Last close As at 05/08/2026
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Research: Industrials
In FY23, Information Services Corporation (ISC) enjoyed year-on-year top-line and adjusted operating profit growth, augmented by consistent organic expansion of its Services division and incremental earnings from fee uplifts linked to the Master Service Agreement (MSA) extension. Management’s encouraging FY24 guidance reflects organic growth potential from the Services division, alongside a full-year impact of earnings accretion from fee adjustments. We have raised our valuation modestly from C$37/share to C$40/share, which implies 48% upside.
Written by
Information Services Corporation |
A busy end to a record FY23 |
FY23 results |
Industrial support services |
2 April 2024 |
Share price performance
Business description
Next events
Analysts
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In FY23, Information Services Corporation (ISC) enjoyed year-on-year top-line and adjusted operating profit growth, augmented by consistent organic expansion of its Services division and incremental earnings from fee uplifts linked to the Master Service Agreement (MSA) extension. Management’s encouraging FY24 guidance reflects organic growth potential from the Services division, alongside a full-year impact of earnings accretion from fee adjustments. We have raised our valuation modestly from C$37/share to C$40/share, which implies 48% upside.
Year end |
Revenue (C$m) |
EBITDA (C$m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/22 |
189.9 |
64.4 |
46.5 |
1.95 |
0.92 |
14.0 |
3.4 |
12/23 |
214.5 |
72.9 |
39.2 |
1.65 |
0.92 |
16.5 |
3.4 |
12/24e |
242.0 |
85.5 |
46.5 |
1.89 |
0.92 |
14.4 |
3.4 |
12/25e |
258.1 |
90.4 |
51.7 |
2.10 |
0.92 |
13.0 |
3.4 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
FY23 results highlight strengthening prospects
ISC reported FY23 revenue and adjusted EBITDA of C$215m and C$73m, representing year-on-year increases of 13%, in line with August’s updated guidance. Registry Operations benefited from incremental earnings from Saskatchewan Land Registry fee uplifts alongside a full-year revenue contribution from the Ontario Property Tax Assessment (OPTA) acquisition (C$16m), achieving EBITDA of C$59m (FY22: C$52m). The Services division enjoyed heightened customer acquisition, boosted by an influx of customers continuing to focus on due diligence in a high interest rate environment, with EBITDA increasing 11% to C$21m. Net income (normalised) declined 14% to C$29m, largely due to a rise in finance expenses from the net debt increase to C$153m (excluding leases) (FY22: C$32m), driven by the C$150m upfront payment for the MSA extension, combined with an increase in amortisation of 48% to C$18m.
Encouraging outlook
The company maintains its FY24 revenue and adjusted EBITDA guidance of C$240–250m (Edison: C$242m) and C$83–91m (Edison: C$86m), with our projections signifying year-on-year increases of 13% and 17%, respectively. This anticipated growth is driven by robust organic expansion and ongoing customer acquisition efforts in the Services division. Furthermore, Registry Operations should benefit from a full-year contribution of introduced annual CPI fee adjustments from the MSA extension, which should somewhat offset the expected plateau in transaction volumes. The company has also set an ambitious target to double revenue and adjusted EBITDA by 2028 organically and through strategic M&A.
Valuation: Substantial upside potential
Information Services Corporation is a research client of Edison Investment Research Limited
We have rolled forward our DCF to an FY24 basis, which now returns a value of C$40/share (versus C$37/share previously). The stock trades at 13.0x FY25e P/E, representing a material discount, not only to its own history but also to a selection of peers, despite its long-term predictable cash flows bolstered by the MSA extension.
FY23 results highlight robust, sustainable growth
ISC’s record FY23 results align with August’s updated guidance and highlight the sustained organic growth potential within the Services division, with growth further bolstered by incremental earnings derived from CPI fee adjustments associated with the MSA extension, alongside the full-year contribution from acquisitions completed in 2022. The company achieved FY23 revenue and adjusted EBITDA of C$214.5m and C$72.9m, representing year-on-year increases of 13.0% and 13.2%, respectively. Despite a substantial increase in amortisation from the extension to C$17.5m (FY22: C$11.8m), normalised EBIT stood at C$52.4m, an increase of 5.4%, yielding a margin of 24%. Year-end net debt (pre IFRS 16) increased from C$31.6m in FY22 to C$153.1m, attributable to the C$150m upfront payment for the MSA extension. A subsequent increase in net finance costs from C$3.2m to C$13.2m contributed to a 14.1% decrease in net income to C$29.4m, equating to a basic normalised EPS of C$1.65 (FY22: C$1.95).
Exhibit 1: FY23 results summary
C$m |
FY20 |
FY21 |
FY22 |
FY23 |
% change FY23 vs FY22 |
Group revenue |
136.7 |
169.4 |
189.9 |
214.5 |
13.0% |
Gross profit |
105.5 |
129.0 |
140.7 |
159.1 |
13.1% |
Gross margin |
77.1% |
76.2% |
74.1% |
73.1% |
- |
Adjusted EBITDA |
49.2 |
67.8 |
64.4 |
72.9 |
13.2% |
Group EBITDA margin |
36.0% |
40.0% |
33.9% |
34.0% |
- |
EBIT |
36.5 |
54.0 |
49.7 |
52.4 |
5.4% |
EBIT margin |
26.7% |
31.9% |
26.2% |
24.4% |
- |
Profit before tax |
34.4 |
51.4 |
46.5 |
39.2 |
(15.7%) |
Net income |
26.6 |
39.4 |
34.2 |
29.4 |
(14.1%) |
Basic normalised EPS (C$) |
1.52 |
2.25 |
1.95 |
1.65 |
(15.1%) |
Net cash/(debt) |
(51.2) |
(9.9) |
(40.4) |
(162.9) |
303.3% |
Net cash/(debt) excluding lease liabilities |
(42.4) |
(0.9) |
(31.6) |
(153.1) |
384.5% |
Source: ISC. Note: EBIT, PBT, net income and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
The key divisional highlights of FY23 were:
■
Registry Operations: revenue and adjusted EBITDA increased 12.9% and 13.2% y-o-y to C$103.5m and C$58.9m, respectively, yielding an impressive margin of 57%, in line with the prior year. Growth was attributable to a full year’s contribution from the OPTA acquisition (made in 2022), generating revenue of C$15.5m (FY22: C$8.9m), alongside incremental revenue from CPI fee uplifts associated with the MSA extension and implemented in Q323. This more than offset a subdued Canadian property market from mortgage rate hikes and subsequent reduced Saskatchewan Land Registry transaction volume (5% reduction), notably in H123. Q423, in particular, saw a surge in Land Registry revenue, increasing by 42% to C$18.5m (29% of FY23 Land Registry revenue), benefiting significantly from the fee adjustments.
■
Services: revenue and adjusted EBITDA increased 10.2% and 11.1% y-o-y to C$101.7m and C$21.1m, respectively, presenting a margin of 20.7% (FY22: 20.5%). This was attributable to organic expansion with strong customer and transaction growth as ISC continues to implement technology that provides additional value-added product offerings. Regulatory Solutions enjoyed a surge in activity as ISC’s financial institution customers implemented stronger due diligence in a high interest rate environment, with its revenue rising 15.6% to C$76.2m. Recovery Solutions revenue was in line with the prior year at C$10.8m (FY22: C$10.9m), affected by a consecutive year of reduced used vehicle prices from COVID-19 pandemic peaks and subsequent decreased revenue per file in Asset Recovery. Corporate Solutions revenue decreased 3.4% to C$14.8m due to the anticipated decline in Ontario corporate filing transactions, which more than offset new customer acquisition.
■
Technology Solutions: the division experienced top-line growth of 58.5% y-o-y to C$9.3m with adjusted EBITDA of C$0.8m compared to a loss of C$1.2m in FY22, with a strong recovery witnessed in H223 from the recognition of revenue associated with the advancement of new contract delivery, as increases in procurement activity started to unravel. This more than offset the continued investment in people to deliver new and continuing implementation contracts.
Exhibit 2: ISC revenue and EBITDA by segment (FY22/23)
(C$m) |
FY22 |
FY23 |
Year-on-year change |
Revenue by segment |
|||
Registry Operations |
91.7 |
103.5 |
12.9% |
Services |
92.3 |
101.7 |
10.2% |
Technology Solutions |
5.8 |
9.3 |
58.5% |
Corporate & Other |
0.0 |
0.0 |
26.3% |
Group revenue |
189.9 |
214.5 |
13.0% |
Adjusted EBITDA by segment |
|||
Registry Operations |
52.1 |
58.9 |
13.2% |
Services |
19.0 |
21.1 |
11.1% |
Technology Solutions |
(1.2) |
0.8 |
N/A |
Corporate & other |
(5.4) |
(6.5) |
20.0% |
Group adjusted EBITDA |
64.4 |
72.9 |
13.2% |
Adjusted EBITDA margin by segment |
|||
Registry Operations |
56.8% |
56.9% |
- |
Services |
20.5% |
20.7% |
- |
Technology Solutions |
(21.1%) |
8.9% |
- |
Group adjusted EBITDA margin |
33.9% |
34.0% |
- |
Source: ISC
ISC’s visible track record of strong positive operating cash flows continued into 2023, increasing 30.4% to C$56.8m, largely due to improved EBITDA and more favourable working capital movements (C$2.6m improvement). The large cash outflow from investing activities of C$154.9m (FY22: C$55.6m) was almost fully attributable to the C$150m upfront contract extension fee.
ISC maintains a strong balance sheet, despite the C$150m upfront payment for the MSA extension in July, with year-end net debt of C$153.1m (FY22: C$31.6m), implying a leverage ratio of 2.1x, well within the company’s target of 2.0–2.5x. The restated revolving credit facility (RCF) terms, with a subsequent aggregate of C$250m available, and additional flexibility through the C$100m accordion option, provides ISC with further debt flexibility for potential deals. The company also demonstrates a positive sustained net asset position with expected continued growth. Net assets in 2023 stood at C$168.8m, representing an 8.5% increase compared to 2022.
Outlook: Services division set to be a key organic driver
Management has reaffirmed FY24 revenue and adjusted EBITDA guidance of C$240–250m (Edison: C$242m) and C$83–91m (Edison: C$86m), with our projections signifying year-on-year increases of 13% and 17%, respectively. This anticipated growth is driven by robust organic expansion and ongoing customer acquisition efforts in the Services division. Furthermore, Registry Operations should benefit from a full-year contribution of introduced annual CPI fee adjustments from the MSA extension, which should somewhat offset the expected plateau in Land Registry transaction volumes.
The company has also set an ambitious target to double revenue and adjusted EBITDA over the next five years both organically and through execution of value accretive M&A opportunities, targeting one to two transactions per year. The majority of this anticipated organic growth should come from the Services division, which has seen revenue growth of c 650% from 2016 to 2023, following its inception in 2015 through the acquisition of ESC Corporate Services. Strong organic growth should continue to persist in the foreseeable future, as ISC capitalises on the growing trend towards business process outsourcing, with continued investment in Registry Complete and Recovery Complete technology platforms, improving its revenue potential for the existing customer base. Continued transaction and customer growth should further bolster this division’s expansion.
Regarding the FY28 target, we note that growth from M&A is a lot more unpredictable and bears the risk that an acquired company, or its development once acquired, may not perform to management’s expectations. This risk could be exacerbated if the organisation acquires a company to expand into an unfamiliar market or region.
Forecasts reflect value accretive growth
We have upwardly adjusted our FY24 revenue forecasts, which incorporate a higher organic growth assumption of 13% y-o-y to C$114.9m in the Services division (7% growth previously), contributing to an anticipated group revenue growth of 12.8% to C$242.0m (C$230.2m previously). Our FY24 Registry Operations growth forecast of 12% to C$115.9m is solely based on a full year of incremental earnings from CPI fee uplifts (anticipated incremental revenue of c C$10m) supported modestly by forecasted Saskatchewan GDP growth forecasts of 1.3% with an assumed plateau in transactions. A combination of increased COGs and operating expenses from a higher base year than anticipated and the higher revenue growth assumption for the lower-margin Services division has decreased our adjusted EBITDA assumption by 4.8% to C$85.5m.
Our FY24 forecasts for normalised PBT and EPS of C$46.5m and C$1.89 imply year-on-year growth of 18.6% and 14.7%. With a visible track record of deleveraging, we expect net debt to decrease by 8.7% to C$139.8m, implying a leverage ratio of 1.6x, underpinned by top-line growth and increased profitability.
Exhibit 3: Forecast revisions
2023 |
2024e |
2025e |
2026e |
|||||
C$m |
Old |
New |
% chg |
Old |
New |
% chg |
New |
|
Revenue |
214.5 |
230.2 |
242.0 |
5.1% |
240.5 |
258.1 |
7.3% |
272.0 |
Y-o-y % change |
- |
7.3% |
12.8% |
- |
4.5% |
6.6% |
- |
5.4% |
Adjusted EBITDA |
72.9 |
89.8 |
85.5 |
-4.8% |
92.8 |
90.4 |
-2.6% |
93.8 |
Y-o-y % change |
- |
23.3% |
17.4% |
- |
3.4% |
5.7% |
- |
3.8% |
Normalised operating profit |
52.4 |
63.7 |
59.5 |
-6.6% |
66.0 |
63.6 |
-3.6% |
66.4 |
Y-o-y % change |
- |
21.7% |
13.6% |
- |
3.6% |
7.0% |
- |
4.3% |
Normalised PBT |
39.2 |
50.9 |
46.5 |
-8.8% |
54.2 |
51.7 |
-4.7% |
55.7 |
Y-o-y % change |
- |
30.0% |
18.6% |
- |
6.5% |
11.2% |
- |
7.8% |
EPS - (C$) Continuing, Basic |
1.65 |
2.12 |
1.89 |
-10.7% |
2.26 |
2.10 |
-6.8% |
2.26 |
Y-o-y % change |
- |
28.4% |
14.7% |
- |
6.3% |
11.0% |
- |
7.6% |
DPS (C$) |
0.92 |
0.92 |
0.92 |
0.0% |
0.92 |
0.92 |
0.0% |
0.92 |
Y-o-y % change |
- |
0.0% |
0.0% |
- |
0.0% |
0.0% |
- |
0.0 |
Net cash/(debt) (pre IFRS 16) |
(153.1) |
(136.0) |
(139.8) |
2.8% |
(121.3) |
(125.3) |
3.3% |
(107.3) |
Y-o-y % change |
- |
-11.2% |
-8.7% |
- |
-10.8% |
-10.4% |
- |
-14.4% |
Source: ISC, Edison Investment Research
Our revised FY25 forecasts consist of revenue, PBT and EPS growth of 6.6%, 11.2% and 11.0% yo-y to C$258.1m, C$51.7m and C$2.10, respectively, largely driven by an assumption of continuing organic expansion of 11% within the Services division through increased customer acquisition and transactions. We expect growth from this division to continue into FY26e with an anticipated 7.6% growth in EPS to C$2.26, largely attributable to the Services division (9% organic growth assumption), incorporating only a modest 1% revenue growth assumption in Registry Operations.
We have maintained the current annual dividend of C$0.92 for the next three forecast years. However, since this implies cover of 2.1x and 2.3x in FY25e and FY26e, respectively, and with FY20–23 average cover of 1.8x, management has room to grow the dividend if it chooses.
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Exhibit 4: Revenue and adjusted EBITDA, FY20–26e |
Exhibit 5: EPS, DPS and dividend cover, FY20–26e |
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|
|
Source: ISC, Edison Investment Research |
Source: ISC, Edison Investment Research |
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Exhibit 4: Revenue and adjusted EBITDA, FY20–26e |
|
|
Source: ISC, Edison Investment Research |
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Exhibit 5: EPS, DPS and dividend cover, FY20–26e |
|
|
Source: ISC, Edison Investment Research |
Research: Healthcare
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