Information Services Corporation (TSX:ISV) told investors that it is positioned for success in a higher interest rate environment thanks to the robustness of its businesses.
Releasing results for the fourth quarter and full year to December 31, 2022, the company said it anticipates revenue consistency in 2023, driven by its two core segments, Registry Operations and Services, through the addition of Ontario Property Tax Assessment Services revenue and the continuing expansion of its Services suite of products and services to existing customers.
“On the back of a remarkable 2021, ISC delivered another successful year with increases in revenue, EBITDA, and free cash flow along with stable net income,” ISC CEO Shawn Peters said in a statement.
READ: Information Services adds international railway rolling stock to its portfolio with acquisition of Regulis
“Registry Operations continued to demonstrate how robust a business it is, and our Services segment matured in 2022 when it overtook Registry Operations revenue for the first time,” Peters added. “We have invested in our businesses throughout 2022 and are in an enviable position to capitalize on organic growth opportunities in 2023, including executing on appropriate acquisitions.”
ISC reported a 4% increase in 4Q revenue to $46.1 million due to the continued transaction and customer growth in Services, specifically in the Corporate Solutions division, along with $1.5 million of revenue contributed from the UPLevel business that was acquired in February 2022.
Net income for the quarter declined to $3.9 million or $0.22 per basic and diluted share compared to $10.3 million or $0.59 per basic share and $0.57 per diluted share in 4Q 2021. The company attributed the reduction to an increase in share-based compensation as a result of an increase in its share price year-over-year, a reduction in revenues in the Saskatchewan Land Registry during the quarter due to a return of transaction volumes to more normalized pre-pandemic levels, and reduced revenue and earnings contributed by Technology Solutions during the quarter.
Free cash flow for the quarter was $7.9 million, a decrease of 43% from the year-earlier period.
The company noted that it declared a quarterly cash dividend of $0.23 per Class A limited voting share, which was payable on or before January 15, 2023.
Acquisitions
During the quarter its ISC Atlantic Services Inc subsidiary also acquired Regulis, the Registrar designate for the International Registry for Railway Rolling Stock, for €400,000 ($600,000) with up to an additional €1.6 million to be paid in future years as certain criteria are met.
For the full year, revenue rose 12% to $189.9 million, while underlying earnings (EBITDA) were slightly higher at $60.9 million. Net income of $30.8 million was relatively consistent when compared to the record-high net income earned in 2021, the company said.
Free cash flow for the year improved to $45.9 million, an increase of $1.1 million due to contributions by both Registry Operations and Services accompanied by additional EBITDA from acquisitions made during the year as well as fewer capital expenditures.
The company ended 2022 with cash of $34.5 million compared to $40.1 million as of December 31, 2021. Total debt amounted to $66 million compared to $41 million a year earlier.
Positive outlook
For 2023, the company said it expects revenue growth well over 2022 levels between $200 million and $205 million, net income to be between $27 million and $32 million, and EBITDA to be between $58 million and $63 million. Due to the evolution of its business over the last two years, ISC said adding adjusted EBITDA to its guidance metrics will help provide a better understanding of the performance of its business by removing the impact from share-based compensation, acquisition expenses or any other non-recurring costs. In 2023, it expects adjusted EBITDA to be between $65 million and $70 million.
“The diversification of our business remains a key part of our strategy,” ISC concluded. “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 acquisition targets that complement or add value to our existing lines of business.”
ISC will hold an investor conference call today, March 15, 2023, at 11:00am ET to discuss the results.
The live audio webcast will be available on its website. Participants who wish to ask a question on the live call may do so through the ISC website or by registering through the following link.
Headquartered in Canada, ISC is the leading provider of registry and information management services for public data and records.
Contact the author at stephen.gunnion@proactiveinvestors.com