Services Corporation | TSX:ISV | Toronto | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.22 | 0.76% | 29.00 | 28.90 | 29.30 | 29.01 | 28.90 | 28.90 | 4,359 | 21:10:02 |
2023 Second Quarter Highlights
Financial Position as at June 30, 2023
Commenting on ISC’s results, Shawn Peters, President and CEO stated, “Our financial performance for the second quarter and first half of 2023 is a reflection of the robust nature of ISC’s business segments as well as the benefit of a diverse revenue stream. While successive increases to interest rates by the Bank of Canada have affected activity in the Saskatchewan Land Registry in particular, the upside to this is that the Regulatory Solutions division in Services had a strong quarter, driven by many of our financial institution customers implementing stronger due diligence because of a higher interest rate environment.” Peters continued, “We will continue to monitor the impact interest rates could have on our business while remaining confident in the strength and long-term potential of ISC.”
Management’s Discussion of ISC’s Summary of 2023 Second Quarter Financial Results
(thousands of CAD; except earnings per share and where noted) | Three MonthsEnded June 30, 2023 | Three MonthsEnded June 30, 2022 | ||
Revenue | ||||
Registry Operations | $24,796 | $24,479 | ||
Services | 26,072 | 24,894 | ||
Technology SolutionsCorporate and other | 2,4207 | 1,4934 | ||
Consolidated revenue | $53,295 | $50,870 | ||
Consolidated expenses | $40,965 | $33,919 | ||
Consolidated adjusted EBITDA1 | $17,824 | $19,246 | ||
Consolidated adjusted EBITDA margin1 | 33.4% | 37.8% | ||
Consolidated net income | $8,233 | $11,657 | ||
Consolidated adjusted net income1 | $9,256 | $10,785 | ||
Earnings per share (basic)1 | $0.47 | $0.66 | ||
Earnings per share (diluted)1 | $0.46 | $0.65 | ||
Adjusted earnings per share (basic)1 | $0.52 | $0.62 | ||
Adjusted earnings per share (diluted)1 | $0.51 | $0.60 | ||
Adjusted free cash flow1,2 | $11,900 | $13,218 |
1Adjusted net income, , adjusted EBITDA 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.
2During the second quarter of 2023, ISC has made the decision to add adjusted net income and adjusted free cash flow as new non-IFRS financial metrics that exclude certain items outside the normal course of business and are believed to provide useful information related to ISC’s performance.
2023 Second Quarter Results of Operations
OutlookThe 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 six months ended June 30, 2023.
Our long-term strategy remains centered on delivering value for shareholders through the consistent performance of our existing business and the execution of appropriate growth opportunities, including acquisition targets that are complementary to or add value to existing lines of business.
Registry Operations has performed well for the first half of 2023 despite successive increases to the interest rate by the Bank of Canada since 2022, which has impacted Saskatchewan real estate activity. The benefit of steady revenue from Ontario Property Tax Assessment Services continues to be positive, which is reflected in our year-to-date results. We expect the softness of real estate activity in Saskatchewan to persist during the last half of 2023, however, Registry Operations is expected to remain as a strong free cash flow contributor.
For Services, we expect to see customer and transaction growth remain strong in Regulatory Solutions, while volumes in Recovery Solutions will likely remain at current levels until the impact of interest rate increases begin to permeate into this part of our business. In the Corporate Solutions division, we expect to continue to mitigate any decline in revenue from the Ontario Business Registry contract through the addition of new customers across our Services divisions. Our ongoing investment in the technology supporting our Services segment, combined with our focus on our customers, is translating into robust organic growth through new customer acquisition.
In Technology Solutions, implementation work continues on existing contracts. The segment will also be supporting the registry enhancement work that has commenced for the Saskatchewan Registries. The new business pipeline also remains healthy and we are actively pursuing a number of opportunities.
Following the announcement of the extension to the MSA with the Province to 2053 on July 5, 2023, the Company conducted a review of the annual guidance metrics it publishes to ensure that it continues to provide the most appropriate metrics by which to guide for ISC’s forward-looking performance. Going forward, the Company will only be using revenue and adjusted EBITDA and has ceased using net income and free cash flow.
As such, and as a result of the extension to the MSA, the Company now expects revenue to be between $207.0 million and $212.0 million and adjusted EBITDA1 to be between $71.0 million and $76.0 million.
In summary, the Company remains confident in the strength and long-term potential of the business.
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”. Refer to section 2 “Consolidated Financial Analysis” for a reconciliation of historical adjusted EBITDA to net income.
Note to ReadersThe 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 June 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 investor.relations@isc.ca.
All figures are in Canadian dollars unless otherwise noted.
Conference Call and WebcastWe will hold an investor conference call on Thursday, August 3, 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/BI69c1d6014af549099dfab3527c771c25
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 ISCHeadquartered 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 InformationThis 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 second quarter ended June 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 MeasuresIncluded within this news release is reference to the following non-IFRS performance measures. These measures, which are reconciled below are reviewed regularly by management and the Board of Directors in assessing our performance and making decisions regarding the ongoing operations of our business and its ability to generate returns. These measures may also be used by external parties in decision making related to ISC’s performance. They are not recognized measures under IFRS and do not have a standardized meaning under IFRS, so may not be reliable ways to compare us to other companies.
Non-IFRS Performance Measure | Why we use it | How we calculate it | Most comparable IFRS financial measure |
Adjusted net incomeAdjusted earnings per share, basicAdjusted earnings per share, diluted |
| Adjusted net income;Net incomeAddShare-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, accretion on the liability to Government of Saskatchewan 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 outstandingAdjusted earnings per share, diluted;Adjusted net income divided by diluted weighted average number of common shares outstanding | Net incomeEarnings per share, basicEarnings per share, diluted |
EBITDAEBITDA Margin |
| EBITDA:Net income add (remove)Depreciation and amortization, net finance expense, income tax expenseEBITDA Margin:EBITDA divided byTotal revenue | Net income |
Adjusted EBITDAAdjusted EBITDA Margin |
| Adjusted EBITDA:EBITDA add (remove)share-based compensation expense, acquisition, integration and other costs, gain/loss on disposal of assets if significantAdjusted EBITDA Margin:Adjusted EBITDA divided byTotal 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 June 30, | ||||||||
(thousands of CAD) | 2023 | 2022 | ||||||
Adjusted net income | $ | 9,256 | $ | 10,785 | ||||
Add (subtract): | ||||||||
Share-based compensation expense | 347 | 1,900 | ||||||
Acquisition, integration and other costs | (1,730 | ) | (688 | ) | ||||
Effective interest component of interest expense | (18 | ) | (18 | ) | ||||
Tax effect on above adjustments1 | 378 | (322 | ) | |||||
Net income | $ | 8,233 | $ | 11,657 | ||||
Reconciliation of Adjusted EBITDA to EBITDA to Net Income
Three Months Ended June 30, | ||||||||
(thousands of CAD) | 2023 | 2022 | ||||||
Adjusted EBITDA | $ | 17,824 | $ | 19,246 | ||||
Add (subtract): | ||||||||
Share-based compensation expense | 347 | 1,900 | ||||||
Acquisition, integration and other costs | (1,730 | ) | (688 | ) | ||||
EBITDA | $ | 16,441 | $ | 20,458 | ||||
Add (subtract): | ||||||||
Depreciation and amortization | (4,111 | ) | (3,507 | ) | ||||
Net finance expense | (889 | ) | (666 | ) | ||||
Income tax expense | (3,208 | ) | (4,628 | ) | ||||
Net income | $ | 8,233 | $ | 11,657 | ||||
EBITDA margin (% of revenue) | 30.8 | % | 40.2 | % | ||||
Adjusted EBITDA margin (% of revenue) | 33.4 | % | 37.8 | % | ||||
Reconciliation of Adjusted Free Cash Flow to Free Cash Flow to Net Cash Flow Provided by Operating Activities
Three Months Ended June 30, | ||||||||
(thousands of CAD) | 2023 | 2022 | ||||||
Adjusted Free Cash Flow | $ | 11,900 | $ | 13,218 | ||||
Add (subtract): | ||||||||
Share-based compensation expense | 347 | 1,900 | ||||||
Acquisition, integration, and other costs | (1,730 | ) | (688 | ) | ||||
Registry enhancement capital expenditures | (375 | ) | - | |||||
Free cash flow | $ | 10,142 | $ | 14,430 | ||||
Add (subtract): | ||||||||
Cash additions to property, plant and equipment | 164 | 138 | ||||||
Cash additions to intangible assets | 1,206 | 181 | ||||||
Interest received | (243 | ) | (42 | ) | ||||
Interest paid | 1,043 | 435 | ||||||
Interest paid on lease obligations | 94 | 98 | ||||||
Principal repayment on lease obligations | 574 | 536 | ||||||
Net change in non-cash working capital1 | 1,327 | (3,439 | ) | |||||
Net cash flow provided by operating activities | $ | 14,307 | $ | 12,337 | ||||
1 Refer to Note 15 of ISC’s Consolidated Financial Statements for the three and six months ended June 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 $1.0 million decrease for the three months ended June 30, 2022.
Investor ContactJonathan HackshawSenior Director, Investor Relations & Capital MarketsToll Free: 1-855-341-8363 in North America or 1-306-798-1137investor.relations@isc.ca
Media ContactJodi BosnjakExternal Communications SpecialistToll Free: 1-855-341-8363 in North America or 1-306-798-1137corp.communications@isc.ca
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