ISC Reports Third Quarter 2024 Financial Results; Strong Volumes Continue in the Saskatchewan Land Registry
Solid consolidated revenue and adjusted EBITDA growth for the quarter
Bank Act Security Registry successfully launched
2024 guidance re-affirmed
REGINA, Saskatchewan, Nov. 05, 2024 (GLOBE NEWSWIRE) -- November 5, 2024, Information Services Corporation (TSX:ISV) ("ISC" or the "Company") today reported on the Company's financial results for the third quarter ended September 30, 2024.
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 three and nine months ended September 30, 2024.
2024 Third Quarter Highlights
Revenue was $60.9 million for the quarter, an increase of 12 per cent compared to the third quarter of 2023. This increase was driven by increased volumes across the Saskatchewan Registries division, combined with a full quarter of fee adjustments compared to two months in the prior period, new revenue related to the Bank Act Security Registry ("the BASR") and the advancement of project work on existing and new solution definition and implementation contracts in Technology Solutions.
Net income was $4.2 million or $0.23 per basic and diluted share compared to $4.2 million or $0.24 per basic share and $0.23 per diluted share in the third quarter of 2023. Strong operating results were offset by increased share-based compensation expense, increased investment in information technology services primarily related to project delivery work in Technology Solutions as well as increased amortization associated with the Extension.
Net cash flow provided by operating activities was $14.2 million for the quarter, a decrease of $0.4 million from $14.6 million in the third quarter of 2023. The change was driven by changes in non-cash working capital, partially offset by strength in the operating segments.
Adjusted net income was $11.0 million or $0.61 per basic share and $0.60 per diluted share compared to $8.4 million or $0.47 per basic share and $0.46 per diluted share in the third quarter of 2023. The growth in adjusted net income for the three and nine months ended September 30, 2024, reflects the strong results from all operating segments.
Adjusted EBITDA was $22.7 million for the quarter compared to $19.2 million in the third quarter of 2023. The increase was driven by volume increases across the Saskatchewan Registries division and fee adjustments, which resulted in higher revenues. Additionally, progress continues to be made on existing and new solution definition and implementation contracts in Technology Solutions. Adjusted EBITDA margin was 37.3 per cent compared to 35.2 per cent in the third quarter of 2023, driven mainly by the volume increases and fee adjustments in Registry Operations' Saskatchewan Registries division discussed above.
Adjusted free cash flow for the quarter was $15.9 million, up 10 per cent compared to $14.4 million in the third quarter of 2023. This growth was driven by strong performance across the Saskatchewan Registries division and progress on existing and new solutions definition and implementation contracts in Technology Solutions.
Voluntary prepayments of $16.0 million were made towards the Company's Credit Facility during the quarter. This is part of the Company's plan to deleverage towards a long-term net leverage target of 2.0x, 2.5x.
Financial Position as at September 30, 2024
Cash of $12.0 million compared to $24.2 million as of December 31, 2023.
Total debt of $177.5 million compared to $177.3 million as of December 31, 2023.
Events
On July 2, 2024, the Company launched the online, self-service Customer Portal for the Bank Act Security Registry ("the BASR").
On July 31, 2024, the first of five annual cash payments of $30.0 million was made pursuant to the Extension Agreement, using funds drawn from the Credit Facility.
Commenting on ISC's results, Shawn Peters, President and CEO stated, "Similar to the first and second quarters for the year, the third quarter of 2024 delivered excellent results with revenue up 12 per cent and adjusted EBITDA up 18 per cent, compared to the third quarter of 2023. The diversified nature of our business is clearly a major strength for us based on these results." Peters continued, "Given our performance for the year to date, we have re-iterated our guidance for 2024, which means that we expect to post our highest annual revenue and adjusted EBITDA upon completion of the year and since going public in 2013."
Summary of 2024 Third Quarter Consolidated Financial Results
(thousands of CAD; except earnings per share, adjusted earnings per shareand where noted)
Three MonthsEnded September 30, 2024
Three Months Ended September 30, 2023
Revenue
Registry Operations
$31,860
$27,419
Services
25,562
25,551
Technology SolutionsCorporate and other
3,5082
1,6355
Total Revenue
$60,932
$54,610
Expenses
$49,707
$43,334
Adjusted EBITDA1
$22,706
$19,209
Adjusted EBITDA margin1
37.3%
35.2%
Net income
$4,203
$4,234
Adjusted net income1
$11,035
$8,357
Earnings per share (basic)
$ 0.23
$0.24
Earnings per share (diluted)
$ 0.23
$0.23
Adjusted earnings per share (basic)1
$ 0.61
$0.47
Adjusted earnings per share (diluted)1
$ 0.60
$0.46
Adjusted free cash flow1
$15,941
$14,444
1 Adjusted 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".
2024 Third Quarter Results of Operations
Total revenue was $60.9 million, up 12 per cent compared to Q3 2023.
Registry Operations segment revenue was $31.9 million, up compared to $27.4 million in Q3 2023:
Land Registry revenue was $20.7 million, up compared to $17.8 million in Q3 2023.
Personal Property Registry revenue was $3.3 million, up compared to the same prior year period.
Corporate Registry revenue was $3.1 million, up compared to $2.8 million in Q3 2023.
Property Tax Assessment Services revenue was $3.9 million, up compared to the same prior year period.
Other revenue was $0.8 million, up compared to the same prior year period.
Services segment revenue was $25.6 million, consistent when compared to $25.6 million in Q3 2023:
Regulatory Solutions revenue was $18.9 million, down compared to $19.4 million in Q3 2023.
Recovery Solutions revenue was $3.7 million, up compared to $2.9 million in Q3 2023.
Corporate Solutions revenue was $2.9 million, down compared to $3.3 million in Q3 2023.
Technology Solutions revenue from third parties was $3.5 million, up from $1.6 million in Q3 2023.
Consolidated expenses (all segments) were $49.7 million, up $6.4 million compared to $43.3 million in Q3 2023.
Net income was $4.2 million or $0.23 per basic share and $0.23 per diluted share, compared to $4.2 million or $0.24 per basic and $0.23 per diluted share for Q3 2023.
OutlookThe following section includes forward-looking information, including statements related to our strategy, future results, including revenue and adjusted EBITDA, segment performance, expenses, operating costs and capital expenditures, 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, 2024.
The Bank of Canada has now lowered its key interest rate three times in 2024 with market expectations of further cuts into next year. Strong activity in the Saskatchewan real estate market is expected to continue in the near term, despite inventory challenges in lower-value homes. We continue to monitor interest rates and other economic conditions which can impact real estate activity. Factors such as strong population growth and improved market confidence create an environment for heightened real estate activity, most notably benefitting the Saskatchewan Land Registry. In addition, the realization of a full year of fee adjustments will continue to support strong revenue in the Saskatchewan Registries division of the Registry Operations segment.
Services will continue to be a significant part of our organic growth. The current trend of enhanced due diligence in an environment of increased regulatory oversight is expected to continue and positively impact the Regulatory Solutions division. Furthermore, the decline in used car values, which worsens the loan-to-value of the vehicle and reduces any equity debtors may have in their existing vehicle(s), coupled with current mortgage, rental and inflationary pressures is expected to negatively impact consumers' disposable income as well as lead to increased assignment levels in our Recovery Solutions division for the next two years.
The key drivers of expenses in adjusted EBITDA in 2024 are expected to be wages and salaries and cost of goods sold. Furthermore, as a result of the Extension Agreement, the Company has additional operating costs associated with the enhancement of the Saskatchewan Registries and increased interest expense arising from ...
