Teranet Reports Record Revenue and Strong Results for the Second Quarter of 2007



    
    QUARTERLY SUMMARY:

    -   Strong Distributable cash of $45.3 million or $0.29 per unit
    -   Payout ratio of 64%
    -   Record revenue of $66.0 million
    -   Adjusted EBITDA(*) of $49.3 million, up 6.0%
    -   Automated parcel base tops 5 million
    -   Other Value-Added services revenue up 6.3%
    

    TORONTO, Aug. 9 /CNW/ - Teranet Income Fund ("Teranet" or the "Fund")
(TSX: TF.UN) today announced its second quarter results for the period ended
June 30, 2007.
    "This quarter's record revenue was driven by growth in our automated
parcel base and favourable adoption rates for our services. We are pleased
that our Other Value-Added services revenue continues to show strong growth,"
said Aris Kaplanis, President and Chief Executive Officer of Teranet Inc. "Our
automation and conversion of Ontario land information continues to proceed
according to schedule, having reached a significant milestone of 5 million
properties online. We are confident that this growing revenue base, in
conjunction with our track record of organic growth and increasing
efficiencies, makes the Fund well-positioned for delivering unitholder value."
    The Fund began operations on June 16, 2006. The results for the quarter
ended June 30, 2007 are compared to the same period for the prior year which
includes the combined operating results of Teranet Inc. from April 1, 2006 to
June 15, 2006 and the results of the Fund from June 16, 2006 to June 30, 2006.
The results for the six months ended June 30, 2007 are compared to the
combined operating results of Teranet Inc. and the Fund for the period January
1 to June 30, 2006. Because this comparative period is prior to the purchase
of Teranet Inc. by the Fund, this information is provided for reference
purposes only and is not intended as a comprehensive comparison of financial
results.
    Total revenue for the quarter ended June 30, 2007 was $66.0 million, up
3.4% compared to $63.8 million for the same period in 2006. The increase is
mainly attributed to increases in registration, search and Teraview
value-added revenue resulting from an increase in the parcel base in the ELRS
and is partially offset by a stabilization in real estate and refinancing
activity as compared to last year's high volumes. Revenue from Other
Value-Added services was $7.9 million, a 6.3% increase over the prior year's
quarter, which included a one-time revenue item of $1.3 million. Excluding
this item, year over year growth in Other Value-Added services was 28.4%,
reflecting continued market adoption of these services. For the six-month
period ended June 30, 2007, total revenue was $119.2 million, up 1.0% compared
to $118.0 million in the six-month period ended June 30, 2006.
    Teranet's automated parcel base grew 6.6% over the prior year to
5.0 million properties. This represents 92.1% of the estimated provincial
parcel base, up from 89.0% a year earlier. Registration volumes for the second
quarter were 510,786, an increase of 2.2% versus the same period in 2006 while
search volumes for the quarter were 699,163, an increase of 5.7% over the same
quarter last year. For the six-month period, registration volumes were
919,926, a decrease of 20,191 transactions versus the same period last year,
which is attributable to a stabilization in real estate and refinancing
activity. Search volumes were 1,286,721, an increase of 3.4% over the same
period last year.
    For the second quarter, total operating expenses before amortization,
other income, interest expense, and income taxes were $16.7 million, a
decrease of 3.5% from $17.3 million in the same quarter last year, primarily
due to cost reduction and cost containment initiatives. For the six-month
period, expenses before amortization, other income, interest expense, and
income taxes decreased 24.4% to $32.6 million from $43.1 million in the same
period last year. In the comparable period of 2006, these expenses included
$3.5 million in transaction costs that were incurred in connection with the
creation of the Fund.
    Excluding these costs, total operating expenses before amortization,
other income, interest expense, and income taxes decreased by $7.0 million
primarily as a result of cost reduction and cost containment initiatives and a
number of other expenditures that occurred in the second quarter of 2006 that
were not second quarter of 2007.
    Adjusted EBITDA(*) for the quarter was $49.3 million, an increase of 6.0%
from $46.5 million in the same quarter last year. The year-over-year increase
is primarily due to higher revenue as well as marginal benefit from lower
expenses incurred in the second quarter of 2007. For the six-month period,
adjusted EBITDA(*) was $86.7 million, an increase of 10.5% from $78.5 million in
the same period last year.
    Distributable Cash for the second quarter was $45.3 million or
$0.2920 per unit and includes proceeds from a holdback from the sale of an
investment in a prior period of $0.24 million or $0.0015 per unit.
Distributions declared were $29.1 million or $0.1875 per unit for a payout
ratio of 64%. For the six-month period, distributable cash was $80.4 million
or $0.5185 per unit and includes proceeds from a holdback from the sale of an
investment in a prior period of $0.52 million or $0.0033 per unit.
Distributions declared were $58.1 million or $0.3750 per unit for a payout
ratio of 72%.
    Teranet continues to make investments in its future. Second quarter
capital expenditures were $8.1 million, consisting of maintenance capital
expenditures of $0.4 million and deferred ELRS implementation costs of
$7.7 million. Second quarter maintenance capital expenditures increased by
$0.2 million, mainly due to the timing of the expenditures. Deferred ELRS
implementation costs for the quarter increased by 3.8% over the prior year,
primarily as a result of higher compensation and related costs. For the
six-month period, total capital expenditures were $16.2 million, consisting of
maintenance capital expenditures of $0.5 million and deferred ELRS
implementation costs of $15.7 million.
    Teranet's cash position as at June 30, 2007 was $213.2 million of which
$98.8 million was restricted in nature.
    On June 12, 2007, new tax legislation was enacted that changes the rules
applicable to publicly traded income trusts in 2011. In 2011, income taxes
payable will reduce net earnings of the Fund. As the new trust tax legislation
has been enacted under Canadian GAAP, the Fund is required to give accounting
recognition to these new rules. As a result on June 12, 2007, the Fund
recognized a non-cash future income tax recovery and corresponding asset,
amounting to $0.805 million. This asset represents the difference between the
accounting values of the assets and liabilities of the Fund and the tax basis
of these same assets and liabilities.

    Outlook

    Management's outlook is positive. Continued strength in key market
fundamentals such as low unemployment rates, low interest rates and net
positive migration form a solid platform upon which the Fund can leverage
Teranet's expertise to build value for unitholders.
    The base on which the Fund earns a substantial portion of its revenue is
expected to grow as Teranet continues to automate Ontario's properties and
increase the automated parcel base. The Fund also expects to benefit from
organic growth in the parcel base and will continue to focus on expanding the
Other Value-Added services business.
    On an annualized basis, management expects to incur maintenance capital
expenditures that will not exceed approximately $4.0 million or $0.0258 per
unit, a decrease from the previous estimate of $5.0 million or $0.0323 per
unit. Management estimates that beyond 2007, annualized maintenance capital
expenditures will not exceed $5.0 million or $0.0323 per unit.
    Management believes that the performance of the Fund is on track to meet
ongoing requirements for working capital and capital expenditures and to
sustain monthly distributions to unitholders.
    Teranet's management's discussion and analysis and consolidated financial
statements and accompanying notes are available on the company's web site at
www.teranet.ca or on www.sedar.com.

    
    Revenue
    (in thousands of dollars except volume and parcel base data)

                      -------------------------------------------------------
                             THREE-MONTH            SIX-MONTH    PERIOD FROM
                             PERIOD ENDED          PERIOD ENDED   JUNE 16 TO
                               JUNE 30               JUNE 30        JUNE 30
                             (UNAUDITED)           (UNAUDITED)    (UNAUDITED)
                      -------------------------------------------------------
                          2007(1)    2006(2)    2007(1)    2006(2)    2006(2)
    -------------------------------------------------------------------------
    Statutory
     registration      $  30,793  $  30,143  $  55,446  $  56,652  $   6,506
    -------------------------------------------------------------------------
    Statutory search       5,814      5,538     10,722     10,410        947
    -------------------------------------------------------------------------
    Statutory writs        8,067      8,111     13,725     14,084      1,722
    -------------------------------------------------------------------------
    Teraview value-
     added services(3)    13,395     12,562     24,560     23,661      2,369
    -------------------------------------------------------------------------
    Other value-added
     services(4)           7,946      7,473     14,779     13,211      1,933
    -------------------------------------------------------------------------
    Total revenue      $  66,015  $  63,827  $ 119,232  $ 118,018  $  13,477
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Volumes:
    -------------------------------------------------------------------------
    Registration
     volumes             510,786    500,022    919,926    940,117    107,613
    -------------------------------------------------------------------------
    Search volumes       699,163    661,490  1,286,721  1,244,315    113,556
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Parcel Base as
     at June 30:            2007       2006       2007       2006       2006
    -------------------------------------------------------------------------
    Teranet
     (Automated)       5,019,889  4,709,774  5,019,889  4,709,774  4,709,774
    -------------------------------------------------------------------------
    Automated %            92.1%      89.0%      92.1%      89.0%      89.0%
    -------------------------------------------------------------------------

    (1) These amounts are derived from the Fund's interim unaudited
        consolidated financial statements dated June 30, 2007.
    (2) These amounts include results from the Company for the seventy-six
        day period ended June 15, 2006 and results from the Fund for the
        fifteen-day period ended June 30, 2006. Results for all periods prior
        to June 16, 2006 are based on results as presented in internally
        prepared financial statements for the Company. The Fund's results for
        the period from June 16, 2006 to June 30, 2006 are included in the
        combined results for the three-month period ended June 30, 2006 and
        for the six-month period ended June 30, 2006.
    (3) Teraview value-added services include ancillary revenue of less
        than 1%.
    (4) Other value-added services include revenue from non-statutory new
        business products and statutory ancillary revenue from on-site
        automated land registry offices.
    

    Conference Call & Webcast

    Teranet will hold a conference call and live audio webcast on Thursday,
August 9, 2007 at 10 a.m. (ET) to discuss the Fund's financial results for the
period ended June 30, 2007. To participate in the teleconference, please dial
416-644-3423 or 1-800-589-8577. To access the live audio webcast, visit
Teranet's web site at www.teranet.ca. The call will be archived on the web
site as a webcast and a podcast. A replay of the conference call will be
available until end of day Thursday, August 16, 2007. To access the replay,
please dial 416-640-1917 or 1-877-289-8525 and enter the passcode
21241029 followed by the number sign.

    About Teranet Income Fund and Teranet

    Teranet Income Fund is an unincorporated, open-ended trust established
under the laws of Ontario by way of a declaration of trust. The Fund was
created to indirectly acquire all of the outstanding shares of Teranet Inc.
The units of the Fund trade on the Toronto Stock Exchange under the symbol
TF.UN.
    Teranet is a leading provider of integrated land-based information
products and services. Teranet operates in Ontario and provides access to the
Ontario Electronic Land Registration System ("ELRS") through its proprietary
Teraview(R) application. This product enables customers to conduct electronic
registrations as well as title and writ searches relating to real property.
Teranet has the exclusive right to access the data in and operate the ELRS and
the Writs of Execution database, and create and market value-added products
and services in connection with the ELRS and writs until March 31, 2017. These
licences extend on a non-exclusive basis in perpetuity for the ELRS and until
2047 for writs. Teranet has leveraged its core capabilities to create
electronic service offerings in complementary information and e-commerce
areas.

    (*) Non-GAAP Measures

    This discussion makes reference to Adjusted EBITDA and Distributable Cash
to assist in assessing the Fund's financial performance. Adjusted EBITDA and
Distributable Cash, however, are not recognized earnings measures under GAAP
and do not have standardized meanings prescribed by GAAP. Therefore, Adjusted
EBITDA and Distributable Cash may not be comparable to similar measures
presented by other issuers. References to Adjusted EBITDA are to earnings
before interest, income taxes, depreciation, amortization, other,
non-controlling interest and certain non-recurring items. References to
Distributable Cash are to Adjusted EBITDA, as adjusted for maintenance capital
expenditures and other adjustments listed in the reconciliation provided in
the Management's Discussion and Analysis of Financial Condition and Results of
Operations. Distributable Cash is not intended to be representative of cash
flow or results of operations determined in accordance with GAAP. As the Fund
intends to pay cash distributions in equal monthly amounts on an ongoing
basis, management believes that Adjusted EBITDA and Distributable Cash are
important measures in evaluating its performance.

    Forward-Looking Statements

    This news release contains statements that, other than statements of
historical fact, may be forward-looking statements about the objectives,
financial condition and results of operations of the Fund. These statements
are forward-looking and reflect management's current views and are based on
certain assumptions and expectations as of August 8, 2007. Actual results
could be materially different from expectations if known or unknown risks
affect the business, or if estimates or assumptions turn out to be inaccurate.
No forward-looking statement is a guarantee of future results. Investors are
cautioned not to place undue reliance on such forward-looking statements.
Forward-looking statements do not take into account the effect that
transactions or non-recurring items announced or occurring after the
statements are made may have on the business. Teranet disclaims any intention
or obligation to update any forward-looking statement even if new information
becomes available, as a result of future events or for any other reason. These
statements are subject to a number of risks described in the Risks and
Uncertainties section of the MD&A, which is available at www.sedar.com. Risks
and Uncertainties may cause actual results to differ materially from those
contained in forward-looking statements.





For further information:

For further information: Bonnie Foster, Vice President Corporate
Communications, (416) 643-1095, bonnie.foster@teranet.ca; 1 Adelaide Street
East, Suite 600, Toronto, Ontario, M5C 2V9, Canada, Phone (416) 360-5263,
www.teranet.ca

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