2023 First Quarter Highlights
- Revenue was
$49.1 millionfor the quarter, an increase of $4.9 millionor 11 per cent compared to the first quarter of 2022 due to revenue from Registry Operations’ new Ontario Property Tax Assessment Services division, following the acquisition of Reamined Systems Inc.(“Reamined”) in June 2022. Continued growth in transactions and customers in the Services segment also contributed to the overall revenue increase over the prior year. This was partially offset by a decrease in the Saskatchewan Land Registry revenue as transaction volumes trended toward pre-pandemic levels.
- Net income was
$6.9 millionor $0.39per basic and $0.38per diluted share compared to $7.4 millionor $0.42per basic share and $0.41per diluted share in the first quarter of 2022. The decrease in net income results from higher amortization related to intangible assets arising from acquisitions in 2022, as well as higher net finance expense.
- EBITDA was
$14.7 millioncompared to $13.8 millionin the first quarter of 2022, primarily driven by increased EBITDA in Registry Operations and Services and a decrease in share-based compensation compared to the prior year quarter. EBITDA margin was 29.9 per cent for the quarter compared to 31.3 per cent in the first quarter of 2022. The change in margin year-over-year was largely due to the return of the Saskatchewan Land Registry volumes to pre-pandemic levels accompanied by reduced EBITDA in Technology Solutions, as further described below, partially offset by the decrease in share-based compensation due to a decline in the Company’s share price during the quarter.
- Adjusted EBITDA was
$14.5 millionfor the quarter compared to $14.6 millionin 2022. Adjusted EBITDA margin was 29.5 per cent compared to 33.0 per cent in the first quarter of 2022. The change in margin year-over-year is largely due to the return of the Saskatchewan Land Registry volumes to pre-pandemic levels accompanied by reduced EBITDA in Technology Solutions.
- Free cash flow for the quarter was
$10.1 million, flat compared to the first quarter of 2022 due to slightly higher cash provided by operating activities net of changes in working capital, offset primarily by increased interest expense. Commencing on January 1, 2023, following a review of comparative financial information and practices by other publicly traded companies, ISC elected to refine its definition of free cash flow to present ISC’s free cash flow on a levered basis. ISC believes this change will provide better information for management, investors and potential investors regarding ISC’s liquidity and financial strength. As such, free cash flow now includes interest received and paid, interest paid on lease obligations and principal repayments on lease obligations. The impact of this change to free cash flow in the prior year period was a $0.9 milliondecrease to the previously reported amount of $11.0 million.
- Late in the fourth quarter of 2022, ISC, through its wholly owned subsidiary,
Enterprise Registry Solutions Limited(“ERS”) commenced the implementation of integrated registry platforms for the Government of Cyprus(“Cyprus”), launched the States of Guernsey online Register of Charities and Non-Profit Organisations(“Guernsey”), and completed the development of corporate registry technology for Bonaire, Sint-Eustatius and Saba — all of which run on the RegSys solution.
Cyprusproject will deploy the RegSys platform to a complex and significant government department, the Department of Registrar of Companies and Intellectual Property, and is expected to revolutionize registry operations for the Government of Cyprus, bringing significant productivity increases, regulatory compliance and streamlined user experiences for individuals and companies who interact with the DRCIP registries. The total value of the contract (in partnership with another firm) is €10 million and ISC’s portion of this contract over the life of the project is €5.7 million (approximately $8.4 million).
- In late 2022, the States of Guernsey launched the first phase of the online Register of Charities and
Non-Profit Organisationsto the public, operating on the RegSys solution, and transforming the way charities interact with the States of Guernsey. This first phase of the project is an important milestone for Guernsey, as RegSys will be used by Guernsey to demonstrate compliance during the imminent MONEYVAL evaluation — an examination of measures taken in the financial, regulatory and criminal justice sectors to combat money laundering and terrorist financing in the European Union. The second phase of the project began in the first quarter of 2023, bringing the Corporate, Beneficial Ownership and Intellectual Property Registers onto the new RegSys platform to provide an integrated solution for the States of Guernsey. The total value of the two-phased project (including implementation and support and maintenance) is expected to be £7.7 million (approximately $12.9 million).
- Revenues for these projects will be recognized as milestones are achieved. Costs to ramp up and begin the projects have been recognized as incurred in the first quarter, reducing adjusted EBITDA in Technology Solutions for the quarter.
Financial Position as at
- Cash of
$24.2 millioncompared to $34.5 millionas of December 31, 2022.
- Total debt of
$56.1 millioncompared to $66.0 millionas of December 31, 2022.
Commenting on ISC’s results,
Management’s Discussion of ISC’s Summary of 2023 First Quarter Financial Results
|(thousands of CAD dollars;
except earnings per share
and where noted)
Corporate and other
|Consolidated EBITDA margin1(% of revenue)||29.9%||31.3%|
|Consolidated adjusted EBITDA1||$14,516|
|Consolidated adjusted EBITDA margin1||29.5%||33.0%|
|Consolidated net income||$6,864|
|Earnings per share (basic)1||$0.39|
|Earnings per share (diluted)1||$0.38|
|Free cash flow1,2||$10,054|
1 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 corporations. For more information, please refer to section 8.8 “Non-IFRS Financial Measures”, section 6.1 “Cash Flow” for a reconciliation of free cash flow and section 2 “Consolidated Financial Analysis” for a reconciliation of EBITDA and adjusted EBITDA to net income in Management’s Discussion and Analysis for the quarter ended
2 Commencing on
2023 First Quarter Results of Operations
- Total revenue was
$49.1 million, up 11 per cent compared to Q1 2022.
- Registry Operations segment revenue was
$22.8 million, up compared to $19.6 millionin Q1 2022:
- Land Registry revenue was
$12.5 million, down compared to $13.9 millionin Q1 2022.
- Personal Property Registry was
$2.8 million, up compared to $2.6 millionin Q1 2022.
- Corporate Registry revenue was
$3.3 million, up compared to $3.1 millionin Q1 2022.
- Property Tax Assessment Services revenue in Registry Operations was
$3.8 millionwith no comparison to the prior year period as Reamined was acquired in the second quarter of 2022.
- Land Registry revenue was
- Services segment revenue was
$24.7 million, up compared to $22.7 millionin Q1 2022:
- Regulatory Solutions was
$17.8 millionup compared to $15.4 millionin Q1 2022.
- Recovery Solutions was
$2.9 million, flat compared to the same prior year period.
- Corporate Solutions revenue was
$4.0 million, down compared to $4.3 millionin Q1 2022.
- Regulatory Solutions was
- Technology Solutions segment revenue from external parties was
$1.6 million, down from $1.8 millionin Q1 2022.
- Consolidated expenses (all segments) were
$38.6 million, up $5.1 millioncompared to $33.5 millionin Q1 2022.
- Net income was
$6.9 millionor $0.39per basic share and $0.38per diluted share, down $0.5 millioncompared to $7.4 millionor $0.42per basic and $0.41per diluted share for Q1 2022.
The following section includes forward‐looking information, including statements related to future results, including revenue, net income, EBITDA and adjusted EBITDA, segment performance, the industries in which we operate, economic activity, growth opportunities, investments, expenses, completion of projects, ISO 27001 and business development opportunities. Refer to “Caution Regarding Forward‐Looking Information”.
For the Registry Operations segment in
Services is expected to deliver new customer and transaction growth in 2023 as we continue to implement technology that provides additional value‐added product offerings. Following the introduction of Recovery Complete in the latter half of 2022, we expect to deliver similar integrated benefits for recovery clients that our search and registration clients have experienced after moving over to our Registry Complete platform. We continue to expect that further changes to the Ontario Business Registry in 2023 will have an impact but believe that the benefits of Registry Complete, our strong customer service and diversification will mitigate potential loss of business from the anticipated further opening of this registry to the public in the latter part of 2023.
In Technology Solutions, we are excited to be in the early stages of delivery of two new contracts. We also continue to complete and deliver solution implementation projects deferred from 2022. As previously reported, jurisdictions are reactivating procurement activities and we remain optimistic about our business development pipeline for Technology Solutions. The key drivers of expenses will continue to be wages and salaries, cost of goods sold, information technology, and costs associated with the pursuit of new business opportunities. We continue to progress towards completion of ISO 27001 certification in 2023 — consistent with our corporate strategy. This international certification will demonstrate our adherence to controls in the management of information security assets.
It is based on the foregoing that we continue to expect revenue to be between
The diversification and growth of our business remains a key part of our strategy. As such, we will continue to look for efficiencies across the business, drive organic growth in our Services and Technology Solutions segments by winning new business, and explore appropriate business development opportunities that complement or add value to our existing lines of business.
1 EBITDA and Adjusted EBITDA are not recognized as a measures under IFRS and does not have a standardized meaning prescribed by IFRS and, therefore, it 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 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
This news release provides a general summary of ISC’s results for the quarters ended
All figures are in Canadian dollars unless otherwise noted.
Conference Call and Webcast
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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
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 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|
Depreciation and amortization, net finance expense, income tax expense
Adjusted EBITDA Margin
Share-based compensation expense, acquisition, integration and other costs
Adjusted EBITDA Margin:
|Free Cash Flow
||Net cash flow provided by operating activities
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
The following presents a reconciliation of net income to EBITDA and adjusted EBITDA and a reconciliation of net cash flow provided by operating activities to free cash flow:
Reconciliation of Net Income to EBITDA and adjusted EBITDA
|Three Months Ended
|(thousands of CAD)||2023||2022|
|Depreciation and amortization||4,128||3,145|
|Net finance expense||905||435|
|Income tax expense||2,790||2,848|
|Share-based compensation expense||(1,190||)||122|
|Acquisition, integration and other costs||1,019||629|
|EBITDA margin (% of revenue)||29.9%||31.3%|
|Adjusted EBITDA margin (% of revenue)||29.5%||33.0%|
Reconciliation of Net Cash Flow Provided by Operating Activities to Free Cash Flow
|Three Months Ended
|(thousands of CAD)||2023||20222|
|Net cash flow provided by operating activities||$||5,738||$||(2,279||)|
|Net change in non-cash working capital1||6,130||13,784|
|Cash provided by operating activities excluding working capital||11,868||11,505|
|Cash additions to property, plant and equipment||(15||)||(90||)|
|Cash additions to intangible assets||(269||)||(430||)|
|Interest paid on lease obligations||(95||)||(97||)|
|Principal repayment on lease obligations||(593||)||(485||)|
|Consolidated free cash flow||$||10,054||$||10,069|
1 Refer to Note 15 of the Financial Statements for reconciliation.
2 Commencing on
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