provider of key search and registry...
TRANSCRIPT
Forward-Looking Statements
This presentation contains forward-looking information within the meaning of applicable Canadian securities legislation, including certain assumptions with respect to 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, employee future benefits, 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 19, 2014, ISC’s unaudited condensed Consolidated Financial Statements and Notes and Management’s Discussion and Analysis for the quarter ended September 30, 2014 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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Corporate Profile
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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
• ~4% dividend yield
• Ticker symbol TSX: ISV
Essential Registry and Information Services
Providing Critical Support to Economic Activity
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Maintenance Authentication
Collection Verification ISC Property and land ownership
Resource claims
Business registrations and
annual returns
Personal property registrations
Other land-based information
Accessibility
Government
Unique Approach to Registry Management and Administration
Full-Service Registry Expertise for Governments
• 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
ISC
FULL-SERVICE REGISTRY MANAGEMENT
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Customers
Majority of Customers Rate Us a 9 / 10 for Service Quality and Delivery
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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
• Financial institutions
• Resource companies
• Utilities
• Pipeline businesses
ISC – Alternative Registry Service Delivery Model
New Service Delivery Relationship with Province of Saskatchewan
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Land and Land Survey Personal Property Corporate
• Full-service provider of search and registry services for Government
• 20 year exclusive service agreement, including registry data licence – major barrier to entry
• New service relationship with Government oversight
• For staff and customers it’s “business as usual”
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
Generating Stable Cash Flows
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Multiple Revenue Streams
Revenue Streams1 ($M)
Stability, Growth and Diversification
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1 Excludes Vital Statistics Registry.
$68.7
$75.2 $79.1
$60.7
2011 2012 2013 Q3YTD 2014
Land Titles Registry Personal Property Registry Corporate Registry Geomatics Land Surveys Directory Other
Revenue - Third Quarter 2014
Stable and Predictable Revenue Flow
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$21.3 MM Total revenue for the three months ended Sep 30, 2014
2.1 % Increase compared to the
same period in 2013
78% $16.6 MM
13% $2.7 MM
9% $1.9 MM
Q3 2014 Revenue by Line of Business
Land Titles Registry, Land Surveys Directory andGeomatics
Personal Property Registry
Corporate Registry
Revenue Growth
Revenues ($M) CAGR
7.5%
Revenue Growth Driven by Robust Economy
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$55.1 $58.4
$68.7 $75.2
$79.1
2009 2010 2011 2012 2013
Earnings Growth
EBITDA ($M)
1 Excludes one-time costs related to the public offering and the results of the Vital Statistics Registry.
Strong and Growing EBITDA
CAGR 9.0%
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EBITDA Adjusted EBITDA1
$22.1 $22.2 $24.2
$28.8 $30.6
$25.3
$30.2
$34.0
2009 2010 2011 2012 2013
Financial Highlights
(thousands of CAD dollars, except for dividends declared and earnings per share )
Three months ended Sep 30,
2014
Three months ended Sep 30,
2013
Nine months ended Sep 30,
2014
Nine months ended Sep 30,
2013
Revenue1 $ 21,278 $ 20,832 $ 60,700 $ 59,091
Net Income and total comprehensive income
$ 6,239 $ 6,015 $ 14,346 $ 72,238
EBITDA2 $ 9,665 $ 9,504 $ 23,206 $ 22,224
Adjusted EBITDA2 $ 9,665 $ 9,564 $ 23,206 $ 25,613
EBITDA margin2 45.4% 45.6% 38.2% 36.9%
Adjusted EBITDA margin2 45.4% 45.9% 38.2% 43.3%
Free cash flow2 $ 7,622 $ 9,091 $ 18,368 $ 20,141
Dividends declared per share $0.20 $ 0.18 $0.60 $ 0.18
Earnings per share, basic3 $0.36 $0.35 $0.82 $4.13
Results Continue to Support Dividend and Growth 15
1) Revenue in 2013 does not include the Vital Statistics Registry, which is reflected as a discontinued operation. 2) EBITDA, 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 “Non-IFRS Measures” in Management’s Discussion & Analysis for the third quarter ended Sep 30, 2014.
3) The calculation of earnings per share is based on net income after tax and the weighted average number of shares outstanding during the period.
Use of Balance Sheet
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Balance sheet remains strong with ability
to fund growth opportunities
Continues to support dividend
Re-investing into business
Balance Sheet Provides Financial Stability And Flexibility
*dividends paid as of Sep 30, 2014
$32.2 MM Amount of cash on hand as
of Sep 30, 2014
$10.5 MM Amount of 2014 dividends
paid to shareholders*
$5 – 7 MM CapEx expected in 2014
$9.9 MM Debt as of Sep 30, 2014
Higher Levels of
Customer Service
and Convenience
Self-service through online technology-enabled interfaces
Outsourcing of
Business Processes
and Services
Limited budgets and core business
focus
Reliability
and Security of
Information
Expertise in authenticated and
secure data required
Trends Affecting Government Information Services
Core Expertise Aligns with Trends
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Growth Strategy
Expand Service Offerings in Saskatchewan
Leveraging Existing Relationships to Increase Scope and Scale
Prudent And Measured Approach To Growth 19
Diversify Geographically
Leverage Unique Saskatchewan Expertise to Grow in Other Markets
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
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Consistent Expansion of Alternative Registry Delivery Model
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
Proven Approach to Add, Integrate and Modernize End to End Registries
2006
Personal Property Registry Online system with B2B interface launched
2014
Corporate Registry Initiating process and system modernization
Saskatchewan Economy
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Land Titles Registry - Housing starts and building permits
• Average home resale prices are expected to increase by 2.4 per cent in 2014, down from 3.0% in the second quarter report.
• Slight increase of 1.2 per cent are expected in existing home sales volumes for 2014.
• Housing starts for January to September of 2014 are down 1.7 per cent over the same period in 2013.
• Building building permits issued from January to August of 2014 is down 11.2 per cent compared to the same period in 2013.
Personal Property Registry – Retail sales
• For January to April 2014, retail sales increased by 6.5 per cent over the same period in 2013 in Saskatchewan.
• Slight increases in annual motor vehicles sales forecasted for 2014 over 2013.
General – GDP and employment
• Saskatchewan GDP growth expected at 1.3% in 2014, down from 1.4%.
• 1.6% employment growth in SK expected in 2014.
Sources: CMHC Housing Market Outlook – Canadian Edition – Third Quarter 2014 BMO Capital Markets Economics – Provincial Economic Outlook – July 2014 RBC Economics – Provincial Outlook – Update September 2014 Statistics Canada CANSIM Table 027-0001 – October 10, 2014
Outlook 2014
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• Revenue expected to remain stable based on current economic forecasts
• EBITDA of 36% for 2014; expected growth of 1/2 % per annum (up to ~ 40%)
• CapEx of $5 to $7 million
• Laying foundation for growth by prudently examining and evaluating opportunities
• Commenced cost efficiency review.
• Commenced review and assessment of projects to ensure synergy with Company mandate
Performance YTD Is As Expected
Investment Proposition
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Stable And Predictable Business
Strong Market Position
• 20 year exclusive Master Service Agreement, including data licence – major barrier to entry
• 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
Growth Opportunities
• Provincial and extra-Provincial
• Potential new information solution offerings
Solid Balance Sheet
• Strong cash flow supporting continuation of dividend
• Unleveraged
Ownership
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As at October 31, 2014
Diversified Shareholder Base
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 Institutional Shareholder % O/S
Sentry Investments 10.11%
Montrusco Bolton Investments Inc. 6.98%
Burgundy Asset Management Ltd. 3.93%
QV Investors Inc. 3.77%
Industrial Alliance Investment Mgmt Inc. 3.07%
Mawer Investment Management Ltd. 1.85%
IG Investment Management Ltd 1.37%
Mackenzie Institutional 1.14%
Brompton Management Ltd 1.11%
Picton Mahoney Asset Management 1.03%
TOP 10 Institutional Holders
Analyst Coverage
SK Government
31%
Institutional Holders
35%
Retail Investors
34%
Ownership Distribution
TSX: ISV
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Shares outstanding 17.5 million Class A Limited Voting Shares
Listing TSX: ISV
Market Cap $333,200,000
52 Week High $19.99
52 Week Low $16.53
Dividend $0.80 per share annually (paid quarterly)
Contact [email protected] or call toll free: 1 855 341 8363
As at November 12, 2014
Appendix A: Management
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Jeff Stusek - President and Chief Executive Officer
Mr. Stusek spent 13 years with the City of Regina, including three years as Director of Transit prior to joining ISC in 2008. He holds an MBA from the University of Regina.
Kathy Hillman-Weir – VP Corporate Affairs & General Counsel, Chief Privacy Officer
Kathy 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
Ken 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.
Appendix B: Board of Directors
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Joel Douglas Teal , Board Chair Jess Huan Chua Tom Christiansen
Tony Guglielmin Doug Emsley Michelle Ouellette, Q.C.
Brad Sylvester Dion E. Tchorzewski Scott Musgrave
Appendix C: Land Titles Registry
Revenue Strongly Linked to Real Estate Market Activity
Transaction Volume
Search 15.4%
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Registrations 86%
Searches 14%
Maintenance 0 %
2013 Revenue by Type 1,017,137
1,027,372
1,010,991
2011 2012 2013
Appendix D: Personal Property Registry
Highly Automated With 99% of Searches Online
Transaction Volume
Maintenance 11.0%
Search 14.6%
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389,091 419,118
443,300
2011 2012 2013
Registrations 74%
Searches 15%
Maintenance 11%
2013 Revenue by Type
Appendix E: Corporate Registry
Revenue Growth Driven by Strong Economy and New Services
Transaction Volume1
Search 16.7%
Registration 24.3%
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Maintenance 60%
Registrations 22%
Searches 18%
2013 Revenue by Type
374,351 391,577
408,680
2011 2012 2013
1 Management of the Corporate Registry was transferred to ISC in Q4 2010.