ISC® Reports 2019 Third Quarter Financial Results
REGINA, Saskatchewan, Nov. 06, 2019 (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, 2019. 2019 Third Quarter HighlightsRevenue of $32.2 million compared to $30.2 million in Q3 2018, up 6.6%.Net income of $3.3 million or $0.19 per basic and diluted share compared to $7.8 million or $0.44 per basic and diluted share in Q3 2018. The year-over-year decrease is largely due to (i) a gain in 2018 from an adjustment to the fair value estimate of the contingent consideration associated with our AVS acquisition ($2.8 million) and (ii) one-time costs this quarter related to the closure of three of our regional offices ($1.4 million).EBITDA (earnings before interest, taxes, depreciation and amortization) of $8.6 million, down compared to $12.1 million in Q3 2018. Excluding the $2.8 million fair value estimate of the contingent consideration adjustment in 2018 and the $0.8 million one-time costs this quarter related to office closures that are included in EBITDA, EBITDA was flat for the three months ended September 30, 2019, versus 2018. EBITDA margin of 26.7% compared to 40.2% in Q3 2018, down as expected, as a result of the lower margin profile of our collateral management product line in our Services segment.Adjusted EBITDA for the quarter was $8.7 million, a margin of 26.9%, compared to $9.7 million and a 32.3% margin in 2018.Free cash flow of $6.6 million, a decrease of $1.0 million or 12.8% compared to Q3 2018, mainly due to the one-time costs associated with our office closures.Subsequent to the end of the third quarter, we announced that our wholly owned Irish subsidiary, Enterprise Registry Solutions Limited (“ERS”), signed an agreement with the Irish Aviation Authority to implement and support its new Safety Regulation System. The total value of the implementation contract is approximately $7.0 million, with a subsequent agreement expected for system support and maintenance. The new system is expected to go-live in 2021.Financial Position as at September 30, 2019Cash of $19.3 million compared to $28.7 million as at December 31, 2018.Total debt of $18.5 million compared to $20.0 million as at December 31, 2018.Commenting on ISC’s results, Jeff Stusek, President and CEO stated, “Our performance in the third quarter was as expected and we remain a strong free cash flow business.” Stusek continued, “Registry Operations continues to be challenged by the effects of economic conditions but is delivering robust results. The primary driver of growth continues to come from our Services business, largely through the continued expansion of our customer base in collateral management and KYC. We remain on track to meet our guidance for 2019 and will continue to source new business development opportunities as well as accretive acquisition targets.”Management’s Discussion of ISC’s Summary of 2019 Third Quarter Financial Results1EBITDA, adjusted EBITDA 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 corporations. Please refer to section 8.8 “Non-IFRS Financial Measures”, section 2 “Consolidated Financial Analysis” for a reconciliation of EBITDA and adjusted EBITDA to net income and section 6.1 “Cash Flow” for a reconciliation of free cash flow in Management’s Discussion & Analysis for the three and nine months ended September 30, 2019.2019 Third Quarter Results of OperationsTotal revenue was $32.2 million, up $2.0 million compared to Q3 2018.Registry Operations segment revenue was $17.6 million, down $0.3 million compared to Q3 2018.Land Registry revenue was $12.4 million, down $0.4 million compared Q3 2018.Personal Property Registry was $2.7 million, flat compared to Q3 2018.Corporate Registry revenue was $2.4 million, flat compared to Q3 2018.Services segment revenue was $12.9 million, up $2.5 million compared to Q3 2018.Technology Solutions segment revenue was $5.1 million, down compared to $5.5 million in Q3 2018.Consolidated expenses (all segments) were $26.9 million, up $3.2 million compared to $23.7 million for Q3 2018.Net income was $3.3 million or $0.19 per basic and diluted share, compared to $7.8 million or $0.44 per basic and diluted share for Q3 2018.Capital expenditures were $0.8 million compared to $0.6 million in Q3 2018.Outlook
The following section includes forward-looking information, including statements related to the industries in which we operate, growth opportunities, project milestones, our costs and expenses and our future financial position and results including expected revenue, EBITDA, and capital expenditures. Refer to section 3 “Caution Regarding Forward-Looking Information” in our Management’s Discussion and Analysis for the three and nine months ended September 30, 2019.The diversification of our business remains a key part of our strategy, as evidenced by the positive impact our Services segment is having on the business overall. For the balance of 2019, ISC will continue to drive the organic growth of all our segments by looking to expand our service offerings, secure new business and explore appropriate acquisition targets which are complementary to, or add value to, our existing lines of business.We continue to expect consolidated revenue growth in 2019 to be primarily driven by Services through the continuing expansion of the collateral management product line, legal due diligence and Know-Your-Customer (“KYC”) services, including new and organic customer growth and new product development. We are also focused on consolidating servicing platforms and implementing additional automation within Services to better serve our customers and thereby reduce cost of delivery. We have completed the integration of Securefact, an identity and beneficial ownership attestation program acquired in February 2019, which allows us to provide a strengthened portfolio of KYC solutions and services, including individual verification, beneficial ownership solution and enhanced business verification. The overall outlook for Services remains positive and strong. Saskatchewan economic conditions are expected to remain muted for the remainder of 2019, which continues to impact the Land Registry within Registry Operations. Recently introduced government programs aimed at improving access to home ownership have not had and are not expected to have significant impact on the Saskatchewan real estate market. Rather we continue to see reduced transaction levels and we anticipate the Registry Operations revenue and volume trends we have witnessed in the first nine months of this year will continue for the balance of 2019 and into 2020.In Technology Solutions, certain project milestones were delayed due, in part, to changing customer requirements and timelines, resulting in lower than expected revenue realization during the quarter and projected for year-end. Some of the milestones are expected to be realized in the fourth quarter while others are expected to be delayed until 2020. We will continue to work with our clients to achieve performance-related milestones on a timely basis.In all segments, we will continue to focus on efficiencies with the key drivers of our expenses being wages and salaries, cost of goods sold and information technology costs, as well as costs associated with the pursuit of new business opportunities. We continue to expect to spend between $2.0 million and $4.0 million on business-as-usual capital expenditures.With that in mind, our guidance remains unchanged with revenue expected to be between $129.0 million and $135.0 million, EBITDA to be between $31.0 million and $35.0 million and an EBITDA margin between 24.0 per cent and 27.0 per cent.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 September 30, 2019 and 2018. 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 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 Webcast
We will hold an investor conference call on Thursday, November 7, 2019 at 11:00 a.m. EST (10:00 a.m. CT) 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. 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 our website at the link above. We invite media 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 Information
This 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, project milestones, our costs and expenses and our future financial position and results including expected revenue, EBITDA and capital expenditures. 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 economic, market and business conditions, reliance on key customers and licenses, 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, 2018 and ISC’s unaudited Condensed Consolidated Interim Financial Statements and Notes and Management’s Discussion and Analysis for the three and nine months ended September 30, 2019, 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.Investor ContactJonathan Hackshaw
Director, Investor Relations & Capital Markets
Toll Free: 1-855-341-8363 in North America or 1-306-798-1137
investor.relations@isc.ca