Mr. Shawn Peters reports

ISC REPORTS 2023 SECOND QUARTER FINANCIAL RESULTS

Information Services Corp. has released the company's financial results for the second quarter ended June 30, 2023.

Second quarter 2023 highlights:

• Revenue was $53.3-million for the quarter, an increase of 5 per cent compared with the second quarter of 2022. This was primarily driven by increased revenue in services, spurred by continued transaction and customer growth in regulatory solutions, and additional third party revenue in technology solutions as progress is made on both continuing and new contracts. Registry operations also contributed to the increased revenue as a result of a full three months of results from the Ontario property tax assessment services division compared with one month in the prior year following its acquisition on June 1, 2022. This was offset by a decrease in Saskatchewan land registry revenue due to reduced activity in the Saskatchewan real estate sector during the quarter.
• Net income was $8.2-million or 47 cents per basic and 46 cents per diluted share compared with $11.7-million or 66 cents per basic share and 65 cents per diluted share in the second quarter of 2022. The decrease in net income compared with the prior year is the result of a decrease in Saskatchewan land registry revenue, an increase in share-based compensation and increased investments in people offset by income from Ontario property tax assessment services for the three months in the current year compared with one month in the prior year.
• Net cash flow provided by operating activities was $14.3-million for the quarter, an increase of $2.0-million driven by changes in non-cash working capital, primarily an increase in accounts payable increasing cash flows partially offset by lower net income.
• Adjusted net income was $9.3-million or 52 cents per basic share and 51 cents per diluted share compared with $10.8-million or 62 cents per basic share and 60 cents per diluted share in the second quarter of 2022. This decrease primarily relates to a decrease in Saskatchewan land registry revenue and higher amortization related to intangible assets arising from the acquisition of the Ontario property tax assessment services division in 2022, as well as higher net finance expense.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $17.8-million for the quarter compared with $19.2-million in 2022 primarily due to a reduction in Saskatchewan land registry revenue in the current year due to reduced activity in the Saskatchewan real estate sector and increased personnel costs in both technology solutions and corporate segments. This was partially offset by a full three-month adjusted EBITDA contribution from Ontario property tax assessment services compared with one month in the prior year and additional revenue from customer and transaction growth in regulatory solutions. Adjusted EBITDA margin was 33.4 per cent compared with 37.8 per cent in the second quarter of 2022.
• Adjusted free cash flow for the quarter was $11.9-million, down 10 per cent compared with $13.2-million in the second quarter of 2022 primarily related to reduced revenue in the Saskatchewan land registry due to lower activity in the Saskatchewan real estate sector accompanied by increased interest expense resulting from higher interest rates and borrowings outstanding during the period when compared with the prior year.

Financial position as at June 30, 2023:

• Cash of $26.6-million compared with $34.5-million as of Dec. 31, 2022;
• Total debt of $51.1-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 financial performance for the second quarter and first half of 2023 is a reflection of the robust nature of ISC's business segments, as well as the benefit of a diverse revenue stream. While successive increases to interest rates by the Bank of Canada have affected activity in the Saskatchewan land registry in particular, the upside to this is that the regulatory solutions division in services had a strong quarter, driven by many of our financial institution customers implementing stronger due diligence because of a higher interest rate environment."

Mr. Peters continued, "We will continue to monitor the impact interest rates could have on our business while remaining confident in the strength and long-term potential of ISC."

Outlook

Its long-term strategy remains centred on delivering value for shareholders through the consistent performance of its existing business and the execution of appropriate growth opportunities, including acquisition targets that are complementary to or add value to existing lines of business.

Registry operations has performed well for the first half of 2023 despite successive increases to the interest rate by the Bank of Canada since 2022, which have impacted Saskatchewan real estate activity. The benefit of steady revenue from Ontario property tax assessment services continues to be positive, which is reflected in its year-to-date results. It expects the softness of real estate activity in Saskatchewan to persist during the last half of 2023; however, registry operations are expected to remain as a strong free cash flow contributor.

For services, it expects to see customer and transaction growth remain strong in regulatory solutions while volumes in recovery solutions will likely remain at current levels until the impact of interest rate increases begin to permeate into this part of the business. In the corporate solutions division, it expects to continue to mitigate any decline in revenue from the Ontario business registry contract through the addition of new customers across its services divisions. Its continuing investment in the technology supporting its services segment, combined with its focus on its customers, is translating into robust organic growth through new customer acquisition.

In technology solutions, implementation work continues on existing contracts. The segment will also be supporting the registry enhancement work that has commenced for the Saskatchewan registries. The new business pipeline also remains healthy, and Information Services is actively pursuing a number of opportunities.

Following the announcement of the extension to the MSA with the province to 2053 on July 5, 2023, the company conducted a review of the annual guidance metrics it publishes to ensure that it continues to provide the most appropriate metrics by which to guide Information Services' forward-looking performance. Going forward, the company will only be using revenue and adjusted EBITDA, and has ceased using net income and free cash flow.

As such, and as a result of the extension to the MSA, the company now expects revenue to be between $207.0-million and $212.0-million and adjusted EBITDA (1) to be between $71.0-million and $76.0-million.

In summary, the company remains confident in the strength and long-term potential of the business.

(1) Adjusted EBITDA is not recognized as a measure under international financial reporting standards, does not have a standardized meaning prescribed by IFRS and, therefore, may not be comparable with similar measures reported by other companies.

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 MD&A are reviewed and approved by the audit committee.

This news release provides a general summary of Information Services' results for the quarters ended June 30, 2023, and 2022. Readers are encouraged to download the company's complete financial disclosures. Links to Information Services' financial statements and related notes and MD&A for the period are available on its website in the investor relations section.

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

Conference call and webcast

The company will hold an investor conference call on Thursday, Aug. 3, 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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