Teranet Reports Solid Q2 Results

    51% Growth in Value-Added Services Drives Revenue and EBITDA Increases


    - Distributable Cash(*) of $44.8 million or $0.29 per unit
    - Revenue increases 5.9% to $69.9 million
    - EBITDA(*) up 3.3% to $51.0 million
    - Other value-added services revenue grows 51.2%

    TORONTO, Aug. 8 /CNW/ - Teranet Income Fund (TSX: TF.UN) today announced
its second quarter results for the period ended June 30, 2008.
    "Teranet is successfully diversifying our revenue base, growing other
value-added services by 44% last quarter and 51% this quarter with new
customers and a broader product offering. By delivering on our growth strategy
as well as adding more parcels to our database, we believe we can continue to
successfully offset any decline in real estate purchase and sale activity in
Ontario," said Aris Kaplanis, President and Chief Executive Officer of Teranet
Inc. "The Fund has stable cash flow, strong margins and very well protected
distributions. We have made good progress growing the non-statutory area of
our business. And we are actively pursuing tuck-in acquisitions that offer
good value and expand our opportunities for diversification and growth."
    "We are pleased that we grew revenue and EBITDA in the second quarter.
Distributable Cash year-over-year was affected by the timing of maintenance
capital expenditures, which have been more heavily weighted in the first two
quarters of this year but are still not expected to exceed $5 million for the
full year, as well as lower interest income as we used our cash to create
value through unit repurchases, distribution increases and an acquisition in
the first quarter," said Brian Kyle, Vice President Finance and Chief
Financial Officer.
    Total revenue for the second quarter was $69.9 million, an increase of
5.9% from $66.0 million in the same period in 2007. The growth is mainly
attributable to an increase in other value-added services revenue of
$4.1 million or 51.2% to $12.0 million, which was due primarily to growth in
new products and services and an acquisition. Revenue for the six-month period
increased 6.1% to $126.5 million, again primarily due to growth in other
value-added services.
    Teranet's automated parcel base grew 5.4% over the prior year to
5.29 million properties, representing 95.2% of the estimated provincial parcel
base, up from 5.02 million properties and 92.1% of the provincial parcel base
a year earlier. Registration volumes for the quarter were 505,990, a decrease
of 0.9% from 2007, while search volumes increased by 0.7% to 704,333
transactions. For the six-month period, registration volumes declined by 0.4%
while search volumes increased by 0.2%.
    Total operating expenses before amortization, other income, interest
expense and income taxes for the second quarter of 2008 were $18.9 million, up
13.5% from $16.7 million in the prior year's quarter due to higher
compensation related costs, the additional operational costs from Do Process
Software Ltd. (Do Process) and increased research and development activity.
For the six-month period, total operating expenses increased 6.9% to
$34.8 million for similar reasons.
    EBITDA for the second quarter of 2008 rose 3.3% to $51.0 million,
compared to $49.3 million in the prior year, primarily due to revenue growth
in other value-added services partially offset by higher operational costs.
For the six-month period, EBITDA grew 5.7% to $91.6 million. EBITDA margin
declined to 73% from 75% for the three-month period as a result of the shift
in the sales mix toward lower margin other value-added services revenue.
EBITDA margin for the six months was 72% compared to 73% in the prior year,
again due to the change in sales mix.
    Distributable Cash per unit for the second quarter of 2008 was
essentially flat at $0.29. Distributable Cash for the three-month period was
$44.8 million compared to $45.3 million in the same quarter last year, due
primarily to lower interest income and increased maintenance capital
expenditures as a result of timing. Distributions declared were $30.9 million
or $0.2002 per unit, resulting in a payout ratio of 69% for the quarter. For
the six-month period, Distributable Cash per unit was $0.53 per unit, up from
$0.52. Distributable Cash was $81.6 million compared to $80.4 million in the
2007 year-to-date period. The payout ratio was 75% for the six-month period.
    Total capital expenditures in the second quarter of 2008 were
$10.0 million, compared to $8.1 million in the same quarter last year. Total
capital expenditures in the second quarter of 2008 consisted of deferred ELRS
implementation costs of $9.0 million and maintenance capital expenditures of
$1.0 million. Maintenance capital expenditures in the second quarter increased
by $0.6 million compared to the prior year primarily due to timing of
expenditures, while deferred ELRS implementation costs increased by
$1.3 million primarily as a result of higher compensation and other costs
associated with property activations. For the six-month period, total capital
expenditures were $18.7 million up from $16.2 million.
    Teranet's cash position at June 30, 2008 was $192.1 million, of which
$98.5 million was restricted in nature.

    2008 Outlook

    Teranet's management team is optimistic about opportunities for 2008. As
the exclusive provider of electronic land registrations and searches in
Ontario, the Fund has excellent market stability. The base on which the Fund
earns a substantial portion of its revenue is expected to grow as the Company
continues to automate properties in Ontario, thereby increasing the automated
parcel base. At the same time, the Company expects to benefit from organic
growth in the parcel base.
    Management estimates that approximately 40% of revenue is tied directly
to real estate purchase and sale activity, and aims to reduce that number by
continuing to diversify revenue and grow other value-added services.
    While the activity level of purchases and sales has softened somewhat in
the first half of this year compared to the particularly strong rate of 2007,
it is still expected to be healthy. Despite economic headwinds in Ontario,
there appears to be a solid foundation for the province's housing market.
Management believes the price and sales growth in Ontario's real estate in
past years have been driven by strong market fundamentals, not by the type of
speculation or lending practices that characterized the U.S. situation. The
fundamentals supporting the real estate market in Ontario continue to include:
solid employment rates; historically low interest rates; and net positive
migration. As a result, it is expected that any softening in real estate will
be gradual and Ontario will experience balanced market conditions.
    Teranet continues its efforts to diversify its revenue base through
organic growth and acquisitions. Management believes that continued growth in
the parcel base and Teranet's efforts to offer new products and grow other
value-added services will more than offset the revenue impact of any softening
in the number of transactions directly related to purchase and sale activity.
In addition, management expects Teranet's revenue from regularly occurring
real estate activity not related to purchases and sales - such as
refinancings, maturity discharges, new or additional mortgages without
ownership changes and title changes driven by marriage, death or divorce - to
remain stable.
    With a conservative payout ratio of 75% year-to-date, management is very
confident in the Fund's ability to meet ongoing requirements for working
capital and capital expenditures and to sustain monthly distributions to
Unitholders. It is management's objective to be able to maintain the 2010
level of cash distributions as a taxable entity in 2011, despite losing the
benefit of the tax shield, in order to provide a high-quality, high-yield
investment opportunity for investors.

    Teranet's management's discussion and analysis and interim consolidated
financial statements and accompanying notes are available on the company's web
site at www.teranet.ca or on www.sedar.com.

    Selected Financial Highlights

    (in thousands of dollars except EBITDA margin percentages, per unit
amounts, payout ratio, volume, parcel base and registration activity rate

                                      THREE-MONTH              SIX-MONTH
                                     PERIOD ENDED            PERIOD ENDED
                                        JUNE 30                 JUNE 30
                                      (UNAUDITED)             (UNAUDITED)
                                  2008(1)     2007(1)     2008(1)     2007(1)
    Revenue                      $69,906     $66,015    $126,458    $119,232
    Operating expenses            18,933      16,685      34,818      32,568
    EBITDA                       $50,973     $49,330     $91,640     $86,664
    EBITDA margin %                  73%         75%         72%         73%

    Distributable Cash           $44,810     $45,253     $81,557     $80,360
    Distributable Cash per
     Unit                        $0.2902     $0.2920     $0.5277     $0.5185
    Distributions declared       $30,912     $29,060     $61,055     $58,119
    Distributions declared
     per unit                    $0.2002     $0.1875     $0.3950     $0.3750
    Payout ratio(2)                  69%         64%         75%         72%

    Registration volumes         505,990     510,786     916,461     919,926
    Search volumes               704,333     699,163   1,289,536   1,286,721

    Parcel base at June 30:
    Teranet (Automated)        5,292,988   5,019,889   5,292,988   5,019,889
    Automated %                    95.2%       92.1%       95.2%       92.1%

    Estimated provincial
     Registration Activity
     Rate(3) (Combined
     automated and manual
     Registrations)                0.377       0.404       0.343       0.366
    Teranet Registration
     Activity Rate(3)              0.384       0.410       0.350       0.372

    Conference Call & Webcast Details

    Teranet will hold a conference call and live audio webcast to discuss the
Fund's financial results for the period ended June 30, 2008.

    Date:        August 8, 2008
    Time:        10:00 am (ET)
    Live Call:   416-915-5762 or 1-800-814-4890
    Replay:      416-640-1917 or 1-877-289-8525, passcode 21278341
    Webcast:     Audio available 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 on Friday,
August 15, 2008.

    About Teranet

    Teranet offers e-services to the legal, real estate, government,
financial and healthcare markets. Teranet provides exclusive access to
Ontario's Electronic Land Registration System ("ELRS"), enabling customers to
conduct electronic registrations as well as title and writ searches relating
to real property. Teranet has also leveraged its core competencies to create
electronic service offerings in complementary areas. Teranet's comprehensive
products and services include property information, transaction management,
collateral risk management, geospatial information, workflow software and
enterprise solutions. Teranet Income Fund units are listed on the Toronto
Stock Exchange under the symbol TF.UN. For more information about Teranet,
visit www.teranet.ca.

    (*) Non-GAAP Measures

    This discussion also makes reference to EBITDA and Distributable Cash to
assist in assessing the Fund's financial performance. EBITDA and Distributable
Cash, however, are not recognized earnings measures under generally accepted
accounting principles in Canada (GAAP) and do not have standardized meanings
prescribed by GAAP. Therefore, EBITDA and Distributable Cash may not be
comparable to similar measures presented by other issuers. References to
EBITDA are to earnings from operations before interest, income taxes,
depreciation, amortization and other non-operating income and expenses.
References to Distributable Cash are to cash flow from operating activities
adjusted for items 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 in equal monthly distribution amounts on an ongoing basis, management
believes that 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 7, 2008. 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,
except as required by law. These statements are subject to a number of risks
described in the Risk Factors section of the MD&A, which is available at
www.teranet.ca or www.sedar.com. Risk factors may cause actual results to
differ materially from those contained in forward-looking statements.

    (1) These amounts are derived from the Fund's interim unaudited
    consolidated financial statements dated June 30, 2008 and June 30, 2007.
    (2) The level of distributions paid is reviewed periodically to take into
    account the current and prospective performance of the business and other
    items considered to be prudent.
    (3) Quarterly and year-to-date estimated provincial and Teranet
    registration activity rates are annualized rates.

For further information:

For further information: Tanis Robinson, Manager, Investor Relations,
(416) 643-1096, tanis.robinson@teranet.ca

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