Annual Report 2017
2017 Highlights
2017 results and progress
2018 guidance
Revenue
$93.6M
compared to $88.4M in 2016
Targeting between
$124.0M and $130.0M
EBITDA Margin
32.1%
compared to 33.4% in 2016
Targeting between
24.0% and 26.0%
CapEx
$2.0M
compared to $6.3M in 2016
Targeting between
$4.0M and $6.0M
ACQUISITIONS
Executed on growth strategy with
three acquisitions to complement
our business.
LEADERSHIP
An expanded leadership team to support
Jeff Stusek, President & CEO of ISC,
in advancing the business and future
growth of the Company.
TECHNOLOGY
Renewed focus on technology solutions
to position us to meet the wide array of
client and customer needs.
Revenue Distribution by Line of Business
for year ended December 31
Land Titles Registry
Geomatics
Land Surveys Directory
Personal Property Registry
Corporate Registry
Services
Other
54.8%
2.4% 1.4% 10.6%
10.8%
15.9%
4.1%
7
1
0
2
6
1
0
2
5
1
0
2
58.0%
2.5% 1.7% 11.3%
10.3%
15.4% 0.9%
67.7%
3.1% 1.9% 12.7%
10.4% 4.0% 0.2%
About Us
ISC (TSX:ISV) is the leading
provider of registry and
information management
services for public data
and records.
Headquartered in Canada, ISC is the leading
provider of registry and information management
services for public data and records. Throughout
our history, we have delivered value to our clients
by providing solutions to manage, secure and
administer information.
Contents
About Us ............................................................ 1
Management’s Discussion and Analysis .............. 9
Letter From Our Chair ......................................... 2
Consolidated Financial Statements .................. 46
Letter From Our CEO .......................................... 3
Board of Directors & ISC Leadership ................. 78
Corporate Social Responsibility ............................ 5
Corporate Information ..................................... 79
1
2017 ISC® Annual Report Letter From Our Chair
Joel Teal
Chair, Board of Directors
We don’t view our
historical performance
as a milestone; we view
it as a benchmark.
Delivering shareholder value – in all its
forms – has always been the primary
focus of your Board of Directors. It is a
guiding principle that shapes our strategic
priorities and decisions. I’m pleased to
report on our progress in creating value
and our plans to continue to build the
Company.
In measuring performance since our Initial
Public Offering (“IPO”) in July 2013, ISC
has a very good story to tell. Our total
shareholder return (including dividend
payments) from our IPO to the end of
2017 was 62 per cent, which is 30 per
cent higher than the performance of the
Toronto Stock Exchange over the same
period. It’s a testament to the vision and
efforts of President and CEO Jeff Stusek
and his leadership group, who work to
ensure our Company is driven to deliver
value for all our stakeholders.
We don’t view our historical performance
as a milestone; we view it as a benchmark.
To further improve performance, we
need to ensure management has the
tools to keep the Company growing,
which fuelled our acquisition decisions
in 2017. We’ll continue to prudently
evaluate opportunities that have accretive
value for our existing operations or
that add strategically to our lines of
business. In each case, we’ll assess
the opportunities through the lens of
delivering long-term value.
We recognize that delivering value has
different definitions and we believe that
proper governance and investing in
our communities are building blocks in
protecting and increasing the value of ISC.
Each year, ISC invests up to 1.5 per cent of
our net income on community programs
and partnerships. This has led to more
than $1.0 million in support between 2013
and 2017 for over 300 organizations in
the places we work and live. We have
also built a strong local supply chain and
have spent more than $103 million with
companies who are our neighbours and
customers, extending the value of ISC to
a broader market.
We will continue to evolve and, as part
of that, our leadership group will evolve
as well. On behalf of our Board, I want
to thank Michelle Ouellette, Q.C., who
has served as a director since July 2013
and will step down at the next annual
general meeting of shareholders. Michelle
has made an invaluable contribution in
establishing the direction and success
of ISC.
Our Governance and Nominating
Committee has identified two new
nominees, Heather Ross and Laurie
Powers, who have agreed to stand for
election to the Board at the annual
general meeting. Both are experienced
leaders in the finance sector and have
the ability to contribute to ISC in years
to come. I encourage you to read their
full biographies in the Management
Information Circular, which is available on
our website at www.company.isc.ca.
I am confident that our activities and
decisions will support the continuing
success of ISC. By maintaining our focus
on delivering value, we will serve the
needs of our shareholders, customers
and communities.
Yours sincerely,
Joel Teal
Chair, Board of Directors
2
2017 ISC® Annual Report Letter From Our CEO
Jeff Stusek
President and Chief Executive Officer
While new services are
exciting, we never lose sight
of the importance of our
core registry business, which
continued to perform well.
ISC’s quest to deliver value is shaped
by two distinct forces: our promise to
provide secure, dependable registry
information services and our need to
continually advance and expand the
services we provide. In 2017, more than
any year in our history, we achieved
success in each area, resulting in
improved financial performance and
new opportunities to create greater
value for our shareholders.
Our long-term, deliberate approach
to assessing opportunities led to the
successful acquisition of Enterprise
Registry Solutions (“ERS”), in January
2017 – an ideal fit that brought
additional leading technology and
talent to ISC. With the addition of ERS’s
RegSys platform, we are able to offer
new solutions to prospective clients
and open doors to new business
opportunities. Moreover, the full staff
of ERS joined our ISC team and added
the most precious resources in our
industry: talent, experience and ideas.
The combination of our two groups was
immediately effective and prepared ISC
to pursue further opportunities.
The strength and adaptability of the
RegSys platform, along with the shared
knowledge of our people, enabled
us to introduce new online registry
services for subject areas as diverse as
intellectual property, securities, charities
and Uniform Commercial Code. As a
result, we entered into new agreements
in early 2018 that will see us deliver
registry services to the Province of Nova
Scotia and the Companies Registration
Office in Ireland. These partnerships
reinforce our long-held belief that ISC
can successfully market and deliver
our products and services everywhere
information matters, and we expect
to see more organic growth over the
course of 2018.
Growth and expansion through
acquisition requires commitment to
a long-term vision. Two years ago, ISC
acquired ESC Corporate Services Ltd. to
introduce new platforms and services.
In 2017, we augmented this area of
our operations by acquiring Alliance
Online Ltd. in July and AVS Systems Inc.
(“AVS”) in December. These activities
have made ISC a competitive player
in providing automation software
technology services to lending, leasing,
and credit issuing businesses and
institutions in Canada. By bringing
together these complementary
businesses, we are expanding our
portfolio of services and finding new
revenue-generating opportunities. We
expect that our Services segment is also
well positioned to see further organic
growth in 2018 and beyond.
While new services are exciting, we
never lose sight of the importance
of our core registry business, which
continued to perform well. We have
a strong and mutually beneficial
relationship with our key client, the
Government of Saskatchewan, that is
built on our ability to deliver secure,
reliable service to end-use customers.
We continually review the requirements
of provincial legislation related to
registry services, with an eye to ensuring
not only compliance, but to discover
new ways to deliver services on behalf
of the Province of Saskatchewan that
are efficient, accessible and cost-
effective.
3
2017 ISC® Annual Report Across our Company, we are driven by
a desire to live up to the expectations
of our stakeholders. We are grateful
for the leadership of a visionary
Board of Directors, the support of
our shareholders and the ongoing
partnerships with our customers. On
behalf of our leadership team and
employees, I want to say thank you for
your confidence in ISC.
Yours sincerely,
Jeff Stusek
President and Chief Executive Officer
2017 ISC® Annual Report
Managing costs is a top-of-mind
concern for our leadership team. In
2017, we faced additional expenses
related to our acquisitions, specifically
with consolidation costs at the
corporate level. To offset these higher
costs, we implemented a number
of changes, including ending certain
contracts with external technology
suppliers and bringing services in-
house at a lower cost. We strive to
balance our cost-conscious approach
with an understanding that we must
be competitive to attract the right
talent at all levels of our organization.
We will continue to monitor our cost
centres and search for efficiencies
without compromising our ability to
deliver secure, reliable services to
our customers.
In addition, we sold our 30 per cent
ownership position in Dye & Durham
Corporation for $25.0 million in October
2017, realizing a $15.4 million accounting
gain before tax. While pleased with
this investment, we believed it was the
right time to divest so we could focus
on other growth objectives, such as
expanding the capability of our Services
segment through the acquisition of AVS.
The combined result of our activities in
2017 was a year-over-year increase in
revenue; earnings before interest, taxes,
depreciation and amortization (EBITDA);
and net income. We achieved an
EBITDA margin of 32.1 per cent, which
was well within our stated objective at
the beginning of 2017.
To prepare the Company for the
pursuit of new growth opportunities,
I introduced organizational changes
that better reflect the pillars for our
future business success. Effective
January 1, 2018, ISC operates along
three distinct lines of business: Registry
Operations, Technology Solutions,
and Services. Each business line has
its own leader and is supported by key
shared functions such as Finance, Legal,
Business Strategy, and People and
Culture. This new structure reflects our
belief in building on our long-standing
success in registry services while adding
technology and talent to address
the evolving needs of our customers. I
encourage you to read more about our
structure and leadership team in the
Management’s Discussion and Analysis
section that follows this letter.
As pleased as we are with the
performance of 2017, we believe it is
only a beginning. We will keep evolving
and will use the lessons learned from
recent acquisitions and partnerships
to further advance the interests of ISC.
I am a firm believer that there are always
areas for improvement, and we will be
relentless in building a service-driven
company that capitalizes on our growing
list of competitive advantages.
4
Corporate Social Responsibility
2017 ISC® Annual Report
For ISC, corporate social responsibility is
about recognizing that we are supported by
the people and places we serve.
We are entrusted with information vital
to a progressive world; whether it be
land titles, business registration or other
public records, we are acutely aware of our
responsibilities to safeguard and efficiently
handle this information, both for today’s
immediate purposes and the demands of the
historical record.
Throughout our history, we have committed
to being a socially responsible corporate
citizen. In this section of the Annual Report,
we outline key elements of our approach to
corporate social responsibility, and the actions
we take to operate as a supportive neighbour
in our communities.
2017 Highlights
$261,570
in community investment
87
community organizations supported
$26,170
employee fundraising for United Way
182
families honoured with an ISC Century
Family Farm Award
5
2017 ISC® Annual Report
Investing in our communities
Community involvement
At its heart, corporate social responsibility is about people. We directly
support our colleagues, friends and neighbours in their efforts to better
our communities.
Each year, we target contributing up to 1.5 per cent of our net income
to supporting non-profit organizations, community initiatives and
charitable causes that make a difference to the people and places we
serve. Our community giving program is focused on preserving cultural
heritage, encouraging economic growth and celebrating life events.
Our people giving back
United Way
Century Family Farm award recipients, the Schulhauser family from Dysart, SK.
Whether it is a community event, a fundraising campaign or other
project, we are proud of our employees and their efforts to give back to
the communities where they live, work and play.
Honouring our roots –
ISC Century Family Farm Awards
One example is the United Way. Employees rally together each year
in support of the United Way’s annual campaign, with the Company
pledging to match every dollar raised. In 2017, employee fundraising
exceeded $26,000 through office events and individual donations.
From the 1870s to the early 1900s, teams of surveyors fanned
out across the plains and parklands to measure and mark the
first subdivisions of land in what would become the province of
Saskatchewan.
Albert Community School (Regina)
Making a difference in the community takes more than dollars; it takes
personal involvement.
A partnership with Regina’s Albert Community School initially provided
funding for technology and grew with ISC employees volunteering their
time for computer training and student reading programs. A favourite
annual holiday event at the school is the Santa Store – students can
choose gifts for their families free of charge, from a selection of donated
items which are wrapped on-site by ISC volunteers.
ISC is the custodian of the original Dominion Land Survey Field Books
compiled by these early surveyors. There are more than 8,000 field
books and 21 index books, together comprising 430,000 pages of
historical information – including handwritten notes and drawings. ISC
makes these and other resources available to anyone researching their
family’s history in the province.
One of the ways ISC celebrates this rich history is with our Century
Family Farm Awards. The awards honour Saskatchewan families who
have followed in the footsteps of their ancestors and farmed the same
land continuously for 100 years or more.
Every year, families from across Saskatchewan join ISC at events held in
Regina and Saskatoon in celebration of their farm’s 100-year milestone
achievement. Since the program was initiated in 2007, almost 4,100
families have received the ISC Century Family Farm Award.
6
2017 ISC® Annual Report
ISC pledged a donation of $250,000 toward connection
of the Trans Canada Trail. Jonathan Hackshaw, ISC
Director of Corporate Communications and Investor
Relations, with Trans Canada Trail Board Co-Chair, Valerie
Pringle (left), and President & CEO, Deborah Apps, at the
Saskatchewan Connection event.
Celebrating Canadian
Heritage – The Great Trail
ISC is a proud contributor to the Trans Canada
Trail. Our $250,000 contribution over 5 years
helped Saskatchewan become the fourth
jurisdiction in Canada to meet its connection
milestone, after the Yukon, Prince Edward
Island and Newfoundland and Labrador.
As one of the keepers of Canada’s historical
heritage, it was appropriate that we help foster
appreciation for our country’s spectacular
natural heritage by investing in infrastructure
that helps people enjoy safe, affordable
outdoor activity. The Great Trail is a great
connector, stretching from prairie to pine,
waterway to greenway. People can experience
rural and city surroundings, ferry crossings and
several of Saskatchewan’s provincial parks.
Jeff Stusek with John Lee, President and CEO, of
Economic Development Regina.
Growing a vibrant
community – Economic
Development Regina
As one of 11 founding partners with Economic
Development Regina (EDR), ISC has invested
in the Regina Advantage campaign –
supporting a vision of Regina prospering as a
vibrant and diversified economy for investors,
a strong destination experience for visitors,
and a community of choice for residents.
Our work is the foundation for both individuals
and corporations to support economic
activity. EDR provides leadership for growth
and diversification through retention and
expansion of existing businesses and
by encouraging investment, industry
development and tourism.
Employees from ISC’s Regina Customer Service Centre
present a donation to the Canadian Red Cross.
Local community support
We believe in offering a helping hand to the
causes that are important to our people.
Annually, our eight Saskatchewan customer
service centres each receive $2,000 to donate
to the local charitable organization(s) of their
choice – from grassroots charities to the local
chapters of national non-profit organizations.
Examples include:
Canadian Mental Health Association
Canadian Red Cross
REACH (Regina Education and Action on
Child Hunger)
Moose Jaw Diversified Services
Swift Current Lyric Theatre
To support our people in their personal efforts
to better our communities, the Company may
match up to $1,000 per employee, per year,
toward their individual charitable contributions
or fundraising efforts. We also encourage our
people to be active in their community with
one paid day per year for volunteering.
7
2017 ISC® Annual Report
Community involvement
The Saskatchewan Young Professionals and Entrepreneurs
recognized ISC for its support of business programming for
youth in the community.
ISC employees and their families were invited to an
exclusive preview of Disney’s the Little Mermaid at
Globe Theatre in Regina as part of the Company’s
production sponsorship.
ISC proudly supported UnderstandUs to help the
organization’s objective to create awareness, suspend
judgment, and improve the understanding of mental
health in its entirety.
Entrepreneurs and
business growth
Business registration and associated services
are often the first steps entrepreneurs take
when getting their ventures off the ground.
ISC provides these services as part of our
core registry business in Saskatchewan. We
also support the vision and energy of our
entrepreneurs by sponsoring programs for
professional growth and events that recognize
their accomplishments. Examples include:
First Nations University of Canada –
Aboriginal Youth Entrepreneurship Camp
Enactus Regina/Prince’s Operation
Entrepreneur – Entrepreneurial Boot Camp
Women Entrepreneurs of Saskatchewan –
Innovation Through Technology Conference
Square One/Saskatoon Regional Economic
Development Authority
Saskatchewan Young Professionals and
Entrepreneurs
8
Art, education and sport
Health and home
ISC contributes to our communities’ capacity
to foster healthy people by supporting
organizations that provide important
services for the most vulnerable among us.
Examples include:
Kinsmen Telemiracle
UnderstandUs
Habitat for Humanity
Family Service Regina
STARS Air Ambulance
Healthy communities are ones where
education is honoured, artists are held in high
esteem, and physical activity is a priority. ISC
supports our artists, educators, students
and athletes. We recognize how they foster
knowledge and expertise, create works that
engage and enrich our experience, and deliver
performances that inspire us. Examples of
organizations and events supported include:
Globe Theatre
MacKenzie Art Gallery
File Hills Qu’Appelle Tribal Council –
Saskatchewan First Nations Summer Games
University of Saskatchewan – RCC Cuming
Prize in Commercial Law
Hill Business School – JDC West
The Way Forward
As our aspirations take ISC beyond our home province’s borders, we carry our Saskatchewan
roots with us – never forgetting where we came from. We know our success depends on how
well we support each other, both collectively and personally.
Management’s Discussion and Analysis
For the Fourth Quarter and Year Ended December 31, 2017
Table of Contents
Introduction
1
2
3
4
5
6
7
8
9
Responsibility for Disclosure
Caution Regarding Forward-Looking Information
Consolidated Highlights
Business Overview
Business Strategy
Results of Operations
Summary of Consolidated Quarterly Results
Financial Measures and Key Performance Indicators
10 Outlook
11
12
13
Liquidity and Capital Resources
Share-Based Compensation Plan
Commitments
14 Off-Balance Sheet Arrangements
15
16
17
18
19
20
21
22
Related Party Transactions
Critical Accounting Estimates
Changes in Accounting Policies
Financial Instruments and Financial Risks
Business Risks and Risk Management
Internal Controls over Financial Reporting
Disclosure Controls and Procedures
Non-IFRS Financial Measures
10
10
10
11
14
18
19
34
35
36
36
39
39
39
39
40
40
41
42
44
44
45
9
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017 1 Introduction
This Management’s Discussion and Analysis (“MD&A”) for
Information Services Corporation (“ISC”) discusses our financial
and operating performance, business indicators and outlook
from management’s viewpoint.
This document should be read in its entirety and is intended
to complement and supplement ISC’s Consolidated Financial
Statements for the years ended December 31, 2017, and 2016.
Additional information, including our Annual Information
Form for the year ended December 31, 2017, is available on
the Company’s website at www.company.isc.ca and in the
Company’s profile on SEDAR at www.sedar.com.
This MD&A contains information from our audited Consolidated
Financial Statements (the “Financial Statements”) for the
years ended December 31, 2017, 2016, and 2015, prepared in
accordance with International Financial Reporting Standards
(“IFRS”), as issued by the International Accounting Standards
(“IAS”) Board. The financial information that appears throughout
our MD&A is consistent with the Financial Statements.
Unless otherwise noted, or unless the context indicates
otherwise, “ISC”, the “Company”, “we”, “us” and “our” refer
to Information Services Corporation, its subsidiaries and its
predecessors. Any statements in this MD&A made by, or on
behalf of, management are made in such persons’ capacities as
officers of ISC and not in their personal capacities.
ISC presents its Financial Statements in Canadian dollars (“CAD”).
In this MD&A, all references to “$” or “dollars” are to Canadian
dollars and amounts are stated in Canadian dollars unless
otherwise indicated.
This MD&A contains forward-looking statements and should
be read in conjunction with the “Caution Regarding Forward-
Looking Information” section below.
This MD&A is current as of March 13, 2018.
2 Responsibility for Disclosure
The Board of Directors (“Board”) of ISC is responsible for review
and approval of this disclosure.
The Audit Committee (“Audit Committee”) of the Board, which
is comprised exclusively of independent directors, reviews
and approves the fiscal year-end MD&A and recommends it
to the Board for approval. Interim MD&As are reviewed and
approved by the Audit Committee. Other key responsibilities
of the Audit Committee include reviewing our existing internal
control procedures and planned revisions to those procedures
and advising the directors on auditing matters and financial
reporting issues.
3 Caution Regarding Forward-
Looking Information
Certain statements in this MD&A and certain information
incorporated by reference herein contain forward-looking
information within the meaning of applicable Canadian
securities legislation. The purpose of the forward-looking
information is to provide a description of management’s
expectations regarding future events or developments and
may not be appropriate for other purposes.
Forward-looking information which may be found in this MD&A
includes, without limitation, those contained in the “Outlook”
section hereof, and management’s expectations, intentions
and beliefs concerning the industries in which we operate,
business strategy and strategic direction, growth opportunities,
integration, contingent consideration, development and
completion of projects, the competitive landscape, seasonality,
our future financial position and results, capital and operating
expectations, projected costs, the impact of certain payments
to the Government of Saskatchewan, access to financing,
debt levels, free cash flow, expectations for meeting future
cash requirements, the economy and the real estate market,
reporting currency and currency fluctuations, dividend
expectations, and other plans and objectives of or involving
ISC. The words “may”, “will”, “would”, “should”, “could”, “expect”,
“plan”, “intend”, “trend”, “indicate”, “anticipate”, “believe”,
“estimate”, “predict”, “project”, “targets”, “strive”, “strategy”,
“continue”, “likely”, “potential” or the negative or other variations
of these words or other comparable words or phrases are
intended to identify forward-looking information.
Forward-looking information is based on estimates and
assumptions made by us in light of ISC’s experience and
perception of historical trends, current conditions and expected
future developments, as well as other factors that ISC believes
are appropriate and reasonable in the circumstances. There can
be no assurance that such estimates and assumptions will prove
to be correct. Certain assumptions with respect to our ability to
implement our business strategy, compete for business (other
than our exclusive service offerings to the Government of
Saskatchewan), market our technology assets and capabilities,
as well as business and economic conditions, availability
of financing, the value of the Canadian dollar, consumer
confidence, interest rates, level of unemployment, inflation, the
real estate market in Saskatchewan, liabilities, income taxes, our
ability to attract and retain skilled staff, the extent of any labour,
equipment or other disruptions, goodwill and intangibles are
material factors in preparing forward-looking information.
Forward-looking information involves known and unknown
risks, uncertainties and other factors that may cause actual
results or events to differ materially from those expressed
10
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017 or implied by such forward-looking information. Factors that
could cause our actual results or events to differ materially
from those expressed or implied by such forward-looking
information, include, without limitation, the following:
changes to or loss of the MSA (as that term is defined
herein) and potential disagreements with the Government
of Saskatchewan; limitations on our ability to increase fees
under the MSA; reliance on key customers and licences;
dependence on key projects and clients, securing new business
and fixed-price contracts; changes in economic, market and
other conditions; reliance on information technology systems;
ability to realize growth opportunities, including the ability
to complete and integrate new acquisitions and to secure
contracts to provide new service offerings; ability to manage
our foreign operations; competition for service offerings (other
than our exclusive service offerings to the Government of
Saskatchewan); undisclosed liabilities acquired pursuant to
past or future acquisitions; ability to attract and retain qualified
personnel; ability to obtain future financing; failure to protect
our intellectual property rights; legislative changes; changes
in anticipated tax liabilities; risk of litigation; adequacy of our
insurance coverage; reliance on third-party suppliers or other
contractors; adverse changes in labour relations; liability to the
Government of Saskatchewan; any compromise to the integrity
or security of our information assets; any failure in our financial
reporting safeguards or internal controls; ownership restrictions
and director appointment rights and restrictions under The
Information Services Corporation Act (Saskatchewan); and
our ability to continue to pay dividends. You should consider
these factors carefully. We caution that the foregoing list is
not exhaustive. Other events or circumstances could cause
actual results to differ materially from those estimated or
projected and expressed in, or implied by, this forward-looking
information. See “Business Risks and Risk Management”.
Furthermore, unless otherwise stated, the forward-looking
information contained in this MD&A is made as of the date of
this MD&A. We have no intention and undertake no obligation
to update or revise any forward-looking information, whether as
a result of new information, future events or otherwise, except
as required by law. The forward-looking information contained
in this MD&A is expressly qualified by this cautionary statement.
You should not place undue reliance on forward-looking
information contained herein.
4 Consolidated Highlights
4.1 Fourth Quarter Consolidated Highlights
• Revenue was $23.6 million for the three months ended
December 31, 2017, an increase of $2.4 million compared to
$21.2 million for the three months ended December 31, 2016.
• EBITDA (earnings before interest, taxes, depreciation and
amortization expense) for the fourth quarter of 2017 was
$7.8 million compared to $6.8 million in the same quarter last
year, an increase of $1.0 million.
• The EBITDA margin for the fourth quarter of 2017 was
33.2 per cent compared to 32.2 per cent in the same quarter
in 2016.
• Adjusted EBITDA was $9.0 million for the fourth quarter
compared to $7.3 million in the same quarter last year, with
an adjusted EBITDA margin of 38.0 per cent for the quarter
compared to 34.6 per cent in the fourth quarter of 2016.
EBITDA was adjusted for stock-based compensation expense
or income, stock option expense, transactional gains and
losses on assets, and acquisition and integration costs.
• Net income for the three months ended December 31, 2017,
was $18.8 million or $1.07 per basic and diluted share. In
the fourth quarter of 2016, net income was $2.9 million or
$0.17 per basic and diluted share. The increase in net income
and earnings per share was largely due to the impact of
the $15.4 million accounting gain before tax on the sale
of our 30.1 per cent ownership interest in Dye & Durham
Corporation (“Dye & Durham” or “D&D”) for $25.0 million
in cash on October 5, 2017. Without the impact of the gain,
net income would have been $5.4 million or $0.31 per basic
and diluted share. Also contributing to the increase in net
income and earnings per share was the impact of a one per
cent increase in substantively enacted future corporate tax
rates by the Saskatchewan government in December 2017.
This resulted in a reduction in deferred income tax expense
in the current period of $1.4 million, an increase of $0.08
per basic and diluted share. This tax increase reversed a
previously announced reduction which impacted our third
quarter of 2017.
• On December 21, 2017, the Company through its wholly
owned subsidiary ESC Corporate Services Ltd. (“ESC”),
acquired all of the issued and outstanding shares of AVS
Systems Inc. (“AVS”). AVS provides automation software
technology services to serve lending, leasing, and credit
issuing businesses and institutions in Canada. The Company
paid $25.0 million in cash on closing. The Company may pay
up to $20.0 million in additional consideration contingent on
the realization of future business with financial institutions
and auto and equipment finance companies across Canada
over a period of 13 months ending January 31, 2019.
• On November 7, 2017, our Board declared a quarterly
cash dividend of $0.20 per Class A Share, paid on or
before January 15, 2018, to shareholders of record as of
December 31, 2017.
11
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017 4.2 Year-End Consolidated Highlights
4.3 Subsequent Events
• Revenue was $93.6 million for the year ended December 31,
2017, an increase of 5.9 per cent compared to $88.4 million
for the year ended December 31, 2016.
• On March 13, 2018, our Board declared a quarterly cash
dividend of $0.20 per Class A Share, payable on or before
April 15, 2018, to shareholders of record as of March 31, 2018.
• EBITDA for the year ended December 31, 2017, was
$30.0 million compared to $29.5 million in the same period
last year.
Consolidated Revenue
for the year ended December 31,
(CAD$ millions)
• Our EBITDA margin for the year ended December 31, 2017,
100.0
was 32.1 per cent compared to 33.4 per cent in 2016.
• Adjusted EBITDA was $33.4 million for the year ended
December 31, 2017, compared to $33.5 million in the same
period last year, with ISC generating an adjusted EBITDA
margin of 35.7 per cent for the period compared to 37.9 per
cent in the year ended December 31, 2016. EBITDA was
adjusted for stock-based compensation expense or income,
stock option expense, transactional gains and losses on
assets, and acquisition and integration costs.
• Net income for the year ended December 31, 2017, was
$27.8 million or $1.59 per basic and $1.58 per diluted share.
For 2016, net income was $15.5 million or $0.89 per basic
and $0.88 per diluted share. The increase in net income
and earnings per share was mainly due to the impact of the
$15.4 million accounting gain before tax on the sale of our
30.1 per cent ownership interest in D&D on October 5, 2017.
Without this gain, net income would have been $14.4 million
or $0.82 per basic and diluted share.
• On January 23, 2017, we acquired all issued and outstanding
common shares of Enterprise Registry Solutions Ltd. (“ERS“),
a global leader in the development and implementation of
registry technology. The Company completed the transaction
with $14.3 million of the purchase price paid on closing of the
transaction and up to €5.0 million in additional consideration
contingent on the retention of existing leadership and
realization of future business. The purchase price was financed
through a combination of cash and $10.0 million of debt.
•
In March 2017, we contributed additional capital of
$2.5 million, representing slightly more than our pro rata share
of an equity raise by Dye & Durham, raising our ownership
interest to 30.1 per cent. These funds were used to finance
certain growth activities of Dye & Durham. On October 5,
2017, we sold our interest in Dye & Durham.
• On June 1, 2017, through our wholly owned subsidiary,
ESC Corporate Services Ltd. (“ESC”), we acquired all issued
and outstanding common shares of Alliance Online Ltd.
(“Alliance”), a personal property, corporate and land registry
search and submission provider located in Mississauga, ON,
for a purchase price of $1.0 million plus working capital of
$0.1 million.
90.0
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
25.0
20.0
15.0
10.0
5.0
0.0
12
.
3
8
7
2015
.
4
8
8
2016
.
6
3
9
2017
Consolidated EBITDA1 and Adjusted Consolidated EBITDA1
for the year ended December 31,
(CAD$ millions)
EBITDA
Adjusted EBITDA
38.8%
36.2%
33.4%
37.9%
35.7%
32.1%
.
4
8
2
.
4
0
3
.
5
9
2
.
5
3
3
.
0
0
3
.
4
3
3
2015
2016
2017
1 EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin are not
recognized as measures under IFRS and do not have a standardized meaning
prescribed by IFRS and, therefore, they may not be comparable to similar measures
by other corporations. Refer to section 22 “Non-IFRS Financial Measures”.
Percentages expressed represent the EBITDA and adjusted EBITDA margin
percentages, respectively.
Consolidated Free Cash Flow 1
for the year ended December 31,
(CAD$ millions)
.
4
2
2
2015
.
0
0
2
2016
.
9
2
2
2017
1 ISC has changed the recognition of current income taxes within the definition of free
cash flow to match the balance recognized on the statement of comprehensive
income. Comparative figures for 2015 and 2016 have been updated accordingly. Free
cash flow is not recognized as a measure under IFRS and does not have a standardized
meaning prescribed by IFRS and, therefore, may not be comparable to similar
measures by other corporations. Refer to section 22 “Non-IFRS Financial Measures.”
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017
4.4 Select Consolidated Financial Information
The select annual financial information set out for the years ended December 31, 2017, 2016, and 2015, is derived from ISC’s
Consolidated Financial Statements and has been prepared on a consistent basis. In the opinion of the Company’s management, such
financial data reflects all adjustments necessary for a fair presentation of the results for those periods. It should be noted that (i) the
2017 and 2016 results each include a full financial year for ESC, which was acquired on October 1, 2015, as compared to 2015, which
only included ESC’s results for the fourth quarter and (ii) the 2017 results include ERS starting January 23, 2017, and AVS starting
December 21, 2017. In addition, the 2017 results exclude the Company’s share of profit in Dye & Durham in the fourth quarter of 2017
as the shares were sold on October 5, 2017 and instead include the gain on the sale of the shares.
(thousands of CAD dollars)
Revenue
Net income
EBITDA 1
Adjusted EBITDA 1
EBITDA margin (% of revenue) 1
Adjusted EBITDA margin (% of revenue) 1
Free cash flow 2
Dividend declared per share
Earnings per share, basic 3
Earnings per share, diluted 3
Total assets
Total non-current liabilities
2017
$ 93,592
27,789
$ 30,015
33,403
32.1%
35.7%
$ 22,918
0.80
$
1.59
1.58
2017
$ 171,825
$ 45,202
Year Ended December 31,
2015
2016
$ 88,375
15,503
$ 29,529
33,454
33.4%
37.9%
19,993
0.80
0.89
0.88
$
$
$
78,318
15,917
$ 28,364
30,386
36.2%
38.8%
$ 22,403
0.80
$
0.91
0.90
As at December 31,
2015
2016
$
$
131,321
25,637
$
$
136,277
27,345
1 EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin and free cash flow are not recognized as measures under IFRS and do not have a standardized meaning
prescribed by IFRS and, therefore, they may not be comparable to similar measures reported by other corporations. Refer to section 22 “Non-IFRS Financial Measures”. The 2017
EBITDA figure does not include the gain from our sale of ownership in D&D.
2 ISC has changed the recognition of current income taxes within the definition of free cash flow to equal the balance recognized on the statement of comprehensive income.
Comparative figures for 2015 and 2016 have been updated accordingly.
3 The calculation of earnings per share was based on net income after tax and the weighted average number of shares outstanding during the period.
4.5 Significant Acquisitions
During the year, the Company completed the acquisition
of three entities: ERS, Alliance and AVS. Details around our
significant acquisitions are below. Refer to Note 23 of our
financial statements for more information pertaining to
our acquisitions.
ERS
On January 23, 2017, the Company acquired all of the issued
and outstanding common shares of ERS. The Company
completed the transaction with $14.3 million (€10.0 million) of
the purchase price paid on closing of the transaction, subject
to working capital adjustments. The transaction was financed
through a combination of cash and $10.0 million of debt from
our existing credit facilities, pursuant to the September 28,
2015, amended and restated Credit Facilities. As part of the
transaction, the Company agreed to pay up to €5.0 million
in consideration contingent upon the retention of existing
leadership and the award and realization of future business over
a 30-month period. For accounting purposes, the retention
portion of the contingent consideration is classified as post-
acquisition remuneration and is not included as part of the
related acquisition consideration. The portion of the contingent
consideration related to the award and realization of future
business will be recorded in the period incurred, if the realization
occurs within the 30-month period.
ERS, which is headquartered in Dublin, Ireland, is a provider
of registry technology solutions and expertise, specializing
in the implementation and support of systems related to
the corporate registry domain. Its registry solutions support
registries in Europe, North America and Asia. The acquisition
of ERS strengthens the Company’s ability to compete more
effectively for new registry business by having an additional
registry technology solution in its offering.
13
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017
AVS
On December 21, 2017, the Company, through its wholly owned
subsidiary ESC, acquired all of the issued and outstanding
common shares of AVS. The Company completed the
transaction with $25.0 million of the purchase price paid in
cash on closing of the transaction, subject to working capital
adjustments. As part of the transaction, the Company agreed to
pay up to $20.0 million in additional consideration contingent on
the realization of future business with financial institutions and
auto and equipment finance companies across Canada, over a
period of 13 months ending January 31, 2019. Management’s fair
value estimate for the contingent consideration is $14.8 million
at December 31, 2017 and is recorded in other long-term
liabilities. A Business Acquisition Report was filed on SEDAR in
relation to the AVS acquisition on March 5, 2018.
AVS, which is based in Vernon, BC, provides automation
software technology services to serve lending, leasing, and
credit issuing businesses and institutions in Canada. The
acquisition of AVS positions the Company’s Services segment
to support the growing needs of financial institutions and legal
firms to outsource key business processes associated with
credit due diligence, protection and default solutions while
they focus on their core businesses and allows the Company to
capitalize on new avenues for growth in our Services segment.
5 Business Overview
Headquartered in Canada, ISC is the leading provider of registry
and information management services for public data and
records. Throughout our history, we have delivered value to
our clients by providing solutions to manage, secure and
administer information.
We continue to examine and pursue growth initiatives in
Canada and internationally, including other potential strategic
acquisitions and opportunities to provide registry and other
services in additional jurisdictions.
5.1 Segment Information
Operating segments are identified as components of a company
where separate discrete financial information is available for
evaluation by the chief operating decision maker regarding
allocation of resources and assessment of performance.
ISC operates two reportable segments, defined by their primary
type of service offerings, namely Registries and Services. The
Registries segment includes the provision of registry services
with our core business commitment to the Government of
Saskatchewan outlined in a 20-year Master Service Agreement
(“MSA”). Our Services segment contains the product and
services we provide to legal and financial institutions through
ESC. The balance of our corporate activities and shared services
functions, including the services and products provided by ERS,
are reported as Corporate.
As further outlined in section 6 “Business Strategy”, with the
acquisitions in 2017 and additions to our management team,
beginning in 2018, the Company will organize into three
segments – Registry Operations, Technology Solutions and
Services. Commencing in the first quarter of 2018, we will
present our results under these three segments.
5.2 Registries Segment
Our Registries segment involves the provision of registry and
information services and software solutions to governments
and private sector organizations. We work with our clients to
support their policies and execute procedures to ensure the
integrity of the data, and manage the information technology,
data management and authentication processes.
Currently, ISC provides registry and information services to
the Province of Saskatchewan under a 20-year MSA and is the
exclusive full-service solution provider of the Saskatchewan
Land Registry, the Saskatchewan Personal Property Registry,
the Saskatchewan Corporate Registry, the Common
Business Identifier Program and the Business Registration
Saskatchewan Program in Saskatchewan (collectively, the
“Saskatchewan Registries”).
For all services in this segment, competitors include
infrastructure funds and private equity firms as well as
information services companies, registry software providers
and other such information-based companies that develop
and provide software platforms to manage registry and related
information services. These types of companies may compete
with ISC by acting as, or partnering with, businesses that can
provide other required processes, such as customer service
and delivery, in conjunction with software platforms to provide
full-service solutions.
Saskatchewan Land Registry
The Saskatchewan Land Registry (“Land Registry”) includes
the Saskatchewan Land Titles Registry (“Land Titles Registry”),
Saskatchewan Land Surveys Directory (“Land Surveys”) and
Saskatchewan Geomatics services (“Geomatics”).
Saskatchewan Land Titles Registry
The Land Titles Registry issues titles to land and registers
transactions affecting titles, including changes of ownership
and the registration of interests in land, in the Province of
Saskatchewan. The Land Titles Registry provides access to
timely and reliable land ownership information to support new
and used home sales, land and home development transfers
14
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017 and other value-added transactions. Its primary users
include law firms, financial institutions, developers and
resource companies.
Because the Land Titles Registry revenue is comprised of
both residential and non-residential activity, mortgage rates
and business lending rates may affect revenue. Changes in
land values, provincial population and mortgage qualifying
requirements also affect the housing market which, in turn,
influences changes of ownership and revenue.
Revenue for the Land Titles Registry is earned through
registration, search and maintenance fees. Registration fees
are either a flat fee or value-based, calculated as a percentage
of the value of the land and/or property being registered.
We typically charge a flat fee per transaction for search and
maintenance transactions. However, in certain instances,
we may charge a negotiated fee for a customized search or
maintenance transaction such as certain mineral certification
or bulk data requests.
Approximately 79.9 per cent of all Land Titles Registry
registration transactions were submitted online in 2017.
Saskatchewan Land Surveys and Geomatics
Land Surveys registers land survey plans and creates
a representation of Saskatchewan land parcels in the
cadastral parcel mapping system. Land survey plans define
the geographic boundaries of land parcels throughout
Saskatchewan, while the cadastral parcel mapping system
depicts the land survey system with surface and mineral
ownership parcel boundaries.
Our customers include surveyors, developers, resource
companies and other businesses that require our mapping
systems and survey plans to support their development plans.
Land Surveys services include registrations, searches and
related survey services. Revenue related to all services is earned
as a flat fee per transaction.
Geomatics manages geographic data related to the cadastral
parcel mapping system, which is integrated with the Land Titles
Registry and Land Surveys. Geomatics data is searchable by
the public and provides the cadastral and derived data used
to produce the Saskatchewan provincial base map for land-
related activities within the province. The services provided
vary considerably.
Geomatics customers include government departments
(provincial and municipal), resource companies, land developers,
utility, pipeline and transportation companies, and the public.
Unlike the other services offered within the Land Registry,
Geomatics generates revenue mainly through value-added
services. Fees for Geomatics services are typically negotiated
per transaction based on the type and nature of services
required. For example, ISC receives a service fee from the
Saskatchewan Ministry of Government Relations for hosting
the Saskatchewan Civic Address Registry, a province-wide civic
address registry and an online maintenance system but does not
receive transaction-based fees related to the use of the portal.
We also provide Geomatics services for land-related data
and applications. For example, ISC developed the Mineral
Administration Registry Saskatchewan (“MARS”) for the
Saskatchewan Ministry of the Economy, which provides an
online system for issuing and administering Crown land mineral
dispositions throughout Saskatchewan and eliminates the need
to physically stake Crown mineral claims. We have been hosting
and supporting MARS since 2015 in exchange for a service fee.
Saskatchewan Personal Property Registry
The Saskatchewan Personal Property Registry (“Personal
Property Registry”) is a notice-based public registry in which
security interests and other certain interests in personal
property (property other than land, buildings and other property
affixed to land) may be registered. The Personal Property
Registry enables lenders as well as buyers of personal property,
such as motor vehicles, to search for information such as
security interests registered against an individual, business
or personal property used as collateral. Buyers and lenders
search the Personal Property Registry to verify there are no
outstanding notices of third-party interests in personal property.
General provincial economic drivers, including automotive
sales, interest rates and the strength of commercial activity
across the province, influence the revenue in the Personal
Property Registry.
Our customers include third-party providers to the financial
industry, financial institutions, insurance companies, law firms,
equipment and auto dealers, and auctioneers.
Customers are charged flat fees per transaction and the
automated web-based system enables real-time completion of
search and registration services as well as minimizes operational
effort to deliver services.
Customers complete 99.6 per cent of searches in the registry
online. The high online usage is stable with minimal numbers
of end-use consumers needing staff assistance to complete
their transactions.
Saskatchewan Corporate Registry
The Saskatchewan Corporate Registry (“Corporate Registry”) is
a province-wide system for registering business corporations,
non-profit corporations, co-operatives, sole proprietorships,
partnerships and business names. Every corporation must be
registered in the Corporate Registry to maintain its legal status
15
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017 and carry on business within Saskatchewan. Records on all
Saskatchewan businesses are maintained and made available
to the public through the Corporate Registry.
Our customers include law firms, financial institutions,
accountants, non-profit and co-operative associations,
and entrepreneurs.
Services are billed as flat fees for each transaction. Unlike our
other registries, the Company earns most of its fees in the
Corporate Registry in relation to maintenance services provided
to business entities that file annual returns or wish to make
changes to their structure or profile.
On July 11, 2016, ISC launched a new technology system for the
Corporate Registry, updating the registry’s technology platform
and providing customers a more convenient service to search,
register and maintain corporate entities in Saskatchewan. The
RegSys platform, a system we sell through ERS, has many
benefits, including online submission of all filings and immediate
registration for most transactions. The online application also
offers access to digitally verified registry documents and options
for customers to self-manage staff access. Approximately
86.4 per cent of all registrations in the Corporate Registry were
submitted online in 2017. A number of permanent changes
to the services and fee structure were implemented with the
launch of the system.
Common Business Identifier Program and
Business Registration Saskatchewan Program
The Common Business Identifier Act (Saskatchewan) provides
the framework and authority for Saskatchewan to expand the
use of the Canada Revenue Agency Business Number as the
common business identifier for business entities that interact
with participating public-sector programs in Saskatchewan.
Business Registration Saskatchewan provides a single online
point of access that enables new businesses to integrate with
other government agencies and complete the initial steps to
register in the Corporate Registry, register as an employer with
Saskatchewan Workers’ Compensation Board and register for
Provincial Sales Tax with the Saskatchewan Ministry of Finance.
ISC earns an annual operating fee under the Programs
Operating Agreement for the Common Business Identifier and
Business Registration Saskatchewan Programs, entered into
under the amendment to the MSA announced on March 7,
2016. The operating fee is subject to an annual Consumer Price
Index adjustment calculated in accordance with the MSA. We
do not currently charge any additional fees for business owners
who register through Business Registration Saskatchewan.
Saskatchewan Asbestos Registry
On November 7, 2013, Saskatchewan proclaimed legislation
requiring mandatory reporting of public buildings known to
contain asbestos. The Saskatchewan Asbestos Registry of
Public Buildings was created to share information about public
buildings containing asbestos.
In 2015, we completed the development and implementation
of the Saskatchewan Asbestos Registry, which was launched
on May 4, 2015, and entered into an agreement with the
Saskatchewan Ministry of Labour Relations and Workplace
Safety to host and support the Asbestos Registry. ISC receives
a monthly service fee for hosting and managing this registry.
5.3 Services Segment
Our Services segment provides products and services through
ESC. ESC delivers industry-leading solutions uniting public
record data, customer authentication, corporate legal services
and collateral management to support optimal lending practices
through innovation, technology and deep domain expertise.
The business has offices in Toronto, ON, Montreal, QC and
Vernon, BC.
In June 2017, ESC acquired Alliance, a personal property,
corporate, and land registry search and submission provider.
In December 2017, ESC acquired AVS, based in Vernon, BC.
AVS provides automation software technology services to
serve lending, leasing, and credit issuing businesses and
institutions in Canada. With the addition of AVS, our Services
segment is now positioned to serve the full credit-lending
cycle and deliver proven credit due diligence, protection and
default solutions to the Canadian financing industry. Both
Alliance and AVS were amalgamated with ESC upon closing
of the respective transactions.
Through these acquisitions, our Services segment has expanded
its customer base and strategic partnerships with large financial
institutions and auto and equipment finance companies across
Canada to broaden its existing market share in the competitive
collateral management business. We now distinguish ourselves
from our competitors through a robust technology platform
that provides a fully automated workflow for our clients.
Revenue derived from our Services segment is linked to clients
and the business they undertake across Canada. Economic
activity can affect credit lending, mergers, acquisitions,
incorporations and various new business startup activities,
which drives activity for our Services segment. Other key drivers
for this segment include increased regulatory and compliance
requirements for financial institutions as well as the growing
trend to outsource business processes and services to realize
cost savings and focus on their core businesses without
compromising service quality.
16
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017 We report revenue from our Services segment’s products and
services in three distinct categories: search and registration
services (which now also includes services provided by AVS),
Know-Your-Customer (“KYC”) services and corporate supplies.
Services provided have two revenue components: transactional
fees and per unit charges. We earn revenue through transaction
fees for all search and registration products as well as KYC
services. All government fees associated with the service are
either embedded in the search fee or charged in addition to the
service transaction fee. Corporate supplies are charged a per
unit fee in the same manner as a product in a retail transaction.
We do not earn any subscription-based fees relating to any of
our Services segment products.
With the addition of AVS in our Services segment, in 2018 we
will simplify the way in which we report revenue for our Services
segment. This will allow us to better reflect the business by
the industries and customers we serve. The three categories
of search and registration, KYC and corporate supplies will be
consolidated to two categories, namely Legal Support Services
and Financial Support Services. Legal Support Services revenue
will consist of revenue from the corporate supplies business as
well as search and registration services provided to our legal
customers. Financial Support Services will consist of search
and registration, KYC and other services ESC provides to
non-legal customers, such as financial institutions and auto
finance companies.
Our competitors in the Services segment vary by market and
geography. Competitors primarily include other intermediaries
and suppliers to legal professionals and financial institutions,
offering national ordering and fulfilment platforms. Our search
and registration services for professional firms compete with
similar service companies, providing additional value through
convenience and intermediation of various public registries.
In Ontario, the Ontario Business Information System (“ONBIS”)
licence holders make up most of the competition alongside
a few smaller vendors. In Quebec, the competition includes
similar service providers active in that market exclusively.
In the financial services marketplace, we compete against a
small number of distinctly different service providers, all of
whom offer additional services beyond our KYC programs. For
corporate supplies, we have a small number of competitors
supplying the legal market with customized products, while the
consumer market is typically serviced by big box office supply
retailers. We also service the consumer market through direct
supply relationships with office products providers.
Our Services segment is sufficiently diversified with little
seasonality to its revenue performance.
Search and Registration Services
We provide nationwide search and registration services for our
customers directly or indirectly. We provide search services,
including corporate, business name, personal property, real
property, corporate name search reports (also known as NUANS 1
reports), trademark and the Bank Act (Canada) primarily to legal
professionals. Registration and filing services include personal
property, trademark, business incorporations, amendments, and
amalgamations that we provide to legal professionals as well as
financial service businesses and institutions.
The Company has built an online workflow platform to
service legal customers through a team of experienced law
clerks in both Ontario and Quebec able to provide full-service
public registry solutions to support business and complex
legal transactions. The Company’s proven technology for
fully automated workflow also satisfies many of the most
sophisticated financial institutions in Canada.
We benefit from ESC’s status as one of three official service
providers under the ONBIS licence to the Government of
Ontario’s Ministry of Government Services. This licence is
currently renewed on a three-year term until January 2020 with
an optional two-year extension. ESC also holds licences with
the Government of Ontario to distribute and register Personal
Property Security Act (“PPSA”) searches and registrations, as well
as the Government of Quebec’s Corporate Registry (“REQ”) and
Corporations Canada for registering corporations directly within
each of these two registry systems. ESC is one of two licensees
directly integrated into the REQ database for providing full-
service search and registration transactions in Quebec.
Know-Your-Customer Services
We support customers’ due diligence activities for compliance
purposes and credit service solutions through the verification,
storage and retrieval of corporate and business information
compiled and obtained from public registry sources such as
corporate registry, personal property registry, land registry,
litigation, bankruptcy and Bank Act searches. These services
are provided primarily to financial and credit institutions.
We use our proprietary platform for financial institutions
and companies in the financial services sector to on-board
new commercial accounts while remaining compliant with
Canadian KYC and Anti-Money Laundering regulations
captured under the Proceeds of Crime (Money Laundering) and
Terrorist Financing Act (Canada). The customer on-boarding
verification reports we generate leverage our search service
to provide our clients with a process and system to verify,
retrieve and store information about corporate clients to meet
these regulatory requirements.
1 NUANS (Newly Updated Automated Name Search) is a registered trademark of the Government of Canada and is a computerized search system that compares a proposed
corporate name or trademark with databases of existing corporate bodies and trademarks.
17
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017 Corporate Supplies
Organizational Structure
The corporate supplies provided by our Services segment help
companies to effectively organize and maintain their corporate
legal documents. These products are sold and distributed
primarily to legal professionals and law firms and include
customized corporate minute books, corporate seals, share
certificates, legal supplies and related ancillary accessories for
businesses and corporations.
6 Business Strategy
Strategic Priorities
ISC’s goal is to deliver value to shareholders through the
consistent performance of its existing business and the
execution of appropriate growth opportunities. The Company
has identified the following key strategic priorities to support
the achievement of this goal:
• To be the global leader in registry operations and solutions
and the Canadian leader in provision of value-add services
utilizing public data and records;
• To deliver organic revenue growth over three years with
continued emphasis on EBITDA growth, and increasing
revenue from our products, registry expertise and advisory
services; and
• To provide enhanced customer experience for those
interacting with ISC, registry systems and registry information.
On October 12, 2017, ISC announced an expanded leadership
team to support our evolving business as well as our strategic
priorities. In addition, the Company also noted that there
would be an increased emphasis on technology solutions to
complement the existing Registries and Services businesses.
These changes position us to meet the wide array of client
and customer needs for registry and related information
services solutions.
Beginning in 2018, we will organize into three segments –
Registry Operations, Technology Solutions and Services. A
functional summary of these three segments is as follows:
• Registry Operations (currently our Registries segment)
will focus on the delivery of registry services on behalf
of governments.
• Technology Solutions will provide support for the
development, delivery and support of registry (and related)
technology solutions.
• Services will continue to deliver products and services that
utilize public records and data to provide value to customers
in the legal and financial sectors.
As a result, we will commence reporting these segments with
the disclosure of our first quarter 2018 financial results. These
segments will replace our current reporting format as described
in section 5.1 “Segment Information”.
18
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017 7 Results of Operations
Consolidated Statements of Comprehensive Income
(thousands of CAD dollars)
Revenue
Expenses:
Wages and salaries
Information technology services
Depreciation and amortization
Occupancy costs
Professional and consulting services
Cost of goods sold
Financial services
Project initiatives
Other
Total expenses
Net income before items noted below
Finance (expense) income
Interest income
Interest expense
Net finance expense
Share of profit (loss) in associate
Change in contingent consideration
Gain on sale of associate
Income before tax
Income tax expense
Net income
Other comprehensive income (loss)
Unrealized gain (loss) on translation of financial
7,913
2,093
1,792
1,295
711
1,378
683
1,005
669
17,539
6,050
172
(247)
(75)
–
–
15,438
21,414
(2,640)
18,774
$
statements of foreign operations
193
Change in fair value of marketable securities
(net of tax)
Other comprehensive income (loss) for the period
Total comprehensive income
(2)
191
18,965
$
7.1 Fourth Quarter Results
Consolidated Revenue
Three Months Ended December 31,
2016
2017
Year Ended December 31,
2016
2017
$ 23,589
$
21,201
$ 93,592
$ 88,375
8,214
2,432
2,955
1,284
1,607
779
510
(298)
765
18,248
2,953
68
(142)
(74)
(925)
–
–
3,804
(885)
2,919
–
–
–
2,919
$
$
32,802
10,179
7,507
5,292
4,511
4,141
2,235
2,823
2,204
71,694
21,898
369
(876)
(507)
610
–
15,438
37,439
(9,650)
$ 27,789
28,008
9,602
8,429
4,992
5,564
3,586
2,362
3,214
2,172
67,929
20,446
256
(577)
(321)
1,654
(1,000)
–
20,779
(5,276)
15,503
$
429
–
(39)
390
$ 28,179
–
–
15,503
$
Revenue was $23.1 million for the three months ended December 31, 2017, an increase of $2.4 million compared to the same
period in 2016.
(thousands of CAD dollars)
Registries
Services
Corporate
Segments
Land Registry (Land Titles Registry,
Land Surveys, and Geomatics)
Personal Property Registry
Corporate Registry
Registries revenue
Services revenue
Other revenue
Total revenue
$
$
13,762
2,294
2,468
18,524
–
–
18,524
$
$
–
–
–
–
4,035
–
4,035
$
$
–
–
–
–
–
1,030
1,030
Three Months Ended December 31,
2016
2017
$
13,762
2,294
2,468
18,524
4,035
1,030
$ 23,589
$
$
13,038
2,273
2,254
17,565
3,427
209
21,201
19
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017
Registries
Overall
Revenue for our Registries segment was $18.5 million for the three months ended December 31, 2017, an increase of $1.0 million or
5.5 per cent compared to the fourth quarter in 2016. Overall fourth quarter revenue was higher primarily due to increased revenue
from the Land Titles Registry and Corporate Registry.
Land Registry
Revenue for the Land Registry was $13.8 million for the quarter ended December 31, 2017, an increase of 5.5 per cent compared to
the same period in 2016.
(i) Land Titles Registry
Land Titles Registry revenue for the fourth quarter of 2017 was $12.9 million, a rise of $0.8 million or 6.3 per cent compared to
the same period in 2016. This was mainly due to stronger high-value property registration revenue. Each high-value registration
generated revenue of $10,000 or more. Revenue from these types of registrations was a record $1.9 million for the quarter with
two unusually high-value transactions accounting for $0.6 million in revenue.
Most of the revenue in the Land Titles Registry is derived from value-based fees. Average land values increased by 1.7 per cent in the
fourth quarter after removing the effect of the two unusually high-value transactions noted above.
Overall transaction volumes grew by 3.8 per cent for the fourth quarter of 2017 compared to the same period last year, partly due
to a rise in resource sector interest transactions. The volume of regular land transfers and title searches grew by 1.7 per cent and
3.3 per cent, respectively, compared to the same period in 2016. The volume of mortgage registrations continued to show a decline,
down 15.8 per cent for the quarter compared to the same period in 2016.
The following graphs show the Land Titles Registry revenue by type of transaction and the overall transaction volume, respectively.
Seasonality remains consistent year-over-year with the fourth quarter typically generating slightly less revenue than the third
quarter. For more information on seasonality, please refer to section 8 “Summary of Consolidated Quarterly Results”.
Land Titles Registry Revenue by Type
(CAD$ millions)
Registration
Search
20.0
15.0
10.0
5.0
0.0
250,000
220,000
190,000
160,000
130,000
100,000
20
14.4
2.1
12.3
14.1
1.9
12.2
10.6
1.8
8.8
12.2
1.7
10.4
10.9
1.9
8.9
14.0
2.0
12.0
13.5
1.7
11.7
12.9
1.8
11.1
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Q1 2017
Q2 2017
Q3 2017
Q4 2017
Note: Values may not add up due to rounding from minor Maintenance transactions not displayed.
Land Titles Registry Transaction Volume
(Number of transactions)
8
5
1
,
2
2
2
5
2
7
,
4
3
2
6
3
3
,
1
3
2
,
0
6
5
0
0
2
7
0
2
3
2
2
,
6
0
7
,
0
3
2
5
0
2
8
9
1
,
0
0
1
,
8
0
2
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Q1 2017
Q2 2017
Q3 2017
Q4 2017
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017 (ii) Land Surveys and Geomatics
Collectively, the revenue from Land Surveys and Geomatics was $0.8 million for the fourth quarter, a decrease of 5.1 per cent
compared to last year.
Revenue from Land Surveys was down 9.7 per cent for the fourth quarter, or $32 thousand in 2017, compared to the same period in
2016. This was primarily due to a decline in services revenue, down 43.5 per cent, or $25 thousand, on lower volumes.
Geomatics revenue was down 2.4 per cent compared to the same quarter in 2016 due to lower requests for geomatics services.
Personal Property Registry
Revenue for the Personal Property Registry for the fourth quarter of 2017 was $2.3 million, consistent with the same period in 2016.
Personal property security registration setups saw volumes improve by 0.7 per cent compared to the same period in 2016. Revenue
for the same transaction type increased by 1.1 per cent compared to the same period last year.
The following graph depicts the Personal Property Registry revenue by type of transaction. Compared to the same period last year,
fourth quarter 2017 registration and search revenue was 1.2 per cent and 3.3 per cent higher, respectively. Maintenance revenue
was 5.0 per cent lower. Revenue results for the fourth quarter are weaker compared to the third quarter, reflecting the typical
pattern of seasonality.
Personal Property Registry Revenue by Type
(CAD$ millions)
Registration
Search
Maintenance
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
2.2
0.3
0.4
1.5
2.8
0.4
0.5
1.9
2.7
0.3
0.5
1.9
2.3
0.2
0.4
1.6
2.3
0.3
0.5
1.6
2.8
0.3
0.5
1.9
2.5
0.2
0.5
1.8
2.3
0.2
0.5
1.6
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Q1 2017
Q2 2017
Q3 2017
Q4 2017
Note: Values may not add due to rounding.
Transaction volumes for the fourth quarter of 2017 increased by 1.3 per cent compared to the same period last year. Specifically,
registration volumes grew by 1.2 per cent and search transactions by 2.8 per cent, offsetting an 8.2 per cent decline in
maintenance volumes.
Personal Property Registry Transaction Volume
(Number of transactions)
140,000
130,000
120,000
110,000
100,000
90,000
80,000
70,000
60,000
50,000
2
2
4
5
0
1
,
3
3
0
3
2
1
,
0
0
4
0
2
1
,
4
1
1
,
7
0
1
4
5
6
4
1
1
,
7
6
6
6
2
1
,
6
5
4
5
1
1
,
0
6
4
8
0
1
,
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Q1 2017
Q2 2017
Q3 2017
Q4 2017
21
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017 Corporate Registry
Revenue for the Corporate Registry for the quarter ended December 31, 2017, was $2.5 million, an increase of 9.5 per cent,
or $0.2 million, compared to the same period in 2016. This quarterly variance is largely explained by increases across most
transaction types.
Revenue from the filing of annual returns and renewals increased by 4.8 per cent in the quarter compared to the same period in
2016. Revenue from the incorporation and registration of new business entities also increased by 9.4 per cent compared to the
fourth quarter last year. Search revenue increased by 7.0 per cent compared to the fourth quarter in 2016. Entity amendment
revenue, which is part of maintenance transactions, also increased 121.3 per cent, or $183 thousand.
The following graph depicts revenue by type of transaction. Corporate Registry revenue for the fourth quarter of 2017 increased
compared to the same period in 2016 due to improvements across maintenance, registration and search transaction types.
Quarterly revenue continues to mirror the Company’s typical pattern of seasonality.
Corporate Registry Revenue by Type
(CAD$ millions)
Registration
Search
Maintenance
2.6
1.8
0.2
0.6
2.4
1.5
0.2
0.6
2.3
1.4
0.3
0.6
1.9
1.1
0.3
0.5
2.8
1.8
0.4
0.7
2.6
1.6
0.4
0.7
2.2
1.3
0.3
0.6
2.5
1.5
0.3
0.6
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Q1 2017
Q2 2017
Q3 2017
Q4 2017
Note: Values may not add due to rounding.
The following graph shows the transaction volumes for the Corporate Registry for the fourth quarter of 2017. The Corporate Registry
system implementation and the new fee schedule (both implemented in July 2016), changed the way we record volumes for fee
generating transactions. We have adjusted the historical trending in the graph below to approximate expected comparative volumes
under the current system.
Corporate Registry Transaction Volume
(Number of transactions)
1
3
7
,
9
6
3
6
9
6
7
,
6
2
2
6
9
,
5
3
0
2
9
,
7
7
3
9
7
,
2
6
9
2
8
,
Q1 2016*
Q2 2016*
Q3 2016
Q4 2016
Q1 2017
Q2 2017
Q3 2017
Q4 2017
* Note: As noted above, we adjusted historical trending to approximate expected comparative volumes under the current structure.
120,000
100,000
80,000
60,000
40,000
20,000
0
22
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017 Transaction volumes for the fourth quarter increased by 7.8 per cent compared to the same period last year. Specifically, registration
volumes grew by 15.3 per cent, search transactions by 6.0 per cent, and maintenance volumes by 9.5 per cent compared to the
same period in 2016.
As of December 31, 2017, there were approximately 72,993 active Saskatchewan Business Corporations registered with the
Corporate Registry compared to 74,830 as at December 31, 2016. The majority of the change can be attributed to the resumption
of enforcement processes for annual returns and renewals which was restarted in 2017. Prior to this, enforcement processes had
been suspended before and after the Corporate Registry system implementation in July 2016.
Services
Revenue derived from our Services segment is linked to clients and the business they undertake across Canada. Economic activity
can affect credit lending, mergers, acquisitions, incorporations and various new business startup activities, which drives activity for
our Services segment. Other key drivers for this segment include increased regulatory and compliance requirements for financial
institutions, as well as the growing trend to outsource business processes and services to realize cost savings and focus on their core
businesses without compromising service quality.
Revenue in our Services segment for the three months ended December 31, 2017, was $4.0 million. This is an increase of $0.6 million
or 17.7 per cent compared to the fourth quarter of 2016. This is due to continued expansion of new financial services clients adopting
KYC services, a full quarter of incremental revenue from our Alliance acquisition PPSA-related revenue plus post-acquisition revenue
from AVS for December 21 to December 31, 2017, which is captured in the search and registration category in our Services segment.
Search and registration services revenue for the fourth quarter of 2017 was $2.0 million, an increase of $0.5 million or 36.9 per cent
compared to the same period in 2016. The increase was primarily due to additional revenue from our acquisitions of AVS and
Alliance. Search and registration services are provided primarily to lawyers and law firms.
KYC services revenue for the three months ended December 31, 2017, was $1.3 million and grew by $129 thousand or 10.7 per cent
compared to the same period last year. The increase was due to new customer on-boarding and organic growth of the existing
customer base. KYC services are provided primarily to financial institutions.
Corporate supplies revenue for the fourth quarter of 2017 was $0.7 million, a decrease of $55 thousand or 7.0 per cent compared
to the same quarter in 2016. The revenue decrease for the fourth quarter was due to timing of customer orders. Corporate supplies
and services are primarily provided to lawyers and law firms.
Services Revenue by Type
(CAD$ millions)
Search and Registration
Know-Your-Customer
Corporate Supplies
3.3
0.8
1.0
1.5
3.6
0.8
1.2
1.6
3.3
0.7
1.2
1.4
3.4
0.8
1.2
1.4
3.8
0.9
1.4
1.5
3.6
0.8
1.3
1.5
3.6
0.7
1.5
1.4
4.0
0.7
1.3
2.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Q1 2017
Q2 2017
Q3 2017
Q4 2017
23
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017 Consolidated Expenses
For the three months ended December 31, 2017, consolidated expenses (all segments) were $17.5 million, a decrease of 3.9 per cent,
compared to $18.2 million for the same period in 2016, as shown below.
(thousands of CAD dollars)
Expenses
Wages and salaries
Information technology services
Depreciation and amortization
Occupancy costs
Professional and consulting services
Cost of goods sold
Financial services
Project initiatives
Other
Total expenses
Three Months Ended December 31,
2016
2017
$
$
7,913
2,093
1,792
1,295
711
1,378
683
1,005
669
17,539
$
$
8,214
2,432
2,955
1,284
1,607
779
510
(298)
765
18,248
The decrease in expenses was due to a combination of the following:
• Wages and salaries were $7.9 million, down $0.3 million, for the three months ended December 31, 2017, compared to the same
period in 2016. The decrease was mainly due to the timing of accruals related to our Short-term Incentive Plan, partially offset
by the additional wages and salaries from our subsidiary ERS, increased employee resourcing in our technology area and annual
salary increases generally.
•
Information technology service costs were $2.1 million, down $0.3 million for the quarter compared to the fourth quarter of
2016. The decrease in the quarter reflects savings associated with the termination of our technology services contract with DXC
Technology Company (“DXC”) (formerly Hewlett-Packard (Canada) Co.), which were partially offset by additional wages and
salaries in our technology area, as mentioned above, as the Company consolidated support and development functions internally
and by the technology costs in our ERS subsidiary.
• Depreciation and amortization costs were $1.8 million for the three months ended December 31, 2017, compared to $3.0 million in
the same period in 2016. The decrease is due to an acceleration of depreciation of certain assets replaced by the new technology
system for the Saskatchewan Corporate Registry in 2016 and the full amortization of the land data conversion asset at the end of
the second quarter of 2017. This was offset slightly by the depreciation of new assets and depreciation in our subsidiary ERS.
• Professional and consulting services were $0.7 million for the three months ended December 31, 2017, compared to $1.6 million
for the same period in 2016. Professional and consulting services encompasses a wide range of activities and the reduction in
2017 is due to different corporate requirements year-over-year.
• Cost of goods sold was $1.4 million for the fourth quarter of 2017, an increase of $0.6 million compared to the fourth quarter of
2016. The rise in the quarter was due to cost of goods increases for our corporate supplies business in our Services segment.
• Project initiatives were $1.0 million for the three months ended December 31, 2017, an increase of $1.3 million compared to the
same period in 2016. The increase was due to focused effort on growth initiatives and the transfer of an ongoing project to assets
under development in 2016 that met our capitalization requirements.
Net Finance Expense (Income)
Net finance expense was flat at $0.1 million for the three months ended December 31, 2017, and for the same period in 2016.
24
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017
Gain on Sale of Associate
During the quarter, the Company sold its 30.1 per cent stake in Dye & Durham for $25.0 million which resulted in a $15.4 million
accounting gain before tax ($13.4 million after-tax). For more details, refer to Note 11 of our Financial Statements for the period
ended December 31, 2017.
Net Income and Earnings per Share
Net income for the three months ended December 31, 2017, was $18.8 million or $1.07 per basic and diluted share, compared to
$2.9 million or $0.17 per basic and diluted share for the same period in 2016. The increase in net income and earnings per share
was mainly due to the gain on the sale of our stake in Dye & Durham. Without the gain, net income would have been $5.4 million
or $0.31 per basic and diluted share.
Adjusted EBITDA
Adjusted EBITDA was $9.0 million, a 38.0 per cent margin, for the three months ended December 31, 2017, compared to
$7.3 million, a 34.6 per cent margin, for the same period in 2016. Refer to section 9 “Financial Measures and Key Performance
Indicators” for a reconciliation of EBITDA to adjusted EBITDA.
7.2 Year-End Results
Consolidated Revenue
Revenue was $93.6 million for the year ended December 31, 2017, compared to $88.4 million in 2016, an increase of 5.9 per cent.
(thousands of CAD dollars)
Registries
Services
Corporate
Land Registry (Land Titles Registry,
Land Surveys, and Geomatics)
Personal Property Registry
Corporate Registry
Registries
Services
Other
$ 54,792
9,953
10,143
74,888
–
–
$ 74,888
$
$
–
–
–
–
14,902
–
14,902
$
$
–
–
–
–
–
3,802
3,802
Year-Ended December 31,
2016
2017
$ 54,792
9,953
10,143
74,888
14,902
3,802
$ 93,592
$
54,921
9,947
9,082
73,950
13,639
786
$ 88,375
Registries
Overall
Revenue for all Registries was $74.9 million for the year
ended December 31, 2017, an increase of $0.9 million, or
1.3 per cent, compared to 2016. Our results were better
compared to the previous year due to increased revenue
from the Corporate Registry.
The Company’s top five customers for the Registries segment
represent 19.1 per cent of the total Registries segment revenue
for the year ended December 31, 2017. Of those customers, no
single customer represented more than 10.0 per cent of total
Registries segment revenue.
Total Registries Revenue
for the year ended December 31,
(CAD$ millions)
100.0
Land Titles Registry
Geomatics
Personal Property Registry
Land Surveys Directory
Corporate Registry
80.0
60.0
40.0
20.0
0.0
.
0
5
7
2015
.
0
4
7
2016
.
9
4
7
2017
25
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017
Land Registry
Land Registry revenue was $54.8 million for the year ended December 31, 2017, a decrease of $0.1 million or 0.2 per cent
compared to 2016.
(i) Land Titles Registry
Land Titles Registry revenue for the year ended December 31, 2017, was $51.3 million, essentially flat compared to 2016 revenue
of $51.2 million.
Most of the revenue in the Land Titles Registry is derived from value-based fees. ISC observed higher average land values for
regular land transfers in 2017 compared to 2016, which was a result of a number of high-value property transactions processed in
the second half of 2017. We received $5.6 million in revenue from these transactions in 2017, well above the $3.6 million in 2016.
Between 2010 and 2016, we typically saw an average of $3.3 million on an annual basis. This high-value property transaction
revenue helped offset volume and revenue declines in other key transaction types.
Land Titles Registry Revenue by Type
for the year ended December 31,
(CAD$ millions)*
Land Titles Registry Transaction Volume
for the year ended December 31,
(Number of transactions)
Registration
Search
1,000,000
$53.0
14.5%
$51.2
14.6%
$51.3
14.5%
85.5%
85.3%
85.4%
2015
2016
2017
* Note: Values may not total due to rounding from Maintenance transactions that were
too small to display in chart.
900,000
800,000
700,000
600,000
500,000
9
1
1
,
9
1
9
2015
9
7
7
,
8
8
8
2016
,
8
1
2
0
6
8
2017
Overall revenue generating transactions in the Land Titles Registry fell 3.2 per cent in 2017, due to a slower real estate market in
Saskatchewan. The volume of regular land transfers, mortgage registrations and title searches declined by 3.1 per cent, 9.9 per cent
and 0.6 per cent, respectively, compared to 2016.
Parts of the Saskatchewan real estate market may have experienced a buyers’ market in 2017. While the number of completions
was down 22.2 per cent, housing starts increased 7.2 per cent year-over-year. This may contribute to additional supply in the
Saskatchewan real estate market going into 2018.
The primary customers of the Land Titles Registry are law firms, financial institutions, developers and resource companies. For
the year ended December 31, 2017, our top 20 Land Titles Registry customers represented about 41.1 per cent of revenue, and
our top 100 Land Titles Registry customers represented 75.3 per cent of revenue. In 2017, 79.9 per cent of all Land Titles Registry
registration transactions were submitted online, an increase of 1.3 per cent compared to 2016.
26
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017 (ii) Land Surveys and Geomatics
Collectively, the revenue from Land Surveys and Geomatics was $3.5 million for the year ended December 31, 2017, a decrease
of $0.2 million, or 4.5 per cent, compared to 2016. The overall decrease was due to lower revenue from Land Surveys, which was
affected by the economy.
In 2017, Land Surveys generated revenue of $1.3 million, down $0.2 million or 12.2 per cent for the year due to lower transaction
volumes, which were down by 5.7 per cent year-over-year.
Land Surveys Revenue by Type
for the year ended December 31,
(CAD$ millions)
Land Surveys Transaction Volume
for the year ended December 31,
(Number of transactions)
Registration
Search
Services
40,000
$1.5
7.7%
11.2%
81.1%
$1.5
17.0%
11.1%
71.9%
$1.3
13.9%
12.9%
73.2%
2015
2016
2017
30,000
20,000
10,000
0
5
1
8
5
3
,
2015
7
2
6
3
3
,
2016
2
2
7
,
1
3
2017
Land Surveys customers include surveyors, developers, resource companies, governments and other businesses that access our
mapping systems and survey plans to support their development plans. For the year ended December 31, 2017, our top 20 Land
Surveys customers represented 90.6 per cent of revenue and the top 100 customers accounted for 95.8 per cent.
Total revenue resulting from Geomatics was relatively flat at $2.2 million for 2017, with a slight increase of 0.7 per cent year-over-year.
Geomatics customers include government departments
(provincial and municipal), resource companies, land
developers, other businesses and the general public. They
also include utility, pipeline and transportation companies.
For the year ended December 31, 2017, our top 20 Geomatics
customers comprised 84.9 per cent of revenue, while our top
100 customers represented 97.5 per cent of revenue.
Geomatics Revenue
for the year ended December 31,
(CAD$ millions)
3.0
2.5
2.0
1.5
1.0
0.5
0.0
4
2
.
2015
2
2
.
2016
2
2
.
2017
27
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017 Personal Property Registry
Revenue for the Personal Property Registry for the year ended December 31, 2017, was stable at $10.0 million, which represents a
small increase of 0.1 per cent from the same period in 2016.
Registration revenue for this registry decreased by 0.4 per cent in 2017 and maintenance revenue was down by 8.1 per cent. This
was offset by increased search revenue in 2017, up 5.9 per cent compared to 2016.
Personal Property Registry Revenue by Type
for the year ended December 31,
(CAD$ millions)
Personal Property Registry Transaction Volume
for the year ended December 31,
(Number of transactions)
Registration
Search
Maintenance
500,000
$10.0
10.7%
16.6%
$9.9
11.6%
18.6%
$10.0
10.9%
19.6%
400,000
72.7%
69.9%
69.5%
300,000
2015
2016
2017
200,000
8
8
7
,
7
4
4
2015
9
6
9
5
5
4
,
2016
,
7
3
2
5
6
4
2017
The graph above reflects year-over-year transaction volumes. Overall volumes improved by 2.0 per cent in 2017. Search volume grew
3.6 per cent while registration volume increased 1.8 per cent, more than offsetting the 5.8 per cent decline of maintenance volumes.
Personal property security registration setups saw volumes modestly improve in 2017 by 0.6 per cent compared to 2016. Revenue
for the same transaction type decreased by 0.7 per cent in 2017 compared to 2016, partly due to registry fee changes made in
July 2016, which lowered fees for setups as part of a rebalancing of fees across the Saskatchewan registries.
Customers of the Personal Property Registry are primarily in the financial sector as well as law firms. The top 20 Personal Property
Registry customers generated 80.6 per cent of the revenue in 2017, while the top 100 represented 93.3 per cent of revenue.
28
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017
Corporate Registry
Revenue for the Corporate Registry in 2017 was $10.1 million, up 11.7 per cent or $1.0 million. This is a result of a full year’s impact of
structural pricing changes implemented in July 2016 and year-over-year growth in key transaction categories.
In July 2016, ISC implemented a new system for the Corporate Registry which included several permanent changes to the services
and fee structure. This affected how we record volumes and contained targeted fee increases. This change, coupled with reduced
transaction volume experienced post-implementation in the third quarter of 2016, contributed to the year-over-year improvements
in revenue for 2017.
Corporate Registry Revenue by Type
for the year ended December 31,
(CAD$ millions)
Corporate Registry Transaction Volume
for the year ended December 31,
(Number of transactions)
Maintenance
Registration
Search
400,000
$8.1
10.8%
28.9%
60.3%
$9.1
12.1%
24.6%
63.4%
$10.1
13.6%
25.5%
60.9%
300,000
200,000
100,000
2015
2016
2017
2015*
6
6
3
9
1
3
,
2016*
0
0
6
0
5
3
,
2017
* Note: As a result of the new fee schedule and Corporate Registry system
implementation in July 2016, the recording of volumes for fee generating
transations has changed. Historical trending in the graph above has been
adjusted to approximate expected comparative volumes under the
current structure.
With that in mind, revenue from the filing of annual returns and renewals improved by 10.9 per cent in 2017 compared to 2016.
Revenue from the incorporation and registration of new business entities rose by 15.7 per cent compared to 2016. Search revenue
also climbed by 25.7 per cent year-over-year, largely due to pricing changes.
For the Corporate Registry, customers mainly include law firms, companies in the financial sector, as well as the Government of
Saskatchewan. They also include businesses such as corporations, non-profit corporations, co-operatives and sole proprietorships
that were, or will be, registered in the Corporate Registry. The top 20 Corporate Registry customers accounted for nearly
32.4 per cent of revenue in 2017, and the top 100 customers made up about 50.2 per cent.
29
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017 Services
The revenue in our Services segment for the year ended December 31, 2017, was $14.9 million, a rise of $1.3 million, or 9.2 per cent
compared to 2016. The increase was due to growth in ESC’s KYC services revenue along with new revenue as a result of acquiring
AVS Systems Inc. in December 2017.
Services Revenue by Type
for the year ended December 31
(CAD$ millions)
15.0
12.0
9.0
6.0
3.0
0.0
Search and Registration
Know-Your-Customer
Corporate Supplies
3.2
0.8
0.9
1.5
2015*
13.6
3.1
4.6
6.0
2016
14.9
3.0
5.4
6.4
2017
* Note: 2015 revenue results for ESC, which ISC acquired on October 1, 2015, are
for the fourth quarter only.
Services Revenue
for the year ended December 31, 2017
Search and Registration
Know-Your-Customer
Corporate Supplies
20.4%
43.1%
36.5%
2017 was a solid year for our Services segment with growth across most of its lines of business. This was a combination of strategic
acquisitions along with increases in legal activity across the country and strong compliance-driven activities in the financial services
industry that triggered active due diligence on companies nationwide.
Revenue from search and registration services was $6.4 million for the year ended December 31, 2017, an improvement of
$0.5 million or 7.7 per cent. The growth was primarily due to new revenue from the Alliance and AVS acquisitions.
Revenue from KYC services for the year ended December 31, 2017, was $5.4 million, an increase of $0.9 million or 19.6 per cent. The
increase was due to new customer on-boarding and organic growth of the existing customer base.
Revenue from corporate supplies for the year was $3.0 million, a modest decrease of $0.1 million or 2.8 per cent. The decrease was
due to a declining customer base in Quebec and Ontario.
The top 20 ESC customers comprised about 48.4 per cent of the revenue for the year ended December 31, 2017, while the top 100
ESC customers made up nearly 64.7 per cent of revenue. No single customer accounted for more than 25.0 per cent of ESC revenue
in the same period.
30
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017 Consolidated Expenses
For the year ended December 31, 2017, consolidated expenses (all segments) were $71.7 million, an increase of 5.5 per cent,
compared to $67.9 million for the same period in 2016, as shown below.
(thousands of CAD dollars)
Expenses
Wages and salaries
Information technology services
Depreciation and amortization
Occupancy costs
Professional and consulting services
Cost of goods sold
Financial services
Project initiatives
Other
Year Ended December 31,
2016
2017
$ 32,802
10,179
7,507
5,292
4,511
4,141
2,235
2,823
2,204
$ 71,694
$ 28,008
9,602
8,429
4,992
5,564
3,586
2,362
3,214
2,172
$ 67,929
The increase in expenses was due to a combination of the following:
• Wages and salaries were $32.8 million, up $4.8 million, for the year ended December 31, 2017, compared to the same period in
2016. The increase was mainly the result of the additional wages and salaries from our new subsidiary, ERS, but also includes
increased salaries from the in-sourcing of the former DXC technology contract, expansion to our leadership team and normal
annual salary increases.
•
Information technology services increased to $10.2 million for the year ended December 31, 2017, as compared to $9.6 million in
2016. The variance was due to a combination of the additional information technology services costs from our ERS subsidiary,
partially offset by savings realized from the cancelled DXC contract.
• Depreciation and amortization costs were $7.5 million for the year ended December 31, 2017, compared to $8.4 million for the
same period in 2016. The decrease was due to the accelerated depreciation of certain assets replaced by the new technology
system for the Saskatchewan Corporate Registry in 2016 and the full and final amortization of the land data conversion asset at
the end of the second quarter 2017. This was offset slightly by the depreciation of new assets in the Company and those acquired
in our ERS subsidiary.
• Professional and consulting services were $4.5 million for the year ended December 31, 2017, compared to $5.6 million in 2016.
Professional and consulting services encompasses a wide range of activities, and the reduction in 2017 is due to different
corporate requirements year-over-year.
• Cost of goods sold was $4.1 million for the year ended December 31, 2017, compared to $3.6 million in 2016. The increase was due
to increased business in and the addition of AVS to our Services segment.
• Financial services was $2.2 million for the year ended December 31, 2017, compared to $2.4 million for the same period in 2016. The
decrease is mainly due to the realization of the currency gain of foreign exchange related to the purchase of our subsidiary ERS.
• Project initiatives were $2.8 million for the year compared to $3.2 million in 2016. The decrease was due to the completion of
some initiatives in 2016 and a reduction in the number of corporate projects in 2017.
Net Finance Expense (Income)
Net finance expense (income) for the year ended December 31, 2017, was an expense of $0.5 million compared to an expense of
$0.3 million for the same period in 2016. The increase was due to the drawdown of our operating facility to fund the acquisition of
ERS, offset partially by the additional interest earned on cash from the Dye & Durham sale.
31
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017
Change in Contingent Consideration
ISC’s acquisition of ESC included performance-based contingent consideration to the previous owner. During the third quarter
of 2016, management assessed and increased its estimate of the consideration by $1.0 million due to the performance of ESC
through the third quarter. The net impact of the change in contingent consideration was included in ‘change in contingent
consideration’ on the consolidated statement of comprehensive income. The contingent consideration amount was settled
in the fourth quarter of 2016.
Gain on Sale of Associate
On October 5, 2017, the Company sold its 30.1 per cent ownership in Dye & Durham for $25.0 million cash, which resulted in a
$15.4 million accounting gain before tax ($13.4 million after-tax).
Tax Provision
The Company is subject to federal and provincial income taxes at an estimated combined statutory rate of 26.75 per cent (2016 –
27.0 per cent). Income tax expense varies from the amounts that would be computed by applying the statutory income tax rate to
earnings before taxes for the following reasons:
(thousands of CAD dollars, except where noted)
Net income before tax
Combined statutory income tax rate
Expected income tax expense
Increase (decrease) in income tax resulting from:
Investment in associate – non-taxable items
Non-deductible expenses/non-taxable income
Foreign income tax rate differential
Scientific research and experimental development (“SR&ED”) reassessment
Adjustment to prior year’s deferred tax assets
Impact of change in taxes
Tax pools not previously recognized
Unrecognized tax asset 1
Other
Income tax expense
Effective income tax rate
Year Ended December 31,
2016
2017
$ 37,439
26.75%
10,015
(2,228)
539
336
324
266
109
–
114
175
$ 9,650
25.8%
$ 20,779
27.0%
5,610
(447)
375
–
–
–
–
(264)
–
2
5,276
25.4%
$
1 No deferred tax asset has been recognized in respect of $0.9 million of tax losses related to ERS. The tax asset will be recognized as sufficient future taxable profits are earned.
These losses do not expire.
The Company records future income tax assets and liabilities related to deductible temporary differences. The Company
assesses the value of these assets and liabilities based on their probability of being realized given management assessments
of future taxable income.
32
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017
Net Income and Earnings per Share
Net income and total comprehensive income for the three months ended December 31, 2017, was $18.8 million, or $1.07 per basic
and diluted share, compared to $2.9 million, or $0.17 per basic and diluted share, for the same period in 2016. Net income and total
comprehensive income for the year ended December 31, 2017, was $27.8 million, or $1.59 per basic and $1.58 per diluted share,
compared to $15.5 million, or $0.89 per basic and $0.88 per diluted share, for the same period in 2016. The increase in net income
and earnings per share was principally due to the gain on the sale of our stake in Dye & Durham. Without the gain, net income would
have been $14.4 million, or $0.82 per basic and diluted share.
(thousands of CAD dollars)
Registries
Services 1
Corporate 2
Net income
Three Months Ended December 31,
2016
2017
Year Ended December 31,
2016
2017
$
$
5,866
(733)
13,641
18,744
$
$
4,277
(96)
(1,262)
2,919
$
16,412
99
11,278
$ 27,789
$
$
17,856
(403)
(1,950)
15,503
1 Net income for the Services segment for the year ended December 31, 2016, was impacted by the $1.0 million adjustment to the contingent consideration.
2 Net income for the Corporate segment for the year ended December 31, 2017, was impacted by the $15.4 million accounting gain due to the sale of our stake in Dye & Durham.
The calculation of earnings per share is based on net income after tax and the weighted average number of shares outstanding
during the period. Details of the earnings per share are set out below:
(thousands of CAD dollars, except number of shares and earnings per share)
Net income
Weighted average number of shares, basic
Potential dilutive shares resulting from stock options
Weighted average number of shares, diluted
Earnings per share ($ per share)
Total, basic
Total, diluted
Adjusted EBITDA
Year Ended December 31,
2016
2017
$ 27,789
17,500,000
95,648
17,595,648
$
15,503
17,500,000
35,471
17,535,471
$
$
1.59
1.58
$
$
0.89
0.88
Adjusted EBITDA was $33.4 million for the year ended December 31, 2017, flat compared to $33.5 million in the same period last
year, with ISC generating an adjusted EBITDA margin of 35.7 per cent for the period compared to 37.9 per cent in the year ended
December 31, 2016. The margin as a percentage of revenue declined due to the increased expenses from our acquisitions offsetting
the increased revenue to produce the same EBITDA.
33
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017
8 Summary of Consolidated Quarterly Results
The following table sets out select quarterly results for the past eight quarters. Our Registries segment experiences moderate
seasonality, primarily because Land Titles revenue fluctuates in line with real estate transaction activity in Saskatchewan. Typically,
our second and third quarters generate higher revenue during the fiscal year when real estate activity is traditionally highest.
Our Services segment is sufficiently diversified with little seasonality to its revenue performance.
The balance of our corporate activities and shared services functions, as well as the services and functions of ERS, reported as
Corporate, do not experience seasonality. Expenses are generally consistent from quarter to quarter, but can fluctuate due to the
timing of project-related activities or the addition of acquisitions.
As a result, our EBITDA margin fluctuates in line with the above factors.
Summary of Consolidated Quarterly Results
(thousands of CAD dollars)
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
2017
2016
Revenue
Expenses
Net income before items
noted below
Net finance income (expense)
Share of profit (loss) in associate
Gain on sale of associate
Change in contingent
consideration
Income before tax
Income tax expense
Net income
Other comprehensive
income (loss)
Total comprehensive income
EBITDA margin (% of revenue) 1
Adjusted EBITDA margin
$ 23,589
17,539
$ 23,862
18,168
$ 24,646
18,406
$ 21,496
17,583
$ 21,201
18,248
$ 22,894
16,854
$ 24,674
16,468
$ 19,606
16,359
6,050
(75)
–
15,438
5,694
(215)
200
–
6,240
(105)
587
–
3,913
(112)
(177)
–
2,953
(74)
925
–
6,040
(78)
479
–
8,206
(83)
263
–
3,247
(85)
(13)
–
–
21,414
(2,640)
$ 18,774
–
5,679
(3,823)
$ 1,856
–
6,722
(1,989)
$ 4,733
–
3,624
(1,198)
$ 2,426
–
3,804
(885)
$ 2,919
(1,000)
5,441
(1,631)
$ 3,810
–
8,386
(1,808)
$ 6,578
–
3,149
(953)
$ 2,196
191
$ 18,965
33.2%
(29)
$
1,827
31.8%
306
$ 5,039
35.8%
(78)
$ 2,348
26.8%
–
$ 2,919
32.2%
–
$ 3,810
32.1%
–
$ 6,578
41.7%
–
$ 2,196
25.9%
(% of revenue) 1
Earnings per share, basic
Earnings per share, diluted
38.0%
1.07
1.07
$
$
36.4%
0.11
$
0.11
$
38.8%
$ 0.27
$ 0.27
28.9%
$ 0.14
$ 0.14
34.6%
$ 0.17
$ 0.17
41.5%
$ 0.22
$ 0.22
45.1%
$ 0.38
$ 0.37
27.9%
$ 0.13
$ 0.12
1 EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin are not recognized as measures under IFRS and do not have a standardized meaning prescribed by IFRS
and, therefore, they may not be comparable to similar measures by other corporations. Refer to section 22 “Non-IFRS Financial Measures”.
34
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017
9 Financial Measures and Key Performance Indicators
Revenue, expenses and net income are key performance indicators the Company uses to manage its business and evaluate its
financial results and operating performance.
In addition to these results, which are reported in accordance with IFRS, certain non-IFRS measures are supplemental indicators
of operating performance and financial position as well as for internal planning purposes. The Company evaluates its performance
against these metrics by comparing actual results to management budgets, forecasts and prior period results. These non-IFRS
financial measures include EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin and free cash flow. Refer to
section 22 “Non-IFRS Financial Measures”.
Consolidated Earnings Before Interest, Taxes, Depreciation and Amortization
(thousands of CAD dollars)
Net income
Depreciation and amortization
Net finance expense
Income tax expense
Gain on sale of associate
EBITDA 1
Adjustments
Stock-based compensation expense
Stock option expense
Acquisition and integration costs
Gain on disposal of property, plant and
equipment assets
Adjusted EBITDA 1
EBITDA margin (% of revenue) 1
Adjusted EBITDA margin (% of revenue) 1
Three Months Ended December 31,
2016
2017
Year Ended December 31,
2016
2017
$
18,774
1,792
75
2,640
(15,438)
7,842
67
120
925
–
$ 8,954
33.2%
38.0%
$
$
2,919
2,955
74
885
–
6,833
46
95
362
–
7,336
32.2%
34.6%
$ 27,789
7,507
507
9,650
(15,438)
30,015
327
471
2,591
$
15,503
8,429
321
5,276
–
29,529
418
376
3,132
(1)
$ 33,403
32.1%
35.7%
(1)
$ 33,454
33.4%
37.9%
1 EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin are not recognized as measures under IFRS and do not have a standardized meaning prescribed by IFRS
and, therefore, they may not be comparable to similar measures reported by other corporations. Refer to section 22 “Non-IFRS Financial Measures”.
Consolidated Free Cash Flow
(thousands of CAD dollars)
Net cash flow provided by operating activities
Net change in non-cash working capital 1
Cash provided by operating activities
excluding working capital
Cash additions to property, plant and equipment
Cash additions to intangible assets
Consolidated free cash flow 2,3
1 Refer to Note 24 of the Financial Statements for reconciliation.
Three Months Ended December 31,
2016
2017
Year Ended December 31,
2016
2017
$
8,401
(3,879)
$
6,052
(369)
$ 32,924
(7,871)
$
26,164
528
4,522
(289)
(1,429)
2,804
$
5,683
(21)
(1,578)
4,084
$
25,053
(448)
(1,686)
$ 22,919
26,692
(851)
(5,848)
19,993
$
2 Free cash flow is not recognized as a measure under IFRS and does not have a standardized meaning prescribed by IFRS and, therefore, may not be comparable to similar
measures by other corporations. Refer to section 22 “Non-IFRS Financial Measures”.
3 ISC has changed the recognition of current income taxes within the definition of free cash flow to match the balance recognized on the statement of comprehensive income.
Comparative figures for 2015 and 2016 have been updated accordingly
Consolidated free cash flow for the three months ended December 31, 2017, was $2.8 million compared to $4.1 million for the same
period of 2016 and $22.9 million for the year ended December 31, 2017, compared to $20.0 million last year. The decrease in the
three months ended December 31, 2017 compared to the same period in 2016 is due to changes in income taxes. The increase for
the year ended 2017 compared to 2016 is primarily due to the higher additions to intangibles in 2016.
35
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017
11 Liquidity and Capital Resources
11.1 Cash Flow
Our primary source of operating cash flow is generated from
revenue related to the Registry and Services segments.
Our primary uses of funds are operational expenses, capital
expenditures and dividends.
Historically, ISC has financed its operations and met its capital
and finance expenditure requirements through cash provided
from operating activities. Most recently, the Company has
also utilized borrowing to supplement cash generated from
operations to finance acquisition activities. The Company
believes that internally generated cash flow, supplemented
by additional borrowing that may be available to us (refer to
Note 15 of the Financial Statements for our existing Credit
Facilities), will be sufficient to meet cash requirements, capital
expenditures and anticipated dividend payments.
Liquidity risk is managed based on financial forecasts and
anticipated cash flow. The majority of cash is held with Canadian
chartered banks and the risk of loss is believed to be minimal. As
at December 31, 2017, the Company held $31.3 million in cash,
compared to $33.5 million as at December 31, 2016, a decrease
of $2.2 million.
The Company expects to be able to meet its cash requirements,
including being able to settle current liabilities of $22.7 million
(December 31, 2016 – $16.4 million) and meet any unanticipated
cash requirements due to changes in working capital
commitments. Such changes that would affect our liquidity
may arise from, among other factors, general economic
conditions and the failure of one or more customers to pay their
obligations. Deficiencies arising from short-term working capital
requirements and capital expenditures may be financed on a
short-term basis with bank indebtedness or on a permanent
basis with offerings of securities.
10 Outlook
The following section includes forward-looking information,
including statements related to the industries in which we
operate, growth opportunities and our future financial position
and results including expected revenue, EBITDA and capital
expenditures. Refer to section 3 “Caution Regarding Forward-
Looking Information”.
We see two factors influencing the outlook for our Registries
segment, specifically the Saskatchewan Land Registry, those
being changes to the mortgage rules and an increase in
overnight lending rates. The Office of the Superintendent of
the Financial Institutions Canada implemented revisions to its
mortgage rules effective on January 1, 2018 1, which now include
a requirement to “stress test” borrowers with uninsured loans
to ensure they could withstand increases in interest rates. In
addition, The Bank of Canada raised its overnight lending rate on
January 17, 2018 following two similar increases in 2017. Interest
rate changes often influence consumer behaviour and, as such,
may affect ISC’s business. We expect, however, it will be some
time before the impact of these changes is known. In general,
we expect the performance of our Registries segment in 2018
to be in line with that of 2017.
In our Services segment, we expect to see further customer
growth in the Financial Support Services revenue category,
with customers leveraging KYC on-boarding services as our
customers’ programs come on stream during the year. With our
recent acquisition of AVS, we also expect continued revenue
growth in our Financial Support Services as we are now able to
provide complete “best in class” service offerings to the market.
ESC will continue to invest in its core technology platforms
to enable integrated solutions in conjunction with its AVS
technology in the year ahead.
The key drivers of our expenses will continue to be wages,
salaries and information technology costs, as well as the pursuit
of new business opportunities.
The acquisition of AVS in December 2017, with a high revenue,
lower margin profile, changes ISC’s consolidated revenue and
EBITDA margin profile compared to previous years. With that
in mind, and based on our outlook, ISC currently expects total
revenue of between $124.0 and $130.0 million with an EBITDA
margin of between 24.0 per cent and 26.0 per cent. Capital
expenditures are expected to range between $4.0 million and
$6.0 million and will be funded through operating cash flow.
ISC’s guidance does not include revenue or costs from any
potential new contracts in any of its reportable segments.
1 Office of the Superintendent of Financial Institutions Canada (OSFI) – News Release “OSFI is reinforcing a strong and prudent regulatory regime for residential mortgage
underwriting”, October 17, 2017.
36
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017 The following table summarizes our sources and uses of funds for the three months and years ended December 31, 2017 and 2016:
(thousands of CAD dollars)
Net cash flow provided by operating activities
Net cash flow used in investing activities
Net cash flow used in financing activities
Effects of exchange rate changes on
cash held in foreign currencies
Decrease in cash
Cash, beginning of period
Cash, end of period
Three Months Ended December 31,
2016
2017
Year Ended December 31,
2016
2017
$
8,401
(1,146)
(14,542)
(19)
(7,306)
38,571
$ 31,265
$
$
6,052
(1,021)
(9,603)
–
(4,572)
38,105
33,533
$ 32,924
(18,426)
(16,758)
(8)
(2,268)
33,533
$ 31,265
$
$
26,164
(7,436)
(21,616)
–
(2,888)
36,421
33,533
Net Cash Flow Provided by Operating Activities
Net cash flow provided by operating activities for the three months ended December 31, 2017, was $8.4 million compared to
$6.1 million for the same period in 2016 and for the year ended December 31, 2017, was $32.9 million compared to $26.2 million
for the same period in 2016. The increase in the quarter compared to the same period last year was mainly due to the increase in
revenue. The increase for the year ended 2017 was mainly due to differences in income taxes and changes in working capital, driven
by the timing of sales contracts.
Net Cash Flow Used in Investing Activities
Net cash flow used in investing activities for the three months ended December 31, 2017, was flat compared to the same period last
year and for the year ended December 31, 2017, was $18.4 million compared to $7.4 million for the same period in 2016. The increase
was due to the acquisitions of AVS, ERS and Alliance, as well as additional investments in Dye & Durham during 2017, somewhat
offset by the proceeds received from the sale of our stake in Dye & Durham.
Net Cash Flow Used in Financing Activities
Net cash flow used in financing activities for the three months ended December 31, 2017, was $14.5 million compared to $9.6 million
for the three months ended December 31, 2016. For the year ended December 31, 2017, net cash flow provided by financing
activities was $16.8 million compared to $21.6 million used in financing activities for the same period in 2016. The change in the
quarter was mainly due to the repayment of the operating loan and long-term debt while the change year-to-date was due to the
payment of contingent consideration in 2016 that did not reoccur in 2017.
11.2 Capital Expenditures
Capital expenditures for the three months ended December 31, 2017, were $1.7 million, compared to $1.1 million for the same period
in 2016. For the year ended December 31, 2017, capital expenditures were $2.0 million compared to $6.3 million for the same period
in 2016. The increase in the fourth quarter of 2017 is due to system development work in our ERS and ESC subsidiaries. Capital
expenditures in 2016 were mainly focused on our Corporate Registry modernization, which was completed in 2016. The lower
capital expenditures are due to management’s focus on integration activities of both ERS and Alliance as well as the acquisition of
AVS. In addition, the Company is gradually shifting to more hosted and cloud service providers, thereby reducing its spend in certain
historical capital areas, such as hardware technology.
(thousands of CAD dollars)
Registries
Services
Corporate
Total capital expenditures
Three Months Ended December 31,
2016
2017
Year Ended December 31,
2016
2017
$
$
41
360
1,317
1,718
$
$
200
5
903
1,108
$
$
41
427
1,575
2,043
$
$
3,189
2,050
1,036
6,275
37
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017
11.3 Debt
Debt for the three months ended December 31, 2017, was
$21.6 million compared to $23.4 million at December 31, 2016.
In September 2017 we extended our credit agreement to
October 1, 2019. At December 31, 2017, the aggregate amount
available under the Credit Facilities is $31.560 million comprised
of (i) a $9.935 million committed revolving term loan facility
along with; (ii) a $10.0 million uncommitted revolving credit
facility to be used for general corporate purposes (December 31,
2017 and 2016 had nil drawings); and (iii) a $11.625 million
committed non-revolving reducing credit facility.
The Revolving Term Facility of $9.935 million consists of a three-
year, committed revolving term loan facility that matures on
11.4 Total Assets
October 1, 2019, unless renewed prior to that time. It is currently
held in a six-month bankers’ acceptance note bearing interest at
1.658 per cent that matures on March 16, 2018, (December 31,
2016 – bankers’ acceptance note, due June 21, 2017, bearing
interest at 1.1 per cent per annum).
The Non-Revolving Term Facility had $11.6 million outstanding
as of December 31, 2017, and is repayable through quarterly
payments of $375 thousand maturing on October 1, 2019. This
facility currently consists of a prime based loan with interest at
3.9 per cent per annum (December 31, 2016 – prime based loan
with interest at 3.4 per cent per annum).
Total assets increased to $171.8 million at December 31, 2017, compared to $131.3 million at December 31, 2016, primarily due to the
acquisitions of AVS and ERS.
(thousands of CAD dollars)
Total assets excluding intangibles, goodwill and cash
Intangibles
Goodwill
Cash
Total assets
(thousands of CAD dollars)
Total assets excluding intangibles, goodwill and cash
Intangibles
Goodwill
Cash
Total assets
Registries
$ 28,480
4,359
5,800
17,181
$ 55,820
Registries
$ 33,847
6,149
–
21,232
$ 61,228
11.5 Working Capital
Services
Corporate
As at December 31,
2017
$
5,340
36,488
34,513
4,229
$ 80,570
$
15,245
6,175
4,160
9,855
$ 35,435
$ 49,065
47,022
44,473
31,265
$ 171,825
Services
Corporate
As at December 31,
2016
$
3,371
15,271
13,141
1,685
$ 33,468
$ 22,934
3,075
–
10,616
$ 36,625
$ 60,152
24,495
13,141
33,533
131,321
$
As at December 31, 2017, working capital was $18.3 million, compared to $25.4 million at December 31, 2016. The change in working
capital is mainly the result of increased income taxes payable at December 31, 2017, due to the taxes associated with the sale of our
stake in D&D and increases in deferred revenue as well as accounts payable and accrued liabilities from our acquisitions.
(thousands of CAD dollars)
Current assets
Current liabilities
Working capital
11.6 Outstanding Share Data
As at December 31,
2017
As at December 31,
2016
$ 40,989
(22,652)
18,337
$
$ 41,800
(16,363)
25,437
$
The number of basic issued and outstanding Class A Shares as at December 31, 2017, was 17.5 million and the number of fully diluted
shares was 17.6 million. On November 7, 2017, the Board declared a quarterly cash dividend of $0.20 per Class A Share, which was
paid on January 15, 2018, to shareholders of record as of December 31, 2017.
38
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017
12 Share-Based Compensation Plan
12.1 Deferred Share Unit Plan
The Company has established a Deferred Share Unit (“DSU”)
plan to provide directors and senior officers of ISC with the
opportunity to participate in the long-term success of ISC
and to promote a greater alignment of interests between our
directors, senior officers and shareholders. Refer to Note 14
of the Financial Statements for information pertaining to the
share-based compensation plan.
Share-based compensation, related to DSUs, for the three
months ended December 31, 2017, totalled $66 thousand
(2016 – $46 thousand) and for the year ended December 31,
2017, totalled $327 thousand (2016 – $418 thousand). The
total carrying amount of the liability arising from the DSUs as
of December 31, 2017, totalled $1.1 million (December 31, 2016 –
$800 thousand).
As at December 31, 2017, the DSU plan balance was
58,074.60 (December 31, 2016 – 41,492.55) with a fair value
of $17.37 per DSU.
12.2 Stock Option Plan
The Company established a stock option plan that was
approved by shareholders in 2014 and subsequently amended
and restated with the approval of shareholders on May 17, 2017.
Refer to Note 14 of the Financial Statements for information
pertaining to the share-based compensation plan.
Compensation expense is recognized in proportion to the
amount of stock options vested. Share-based compensation
related to the stock option plan for the three months ended
December 31, 2017, totalled $142 thousand (2016 – $96 thousand)
and for the year ended December 31, 2017, totalled $471 thousand
(2016 – $376 thousand). The total carrying amount of the equity
settled employee benefit reserve arising from these stock
options as at December 31, 2017, totalled $1.1 million
(December 31, 2016 – $599 thousand).
As at December 31, 2017, a total of 1,076,600 (December 31,
2016 – 759,259) stock options had been granted. The
outstanding share options at the end of the period had a
weighted average exercise price of $17.01 (December 31, 2016
– $15.41). The number of options exercisable at the end of the
period was 318,700 and had a weighted average exercise price of
$16.08 based on a range of exercise prices from $15.04 to $18.85.
13 Commitments
The Company is subject to contractual obligations such as leasing office space, the MSA with the Government of Saskatchewan,
management services contracts and an information technology service agreement with Information Systems Management Canada
Corporation (“ISM”). The following table summarizes our commitments as of December 31, 2017:
(thousands of CAD dollars)
2018
2019
2020
2021
2022
Thereafter
Total
Office leases 1
Master Service Agreement 2
Information Technology 3 and
other Service Agreements
Total
$ 3,304
500
$ 3,283
500
$ 3,075
500
$ 2,651
500
$ 2,083
500
$ 3,818
5,500
$ 18,214
8,000
4,664
$ 8,468
1,896
$ 5,679
263
$ 3,838
–
$ 3,151
–
$ 2,583
–
$ 9,318
6,823
$ 33,037
1 The Company leases all of its office space through operating leases. Operating leases related to office space include lease terms of between two and ten years, with various
options to extend. The Company does not have an option to purchase the leased assets at the expiry of the lease period.
2 The MSA requires the Company to pay the Government of Saskatchewan and to manage and operate the Land Titles Registry, Land Surveys, Personal Property Registry and
Corporate Registry on behalf of the Government of Saskatchewan for a 20-year period.
3 ISM provides hardware management services and support services for software and hardware infrastructure pursuant to a services agreement. An Amending Agreement for a
five-year term was signed effective as of May 1, 2015.
14 Off-Balance Sheet Arrangements
The Company had no off-balance sheet arrangements as at December 31, 2017.
15 Related Party Transactions
Routine operating transactions with related parties are settled at agreed upon exchange amounts under normal trade terms. Refer
to Note 20 of our Financial Statements for information pertaining to transactions with related parties.
39
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017
16 Critical Accounting Estimates
ISC’s critical accounting estimates are contained in Note 2 of the
Financial Statements under the summary of use of estimates
and judgments and include references to:
• the carrying value, impairment and estimated useful lives of
property, plant and equipment;
• the carrying value, impairment and estimated useful lives of
intangible assets;
• the carrying value and impairment of goodwill;
• the recoverability of deferred tax assets; and
• the measurement of the contingent consideration to be paid
in conjunction with the ERS and AVS acquisitions.
The preparation of the Financial Statements in conformity
with IFRS requires management to make estimates and
underlying assumptions and judgments that affect the
accounting policies and reported amounts of assets, liabilities,
revenue and expenses.
Estimates and underlying assumptions are reviewed on an
ongoing basis. Actual results may differ from these estimates.
Revisions to accounting estimates are recognized in the
period in which the estimates are revised and in any future
periods affected.
17 Changes in Accounting Policies
Refer to Note 3 of the Financial Statements for information pertaining to the adoption and changes in accounting policies
effective in 2017.
The IAS and International Financial Reporting Interpretations Committee issued the following new standards and amendments
to standards and interpretations, which become effective for future periods.
Proposed Standard Description
Amendment to
IFRS 2 – Share-based
Payment
IFRS 9 – Financial
Instruments
The amendments provide requirements on the accounting for the effects of vesting
and non-vesting conditions on the measurement of cash-settled share-based
payments; share-based payment transactions with a net settlement feature for
withholding tax obligations; and a modification to the terms and conditions of a share-
based payment that changes the classification of the transaction from cash-settled
to equity settled. The adoption of the new standard will not have a material impact
on the financial statements of the Company.
The new Standard replaces the current multiple classification and measurement models
for financial assets and liabilities with a single model that has only two classifications:
amortized cost and fair value. Under IFRS 9, where the fair value option is applied to
financial liabilities, any change in fair value resulting from an entity’s own credit risk is
recorded through other comprehensive income (loss) rather than net income (loss). The
new Standard also introduces a credit loss model for evaluating impairment of financial
assets. The adoption of the new Standard will not require any adjustments to the values
recorded in the Company’s consolidated financial statements in the period of initial
application (January 1, 2018). However, the Company will be required to amend certain
note disclosures to accommodate the new standard.
Effective Date
January 1,
2018
January 1,
2018
40
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017 Effective Date
January 1,
2018
Proposed Standard Description
IFRS 15 – Revenue
from Contracts with
Customers
The Standard provides for a single model that applies to contracts with customers as
well as two revenue recognition approaches: at a point in time or over time. The model
features a contract-based, five-step analysis of transactions to determine whether,
when and how much revenue is recognized. The new Standard applies to contracts
with customers. It does not apply to insurance contracts, financial instruments or leases,
which are within the scope of other IFRS. The new revenue standard permits either a full
retrospective method of adoption with restatement of all prior periods presented, or a
modified retrospective method with the cumulative effect of applying the new standard
recognized as an adjustment to opening retained earnings in the period of adoption.
The Company has decided to adopt the new revenue Standard using the modified
retrospective method.
Due to the recent acquisition of AVS, the company continues to assess the impact of
the new standard on ESC. With the exception of AVS, the Company has completed
assessments of all revenue streams of existing operations. The adoption of IFRS 15 will
not have a significant impact to the financial results of the Company.
IFRS 16 – Leases
“IFRS 16 – Leases” replaces “IAS 17 – Leases” and sets out the principles for the recognition,
measurement, presentation and disclosure of leases for both parties to a contract (i.e.,
the customer (‘lessee’) and the supplier (‘lessor’)). The Company is currently assessing the
impact on our consolidated Financial Statements along with the timing of our adoption
of IFRS 16. The Company believes that, on adoption of the Standard, there will be an
increase to assets and liabilities, as the Company will be required to record a right-of-
use asset and a corresponding lease liability on the consolidated statements of financial
position, as well as a decrease to operating costs, an increase to finance costs (due to
accretion of the lease liability) and an increase to depreciation and amortization (due to
amortization of the right-of-use asset).
January 1,
2019
18 Financial Instruments
and Financial Risks
Financial instruments held in the normal course of business
included in our consolidated statement of financial position as
at December 31, 2017, consist of cash, short-term investments,
trade and other receivables, accounts payable and accrued
liabilities, long-term debt and other long-term liabilities.
The Company does not use any form of derivative financial
instruments to manage our exposure to credit risk, interest
rate risk, market risk or foreign currency exchange risk. Refer to
Note 19 of the Financial Statements for information pertaining
to financial instruments and related risk management.
18.1 Fair Value of Financial Instruments
The carrying values of cash, trade and other receivables,
accounts payable and accrued liabilities approximate fair value
due to their immediate or relatively short-term maturity. Within
the long-term debt, the revolving term is currently managed
throughout the three-year term with short-term bankers’
acceptance notes and, as such, the carrying value approximates
fair value due to the short term to maturity as well. It has
been determined that there are no differences between the
carrying amount and the fair market value of these instruments.
The non-revolving term within the long-term debt bears an
interest rate of prime plus applicable margin, which exposes the
Company to some interest rate risk. However, the impact of a
change in interest rates is considered low.
18.2 Credit Risk
Credit risk is the risk that one party to a transaction will fail to
discharge an obligation and cause the other party to incur a
financial loss. The Company extends credit to its customers
in the normal course of business and is exposed to credit
risk in the event of non-performance by customers but does
not anticipate such non-performance would be material.
The Company monitors the credit risk and credit rating of
customers on a regular basis. The Company has significant
concentration of credit risk among government sectors. Its
customers are predominantly provincial, federal and municipal
government ministries and agencies, and its private sector
customers are diverse.
41
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017 19 Business Risks and
Risk Management
All companies are exposed to risk and are required to mitigate
risks on a daily and long-term basis. A key component of
creating strong and sustainable corporate performance is
to balance risk and reward. This begins by understanding a
company’s risk tolerance and appetite for taking on new risks.
ISC actively identifies risks that may affect the Company’s
ability to achieve its goals and objectives and implements
processes to manage those risks. At the foundation of this
process are the frameworks, policies, tools and procedures that
help the organization to ensure risks are being identified and
managed at a strategic, operational and procedural level. ISC is
constantly addressing numerous existing and emerging risks.
Our corporate strategies and plans are designed to implement
effective risk mitigation or management approaches on an
ongoing basis.
The Board oversees ISC’s Enterprise Risk Management (“ERM”)
framework. This includes ensuring appropriate management
systems are in place to ensure ISC’s risks are prudently managed.
The leadership team is accountable for providing executive
oversight of ISC’s ERM activities, including the ongoing
identification and assessment of risks and the development of
mitigation strategies to manage the corporate risks facing the
Company. The key corporate risks are documented and tracked
as part of ISC’s risk register.
The majority of cash is held with Canadian chartered banks
and the Company believes the risk of loss to be minimal. The
maximum exposure to credit risk at December 31, 2017, is
$39.1 million (December 31, 2016 – $38.4 million) equal to the
carrying value of the Company’s financial assets, those being
cash at $31.2 million (December 31, 2016 – $33.5 million),
short-term investments at $0.3 million (December 31, 2016 –
$0.2 million) and trade receivables at $7.5 million (December 31,
2016 – $4.7 million). Quarterly reviews of the aged receivables
are completed. The Company expects to fully collect the
carrying value on all outstanding receivables. Therefore, the
risk to the Company is considered to be low.
18.3 Liquidity Risk
Liquidity risk is the risk that the Company will not be able to
meet its financial obligations as they fall due. The Company’s
cash resources are managed based on financial forecasts and
anticipated cash flow.
18.4 Market Risk
The Company’s exposure to market risk is limited to the DSU
liability whose fair value is affected by equity prices.
18.5 Interest Rate Risk
The Company is subject to interest rate risks as the Credit
Facilities bear interest at rates that are based on floating rates
based on prime, which can vary in accordance with borrowing
rates. The Company manages interest rate risk by using short-
term bankers’ acceptance notes with an option to lock in rates
at any time and by monitoring the effects of market changes in
interest rates. The Company considers the interest rate risk on
its overall debt to be low.
18.6 Foreign Currency Exchange Risk
The Company operates internationally and is exposed to
fluctuations in various currencies with the euro being the most
material. Movements in foreign currencies against the Canadian
dollar may impact revenue, the value of assets and liabilities, and
affect the Company’s profit and loss. The Company’s exposure
to other currencies is negligible at the end of the period.
42
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017 A complete list of risk factors is contained in the Company’s Annual Information Form available on the Company’s website at www.
company.isc.ca and in the Company’s profile on SEDAR at www.sedar.com. The following are high-level descriptions of primary
business risks:
MSA Compliance
Inability to comply with the requirements in the MSA could result in the loss/termination of
the agreement as well as impacting ISC’s reputation and future growth strategies.
Misalignment of Service
Evolution and Pricing Approach
There is a risk that business model requirements for successful and profitable evolution of
registry services are not supported by the Government of Saskatchewan.
Reliance on Key and New
Customers and Clients
We rely on certain key customers and securing new clients and customers in new business
lines. The failure to maintain existing customers or successfully source new clients and
customers could have a material and adverse effect.
Revenue Diversification
There is a risk that ISC’s current revenue sources are not significantly diversified to
withstand economic challenges or downturns connected to common revenue drivers.
Information Technology
Acquisitions
Our operations rely on information technology systems. There is a risk that we do not
have the information technology systems in place to effectively facilitate current and
future requirements to support our business needs and the achievement of our strategic
goals. There is also a risk of potential service disruptions or service delays. We also rely on
third-party service providers for aspects of our IT infrastructure and the provision of critical
IT-related services.
There is a risk that acquisitions could occur with insufficient due diligence, leadership
and cultural differences, over-valuation, imprudent financing, ineffective post-acquisition
integration or could be misaligned with ISC’s overall strategy.
Cost/Efficiency/ Profitability
There is a risk that ISC’s business model and resourcing mix will not allow ISC to achieve cost
efficiencies in new or existing product lines or be sufficiently nimble to take advantage of
business development opportunities or adapt to volume changes within its business.
International Expansion
Competition
We have expanded our operations internationally. We are required to comply with the laws
and regulations of each country where we carry on business and face certain risks inherent
in doing business in international markets, including with respect to integrating operations
across different cultures and languages, complying with foreign laws, customs and practices,
enforcing agreements and collecting receivables through foreign legal systems, and staffing
and managing foreign operations. International expansion could expose us to geographic
regions that may be subject to greater political, economic and social uncertainties.
ISC may be ineffective in its ability to compete against current or future competitors, in
some cases given others’ potential advantage being larger, with greater geographic scope
and greater financial, sales, marketing, technical, personnel and other resources, having
specialized capabilities, operations in lower cost countries or newer technologies, products
or services.
Human and Organizational
Capital
There is a risk that ISC does not have the required competencies, skills and knowledge to
execute on strategic priorities as a growing publicly traded company.
Financing and Capital Needs
There can be no assurance that additional financing will be available to ISC when needed
or on terms acceptable to ISC or the effect, if any, that future issuances and sales of ISC’s
securities will have on the market price of our securities.
43
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017 Reputational
Labour Relations
Insurance May Not Provide
Adequate Coverage
ISC’s reputation could be negatively impacted, thereby damaging ISC’s credibility, future
revenue and/or business opportunities. Events that could impact ISC’s reputation include
the integrity and security of information, failure to protect our intellectual property rights,
inability to successfully implement on growth strategies or failure to comply with rules,
regulation and disclosures.
In the event of a labour disruption such as a strike or lockout, ISC’s ability to carry on
operations would be expected to be impaired significantly, which could have a material and
adverse effect on the business, results of operations and financial condition.
We carry various forms of insurance to protect ourselves from a variety of insurable risks.
Our insurance may not provide sufficient coverage and insurance against certain risks may
not be available to us, may be limited in amount or may not continue to be available at
economically feasible premiums, or at all.
20 Internal Controls over
Financial Reporting
21 Disclosure Controls
and Procedures
The Company’s management, including the President and Chief
Executive Officer and the Executive Vice-President and Chief
Financial Officer, is responsible for establishing and maintaining
appropriate internal controls over financial reporting. Internal
controls over financial reporting have been designed to
provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements
in accordance with IFRS. The design and effectiveness of
ISC’s internal controls over financial reporting in accordance
with National Instrument 52-109 Certification of Disclosure
in Issuers’ Annual and Interim Filings as at December 31, 2017,
was evaluated by management. The Internal Control –
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”) was
used to evaluate the effectiveness of our internal controls over
financial reporting. Based on this evaluation, the President and
Chief Executive Officer and the Executive Vice-President and
Chief Financial Officer concluded that our internal controls over
financial reporting were effective as at December 31, 2017.
The design scope of internal controls over financial reporting
has been limited to exclude controls, policies and procedures of
ERS and AVS, having been acquired less than 365 days prior to
December 31, 2017.
No changes in our internal controls over financial reporting that
have occurred during the period have materially affected or are
reasonably likely to materially affect our internal controls over
financial reporting.
It should be noted that all internal control systems, no matter
how well designed, have inherent limitations. Therefore, even
those systems determined to be effective can provide only
reasonable assurance with respect to financial statement
preparation and presentation.
The Company’s management, including the President and Chief
Executive Officer and the Executive Vice-President and Chief
Financial Officer, is responsible for establishing and maintaining
appropriate disclosure controls and procedures. Disclosure
controls and procedures are designed to provide reasonable
assurance that relevant information is gathered and reported
to senior management, including the President and Chief
Executive Officer and the Executive Vice-President and Chief
Financial Officer, on a timely basis so that appropriate decisions
can be made regarding public disclosures.
The design scope of disclosure controls and procedures has
been limited to exclude controls, policies and procedures of
ERS and AVS, having been acquired less than 365 days prior
to December 31, 2017.
The contribution of ERS to ISC’s consolidated Financial
Statements for the three months ended December 31, 2017,
was approximately 4.0 per cent of revenue and 7.0 per cent
of expenses and for the year ended December 31, 2017, was
approximately 3.0 per cent of revenue and 8.0 per cent of
expenses. ERS contributed 5.0 per cent of current assets,
11.0 per cent of non-current assets, 9.0 per cent of current
liabilities and 3.0 per cent of non-current liabilities.
The contribution of AVS to ISC’s consolidated Financial
Statements for the three months and year ended December 31,
2017, was approximately 0.4 per cent of revenue and 0.5 per cent
of expenses. AVS contributed 8.0 per cent of current assets,
34.0 per cent of non-current assets, 4.0 per cent of current
liabilities and 46.0 per cent of non-current liabilities.
The design and effectiveness of ISC’s disclosure controls and
procedures in accordance with National Instrument 52-109
Certification of Disclosure in Issuers’ Annual and Interim Filings
44
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017 22.2 Non-IFRS Financial Measures Definition
EBITDA is defined as earnings before interest, taxes,
depreciation and amortization expense. Adjusted EBITDA
adjusts EBITDA for stock-based compensation expense or
income, stock option expense, transactional gains or losses
on assets, asset impairment charges, and acquisition and
integration costs. These measures, in addition to net income
and income from operations, measure business performance
and cash flow generation because it removes cash flow
fluctuations caused by the above adjustments. Furthermore,
we use adjusted EBITDA for business planning purposes and to
evaluate and price potential acquisitions. In addition to its use by
management, we also believe these measures are widely used
by securities analysts, investors and others to evaluate the
financial performance of our Company and for comparing our
results with those of other companies. EBITDA margin and
adjusted EBITDA margin are calculated as a percentage of
overall revenue.
Free cash flow is used as a financial measure in our evaluation
of liquidity and financial strength. Adjusting for the swings
in non-cash working capital items due to seasonality or
other timing issues and cash additions to property, plant and
equipment and intangible assets, free cash flow assists in the
long-term assessment of liquidity and financial strength. This
measurement is useful as an indicator of our ability to service
our debt, meet other payment obligations and make strategic
investments. Free cash flow does not represent residual cash
flow available for discretionary expenditures.
as at December 31, 2017, was evaluated by management. Based
on the foregoing evaluation, the President and Chief Executive
Officer and the Executive Vice-President and Chief Financial
Officer concluded that our disclosure controls and procedures
are effective to provide reasonable assurance that material
information relating to the Company is made known to them
and that information required to be disclosed by the Company is
recorded, processed, summarized and reported within the time
periods specified in applicable securities legislation.
22 Non-IFRS Financial Measures
22.1 Non-IFRS Financial Measures
This MD&A includes certain measures, which have not
been prepared in accordance with IFRS, such as EBITDA,
EBITDA margin, adjusted EBITDA, adjusted EBITDA margin
and free cash flow. Rather, these measures are provided as
additional information to complement those IFRS measures
by providing further understanding of our results of operations
from management’s perspective, to provide investors with
supplemental measures of our operating performance and,
thus, highlight trends in our core business that may not
otherwise be apparent when relying solely on IFRS
financial measures.
Management also uses non-IFRS measures to facilitate
operating performance comparisons from period to period,
prepare annual operating budgets and assess our ability
to meet our future capital expenditure and working
capital requirements.
Accordingly, these non-IFRS measures should not be
considered in isolation or as a substitute for analysis of our
financial information reported under IFRS. Such measures do
not have any standardized meaning prescribed by IFRS and,
therefore, they may not be comparable to similar measures
presented by other corporations.
45
2017 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2017 2017 Consolidated Financial Statements
For the Year Ended December 31, 2017
Table of Contents
Management’s Responsibility
Independent Auditor’s Report
Consolidated Statements of Financial Position
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
Status of the Company
Basis of Presentation
Summary of Significant Accounting Policies
Cash
Short-Term Investments
Trade and Other Receivables
Seasonality
Property, Plant and Equipment
Intangible Assets
Goodwill
Investment in Associate
Accounts Payable and Accrued Liabilities
Tax Provision
Share-Based Compensation Plan
Debt
Liabilities Arising from Financing Activities
Earnings per Share
Equity and Capital Management
Financial Instruments and Related Risk Management
Related Party Transactions
Compensation of Key Management Personnel
Segment Information
Acquisition
Net Change in Non-Cash Working Capital
Commitments and Contingencies
Pension Expense
Subsequent Events
46
47
48
49
50
51
52
53
53
54
60
60
61
61
61
62
63
63
63
64
65
67
68
68
68
69
71
71
72
74
76
76
77
77
2017 ISC® Annual Report | Consolidated Financial Statements Management’s Responsibility
Management’s Report on Consolidated Financial Statements
The accompanying consolidated financial statements of Information Services Corporation were prepared by management, which
is responsible for the integrity and fairness of the information presented, including the many amounts that must, of necessity,
be based on estimates and judgments. These consolidated financial statements were prepared in accordance with International
Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. Financial information appearing
throughout our management’s discussion and analysis is consistent with these consolidated financial statements.
In discharging our responsibility for the integrity and fairness of the consolidated financial statements and for the accounting
systems from which they are derived, we maintain the necessary system of internal controls designed to ensure that transactions
are authorized, assets are safeguarded and proper records are maintained. These controls include quality standards in hiring
employees, policies and procedure manuals, a corporate code of conduct, and accountability for performance within appropriate
and well-defined areas of responsibility.
The Board of Directors oversees management’s responsibilities for financial reporting through an Audit Committee, which is
composed entirely of directors who are neither officers nor employees of Information Services Corporation. This Committee reviews
our consolidated financial statements and recommends them to the Board of Directors for approval. Other key responsibilities of the
Audit Committee include reviewing our existing internal control procedures and planned revisions to those procedures, and advising
the directors on auditing matters and financial reporting issues.
Deloitte LLP, who was appointed by the shareholders of Information Services Corporation upon the recommendation of the Audit
Committee and the Board of Directors’ approval, have performed an independent audit of the consolidated financial statements and
their report follows. The auditors have full and unrestricted access to the Audit Committee to discuss their audit and related findings.
Jeff Stusek
President and Chief Executive Officer
Shawn B. Peters, CPA, CA, ICD.D
Executive Vice-President and Chief Financial Officer
March 13, 2018
47
2017 ISC® Annual Report | Consolidated Financial Statements Independent Auditor’s Report
To the Shareholders of Information Services Corporation
We have audited the accompanying consolidated financial statements of Information Services Corporation, which comprise the
consolidated statements of financial position as at December 31, 2017 and December 31, 2016, and the consolidated statements of
comprehensive income, changes in equity and cash flows for the years then ended, and a summary of significant accounting policies
and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with
International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the
preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our
audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements
are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material
misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements
in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Information
Services Corporation as at December 31, 2017 and December 31, 2016, and its financial performance and its cash flows for the years
then ended in accordance with International Financial Reporting Standards.
Chartered Professional Accountants
Licensed Professional Accountants
March 13, 2018
Regina, Saskatchewan
48
2017 ISC® Annual Report | Consolidated Financial Statements Consolidated Statements of Financial Position
(thousands of CAD dollars)
Assets
Current assets
Cash
Short-term investments
Trade and other receivables
Income tax recoverable
Prepaid expenses
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Goodwill
Investment in associate
Deferred tax asset
Total assets
Liabilities
Current liabilities
Accounts payable and accrued liabilities
Long-term debt – current portion
Income tax payable
Deferred revenue
Total current liabilities
Non-current liabilities
Other long-term liability
Deferred revenue
Deferred tax liability
Long-term debt
Total non-current liabilities
Shareholders’ equity
Share capital
Equity settled employee benefit reserve
Accumulated other comprehensive income
Retained earnings
Total shareholders’ equity
Total liabilities and shareholders’ equity
See Note 25 for Commitments and Contingencies
See accompanying Notes
Note
As at December 31,
2017
As at December 31,
2016
4
5
6
8
9
10
11
13
12
15
13
16, 23
13
15
18
14
$
$
$
$
31,265
301
7,510
–
1,913
40,989
4,504
47,022
44,473
–
34,837
171,825
16,522
1,500
3,223
1,407
22,652
15,723
–
9,419
20,060
45,202
19,955
1,070
390
82,556
103,971
171,825
$
$
$
$
33,533
150
4,727
1,518
1,872
41,800
5,402
24,495
13,141
6,011
40,472
131,321
14,425
1,500
–
438
16,363
–
19
3,683
21,935
25,637
19,955
599
–
68,767
89,321
131,321
APPROVED BY THE BOARD OF DIRECTORS ON MARCH 13, 2018:
Joel Teal
Director
Anthony Guglielmin
Director
49
2017 ISC® Annual Report | Consolidated Financial Statements
Consolidated Statements of Comprehensive Income
(thousands of CAD dollars)
Revenue
Expenses
Wages and salaries
Information technology services
Depreciation and amortization
Occupancy costs
Professional and consulting services
Cost of goods sold
Financial services
Project initiatives
Other
Total expenses
Net income before items noted below
Finance (expense) income
Interest income
Interest expense
Net finance (expense)
Share of profit in associate
Change in contingent consideration
Gain on sale of associate
Income before tax
Income tax expense
Net income
Other comprehensive income (loss)
Items that may be subsequently reclassified to net income
Unrealized gain on translation of financial statements
of foreign operations
Change in fair value of marketable securities, net of tax
Other comprehensive income for the year
Total comprehensive income
Earnings per share ($ per share)
Total, basic
Total, diluted
See accompanying Notes
Note
22
8, 9
4
11
11
13
17
17
Year Ended December 31,
2017
Year Ended December 31,
2016
$
93,592
$
88,375
32,802
10,179
7,507
5,292
4,511
4,141
2,235
2,823
2,204
71,694
21,898
369
(876)
(507)
610
–
15,438
37,439
(9,650)
27,789
429
(39)
390
28,179
1.59
1.58
$
$
$
$
28,008
9,602
8,429
4,992
5,564
3,586
2,362
3,214
2,172
67,929
20,446
256
(577)
(321)
1,654
(1,000)
–
20,779
(5,276)
15,503
–
–
–
15,503
0.89
0.88
$
$
$
$
50
2017 ISC® Annual Report | Consolidated Financial Statements
Consolidated Statements of Changes in Equity
(thousands of CAD dollars)
Note
Balance at January 1, 2016
Net income
Stock option expense
Dividend declared
Balance at December 31, 2016
Balance at January 1, 2017
Net income
Other comprehensive income
Stock option expense
Dividend declared
Balance at December 31, 2017
See accompanying Notes
14
14
Retained
Earnings
$ 67,264
15,503
–
(14,000)
$ 68,767
$ 68,767
27,789
–
–
(14,000)
$ 82,556
Accumulated Other
Comprehensive
Income
Share
Capital
$
$
$
$
19,955
–
–
–
19,955
19,955
–
–
–
–
19,955
$
$
$
$
–
–
–
–
–
–
–
390
–
–
390
Equity
Reserve
223
–
376
–
599
599
–
–
471
–
1,070
$
$
$
$
Total
$ 87,442
15,503
376
(14,000)
$ 89,321
$ 89,321
27,789
390
471
(14,000)
$ 103,971
51
2017 ISC® Annual Report | Consolidated Financial Statements
Consolidated Statements of Cash Flows
(thousands of CAD dollars)
Operating
Net income
Add: Charges not affecting cash
Depreciation
Amortization
Foreign exchange (gain)
Deferred tax expense recognized in net income
Gain on disposal of property, plant and equipment
Recovery of MARS* project expenses
Net finance expense
Stock option expense
Share of profit in associate
Gain on sale of associate
Net change in non-cash working capital
Net cash flow provided by operating activities
Investing
Interest received
Cash received on disposal of property, plant and equipment
Additions to property, plant and equipment
Additions to intangible assets
Net cash outflow on acquisition in subsidiary
Net cash outflow on investment in associate
Net proceeds from sale of associate
Net cash flow used in investing activities
Financing
Interest paid
Repayment of long-term debt
Repayment of operating loan
Drawdown of operating loan
Contingent consideration paid
Dividend paid
Net cash flow used in financing activities
Effects of exchange rate changes on cash held in foreign currencies
Decrease in cash
Cash, beginning of year
Cash, end of year
* Mineral Administration Registry Saskatchewan
See accompanying Notes
Year Ended December 31, Year Ended December 31,
2016
2017
Note
$
27,789
$
15,503
8
9
9
14
24
23
11
1,446
6,061
(8)
4,604
(1)
232
507
471
(610)
(15,438)
7,871
32,924
369
3
(448)
(1,686)
(38,724)
(2,451)
24,511
(18,426)
(883)
(1,875)
(10,000)
10,000
–
(14,000)
(16,758)
(8)
(2,268)
33,533
31,265
$
$
1,791
6,638
–
3,486
(1)
232
321
376
(1,654)
–
(528)
26,164
256
2
(851)
(5,848)
–
(995)
–
(7,436)
(491)
(1,125)
–
–
(6,000)
(14,000)
(21,616)
–
(2,888)
36,421
33,533
52
2017 ISC® Annual Report | Consolidated Financial Statements
1 Status of the Company
Information Services Corporation (“ISC” or the “Company”) is
a Canadian corporation with its Class A shares listed on the
Toronto Stock Exchange (“TSX”) under the symbol “ISV”. The
head and registered office of the Company is 300 - 10 Research
Drive, Regina, Saskatchewan, S4S 7J7. The Company, directly or
through its subsidiaries, is a provider of registry and information
management services for public data and records and is the
exclusive provider of the Land Titles Registry, Land Surveys
Directory, Geomatics, Personal Property Registry and Corporate
Registry (collectively, the “Registries”) in Saskatchewan.
The Company owns 100 per cent of ESC Corporate Services
Ltd. (“ESC”), a leading technology-enabled corporate services
provider. ESC is incorporated under the Business Corporations
Act (Ontario) and provides services to law firms, corporations,
financial institutions and others to fulfil a wide variety of clients’
public records due diligence, filings and corporate supply
requirements in connection with public business registries in
Canada and certain other countries. ESC has offices in Toronto,
ON, and Montreal, QC.
On January 23, 2017, the Company acquired all of the issued
and outstanding common shares of Enterprise Registry
Solutions Ltd. (“ERS”). Headquartered in Dublin, Ireland, ERS is
a provider of technology solutions and expertise, specializing
in the implementation and support of systems related to
the corporate registry domain. Its registry solutions support
registries in Europe, North America and Asia. This acquisition
enhances ISC’s core registry offering by adding leading
technology solutions and consultancy services. The Company
completed the transaction with $14.3 million of the purchase
price paid on closing of the transaction and up to €5.0 million in
additional consideration contingent on the retention of existing
leadership and realization of future business (see Note 23).
On October 5, 2017, the Company’s wholly owned subsidiary
ISC Enterprises Inc. (“ISC Ent”) sold its 30.1 per cent ownership
stake in Dye & Durham Corporation (“Dye & Durham”) for
$25.0 million cash and recorded a gain before tax of $15.4 million
(see Note 11).
On December 21, 2017, the Company through its wholly owned
subsidiary ESC acquired all issued and outstanding shares of
AVS Systems Inc. (“AVS”). AVS provides automation software
technology services to serve lending, leasing, and credit issuing
businesses and institutions in Canada. The Company paid
$25.0 million in cash on closing. The Company may pay up to
$20.0 million in additional consideration contingent on the
realization of future business with financial institutions and auto
and equipment finance companies across Canada over a period
of 13 months ending January 31, 2019 (see Note 23).
2 Basis Of Presentation
Statement of compliance
These consolidated financial statements have been prepared
in accordance with International Financial Reporting Standards
(“IFRS”), as issued by the International Accounting Standards
Board (“IAS Board”).
The Company’s Board of Directors (the “Board”) authorized
the consolidated financial statements for the year ended
December 31, 2017, for issue on March 13, 2018.
Basis of measurement
The consolidated financial statements have been prepared on
a going concern basis using the historical cost basis except for
financial instruments that are measured at fair values at the
end of each reporting period, as explained in the accounting
policies below.
Historical cost is generally based on the fair value of the
consideration given in exchange for goods and services.
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date, regardless of
whether that price is directly observable or estimated using
another valuation technique. In estimating the fair value of
an asset or a liability, the Company takes into account the
characteristics of the asset or liability if market participants
would take those characteristics into account when pricing
the asset or liability at the measurement date. Fair value for
measurement and/or disclosure purposes in these consolidated
financial statements is determined on such a basis, except for
share-based payment transactions that are within the scope
of IFRS 2 – Share-based Payment and measurements that have
some similarities to fair value but are not fair value, such as net
realizable value in International Accounting Standards (“IAS”) 2
– Inventories or value in use in IAS 36 – Impairment of Assets.
In addition, for financial reporting purposes, fair value
measurements are categorized into Level 1, 2 or 3 based on the
degree to which the inputs to the fair value measurements are
observable and the significance of the inputs to the fair value
measurement in its entirety, which are described as follows:
• Level 1 inputs are quoted prices (unadjusted) in active
markets for identical assets or liabilities that the entity can
access at the measurement date;
• Level 2 inputs are inputs, other than quoted prices included
within Level 1, that are observable for the asset or liability,
either directly or indirectly; and
• Level 3 inputs are unobservable inputs for the asset or liability.
53
2017 ISC® Annual Report | Notes to the Consolidated Financial Statements
Functional and presentation currency
These consolidated financial statements are presented
in Canadian dollars (“CAD”), which is the functional currency
of the parent company.
Basis of consolidation
These consolidated financial statements incorporate the
financial statements of the Company and its wholly owned
significant operating subsidiaries: ISC Saskatchewan Inc. (“ISC
Sask”), ISC Ent, ESC and ERS. All intragroup assets and liabilities,
equity, income, expenses and cash flows are eliminated in full
on consolidation.
Use of estimates and judgments
The preparation of these consolidated financial statements, in
conformity with IFRS, requires management to make estimates
and underlying assumptions and judgments that affect the
accounting policies and reported amounts of assets, liabilities,
revenue and expenses.
Estimates and underlying assumptions are reviewed on an
ongoing basis. Actual results may differ from these estimates.
Revisions to accounting estimates are recognized in the period
in which the estimates are revised and in any future periods
affected. Critical accounting estimates and judgments are those
that have a significant risk of causing material adjustment.
Management believes that the following are the significant
accounting estimates and judgments used in the preparation
of the consolidated financial statements.
Significant items subject to estimates and underlying
assumptions include:
• the carrying value, impairment and estimated useful lives
of property, plant and equipment (Note 8);
• the carrying value, impairment and estimated useful lives
of intangible assets (Note 9) and goodwill (Note 10);
• the recoverability of deferred tax assets (Note 13); and
• the measurement of the contingent consideration to be
paid in conjunction with the ERS and AVS acquisition
(Notes 16 and 23).
The relevant accounting policies in Note 3 contain further
details on the use of these estimates and assumptions.
3 Summary of Significant Accounting Policies
Foreign Currency
The individual financial statements of each subsidiary entity
are presented in the currency of the primary economic
environment in which the entity operates (its functional
currency). For the purpose of the consolidated financial
statements, the results and financial position of each subsidiary
entity are presented in Canadian dollars, which is the functional
currency of the parent Company and the presentation currency
for the financial statements.
In preparing the financial statements of the individual
subsidiaries, transactions in currencies other than the entity’s
functional currency (foreign currencies) are recognized at the
rates of exchange prevailing at the dates of the transactions. At
the end of each reporting period, monetary items denominated
in foreign currencies are retranslated at the rates prevailing at
that date. Exchange differences are recognized in earnings in
the period in which they arise. Non-monetary items that are
measured in terms of historical cost in a foreign currency are
not retranslated.
For the purpose of presenting consolidated financial
statements, the assets and liabilities of the Company’s foreign
operations are expressed in Canadian dollars using exchange
rates prevailing at the end of the reporting period. Income
and expense items are translated at the average exchange
rates for the period. Foreign currency gains and losses are
recognized in other comprehensive income. The relevant
amount in cumulative foreign currency translation adjustment is
reclassified into earnings upon disposition or partial disposition
of a foreign operation and attributed to non-controlling interests
as appropriate.
Property, plant and equipment
Property, plant and equipment are recorded at cost less
accumulated depreciation and any provisions for impairment.
Cost includes expenditures that are directly attributable
to the acquisition of the asset. The cost of self-developed
assets includes materials, services, direct labour and directly
attributable overhead. Interest costs associated with major
capital and development projects are capitalized during the
development period. Depreciation of assets under development
will commence once they are operational and available for use.
The costs of maintenance, repairs, renewals or replacements
which do not extend productive life of an asset are charged
to operations when incurred. The costs of replacements and
improvements which extend productive life are capitalized.
The cost of replacing part of an item of property, plant and
equipment is recognized in the carrying amount of the item
if it is probable that the future economic benefits embodied
within the part will flow to the Company and its cost can be
measured reliably. The carrying amount of the replaced part
is derecognized.
Depreciation is recorded on property, plant and equipment
on the straight-line basis, which is the cost of the asset less its
residual value over the estimated productive life of each asset.
The useful life of each asset is as follows:
54
2017 ISC® Annual Report | Notes to the Consolidated Financial Statements Leasehold improvements
Office furniture
Office equipment
Hardware
Term of lease
2-10 years
2-10 years
3 years
The estimated useful life and depreciation methods are
reviewed at the end of each annual reporting period, with the
effect of any changes in estimate being accounted for on a
prospective basis. Gains or losses arising from the disposition
or retirement of an item of property, plant and equipment are
measured at the difference between the net disposal proceeds
and the carrying amount of the asset and are recognized in the
consolidated statements of comprehensive income.
Intangible assets
Intangible assets consist of acquired and internally developed
internal-use software and business solutions. It also includes
externally acquired customer contracts, customer and partner
relationships, brand, non-competes, other intangible assets, and
assets under development.
Intangible assets acquired separately
Internal-use software and business solutions acquired
separately are carried at cost less accumulated amortization
and any accumulated impairment losses. Internal-use software,
business solutions, customer and partner relationships, brand,
and non-competes acquired through business combinations are
initially recorded at their fair value based on the present value of
expected future cash flows, which involves estimates about the
future cash flows and discount rates.
Internally generated intangible assets
Research expenditures are expensed while internal-use software
developed internally and business solutions developed internally
and marketed externally are capitalized only when they meet
the recognition criteria for internally generated intangible assets
as provided under IFRS. An internally generated intangible asset
arising from development is recognized if, and only if, all of the
following have been demonstrated:
• the technical feasibility of completing the intangible asset so
that it will be available for use or sale;
• the intention to complete the intangible asset and use or sell it;
• the ability to use or sell the intangible asset;
• how the intangible asset will generate probable future
economic benefits;
• the availability of adequate technical, financial and other
resources to complete the development and to use or sell the
intangible asset; and
• the ability to measure reliably the expenditure attributable to
the intangible asset during its development.
The amount initially recognized for an internally generated
intangible asset is the sum of the expenditures incurred
from the date when the intangible asset first meets the
recognition criteria. If no internally generated intangible asset
can be recognized, development expenditures are charged to
operations in the period in which they are incurred. Subsequent
to initial recognition, an internally generated intangible
asset is reported at cost less accumulated amortization and
accumulated impairment losses, on the same basis as an
intangible asset acquired separately.
Amortization of intangible assets
Amortization is recorded on intangible assets on the straight-line
over the corresponding estimated useful life of the applicable
assets. The estimated useful life and amortization methods
are reviewed at the end of each annual reporting period, with
the effect of any changes in estimate being accounted for on a
prospective basis. Gains or losses arising from derecognition of
an intangible asset are measured at the difference between the
net disposal proceeds and the carrying amount of the asset and
are recognized in the statements of comprehensive income.
Internal-use software
3-15 years
5-7 years
Term of contract
Business solutions
Contracts
Customer and partner relationships 5-15 years
1-15 years
Brand, non-competes and other
N/A (not ready for use)
Assets under development
Impairment of tangible and intangible assets
At each statement of financial position date, ISC reviews
the carrying amounts of its tangible and intangible assets to
determine whether there is any indication that those assets
have suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any). Where
it is not possible to estimate the recoverable amount of an
individual asset, ISC estimates the recoverable amount of
the cash-generating unit (“CGU”) to which the asset belongs.
Where a reasonable and consistent basis of allocation can be
identified, corporate assets are also allocated to individual CGUs;
otherwise, they are allocated to the smallest group of CGUs
for which a reasonable and consistent allocation basis can be
identified. Intangible assets not yet available for use are tested
for impairment annually in December and whenever there is an
indication that the asset may be impaired.
The recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset for which
the estimates of future cash flows have not been adjusted. If the
55
2017 ISC® Annual Report | Notes to the Consolidated Financial Statements
recoverable amount of an asset (or CGU) is estimated to be less
than its carrying amount, the carrying amount of the asset (or
CGU) is reduced to its recoverable amount. An impairment loss
is recognized immediately in comprehensive income.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (or CGU) is increased to the revised estimate
of its recoverable amount, but so that the increased carrying
amount does not exceed the carrying amount that would have
been determined had no impairment loss been recognized for
the asset (or CGU) in prior years. A reversal of an impairment loss
is recognized immediately in comprehensive income.
Goodwill
Goodwill arising on the acquisition of a business represents
the excess of the purchase price over the net fair value of
the identifiable assets, liabilities and contingent liabilities of
the acquired business recognized at the date of acquisition.
Goodwill is initially recognized as an asset at cost and is
subsequently measured at cost less any accumulated
impairment losses.
Impairment of goodwill
For the purpose of impairment testing, goodwill is allocated
to the CGUs expected to benefit from the synergies of the
combination. CGUs are tested for impairment annually or more
frequently if events indicate that the units may be impaired. The
Company’s reporting segments that correspond to the CGUs for
impairment testing are disclosed in Note 10.
When the recoverable amount of the CGU is less than the
carrying amount of the CGU, the impairment loss is allocated
first to reduce the carrying amount of any goodwill allocated
to the unit and then to the other assets of the CGU on a pro
rata basis. An impairment loss recognized for goodwill is not
reversed in a subsequent year. The Company performs its
annual review of goodwill in December each year.
Business acquisition
Business acquisitions are accounted for using the acquisition
method. The consideration transferred in a business
combination is measured at fair value, which is calculated at
the date of acquisition as the sum of the fair values of the assets
transferred by the Company and the liabilities incurred by the
Company to the former owners of the acquiree in exchange for
the control of the acquiree. Acquisition costs are recognized in
profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the
liabilities assumed are recognized at their fair value, except the
deferred tax assets and liabilities are recognized and measured
in accordance with IAS 12 – Income Taxes.
Goodwill is measured as the excess of the sum of the
consideration transferred, the amount of any non-controlling
interests in the acquiree and the fair value of the acquirer’s
previously held equity interest in the acquiree, if applicable,
over the net of the identifiable assets acquired and the liabilities
assumed at date of acquisition.
When the consideration transferred by the Company in a
business combination includes assets or liabilities resulting
from a contingent consideration arrangement, the contingent
consideration is measured at its acquisition-date fair value and
included as part of the consideration transferred in a business
combination. Changes in the fair value of the contingent
consideration that qualify as measurement period adjustments
are adjusted retrospectively, with corresponding adjustments
against goodwill. Measurement period adjustments are
adjustments that arise from additional information obtained
during the ‘measurement period’ (which cannot exceed one
year from the acquisition date) about facts and circumstances
that existed at the acquisition date.
The subsequent accounting for changes in fair value of the
contingent consideration that do not qualify as a measurement
period adjustment depends on how the contingent
consideration is classified. Contingent consideration that is
classified as equity is not measured at subsequent reporting
dates and its subsequent settlement is accounted for within
equity. Contingent consideration that is classified as an asset
or a liability is remeasured at subsequent reporting dates in
accordance with IAS 39 – Financial Instruments, Recognition and
Measurement, or IAS 37 – Provisions, Contingent Liabilities and
Contingent Assets, as appropriate, with the corresponding gain
or loss recognized in net earnings or loss.
Leases
Leases are classified as finance leases whenever the terms
of the lease transfer substantially all the risks and rewards of
ownership to the Company. ISC has determined that all leases
entered into by the Company are classified as operating leases,
as the risks and rewards of ownership have not been transferred
to the Company.
Operating lease payments are recognized as an expense on the
straight-line basis over the lease term, except where another
systematic basis is more representative of the time pattern in
which economic benefits from the leased asset are consumed.
In the event that lease incentives are received to enter into
operating leases, such incentives are recognized as a liability. The
aggregate benefit of incentives is recognized as a reduction of
rental expense on the straight-line basis, except where another
systematic basis is more representative of the time pattern in
which economic benefits from the leased asset are consumed.
56
2017 ISC® Annual Report | Notes to the Consolidated Financial Statements Revenue recognition
Employee benefits
Revenue from the Registries and other services are recognized
in the accounts when services are rendered. Amounts received
in advance of Geomatics services being performed are reflected
as deferred revenue and are recorded as revenue when services
are rendered. Amounts received from customers in advance
are reflected as ‘advances from customers’ and are recorded as
revenue when services are rendered.
Revenue from the Registries and other services is recognized in
the accounts when services are rendered. Amounts received in
advance of Geomatics services being performed are reflected
as deferred revenue and are recorded as revenue when services
are rendered. Amounts received from customers in advance
are reflected as ‘advances from customers’ and are recorded as
revenue when services are rendered.
Revenue from the sale of goods is recognized when all the
following conditions are satisfied:
• the Company has transferred to the buyer the significant risks
and rewards of ownership of the goods;
• the Company retains neither continuing managerial
involvement to the degree usually associated with ownership
nor effective control over the goods sold;
• the amount of revenue can be measured reliably;
•
it is probable that the economic benefits associated with the
transaction will flow to the Company; and
• the costs incurred or to be incurred in respect of the
transaction can be measured reliably.
Revenue from fixed-price contracts to provide services is
recognized by reference to the stage of completion as defined
in the contract when the outcome of the contract can be
estimated reliably. The outcome of a contract can be estimated
reliably when all of the following conditions are satisfied:
• the amount of revenue can be measured reliably;
•
it is probable that the economic benefits associated with the
transaction will flow to the Company;
• the stage of completion of the transaction at the end of the
reporting period can be measured reliably; and
The Company provides pension plans for all eligible employees.
Certain Saskatchewan employees hired prior to October 1,
1977, participate in the Public Service Superannuation Plan, a
defined benefit plan. Pension obligations for this plan are the
responsibility of the General Revenue Fund of the Province
of Saskatchewan.
Saskatchewan employees hired after October 1, 1977, make
contributions to the Public Employees Pension Plan, a defined
contribution plan. The Company’s obligations are limited to
making regular payments to the plans for current services.
These contributions are expensed.
ESC employees make contributions to a defined contribution
plan. The Company’s obligations are limited to making regular
payments to the plans for current services.
ERS employees have an option to make contributions to a
defined contribution plan. The Company’s obligation is limited
to matching employee contributions up to a maximum rate of
5 per cent of salary. These contributions are expensed.
Government grants
Government grants are not recognized until there is reasonable
assurance that the Company will comply with the conditions
attached to them and that the grants will be received.
Government grants whose primary condition is that the Company
should purchase, construct or otherwise acquire non-current
assets are recognized as deferred income in the statements of
financial position and transferred to profit on a systematic and
rational basis over the useful life of the related assets.
Other government grants are recognized as income over the
periods necessary to match them with the costs for which they
are intended to compensate, on a systematic basis. Government
grants that are receivable as compensation for expenses or
losses already incurred or for the purpose of giving immediate
financial support to the Company with no future related costs
are recognized in profit or loss in the period in which they
become receivable.
Other government grants are netted against the related
expenses as services are performed.
• the costs incurred for the transaction and the costs to
complete the transaction can be measured reliably.
Financial instruments
Revenue from time and material contracts is recognized at
the contractual rates as labour hours are delivered and direct
expenses are incurred.
Non-derivative financial instruments
Non-derivative financial instruments are recognized when
the Company becomes a party to the contractual provisions
of the instrument. Financial assets are derecognized when
the rights to receive cash flows from the assets have expired
or have been transferred and the Company has transferred
57
2017 ISC® Annual Report | Notes to the Consolidated Financial Statements substantially all risks and rewards of ownership. Non-derivative
financial instruments are recognized initially at fair value plus, for
instruments not at fair value through profit or loss, any directly
attributable transaction costs.
Investment income earned on the temporary investment
of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs
eligible for capitalization.
At initial recognition, all financial instruments are classified in one
of the following categories depending on the purpose for which
the instruments were acquired.
Financial assets and liabilities at fair value
through profit or loss
Financial assets and liabilities at fair value through profit or loss
(“FVTPL”) are financial assets and liabilities held for trading or
that are designated as such by management. Such assets are
held for trading if they are acquired principally for the purpose
of selling in the short term. These assets and liabilities are initially
recognized, and subsequently carried, at fair value, with changes
recognized in the consolidated statements of comprehensive
income. Transaction costs are expensed. Assets and liabilities
in this category include cash, short-term investments, and the
contingent consideration related to the AVS acquisition.
Available-for-sale
Non-derivative financial assets not included in the above
category are classified as available-for-sale (“AFS”). They are
carried at fair value with changes therein, other than impairment
losses, interest calculated using the effective interest method
and foreign currency differences on AFS monetary items,
recognized in other comprehensive income or loss. When an
investment is derecognized or is determined to be impaired,
the cumulative gain or loss previously recognized in equity is
transferred to profit or loss for the period.
Loans and receivables
Loans and receivables (“LAR”) are subsequently measured
at amortized cost using the effective interest method, less
any impairment losses, with interest expense recognized
on an effective yield basis. Assets in this category include
trade receivables.
Other financial liabilities
Other financial liabilities (“OFL”) are initially measured at fair
value and are subsequently measured at amortized cost using
the effective interest method, with interest expense recognized
on an effective yield basis. Liabilities in this category include
trade and other payables, dividend payable, and long-term debt.
Borrowing costs
Borrowing costs directly attributable to the purchase,
construction or production of qualifying assets, which are assets
that necessarily take a substantial period of time to get ready for
their intended use or sale, are added to the cost of those assets,
until such time as the assets are substantially ready for their
intended use or sale.
All other borrowing costs are recognized in profit or loss in
the period in which they are incurred.
Provisions
Provisions are recognized when the Company has a present
obligation (legal or constructive) as a result of a past event,
it is probable that the Company will be required to settle the
obligation and a reliable estimate can be made of the amount
of the obligation. The amount recognized as a provision is the
best estimate of the consideration required to settle the present
obligation at the end of the reporting period, taking into account
the risks and uncertainties surrounding the obligation. Where a
provision is measured using the cash flows estimated to settle
the present obligation, its carrying amount is the present value
of those cash flows.
When some or all of the economic benefits required to settle
a provision are expected to be recovered from a third party,
the receivable is recognized as an asset if it is virtually certain
that reimbursement will be received and the amount of the
receivable can be measured reliably.
Share-based compensation plan
A deferred share unit (“DSU”) plan has been approved by
the Board, which is described in Note 14. The Company has
recognized an obligation at an estimated amount based on
the fair value of the DSUs as of the grant date using the market
value of the Company’s Class A Shares on the TSX. At the
end of each reporting period, the estimates are re-assessed
based on the fair value of the DSUs as of the reporting period.
Compensation expense is recognized in proportion to the
amount of DSUs vested. The DSUs can be settled in cash or
shares that are purchased from the open market by a broker.
As a result, at the end of each reporting period, the estimates
are re-assessed based on the fair value of the DSUs with any
change in estimate recognized in the obligation and expense.
A stock option plan has been approved by the Board and
shareholders, which is described in Note 14. The Company
has recognized an obligation at an estimated amount based
on the fair value of the stock options as of the grant date
using the Black-Scholes option pricing model. The share-
based compensation expense is recognized in proportion
to the amount of stock options vested. This expense for the
reporting period also represents the total carrying amount
of the equity settled employee benefit reserve arising from
these stock options.
58
2017 ISC® Annual Report | Notes to the Consolidated Financial Statements Investment in associate
The Company has recorded its investment in associate using the equity method. The carrying amount of the investment in associate
is calculated at cost plus the entity’s subsequent share of the associate’s comprehensive income. If, at the end of a reporting period,
there is an indication that an investment may be impaired, the entire carrying amount of the investment is tested for impairment.
If the carrying amount of the investment is found to be less than its recoverable amount, the carrying amount is reduced to its
recoverable amount and an impairment loss is immediately recognized in profit or loss.
Changes in accounting policies
The Company has adopted the following new and revised standards, along with any consequential amendments, effective January 1,
2017, or on such date as they became applicable. These changes were made in accordance with the applicable transitional provisions.
The adoption of these changes did not require any adjustments to the consolidated financial statements.
Standard
Description
Amendment to IAS 7 –
Statements of Cash Flows
The amendment to IAS 7 require disclosures that enables users of financial statements to
evaluate changes in liabilities arising from financing activities, including both changes arising from
cash flow and non-cash changes. To address this, the Company has presented a reconciliation
between opening and closing balances of liabilities with changes arising from financing activities
in Note 16.
Amendment to IAS 12 –
Income Taxes
Clarification of recognizing a deferred tax asset that is related to a debt instrument measured at
fair value. This standard has no impact to the current year financial statements.
Recent accounting pronouncements
The IAS Board and International Financial Reporting Interpretations Committee issued the following new standards and
amendments to standards and interpretations, which become effective for future periods.
Proposed Standard
Description
Amendment to IFRS 2 –
Share-based Payment
IFRS 9 – Financial Instruments
The amendments provide requirements on the accounting for the effects
of vesting and non-vesting conditions on the measurement of cash-settled
share-based payments; share-based payment transactions with a net
settlement feature for withholding tax obligations; and a modification
to the terms and conditions of a share-based payment that changes the
classification of the transaction from cash-settled to equity-settled. The
adoption of the new standard will not have a material impact on the financial
statements of the Company.
The new standard replaces the current multiple classification and measurement
models for financial assets and liabilities with a single model that has only two
classifications: amortized cost and fair value. Under IFRS 9, where the fair value
option is applied to financial liabilities, any change in fair value resulting from
an entity’s own credit risk is recorded through other comprehensive income
(loss) rather than net income (loss). The new standard also introduces a credit
loss model for evaluating impairment of financial assets. The adoption of the
new standard will not require any adjustments to the values recorded in the
Company’s consolidated financial statements in the period of initial application
(January 1, 2018). However, the Company will be required to amend certain note
disclosures to accommodate the new standard.
Effective Date
January 1,
2018
January 1,
2018
59
2017 ISC® Annual Report | Notes to the Consolidated Financial Statements Proposed Standard
Description
IFRS 15 — Revenue from
Contracts with Customers
IFRS 16 — Leases
The standard provides for a single model that applies to contracts with
customers as well as two revenue recognition approaches: at a point in time
or over time. The model features a contract-based, five-step analysis of
transactions to determine whether, when and how much revenue is recognized.
The new standard applies to contracts with customers. It does not apply to
insurance contracts, financial instruments or leases, which are within the
scope of other IFRS standards. The new revenue standard permits either a
full retrospective method of adoption with restatement of all prior periods
presented, or a modified retrospective method with the cumulative effect of
applying the new standard recognized as an adjustment to opening retained
earnings in the period of adoption. The Company has decided to adopt the new
revenue standard using the modified retrospective method.
Due to the recent acquisition of AVS, the company continues to assess the
impact of the new standard on ESC. With the exception of AVS, the Company
has completed assessments of all revenue streams of existing operations. The
adoption of IFRS 15 will not have a significant impact to the financial results of
the Company.
IFRS 16 – Leases replaces IAS 17 – Leases and sets out the principles for the
recognition, measurement, presentation and disclosure of leases for both
parties to a contract (i.e., the customer (‘lessee’) and the supplier (‘lessor’)).
The Company is currently assessing the impact on our consolidated financial
statements along with the timing of our adoption of IFRS 16. The Company
believes that, on adoption of the Standard, there will be an increase to assets
and liabilities, as the Company will be required to record a right-of-use asset
and a corresponding lease liability on the consolidated statements of financial
position, as well as a decrease to operating costs, an increase to finance costs
(due to accretion of the lease liability) and an increase to depreciation and
amortization (due to amortization of the right-of-use asset).
Effective Date
January 1,
2018
January 1,
2019
4 Cash
Cash is held on deposit and certain accounts earn interest at a range of 0.50 per cent to prime less 1.95 per cent. Interest revenue
earned in 2017 is $369 thousand (2016 – $256 thousand).
5 Short-Term Investments
The components of short-term investments are as follows:
(thousands of CAD dollars)
Guaranteed investment certificates (GICs)
Marketable securities at fair value
Total short-term investments
December 31,
2017
December 31,
2016
$
$
150
151
301
$
$
150
–
150
GICs consist of one-year certificates issued by and held as collateral by a Canadian chartered bank at an interest rate of 0.5 per cent
per annum with maturity dates occurring in June 2018 and September 2018. Marketable securities consist of an investment in less
than 5 per cent of the issued and outstanding shares of a company listed on the Australian Stock Exchange, which was acquired as
part of the ERS acquisition.
60
2017 ISC® Annual Report | Notes to the Consolidated Financial Statements
6 Trade and Other Receivables
7 Seasonality
The components of trade and other receivables are as follows:
(thousands of CAD dollars)
December 31,
2017
December 31,
2016
$ 6,497
Trade receivables
383
GST/HST/VAT receivable
Other
630
Total trade and other receivables $ 7,510
$ 3,363
484
880
$ 4,727
Our Registries segment experiences moderate seasonality,
primarily because Land Titles revenue fluctuates in line with
real estate transaction activity in Saskatchewan. Typically, our
second and third quarters generate higher revenue during the
fiscal year when real estate activity is traditionally highest. Our
Services segment is sufficiently diversified with little seasonality
to its revenue performance. However, some smaller categories
of products or services can have some seasonal variation,
slightly increasing during the second and fourth quarters.
Our Corporate segment, which includes the balance of our
corporate activities and shared services functions, as well as the
services and functions of ERS, does not experience seasonality.
Expenses, however, are generally consistent from quarter to
quarter, but can fluctuate due to the timing of project-related
activities or the addition of acquisitions.
8 Property, Plant And Equipment
Leasehold
Improvements
Office
Furniture
Office
Equipment
Hardware
Asset under
Development
Total
(thousands of CAD dollars)
Cost
Balance at December 31, 2015
Additions
Disposals
Transfers
Balance at December 31, 2016
Acquired assets
Additions
Disposals
Transfers
Foreign exchange adjustments
Balance at December 31, 2017
Accumulated depreciation
Balance at December 31, 2015
Depreciation
Disposals
Balance at December 31, 2016
Depreciation
Disposals
Foreign exchange adjustments
Balance at December 31, 2017
Carrying value
At December 31, 2016
At December 31, 2017
$ 9,708
15
–
957
$ 10,680
51
44
–
53
–
$ 10,828
$ 5,678
826
–
$ 6,504
794
–
–
$ 7,298
$
3,154
46
(14)
17
$ 3,203
19
18
(26)
–
–
$ 3,214
$ 2,258
264
(13)
$ 2,509
254
(24)
–
$ 2,739
$ 4,176
$ 3,530
$
$
694
475
$
$
$
$
$
$
$
$
148
1
(6)
50
193
–
2
–
–
–
195
79
37
(6)
110
26
–
–
136
$
1,997
24
(124)
588
$ 2,485
47
252
(158)
–
2
$ 2,628
$
1,496
664
(124)
$ 2,036
372
(156)
1
$ 2,253
83
59
$
$
449
375
$
$
1,141
471
–
(1,612)
–
–
118
–
(53)
–
65
–
–
–
–
–
–
–
–
$
$
$
$
$
$
$ 16,148
557
(144)
–
$ 16,561
117
434
(184)
–
2
$ 16,930
$
$
9,511
1,791
(143)
11,159
1,446
(180)
1
$ 12,426
–
65
$ 5,402
$ 4,504
61
2017 ISC® Annual Report | Notes to the Consolidated Financial Statements
9 Intangible Assets
(thousands of CAD dollars)
Cost
Balance at December 31, 2015
Additions
Disposals
Transfers
Balance at December 31, 2016
Internal Use
Software –
Acquired
Internal Use
Software –
Internally
Developed
Business
Solutions –
Acquired
Business
Solutions – Brand, Non-
Compete,
Internally
Other
Developed
Contracts,
Customer
& Partner
Assets
Under
Relationships Development
Total
$ 9,847 $ 84,842 $
82
(244)
6,311
–
(7,409)
–
$ 15,996 $ 77,433 $
–
–
–
–
–
$
$
1,627
–
–
–
1,627
$
$
1,333 $ 10,844
2,010
–
–
1,333 $ 12,854
–
–
–
$ 3,557
3,626
–
(6,311)
872
$
$ 112,050
5,718
(7,653)
–
110,115
$
27,033
1,997
Acquired assets
1,609
–
Additions
–
–
Impairment
(379)
–
Disposals
–
–
Transfers
Foreign exchange adjustments
190
116
Balance at December 31, 2017 $ 25,793 $ 77,346 $ 2,113 $ 1,867 $ 2,257 $ 27,312 $ 1,880 $ 138,568
9,728
84
–
(15)
–
–
14,417
–
–
–
–
41
–
1,248
–
–
(240)
–
–
277
–
(364)
–
–
–
–
–
–
240
–
891
–
–
–
–
33
Accumulated Depreciation
Balance at December 31, 2015
Amortization
Disposals
Recovery of MARS* expenses
Balance at December 31, 2016
$ 5,785 $ 79,418 $
2,056
(244)
–
3,369
(7,409)
–
$ 7,597 $ 75,378 $
–
–
–
–
–
$
$
1,027
27
–
232
1,286
$
$
31 $
188
–
–
219 $
Amortization
Disposals
Recovery of MARS* expenses
Foreign exchange adjustments
Balance at December 31, 2017 $ 10,368 $ 76,241 $
2,786
(15)
–
–
1,227
(364)
–
–
281
–
–
7
80
–
232
–
332
–
–
3
288 $ 1,598 $
554 $ 2,497 $
$
$
142
998
–
–
1,140
1,355
–
–
2
–
–
–
–
–
$ 86,403
6,638
(7,653)
232
$ 85,620
6,061
–
(379)
–
232
–
–
12
– $ 91,546
$
341
$ 24,495
11,714
269 $ 1,703 $ 24,815 $ 1,880 $ 47,022
1,114 $
872
$
Carrying Value
At December 31, 2016
At December 31, 2017
$ 8,399 $ 2,055 $
$ 15,425 $
$
1,105 $ 1,825 $
–
* Mineral Administration Registry Saskatchewan
62
2017 ISC® Annual Report | Notes to the Consolidated Financial Statements
10 Goodwill
Discount rate
The components of goodwill are as follows:
(thousands of CAD dollars)
Balance, beginning of year
Additions (Note 23)
Foreign exchange adjustment
Balance, end of year
December 31,
2017
December 31,
2016
$
13,141
31,105
227
$ 44,473
$
$
13,141
–
–
13,141
For the purposes of the annual impairment testing, goodwill
is allocated to the following CGUs which are the groups of
units expected to benefit from the synergies of the business
combinations:
(thousands of CAD dollars)
December 31,
2017
December 31,
2016
ISC
ESC including Alliance Online Ltd.
AVS 1
ERS
Balance at December 31, 2017
$ 5,800
13,587
20,926
4,160
$ 44,473
$
$
–
13,141
–
–
13,141
1 Due to the AVS acquisition occurring December 21, 2017, no impairment test was
performed at December 31, 2017.
The Company performs a goodwill impairment test annually
on December 31 and whenever there is an indication of
impairment. No impairment of goodwill was identified as a
result of the Company’s most recent annual impairment test.
The Company has used the value in use method to evaluate the
carrying amount of goodwill for the ESC and ERS CGUs and the
market capitalization approach for ISC. Key assumptions include
an estimate of current cash flow, taxes, a perpetual growth rate
of 2% (2016 – 2%) and discount rates ranging from 15.0 - 15.1%
(2016 – 15.5%).
Recoverable amounts
Management’s past experience and future expectations of
the business performance are used to make a best estimate
of the expected revenue, earnings before interest, taxes, and
depreciation and amortization and operating cash flows for a
three- to four-year period.
Perpetual growth rate
The perpetual growth rate based on management’s current
assessment of the long-term growth prospect of the Company
in the jurisdictions in which it operates.
Working capital and capital investment
The Company’s valuation model also takes account of working
capital and capital investments to maintain the condition of the
assets of each CGU group.
The discount rate applied is a pre-tax rate that reflects the time
value of money and the risk associated with the respective CGU.
11 Investment in Associate
In 2015, through its wholly owned subsidiary ISC Ent, the
Company invested $3.3 million in OneMove Technologies Inc.
(now Dye & Durham), acquiring 30 per cent of the issued and
outstanding voting common shares through its wholly owned
subsidiary, ISC Ent. During 2016, the Company contributed
additional capital representing its pro rata share of equity
raises by Dye & Durham, maintaining ISC’s 30 per cent
ownership interest.
On March 27, 2017, the Company contributed additional capital
of $2.4 million representing its pro rata share of an equity
raise by Dye & Durham. Subsequently, on March 28, 2017, the
Company contributed additional capital of $0.1 million, raising
its ownership interest to 30.1 per cent.
On March 31, 2017, Dye & Durham announced it had acquired
100 per cent of OnCorp Direct Inc. (“OnCorp”), a leading
provider of corporate and personal property search and
registration services, due diligence, and other registry-related
services to legal and financial professionals, corporations and
financial institutions across Canada.
ISC’s 30.1 per cent ownership level and related rights gave the
Company significant influence over Dye & Durham, but did not
represent control and, as a result, the Company has accounted
for this investment using the equity method. The Company
recorded its pro rata share of the net income (loss) on its
consolidated statements of comprehensive income.
On October 5, 2017, the Company sold its 30.1 per cent ownership
stake in Dye & Durham for $25.0 million and recorded a gain
before tax of $15.4 million (after-tax of $13.4 million).
12 Accounts Payable and Accrued Liabilities
The components of accounts payable and accrued liabilities are
as follows:
(thousands of CAD dollars)
December 31,
2017
December 31,
2016
Trade payables
Accrued liabilities
Advances from customers
Dividend payable
Provision for early retirement plan
Total accounts payable and
accrued liabilities
$
1,437
7,489
4,096
3,500
–
$
1,569
5,214
4,135
3,500
7
$ 16,522
$ 14,425
63
2017 ISC® Annual Report | Notes to the Consolidated Financial Statements
13 Tax Provision
The Company is subject to federal and provincial income taxes at an estimated combined statutory rate of 26.75 per cent (2016 –
27.0 per cent).
The increase in tax bases of certain of the Company’s assets upon the change in tax status related to the Company’s Initial Public
Offering, created a deferred tax asset. Upon acquisition of ERS, Alliance Online Ltd. (“Alliance”) and AVS, the value of the acquired
assets was greater on an accounting basis than on a tax basis, resulting in a deferred tax liability.
(thousands of CAD dollars)
Current tax expense
Deferred tax expense
Income tax expense
December 31,
2017
$
5,046
4,604
$ 9,650
December 31,
2016
$
$
1,790
3,486
5,276
Income tax expense varies from the amounts that would be computed by applying the statutory income tax rate to earnings before
taxes for the following reasons:
(thousands of CAD dollars)
Net income before tax
Combined statutory income tax rate
Expected income tax expense
Increase (decrease) in income tax resulting from:
Investment in associate – non-taxable items
Non-deductible expenses/non-taxable income
Foreign income tax rate differential
Scientific research and experimental development (“SR&ED”) reassessment
Adjustment to prior year’s deferred tax assets
Impact of change in tax rates
Tax pools not previously recognized
Unrecognized tax asset 1
Other
Income tax expense
Effective income tax rate
Year Ended December 31,
2016
2017
$ 37,439
26.75%
10,015
(2,228)
539
336
324
266
109
–
114
175
$ 9,650
25.8%
$ 20,779
27.0%
5,610
(447)
375
–
–
–
–
(264)
–
2
5,276
25.4%
$
1 No deferred tax asset has been recognized in respect of $0.9 million of tax losses related to ERS. The tax asset will be recognized as sufficient future taxable profits are earned.
These losses do not expire.
Income tax effects of temporary differences that give rise to significant portions of deferred income tax assets and liabilities
are as follows:
(thousands of CAD dollars)
Property, plant and equipment
Intangible assets
Investment in associate
Non-capital losses
Other assets
Net deferred tax assets
Net Balance Recognized
January 1,
2017
in Profit
or Loss
Foreign
Net Balance
Exchange December 31, Deferred
Tax Asset
2017
Acquisitions Movement
$
254
30,632
(232)
5,750
385
$
(43) $
(323)
232
(4,378)
(92)
(10) $
(6,741)
–
–
–
–
(16)
–
–
–
$
201
23,552
–
1,372
293
$
180
32,992
–
1,372
293
Deferred
Tax Liability
$
21
(9,440)
–
–
–
(liabilities)
$ 36,789
$ (4,604) $ (6,751) $
(16) $ 25,418
$ 34,837 $ (9,419)
64
2017 ISC® Annual Report | Notes to the Consolidated Financial Statements
(thousands of CAD dollars)
Property, plant and equipment
Intangible assets
Investment in associate
Non-capital losses
Other assets
Net deferred tax assets (liabilities)
Net Balance
January 1,
2016
$
120
33,130
(9)
6,860
174
$ 40,275
Recognized
in Profit
or Loss
Foreign
Exchange
Acquisitions Movement
Net Balance
December 31,
2016
Deferred
Tax Asset
Deferred
Tax Liability
$
$
134
(2,498)
(223)
(1,110)
211
(3,486) $
$
–
–
–
–
–
–
$
$
–
–
–
–
–
–
$
254
30,632
(232)
5,750
385
$ 36,789
$
191
34,156
–
5,740
385
$ 40,472
$
$
63
(3,524)
(232)
10
–
(3,683)
In assessing the recovery of deferred income tax assets, management considers whether it is more likely than not that the deferred
income tax assets will be realized. The recognition and measurement of the current and deferred tax assets and liabilities involves
dealing with uncertainties in the application of complex tax regulations and in the assessment of the recoverability of the deferred
tax assets. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during
the periods in which the temporary differences are deductible.
Actual income taxes could vary from these estimates as a result of future events, including changes in income tax laws or the outcome
of tax reviews by tax authorities and related appeals. To the extent the final outcome is different from the amounts initially recorded,
such differences, which could be significant, will impact the tax provision in the period in which the outcome is determined.
No deferred tax has been recognized in respect of temporary differences associated with investments in the Company’s subsidiaries
where the Company is in a position to control the timing and reversal of the temporary differences and it is probable that such
differences will not reverse in the foreseeable future.
14 Share-Based Compensation Plan
Deferred share unit (“DSU”) plan
The Company has established a DSU plan to provide directors and senior officers of ISC with the opportunity to participate in the
long-term success of ISC and to promote a greater alignment of interests between its directors, senior officers and shareholders.
The ISC Board may award DSUs at its discretion from time to time in accordance with the plan and upon such other terms and
conditions as the Board may prescribe. DSU awards vest immediately, unless an alternate vesting schedule is specified by the Board
at the time of the award.
DSUs earn dividend equivalent units (“DEUs”) in the form of additional DSUs at the same rate as dividends on Class A Limited Voting
Shares (“Class A Shares”). The participant is not allowed to convert the DSUs until termination of employment/directorship or death.
The cash value of the DSUs is equivalent to the market value of the Class A Shares when redemption takes place.
On each applicable redemption date, the Company delivers to each participant a cash payment equal to the redemption value of the
DSUs, or an equivalent number of Class A Shares purchased on the TSX. A summary of the status of the DSU plan and the changes
within the period ended December 31, 2017, are as follows:
Balance at January 1, 2017
DSUs/DEUs redeemed January 10, 2017
DSUs/DEUs redeemed March 18, 2017
DSUs/DEUs redeemed May 16, 2017
DSUs granted May 17, 2017
Total notional dividend equivalents declared to date
Balance at December 31, 2017
Weighted Average
Award Price
Units
41,492.55
(1,351.78)
(724.50)
(2,027.67)
15,222.00
5,464.00
58,074.60
$
$
16.97
18.16
18.24
18.80
18.85
17.06
17.37
The Company has recognized an obligation at an estimated amount based on the fair value of the DSUs as of the grant date.
Compensation expense is recognized in proportion to the amount of DSUs vested. At the end of each reporting period, the
estimates are re-assessed based on the fair value of the DSUs as of the reporting period. Any change in estimate is recognized
as a liability and an expense at the end of the reporting period.
65
2017 ISC® Annual Report | Notes to the Consolidated Financial Statements
Share-based compensation for the twelve months ended December 31, 2017, totalled $327 thousand (2016 – $418 thousand).
The total carrying amount of the liability arising from the DSUs as of December 31, 2017, totalled $1.1 million (December 31, 2016 –
$800 thousand). The liability amount is included within Accounts payable and accrued liabilities on the consolidated statements
of financial position.
The fair value of the DSUs at December 31, 2017, has been calculated using the market value of the Company’s Class A Shares
on the TSX.
Stock option plan
The Company established a stock option plan that was approved by shareholders in 2014 and subsequently amended and restated
with the approval of shareholders on May 17, 2017. The exercise price of options issued under the stock option plan is determined by
the Board at the time of the grant, but shall not be less than the closing price for the Class A Shares on the TSX on the trading day
immediately preceding the date of the grant.
Unless the Board determines otherwise, options granted will vest and become exercisable in equal tranches over the four years
following the date of the grant. Once vested, options may be exercised at any time within eight years of the date of the grant, after
which they expire and terminate.
A summary of the status of the stock option plan and the changes within the twelve months ended December 31, 2017, are as follows:
Balance at December 31, 2016
Stock options granted May 17, 2017
Balance at December 31, 2017
Units
759,259
317,341
1,076,600
Average
Exercise Price
$
$
15.41
18.85
17.01
The outstanding share options at the end of the period had a weighted average exercise price of $17.01 (December 31, 2016 – $15.41).
The number of options exercisable at the end of the period was 318,700 and had a weighted average exercise price of $16.08 based
on a range of exercise prices from $15.04 to $18.85.
The Company has recognized an equity reserve at an estimated amount based on the fair value of the stock options using the Black-
Scholes option pricing model as of the following grant dates based on the following inputs:
May 17, 2017
August 15, 2016
August 12, 2015
May 13, 2014
Spot price
Expected volatility
Risk-free interest rate
Dividend yield
Expected life (days)
Fair value
$
18.85
19.33%
1.60%
4.73%
2,920
1.66
$
$
17.40
17.77%
1.30%
4.48%
2,920
1.35
$
$
15.04
18.97%
2.00%
4.54%
2,920
1.45
$
18.80
$
22.50%
2.50%
4.20%
2,920
2.74
$
The Company included the following variables:
• the expected volatility, which is based on a three-year standard deviation of ISC stock price;
• the risk-free rate, that is estimated based on a 10-year Canada bond rate; and
• the maximum option term, which is the maximum duration before expiry.
Compensation expense is recognized in proportion to the amount of stock options vested. Share-based compensation related to
the stock option plan for the twelve months ended December 31, 2017, totalled $471 thousand (2016 – $376 thousand). The total
carrying amount of the equity settled employee benefit reserve arising from these stock options as of December 31, 2017, totalled
$1.1 million (December 31, 2016 – $599 thousand).
66
2017 ISC® Annual Report | Notes to the Consolidated Financial Statements
15 Debt
On September 28, 2015, the Company entered into an amended and restated credit agreement in connection with the secured
credit facilities (collectively, the “Credit Facilities”) provided by a Canadian chartered bank (the “Lender”). On September 27, 2017,
the credit agreement was extended to October 1, 2019. At December 31, 2017, the aggregate amount available under the Credit
Facilities is $31.560 million comprised of (i) a $9.935 million committed revolving term loan facility (the “Revolving Term Facility”)
along with; (ii) a $10.0 million uncommitted revolving credit facility (the “Operating Loan”) to be used for general corporate
purposes (December 31, 2017 and 2016 had nil drawings); and (iii) a $11.625 million committed non-revolving reducing credit
facility (the “Non-Revolving Term Facility”).
Borrowings under the Credit Facilities bear interest at a base rate of prime, bankers’ acceptance, letter of credit or letter of guarantee
fee (determined in accordance with the terms of the Credit Facilities), plus a margin varying between 0.7 per cent and 1.7 per cent
per annum depending on the type of advance. The Company is also required to pay a commitment fee quarterly in arrears at the
rate of 0.34 per cent per annum of the unutilized portion of the Revolving Term Facility loan.
(thousands of CAD dollars)
Operating loan
Revolving Term Facility, which consists of a three-year committed revolving term loan facility
that matures on October 1, 2019, unless renewed prior to that time. This facility currently
consists of a six-month bankers’ acceptance note bearing interest at 1.658 per cent per
annum that matures on March 16, 2018 (December 31, 2016 – a bankers’ acceptance note,
due June 21, 2017, bearing interest at 1.100 per cent per annum).
Non-Revolving Term Facility, used to fund, in part, the acquisition of ESC, repayable by ISC
through quarterly payments of $375 thousand and matures on October 1, 2019. This facility
currently consists of a prime based loan with interest at 3.9 per cent per annum
(December 31, 2016 – prime based loan with interest at 3.4 per cent per annum).
Current portion
Long-term portion
Total long-term debt
December 31,
2017
December 31,
2016
$
–
$
–
$
9,935
$
9,935
1,500
10,125
$ 21,560
1,500
12,000
$ 23,435
The Revolving Term Facility and the Operating Loan under the Credit Facilities contain financial covenants which require the
Company to maintain a ratio of Funded Debt to Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) (defined
in the Credit Facilities) of less than 2:1 and a Fixed Charge Coverage ratio (as defined in the Credit Facilities) of greater than 1.35:1.
The Non-Revolving Term Facility under the Credit Facilities contains financial covenants which require the Company to maintain a
ratio of Funded Debt less up to $5.0 million cash on hand to ESC Adjusted EBITDA being less than 3:1 and an Interest Coverage ratio
(as defined in the Credit Facilities) of greater than 3:1.
The Credit Facilities also contain other positive covenants, negative covenants, events of default, representations and warranties
customary for credit facilities of this nature. The Company was in compliance with all covenants throughout the period.
The indebtedness under the Credit Facilities is secured by a first ranking security interest in all of the personal property and floating
charge on all real property of the Company, a pledge of all shares of ISC Sask and ESC, an unlimited guarantee and postponement
of claim from ISC Sask and ESC guaranteeing all of ISC’s indebtedness and obligations to the Lender, a second ranking security
interest (subject to the security of the Government of Saskatchewan under a debenture) in all of the personal property and floating
charge over all property of ISC Sask and a first ranking security interest in all of the personal property and floating charge on all real
property of ESC.
The amount of borrowing costs capitalized during 2017 and 2016 were nil.
67
2017 ISC® Annual Report | Notes to the Consolidated Financial Statements
16 Liabilities Arising from Financing Activities
The tables below provide the reconciliation of movements of liabilities to cash flows arising from financing activities.
(thousands of CAD dollars)
Financing activities:
Interest paid (a)
Repayment of long-term debt (b)
Repayment of operating loan (c)
Drawdown of operating loan (c)
Dividends paid (d)
Net cash flow used in financing activities
Year Ended December 31,
2017
$
(883)
(1,875)
(10,000)
10,000
(14,000)
$ (16,758)
(thousands of CAD dollars)
Interest payable
Long-term debt including
current portion
Operating loan
Dividends payable
Contingent consideration –
long-term
Net cash flow using in
financing activities
Year Ended
December 31,
2016 1
Cash Flows 2
Acquisitions
Non-cash Changes
Foreign
Exchange
Movement
Fair Value
and Other
Changes
Year Ended
December 31,
2017
$
–
$
(883)
(a) $
23,435
–
3,500
(1,875)
–
(14,000)
(b)
(c)
(d)
$
–
–
–
–
–
–
–
–
$
883
$
–
–
–
14,000
21,560
–
3,500
14,762
38
923
15,723
$ 26,935
$
(16,758)
$
14,762
$
38
$
15,806
$ 40,783
1 With the implementation of IAS 7 – Statement of Cash Flows, the Company is not required to provide the comparative information for preceding periods.
2 The cash flows from long-term and short-term debt make up the net amount of proceeds and repayments presented in the statement of cash flows.
17 Earnings per Share
The calculation of earnings per share is based on net income after tax and the weighted average number of shares outstanding
during the period. Details of the earnings per share are set out below:
(thousands of CAD dollars, except number of shares and earnings per share)
Net income
Weighted average number of shares, basic
Potential dilutive shares resulting from stock options
Weighted average number of shares, diluted
Earnings per share ($ per share)
Total, basic
Total, diluted
18 Equity and Capital Management
December 31,
2017
December 31,
2016
$ 27,789
$
15,503
17,500,000
95,648
17,595,648
17,500,000
35,471
17,535,471
$
$
1.59
1.58
$
$
0.89
0.88
The Company’s authorized share capital consists of an unlimited number of Class A Shares, one Class B Golden Share (the
“Golden Share”) and an unlimited number of Preferred Shares, issuable in series. The Company currently has 17,500,000 Class A
Shares issued and outstanding, one Golden Share issued and outstanding and no Preferred Shares issued or outstanding. Class A
Shares are entitled to one vote per share. The Golden Share, held by the Government of Saskatchewan, has certain voting rights
with respect to the location of the head office and the sale of all or substantially all of the assets of the Company. The Golden
68
2017 ISC® Annual Report | Notes to the Consolidated Financial Statements
Share has no pre-emptive, redemption, purchase or conversion rights and is not eligible to receive dividends declared by the
Company. The Preferred Shares can be issuable at any time and may include voting rights.
Class A
Class B
Number
of Shares
17,500,000
–
17,500,000
17,500,000
–
17,500,000
Share Capital
$
$
19,955
–
19,955
19,955
–
19,955
Number
of Shares
Share Capital
1
–
1
1
–
1
$
$
$
–
–
–
–
–
–
(thousands of CAD dollars, except number of shares)
Balance at January 1, 2016
No movement
Balance at December 31, 2016
Balance at January 1, 2017
No movement
Balance at December 31, 2017
Capital management
The Company’s capital at December 31, 2017, consists of
long-term debt, share capital, employee benefit reserve,
accumulated other comprehensive income and retained
earnings (comprising total shareholders’ equity).
(thousands of CAD dollars)
Long-term debt
Share capital
Accumulated other
comprehensive income
Equity settled employee
benefit reserve
Retained earnings
Capitalization
December 31,
2017
$ 21,560
19,955
December 31,
2016
$ 23,435
19,955
390
–
1,070
82,556
$ 125,531
599
68,767
112,756
$
19 Financial Instruments and
Related Risk Management
The Company does not use any form of derivative financial
instruments to manage its exposure to credit risk, interest rate
risk, market risk or foreign currency exchange risk.
Credit risk
Credit risk is the risk that one party to a transaction will fail to
discharge an obligation and cause the other party to incur a
financial loss. The Company extends credit to its customers
in the normal course of business and is exposed to credit risk
in the event of non-performance by customers, but does
not anticipate such non-performance would be material.
The Company monitors the credit risk and credit rating of
customers on a regular basis. The Company has significant
concentration of credit risk among government sectors. Its
customers are predominantly provincial, federal and municipal
government ministries and agencies, and its private sector
customers are diverse.
The majority of cash is held with Canadian chartered banks
and the Company believes the risk of loss to be minimal. The
maximum exposure to credit risk at December 31, 2017, is
$39.1 million (December 31, 2016 – $38.4 million) equal to the
carrying value of the Company’s financial assets, those being
cash at $31.2 million (December 31, 2016 – $33.5 million),
short-term investments at $0.3 million (December 31, 2016 –
$0.2 million) and trade receivables at $7.5 million (December 31,
2016 – $4.7 million). Quarterly reviews of the aged receivables
are completed. The Company expects to fully collect the
carrying value on all outstanding receivables. Therefore, the risk
to the Company is considered to be low.
The following table sets out details of cash and aging of
receivables:
December 31,
2017
$ 31,265
301
December 31,
2016
$
33,533
150
5,903
4,050
1,282
638
325
$ 39,076
39
$ 38,410
(thousands of CAD dollars)
Cash
Short-term investments
Current trade and other
receivables
Up to three months past
due date
Greater than three months
past due date
Total credit risk
Interest rate risk
The Company is subject to interest rate risks as the Credit
Facilities (Note 15) bears interest at rates that are floating rates
based on prime, which can vary in accordance with borrowing
rates. The Company manages interest rate risk by using short-
term bankers’ acceptance notes with an option to lock in rates
at any time and by monitoring the effects of market changes in
interest rates.
69
2017 ISC® Annual Report | Notes to the Consolidated Financial Statements
The following table presents a sensitivity analysis to changes in market interest rates and their potential impact on the Company for
the periods ended December 31, 2017 and 2016. As the sensitivity is hypothetical, it should be used with caution.
(thousands of CAD dollars)
+ 100 bps*
– 100 bps
+ 100 bps
– 100 bps
Increase (decrease) in interest expense
Decrease (increase) in net income before tax
Decrease (increase) in total comprehensive income
$
$
$
125
125
92
$
$
$
(125)
(125)
(92)
$
$
$
140
140
103
$
$
$
(140)
(140)
(103)
December 31, 2017
December 31, 2016
* bps = basis point spread
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s cash
resources are managed based on financial forecasts and anticipated cash flows.
The following summarizes the contractual maturities for the Company’s financial liabilities at December 31, 2017:
(thousands of CAD dollars)
Long-term debt
Accounts payable and accrued liabilities
Other long-term liabilities
Total liabilities
Carrying
Amount
$ 21,560
16,522
14,762
$ 52,844
Contractual
Cash Flows
$
22,318
16,522
16,135
$ 54,975
0-6
months
$
10,918
16,522
–
$ 27,440
7-12
months
975
–
–
975
$
$
12+
months
$
10,425
–
16,135
$ 26,560
Contractual cash flows for long-term debt includes principal and interest.
Market risk
The carrying amount and fair value of the financial assets and financial liabilities are as follows:
(thousands of CAD dollars)
Classification
Level
Financial assets
Cash
Short-term investments
GICs
Marketable securities
Trade and other receivables
FVTPL
FVTPL
AFS
LAR
Financial liabilities
Accounts payable and accrued liabilities OFL
OFL
Long-term debt – current portion
OFL
Long-term debt
FVTPL
Other long-term liabilities
L2
L2
L1
L2
L2
L2
L2
L2
December 31, 2017
December 31, 2016
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
$ 31,265
$ 31,265
$
33,533
$
33,533
150
151
7,510
150
151
7,510
16,522
1,500
20,060
14,762
16,522
1,500
20,060
14,762
150
–
4,727
14,425
1,500
21,935
–
150
–
4,727
14,425
1,500
21,935
–
Fair value of financial instruments
IFRS require fair value measurements to be categorized into levels within a fair value hierarchy based on the nature of inputs
used in the valuation.
• Level 1 – Quoted prices are readily available from an active market.
• Level 2 – Inputs, other than quoted prices included in Level 1 that are observable either directly or indirectly.
• Level 3 – Inputs are not based on observable market data.
70
2017 ISC® Annual Report | Notes to the Consolidated Financial Statements
The carrying values of cash, trade and other receivables,
accounts payable and accrued liabilities approximate fair
value due to their immediate or relatively short-term maturity.
Within the long-term debt, the revolving term is currently
managed throughout the three-year term with short-term
bankers’ acceptance notes and, as such, the carrying value
approximates fair value due to the short term to maturity as
well. It has been determined that there are no differences
between the carrying amount and the fair market value of
these instruments. The non-revolving term within the long-
term debt bears an interest rate of prime plus applicable
margin, which exposes the Company to some interest rate
risk. However, as noted in the sensitivity analysis of interest
rate risk above, the impact of a change in interest rates is
considered low.
The deferred share unit liability’s fair value is calculated taking
into consideration the market price, expected volatility and the
risk-free interest rate. This liability is classified as Level 2, but
the risk remains low due to the materiality.
Foreign currency exchange risk
The Company operates internationally and is exposed to
fluctuations in various currencies with the euro being the
most material. Movements in foreign currencies against the
Canadian dollar may impact revenue, the value of assets and
liabilities and affect the Company’s profit and loss.
Based on the balance of foreign net monetary assets and net
assets carried on the consolidated statements of financial
position, the impact of an increase (decrease) of 10 per cent
in the euro relative to the Canadian dollar as at December 31,
2017, on net monetary assets was a decrease (increase) of
$52 thousand and on net assets was an increase (decrease)
of $1.3 million. The Company’s exposure to other currencies is
negligible at the end of the period.
20 Related Party Transactions
Included in these consolidated financial statements are
transactions with various Saskatchewan Crown corporations,
ministries, agencies, boards and commissions related to the
Company by virtue of common control by the Government of
Saskatchewan and non-Crown corporations and enterprises
subject to joint control and significant influence by the
Government of Saskatchewan (collectively referred to as
“related parties”). The Company has elected to take the
exemption under IAS 24 – Related Party Disclosures which
allows government-related entities to limit the extent of
disclosures about related party transactions with government
or other government-related entities.
Routine operating transactions with related parties are settled
at agreed upon exchange amounts under normal trade terms.
In addition, the Company pays provincial sales tax to the
Saskatchewan Ministry of Finance on all its taxable purchases.
Taxes paid are recorded as part of the cost of those purchases.
Other amounts and transactions due to and from related parties
and the terms of settlement are described separately in these
consolidated financial statements and the notes thereto.
21 Compensation of Key
Management Personnel
Key management personnel include the directors, the President
and Chief Executive Officer, Chief Financial Officer, Executive
Vice-Presidents, Vice Presidents and President, ESC. The
compensation of the key management team during the period
was as follows:
(thousands of CAD dollars)
Year Ended December 31,
2016
2017
Wages, salaries and short-term benefits $ 3,065
722
Share-based compensation
147
Defined contribution plan
Total compensation
$ 3,934
$ 2,211
1,399
89
$ 3,699
The compensation of directors and the President and
Chief Executive Officer is determined by the Board upon
recommendation of its Compensation Committee having
regard to the performance of individuals and market trends.
71
2017 ISC® Annual Report | Notes to the Consolidated Financial Statements
22 Segment Information
Operating segments are identified as components of a company where separate discrete financial information is available for
evaluation by the chief operating decision maker regarding allocation of resources and assessment of performance. The Company
operates in two reportable segments described below, defined by their primary type of service offerings, namely Registries and
Services. The balance of our corporate activities and shared services functions, including the services and functions provided by
our subsidiary ERS are reported as Corporate.
• The Registries segment includes the provision of registry services with our core business commitment to the Government of
Saskatchewan outlined in a 20-year Master Service Agreement.
• The Services segment contains the product and services we provide to legal and financial institutions through ESC.
The Company evaluates performance and allocated resources based on earnings before interest and income tax. Revenue reported
in the following tables represents revenue generated from external customers.
Revenue and net income
For the year ended December 31, 2017
(thousands of CAD dollars)
Registries
Services
Corporate
Inter-segment
Elimination
Total
$ 74,888
–
$ 14,902
–
$ 3,802
467
$
–
(467)
$ 93,592
–
Total revenue
Inter-segment revenue
Net income
Net income (loss) from operations
Depreciation and amortization
Share of profit in associate
Earnings before interest and taxes
Net finance income (expense)
Inter-segment net finance income (expense)
Gain on sale of asset
Income tax expense
Net income (loss)
Capital expenditures
26,243
(2,770)
–
23,473
59
–
–
(7,120)
16,412
$
$
41
4,182
(2,943)
–
1,239
8
(626)
–
(522)
99
(1,020)
(1,794)
610
(2,204)
(574)
626
15,438
(2,008)
11,278
$
427
$
1,575
$
$
$
$
–
–
–
–
–
–
–
–
–
–
For the year ended December 31, 2016
(thousands of CAD dollars)
Registries
Services
Corporate
Inter-segment
Elimination
Total revenue
Net income
Net income (loss) from operations
Depreciation and amortization
Share of profit in associate
Change in contingent consideration
Earnings before interest and taxes
Net finance income (expense)
Inter-segment net finance income (expense)
Income tax recovery (expense)
Net income (loss)
Capital expenditures
$ 73,950
$
13,639
$
786
$
27,087
(3,931)
–
–
23,156
7
–
(5,307)
17,856
$
$
3,189
3,685
(2,638)
–
(1,000)
47
4
(578)
124
(403)
2,050
$
$
(1,897)
(1,860)
1,654
–
(2,103)
(332)
578
(93)
(1,950)
1,036
$
$
$
$
–
–
–
–
–
–
–
–
–
–
–
Inter-segment revenues are charged among segments at an arm’s length rate, based on rates charged to third parties.
72
29,405
(7,507)
610
22,508
(507)
–
15,438
(9,650)
$ 27,789
$ 2,043
Total
$ 88,375
28,875
(8,429)
1,654
(1,000)
21,100
(321)
–
(5,276)
15,503
$
$
6,275
2017 ISC® Annual Report | Notes to the Consolidated Financial Statements
Assets and liabilities
As at December 31, 2017
(thousands of CAD dollars)
Assets
Total assets, excluding intangibles, goodwill and cash
Intangibles
Goodwill
Cash
Total assets
Liabilities
As at December 31, 2016
(thousands of CAD dollars)
Assets
Total assets, excluding intangibles, goodwill and cash
Intangibles
Goodwill
Cash
Total assets
Liabilities
Registries
Services
Corporate
Total
$ 28,480
4,359
5,800
17,181
$ 55,820
$
5,340
36,488
34,513
4,229
$ 80,570
$
15,245
6,175
4,160
9,855
$ 35,435
$ 49,065
47,022
44,473
31,265
$ 171,825
$
16,213
$ 38,816
$
12,825
$ 67,854
Registries
Services
Corporate
Total
$ 33,847
6,149
–
21,232
$ 61,228
$
3,371
15,271
13,141
1,685
$ 33,468
$ 22,934
3,075
–
10,616
$ 36,625
$ 60,152
24,495
13,141
33,533
131,321
$
$
21,937
$
18,088
$
1,975
$ 42,000
The Registries revenue, which is the Company’s largest segment, can be further detailed as follows:
(thousands of CAD dollars)
Land Titles Registry, Land Surveys Directory and Geomatics
Personal Property Registry
Corporate Registry
Total revenue
Year Ended December 31,
2016
2017
$ 54,792
9,953
10,143
$ 74,888
$
54,921
9,947
9,082
$ 73,950
Total consolidated revenue is attributed to customers within Ireland and Canada. For the twelve months ended December 31, 2017,
revenue within Ireland was $3.0 million (2016 – $nil) and the remainder was in Canada. Non-current assets are held in Canada and
Ireland. At December 31, 2017, non-current assets held in Ireland were $8.2 million (2016 – $nil) while the remainder were held in
Canada. The Company’s top five customers for the Registries segment represent 19.1 per cent of total Registry segment revenue
for the year ended December 31, 2017. Of those customers, no single customer represented more than 10.0 per cent of the total
segment revenue.
73
2017 ISC® Annual Report | Notes to the Consolidated Financial Statements
23 Acquisition
During the year, the Company completed the acquisition of three entities: ERS, Alliance and AVS. Each acquisition is a business
combination to which IFRS 3 – Business Combinations applies. A table outlining the net cash flow related to each acquisition is
provided below followed by a table providing the allocation of the net purchase price for accounting purposes.
Net cash outflow related to the acquisition
(thousands of CAD dollars)
ERS
Alliance
AVS
2017
2016
Acquisition date
Jan 23, 2017
Jun 1, 2017 Dec 21, 2017
Total consideration
$
14,145
$
1,127
$ 40,231
$ 55,503
$
Add (deduct) items not yet paid in cash at Dec. 31, 2017:
Working capital
Contingent consideration
Consideration paid in cash
Less: cash balance acquired
Total net cash flow related to the acquisition
$
121
–
14,266
(604)
13,662
$
–
–
1,127
(177)
950
(469)
(14,762)
25,000
(888)
24,112
$
(348)
(14,762)
40,393
(1,669)
$ 38,724
$
–
–
–
–
–
–
The table below presents the final allocation of the net purchase price for accounting purposes for the ERS acquisition and the
preliminary allocation of the net purchase price for accounting purposes for the Alliance and AVS acquisitions:
(thousands of CAD dollars)
Assets
Cash
Short-term investments
Trade and other receivables
Income tax recoverable
Prepaid expenses
Property, plant and equipment
Intangible assets
Liabilities
Accounts payable and accrued liabilities
Deferred revenue
Income tax payable
Deferred tax liability
Net assets acquired
Goodwill arising on acquisition
Total consideration allocated
Net assets acquired
Total goodwill arising on acquisition
Alliance –
Preliminary
Allocation
AVS –
Preliminary
Allocation
2017
2016
$
$
$
177
–
25
–
9
2
732
945
70
–
–
194
264
681
$
888
–
2,161
–
256
75
23,020
26,400
$
1,669
183
3,637
15
328
117
27,033
32,982
227
–
710
6,158
7,095
19,305
1,024
99
710
6,751
8,584
$ 24,398
$
1,127
681
446
40,231
19,305
$ 20,926
55,503
24,398
$ 31,105
$
$
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
ERS
604
183
1,451
15
63
40
3,281
5,637
727
99
–
399
1,225
4,412
14,145
4,412
9,733
$
$
$
74
2017 ISC® Annual Report | Notes to the Consolidated Financial Statements
Enterprise Registry Solutions Ltd.
On January 23, 2017, the Company acquired all of the issued
and outstanding common shares of ERS. The Company
completed the transaction with $14.3 million (€10.0 million) of
the purchase price paid on closing of the transaction, subject
to working capital adjustments. The transaction was financed
through a combination of cash and $10.0 million of debt from
our existing credit facilities, pursuant to the September 28,
2015, amended and restated Credit Facilities. As part of the
transaction, the Company agreed to pay up to €5.0 million
in consideration contingent upon the retention of existing
leadership and the award and realization of future business over
a 30-month period. For accounting purposes, the retention
portion of the contingent consideration is classified as post-
acquisition remuneration and is not included as part of the
related acquisition consideration. The portion of the contingent
consideration related to the award and realization of future
business will be recorded in the period incurred, if the realization
occurs within the 30-month period.
ERS, which is headquartered in Dublin, Ireland, is a provider
of registry technology solutions and expertise, specializing
in the implementation and support of systems related to
the corporate registry domain. Its registry solutions support
registries in Europe, North America and Asia. The acquisition
of ERS strengthens the Company’s ability to compete more
effectively for new registry business by having an additional
registry technology solution in its offering.
The trade and other receivables acquired in this transaction
with a fair value of $1.5 million consisted of $0.6 million of trade
receivables, $0.3 million of unbilled revenue, $0.5 million of
other receivables and $0.1 million of Value Added Tax (“VAT”)
receivables. These receivables are indemnified by the existing
shareholders and thus are estimated to be fully collectible.
Professional fees associated with the cost of the acquisition
recorded during 2017 were $0.3 million ($0.9 million for the
twelve months ended December 31, 2016) and have been
recorded in expenses on the consolidated statements of
comprehensive income.
The revenue and net loss of the acquiree since the
acquisition date included in the consolidated statements
of comprehensive income for 2017 were $3.0 million and
$(2.7) million, respectively.
The consolidated revenue and comprehensive income
for the Company and the acquiree combined for 2017, as
though the acquisition date for the business combination
occurred during the year had been as of January 1, 2017,
would have been $93.8 million, unaudited, and $27.3 million,
unaudited, respectively.
Remuneration expense associated with the contingent
consideration for the twelve months ended December 31,
2017, totalled $0.9 million and has been recorded within
wages and salaries expense on the consolidated statement
of comprehensive income. The carrying value of the liability
associated with this remuneration as of December 31, 2017, is
$1.0 million and is recorded within other long-term liabilities. The
goodwill of $9.7 million arising on the acquisition of ERS included
amounts in relation to the benefit of an increased global market
presence and competencies, related potential revenue growth,
future market development, synergies and the assembled
workforce of ERS. None of the goodwill recognized is expected
to be deductible for income tax purposes.
The intangible assets above consist of technology of
$2.0 million, customer relations of $0.7 million, and a non-
compete clause of $0.6 million.
Alliance Online Ltd.
On June 1, 2017, ISC through its wholly owned subsidiary, ESC,
acquired all of the issued and outstanding common shares of
Alliance Online Ltd., a personal property, corporate and land
registry search and submission provider located in Mississauga,
ON, for a purchase price of $1.0 million plus $127 thousand of
working capital. Immediately after acquisition, Alliance was
amalgamated with and continued as ESC. This acquisition
provides ESC with additional capacity in personal property
registry services and systems.
The goodwill of $0.4 million arising on the acquisition included
amounts in relation to the benefit of an increased market
presence and competencies, related potential revenue
growth, synergies and the assembled workforce of Alliance.
None of the goodwill recognized is expected to be deductible
for income tax purposes.
The intangible assets above consist of technology of
$0.4 million and customer relations of $0.3 million.
AVS Systems Inc.
On December 21, 2017, the Company through its wholly owned
subsidiary ESC, acquired all of the issued and outstanding
common shares of AVS. The Company completed the
transaction with $25.0 million of the purchase price paid in
cash on closing of the transaction, subject to working capital
adjustments. As part of the transaction, the Company agreed to
pay up to $20.0 million in additional consideration contingent
on the realization of future business with financial institutions
and auto and equipment finance companies across Canada over
a period of 13 months ending January 31, 2019. Management’s
fair value estimate for the contingent consideration is
$14.8 million at December 31, 2017 and is recorded in other
long-term liabilities.
75
2017 ISC® Annual Report | Notes to the Consolidated Financial Statements AVS, which is based in Vernon, BC, provides automation
software technology services to serve lending, leasing, and
credit issuing businesses and institutions in Canada. The
acquisition of AVS positions the Company’s Services segment
to support the growing needs of financial institutions and
legal firms to outsource key business processes associated
with credit due diligence, protection and default solutions
while they focus on their core businesses and allows the
Company to capitalize on new avenues for growth in our
Services segment.
The trade and other receivables acquired in this transaction
with a fair value of $2.2 million consisted of $1.3 million of
trade receivables and $0.9 million of unbilled revenue. These
receivables are estimated to be fully collectible.
Professional fees associated with the cost of the acquisition
recorded during 2017 were $0.5 million and have been
recorded in expenses on the consolidated statements of
comprehensive income.
The revenue and net earnings of the acquiree since the
acquisition date included in the consolidated statements
of comprehensive income for 2017 were $0.4 million and
nil, respectively.
The consolidated revenue and comprehensive income for
the Company and the acquiree combined for 2017, as though
the acquisition date for the business combination occurred
during the year had been as of January 1, 2017, would have
been $116.2 million, unaudited, and $27.7 million, unaudited,
respectively.
The goodwill of $20.9 million arising on the acquisition
of AVS included amounts in relation to the benefit of an
increased market presence and competencies, related market
growth, and the assembled workforce of ERS. None of the
goodwill recognized is expected to be deductible for income
tax purposes.
The intangible assets above consist of customer relations of
$5.1 million, partnership relationships of $8.3 million, technology
of $9.3 million and a non-compete clause of $0.3 million.
24 Net Change in Non-Cash Working Capital
The net change during the period comprised the following:
(thousands of CAD dollars)
Trade and other receivables
Prepaid expenses
Accounts payable and
accrued liabilities
Deferred revenue
Income taxes
Net change in non-cash
working capital
Year Ended December 31,
2016
2017
$
1,067
283
$
(512)
(200)
1,631
845
4,045
1,568
(256)
(1,128)
$ 7,871
$
(528)
Income taxes paid, net of refunds received, for the twelve
months ended December 31, 2017, totalled $1.0 million (2016 –
$2.9 million).
25 Commitments and Contingencies
Leasing arrangements
The Company leases all of its office space through operating
leases. Operating leases related to office spaces have lease
terms of between two and ten years, with various options to
extend. The Company does not have an option to purchase
the leased assets at the expiry of the lease period.
The Company leases certain office equipment through
operating leases. Operating leases related to photocopiers
have lease terms of three years. The Company does not have
an option to purchase the leased assets at the expiry of the
lease period.
Master Service Agreement
Pursuant to a Master Service Agreement (the “MSA”) with
the Government of Saskatchewan dated May 30, 2013, the
Company was appointed, on an exclusive basis, to manage
and operate the Land Titles Registry, Land Surveys Directory,
Personal Property Registry and Corporate Registry on behalf
of the Government of Saskatchewan for a 20-year term
expiring on May 30, 2033. The MSA was amended, effective
December 1, 2015, appointing ISC to continue to manage and
operate the Common Business Identifier Program and the
Business Registration Saskatchewan Program for the same
term as the MSA. The MSA requires the Company to pay to the
Government of Saskatchewan the sum of $0.5 million annually,
in a single instalment payable on or before March 1, in each
calendar year of the term commencing with an initial payment
which was due on March 1, 2014.
76
2017 ISC® Annual Report | Notes to the Consolidated Financial Statements
Commitments
As of December 31, 2017, the Company has commitments over the next five years that include future minimum payments for leasing
of office space, an information technology (“IT”) service agreement with Information Systems Management Canada Corporation,
other management services contracts and a commitment to the Government of Saskatchewan under the MSA:
(thousands of CAD dollars)
2018
2019
2020
2021
2022
Thereafter
Total commitments
Contingencies
Office
Leases
3,304
3,283
3,075
2,651
2,083
3,818
18,214
$
$
IT and Other
Service
Agreements
$
4,664
1,896
263
–
–
–
$ 6,823
Master Service
Agreement
$
500
500
500
500
500
5,500
$ 8,000
Total
$
8,468
5,679
3,838
3,151
2,583
9,318
$ 33,037
The Land Titles Act, 2000 (Saskatchewan) contains an assurance provision that allows customers to recover losses due to the
errors or omissions of the Registries. Concurrent with the execution of the MSA, the Company also entered into Registry Operating
Agreements with the Government of Saskatchewan for each of the Registries. Each Registry Operating Agreement contains
registry specific terms and conditions respecting the operation of the applicable Registry, including, but not limited to, the fees
(“Registry Fees”) the Company may charge for the services applicable to each Registry and the allowable increases to those
Registry Fees, minimum service levels applicable to each Registry and specific allocation of risk and liability associated with the
operation of each Registry.
Management’s estimate of liability for claims and legal actions that may be made by customers pursuant to the assurance provision
and the MSA is based upon claims submitted. As at December 31, 2017, the liability was nil (December 31, 2016 – nil).
26 Pension Expense
The total pension costs under the Company’s defined contribution plans for the year were $1.6 million (2016 – $1.4 million).
27 Subsequent Events
On March 13, 2018, the Board declared a quarterly cash dividend of $0.20 per Class A Share, payable on or before April 15, 2018,
to shareholders of record as of March 31, 2018.
77
2017 ISC® Annual Report | Notes to the Consolidated Financial Statements
Board of Directors
Joel D. Teal
Saskatoon, Saskatchewan
Director since: 2013
Chair of the Board of Directors
Karyn A. Brooks
Calgary, Alberta
Director since: 2016
Member of the Audit Committee
Thomas Christiansen
Swift Current, Saskatchewan
Director since: 2009
Member of the Compensation Committee and
a member of the Governance & Nominating Committee
Douglas A. Emsley
Regina, Saskatchewan
Director since: 2013
Chair of the Compensation Committee
Anthony R. Guglielmin
Vancouver, British Columbia
Director since: 2013
Chair of the Audit Committee
William Scott Musgrave
Lloydminster, Alberta
Director since: 2010
Member of the Audit Committee
Michelle Ouellette, Q.C.
Saskatoon, Saskatchewan
Director since: 2013
Member of the Governance & Nominating Committee
Iraj Pourian
Vancouver, British Columbia
Director since: 2016
Member of the Compensation Committee
Dion E. Tchorzewski
Regina, Saskatchewan
Director since: 2013
Chair of the Governance & Nominating Committee
ISC Leadership
Jeff Stusek
President and Chief Executive Officer
Laurel Garven
Vice-President, Business Strategy
Shawn B. Peters, CPA, CA
Executive Vice-President and Chief Financial Officer
Catherine McLean
Vice-President, People and Culture
Kathy E. Hillman-Weir, Q.C.
Executive Vice-President, Chief Corporate Officer,
General Counsel and Corporate Secretary
Kenneth W. Budzak
Executive Vice-President, Registry Operations
Loren Cisyk
Executive Vice-President, Technology Solutions
Dennis White
Vice-President, Marketing and Business Development
Chris Valentine
President, ESC Corporate Services Ltd.
More information on our directors and officers can be found in our most recent Annual Information Form or Management Information
Circular, which are available on our website at www.company.isc.ca, or through the System for Electronic Document Analysis and
Retrieval (SEDAR) at www.sedar.com.
78
2017 ISC® Annual Report
Corporate Information
Head Office
Ownership
Suite 300 – 10 Research Drive
Regina, Saskatchewan S4S 7J7 Canada
Stock Exchange Listing & Symbol
Toronto Stock Exchange: ISV
Share Capital
As at March 13, 2018, the Board and management are not aware
of any shareholder who directly or indirectly owns or exercises,
or directs control over, more than 10.0 per cent of our Class A
Shares, other than:
(a) Crown Investments Corporation of Saskatchewan which
holds 5,425,000 Class A Shares representing 31.0 per cent
of the issued and outstanding Class A Shares; and
Authorized — the Company’s authorized share capital consists
of an unlimited number of Class A Shares, one Class B Golden
Share and an unlimited number of Preferred Shares.
(b) Sentry Investments Inc. which holds 2,604,510 Class A
Shares representing approximately 14.9 per cent of the
issued and outstanding Class A Shares.
Class A Limited Voting Shares
Auditor
Issued and outstanding — 17,500,000 Class A Shares as at
December 31, 2017.
The Company’s articles and the ISC Act limit ownership of
Class A Shares, including joint ownership to no more than
15.0 per cent of the Class A Shares issued and outstanding.
Class B Golden Share
Issued and outstanding — 1 Class B Golden Share (“Golden
Share”) as at December 31, 2017.
The Golden Share held by the Government of Saskatchewan
has certain voting rights with respect to the location of the
head office and the sale of all or substantially all of the assets
of the Company.
Deloitte LLP
Suite 900 – 2103 11th Avenue
Regina, Saskatchewan S4P 3Z8 Canada
Transfer Agent
AST Trust Company (Canada)
For inquiries related to shares, dividends,
changes of address:
1 (800) 387-0825
Toll-free Inside North America:
www.astfinancial.com
inquiries@astfinancial.com
Regulatory Filings
The Golden Share has no pre-emptive, redemption, purchase
or conversion rights and is not eligible to receive dividends
declared by the Company.
The Company’s filings are available through the System
for Electronic Document Analysis and Retrieval (SEDAR)
at www.sedar.com.
Preferred Shares
Investor Contact Information
Issued and outstanding — Nil as at December 31, 2017.
Preferred Shares are issuable at any time and may include
voting rights.
Jonathan Hackshaw
Director, Investor Relations &
Corporate Communications
Toll-free in North America:
Outside North America:
investor.relations@isc.ca
Annual General Meeting
1 (855) 341-8363
1 (306) 798-1137
The annual general meeting of shareholders will be held
at 9:00 a.m. (Saskatchewan time, MDT) on Wednesday
May 16, 2018, at Innovation Place, 6 Research Drive,
Regina, Saskatchewan.
79
2017 ISC® Annual Report Dividends on Class A Shares
On August 12, 2013, ISC’s Board established a policy of paying an annual dividend of $0.80 per Class A Share to be payable on a
quarterly basis. The payment of dividends is not guaranteed, and the amount and timing of any dividends payable by the Company
will be at the discretion of the Board and will be established on the basis of our cash available for distribution, financial requirements,
any restrictions imposed by our Credit Facilities, the requirements of any future financings and other factors existing at the time.
Year
2017
Type
Quarterly
2016
Quarterly
2015
Quarterly
2014
Quarterly
2013
Quarterly
Ex-Dividend Date
Dec 28, 2017
Sep 28, 2017
Jun 28, 2017
Mar 29, 2017
Dec 29, 2016
Sep 28, 2016
Jun 26, 2016
Mar 27, 2016
Dec 29, 2015
Sep 28, 2015
Jun 26, 2015
Mar 27, 2015
Dec 29, 2014
Sep 26, 2014
Jun 26, 2014
Mar 27, 2014
Dec 27, 2013
Sep 26, 2013
Record Date
Dec 31, 2017
Sep 30, 2017
Jun 30, 2017
Mar 31, 2017
Dec 31, 2016
Sep 30, 2016
Jun 30, 2016
Mar 31, 2016
Dec 31, 2015
Sep 30, 2015
Jun 30, 2015
Mar 31, 2015
Dec 31, 2014
Sep 30, 2014
Jun 30, 2014
Mar 31, 2014
Dec 31, 2013
Sep 30, 2013
Payable Date
Amount
Jan 15, 2018
Oct 15, 2017
Jul 15, 2017
Apr 15, 2017
Jan 15, 2017
Oct 15, 2016
Jul 15, 2016
Apr 15, 2016
Jan 15, 2016
Oct 15, 2015
Jul 15, 2015
Apr 15, 2015
Jan 15, 2015
Oct 15, 2014
Jul 15, 2014
Apr 15, 2014
Jan 15, 2014
Oct 15, 2013
$0.20
$0.20
$0.20
$0.20
$0.20
$0.20
$0.20
$0.20
$0.20
$0.20
$0.20
$0.20
$0.20
$0.20
$0.20
$0.20
$0.20
$0.18*
* This dividend represents a partial dividend for the period July 9, 2013 (the closing date of the Company’s Initial Public Offering on July 9, 2013) to September 30, 2013.
Dividends are eligible dividends pursuant to the Income Tax Act (Canada) as amended. An eligible dividend paid to a Canadian
resident is entitled to the enhanced dividend tax credit. For further information on tax implications, please consult a tax advisor.
80
2017 ISC® Annual Report company.isc.ca
TSX:ISV
Information Services Corporation
300 - 10 Research Drive
Regina, Saskatchewan S4S 7J7 Canada
1 (306) 787-8179