Mr. Shawn Peters reports

ISC REPORTS 2023 FIRST QUARTER FINANCIAL RESULTS

Information Services Corp. has released the company's financial results for the first quarter ended March 31, 2023.

First quarter 2023 highlights:

• Revenue was $49.1-million for the quarter, an increase of $4.9-million or 11 per cent, compared with 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. 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 prepandemic levels.
• Net income was $6.9-million or 39 cents per basic and 38 cents per diluted share compared with $7.4-million or 42 cents per basic share and 41 cents per 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 (earnings before interest, taxes, depreciation and amortization) was $14.7-million compared with $13.8-million in the first quarter of 2022, primarily driven by increased EBITDA in registry operations and services and a decrease in share-based compensation compared with the prior-year quarter. EBITDA margin was 29.9 per cent for the quarter compared with 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 prepandemic 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-million for the quarter compared with $14.6-million in 2022. Adjusted EBITDA margin was 29.5 per cent compared with 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 prepandemic levels accompanied by reduced EBITDA in technology solutions.
• Free cash flow for the quarter was $10.1-million, flat compared with 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 Jan. 1, 2023, following a review of comparative financial information and practices by other publicly traded companies, Information Services elected to refine its definition of free cash flow to present Information Services' free cash flow on a levered basis. Information Services believes this change will provide better information for management, investors and potential investors regarding Information Services' 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 $900,000 decrease to the previously reported amount of $11.0-million.
• Late in the fourth quarter of 2022, Information Services, through its wholly owned subsidiary, Enterprise Registry Solutions Ltd. (ERS), commenced the implementation of integrated registry platforms for the government of Cyprus, launched the States of Guernsey on-line register of charities and non-profit organizations, and completed the development of corporate registry technology for Bonaire, Sint-Eustatius and Saba -- all of which run on the RegSys solution:
  • The Cyprus project 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 which interact with the DRCIP registries. The total value of the contract (in partnership with another firm) is 10 million euros, and Information Services' portion of this contract over the life of the project is 5.7 million euros (approximately $8.4-million).
  • In late 2022, the States of Guernsey launched the first phase of the on-line register of charities and non-profit organizations to 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 pounds sterling (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 March 31, 2023:

• Cash of $24.2-million compared with $34.5-million as of Dec. 31, 2022.
• Total debt of $56.1-million compared with $66.0-million as of Dec. 31, 2022.

Commenting on Information Services' results, Shawn Peters, president and chief executive officer, stated: "Our start to the year has been positive and in line with our expectations. The acquisitions we completed in 2022 have made a positive contribution to our performance, more than offsetting the expected contraction in the Saskatchewan market. Our services business is well diversified and continues to grow organically, even in the face of changing Ontario business registry dynamics. I am also very pleased that our technology solutions segment is benefiting from increased post-COVID procurement activities as evidenced with the new contracts we've announced."

Mr. Peters continued, "We continue to monitor economic conditions and have factored that into our guidance; however, as we have proven consistently over the last 10 years, ISC remains a robust business, and we are investing in our people and our technology to scale for continued growth."

Outlook

While the Bank of Canada has kept its key interest rate at 4.50 per cent since January, 2023, the company expects this to be a factor that will impact parts of its business, most notably the Saskatchewan land registry, as Saskatchewan real estate activity continues to trend toward prepandemic levels. However, the robustness and diversity of its business mean it is well positioned to deliver on its expectations for 2023.

For the registry operations segment in Saskatchewan, the real estate sector has seen activity soften in the first quarter of this year as consumers continue to adjust to higher interest rates and higher costs of living driven by inflation. The company continues to monitor interest rates and other economic conditions, which can impact real estate activity. However, provincial market publications note that Saskatchewan continues to fare better than many other regions in the country. Based on the data it uses to model its own trends and forecasts, it agrees with this view. The addition of the Ontario property tax assessment services division, following the acquisition of Reamined in 2022, also provides consistent revenue during the year. As such, the registry operations segment is anticipated to remain as a strong free cash flow contributor in 2023.

Services is expected to deliver new customer and transaction growth in 2023 as it continues to implement technology that provides additional value-added product offerings. Following the introduction of recovery complete in the latter half of 2022, it expects to deliver similar integrated benefits for recovery clients that its search and registration clients have experienced after moving over to its registry complete platform. It continues to expect that further changes to the Ontario business registry in 2023 will have an impact but believes that the benefits of registry complete, its 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, it is excited to be in the early stages of delivery of two new contracts. It also continues to complete and deliver solution implementation projects deferred from 2022. As previously reported, jurisdictions are reactivating procurement activities, and it remains optimistic about its 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. It continues to progress toward completion of ISO 27001 certification in 2023 -- consistent with its corporate strategy. This international certification will demonstrate its adherence to controls in the management of information security assets.

It is based on the foregoing that it continues to expect revenue to be between $200.0-million and $205.0-million, net income to be between $27.0-million and $32.0-million, adjusted EBITDA to be between $65.0-million and $70.0-million, and EBITDA to be between $58.0-million and $63.0-million in 2023. The expected impact of the further opening of the Ontario business registry has been considered in its guidance.

The diversification and growth of its business remain a key part of its strategy. As such, it will continue to look for efficiencies across the business, drive organic growth in its services and technology solutions segments by winning new business, and explore appropriate business development opportunities that complement or add value to its existing lines of business.

Note to readers

The board of directors carries out its responsibility for review of this disclosure primarily through the audit committee, which is composed exclusively of independent directors. The audit committee reviews and approves the fiscal year-end management's discussion and analysis and financial statements, and recommends both to the board for approval. The interim financial statements and management's discussion and analysis are reviewed and approved by the audit committee.

This news release provides a general summary of Information Services' results for the quarters ended March 31, 2023, and 2022. Readers are encouraged to download the company's complete financial disclosures. Links to Information Services' financial statements, related notes and MD&A for the period are available on its website in the investor relations section.

Copies can also be obtained at SEDAR by searching Information Services' profile or by contacting Information Services at investor.relations@isc.ca.

Conference call and webcast

It will hold an investor conference call on Thursday, May 4, 2023, at 11 a.m. ET, to discuss the results. Those joining the call on a listen-only basis are encouraged to join the live audio webcast, which will be available on its website. Participants who wish to ask a question on the live call may do so through the Information Services website or by registering.

Once registered, participants will receive the dial-in numbers and their unique PIN. When dialling in, participants will input their PIN and be placed into the call. The audio file with a replay of the webcast will be available about 24 hours after the event on its website. The company invites media to attend on a listen-only basis.

About Information Services Corp.

Headquartered in Canada, Information Services is a leading provider of registry and information management services for public data and records. Throughout its history, it has delivered value to its clients by providing solutions to manage, secure and administer information through its registry operations, services and technology solutions segments. Information Services is focused on sustaining its core business while pursuing new growth opportunities. The Class A shares of Information Services trade on the Toronto Stock Exchange under the symbol ISV.

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