Information Services Corporation (TSX:ISV) (“ISC” or the “Company”)
today reported on the Company’s financial results for the fourth
quarter and year ended December 31, 2021.
Commenting on ISC’s results, Shawn Peters,
President and CEO stated, “2021 was a remarkable year for ISC. Not
only did we continue to grow our Services business in the face of a
global pandemic, but we experienced outstanding results in our
Saskatchewan-based registries.” Peters continued, “We see continued
strength across our business in 2022, and I’m looking forward to
building upon that strength with expanded products and services,
while putting our balance sheet to work by executing on our
acquisition strategy. As always, our customers and our employees
will be at the heart of everything we do, and 2022 is expected to
be another exciting year for ISC.”
Fourth Quarter 2021
Highlights
- Revenue was $44.2 million for the
quarter, an increase of 13 per cent compared to the fourth quarter
of 2020. The increase was due to strong activity in the
Saskatchewan real estate sector, which drove increased revenue in
the Saskatchewan Land Registry, coupled with continued organic
growth in our Services segment through integrated technology-driven
product offerings.
- Net income was $10.3 million or
$0.59 per basic share and $0.57 per diluted share compared to $7.9
million or $0.45 per basic and diluted share in the fourth quarter
of 2020. The increase is due to the increased revenue in Registry
Operations and Services, lower professional and consulting expenses
in 2021 and a reduction in share-based compensation expense in the
quarter.
- EBITDA was $17.6 million compared
to $15.7 million for the same quarter in 2020. This increase was
largely driven by the same reasons as net income: increased
revenue, lower professional and consulting expenses and a reduction
in share-based compensation during the quarter.
- EBITDA margin was 39.8 per cent for
the quarter compared to 40.2 per cent in 2020 resulting from lower
EBITDA in Technology Solutions, largely due to COVID-19 impacts,
and in Services with the transition of customers to the Registry
Complete platform, which provides additional services, and changes
our revenue recognition by accounting on a gross instead of net
basis.
- Adjusted EBITDA was $17.2 million
for the quarter compared to $17.0 million in the same quarter in
2020. The increase is due to the strong EBITDA, however, during the
quarter, our total share-based compensation expense reduced, which
caused adjusted EBITDA to be marginally lower than EBITDA. Adjusted
EBITDA margin was 38.9 per cent compared to 43.6 per cent in
2020.
- Free cash flow for the quarter was
$13.7 million, an increase of 9 per cent compared to the fourth
quarter of 2020 due to the strong free cash flow nature of the
higher results of operations.
- On November 3, 2021, our Board
declared a quarterly cash dividend of $0.23 per Class A Limited
Voting Share (“Class A Share”), paid on January 15, 2022, to
shareholders of record as of December 31, 2021.
Year-end 2021 Highlights
- Revenue was $169.4 million for the
full year, an increase of 24 per cent compared to 2020. Much like
reported for the fourth quarter, the increase was due to higher
revenue in Registry Operations driven by robust activity in the
Saskatchewan real estate sector, increases in personal property
security registrations and new business entity registrations. This
was accompanied by continued organic growth in our Services segment
through new customer acquisition and the use of technology,
including Registry Complete, offering an integrated suite of
services to our clients and a full year of operations from our new
Recovery Solutions division compared to five months in the prior
year.
- Net income was $32.1 million or
$1.83 per basic share and $1.78 per diluted share compared to $20.8
million or $1.19 per basic share and $1.18 per diluted share in
2020. The increase was the result of increased revenue in Registry
Operations and Services, lower professional and consulting
expenses, offset by increases in share-based compensation due to
strong performance of the Company’s share price during the year,
and increased expenses in both cost of goods sold and financial
services due to revenue growth.
- EBITDA was $60.5 million in 2021
compared to $43.4 million for the twelve months ended December 31,
2020, again due to increased revenue in Registry Operations and
Services, lower professional and consulting expenses, offset by
increases in share-based compensation, and increased costs in both
cost of goods sold and financial services due to revenue growth.
Consolidated EBITDA margin was 35.7 per cent compared to 31.7 per
cent in 2020.
- Adjusted EBITDA was $67.8 million
compared to $49.2 million in 2020. The increase is due to strong
EBITDA and the removal through adjustments of year-to-date
share-based compensation and acquisition and integration costs.
Adjusted EBITDA margin was 40.0 per cent compared to 36.0 per cent
in 2020.
- Free cash flow for the year ended
December 31, 2021, was $44.8 million, an increase of $8.6 million
compared to $36.2 million in 2020 due to higher results of
operations and strong cash flow conversion of the business.
- On September 20, 2021, ISC
announced an extension to its existing credit agreement with a new
maturity date of September 17, 2026. In addition, the amended
agreement simplifies the pricing structure and offers better terms.
The aggregate amount available under the Credit Facility remains
$150.0 million. During the year, ISC made voluntary prepayments of
$35.0 million against its long-term debt reducing its debt to $41.0
million.
- On September 21, 2021, our Board
announced that it had approved an increase in the expected annual
dividend on its Class A Shares from $0.80 to $0.92 or $0.20 to
$0.23 per quarter.
Financial Position as at December 31,
2021
- Cash of $40.1 million compared to
$33.9 million as at December 31, 2020, an increase of $6.2
million.
- Total debt of $41.0 million
compared to $76.3 million as at December 31, 2020.
Subsequent Events
- On February 15, 2022, the Company announced that its Services
segment, through its wholly-owned subsidiary, ESC Corporate
Services Ltd., acquired all of the shares of a group of companies
operating as UPLevel. The purchase consideration is $9.0 million,
subject to working capital and other post-closing adjustments set
out in the share purchase agreement.
- On March 15, 2022, our Board
declared a quarterly cash dividend of $0.23 per Class A Share,
payable on or before April 15, 2022, to shareholders of record as
of March 31, 2022.
Management’s Discussion of ISC’s Summary of Fourth
Quarter and Year-end 2021 Financial Results
(thousands of CAD; except earnings per
shareand where noted) |
|
Quarter EndedDecember 31,2021 |
|
|
Quarter EndedDecember 31,2020 (restated)2 |
|
|
Year EndedDecember 31,2021 |
|
|
Year EndedDecember 31,2020 (restated)2 |
|
Revenue |
|
|
|
|
Registry Operations |
$ |
21,076 |
|
$ |
19,452 |
|
$ |
85,567 |
|
$ |
69,535 |
|
Services |
|
20,549 |
|
|
15,744 |
|
|
75,165 |
|
|
56,398 |
|
Technology Solutions |
|
2,613 |
|
|
3,815 |
|
|
8,644 |
|
|
10,782 |
|
Corporate and other |
|
- |
|
|
2 |
|
|
3 |
|
|
8 |
|
Consolidated revenue |
$ |
44,238 |
|
$ |
39,013 |
|
$ |
169,379 |
|
$ |
136,723 |
|
Consolidated expenses |
$ |
29,775 |
|
$ |
27,086 |
|
$ |
122,625 |
|
$ |
106,055 |
|
Consolidated EBITDA1 |
$ |
17,616 |
|
$ |
15,694 |
|
$ |
60,532 |
|
$ |
43,392 |
|
Consolidated EBITDA margin1 (% of revenue) |
|
39.8 |
% |
|
40.2 |
% |
|
35.7 |
% |
|
31.7 |
% |
Consolidated adjusted EBITDA1 |
$ |
17,225 |
|
$ |
17,002 |
|
$ |
67,815 |
|
$ |
49,210 |
|
Consolidated adjusted EBITDA margin1 |
|
38.9 |
% |
|
43.6 |
% |
|
40.0 |
% |
|
36.0 |
% |
Consolidated net income |
$ |
10,286 |
|
$ |
7,923 |
|
$ |
32,078 |
|
$ |
20,825 |
|
Earnings per share (basic) |
$ |
0.59 |
|
$ |
0.45 |
|
$ |
1.83 |
|
$ |
1.19 |
|
Earnings per share (diluted) |
$ |
0.57 |
|
$ |
0.45 |
|
$ |
1.78 |
|
$ |
1.18 |
|
Free cash flow1 |
$ |
13,732 |
|
$ |
12,651 |
|
$ |
44,800 |
|
$ |
36,235 |
|
- 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,
they may not be comparable to similar measures reported by other
companies, refer to section 8.8 “Non-IFRS financial measures” in
Management’s Discussion & Analysis for the year ended December
31, 2021 for further discussion. Refer to section 2 “Consolidated
Financial Analysis” in Management’s Discussion & Analysis for
the year ended December 31 ,2021 for a reconciliation of EBITDA and
adjusted EBITDA to net income. Refer to section 6.1 “Cash Flow” in
Management’s Discussion & Analysis for the year ended December
31 ,2021 for a reconciliation of free cash flow.
- During the year, the Company revised its accounting policy
related to the configuration and customization costs incurred in
implementing Software-as-a-service (“SaaS”) arrangements in
response to the IFRIC agenda decision released in April 2021. This
accounting policy change resulted in the expense of formerly
capitalized financial system implementation costs incurred in 2018
through 2021. This change resulted in a retroactive adjustment to
expense these costs effective January 1, 2020. This change did not
result in a change in basic or diluted earnings per share for the
current or prior year.
2021 Results of Operations
- Total revenue
was $169.4 million, up 24 per cent compared to 2020.
- Registry
Operations segment revenue was $85.6 million, up 23 per cent
compared to 2020.
- Land Registry
revenue was $63.1 million, compared to $48.7 million in 2020.
- Personal
Property Registry was $11.0 million, up compared to $10.1 million
in 2020.
- Corporate
Registry revenue was $11.2 million, up compared to $10.5 million in
2020.
- Services segment
revenue was $75.2 million, compared to $56.4 million in 2020.
- Regulatory
Solutions revenue was $58.3 million compared to $47.7 million in
2020.
- Recovery
Solutions revenue was $9.5 million compared to $3.7 million in 2020
(revenue for 2020 is from July 31, 2020 to December 31, 2020).
- Corporate
Solutions revenue was $7.4 million compared to $4.9 million in
2020.
- Consolidated
expenses (all segments) were $122.6 million compared to $106.1
million for 2020.
- Net income for the year ended
December 31, 2021, was $32.1 million or $1.83 per basic share and
$1.78 per diluted share. For the year ended December 31, 2020, net
income was $20.8 million or $1.19 per basic and $1.18 per diluted
share.
- Capital
expenditures for 2021 were $2.5 million, compared to $1.5 million
in 2020.
OutlookThe following section
includes forward-looking information, including statements related
to the industries in which we operate, growth opportunities, our
future financial position and results of operations, capital and
operating expectations and the expected impact of COVID-19. Refer
to “Caution Regarding Forward-Looking Information” in Management’s
Discussion & Analysis for the year ended December 31, 2021.
The Company expects to see continued strength in
2022 across its two largest operating segments, Registry Operations
and Services. Both have benefitted from strong economic conditions
in 2021, including an overall positive impact on transaction and
seasonality trends during the pandemic.
While the pandemic has disrupted various sectors
of the Saskatchewan economy, Registry Operations has experienced
exceptional results in 2021, mainly due to the robust real estate
sector in Saskatchewan. While we do not expect the strong economic
activity experienced in 2021 will continue indefinitely, we believe
2022 will still exceed pre-pandemic levels. Saskatchewan’s economy
and registry transactions are expected to begin to return to more
normalized levels midway through 2022 and finish the year just
below 2021 record levels.
Consequently, we expect that Registry Operations
will continue to be a robust contributor to our results in 2022,
due largely to the strong cash flow this business generates on a
consistent basis. Additional investments in 2022 related to people
and technology will be made within this segment to ensure continued
high levels of service as well as secure and efficient systems.
We expect Services to continue to deliver
organic growth in 2022, driven by continuous technology
advancements driving operational efficiency and new product
innovation. We are deliberate in growing our business with existing
customers and the acquisition and onboarding of new customers,
particularly with our new cloud-based Registry Complete software. A
focus on investments in people and technology to advance our growth
will be important. This will allow us to expand our offering to
existing customers and facilitate the acquisition of new customers
throughout the year.
In Technology Solutions, we expect to see
continued progress and completion of solution delivery projects
where COVID-19 and other related delays have resulted in certain
milestones being deferred to 2022. Governments are expected to
continue directing their efforts to managing COVID-19, but we are
seeing the re-commencement of early-stage procurement activity,
which could translate into additional projects commencing later in
2022. An investment in our sales and technology development teams
will be necessary to support these activities, as well as provide
support across the organization on our technology initiatives. We
have also begun the search to find an Irish-based leader for our
Dublin subsidiary to support and drive their growth.
As economic trends potentially revert to
pre-COVID-19 levels, we expect our results to mildly follow suit.
Over the past two years, Registry Operations has delivered
exceptionally strong EBITDA, which is above historical
levels. This strong EBITDA has been propelled by a
combination of a robust Saskatchewan real estate market driving
higher average transaction values, increased ‘high value
transactions’ and slightly higher transaction volumes in the Land
Registry. While we expect continued strength in Registry
Operations’ EBITDA margin, we anticipate it to trend closer to
pre-pandemic levels as depicted in section 3.1 of Management’s
Discussion & Analysis.
Based on the previous details, in 2022 we expect
revenue to be between $168.0 million and $173.0 million, net income
to be between $23.0 million and $27.0 million, and EBITDA to be
between $48.0 million and $53.0 million.
Our results from the last seven quarters have
demonstrated the resilience of our business to economic adversity
as well as its ability to benefit from a strong economy, and we
expect that to continue. The Company’s diversified range of
services, pursuit of growth opportunities, and strong core
offerings have positioned us well for continued success in the
years to come.
In keeping with our strategy, the Company will
also actively explore appropriate acquisition targets in 2022 that
complement or add value to our existing lines of business or
provide new key service offerings that will also drive value.
Note to ReadersThe Board of
Directors (“Board”) of ISC is responsible for review and approval
of this disclosure. The Audit Committee of the Board, which is
comprised exclusively of independent directors, reviews and
approves the fiscal year-end Management’s Discussion and Analysis
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 years ended December 31, 2021 and 2020.
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
www.company.isc.ca
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.
All figures are in Canadian dollars unless
otherwise noted.
Conference Call and
WebcastThe Company will hold an investor conference call
on Wednesday, March 16, 2022 at 11:00 a.m. ET to discuss the
results. Participants may join the call by dialing toll-free
1-844-419-1765 or 1-216-562-0470 for calls outside North America.
It is recommended that participants dial in 5 to 10 minutes prior
to the scheduled start time. Simultaneously, an audio webcast of
the conference call will also be available at the following link
www.company.isc.ca/investor-relations/events. The audio file with a
replay of the webcast will be available about 24 hours after the
event on ISC’s website at the link above. Media are invited to
attend on a listen-only basis.
About ISC®Headquartered in
Canada, ISC is the 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 legislation 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 and the
expected impact of COVID-19. 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 such as COVID-19, 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, 2021 and
ISC’s audited Consolidated Financial Statements and Notes and
Management’s Discussion and Analysis for the fourth quarter and
year ended December 31, 2021, copies of which are filed on SEDAR at
www.sedar.com.
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.
Non-GAAP Performance MeasuresIncluded within
this news release is reference to the following non-GAAP
performance measures. These measures 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 GAAP and
do not have a standardized meaning under IFRS, so may not be
reliable ways to compare us to other companies.
Non-GAAP Performance Measure |
Why we use it |
How we calculate it |
Most comparable IFRS financial measure |
EBITDAEBITDA Margin |
-- To evaluate performance and profitability of segments and
subsidiaries as well as conversion of revenues. -- We believe
that certain investors and analysts use EBITDA to measure our
ability to service debt and meet other performance
obligations. -- EBITDA is also used as a component of
determining short-term incentive compensation for employees. |
EBITDA:Net income addDepreciation and amortization, net finance
expense, income tax expenseEBITDA
Margin: EBITDA divided by Total
revenue |
Net income |
Adjusted EBITDAAdjusted EBITDA Margin |
-- To evaluate performance and profitability of segments and
subsidiaries as well as the conversion of revenue while excluding
non-operational and share-based volatility. -- We
believe that certain investors and analysts use Adjusted EBITDA to
measure our ability to service debt and meet other performance
obligations. |
Adjusted EBITDA:EBITDA Add (remove)Share-based compensation
expense, stock option expense, acquisition and integration costs,
gain on disposal of property, plant and equipment assetsAdjusted
EBITDA Margin:Adjusted EBITDA Divided byTotal revenue |
Net income |
Free Cash Flow |
-- To show cash available for debt repayment and reinvestment
into the Company. -- We believe that certain investors and
analysts use this measure to value a business and its underlying
assets. |
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 |
Net cash flow provided by operating activities |
Investor & Media
Contact
Jonathan HackshawSenior Director, Investor
Relations & Capital MarketsToll Free: 1-855-341-8363 in North
America or 1-306-798-1137investor.relations@isc.ca
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