Information Services Corporation

Good day and thank you for standing by. Welcome to the ISC fourth quarter and year-end 2025 earnings conference call and webcast. At this time, all participants are in listen-only mode. After the speaker's presentation, we'll open up for questions. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's call is being recorded I would like to hand it over to our first speaker, Jonathan Hackshaw, Senior Director, Investor Relations and Capital Markets. Please go ahead.

Thank you, Victor, and good morning to everyone joining us today. Welcome to ISE's conference call for the three months and year-ended December 31st, 2025. On the call today with me are Sean Peters, President and CEO, and Bob Antichow, Chief Financial Officer. This morning, Sean will take you through some of the highlights for the year. Bob will then provide some comments on a financial and operating performance before passing the call back over to Sean for some closing remarks. Before we begin, we would like to remind everyone that we will only be summarizing results today. The company's financial statements and MD&A have been filed on CDOT Plus and are available on our website. We encourage you to review those reports in their entirety. I would also like to remind you that any statements made today that are not historical facts are considered the before looking statements within the meaning of applicable securities laws. The statements may involve a number of risks and uncertainties that are described in detail in the company's CDOT Plus filings. Those risks and uncertainties may cause actual results for different material from those stated. Today's comments are made as of today's date and will not be updated except as required under applicable securities laws. Today's conference call is being broadcast live over the internet and will be archived for replay shortly after the call in the events section of our investor website at investors.ifc.ca. With that, I would now like to turn the call over to Sean. Thank you, Jonathan. Good morning to everyone for joining us for today's call. Before I get into the details, I want to take a moment to reflect on what was truly a landmark year for ISC. 2025 marked our strongest year on record, a testament to the dedication of our team, strength of our diversified business model, and the trust our customers place in us every day. We delivered record revenue of $257.8 million, record adjusted EBITDA of $103.1 million, and record adjusted free cash flow of $74.7 million. We also achieved our long-term net leverage target of two to two and a half times well ahead of schedule, a milestone we had originally anticipated reaching by mid-2026. And all these results speak to the disciplined execution of our strategy and the resilience of our business. If we now turn to our operating segments, registry operations delivered exceptional performance throughout 2025, with revenue growing 10% year over year to reach $137.7 million and adjusted EBITDA increasing 12% to $89.5 million. The Saskatchewan Land Registry was the standout performer. We benefited from a resilient Saskatchewan economy characterized by higher average home prices, constrained residential inventory, and a declining interest rate environment. These conditions drove increased transaction volumes and, importantly, strong high-value property registrations. strong indicator of confidence in the province's commercial and agricultural sectors. Land registry reached a record $89.9 million in revenue, up 9% from the prior year. What's particularly encouraging is the breadth of this growth. Regular land transfers were up 2%, mortgage registrations climbed 16%, and title searches grew 2%. According to the Saskatchewan Realtors Association, 2025 was the second highest sales year on record for the province's housing market. A personal property and corporate registry also achieved record revenues of $13.5 and $14.1 million respectively, up 5% and 7% year over year. These results reflect the underlying strength of the provincial economy and the essential nature of the services we provide. In Ontario, our Property Tax Assessment Services Division grew revenue by 6% to $16.7 billion, benefiting from supplementary professional services requested by the Government of Ontario. And importantly, we completed our first full year of operating the Bank Act Security Registry following its launch in 2024. This contributed $3.5 million to revenue in our other registries division compared to just six months of contribution in the prior year. Turning to services, I'm proud of how this segment navigated what was admittedly a challenging year. Revenue was essentially flat at 109.2 million, but the story here is one of successful diversification and margin expansion. Adjusted EBITDA grew 19% to 27.2 million, and our margin improved to 25% from 21% in the prior year. The segment faced headwinds from the Ontario Notice of Security Interest, or NOSI, ban that took effect in June 2024, as well as the continued opening of the Ontario Business Registry and broader economic uncertainty in that market. However, our long-term diversification strategy proved its worth. Our Recovery Solutions Division delivered outstanding results, with revenue growing 17% to $17.3 million. This counter-cyclical business benefited from increased delinquencies in the automotive lending market, demonstrating the value of having offerings that perform well across different economic environments. Equally important, our regulatory solutions division showed strength in its higher margin KYC and due diligence offerings. Increased recurring and non-recurring volumes in these areas helped offset declines in our collateral management services, which were impacted by the NOSI ban. The takeaway here is clear. Our services segment has built a diversified portfolio that can absorb regulatory and economic shocks while still delivering strong bottom-line results. Finally, technology solutions delivered meaningful progress in 2025, with revenue growing 10% to $33.2 million and adjusted EBITDA reaching $3.2 million, a significant improvement from $0.3 million in the prior year. Our third-party business advanced on several fronts, We made progress on existing solution definition and implementation contracts. And importantly, in the fourth quarter, we began development work on a new digital record system for Ontario's Ministry of Environment, Conservation and Parks. This nine-year contract with a two-year build phase followed by a seven-year operating term represents an exciting expansion of our relationship with the Government of Ontario. Our related party revenue also grew. driven by continued delivery of registry enhancements for the Saskatchewan Registry Division. This internal work is critical to maintaining our registry technology leadership and delivering an exceptional customer experience. Our accomplishments in 2025 extended beyond our financial results. They also reflected our commitment to our people. Earlier this year, we were honored to be recognized by the Globe and Mail's Women Lead Here benchmark for executive gender diversity. We also maintained our standing as one of Saskatchewan's top employers. And in the fall, we achieved a new milestone, Great Place to Work certification. This was our first enterprise-wide certification, encompassing not just our Canadian operations, but also our subsidiary in Ireland. And it reinforces ISC's reputation as a people-first organization and a global market leader. I've said it many times, people matter at ISC. These recognitions are a powerful validation of that commitment. To further strengthen our partnership with our team, we introduced an employee share purchase plan this year. This allows our employees to purchase ISP shares on the TSX and participate directly in the company's future success. Initiatives like this are central to our ongoing strategy to attract and retain the talented individuals who make our achievements possible. Because at the end of the day, our people are what differentiate us. and they're what will drive our continued success going forward. I'll now turn the call over to Bob to discuss some financial highlights in more detail before providing some closing remarks. Thank you, Sean, and good morning, everyone. As Sean mentioned, 2025 was another year of strong performance, with results for adjusted EBITDA exceeding our expectations. The positive performance for the year was driven by a number of factors, which I will now highlight for you. Revenue was $257.8 million for the year end at December 31st, 2025, an increase of 4% compared to $247.4 million in the prior year. This growth was led by strong results across the Saskatchewan Registry's Division of Registry Operations, and in particular, the Land Registry, which benefited from higher average real estate values. Net income was $26.8 million, or $1.44 per basic share and $1.43 per diluted share for the year ended December 31st, 2025, compared to $20.2 million or $1.11 per basic share and diluted share in 2024. The increase is due to adjusted EBITDA contributions from registry operations and services during the year. Registry operations adjusted EBITDA is a result of strong revenue for the reasons previously discussed. Services adjusted EBITDA contribution is a result of the continued performance of the Higher Margin Recovery Solutions Division in addition to increased recurring and non-recurring volumes in the Higher Margin KYC due diligence offerings of the Regulatory Solutions Division. Lower net finance expense due to lower interest rates also contributed to the increase, but was partially offset by higher share-based compensation expense. due to an increase in the company's share price during the year and an increase in professional and consulting services expenses related to resources deployed to respond to Plantro's mini-tender. Net cash flow provided by operating activities was $77.6 million for the year ended December 31, 2025, an increase of $6.4 million compared to the same prior year. driven by the same factors described for net income, along with the timing of changes in non-cash working capital. Adjusted net income was $56.8 million, or $3.05 per basic share and $3.04 per diluted share, for the year ended December 31, 2025. compared to $42.9 million or $2.36 per basic share and $2.35 per diluted share for the same prior year. The growth reflects strong results from registry operations and services in addition to lower interest expenses on long-term debt and depreciation and amortization. Adjusted EBITDA was $103.1 million for the year ended December 31, 2025. compared to $90.3 million in the same prior year. Adjusted EBITDA margin for the year was 40%, which increased compared to 37% in the prior year as a result of the strong performance across the operating segments. Registry operations continued to showcase growth in adjusted EBITDA due to strong results in the Land Registry and the Saskatchewan Registries Division. Services adjusted EBITDA growth was driven by ongoing margin improvement as a result of the continued strength in the recovery and regulatory solutions divisions and a shift towards a higher margin sales mix. Technology solutions growth was due to higher revenue as a result of progress on solution definition and implementation contracts, combined with lower wages and salaries, and information technology services as a result of increased capitalization and one-time grant funding. Adjusted pre-cash flow for the year ended December 31, 2025, with $74.7 million. an increase of $18.3 million compared to $56.4 million in the prior year. This growth was driven by an increase in adjusted EBITDA as previously described, in addition to lower interest paid on debt. Now turning to expenses. Total expenses were $204.1 million, an increase of $7.6 million compared to the prior year. This was due to an increase in wages and salaries and professional and consulting services expenses being offset by decreases in cost of goods sold and depreciation and amortization. Sustaining capital expenditures were $9.6 million compared to $8.3 million in 2024. Increase primarily resulted from increased system development work across our business segments. including registry enhancements in the Saskatchewan Red Streets Division of Registry Operations. After all this, as at December 31st, 2025, we held $19.5 million in cash compared to $21 million as at December 31st, 2024. During the year, as part of the execution of our deleveraging plan, we made voluntary prepayments of $47 million to our credit facility, which contributed to the company succeeding in achieving its stated long-term net leverage target of 2 to 2.5 times ahead of the previously expected timeframe of mid-2026. Before I turn the call back over to Sean, I'd like to finish by firstly highlighting that we also announced yesterday that our board of directors approved a quarterly cash dividend of 23 cents per share. That dividend will be payable on or before April 15th, 2026 to shareholders of record as of March 31st, 2026. Secondly, I want to remind you of the targets we've set for ourselves in 2026. with an expectation that revenue will be within a range of $273 million to $283 million, and adjusted EBITDA is expected to be in a range of $100 million to $107 million. In line with our historic performance, the company also expects robust free cash flow in 2026, which will help to maintain our long-term leverage target of 2 to 2.5 times. I will now turn the call back over to Sean for some concluding remarks. Thanks, Bob. As I mentioned at the start of the call, 2025 was a fantastic year for ISEE. We didn't just hit our targets. We set new records in revenue, adjusted EBITDA, and free cash flow. 2025 clearly demonstrated the power of ISEE's diversified model. Each segment contributed to our record results. We made meaningful progress on our strategic priorities. As Bob just highlighted, the momentum is carrying us into 2026. With the outlook and guidance we announced in early February, we're well positioned to deliver another year of growth while maintaining our disciplined approach to capital allocation. We expect continued strength in registry operations driven by Saskatchewan's resilient economy, organic growth and services through new customer onboarding, and further progress in technology solutions as we advance our third-party contracts. Finally, turning to our strategic review, strategic review of this complexity, balancing the interests of shareholders, the government of Saskatchewan, employees, and customers requires thorough analysis. As we noted in our earnings release yesterday, the special committee, supported by its independent advisors, is continuing its work, and its timely completion is a priority for both the committee and the board. but we're also committed to getting this right, and the time we're investing reflects the seriousness with which we're treating this process. We recognize that potential outcomes could lead to a significant strategic change for the company, and our priority is ensuring that any outcome maximizes value while protecting the interests of all stakeholders. Whatever the path forward, one thing will not change, a laboring commitment to our customers, our people, and our broader community. IC's business model is inherently resilient, It's built on diversified segments, disciplined financial management, and a track record of over 50 consecutive quarters of profitability. In closing, I want to thank all of our stakeholders for their support and patience as we navigate this pivotal moment in ISE's history. We're dedicated to finding the best possible outcome for everyone involved. With that, I'll now hand the call back over to Jonathan. Thanks, Sean. Victor, we'd now like to begin the question and answer session, please.

Thank you. To ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. One moment for our first question. Our first question will come from the line of Steven Bowen from Raymond James. Your line is open.