Revenue: $67.8 million, up 27% compared to Q2 2023.
Net Income: $10.3 million, or $0.57 per basic share and $0.56 per diluted share.
Adjusted Net Income: $14.1 million, or $0.78 per basic share and $0.77 per diluted share.
Adjusted EBITDA: $27.2 million, up from $17.8 million in Q2 2023.
Adjusted EBITDA Margin: 40%, compared to 33.4% in Q2 2023.
Net Cash Flow from Operating Activities: $24.1 million, an increase of $9.8 million from Q2 2023.
Adjusted Free Cash Flow: $15.7 million, up 26% from $12.5 million in Q2 2023.
Capital Expenditures: $2.7 million, up from $0.8 million in Q2 2023.
Cash on Hand: $22.1 million as of June 30, 2024.
Quarterly Dividend: $0.23 per share, payable on or before October 15, 2024.
Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Information Services Corp (IRMTF) reported record revenue and adjusted EBITDA for Q2 2024, with increases of 27% and 53% respectively compared to Q2 2023.
Strong performance in Registry Operations, particularly from the Saskatchewan registries, contributed to revenue and adjusted EBITDA growth of 39% and 68% respectively.
The company secured an amended and restated license and IT services agreement with the government of Ontario, extending operations until March 31, 2028, with options for renewal.
The launch of an online self-service customer portal for the Bank Act Security Registry under a five-year contract with the Bank of Canada enhances customer experience with 24/7 service.
Net cash flow from operating activities increased significantly to $24.1 million, up from $14.3 million in Q2 2023, driven by contributions from Registry Operations and services segments.
Despite strong performance, Information Services Corp (IRMTF) maintained its annual guidance, indicating potential uncertainty in sustaining current growth levels.
The company faces increased interest expenses due to additional borrowings used to fund upfront payments, impacting net income growth.
Sustaining capital expenditures rose significantly to $2.7 million in Q2 2024 from $0.8 million in Q2 2023, indicating higher ongoing investment requirements.
The company is experiencing inventory challenges in lower-value homes, which could impact future real estate activity in the Saskatchewan market.
A decline in used car values is negatively affecting the loan-to-value ratio, potentially impacting the Recovery Solutions division as consumers face financial pressures.
Q: With a strong quarter, why did you maintain the guidance despite the impressive results? Should we expect to hit the upper end of the guidance range? A: Shawn Peters, President and CEO, explained that the strong quarter is part of the seasonality seen in the Land Registry. They have maintained the guidance and are confident in it, but do not comment specifically on where in the guidance range they expect to fall. Robert Antochow, CFO, added that Q2 and Q3 are typically the strongest quarters for the Land Registry.
Q: Can you explain the dynamics behind the high-value transactions in Q2 and whether this trend is sustainable? A: Robert Antochow, CFO, noted that high-value transactions are hard to predict and speculated that the declining interest rate environment might have contributed. Shawn Peters added that while these transactions are difficult to forecast, the strong economy likely played a role, and they expect these to fall within their guidance.
Q: Regarding the Ontario property tax assessment services renewal, were there any changes in the contract that could impact revenue? A: Shawn Peters, President and CEO, stated that the renewal includes standard price increases and a slight change in customer service aspects, but the fees remain steady, subject to normal inflationary increases.
Q: How variable are your expenses, and is there potential to reduce them going forward? A: Robert Antochow, CFO, mentioned that about 80-85% of costs are fixed, but they do keep an eye on expenses. Shawn Peters added that while they are prudent with expenses, investments in people and technology are necessary for growth, which is their current focus.
Q: What drove the strong performance in recovery solutions this quarter, and is this level sustainable? A: Robert Antochow, CFO, explained that the current economic environment, with higher interest rates and declining used car values, has increased recovery activities. They have the capacity to manage increased volumes and are seeing benefits from investments in their recovery complete software.
Q: Can you provide a breakdown of growth in regulatory solutions between existing and new customers? A: Robert Antochow, CFO, stated that they do not provide specific breakdowns for competitive reasons, but the majority of transaction growth comes from existing customers.
Q: How do you manage pricing adjustments in your services segment? A: Robert Antochow, CFO, explained that most of their services are under contract, typically up to three years, and pricing is reviewed at renewal. For non-contracted customers, prices are adjusted annually.
Q: Is the increased due diligence in regulatory solutions expected to continue as rates fall? A: Robert Antochow, CFO, noted that increased regulatory oversight is expected to continue, independent of interest rate changes, as regulators focus on compliance.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.