tsx:isv · 04/11/2015 · “isv” 20-year master service agreement with saskatchewan government...
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TSX:ISV November 4, 2015
Provider of Key Search
and Registry Solutions
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Forward-Looking Statements
This presentation contains forward-looking information within the meaning of applicable Canadian securities legislation. The words ‘‘may’’, ‘‘will’’, ‘‘would’’, ‘‘should’’, ‘‘could’’, ‘‘expect’’, ‘‘plan’’, ‘‘intend’’, ‘‘trend’’, ‘‘indicate’’, ‘‘anticipate’’, ‘‘believe’’, ‘‘estimate’’, ‘‘predict’’, ‘‘project’’, ‘‘targets’’, ‘‘strive’’, ‘‘strategy’’, ‘‘continue’’, ‘‘likely’’ or ‘‘potential’’ or the negative or other variations of these words or other comparable words or phrases are intended to identify forward-looking statements. By their nature, these statements involve assumptions, known and unknown risks and uncertainties and other factors, which may cause actual results, levels of activity and achievements to differ materially from those expressed or implied by such statements. Certain assumptions with respect to the Saskatchewan economy, the impact of commodity prices, such as agricultural commodities, oil and potash and the value of the Canadian dollar on the Saskatchewan economy , consumer confidence, interest rates, level of unemployment, inflation, real estate market in Saskatchewan, claim liabilities, income taxes, our ability to attract and retain skilled staff, the compensation and benefits that will be paid or provided to employees and our level of customer service, as well as, goodwill and intangibles are material factors in preparing forward-looking statements and management’s expectations. Forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those expressed or implied by such forward-looking information. Although ISC believes the forward-looking information contained in this presentation is based upon reasonable assumptions, readers are cautioned not to place undue reliance on forward-looking information as it is inherently uncertain and no assurance can be given that the expectations reflected in such information will prove to be correct. Many factors and risks could cause our actual results to differ materially from those expressed or implied by forward-looking information including those detailed in ISC’s Annual Information Form, dated March 17, 2015, ISC’s unaudited Condensed Consolidated Interim Financial Statements and Notes and Management’s Discussion and Analysis for the period ended September 30, 2015 as well as other documents filed by ISC with Canadian securities regulators through SEDAR (www.sedar.com) from time to time. Investors and others should carefully consider the above-noted factors and risks and other uncertainties and potential events. The forward-looking information in this presentation is made as of the date hereof and, except as required under applicable securities legislation, ISC assumes no obligation to update or revise such information to reflect new events or circumstances.
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• Saskatchewan’s exclusive provider of key search and registry information services.
• Transformed from Crown corporation to publicly traded business corporation in July 2013 (Government retained 31% shareholding) to provide a better business model for the Province and customers.
• Providing customers with safe, secure services necessary to transact property, corporate and personal property searches and registrations.
• Solid balance sheet and cash flow generation.
• ~5.5% dividend yield
• Ticker symbol TSX: ISV
• Acquisition of ESC Corporate Services Ltd. in October 2015.
Corporate Profile
Consistent Expansion of Alternative Registry Delivery Model 5
History of Transitioning, Delivering,
Integrating and Modernizing
Registries
Personal Property Registry Added from Ministry of Justice
Land Titles Registry Online submissions launched
Corporate Registry Added from Ministry of Justice
Enhanced Mineral Cadastral Formed base to transform how government develops mineral leases and production agreements
Vital Statistics Registry Completed process improvement, paper conversion to digital and new system enabling online applications
Mineral Administration Registry Developed and implemented 24/7 online system for issuing mineral claims
Land Titles Registry Converted paper titles into digital titles for surface and mineral parcels
Land Survey Directory Web-based portal enables access to maps and geographic information
Vital Statistics Registry Added from Ministry of Health
Business Registrations Saskatchewan Web-based portal Integrated with Corporate Registry, CRA business number hub, Workers Compensation Board and Saskatchewan Finance PST
ISC Established as Crown corporation
2000 2001 2003 2005 2010 2011 2012 2008 2013
ISC Transformation Privatization of ISC with subsequent IPO on the TSX under the symbol “ISV”
20-year Master Service Agreement with Saskatchewan Government
Vital Statistics Registry Transferred to eHealth Saskatchewan
Corporate Registry Led integration for New West Partnership
2006
Personal Property Registry Online system with B2B interface launched
2014
Corporate Registry Initiating process and system modernization
2015
Asbestos Registry Development and administration of registry
Acquisition of ESC Corporate Services Expansion of portfolio of services in alignment with ISC’s core registry business
Our
Business
Providing Critical Support to Economic Activity 7
Essential Registry and
Information Services
Maintenance Authentication
Collection Verification ISC Property and land ownership
Resource claims
Business registrations and
annual returns
Personal property registrations
Other land-based information
Accessibility
Full-Service Registry Expertise 8
Unique Approach to Registry
Management and Administration
Government
• ISC manages and delivers full-service registry service operations.
• Government retains oversight, traditional public policy accountability and data ownership.
• ISC acts as the customer interface either online, in person or by telephone.
• Ongoing customer support, training and consultation through customer forums and committees.
Process customer requests
Analyze, interpret and apply existing policy
Maintain system integrity through record keeping and upgrades
Initiate product development and product planning
Customer
FULL-SERVICE REGISTRY MANAGEMENT
Positive Customer Ratings for Service Quality and Delivery 9
Customers
End-Use Customers
Individuals or businesses who directly benefit from ISC’s services
• Municipalities
• Real estate agents
• Home builders
• Insurance companies
• Car dealers
Channel Customers
Intermediaries who manage a relationship with an end-user but are typically the beneficiary of our service
• Law firms
• Surveyors
• Engineering firms
Service Delivery Relationship with Province of Saskatchewan 10
ISC – Alternative Registry Service
Delivery Model
Land and Land Survey Personal Property Corporate Land and Land Survey Personal Property Corporate
• Full-service provider of search and registry services for Government
• Twenty-year exclusive service agreement, including registry data licence
• Service relationship with Government oversight
Generating Stable Cash Flows 11
Revenue Model
Transaction Service Revenue Type
Searches Online or in person
Customized Flat fees (standard searches)
Registrations Online or in person Value-based fees (land registry)
Flat fees (other registries)
Maintenance and Related Services
Online or in person
Customized Flat or negotiated fees
Financial
Overview
Experienced Provider of Registry and Information Services 13
Multiple Lines of Business
75.2 79.1 80.5
2012 2013 2014
Land Titles Registry Personal Property Registry Corporate Registry Geomatics Land Surveys Directory Other
Revenue by Line of Business1 ($M)
1Excludes Vital Statistics Registry.
Secure Core Business 14
Revenue – Second Quarter 2015
$19.7 M Total revenue for Q3 2015
41.5 % EBITDA margin for Q3 2015
Consistent EBITDA 15
Earnings
30.2
34.0
30.2
2012 2013 2014
Adjusted EBITDA1 ($M)
1EBITDA, 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 year ended December 31, 2014
Results Continue to Support Dividend and Growth 16
Q3 2015 Financial Highlights
(thousands of CAD dollars, except for dividends declared and earnings per share )
Three months ended Sept 30,
2015
Three months ended Sept 30,
2014
Nine months ended Sept 30,
2015
Nine months ended Sept 30,
2014
Revenue $ 19,675 $ 21,278 $ 55,740 $ 60,700
Net Income and total comprehensive income $ 4,656 $ 6,239 $ 11,350 $ 14,346
EBITDA1 $ 8,164 $ 9,665 $ 20,176 $ 23,206
Adjusted EBITDA1 $ 9,570 $ 9,796 $ 21,762 $ 24,522
EBITDA margin1 41.5% 45.4% 36.2% 38.2%
Adjusted EBITDA margin2 48.6% 46.0% 39.0% 40.4%
Free cash flow1 $ 2,806 $ 7,711 $ 11,500 $ 18,047
Dividends declared per share $ 0.20 $ 0.20 $ 0.60 $ 0.60
Earnings per share, basic2 $ 0.27 $0.36 $ 0.65 $ 0.82 1For a reconciliation of EBITDA, adjusted EBITDA and free cash flow, refer to the section “Financial Measures and Key Performance Indicators” in the Management’s Discussion & Analysis for the three months ended September 30, 2015. EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin 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. Refer to the section “Non-IFRS Measures” in the Management’s Discussion & Analysis for the three months ended September 30, 2015. 2The calculation of earnings per share is based on net income after tax and the weighted average number of shares outstanding during the period.
Balance Sheet Provides Financial Stability And Flexibility 17
Use of Balance Sheet
Balance sheet remains strong with ability
to fund growth opportunities
Continues to support dividend
Re-investing into business
$39.8 M Amount of cash on hand
as at Sep 30, 2015
$10.5 M Amount of 2015 dividends
paid to shareholders*
$4 – 6 M CapEx expected in 2015
$9.9 M Long-term debt
as of Sep 30, 2015
*dividends paid as at Sep 30, 2015
Growth
Objectives
Prudent and Measured Approach to Growth 19
Growth Strategy
Replication • Replicate core service
offerings in other provinces.
• Approaches and models include acquisition of a registry, long-term outsourcing contract and shared subsidiary model.
Enhancement • Opportunities with SK e.g.
providing additional services on behalf of the Province and adding features to existing products.
• Possible enhancements in SK could be leveraged for out of province growth.
Acquisition and
Diversification • New business lines,
industries, sectors and segments.
• Potential expansion into appraisal and valuation, legal services, real estate transactions and transaction processing.
Execution on Growth Strategy 20
ESC
Oct 1, 2015 ISC COMPLETES ACQUISITION OF ESC CORPORATE SERVICES LTD.
Transaction Overview
• ISC successfully completed the acquisition of ESC Corporate Services Ltd. (“ESC”).
• ISC completed the transaction through a wholly owned subsidiary using a combination of
cash and debt
• ISC expects the transaction to be immediately accretive to the Company’s EPS (earnings
per share) in 2015.
Company
Highlights
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Saskatchewan Economy
Land Titles Registry - Housing starts and building permits CMHC Housing Market Outlook currently forecasts a decrease of 10.6 % in existing home sales volume in Saskatchewan for 2015 with an increase of 1.6 % in 2016. Similarly, average home resale prices are forecast to decrease by 0.5 % in 2015 and increase by 1.3 % in 2016.
Personal Property Registry – Employment and new motor vehicle sales The employment rate, as shown in the percentage of Saskatchewan people ages 15-64 employed in January and February 2015 was lower than during the same period in 2014, while March through May 2015 was higher.
New motor vehicle sales (units) for Saskatchewan are expected to be lower in 2015 compared to 2014 volumes.
Sources: CMHC Housing Market Outlook – Canadian Edition – Second Quarter 2015. Scotiabank Global Economics – Provincial Forecast Update – October 5, 2015. Statistics Canada Table 282-0087 – Labour force survey estimates (LFS), by sex and age group, monthly (persons unless otherwise noted), Canada, provinces and territories, CANSIM (database), accessed July 8, 2015.
Focus on Delivering Stable, Predictable Returns 23
Outlook 2015
• Continued focus on delivering stable, predictable returns.
• Current economic slowdown continues to impact revenue in 2015.
• Expected EBITDA margin between 34% and 36%.
• Expected CapEx of $4 - $6 million.
Solid Business 24
Investment Proposition
Strong Market Position
• 20-year exclusive Master Service Agreement, including data licence
• Unique service offering - “full-service”
Capacity To Support Sector Demand
• Higher levels of customer service and convenience
• Outsourcing of business processes and services
• Reliability and security of information
Start of Execution on Growth Opportunities
• Investment in OneMove Technologies Inc.
• Acquisition of ESC Corporate Service Ltd.
Solid Balance Sheet
• Strong cash flow supporting continuation of dividend
• Unleveraged
Diversified Shareholder Base 25
Ownership
Institutional Shareholder % O/S
Sentry Investments 14.74%
Burgundy Asset Management Ltd. 3.93%
IA Clarington 3.08%
I.A. Michael Investment Counsel Ltd. 2.17%
QV Investors Inc. 2.07%
Standard Life Assurance 2.06%
Mawer Investment Management Ltd. 1.94%
Northwest & Ethical Investment 1.94%
IG Investment Management Ltd 1.61%
Mackenzie Institutional 1.37%
TOP 10 Institutional Holders
Institution Analyst Cover Initiated on
RBC Steve Arthur, CFA August 7, 2013
GMP Securities Michael Urlocker, CFA February 3, 2014
CIBC Stephanie Price July 15, 2014
Analyst Coverage
Institutional Investors
37%
Government of
Saskatchewan 31%
Retail Investors
32%
Ownership Distribution
As at Oct 27, 2015
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TSX: ISV
Shares outstanding 17.5 million Class A Limited Voting Shares
Listing TSX: ISV
Market Cap $255,675,000
52 Week High $19.14
52 Week Low $13.21
Dividend $0.80 per share annually (paid quarterly)
Contact investor.relations@isc.ca or call toll free: 1 855 341 8363
As at October 30, 2015
Appendix
Experienced Executive Team 28
Appendix A: Management
Jeff Stusek - President and Chief Executive Officer
Mr. Stusek was appointed President & CEO of ISC in 2008. He spent 13 years with the City of Regina, including three years as Director of Transit prior to joining ISC in 2006. He holds an MBA from the University of Regina.
Kathy Hillman-Weir – VP Corporate Affairs & General Counsel, Chief Privacy Officer
Mrs. Hillman-Weir is responsible for leading the company strategy and stakeholder relations, investor relations, compliance and legal functions. She joined ISC in 2000 and previously held positions in the Saskatchewan Ministry of Justice.
Kenneth W. Budzak – VP Operations & Customer Experience
Mr. Budzak joined ISC in 2001. He previously spent 15 years of senior leadership with the Saskatchewan Wheat Pool and holds a Bachelor of Science in Agricultural Economics from the University of Saskatchewan.
Shawn B. Peters - Vice-President, Finance & Technology and Chief Financial Officer
Before joining ISC in 2012, Mr. Peters held positions at Group Medical Services, Crown Investments Corporation of Saskatchewan and Ernst & Young.
Strong and Independent Board 29
Appendix B: Board of Directors
Joel Douglas Teal ,
Board Chair
Tom Christiansen
Anthony Robert Guglielmin Douglas Allen Emsley Michelle Ouellette, Q.C.
Bradley S. Sylvester Dion E. Tchorzewski William Scott Musgrave
Jess Huan Chua
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