Mr. Jeff Stusek reports

ISC REPORTS FIRST QUARTER 2015 FINANCIAL RESULTS

Information Services Corp. has released the company's financial results for the first quarter ended March 31, 2015.

First quarter 2015 highlights:

• Revenue of $16.0-million;
• EBITDA (earnings before interest, taxes, depreciation and amortization) of $3.8-million;
• EBITDA margin of 23.5 per cent;
• Net income of $1.7-million or 10 cents per share.

Financial position as at March 31, 2015:

• Cash of $37.0-million;
• Free cash flow of $2.1-million;
• Total debt of $9.9-million.

Commenting on the company's results, Jeff Stusek, president and chief executive officer, stated: "As one might expect, our first quarter results were impacted by the slowing economic conditions in Saskatchewan for the first three months of 2015. The first quarter is typically our slowest quarter, but results are down year over year as compared to 2014, and the impact early in the quarter was more than expected. Ours is not a business that should be viewed quarter over quarter, but rather is a long-term business with a solid foundation in Saskatchewan. I am confident that our business has the right balance of financial strength and prudent expense management to deal with quarterly fluctuations. That does not mean we are immune to the impact, and while there is still upside potential in the real estate market, we do expect our year-end EBITDA margin to be about 2 per cent lower than previously forecasted. In the long term, we remain committed to protecting the stability of our results and will continue to pay close attention to the economic outlook."

                               SUMMARY OF FIRST QUARTER FINANCIAL RESULTS 
                 (thousands of Canadian dollars, except earnings per share and where noted)

                                                                  Three months ended  Three months ended
                                                                      March 31, 2015      March 31, 2014
Revenue
Land titles registry, land surveys directory and geomatics                   $11,704             $13,026
Personal property registry                                                    $2,108              $2,112
Corporate registry                                                            $2,198              $2,264
Other                                                                             $1                  $3
Total revenue                                                               $ 16,011            $ 17,405
EBITDA                                                                       $ 3,763             $ 4,983
EBITDA margin (% of revenues)                                                   23.5%               28.6%
Adjusted EBITDA                                                              $ 3,781             $ 5,371
Adjusted EBITDA margin                                                          23.6%               30.9%
Net income and total comprehensive income                                    $ 1,720             $ 2,799
Earnings per share                                                             $0.10               $0.16
Free cash flow                                                               $ 2,053             $ 1,858
Expenses                                                                     $13,568             $13,636

Revenue for the land titles registry, land surveys directory and geomatics was $11.7-million for the three months ended March 31, 2015, a decrease of $1.3-million, or 10.2 per cent, compared with the three months ended March 31, 2014. Results were weaker in the first quarter of 2015, as compared with the same period in 2014, largely due to the slowing of the Saskatchewan economy.

Revenue for personal property registry for the three months ended March 31, 2015, was flat at $2.1-million, when compared with the same period in 2014. Overall transaction volume was down for the first quarter of 2015 by 2.4 per cent compared with the same period last year. The main driver of revenue for this registry, personal property security registration set-ups, has shown a decrease in volume of 10.2 per cent. However, revenue was flat when compared with the same period last year due to increases in the average price per set-up as a result of registry fee increases and longer-term registrations.

Revenue for the corporate registry for the three months ended March 31, 2015, was $2.2-million, a decrease of 2.9 per cent when compared with the three months ended March 31, 2014. Revenue from the incorporation of new businesses, included in registrations, declined by 14.8 per cent in the same period; however, this was partially offset by an increase in revenue of 1.2 per cent from the filing of annual returns, which is included in maintenance.

Expenses were flat at $13.6-million for the three months ended March 31, 2015, compared with the three months ended March 31, 2014.

Capital expenditures for the three months ended March 31, 2015, were $1.0-million, compared with $700,000 for the same period in 2014. Capital expenditures for the first quarter in 2015 were focused on the enhancement of technology supporting the corporate registry and general office improvements.

As at March 31, 2015, the company held $37.0-million in cash compared with $33.6-million as at Dec. 31, 2014, an increase of $3.4-million.

The company had $9.9-million of long-term debt and no short-term borrowings as at March 31, 2015.

Outlook

In 2015, Information Services expects to continue to focus on delivering stable and predictable returns.

The MSA and related registry operating agreements specify the maximum fees allowed to be charged to the public for particular core registry services as per the MSA. The maximum fees are adjustable on a yearly basis and are based on a formula tied to inflation as measured by the Saskatchewan consumer price index published by Statistics Canada. These adjustment provisions do not apply to any value-based fees. There are no restrictions on the fees Information Services may charge for non-core ancillary services that use registry data. Information Services expects to generally adjust prices as outlined in the MSA.

Given that adjustments to its prices are fixed as outlined herein, and that the majority of its revenue is linked to economic conditions in Saskatchewan, the company expects that revenue for 2015 will be impacted. It anticipates variability in quarterly revenue due to increased volatility in the housing and mortgage markets. This is based on a period of moderate economic uncertainty for the Saskatchewan economy in 2015, which is supported by a number of banks reforecasting their growth expectations downward for 2015 for the province.

For example, according to Bank of Montreal Capital Markets' most recent economic forecast for Saskatchewan, the provincial economy is expected to post real gross domestic product growth of 1.0 per cent in 2015, revised downward from 1.9 per cent at the end of February, 2015.

The company expects the housing market, which is a key revenue driver of the land registry, to be impacted. Canada Mortgage and Housing Corp. housing market outlook currently forecasts a decrease of 1.9 per cent in existing home sales volume in Saskatchewan for 2015. CMHC also currently forecasts average home resale prices to increase by 1.4 per cent in 2015, down from its fourth quarter 2014 forecast of 2.1 per cent.

Saskatchewan housing starts for the three months ended March 31, 2015, were down 25.2 per cent compared with the same period in 2014, while the number of completions was up 11.2 per cent. This increase in completions has contributed to a buyers market in certain parts of the province. The extra inventory may have, and may continue to, impact average sales prices in 2015, resulting in softer year-over-year growth.

As well, the land titles registry saw a large number of high value property registrations in 2014, which generate a high fee per transaction. High value property registrations in 2013 and 2014 were higher than the long-term average. High value property registrations have started to return to a normalized level in 2015, and the company expects this trend to continue for the rest of 2015, which directly impacts revenue.

For the PPR, new vehicle sales are an indicator for registration activity. For all of 2014, the number of units of new vehicles sold decreased 1.2 per cent compared with the same period in 2013. Scotiabank revised earlier forecasts downward, expecting annual motor vehicle sales in Saskatchewan to be 55,000 in 2015, an expected decrease over 2014 volumes.

There is risk that consumer behaviour will be affected depending on the duration of this climate of uncertainty. Inactivity could occur if consumers take a wait-and-see approach to their larger purchases such as homes and vehicles. Businesses could scale back or ramp up their investments, depending on which sector they are in. Further changes to interest rates could also impact consumer behaviour. As provincial economic conditions change, the company's revenue may be impacted.

Recent cuts in interest rates by the Bank of Canada, followed by the major banks, are intended to stimulate the economy. In addition, the outlook on potash prices is generally positive, and the strengthening of the U.S. economy and the drop in the value of the Canadian dollar could positively impact Saskatchewan exports. These factors could positively impact Information Services' registries.

Information Services has also monitored the decline in the price of oil and the potential impact to the company. While there is no clear link between the price of oil and the company's revenue, oil and gas are one segment of the Saskatchewan economy, and therefore could have an impact on the company's overall registry business.

In 2015, given uncertain economic conditions described herein, Information Services expects its earnings before interest, taxes, depreciation and amortization margin to be about 2.0 per cent lower than previously forecasted. Information Services' key drivers of expenses will continue to be wages and salaries and information technology costs as the company continues to focus on efficiency and effectiveness, leveraging investment in systems and processes while maintaining a high level of customer service. However, inflationary impacts are expected to move these costs marginally higher in 2015.

Management expects capital expenditures in 2015 to be in the range of $4.0-million to $6.0-million financed from operating cash flow. These expenditures are primarily expected to be sustaining capital expenditures, which include general office improvements, enhancement and upgrades to core technology components and enterprise systems, and the continuation of the renewal and enhancement of the technology supporting the corporate registry.

Conference call and webcast

The company is hosting a conference call and webcast at 9 a.m. (Saskatchewan time) or 11 a.m. (Eastern Time) on May 6, 2015, to discuss these results. Dial-in numbers for the conference call are 1-416-764-8688 or toll-free at 1-888-390-0546.

A live audiocast of the conference call is available at the company's website. The webcast will be available for replay 24 hours after the event until 11:59 p.m. EST on June 6, 2015, on the company's website.

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