OREANDA-NEWS. Information Services Corporation (TSX: ISV) ("ISC" or the "Company") today reported on the Company's financial results for the first quarter ended March 31, 2016.

First Quarter 2016 Highlights 

--  Revenue of $19.6 million

--  EBITDA (earnings before interest, taxes, depreciation and amortization)

    of $5.1 million

--  EBITDA margin of 25.9 per cent

--  Net income of $2.2 million or $0.13 per basic share

--  Amendment of Master Service Agreement to continue to manage and operate

    the Common Business Identifier Program and the Business Registration

    Saskatchewan Program for an annual operating fee of $825 thousand.  

Financial Position as at March 31, 2016 

--  Cash of $33.8 million

--  Free cash flow of $3.3 million

--  Total debt of $24.2 million 

Commenting on the Company's results, Jeff Stusek, President and CEO stated, "The first quarter of 2016 was a solid start to the year for us. Both our Registries and Services segments performed well and made strong contributions to our results. The year over year improvement in our free cash flow and margins is a reflection of the addition of ESC to our revenue stream as well as our prudent management of expenses, which continues to serve us well in a flat economy. We will continue to stay the course while we look for ways to further diversify our revenue stream and generate long-term shareholder value."

Management's Discussion of ISC's Summary of First Quarter 2016 Financial  Results                                                                   

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(thousands of CAD dollars;                                                 

except earnings per share and         Three Months Ended  Three Months Ended

where noted)                              March 31, 2016      March 31, 2015

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Revenue - Registries                                                        

  Land Registry                                 $ 11,495            $ 11,704

  Personal Property Registry                       2,227               2,108

  Corporate Registry                               2,591               2,198

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Total                                             16,313              16,010

Revenue - Services                                 3,277                   -

Revenue - Other                                       16                   1

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TOTAL Revenue                                   $ 19,606            $ 16,011

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EBITDA(1)                                        $ 5,077             $ 3,763

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EBITDA margin(1) (% of revenue)                    25.9%               23.5%

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Adjusted EBITDA(1)                               $ 5,472             $ 3,781

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Adjusted EBITDA margin(1)                          27.9%               23.6%

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Net income and total comprehensive                                         

 income                                          $ 2,196             $ 1,720

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Earnings per share (basic)(2)                     $ 0.13              $ 0.10

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Free cash flow(1)                                $ 3,316             $ 2,053

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Expenses                                         $16,359             $13,568

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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, are not         

    comparable to similar measures by other corporations. See section name 

    "Non-IFRS Measures" in the Management's Discussion & Analysis for the  

    three months ended March 31, 2016.                                     

 

2.  The calculation of earnings per share is based on net income after tax 

    and the weighted average number of shares outstanding during the period.

 

First Quarter 2016 Results of Operations

 

--  Total revenue for ISC for the three months ended March 31, 2016, was

    $19.6 million, a $3.6 million increase when compared to the same period

    in 2015. The increase was mainly due to the inclusion of ESC, which was

    acquired on October 1, 2015.

 

--  Revenue for our Registries segment was $16.3 million, an increase of

    $0.3 million or 1.9 per cent, compared to the first quarter 2015.

    Results improved due to gains from the Corporate Registry and the

    Personal Property Registry, which more than offset declines from the

    Land Registry.

 

    --  Revenue for the Land Registry was $11.5 million, a decrease of $0.2

        million or 1.8 per cent, compared to the first quarter 2015.

 

    --  Revenue for the Personal Property Registry for the three months

        ended March 31, 2016, was $2.2 million, which represents a rise of

        5.6 per cent from the same period in 2015.

 

    --  Revenue for the Corporate Registry for the three months ended March

        31, 2016 was $2.6 million, an increase of $0.4 million or 17.8 per

        cent compared to the first quarter 2015.

 

--  The revenue in our Services segment for the first quarter, which

    consists of revenue earned by our wholly owned subsidiary ESC, was $3.3

    million. This is an improvement of $0.1 million or 3.5 per cent,

    compared to the fourth quarter of 2015.

 

--  Consolidated expenses (including ESC) for the three months ended March

    31, 2016, were $16.4 million, an increase of $2.8 million, compared to

    $13.6 million for the same period of 2015.

 

--  Depreciation and amortization was $1.8 million for the three months

    ended March 31, 2016, compared to $1.3 million in the same period of

    2015. The increase was mainly due to the additional depreciation from

    capital assets of ESC.

 

--  Capital expenditures for the three months ended March 31, 2016, were

    $1.3 million, compared to $1.0 million for the same period in 2015.

    Capital expenditures were focused on the renewal and enhancement of

    technology supporting the Corporate Registry as well as various

    sustaining initiatives around general office improvements.

 

--  As at March 31, 2016, the Company held $33.8 million in cash compared to

    $36.6 million as at December 31, 2015, a decrease of $2.8 million.

 

--  The Company had $24.2 million of debt as at March 31, 2015. For more

    details, see section named "9.3 Long-term debt" in the Management's

    Discussion & Analysis for the three months ended March 31, 2016. 

Outlook

The majority of the Company's revenue is linked to registry transaction volumes and values which are driven by economic conditions in Saskatchewan. The remaining portion of our revenue is linked to the overall economic conditions in Ontario and Quebec. At present, the Company expects the 2016 Saskatchewan economy to be similar to 2015, while moderate growth is anticipated for the central Canadian markets. As a result, ISC reiterates that its expected consolidated EBITDA margin for fiscal 2016 will be in the range of 32.0 to 34.0 per cent.

In our Registries segment, the Saskatchewan economy was challenged in 2015 as the province's energy sector coped with lower oil prices as well as general softness in other resource-based sectors. As noted above, the Company currently expects that the 2016 Saskatchewan economy will be similar to 2015. According to several external forecasts, Saskatchewan's real GDP growth is expected to be near zero after a weak 2015.

Overall, we anticipate transaction volumes in the Land Titles Registry for 2016 to be near 2015 levels, with high value property registrations to return towards normalized levels. For the Personal Property Registry, we forecast a slight increase overall, with revenues from search volumes offsetting anticipated declines from lower new motor vehicle sales in Saskatchewan and reduced property security registration setups. For the Corporate Registry, steady growth of active business entities and related search volume should contribute to stabilized revenue.

As it relates to pricing for the Registries segment, the MSA and related Registry Operating Agreements specify the maximum fees allowed to be charged to the public for particular Core Registry Services. Generally, fees are adjustable on an annual basis using a formula tied to Saskatchewan CPI. ISC anticipates an adjustment in pricing in 2016 as outlined in the MSA.

In our Services segment, we expect the growth of ESC's core business to continue in specific categories relating to the financial services and legal sectors in both its core markets of Ontario and Quebec. The expectation is that the growing base of new customers, as well as new mandates from existing customers, will continue to support overall revenue growth. We expect a continued focus on cost efficiencies to improve margins.

The key drivers of expenses will continue to be wages, salaries and information technology costs. The Company will continue to manage its costs prudently while balancing re-investment in the business in order to maintain or improve the customer experience.

Management expects capital expenditures in 2016 to be in the range of $5.0 million to $6.0 million, funded from operating cash flow. These expenditures are projected to include the completion of the renewal and enhancement of our Corporate Registry technology, enhancement and upgrades to core technology components and enterprise systems, and general office improvements.

About ISC

ISC is an experienced provider of registry and information services for government, individuals and private sector business. As the exclusive provider of the land titles, surveys, personal property and corporate registries for Saskatchewan, the Company maintains and operates these registries, which are key supporters of economic activity in the province.