Annual Report 2019
2019 Highlights
2019 Results and Progress
2020 Guidance
Revenue
$133.0M
compared to $119.1M in 2018
Targeting between
$135.0M and $139.0M
EBITDA Margin
EBITDA
29.3%
compared to 32.0% in 2018
$39.0M
compared to $38.1M in 2018
Targeting between
26.0% and 30.0%
Targeting between
$37.0M and $41.0M
Consolidated
Revenue
ISC 5 Year Revenue
for the year ended December 31,
for the year ended December 31 (CAD$ millions)
( CAD$ millions)
Consolidated EBITDA and
Adjusted Consolidated EBITDA
Consolidated EBITDA and Adjusted Consolidated EBITDA
for the year ended December 31,
for the year ended December 31 (CAD$ millions)
(CAD$ millions)
140.0
120.0
100.0
80.0
60.0
40.0
20.0
0.0
.
3
8
7
.
4
8
8
.
6
3
9
.
1
9
1
1
.
0
3
3
1
EBITDA
Adjusted EBITDA
30.1%
29.3%
32.0%
29.9%
37.9%
35.7%
38.8%
33.4%
36.2%
32.1%
.
4
8
2
.
4
0
3
.
5
9
2
.
5
3
3
.
0
0
3
.
4
3
3
.
1
8
3
.
6
5
3
.
0
9
3
.
0
0
4
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
Percentages expressed represent the EBITDA and
* Percentages expressed represent the EBITDA and
adjusted EBITDA margin percentages, respectively.
adjusted EBITDA margin percentages, respectively.
Revenue Distribution by Segment
Revenue Distribution by Segment
for the year ended December 31,
for the year ended December 31,
2019
Revenue Distribution by Segment
for the year ended December 31,
2018
Technology
Solutions*
9%
5%
38%
53%
Services*
Registry
Operations
36%
59%
*Internal related party and other revenue not displayed in chart
About Us
Headquartered in Canada,
ISC (TSX:ISV) is the leading
provider of registry and
information management
services for public data
and records.
2019 ISC® Annual Report
Throughout our history,
we have delivered
value to our clients by
providing solutions to
manage, secure and
administer information
through our Registry
Operations, Services
and Technology
Solutions segments.
Our Business
We operate three segments defined by their
primary type of service offerings.
Registry Operations
Services
Technology Solutions
Delivery of registry services
on behalf of governments
and private sector
organizations.
Delivery of products and
services that utilize public
records and data to provide
value to customers in the
legal and financial sectors.
Development, delivery
and support of registry
(and related) technology
solutions.
Contents
About Us ............................................................ 1
Management’s Discussion and Analysis .............. 6
Letter From Our Chair ......................................... 2
Consolidated Financial Statements .................. 42
Letter From Our CEO .......................................... 3
Board of Directors and ISC Leadership ............. 82
Corporate Social Responsibility ........................... 4
Corporate Information ..................................... 83
1
Letter From Our Chair
Joel Teal
Chair, Board of Directors
This was an exceptional
year for ISC’s financial
performance because of
our team’s ability to execute.
several years now and we expect this
team to continue helping guide ISC into
the future. To all of them, my sincere
thanks for all their hard work and support.
As we look forward into the new decade,
I hope, like all of us at ISC, you do so
with the same sense of optimism and
excitement. We believe we have the
strategy in place with the right resources
to ensure that we grow and deliver long-
term value to all our stakeholders.
Yours sincerely,
Joel Teal
Chair, Board of Directors
This past year was an important one in
terms of top and bottom line growth,
but also as we position ISC for a future
of sustainable growth. ISC has been
keenly focused on our strategy of
diversifying our business to deliver
that growth. Since 2015, we have made
three key acquisitions, adding Services
and Technology Solutions to our
foundational Registry Operations. The
diversification of our business combines
stability and growth, which is a core
strength and priority as we continue to
grow these segments.
While 2019 might be considered a quieter
year compared to previous years on the
acquisition front, it was very active for
your Board. We remained committed
to our strategy and in full support of
our President & CEO, Jeff Stusek, and
the management team for executing
well on a prudent approach to growth.
The careful evaluation of acquisition
opportunities and a continued focus on
integrating prior acquisitions has served
the Company well and positioned us for
sustainable growth.
During the course of the year, the Board
and its Committees reviewed practices
and strategies in their respective areas
of governance, compensation and
finance. Notably, on the compensation
front, the Board recognized the
importance of ensuring our people
continue to be motivated, engaged
and compensated in keeping with best
practices. More information on this can
be found in our Management Information
Circular, which is available on our website
at www.company.isc.ca.
From a financial position perspective, the
Company’s balance sheet remains very
healthy. Your Board is keenly aware of the
importance of how capital is allocated.
During the year, with the support of the
Audit Committee and management
team, we reviewed the Company’s capital
allocation strategy and will continue to
do so on an ongoing basis to ensure
we make the most effective use of our
balance sheet.
This was an exceptional year for ISC’s
financial performance because of our
team’s ability to execute well and adapt
to changing market conditions. The
results speak for themselves. On behalf
of the Board and all stakeholders, I’d like
to congratulate Jeff and the team on
another job well done in 2019.
My fellow Board members, as always,
continue to be steadfast in their support
and continue to provide tremendous
value around the Board table. The current
Board members have been in place for
2
2019 ISC® Annual Report Letter From Our CEO
Jeff Stusek
President and Chief Executive Officer
Looking ahead, I am
optimistic about our
future and growth
potential.
In 2019, we delivered $133 million in
revenue and $39 million in EBITDA – both
new records for us. Across ISC, 2019 was
as much about taking stock and examining
ways to become more efficient as it was
about delivering on our guidance for
the year through organic growth. On
a consolidated basis, we ended 2019
with some excellent results, which we
intend to surpass in 2020, in line with
our strategy of producing profitable and
sustainable growth.
As always, the strength of our Registry
Operations segment helped lay the
foundation for these results. While economic
conditions continued to impact this
segment, our team delivered consistent
results through prudent management of
the business which, in turn, delivered a
consistent quality customer experience.
We appreciate the trust our customers
in Saskatchewan and the provincial
government place in us every day to deliver
services to, or on their behalf.
While 2019 was a quieter year for new
acquisitions, as Joel noted in his letter, it
allowed us to focus on the integration of
our recent additions and grow organically
through our Services and Technology
Solutions segments, achieving an 11 per
cent increase in consolidated revenue and a
2 per cent increase in consolidated EBITDA.
Since we became public in July 2013, we
have focused on becoming a more diverse
business with multiple avenues from which
to grow.
Delivering the best customer experience
has, and will continue to be, at the forefront
of everything we do. In Registry Operations,
we continued to meet and exceed the
expectations of our customers thanks to our
staff going above and beyond to provide
great customer service. This was also the
case in our Services segment. One of the
reasons for the acquisition of Securefact
in 2019 was in response to requests from
customers for an enhanced Know-Your-
Customer offering. We will always look for
the best and most prudent ways to provide
new services to our customers, as it not only
helps their business, but ours as well.
It is clear to me that, through the execution
of our strategy, we have been delivering
leading registry and regulatory service and
solutions, in addition to having a second-to-
none foundation upon which to build. Our
November 2019 announcement, regarding
the award of a contract by the Irish Aviation
Authority to deliver a new safety regulation
system, is just a small indication of our efforts
to expand our offerings.
Operations segment is more efficient than
ever and in a strong position to benefit
from any uptick in the economy. The
Services segment has built a reputation
for responsive customer service, which is
leading to the winning of new customers
and expansion of services offered to existing
customers. The Technology Solutions
segment is continuing to gain traction as a
key piece of our portfolio. As we continue
to grow this segment, we expect that these
existing relationships will lead to future
additional business opportunities.
The fact remains that none of this would be
possible without our people, who come to
work, day in and day out, to make sure we
have happy, satisfied customers. They always
step up whenever the opportunity presents
itself to provide solutions to our customers
so they can focus on their own businesses.
To all our staff, whether you are in Dublin,
Montreal, Toronto, Vernon or Saskatchewan,
a big thank you. The dedication you have
every day inspires me, and I feel fortunate to
work alongside your talent and capabilities.
Yours sincerely,
Looking ahead, I am optimistic about our
future and growth potential. Our Registry
Jeff Stusek
President and Chief Executive Officer
3
2019 ISC® Annual Report 2019 ISC® Annual Report
Corporate Social Responsibility
ISC and our employees are proud to be a supportive partner in the communities where we live,
work and play. Our community giving program focuses on preserving cultural heritage, encouraging
economic growth and celebrating life’s milestones. In 2019, we invested over $290,000 into
supporting non-profit organizations, community initiatives and cultural programs that matter to the
people and places we serve.
Partnering with STARS
Supporting the well-being of our communities goes beyond financial support. ISC’s
Saskatchewan Geomatics team used their expertise to design and deliver a custom
geographic information system (GIS) dataset that was donated to the Shock Trauma
Air Rescue Service (STARS), as a tool to be added to the air ambulance dispatch system
for precision flight mapping. Consisting of Saskatchewan land location-based data, the
GIS dataset provides real-time information about patients’ locations – including nearby
landmarks, meeting points, hospitals, and other response assets. STARS will also receive
ongoing support from ISC, including data updates and related GIS services.
Square One - Centre for Entrepreneurship
ISC supported Saskatchewan entrepreneurs by sponsoring a designated
Saskatchewan Corporate Registry workspace at Square One, an agency
that assists entrepreneurs with basic startup and growth support. In
addition to the sponsorship, ISC employees provided support for Square
One staff to help entrepreneurs use the Saskatchewan Corporate Registry to follow
important business registration steps.
Supporting The Salvation Army
ISC’s Services team at the ESC office in Toronto proudly supported The
Salvation Army’s 2019 Holiday Kettle campaign by pledging a portion of
December’s corporate supply sales and volunteered their time with a kettle
stationed outside their office, which resulted in a $10,000 donation. In addition, a team of 15
volunteered at The Salvation Army’s Mississauga warehouse to prepare and deliver holiday
toy packages to families.
4
2019 Highlights
$290,123
in community investment
79
community organizations
supported
$54,066
fundraising for United Way
183
families honoured
with an
ISC Century
Family Farm Award
Giving Back to Our Communities
Our people have a dedicated spirit of charitable giving and generously supporting organizations inside and outside of
the workplace. From preparing holiday packages to donning their favourite jerseys as part of global movements, our
people were giving back to their communities in 2019.
Cultural Heritage
As the safekeeper of important historical documents, we support
organizations that promote or preserve cultural heritage and instil
pride in the people of the markets we serve.
Examples include:
• MacKenzie Art Gallery
– MacKenzie Gala
• Regina Multicultural Council
– Mosaic Festival of Cultures
Life Events
• Heritage Festival of Saskatoon
• Saskatchewan Indigenous
Cultural Centre
• Friends of the Wascana Marsh
As a corporation responsible for authenticating and recording important
information related to specific life events and geography, we support
organizations that provide programs related to education, health and
community well-being.
Examples of organizations supported include:
• Canadian Mental
Health Association
• Breast Cancer Ireland
• Dress for Success
• Family Service Regina
• Movember
Economic Growth
As a leader in the business community, we are committed to supporting
organizations and events that foster business excellence. In 2019, ISC
invested in programs focused on economic growth in our communities
through providing support for entrepreneurs, young professionals
and education.
Examples include:
• Economic Development Regina
• Women Entrepreneurs of
Saskatchewan
• Saskatchewan Young
Professionals and Entrepreneurs
(SYPE)
Local Community Giving
• Hill School of Business
JDC West Team
• National Indigenous Youth
Entrepreneur Camp
From grassroots charities to local chapters of national non-profit
organizations, ISC’s Saskatchewan Customer Service Centres each
receive $2,000 annually to donate to local charities of their choice.
In 2019, the organizations supported include:
• Battlefords District Food and
Resource Centre
• John Howard Society of
Saskatchewan
• Swift Current Public Library
• REACH Regina
• Moose Jaw Families for Change
Celebrating Family Farm Centennials
As the safekeeper of original land title documentation, ISC
annually celebrates Saskatchewan’s agricultural history
with the Century Family Farm Awards (CFFA) program.
In 2019, ISC recognized 183 family-owned farms that
have been in operation in the province for 100 years
or more. Each received an award package, including a
copy of the original land title issued to their ancestor that
homesteaded the land.
Annual United Way Campaign
ISC encourages its employees to give back to the community
through the annual United Way workplace campaign. Each year,
the Company pledges to match every dollar contributed by
employees through personal giving and fundraising events. In
2019, the employee-led United Way campaign raised $27,033 for
a total donation of $54,066 from ISC.
5
2019 ISC® Annual Report Management’s Discussion and Analysis
For the Fourth Quarter and Year Ended December 31, 2019
Table of Contents
1
Overview ..................................................................................................................................................................................................................................................8
2
3
4
5
6
7
8
Consolidated Financial Analysis ..............................................................................................................................................................................................12
Business Segment Analysis .......................................................................................................................................................................................................16
Summary of Consolidated Quarterly Results ................................................................................................................................................................ 31
Business Strategy..............................................................................................................................................................................................................................32
Financial and Capital Management ....................................................................................................................................................................................32
Business Risks ......................................................................................................................................................................................................................................35
Accounting Policies, Financial Measures and Control .............................................................................................................................................38
6
2019 ISC® Annual Report 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 audited Consolidated
Financial Statements (“Financial Statements”) for the year
ended December 31, 2019, and 2018. Additional information,
including our Annual Information Form for the year ended
December 31, 2019, 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 the Financial Statements
for the years ended December 31, 2019, 2018, and 2017,
prepared in accordance with International Financial Reporting
Standards (“IFRS”), as issued by the International Accounting
Standards Board (“IAS Board”). The financial information that
appears throughout our MD&A is consistent with the Financial
Statements.
This MD&A also 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.
Refer to section 8.8 “Non-IFRS financial measures”. Refer to
section 2 “Consolidated Financial Analysis” for a reconciliation
of EBITDA and adjusted EBITDA to net income.
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.
The Financial Statements are presented 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 information and should
be read in conjunction with the “Caution Regarding Forward-
Looking Information” that follows. This MD&A is current as of
March 17, 2020.
Responsibility for Disclosure
The ISC Board of Directors (“Board”) carries out its responsibility
for review of this disclosure primarily through the Audit
Committee (“Audit Committee”) of the Board, which is
comprised exclusively of independent directors.
The Audit Committee reviews 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.
Caution Regarding Forward-Looking Information
Certain statements in this MD&A and certain information
incorporated by reference herein contains 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, that 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, market trends and other
plans and objectives of or involving ISC. The words may, will,
should, expect, plan, intend, anticipate, believe, estimate, 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
and compete for business (other than our exclusive service
offerings to the Government of Saskatchewan), as well as
business, economic, market and other conditions, availability
of financing, currency exchange rates, consumer confidence,
interest rates, level of unemployment, inflation, liabilities,
income taxes and our ability to attract and retain skilled staff,
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 or
implied by such forward-looking information. Factors that
could cause our actual results or events to differ materially
7
2019 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2019 from those expressed or implied by such forward-looking information include, without limitation, operational, economic, market,
financial, competitive, regulatory, technological and other risks (including those arising from public health concerns) detailed
from time to time in the filings made by the Company, including those detailed in our Annual Information Form for the year
ended December 31, 2019, and the Financial Statements, copies of which are available on our website at www.company.isc.ca
and in the Company’s profile filed on SEDAR at www.sedar.com. 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.
1 Overview
As required by IFRS, effective January 1, 2019, we have adopted IFRS 16 – Leases (“IFRS 16”), as described in section 8.4 “Changes in
Accounting Policies”, using the full retrospective method to each period in 2018 previously reported, with an impact to opening
retained earnings. We have also reclassified some amounts from previous periods to make them consistent with the presentation
for the current period.
Last year we made an adjustment to the fair value estimate of the contingent consideration associated with our AVS Systems Inc.
(“AVS”) acquisition which resulted in a $3.6 million gain in 2018. Where possible, we have tried to present comparisons with and
without this non-recurring item.
1.1 Consolidated highlights
SELECT CONSOLIDATED FINANCIAL INFORMATION
For the year ended December 31, 2019:
EBITDA1
Adjusted EBITDA1
Revenue
Earnings per share
Free cash flow1
$39.0M $40.0M $133.0M $1.11
$30.0M
+2%* vs 2018
+13% vs 2018
+12% vs 2018
+4%* vs 2018
+9% vs 2018
1 EBITDA, adjusted EBITDA 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 companies; refer to section 8.8 “Non-IFRS financial measures”. Refer to section 2 “Consolidated Financial
Analysis” for a reconciliation of EBITDA and adjusted EBITDA to net income. Refer to section 6.1 “Cash Flow” for a reconciliation of free cash flow.
* Includes the change in contingent consideration in 2018 and one-time costs associated with our office closures in 2019.
8
2019 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2019 The select annual financial information set out for the years ended December 31, 2019, 2018, and 2017, is derived from the
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.
(thousands of CAD dollars)
Revenue
Net income
EBITDA1
Adjusted EBITDA1
EBITDA margin (% of revenue)1
Adjusted EBITDA margin (% of revenue)1
Free cash flow1
Dividend declared per share
Earnings per share, basic
Earnings per share, diluted
Total assets
Total non-current liabilities
2019
$ 132,968
19,400
$ 39,026
40,028
29.3%
30.1%
$ 29,996
0.80
$
1.11
1.11
2019
$ 171,579
$ 32,683
2018 (restated)2
Year Ended December 31,
2017
$ 119,131
18,637
$ 38,124
35,578
32.0%
29.9%
$ 27,411
0.80
$
1.06
1.06
$ 93,592
27,789
$ 30,015
33,403
32.1%
35.7%
$ 22,918
0.80
$
1.59
1.58
As at December 31,
2017
2018
$ 173,682
$ 36,420
$ 171,825
$ 45,202
1 EBITDA, EBITDA margin, adjusted EBITDA, 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 companies; refer to section 8.8 “Non-IFRS financial measures”. Refer to section 2
“Consolidated Financial Analysis” for a reconciliation of EBITDA and adjusted EBITDA to net income. Refer to section 6.1 “Cash Flow” for a reconciliation of free cash flow.
2 On January 1, 2019, the Company adopted IFRS 16 using the full retrospective method and, therefore, the 2018 comparative information has been restated and reported under IFRS
16, with an impact to opening retained earnings. Refer to Note 2 of the Financial Statements for further details.
Consolidated Revenue
Consolidated Revenue
for the year ended December 31,
for the year ended December 31,
(CAD$ millions)
(CAD$ millions)
.
6
6
3
9
3
9
.
.
.
1
1
9
1
9
1
1
1
.
.
0
0
3
3
3
1
3
1
2017
2017
2018
2018
2019
2019
140.0
140.0
120.0
120.0
100.0
100.0
80.0
80.0
60.0
60.0
40.0
40.0
20.0
20.0
0.0
0.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
Consolidated EBITDA1 and Consolidated Adjusted EBITDA1
for the year ended December 31,
(CAD$ millions)
EBITDA
Adjusted EBITDA
29.3% 30.1%
32.0%
29.9%
35.7%
32.1%
.
0
0
3
.
4
3
3
.
1
8
3
.
6
5
3
.
0
9
3
.
0
0
4
2017
2018
2019
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 companies. Refer to section 8.8 “Non-IFRS financial measures”.
Refer to section 2 “Consolidated Financial Analysis” for a reconciliation of EBITDA
and adjusted EBITDA to net income.
Percentages expressed represent the EBITDA and adjusted EBITDA margin
percentages, respectively.
ISC has generated strong results over the past three years. Revenue continues to climb and was up 11.6 per cent to $133.0 million
in 2019 compared to $119.1 million in 2018 and is up nearly 42.1 per cent since 2017. The primary driver of revenue growth
in 2019 continues to come from Services through adding new services for existing accounts and winning of new customer
contracts. For purposes of comparison to 2017, excluding the impact of the gain from the sale of our ownership interest in Dye &
Durham Corporation in 2017, net income in 2017 would have been $14.4 million or $0.82 per basic and diluted share, showing an
increase in net income over the three years as well.
9
2019 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2019
EBITDA (earnings before interest, taxes, depreciation and
amortization expense) is also up at $39.0 million for 2019. In
trying to effect a proper comparison to the previous years,
adjusting out one-time items:
• 2019 EBITDA contains one-time costs of $0.8 million
associated with the closure of three service centres in the
third quarter; and
• 2018 EBITDA contains a one-time gain of $3.6 million for
the adjustment to the fair value estimate of the contingent
consideration associated with our AVS acquisition.
EBITDA and adjusted EBITDA are up due to strong results
across all our segments.
• Registry Operations revenue continues to be challenged
by the effects of economic conditions in Saskatchewan;
however, it continues to manage costs and generate strong
free cash flow.
• Services continues to grow with new products and services,
with lower EBITDA growth in 2019 as we invest in cloud and
other technology improvements for future scale and margin
improvement.
• Technology Solutions continues to focus on executing
current implementations of announced contracts, with
much of that being recognized in the fourth quarter.
Consolidated Free Cash Flow 1
for the year ended December 31,
(CAD$ millions)
30.0
25.0
20.0
15.0
10.0
5.0
0.0
.
9
2
2
2017
.
4
7
2
2018
.
0
0
3
2019
1 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 companies, refer to section 8.8 “Non-IFRS financial
measures”. Refer to section 6.1 “Cash Flow” for a reconciliation of free cash flow.
FOURTH QUARTER CONSOLIDATED HIGHLIGHTS
• Revenue was $37.9 million for the quarter, an increase
of $6.9 million or 22.3 per cent compared to the fourth
quarter of 2018 largely due to the completion of milestones
in current contracts within Technology Solutions and
continued growth in Services.
10
• Net income for the quarter was $7.3 million or $0.42
per basic and diluted share compared to $3.2 million or
$0.18 per basic and diluted share in 2018. The year-over-
year increase is mainly due to the increased revenue in
Technology Solutions and Services.
• EBITDA for the fourth quarter of 2019 was $12.3 million
compared to $8.1 million for the same quarter last year due
to increased results in all segments.
• The EBITDA margin for the fourth quarter of 2019 was
32.5 per cent compared to 26.1 per cent in the same quarter
in 2018. The unusual increase in the quarter was due to the
recognition of licence revenue with milestone achievements
in our Technology Solutions segment.
• Excluding stock-based compensation expense or income,
stock option expense, transactional gains and losses on
assets, and acquisition and integration costs, adjusted
EBITDA was $12.7 million for the quarter compared to
$8.3 million in the same quarter last year.
• Free cash flow for the quarter, was $9.5 million, an increase
of $3.6 million compared to the fourth quarter of 2018 due
to higher results of operations.
• On November 6, 2019, our Board declared a quarterly cash
dividend of $0.20 per Class A Limited Voting Share (“Class A
Share”), paid on January 15, 2020, to shareholders of record
as of December 31, 2019.
YEAR-END CONSOLIDATED HIGHLIGHTS
• Revenue was $133.0 million for the year, an increase of
$13.8 million or 11.6 per cent compared to $119.1 million
for the previous year. The increase was due to the higher
revenue generated by Services and Technology Solutions.
• Net income for the year was $19.4 million or $1.11 per basic
and diluted share compared to $18.6 million or $1.06 per
basic share and diluted share last year. The increase was the
result of increased results in all segments and lower overall
corporate costs for 2019.
• EBITDA for the year was $39.0 million compared to
$38.1 million last year, an increase of $0.9 million.
• The EBITDA margin for the year was 29.3 per cent compared
to 32.0 per cent for 2018. The reduction in year-over-year
EBITDA margin was due to the impact of the contingent
consideration adjustment in 2018, which produced the
unusual 2018 margin. Absent the contingent consideration
adjustment, the EBITDA margin for 2018 would have been
29.0 per cent.
• Excluding stock-based compensation expense or income,
stock option expense, transactional gains and losses on
assets, and acquisition and integration costs, adjusted
EBITDA was $40.0 million for the year, up compared to
2019 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2019 will continue to pursue. We also expect to spend between
$2.0 million and $4.0 million on business-as-usual capital
expenditures.
Although we expect Saskatchewan’s economy to remain flat
in 2020 as it pertains to the registries, Registry Operations
will continue to be a strong contributor to results in 2020,
due largely to the high level of operational efficiency and
the resulting strong cash flow this segment generates on a
consistent basis.
In Technology Solutions, as projects continue to move into the
implementation and completion phases in 2020, we expect
to recognize increased revenue and profitability on those
contracts. Many of those will move into maintenance, and we
will continue to pursue new contracts in both the registry and
regulatory sectors.
In addition, we are monitoring the potential impact of
the current outbreak of the novel coronavirus (COVID-19)
on our people, operations and business. The situation is
evolving rapidly and we will continue to assess any effect
on the Company’s operations and the economies in which
we operate.
Based on the previous details, in 2020 the Company’s revenue
is expected to be between $135.0 million and $139.0 million,
EBITDA to be between $37.0 million and $41.0 million, and an
EBITDA margin between 26.0 per cent and 30.0 per cent.
$35.6 million last year, with an adjusted EBITDA margin of
30.1 per cent for 2019 compared to 29.9 per cent last year.
• Free cash flow for the year increased to $30.0 million,
compared to $27.4 million for the same period of 2018 due
to higher results of operations.
• On February 19, 2019, the Company announced that its
wholly owned subsidiary, ESC Corporate Services Ltd. (“ESC”),
acquired substantially all the assets used in the business
of Securefact Transaction Services, Inc. (“Securefact”) for
$6.8 million by way of an asset purchase agreement.
• On October 9, 2019, the Company announced that our
wholly owned Irish subsidiary, Enterprise Registry Solutions
Limited (“ERS”), signed an agreement with the Irish Aviation
Authority to implement and support its new Safety
Regulation System. The total value of the implementation
contract is approximately $7.0 million, with a subsequent
agreement expected for system support and maintenance.
The new system is expected to go live in 2021.
•
In September 2019, the Company made the decision to
close three regional service centres in Saskatchewan due to
a steadily declining need for counter service and customers’
adoption of online services offered by the Company.
1.2 Subsequent events
• On March 17, 2020, our Board declared a quarterly
cash dividend of $0.20 per Class A Share, payable on
or before April 15, 2020, to shareholders of record as of
March 31, 2020.
1.3 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, EBITDA margin and capital
expenditures. Refer to “Caution Regarding Forward-Looking
Information”.
ISC has built a strong, sustainable and growing business
underpinned by our two largest segments, Registry Operations
and Services. These two segments deliver consistency
and growth, respectively, while our Technology Solutions
segment focuses to become a meaningful contributor to our
consolidated results in the years to come.
In 2020, we expect to deliver continued organic growth, driven
by our Services segment, through the expansion of offerings
to existing customers as well as the acquisition of new
customers throughout the year. The Company will also explore
appropriate acquisition targets which are complementary to
or add value to existing lines of business. The diversification
of our business remains a key part of our strategy, which we
11
2019 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2019 2 Consolidated Financial Analysis
Consolidated revenue was up 22.3 per cent and 11.6 per cent for the three months and year ended December 31, 2019,
respectively, compared to the same periods last year. Net income was also up in the quarter and year-to-date compared to last
year largely due to increased results in all segments and lower overall corporate costs.
2.1 Consolidated statements of comprehensive income
(thousands of CAD dollars)
Revenue
Registry Operations
Services
Technology Solutions
Corporate and other
Total revenue
Expenses
Wages and salaries
Cost of goods sold
Depreciation and amortization
Information technology services
Occupancy costs
Professional and consulting services
Financial services
Other
Total expenses
Net income before items noted below
Finance (expense) income
Interest income
Interest expense
Net finance expense
Change in contingent consideration
Income before tax
Income tax expense
Net income
Other comprehensive income (loss)
Unrealized gain (loss) on translation of financial
statements of foreign operations
Change in fair value of marketable securities,
net of tax
Other comprehensive income (loss) for the period
Total comprehensive income
$
71
(359)
(288)
–
9,346
(1,999)
7,347
78
(77)
1
7,348
Three Months Ended December 31,
2018 (restated)1
2019
Year Ended December 31,
2018 (restated)1
2019
$ 18,069
13,519
9,333
(2,979)
37,942
$ 16,780
11,591
6,276
(3,632)
31,015
$ 70,399
51,230
24,246
(12,907)
132,968
$ 70,259
42,384
21,225
(14,737)
119,131
11,578
8,236
2,697
2,549
786
1,351
462
649
28,308
9,634
10,255
7,033
3,151
2,339
859
962
584
704
25,887
5,128
116
(271)
(155)
(195)
4,778
(1,620)
3,158
247
(37)
210
3,368
$
41,689
31,171
11,400
8,796
3,485
4,281
2,138
2,382
105,342
27,626
283
(1,529)
(1,246)
–
26,380
(6,980)
19,400
37,842
25,084
11,775
8,479
3,369
4,785
2,302
2,713
96,349
22,782
416
(1,189)
(773)
3,567
25,576
(6,939)
18,637
(538)
232
29
(509)
$ 18,891
(108)
124
$ 18,761
1 On January 1, 2019, the Company adopted IFRS 16 using the full retrospective method and, therefore, the comparative information has been restated and reported under IFRS 16,
with an impact to opening retained earnings. Refer to Note 2 of the Financial Statements for further details.
12
2019 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2019
2.2 Consolidated revenue
Consolidated Revenue1
for the three months ended December 31,
Consolidated Revenue1
for the year ended December 31,
3.6
8%
38%
17%
36%
Technology Solutions
Services
Registry Operations
54%
47%
+23%
5%
36%
59%
9%
38%
53%
Technology Solutions
Services
Registry Operations
+12%
2018
2019
2018
2019
1 Technology Solutions and Services are net of Corporate and other revenue/eliminations.
(thousands of CAD dollars)
Registry Operations
Services
Technology Solutions
Corporate and other
Total revenue
Three Months Ended December 31,
2018
2019
Year Ended December 31,
2019
2018
$ 18,069
13,519
9,333
(2,979)
$ 37,942
$ 16,780
11,591
6,276
(3,632)
$ 31,015
$ 70,399
51,230
24,246
(12,907)
$ 132,968
$ 70,259
42,384
21,225
(14,737)
$ 119,131
Total revenue increased in the quarter and for the year as compared to the same periods last year, with increases in all segments.
2.3 Consolidated expenses
Consolidated Expenses
for the three months ended December 31,
(CAD$ millions)
Consolidated Expenses
for the year ended December 31,
(CAD$ millions)
Other
Cost of goods sold
Depreciation and
amortization
Employee expenses
25.9
21%
27%
12%
40%
2018
28.3
20%
29%
10%
41%
2019
96.3
22%
26%
12%
40%
2018
105.3
20%
Other
Cost of goods sold
Depreciation and
amortization
Employee expenses
29%
11%
40%
2019
(thousands of CAD dollars)
Wages and salaries
Cost of goods sold
Depreciation and amortization
Information technology services
Occupancy costs
Professional and consulting services
Financial services
Other
Total expenses
Three Months Ended December 31,
2018 (restated)1
2019
Year Ended December 31,
2018 (restated)1
2019
$ 11,578
8,236
2,697
2,549
786
1,351
462
649
$ 28,308
$ 10,255
7,033
3,151
2,339
859
962
584
704
$ 25,887
$ 41,689
31,171
11,400
8,796
3,485
4,281
2,138
2,382
$ 105,342
$ 37,842
25,084
11,775
8,479
3,369
4,785
2,302
2,713
$ 96,349
1 On January 1, 2019, the Company adopted IFRS 16 using the full retrospective method and, therefore, the comparative information has been restated and reported under IFRS 16,
with an impact to opening retained earnings. Refer to Note 2 of the Financial Statements for further details.
13
2019 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2019
Consolidated expenses were $28.3 million for the fourth quarter, an increase of $2.4 million compared to the same fourth quarter
last year and were $105.3 million for the year, an increase of $9.0 million compared to the same period last year. The increase in the
quarter and year was largely due to:
•
•
increased cost of goods sold related to the corresponding increased revenue in Services; and
increased staffing in Services and Technology Solutions to service our new development and existing implementation and
maintenance commitments.
These increases were partially offset by lower depreciation and amortization, decreased staffing in Registry Operations as well as
decreased professional and consulting services year-over-year across our segments.
2.4 Consolidated net income
Consolidated Net Income1
for the three months ended December 31,
(CAD$ millions)
Consolidated Net Income1
for the year ended December 31,
(CAD$ millions)
7.3
7.3
Adjustment to
contigent consideration
+133%
+119%*
18.6
3.6
15.1
19.4
19.4
Adjustment to
contigent consideration
+4%
+29%*
2019
2018
2019
36%
3.4
3.2
(0.2)
2018
1 On January 1, 2019, the Company adopted IFRS 16. See section 1.1 “Consolidated highlights” – footnote 2 for further details.
* Represents the change in net income excluding the change in contingent consideration.
.
Net income for the quarter was $7.3 million or $0.42 per basic and diluted share, an increase of $4.2 million compared to the
fourth quarter of 2018 and was $19.4 million or $1.11 per basic and diluted share for the year compared to $18.6 million or $1.06
per basic and diluted share last year.
As reported in 2018, net income in 2018 included the positive impact of $3.6 million in adjustments to the fair value estimate of
the contingent consideration associated with our AVS acquisition, which is not present in 2019. Excluding the net adjustments to
the contingent consideration, net income for the three months and year ended December 31, 2018, would have been $3.4 million
and $15.1 million, respectively.
14
2019 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2019 2.5 Consolidated EBITDA and Adjusted EBITDA
Consolidated EBITDA and adjusted EBITDA1,2
for the three months ended December 31,
(CAD$ millions)
Consolidated EBITDA and adjusted EBITDA1,2
for the year ended December 31,
(CAD$ millions)
36%
8.1
8.3
EBITDA
Adjustments
12.3
12.7
38.1
35.6
39.0
40.0
+53%
EBITDA
Adjustments
+13%
0.2
2018
0.4
2019
(2.5)
2018
1.0
2019
1 On January 1, 2019, the Company adopted IFRS 16. See section 1.1 “Consolidated highlights” – footnote 2 for further details.
2 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 companies. Refer to section 8.8 “Non-IFRS financial measures”.
EBITDA for the fourth quarter of 2019 was $12.3 million compared to $8.1 million for the same quarter last year and was
$39.0 million for the year as compared to $38.1 million last year, due to increased results in all segments. Similarly, adjusted EBITDA
was $12.7 million for the quarter, an increase of 53.5 per cent compared to $8.3 million in the fourth quarter of 2018 and was
$40.0 million for the year compared to $35.6 million last year. There were minimal adjustments in adjusted EBITDA for 2019, mainly
related to stock-based compensation and insignificant acquisition and integration costs. There were similar items in 2018, as well
as a $3.6 million adjustment related to contingent consideration on our acquisition of AVS.
(thousands of CAD dollars)
Net income
Depreciation and amortization
Net finance expense
Income tax expense
EBITDA2
Adjustments
Stock-based compensation expense
Stock option expense
Acquisition and integration costs
Gain on disposal of property, plant and
equipment assets
Adjusted EBITDA2
EBITDA margin (% of revenue)2
Adjusted EBITDA margin (% of revenue)2
Three Months Ended December 31,
2018 (restated)1
2019
Year Ended December 31,
2018 (restated)1
2019
$
7,347
2,697
288
1,998
$ 12,330
269
81
–
4
$ 12,684
32.5%
33.4%
$
$
$
3,158
3,151
155
1,620
8,084
(55)
166
44
27
8,266
26.1%
26.7%
$ 19,400
11,400
1,246
6,980
$ 39,026
370
466
164
$ 18,637
11,775
773
6,939
$ 38,124
157
617
(3,402)
2
$ 40,028
29.3%
30.1%
82
$ 35,578
32.0%
29.9%
1 On January 1, 2019, the Company adopted IFRS 16. See section 1.1 “Consolidated highlights” – footnote 2 for further details.
2 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 companies. Refer to section 8.8 “Non-IFRS financial measures”.
The adjusted EBITDA margin of 33.4 per cent for the quarter is higher than the fourth quarter last year primarily due to the
recognition of licence revenue with milestone achievements in Technology Solutions during the quarter, while the adjusted
EBITDA margin of 30.1 per cent for the year is relatively flat compared to 2018.
15
2019 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2019
2.6 Consolidated finance costs
Net finance expense was $0.3 million and $1.2 million for the quarter and the year, respectively, up compared to last year due
to increased fees on our debt facility and less interest earned on our lower cash balance in 2019. With the adoption of IFRS 16,
finance expense now also includes interest expense related to lease obligations associated with our right-of-use assets.
2.7 Change in contingent consideration
In 2018, the Company, through its wholly owned subsidiary ESC, adjusted the fair value and paid the early settlement of the AVS
contingent consideration and finalized the purchase price accounting adjustments. The net result of $3.6 million was included
in “change in contingent consideration” on the consolidated financial statements of comprehensive income of the Financial
Statements.
2.8 Tax provision
The Company is subject to federal and provincial income taxes at an estimated combined statutory rate of 27.0 per cent (2018 –
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)
Net income before tax
Combined statutory income tax rate
Expected income tax expense
Increase (decrease) in income tax resulting from:
Non-taxable items
Non-deductible expenses
Foreign income tax rate differential
Adjustment to prior years’ deferred tax assets
Impact of change in tax rate
Unrecognized tax asset relating to current year losses
Other
Income tax expense
Year Ended December 31,
2018 (restated)1
2019
$ 26,380
27.0%
7,122
$ 25,576
27.0%
6,906
(20)
279
105
(382)
–
–
(124)
6,980
$
(963)
429
447
(235)
(5)
350
10
6,939
$
1 On January 1, 2019, the Company adopted IFRS 16. See section 1.1 “Consolidated highlights” – footnote 2 for further details.
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 income 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 income 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.
3 Business Segment Analysis
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.
ISC currently has three operating segments as follows:
• Registry Operations delivers registry and information services on behalf of governments and private sector organizations.
• Services delivers products and services that utilize public records and data to provide value to customers in the financial and
legal sectors.
• Technology Solutions provides the development, delivery and support of registry (and related) technology solutions.
The balance of our corporate activities and shared services are reported as Corporate and other.
16
2019 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2019
3.1 Registry Operations
When providing registry and information services to
governments and private sector organizations, we work
with those 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.
Most significantly, Registry Operations provides services on
behalf of the Province of Saskatchewan under a 20-year Master
Service Agreement (“MSA”), in effect until 2033, and is the
exclusive full-service solution provider of the Saskatchewan
Land Registry (including the Saskatchewan Land Titles Registry
(“Land Titles Registry”), the Saskatchewan Land Surveys
Directory (“Land Surveys”) and Saskatchewan Geomatics
services (“Geomatics”), collectively the “Land Registry”),
the Saskatchewan Personal Property Registry (“Personal
Property Registry”) and the Saskatchewan Corporate Registry
(“Corporate Registry”). Additional information about the MSA
is available in our Annual Information Form for the year ended
December 31, 2019, on our website at www.company.isc.ca
and in the Company’s profile on SEDAR at www.sedar.com.
Competitors in this segment 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.
Registry Operations 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.
Saskatchewan Land 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 Saskatchewan.
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.
Approximately 80.4 per cent of all Land Titles Registry
registration transactions were submitted online in 2019.
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.
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.
Land Surveys registers land survey plans and creates a
representation of Saskatchewan land parcels in the cadastral
parcel mapping system. Revenue related to all Land Survey
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. Fees for Geomatics services
are typically negotiated per transaction, based on the type and
nature of services required.
Saskatchewan Personal Property Registry
The 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.
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.
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.
Customers complete almost all 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 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 and carry on business
within Saskatchewan.
Services are billed as flat fees for each transaction. Unlike 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.
Approximately 90.8 per cent of all registrations in the
Corporate Registry were submitted online in 2019.
17
2019 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2019 REGISTRY OPERATIONS REVENUE
Registry Operations Revenue
for the three months ended December 31,
(CAD$ millions)
16.8
15%
14%
18.1
6%
14%
13%
71%
67%
Other
Corporate Registry
Personal Property
Registry
Land Registry
+8%
Registry Operations Revenue
for the year ended December 31,
(CAD$ millions)
70.3
14%
15%
70.4
15%
14%
71%
69%
Other
Corporate Registry
Personal Property
Registry
Land Registry
+0%
2018
2019
2018
2019
(thousands of CAD dollars)
Land Registry
Personal Property Registry
Corporate Registry
Other
Registry Operations revenue
Three Months Ended December 31,
2018
2019
Year Ended December 31,
2019
2018
$ 11,968
2,383
2,604
1,114
$ 18,069
$
$
11,920
2,384
2,476
–
16,780
$ 48,901
10,154
10,230
1,114
$ 70,399
50,031
$
10,190
10,038
–
70,259
$
Revenue for Registry Operations was $18.1 million for the
quarter compared to $16.8 million in the fourth quarter of
2018 and for the year was $70.4 million, flat compared to last
year. The increase in the quarter was primarily due to revenue
recognized in other. The Company entered into a change order
pursuant to its MSA with the Government of Saskatchewan to
continue the development of its registry systems. Under the
MSA, the Company owns the IP during the term of the MSA. As
at December 31, 2019, the development associated with the
change order was approximately 85 per cent complete, and
the Company recorded an intangible asset under development
in the amount of $1.5 million and recognized $1.1 million of
Registry Operations Revenue
for the year ended December 31,
(CAD$ millions)
100.0
Other
Corporate Registry
Personal Property Registry
Land Registry
74.9
10.1
10.0
70.3
10.0
10.2
70.4
10.2
10.2
54.8
50.0
48.9
80.0
60.0
40.0
20.0
0.0
2017
2018
2019
Note: Values may not add due to rounding.
18
revenue in other revenue in Registry Operations in 2019 related
to the project. Amortization of the intangible asset is expected
to commence in 2020 when the development is complete.
The top five customers for Registry Operations represented
19.9 per cent of the total segment revenue for 2019. Of those
customers, no single customer accounted for more than
10.0 per cent of total Registry Operations revenue.
Saskatchewan Land Registry
For the fourth quarter, revenue for the Land Registry was
$12.0 million, up slightly by 0.4 per cent compared to the
same period in 2018. Modest revenue growth for the Land
Titles Registry was offset by marginally lower revenue for Land
Surveys and Geomatics during the quarter.
Most of the revenue generated from the Land Registry is from
the Land Titles Registry and is derived from value-based fees.
Land Titles Registry revenue for the quarter was $11.2 million,
a small increase of $0.1 million or 1.3 per cent compared to
the same period in 2018. Despite transaction volumes being
down by 3.8 per cent, revenue was stable partly due to pricing
changes made to title searches in July 2019. In addition,
revenue was supported by higher average land values for
regular land transfers in the fourth quarter.
2019 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2019
Saskatchewan Land Registry Revenue by Type,
for the year ended December 31, 2019
Saskatchewan Land Registry Revenue by Type,
for the year ended December 31, 2018
92.7%
4.7%
2.6%
Land Titles Registry
Geomatics
Land Surveys Directory
93.0%
4.3%
2.7%
High-value property registration revenue was flat in the fourth quarter of 2019 at $1.1 million as compared to 2018. Each high-
value registration generated revenue of $10,000 or more.
The Saskatchewan real estate market continues to exhibit weakness given the lower transaction volumes we have experienced in
2019. Overall transaction volumes for the Land Registry decreased by 3.9 per cent for the fourth quarter of 2019 compared to the
same period last year.
The following graphs show the Land Registry revenue by type of transaction and the overall transaction volume, respectively.
Seasonality remains consistent year-over-year wherein the second and third quarter typically generate the most revenue, with
the fourth quarter routinely generating less revenue than the third quarter. For more information on seasonality, please refer to
section 4 “Summary of Consolidated Quarterly Results”.
15.0
10.0
5.0
0.0
250,000
220,000
190,000
160,000
130,000
100,000
Saskatchewan Land Registry Revenue by Type
(CAD$ millions)
13.5
0.6
1.9
11.0
12.8
0.6
1.7
10.5
11.8
0.6
1.8
9.4
11.9
0.6
1.7
9.7
11.3
0.8
1.7
8.8
Registration
Search
Maintenance/Services
13.2
0.6
1.9
10.7
12.4
0.6
1.9
10.0
12.0
0.5
1.7
9.8
Q1 2018
Q2 2018
Q3 2018
Q4 2018
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Note: Values may not add due to rounding.
Saskatchewan Land Registry Transaction Volume
(Number of transactions)
3
8
6
5
0
2
,
6
8
3
1
2
2
,
4
3
2
0
0
2
,
4
6
0
9
8
1
,
8
9
8
6
8
1
,
7
8
0
0
1
2
,
8
3
6
5
9
1
,
0
2
4
1
8
1
,
Q1 2018
Q2 2018
Q3 2018
Q4 2018
Q1 2019
Q2 2019
Q3 2019
Q4 2019
19
2019 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2019 Revenue-generating transactions in the Land Titles Registry fell 5.4 per cent in the fourth quarter, due to a sluggish real estate
market in Saskatchewan. The volume of regular land transfers and title searches declined by 3.0 per cent and 5.5 per cent,
respectively, compared to 2018. Mortgage registrations volume improved by 5.3 per cent in the fourth quarter of 2019 compared
to 2018.
For the year ended December 31, 2019, Land Registry revenue was $48.9 million, a decrease of $1.1 million or 2.3 per cent
compared to $50.0 million in 2018.
Saskatchewan Land Registry Revenue by Type
for the year ended December 31,
(CAD$ millions)
Saskatchewan Land Registry Transaction Volume
for the year ended December 31,
(Number of transactions)
60.0
50.0
40.0
30.0
20.0
10.0
0.0
54.8
2.4
7.6
Registration
50.0
2.3
7.1
48.9
2.4
7.2
Search
Maintenance
900,000
44.7
40.6
39.3
2017
2018
2019
800,000
700,000
600,000
500,000
0
4
9
1
9
8
,
2017
7
6
3
6
1
8
,
2018
3
4
0
4
7
7
,
2019
Note: Values may not add due to rounding from maintenance transactions that were too small to display in chart.
The decrease in 2019 compared to last year was due to lower volumes in the Land Titles Registry, which were down 5.4 per
cent. Revenue declined at a lesser pace compared to volume due to slightly higher average land values for regular land transfers
coupled with pricing changes made in July 2019 which mainly affected title searches.
High-value property registration revenue was higher in 2019 at $4.3 million, compared to revenue of $3.9 million in 2018. Each
high-value registration generated revenue of $10,000 or more.
Overall, revenue-generating transactions in the Land Titles Registry fell 5.4 per cent in 2019, due to a slower real estate market
in Saskatchewan. The volume of regular land transfers, mortgage registrations and title searches declined by 5.3 per cent,
3.0 per cent and 4.5 per cent, respectively, compared to 2018.
The primary customers of the Land Titles Registry are law firms, financial institutions, developers and resource companies. For
2019, our top 20 Land Titles Registry customers accounted for nearly 41.1 per cent of revenue, and our top 100 Land Titles Registry
customers made up 77.5 per cent of revenue.
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 2019, our top 20 Land Surveys customers accounted
for 89.4 per cent of revenue, and the top 100 customers made up 95.0 per cent of revenue.
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. In 2019, the top 20 Geomatics
customers produced 88.7 per cent of revenue, while the top 100 customers formed 98.0 per cent of revenue.
In 2019, 80.4 per cent of all Land Titles Registry registration transactions were submitted online, an increase of 0.4 per cent
compared to 2018.
Saskatchewan Personal Property Registry
For the fourth quarter of 2019, revenue for the Personal Property Registry was $2.4 million, flat compared to the same quarter in
2018. Overall volume was up 1.2 per cent for the quarter compared to the same period in 2018.
Registration revenue in the fourth quarter of 2019 was similar to 2018, down by only 0.7 per cent, while volumes were down
1.8 per cent. Revenue dropped at a lesser rate than volume, illustrating that average registration term-length increased during
the quarter, which was different than year-to-date. Search revenue grew by 4.0 per cent due to higher volumes, which rose
20
2019 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2019 2019 ISC® Annual Report | Management’s Discussion and Analysis
For the Fourth Quarter and Year Ended December 31, 2019
4.1 per cent compared to the fourth quarter of 2018. Maintenance revenue was down 6.0 per cent compared to the same period
in 2018 on lower volumes, which were down 7.8 per cent.
Revenue results for the fourth quarter, shown by type of transaction on the following graph, are generally lower compared to the
third quarter, reflecting the typical pattern of seasonality.
Saskatchewan Personal Property Registry Revenue by Type
(CAD$ millions)
Registration
Search
Maintenance
2.7
0.3
0.5
1.8
2.7
0.3
0.6
1.8
2.4
0.5
0.5
1.4
2.4
0.2
0.6
1.6
2.3
0.3
0.6
1.4
2.8
0.3
0.7
1.8
2.7
0.3
0.6
1.8
2.4
0.2
0.6
1.5
Q1 2018
Q2 2018
Q3 2018
Q4 2018
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Note: Values may not add due to rounding.
Saskatchewan Personal Property Registry Transaction Volume
(Number of transactions)
4
0
3
8
0
1
,
9
8
6
5
2
1
,
0
6
9
0
2
1
,
4
6
9
7
0
1
,
1
4
1
5
0
1
,
8
1
4
3
2
1
,
2
8
6
9
1
1
,
6
8
2
9
0
1
,
Q1 2018
Q2 2018
Q3 2018
Q4 2018
Q1 2019
Q2 2019
Q3 2019
Q4 2019
3.0
2.5
2.0
1.5
1.0
0.5
0.0
130,000
120,000
110,000
100,000
90,000
80,000
70,000
60,000
50,000
Annual revenue for the Personal Property Registry was $10.2 million, flat compared to 2018. Registration revenue decreased by
2.0 per cent compared to 2018, while maintenance revenue was lower by 16.6 per cent in 2019 due to additional revenue in 2018
from a one-time contract for a system enhancement. This decline in maintenance revenue was offset by higher search revenue in
2019, up 14.4 per cent compared to 2018, as a result of pricing changes made to search transactions in the third quarter of 2018.
Saskatchewan Personal Property Registry
Revenue by Type
for the year ended December 31,
(CAD$ millions)
Saskatchewan Personal Property Registry
Transaction Volume
for the year ended December 31,
(Number of transactions)
10.0
1.1
2.0
6.9
12.0
10.0
8.0
6.0
4.0
2.0
0.0
Registration
10.2
1.3
Search
Maintenance
10.2
1.1
2.2
6.7
2.5
6.5
500,000
400,000
300,000
200,000
2017
2018
2019
Note: Values may not add due to rounding.
7
3
2
5
6
4
,
2017
7
1
9
2
6
4
,
2018
7
2
5
7
5
4
,
2019
21
The previous graph reflects year-over-year transaction volumes. Overall volumes declined by 1.2 per cent in 2019. Registration
volume decreased 0.9 per cent and maintenance volume dropped 12.8 per cent, while search volumes increased by 0.7 per cent.
Personal property security registration setup volumes decreased in 2019 by 0.6 per cent compared to 2018. Revenue for the
same transaction type fell by 1.9 per cent in 2019 compared to 2018. This suggests that average registration term-length declined
overall in 2019 compared to 2018, even though the quarterly results showed an increase in term-length.
Customers of the Personal Property Registry are primarily in the financial sector but also include law firms. The top 20 Personal
Property Registry customers accounted for about 81.4 per cent of the revenue for 2019, while the top 100 produced 93.8 per cent
of revenue.
Saskatchewan Corporate Registry
Revenue for the Corporate Registry for the quarter was $2.6 million, up $128 thousand or 5.2 per cent compared to the same
period in 2018, largely due to pricing changes that came into effect during the third quarter of 2019. Maintenance revenue grew
by 6.1 per cent in the quarter compared to the same period in 2018, again mainly due to pricing changes for the filing of annual
returns and renewals which were implemented in the third quarter of 2019. Pricing changes also impacted revenue from the
incorporation and registration of new business entities, which increased by 10.7 per cent compared to the fourth quarter last year,
contributing to a 5.6 per cent increase to the registration category overall. Search revenue was flat compared to the fourth quarter
of 2018.
As of December 31, 2019, there were approximately 75,000 active Saskatchewan Business Corporations registered with the
Corporate Registry compared to approximately 74,000 as at December 31, 2018.
The following graph illustrates the Corporate Registry revenue by type of transaction. Quarterly revenue continues to mirror the
Corporate Registry’s typical pattern of seasonality.
Saskatchewan Corporate Registry Revenue by Type
(CAD$ millions)
Registration
Search
Maintenance
3.0
2.5
2.0
1.5
1.0
0.5
0.0
2.7
1.7
0.4
0.6
2.5
1.5
0.4
0.6
2.3
1.4
0.3
0.6
2.5
1.5
0.3
0.6
2.7
1.7
0.4
0.6
2.5
1.5
0.4
0.6
2.4
1.5
0.3
0.6
2.6
1.6
0.3
0.7
Q1 2018
Q2 2018
Q3 2018
Q4 2018
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Note: Values may not add due to rounding.
The following graph shows the transaction volumes for the Corporate Registry by quarter.
Saskatchewan Corporate Registry Transaction Volume
(Number of transactions)
100,000
80,000
60,000
40,000
20,000
0
22
3
5
4
2
9
,
2
3
9
7
8
,
0
3
8
0
8
,
6
5
1
4
8
,
1
0
0
2
9
,
7
6
0
0
9
,
8
9
0
2
8
,
9
2
1
3
8
,
Q1 2018
Q2 2018
Q3 2018
Q4 2018
Q1 2019
Q2 2019
Q3 2019
Q4 2019
2019 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2019 Transaction volumes for the fourth quarter decreased by 1.2 per cent compared to the same period last year. Specifically,
registration and search volumes declined by 4.4 per cent and 1.6 per cent, respectively, while maintenance volume increased by
0.5 per cent compared to the same period in 2018.
Annual revenue for the Corporate Registry was $10.2 million, up 1.9 per cent or $0.2 million compared to 2018. This is largely a
result of pricing changes made in the third quarter of 2019.
Saskatchewan Corporate Registry Revenue by Type
for the year ended December 31,
(CAD$ millions)
Saskatchewan Corporate Registry Transaction Volume
for the year ended December 31,
(Number of transactions)
Registration
Search
400,000
10.1
1.4
2.6
6.2
12.0
10.0
8.0
6.0
4.0
2.0
0.0
Maintenance
10.0
1.4
2.5
6.1
10.2
1.4
2.5
6.3
2017
2018
2019
Note: Values may not add due to rounding.
300,000
200,000
100,000
0
0
6
0
5
3
,
2017
1
7
3
5
4
3
,
2018
5
9
2
7
4
3
,
2019
In 2019, search and maintenance revenue improved by 1.5 per cent and 3.3 per cent, respectively, compared to 2018. More
specifically, revenue from the filing of annual returns and renewals increased by 6.8 per cent in 2019 compared to 2018.
Registration revenue declined by 1.1 per cent compared to 2018.
Transaction volumes for 2019 were up slightly compared to 2018. Registration volume declined by 5.1 per cent, while search and
maintenance volume improved by 0.7 per cent and 1.9 per cent, respectively, compared to 2018.
For the Corporate Registry, customers 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 formed nearly 32.3 per cent of
revenue for 2019 and the top 100 customers delivered about 50.0 per cent of revenue.
REGISTRY OPERATIONS EXPENSES AND EBITDA
Registry Operations EBITDA1,2
for the three months ended December 31,
(CAD$ millions)
9.0
7.4
Registry Operations EBITDA1,2
for the year ended December 31,
(CAD$ millions)
32.4
34.1
+21%
+5%
2018
2019
2018
2019
1 On January 1, 2019, the Company adopted IFRS 16. See section 1.1 “Consolidated highlights” – footnote 2 for further details.
2 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 companies. Refer to section 8.8 “Non-IFRS financial measures”.
.
23
2019 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2019
(thousands of CAD dollars)
Revenue
Total expenses (excluding depreciation
and amortization)
EBITDA
Three Months Ended December 31,
2018
2019
Year Ended December 31,
2019
2018
$ 18,069
$
16,780
$ 70,399
$
70,259
9,048
9,021
$
9,333
7,447
$
36,309
$ 34,090
37,868
32,391
$
EBITDA for Registry Operations for the fourth quarter of 2019 was $9.0 million compared to $7.5 million for the same period last
year and was $34.1 million for the year ended December 31, 2019, compared to $32.4 million last year. The year-over-year increase
for the quarter was mainly due to increased revenue related to a change order pursuant to our MSA with the Government of
Saskatchewan for development work on our registry systems. The increase in EBITDA for the year was primarily due to decreased
expenses.
More specifically, Registry Operations expenses were $9.0 million for the quarter, a decrease of $0.3 million compared to
$9.3 million for the same period in 2018 and were $36.3 million for the year ended December 31, 2019, compared to $37.9 million
in 2018. The decrease in the quarter was due primarily to lower technology solutions costs and decreased wages and salaries
due to reduced staffing as a result of our office closures, while the decrease year-to-date was mainly due to lower costs for
technology solutions. Various other expenses were down slightly in the quarter and year-to-date, which are too small to detail
but cumulatively impacted the overall reduction.
3.2 Services
Services delivers solutions uniting public record data, customer authentication, corporate legal services and collateral
management to support lending practices of clients with business across Canada.
We earn revenue through transaction fees for search and registration services, as well as Know-Your-Customer (“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 classify our services as either Legal Support Services or Financial Support Services for the purposes of categorizing revenue.
Key drivers for Services 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 core business activities. Economic activity
can affect credit lending, mergers, acquisitions, incorporations and various new business startup activities, which also impacts
activity for our Services segment.
This core revenue is fairly diversified and has little seasonality; rather, it fluctuates in line with general economic drivers. Our
collateral management services experience seasonality aligned to vehicle and equipment financing cycles, which are generally
stronger in the second and fourth quarters. Some smaller categories of products or services can have some seasonal variation,
increasing slightly during the second and fourth quarters.
Legal Support Services
Legal Support Services captures revenue from nationwide search, registration and filing services to legal professionals directly or
indirectly. This also includes our corporate supplies business, which helps companies to organize and maintain their corporate
legal documents and provides customized corporate minute books, corporate seals, share certificates, legal supplies and related
ancillary accessories for businesses and corporations. We also service the consumer market through direct supply relationships
with office products providers.
We have an online workflow platform to service legal customers through a team of experienced law clerks in both Ontario and
Quebec. We hold an official service licence under the Ontario Business Information System from the Government of Ontario’s
Ministry of Government and Consumer Services, which is currently renewed until January 2021. We also hold licences from
the Government of Ontario to distribute and register Personal Property Security Act searches and registrations, as well as the
24
2019 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2019
Government of Quebec’s Corporate Registry and Corporations Canada for registering corporations directly within each of these
two registry systems.
Our competitors vary by market and geography. They primarily include other intermediaries and suppliers to legal professionals
that provide value through convenience and intermediation of various public registries. There is 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.
Financial Support Services
We support financial and credit institutions’ 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.
We use our proprietary platform to assist clients in on-boarding new commercial accounts. The customer on-boarding verification
reports we generate leverage our search services to provide our clients with a process and system to verify, retrieve and store
information about corporate clients to meet regulatory requirements.
In addition, we provide automation software technology services to serve lending, leasing, and credit issuing businesses and
institutions in Canada. We service the full credit-lending cycle and deliver proven credit due diligence, protection and default
solutions to the Canadian financing industry.
In the financial support services marketplace, we compete against a small number of distinctly different service providers, some of
whom offer KYC programs as part of their other services.
SERVICES REVENUE
Services Revenue1
for the three months ended December 31,
(CAD$ millions)
Services Revenue1
for the year ended December 31,
(CAD$ millions)
11.6
80%
19%
2018
13.5
82%
18%
2019
Financial
Legal
+17%
1 Internal related party and other revenue not displayed in graph.
42.4
79%
21%
2018
51.2
82%
18%
2019
Financial
Legal
+21%
(thousands of CAD dollars)
Legal support services
Financial support services
Internal related parties and other
Services revenue
Three Months Ended December 31,
2018
2019
Year Ended December 31,
2019
2018
$
2,392
11,049
78
$ 13,519
$
$
2,256
9,310
25
11,591
$
8,980
42,028
221
$ 51,230
$
8,782
33,578
24
42,384
$
Revenue for Services was $13.5 million for the fourth quarter, an increase of $1.9 million compared to the fourth quarter of 2018,
largely due to a mixture of organic growth from existing customers and the ramping up of new customers, mainly in KYC, due
diligence and collateral security registration.
25
2019 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2019
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
8.9
6.6
2.3
Our Services revenue for the last eight quarters is shown in the following graph.
Services Revenue by Type
(CAD$ millions)
11.5
10.4
9.2
8.5
11.6
9.3
11.0
8.7
Legal Support Services
13.7
12.9
11.5
10.8
Financial Support Services
13.4
11.0
2.3
2.0
2.3
2.3
2.2
2.1
2.4
Q1 2018
Q2 2018
Q3 2018
Q4 2018
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Note: Values may not add due to rounding.
For the year, revenue in the Services segment was $51.2 million, up $8.8 million or 20.9 per cent compared to $42.4 million in 2018.
Revenue continues to improve primarily as a result of efforts to generate more business from existing customers through new
products and services, such as those from our Securefact acquisition, and win additional mandates with new customers.
Services Revenue by Type1
for the year ended December 31,
(CAD$ millions)
Legal Support Services
Financial Support Services
42.4
8.8
33.6
60.0
50.0
40.0
30.0
20.0
10.0
0.0
14.9
8.6
6.3
2017
Services Revenue by Type1
for the year ended December 31, 2019
17.6%
Financial Support Services
Legal Support Services
82.4%
51.0
9.0
42.0
2018
2019
1 Internal related party and other revenue not displayed in graph.
Legal Support Services
Revenue in the fourth quarter of 2019 for Legal Support Services increased to $2.4 million, up 6.0 per cent compared to the
fourth quarter of 2018 and was $9.0 million for the year, a modest increase of $198 thousand compared to last year, due to
organic growth.
Financial Support Services
Revenue in the fourth quarter of 2019 for Financial Support Services was $11.0 million, up $1.7 million or 18.7 per cent compared
to $9.3 million for the same period of 2018 and for the year was $42.0 million, an increase of $8.5 million or 25.2 per cent compared
to last year. The year-over-year growth can be attributed to the winning of new customers in our collateral management services
combined with an expansion of our KYC offering to existing customers.
The top 20 Services customers comprised approximately 75.0 per cent of the revenue for 2019, while the top 100 Services
customers made up about 88.0 per cent of revenue. No single customer accounted for more than 25.0 per cent of Services
revenue in the same period.
26
2019 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2019 SERVICES EXPENSES AND EBITDA
Services EBITDA1,2
for the three months ended December 31,
(CAD$ millions)
Services EBITDA1,2
for the three months ended December 31,
(CAD$ millions)
10.1
1.9
1.7
1.9
1.9
Change in
contigent consideration
EBITDA excluding
contigent consideration
(1%)*
3.6
6.5
Change in
contigent consideration
EBITDA excluding
contigent consideration
7.1
7.1
+9%*
(0.2)
2018
2019
2018
2019
1 On January 1, 2019, the Company adopted IFRS 16. See section 1.1 “Consolidated highlights” – footnote 2 for further details.
2 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
companies. Refer to section 8.8 “Non-IFRS financial measures”.
*Represents the change in EBITDA excluding the change in contingent consideration.
(thousands of CAD dollars)
Revenue
Total expenses (excluding depreciation
and amortization)
EBITDA excluding contingent consideration
Change in contingent consideration
EBITDA
Three Months Ended December 31,
2018 (restated)1
2019
Year Ended December 31,
2019
2018 (restated)1
$ 13,519
$
11,591
$ 51,230
$
42,384
11,656
1,863
–
1,863
$
$
9,700
1,891
(195)
1,696
$
$
44,119
7,111
–
7,111
$
$
35,856
6,528
3,567
10,095
$
$
1 On January 1, 2019, the Company adopted IFRS 16. See section 1.1 “Consolidated highlights” – footnote 2 for further details.
EBITDA for Services was $1.9 million for the three months ended December 31, 2019, compared to $1.7 million for the same
period last year and was $7.1 million for the year ended December 31, 2019, compared to $10.1 million last year. EBITDA for 2018
was augmented by adjustments to the fair value estimate of the contingent consideration associated with our AVS acquisition.
Excluding the $0.2 million fair value adjustment in the fourth quarter of 2018, EBITDA for the quarter was relatively flat compared
to the same period last year. Excluding the $3.6 million fair value adjustment, EBITDA was $0.6 million higher for 2019, compared
to 2018, largely due to continued growth.
For the quarter, Services expenses were $11.7 million, an increase of $2.0 million compared to $9.7 million for the same period in
2018 and were $44.1 million for the year ended December 31, 2019, compared to $35.9 million last year, primarily due to:
• cost of goods sold for the fourth quarter was up $1.2 million compared to the fourth quarter of 2018 and up $6.1 million year-
over-year compared to the same period of 2018, consistent with the rise in related revenue in the quarter and year;
• wages and salaries were up $0.5 million in the quarter compared to the same period in 2018 and up $1.6 million in 2019
compared to the same period last year. The increase was due to increased staffing levels required to support business growth
objectives as well as the addition of staff related to our acquisition of Securefact in the first quarter of 2019; and
•
information technology services costs were up in the quarter and year compared to the respective prior year periods due to the
acquisition of Securefact and planned integration and technology improvements to support future growth and scale.
27
2019 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2019
3.3 Technology Solutions
Technology Solutions provides the development, delivery and support of registry (and related) technology solutions, generating
revenue through the following:
• sale of software licences related to the technology platform;
• provision of technology solution definition and implementation services; and
• provision of monthly hosting, support and maintenance services.
We offer RegSys – a complete registry solution that provides a readily transferable technology platform capable of serving a wide
range of registry needs. RegSys is a multi-register platform that delivers the flexibility, scalability and features that enable public
sector organizations to deliver enhanced services to businesses and citizens.
With a full suite of integrated modules which provide core functionality for submission, enforcement and enquiry processing,
RegSys delivers solutions enabling the provision of core services to citizens in a user-friendly, efficient manner across multiple
access points. The RegSys solution has also been used to manage other legal registers such as intellectual property, securities,
licences, charities, Uniform Commercial Code and pension schemes.
Competitors in this segment include technology services organizations that provide application development, systems
integration and/or application management services. This includes large multinationals or local niche players, both of which we
can partner with to complement our offering depending on the clients’ needs.
TECHNOLOGY SOLUTIONS REVENUE
Technology Solutions Revenue
for the three months ended December 31,
(CAD$ millions)
9.3
32%
68%
2019
Internal Parties
Third Parties
+49%
6.3
58%
42%
2018
Technology Solutions Revenue
for the year ended December 31,
(CAD$ millions)
21.2
70%
30%
2018
24.2
53%
47%
2019
Internal Parties
Third Parties
+14%
(thousands of CAD dollars)
Third parties
Internal related parties
Technology Solutions revenue
Three Months Ended December 31,
2018
2019
Year Ended December 31,
2019
2018
$
$
6,352
2,981
9,333
$
$
2,606
3,670
6,276
$ 11,416
12,830
$ 24,246
6,442
$
14,783
21,225
$
Revenue in Technology Solutions was $9.3 million for the quarter, an increase of $3.0 million compared to $6.3 million for the same
period in 2018.
Revenue from external parties for the quarter was $6.4 million, an increase of $3.8 million compared to the same period in 2018,
due to the completion of several milestones in the quarter on current contracts.
Internal related party revenue in any quarter is dependent on resources used or consumed internally, particularly in Registry
Operations. Our intent is to continue to service the needs of internal customers as efficiently and effectively as possible, including
the provision of service via related party resources; therefore, this figure may continue to decline over time, particularly as we
pursue additional external revenue.
28
2019 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2019
Technology Solutions Revenue by Type
(CAD$ millions)
Third Parties
Internal Related Parties
10.0
8.0
6.0
4.0
2.0
0.0
4.9
3.8
1.1
Q1 2018
4.6
3.7
0.9
Q2 2018
Note: Values may not add due to rounding.
5.5
3.6
1.9
6.3
3.7
2.6
4.9
3.5
1.4
4.9
3.0
2.0
5.1
3.4
1.7
9.3
3.0
6.4
Q3 2018
Q4 2018
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Revenue in our Technology Solutions segment was $24.2 million for the year ended December 31, 2019, compared to
$21.2 million in 2018, an increase of $3.0 million.
Revenue from external parties increased to $11.4 million compared to $6.4 million in the same period in 2018. Revenue from
external third parties continued to grow in 2019 versus 2018, as delivery against milestones on signed contracts advanced during
the year.
Internal related party revenue year-to-date decreased as we work to continue reducing our costs to provide the maintenance
services to our internal customers.
Technology Solutions Revenue
for the year ended December 31,
(CAD$ millions)
30.0
25.0
20.0
15.0
10.0
5.0
0.0
20.4
16.7
3.7
2017
Third Parties
Internal Related Parties
21.2
14.8
6.4
2018
24.2
12.8
11.4
2019
Note: Values may not add due to rounding.
Technology Solutions Revenue
for the year ended December 31,
Third Parties
Internal Related Parties
52.9%
47.1%
29
2019 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2019 TECHNOLOGY SOLUTIONS EXPENSES AND EBITDA
Technology Solutions EBITDA1,2
for the three months ended December 31,
(CAD$ millions)
2.6
Technology Solutions EBITDA1,2
for the year ended December 31,
(CAD$ millions)
2.3
0.2
2018
2019
2018
2019
1 On January 1, 2019, the Company adopted IFRS 16. See section 1.1 “Consolidated highlights” – footnote 2 for further details.
2 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
companies. Refer to section 8.8 “Non-IFRS financial measures”.
0.5
(thousands of CAD dollars)
Revenue
Total expenses (excluding depreciation
and amortization)
EBITDA
Three Months Ended December 31,
2018 (restated)1
2019
Year Ended December 31,
2019
2018 (restated)1
$
9,333
$
6,276
$ 24,246
$
21,225
6,778
2,555
$
6,063
213
$
21,965
2,281
$
20,732
493
$
1 On January 1, 2019, the Company adopted IFRS 16. See section 1.1 “Consolidated highlights” – footnote 2 for further details.
EBITDA for Technology Solutions was $2.6 million for the quarter compared to $0.2 million in the fourth quarter of 2018 and
was $2.3 million for the year compared to $0.5 million last year. The increases were due to the timing of completion of contract
milestones.
For the quarter, Technology Solutions expenses were up $0.7 million compared to the same period in 2018 and were up
$1.3 million for the year compared to 2018. The increases were largely due to contract implementation expenses which were
recognized as we completed contract milestones, as well as increased employee levels to service the contracted customers and
the growing business. This was partially offset by decreases in information technology costs as a result of the renewal of our
technology infrastructure service contract on January 1, 2019.
3.4 Corporate and other
Corporate and other includes expenses related to our corporate activities and shared services functions, any share of profit (loss) in
associate(s) not included in operating segments, and eliminations of inter-segment revenue and costs.
(thousands of CAD dollars)
Third parties
Internal related parties
Corporate and other revenue
Total expenses (excluding depreciation
and amortization)
EBITDA2
Three Months Ended December 31,
2018 (restated)1
2019
Year Ended December 31,
2019
2018 (restated)1
$
$
$
6
(2,985)
(2,979)
1,869
(1,110)
$
$
$
62
(3,694)
(3,632)
2,360
(1,272)
$
22
(12,929)
$ (12,907)
$
$
70
(14,807)
(14,737)
8,451
(4,456)
$
9,882
(4,855)
$
1 On January 1, 2019, the Company adopted IFRS 16. See section 1.1 “Consolidated highlights” – footnote 2 for further details.
2 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 companies. Refer to section 8.8 “Non-IFRS financial measures”.
30
2019 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2019
EBITDA for the quarter improved by $0.2 million compared to the fourth quarter of 2018 and up by $0.4 million for the year
compared to last year.
4 Summary of Consolidated Quarterly Results
The following table sets out select quarterly results for the past eight quarters. As outlined earlier, Registry Operations 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.
In Services, our core legal and financial services revenue has little seasonality; rather, it fluctuates in line with general economic
drivers. Our collateral management services experiences some seasonality aligned to vehicle and equipment financing cycles,
which are generally stronger in the second and fourth quarters. Some smaller categories of products or services can have some
seasonal variation, increasing slightly during the second and fourth quarters.
Technology Solutions does not experience seasonality but does fluctuate due to the timing of project-related revenue. The
balance of our corporate activities and shared services functions do not experience seasonality. Expenses are generally consistent
from quarter to quarter but can fluctuate due to the timing of project-related or acquisition activities.
As a result, our EBITDA margin fluctuates in line with the cumulative impact of the above factors.
(thousands of CAD dollars)
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
2019
2018 (restated)4
Revenue
Expenses
Net income before items
noted below
Net finance (expense)/income
Change in contingent
consideration
Income before tax
Income tax expense
Net income
Other comprehensive
$ 37,942 $ 32,175
26,888
28,308
$ 34,244
26,308
$ 28,607 $ 31,015 $ 30,186 $ 31,058
24,227
23,838
23,688
25,887
$26,872
22,547
9,634
(288)
5,287
(422)
7,936
(277)
4,769
(259)
5,128
(155)
6,498
423
6,831
(526)
4,325
(516)
–
9,346
(1,999)
$ 7,347 $
–
4,865
(1,607)
3,258
–
7,659
(1,875)
$ 5,784
–
4,510
(1,499)
(195)
4,778
(1,620)
$ 3,011 $ 3,158 $
2,762
9,683
(1,921)
7,762 $
1,000
7,305
(2,155)
5,150 $
–
3,809
(1,242)
2,567
income (loss)
1
Total comprehensive income
EBITDA margin (% of revenue)1, 2
Adjusted EBITDA margin
$ 7,348 $
32.5%
(133)
3,125
26.7%
(% of revenue)1
33.4%
Earnings per share, basic3
Earnings per share, diluted3
$
$
0.42 $
0.42 $
26.9%
0.19
0.19
(56)
$ 5,728
31.4%
31.8%
0.33
$
0.33
$
(321)
210
$ 2,690 $ 3,368 $
25.7%
26.1%
(159)
7,603 $
(265)
4,885 $
40.2%
34.4%
337
2,904
26.8%
26.7%
32.3%
32.3%
27.3%
$
$
0.17 $
0.17 $
0.18 $
0.18 $
0.44 $
0.44 $
28.0%
0.15
0.15
0.29 $
0.29 $
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 companies. Refer to section 8.8 “Non-IFRS financial measures”. Refer to section 2 “Consolidated
Financial Analysis” for a reconciliation of EBITDA and adjusted EBITDA to net income.
2 The Q2, Q3 and Q4 2018 EBITDA includes net adjustments in relation to the fair value estimate of the contingent consideration associated with our AVS acquisition of $1.0 million,
$2.8 million and $(0.2) million, respectively.
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 On January 1, 2019, the Company adopted IFRS 16. See section 1.1 “Consolidated highlights” – footnote 2 for further details.
31
2019 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2019
5 Business Strategy
STRATEGIC PRIORITIES
ISC’s strategy focuses on delivering value to shareholders
through the consistent performance of its existing business
and the execution of appropriate growth opportunities. The
Company’s strategy is realized through three key functions:
• operating registries on behalf of governments;
•
implementing and supporting registry and regulatory
technology solutions; and
• delivering value-add services utilizing public data
and records.
Through these functions, ISC’s strategy is executed with the
intent to:
• deliver leading registry and regulatory services and solutions
to customers around the world through existing lines of
business and potential extension into adjacent opportunities
through innovation and/or acquisition;
• produce increasing revenue with continued emphasis on
EBITDA growth; and
• provide an enhanced customer experience for those
interacting with ISC’s systems, people and information.
ISC’s strategy is influenced by a set of principles:
•
long-term orientation – strategic focus on the sustainability
of the business and the services we deliver;
• growth – active pursuit of attainable organic and inorganic
growth;
•
innovation – emphasis on product and service innovation
and exploration of new verticals; and
• company values – prominent focus on quality of service
delivery and the engagement of our customers and
employees.
6 Financial and Capital
Management
6.1 Cash flow
Our primary source of operating cash flow is generated from
revenue related to our Registry Operations and Services
segments. Our primary uses of funds are operational expenses,
capital expenditures and the payment of 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, will be
sufficient to meet cash requirements, capital expenditures
and anticipated dividend payments (refer to Note 18 in the
December 31, 2019, Financial Statements which are available
on our website at www.company.isc.ca and in the Company’s
profile on SEDAR at www.sedar.com for our existing Credit
Facilities).
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, 2019, the Company
held $23.7 million in cash compared to $28.7 million as at
December 31, 2018, a decrease of $4.9 million.
The Company expects to be able to meet its cash
requirements, including being able to settle current liabilities
of $24.7 million (December 31, 2018 – $28.4 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.
32
2019 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2019 CONSOLIDATED FREE CASH FLOW
(thousands of CAD dollars)
Net cash flow provided by operating activities
Net change in non-cash working capital2
Cash provided by operating activities excluding
working capital
Cash additions to property, plant and equipment
Cash additions to intangible assets
Consolidated free cash flow3
Three Months Ended December 31,
2018 (restated)1
2019
Year Ended December 31,
2018 (restated)1
2019
$
9,481
397
$
8,389
(1,336)
$ 23,630
9,195
$
29,969
217
9,878
(116)
(212)
9,550
$
7,053
(332)
(793)
5,928
$
32,825
(654)
(2,175)
$ 29,996
30,186
(548)
(2,227)
27,411
$
1 On January 1, 2019, the Company adopted IFRS 16. See section 1.1 “Consolidated highlights” – footnote 2 for further details.
2 Refer to Note 29 of the Financial Statements for reconciliation.
3 Free cash flow is not recognized as a measure under IFRS and does not have a standardized meaning prescribed by IFRS and, therefore, they may not be comparable to similar
measures reported by other companies. Refer to section 8.8 “Non-IFRS financial measures”. Refer to section 6.1 “Cash Flow” for a reconciliation of free cash flow.
Consolidated free cash flow for the three months ended December 31, 2019, was $9.6 million compared to $5.9 million for the
three months ended December 31, 2018, and was $30.0 million for the year ended December 31, 2019, compared to $27.4 for the
same period of 2018. The increase was due to higher results of operations.
The following table summarizes our sources and uses of funds for the three months and years ended December 31, 2019, and 2018:
(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
Increase (decrease) in cash
Cash, beginning of period
Cash, end of period
Three Months Ended December 31,
2018 (restated)1
2019
Year Ended December 31,
2018 (restated)1
2019
$
9,481
(257)
(4,762)
$
6
4,468
19,263
$ 23,731
$
$
$
8,389
(12,338)
(4,709)
6
(8,652)
37,303
28,651
$ 23,630
(9,311)
(19,086)
$
(153)
(4,920)
28,651
$ 23,731
$
$
$
29,969
(13,939)
(18,629)
(15)
(2,614)
31,265
28,651
1 On January 1, 2019, the Company adopted IFRS 16. See section 1.1 “Consolidated highlights” – footnote 2 for further details.
NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES
Net cash flow provided by operating activities was $9.5 million and $23.6 million for the quarter and the year, respectively,
compared to $8.4 million and $30.0 million for the same periods of 2018, respectively. The increase in the quarter is due to higher
results of operations across our segments. The decrease between 2019 and 2018 is due to changes in working capital related to
the payment of contingent consideration in 2019 associated with our ERS acquisition, higher income taxes paid and changes in
contract liabilities and receivables driven by the timing of sales contracts and higher overall revenue.
NET CASH FLOW USED IN INVESTING ACTIVITIES
Net cash flow used in investing activities for the quarter was $0.3 million compared to $12.3 million in the same period last year
and was $9.3 million for the year compared to $13.9 million last year. The decrease this year was due to the settlement in the
fourth quarter last year of the contingent consideration related to our AVS acquisition. This was partially offset by our acquisition
of Securefact in February 2019.
NET CASH FLOW USED IN FINANCING ACTIVITIES
Net cash flow used in financing activities for the quarter was $4.8 million, relatively flat compared to the same period in 2018 and
was $19.1 million for the year compared to $18.6 million in 2018. The increase year-over-year was due to higher debt payments
pursuant to our credit agreement that went into effect in the fourth quarter of 2018.
33
2019 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2019
6.2 Capital expenditures
Capital expenditures were $1.4 million and $3.9 million for the quarter and the year, respectively, compared to $1.1 million and
$2.8 million for the same periods in 2018, respectively. Capital expenditures in 2019 were primarily related to the purchase of
systems supporting Corporate and other and system development work across our business segments.
(thousands of CAD dollars)
Registry Operations
Services
Technology Solutions
Corporate and other
Total capital expenditures
6.3 Debt
Three Months Ended December 31,
2018
2019
Year Ended December 31,
2018
2019
$
$
796
164
48
434
1,442
$
$
192
86
352
495
1,125
$
$
1,460
630
651
1,203
3,944
$
$
451
411
1,428
485
2,775
Debt at December 31, 2019, was $18.0 million compared to $20.0 million at December 31, 2018.
At December 31, 2019, the Company had nil cash drawings on Facility 1 (2018 – nil); non-cash drawings, consisting of letters of
credit and similar, were approximately $0.2 million (2018 – $0.2 million). For further information on our Credit Facilities, refer to
Note 18 in the December 31, 2019, Financial Statements which are available on our website at www.company.isc.ca and in the
Company’s profile on SEDAR at www.sedar.com.
The Company was in compliance with all covenants throughout the period. The amount of borrowing costs capitalized during
2019 and 2018 was nil.
6.4 Total assets
Total assets were $171.6 million at December 31, 2019, compared to $173.7 million at December 31, 2018.
(thousands of CAD dollars)
Total assets excluding intangibles,
goodwill and cash
Intangibles
Goodwill2
Cash
Total assets
(thousands of CAD dollars)
Total assets excluding intangibles,
goodwill and cash
Intangibles
Goodwill2
Cash
Total assets
Registry
Operations
$ 26,384
3,803
1,200
–
$ 31,387
Registry
Operations
$ 29,258
4,054
1,200
–
$ 34,512
Services
10,951
31,647
35,715
–
78,313
Services
8,269
30,815
34,198
–
73,282
$
$
$
$
Technology
Solutions
Corporate
and other
As at December 31,
2019
$
6,467
4,525
8,614
–
$ 19,606
Technology
Solutions
$
3,999
5,418
8,912
–
$ 18,329
$
$
$
$
17,321
1,221
–
23,731
42,273
$
$
61,123
41,196
45,529
23,731
171,579
Corporate
and other
As at December 31,
2018 (restated)1
18,491
417
–
28,651
47,559
$
$
60,017
40,704
44,310
28,651
173,682
1 On January 1, 2019, the Company adopted IFRS 16. See section 1.1 “Consolidated highlights” – footnote 2 for further details.
2 In 2019, $4.6 million of goodwill was reallocated to Technology Solutions from Registry Operations for both the current and comparative periods. See note 12 of the Financial
Statements for further details.
6.5 Working capital
As at December 31, 2019, working capital was $17.7 million compared to $13.2 million at December 31, 2018. The increase
in working capital is primarily the result of decreased current liabilities related to the payment last year of the contingent
consideration associated with our ERS purchase, the reduction of short-term contract liabilities as we progress through current
contract milestones, as well as lower income tax payable due to installments made in the quarter.
34
2019 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2019
(thousands of CAD dollars)
Current assets
Current liabilities
Working capital
As at December 31, As at December 31,
2018 (restated)1
2019
$ 42,333
(24,655)
$ 17,678
$ 41,573
(28,378)
$ 13,195
1 On January 1, 2019, the Company adopted IFRS 16. See section 1.1 “Consolidated highlights” – footnote 2 for further details.
6.6 Outstanding share data
The number of issued and outstanding Class A Shares as at December 31, 2019, was 17.5 million and the number of issued and
outstanding share options as of December 31, 2019, was 1,548,247. These amounts are unchanged as of the filing date.
6.7 Common share dividend
On November 6, 2019, our Board declared a quarterly cash dividend of $0.20 per Class A Share, paid on January 15, 2020, to
shareholders of record as of December 31, 2019.
6.8 Commitments
The Company has commitments over the next five years that include future minimum payments for leasing of office space,
an information technology service agreement with Information Systems Management Canada Corporation (“ISM”), other
management services contracts and a commitment to the Government of Saskatchewan under the MSA. The following table
summarizes our commitments as of December 31, 2019:
(thousands of CAD dollars)
2020
2021
2022
2023
2024
Thereafter
Total
Office leases 1
Information technology2 and
other service agreements
Master Service Agreement3
Total
$ 1,177
$ 1,175
$
968
$
932
$
951
$ 1,186
$ 6,389
3,415
500
$ 5,092
2,912
500
$ 4,587
2,829
500
$ 4,297
2,675
500
$ 4,107
-
500
$ 1,451
-
4,500
$ 5,686
11,831
7,000
$ 25,220
1 The Company leases all of its office space and certain office equipment. The office spaces have lease terms of between two and ten years, with various options to extend. The
office equipment leases relate to photocopiers and 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.
2 The Company has a service agreement related to Information Technology with ISM, including lease commitments for computer equipment where the company has taken the
exemption for low value assets. Other service agreements relate to service contracts associated with corporate and shared service infrastructure.
3 The MSA requires the Company to pay the Government of Saskatchewan and to manage and operate the Land Titles Registry, Land Surveys Directory, Personal Property Registry,
Corporate Registry, Common Business Identifier Program and Business Registration Saskatchewan Program on behalf of the Government of Saskatchewan for a 20-year period
expiring on May 30, 2033.
7 Business Risks
7.1 Financial instruments and financial risks
Financial instruments held in the normal course of business, included in our consolidated statements of financial position as at
December 31, 2019, consist of cash, short-term investments, trade and other receivables, contract assets, accounts payable and
accrued liabilities, lease obligations, long-term debt and provisions.
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 23 of the Financial Statements for information pertaining to financial
instruments and related risk management.
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. With long-term debt, ISC has amended and restated its borrowings under the
Credit Facilities, which is managed with prime loans, short-term bankers’ acceptance, letter of credit or letter of guarantee. These
borrowings will bear interest at a base rate of prime plus applicable margin varying between 0.45 per cent and 2.25 per cent per
35
2019 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2019
annum. The Company is not exposed to significant interest rate
risk because interest bearing financial instruments are at a low
level relative to total assets and equity.
The deferred share unit (“DSU”) 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.
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, 2019, is
$36.9 million (December 31, 2018 – $38.1 million) equal to the
carrying value of the Company’s financial assets, those being
cash at $23.7 million (December 31, 2018 – $28.7 million),
short-term investments at $0.5 million (December 31,
2018 – $0.4 million) and trade receivables at $12.6 million
(December 31, 2018 – $9.0 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.
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.
MARKET RISK
The Company’s exposure to market risk is limited to the DSU,
share appreciation rights and performance share unit liabilities
whose fair values are affected by equity prices.
INTEREST RATE RISK
Interest rate risk is the risk arising from the effect of changes
in prevailing interest rates on the Company’s financial
instruments. The Company is subject to interest rate risks on
its debt. This debt bears interest at rates that float, which can
vary in accordance with changes in prime borrowing rates. The
Company manages interest rate risk by monitoring its balance
sheet, cash flows and the effect of market changes in interest
rates. The Company has the option of using short-term bankers’
acceptance notes to lock in rates at any time.
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.
7.2 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.
ISC considers risks that may affect the Company’s ability
to achieve its goals and objectives on an ongoing basis
and implements processes to manage those risks. ISC is
continuously monitoring 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 senior 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 following is a high-level list of ISC’s key business risks.
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.
36
2019 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2019 Cyber and Data Security
There is a risk that ISC could experience unplanned outages, unauthorized access, or
unplanned disclosure of confidential information or loss of critical corporate or customer
data due to a cybersecurity incident.
Technology Infrastructure and
Applications
Competition
There is a risk that ISC’s information technology systems and services, including
applications, may become ineffective, inadequate, unreliable or incapable of effectively
facilitating current and future requirements to support our business needs and the
achievement of our strategic goals. We also rely on third-party service providers for aspects
of our IT infrastructure and the provision of critical IT-related services.
ISC may be ineffective in its ability to compete against current or future competitors, in
some cases given others’ potential advantage having more innovative products, greater
longevity in the market, access to low cost capital, private ownership, etc. or as a result of
ISC’s potential requirement to receive service or other approvals from the Office of Public
Registry Administration or other regulators.
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.
Talent and Teams
ISC may not have the required competencies, skills and knowledge to execute on strategic
priorities and achieve its strategic goals.
Compliance with
Customer Contracts
Acquisitions
Cost/Efficiency/Profitability
Economic Conditions
Inability to comply with the requirements in customer contracts, including the
Master Service Agreement with the Government of Saskatchewan, could result in the
loss/termination of customer contracts as well as impacting ISC’s reputation and future
growth strategies.
There is a risk that acquisitions are not fully aligned with ISC’s lines of business or
appropriately and efficiently integrated with ISC’s operations, brand and information
technology systems.
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.
Changes in the condition of the economy, including those arising from public health
concerns relating to emerging diseases such as COVID-19, could also adversely affect our
employees and our operations, as well as our ability to implement our strategy to look for
opportunities to grow revenue in other jurisdictions, which could have an adverse effect
on our business, results of operations and financial condition.
37
2019 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2019
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. Critical accounting estimates and judgments
are those that have a significant risk of causing material
adjustment.
8.4 Changes in accounting policies
The Company has adopted the following new and revised
standards, along with any consequential amendments,
effective January 1, 2019, or on such date as they became
applicable. These changes were made in accordance with
the applicable transitional provisions. Refer to Note 2 of the
Financial Statements for further information pertaining to the
adoption and changes in these policies.
8 Accounting Policies, Financial
Measures and Controls
8.1 Off-balance sheet arrangements
The Company had no off-balance sheet arrangements as at
December 31, 2019.
8.2 Related party transactions
Routine operating transactions with related parties are settled
at agreed upon exchange amounts under normal trade
terms. Refer to Note 25 in the December 31, 2019, Financial
Statements which are available on our website at www.
company.isc.ca and in the Company’s profile on SEDAR at
www.sedar.com, for information pertaining to transactions
with related parties.
8.3 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 and goodwill;
• the recoverability of deferred tax assets; and
• the amount and timing of revenue from contracts from
customers recognized over time with milestones and the
associated carrying value of assets recognized from the costs
incurred to fulfil the contracts.
38
2019 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2019 Standard
Description
IFRS 16 – Leases
The Company adopted IFRS 16 – Leases (“IFRS 16”) using the full retrospective method and, therefore,
the comparative information has been restated and reported under IFRS 16, with an impact to opening
retained earnings. IFRS 16 supersedes previous accounting standards for leas-es, including IAS 17 –
Leases (“IAS 17”).
IFRS 16 introduces a single, on balance sheet lease accounting model for lessees. The Company, as
a lessee, recognizes a right-of-use asset and a lease liability at the lease commencement date. The
right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability
adjusted for any lease payments made at or before the commencement date, plus any initial direct
costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore
the underlying asset or the site on which it is located, less any lease incentives received. There are
recognition exemptions for short-term leases (lease term of twelve months or less) and leases of
low-value items (such as tablet and personal computers, small items of office furniture, equipment
and telephones). The Company has chosen to use these exemptions and recognize a lease expense
on a straight-line basis as permitted by IFRS 16. For tablet and personal computers, this expense is
recognized in information technology expenses and, for small items of office furniture, equipment and
telephones, this expense is recognized in occupancy expenses.
The right-of-use asset is subsequently depreciated using the straight-line method from the
commencement date to the earlier of the end of the useful life of the right-of-use asset or the end
of the lease term. The estimated useful lives of the right-of-use assets are determined on the same
basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by
impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at
the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot
be readily determined, the Company’s incremental borrowing rate. Generally, the Company uses the
incremental borrowing rate as a discount rate.
Lease payments included in the measurement of the lease liability are comprised of the following:
• fixed payments, including in-substance fixed payments;
• variable lease payments that depend on an index or a rate, initially measured using the index or rate as
at the commencement date;
• amounts expected to be payable under a residual value guarantee; and
• the exercise price under a purchase option that the Company is reasonably certain to exercise and lease
payments in an optional renewal period if the Company is reasonably certain not to terminate early.
The lease liability is measured at amortized cost using the effective interest method. It is remeasured
when there is a change in future lease payments arising from a change in an index or rate, if there is
a change in the Company’s estimate of the amount expected to be payable under the residual value
guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension
or termination option.
In situations where the lease liability is remeasured, the incremental amount of the remeasurement is
also reflected as an adjustment to the right-of-use asset. However, if the carrying amount of the right-
of-use asset is reduced to zero and there is a further reduction in the measurement of the lease liability,
any remaining amount of the remeasurement is recognized in profit or loss.
39
2019 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2019 The IAS Board and International Financial Reporting Interpretations Committee (“IFRIC”) issued the following new standards and
amendments to standards and interpretations, which become effective for future periods.
Proposed Standard
Description
Amendments to IFRS
3 – Definition of a
Business
The amendments to IFRS 3 result in a change to the definition of a business which:
• clarifies that to be considered a business, an acquired set of activities and assets must
include, at a minimum, an input and a substantive process that together significantly
contribute to the ability to create outputs;
Effective Date
January 1,
2020
• narrows the definitions of a business and of outputs by focusing on goods and
services provided to customers and by removing the reference to reduce costs;
• adds guidance and illustrative examples to help entities assess whether a substantive
process has been acquired;
• removes the assessment of whether market participants are capable of replacing any
missing inputs or processes and continuing to produce outputs; and
• adds an optional concentration test that permits a simplified assessment of whether
an acquired set of activities and assets is not a business.
This change will impact the analysis of business combinations. The amendment is
prospective and the Company does not expect to be affected upon transition.
Amendments to IAS 1
and IAS 8 – Definition
of Material
The amendments in Definition of Material (Amendments to IAS 1 and IAS 8) clarify the
definition of “material” and align the definition used in the Conceptual Framework and
the standards.
January 1,
2020
The change in definition may impact the quantity and level of detail of disclosures in
the Company’s financial statements. The amendment is prospective and the Company
does not expect to be affected upon transition.
8.5 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 8.8 “Non-IFRS financial measures”.
8.6 Internal controls over financial reporting
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 scope of internal controls over financial reporting has been limited to exclude controls, policies and procedures of
Securefact, having been acquired less than 365 days prior to December 31, 2019.
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.
40
2019 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2019 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.
8.7 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 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 Securefact,
having been acquired less than 365 days prior to December 31, 2019.
The contribution of Securefact to the Financial Statements for the three months and year ended December 31, 2019, was approximately
1.0 per cent of revenue and 2.0 per cent of expenses. Securefact contributed 5.0 per cent of non-current assets. Securefact did not
contribute to our current assets, current liabilities or non-current liabilities.
8.8 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, may not be comparable
to similar measures presented by other companies.
8.9 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 use by
management, we also believe these measures are widely used by securities analysts, investors and others to evaluate the financial
performance of the 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.
41
2019 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2019 2019 Consolidated Financial Statements
For the Year Ended December 31, 2019
Table of Contents
Management’s Responsibility ...........................................................................................................................................................................................................43
Independent Auditor’s Report .........................................................................................................................................................................................................44
Consolidated Statements of Financial Position .....................................................................................................................................................................46
Consolidated Statements of Comprehensive Income ......................................................................................................................................................47
Consolidated Statements of Changes in Equity ...................................................................................................................................................................48
Consolidated Statements of Cash Flows ...................................................................................................................................................................................49
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
28
29
30
31
32
Nature of the Business ...........................................................................................................................................................................................................50
Basis of Presentation ...............................................................................................................................................................................................................50
Summary of Significant Accounting Policies ..........................................................................................................................................................52
Cash ...................................................................................................................................................................................................................................................59
Short-Term Investments .......................................................................................................................................................................................................59
Trade and Other Receivables .............................................................................................................................................................................................60
Contract Assets ...........................................................................................................................................................................................................................60
Seasonality ....................................................................................................................................................................................................................................60
Property, Plant and Equipment ........................................................................................................................................................................................ 61
Right-of-use Assets ...................................................................................................................................................................................................................62
Intangible Assets .......................................................................................................................................................................................................................63
Goodwill .........................................................................................................................................................................................................................................64
Accounts Payable and Accrued Liabilities.................................................................................................................................................................65
Contract Liabilities ....................................................................................................................................................................................................................65
Lease Obligations .....................................................................................................................................................................................................................65
Tax Provision ................................................................................................................................................................................................................................66
Share-Based Compensation Plans..................................................................................................................................................................................67
Debt ...................................................................................................................................................................................................................................................70
Provisions .......................................................................................................................................................................................................................................71
Liabilities Arising from Financing Activities ..............................................................................................................................................................71
Earnings Per Share ....................................................................................................................................................................................................................72
Equity and Capital Management ....................................................................................................................................................................................72
Financial Instruments and Related Risk Management ......................................................................................................................................73
Revenue ..........................................................................................................................................................................................................................................75
Related Party Transactions ..................................................................................................................................................................................................76
Compensation of Key Management Personnel.....................................................................................................................................................76
Segment Information .............................................................................................................................................................................................................76
Acquisitions ..................................................................................................................................................................................................................................78
Net Change in Non-Cash Working Capital ...............................................................................................................................................................80
Commitments and Contingencies ................................................................................................................................................................................80
Pension Expense .......................................................................................................................................................................................................................81
Subsequent Events ..................................................................................................................................................................................................................81
42
2019 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 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, has performed an independent audit of the consolidated financial statements
and that report follows. The auditor has full and unrestricted access to the Audit Committee to discuss the 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 17, 2020
43
2019 ISC® Annual Report | Consolidated Financial Statements Independent Auditor’s Report
To the Shareholders and the Board of Directors of Information Services Corporation:
Opinion
We have audited the consolidated financial statements of Information Services Corporation (the “Company”), which comprise
the consolidated statements of financial position as at December 31, 2019, and 2018 and January 1, 2018, and the consolidated
statements of comprehensive income, changes in equity and cash flows for the years then ended, and notes to the consolidated
financial statements, including a summary of significant accounting policies (collectively referred to as the “financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company
as at December 31, 2019, and 2018 and January 1, 2018, and its financial performance and its cash flow for the years ended
December 31, 2019, and 2018 in accordance with International Financial Reporting Standards (“IFRS”).
Basis for Opinion
We conducted our audits in accordance with Canadian generally accepted auditing standards (“Canadian GAAS”). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are
relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance
with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Other Information
Management is responsible for the other information. The other information comprises:
• Management’s Discussion and Analysis
• The information, other than the financial statements and our auditor’s report thereon, in the Annual Report.
Our opinion on the financial statements does not cover the other information and we do not and will not express any form of
assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have
performed on this other information, we conclude that there is a material misstatement of this other information, we are required
to report that fact in this auditor’s report. We have nothing to report in this regard.
The Annual Report is expected to be made available to us after the date of the auditor’s report. If, based on the work we will
perform on this other information, we conclude that there is a material misstatement of this other information, we are required to
report that fact to those charged with governance.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, and for
such internal control as management determines is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian GAAS will always detect
a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
44
2019 ISC® Annual Report | Consolidated Financial Statements in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
As part of an audit in accordance with Canadian GAAS, we exercise professional judgment and maintain professional skepticism
throughout the audit.
We also:
•
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit 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 Company’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the
Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However,
future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the
financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the
Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance
of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to
bear on our independence, and where applicable, related safeguards.
The engagement partner on the audit resulting in this independent auditor’s report is Leigh Derksen.
Chartered Professional Accountants
Regina, Saskatchewan
March 17, 2020
45
2019 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
Contract assets
Income tax recoverable
Prepaid expenses
Total current assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Goodwill
Deferred tax asset
Total non-current assets
Total assets
Liabilities
Current liabilities
Accounts payable and accrued liabilities
Contract liabilities
Lease obligations – current portion
Income tax payable
Contingent consideration
Long-term debt – current portion
Provisions
Total current liabilities
Non-current liabilities
Lease obligations
Contingent consideration
Deferred tax liability
Long-term debt
Other liabilities
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 2
See Note 30 for Commitments and Contingencies
See accompanying Notes
Note
As at December 31,
2019
As at December 31,
2018 (restated*)
As at January 1,
2018 (restated*)
4
5
6
7
9
10
11
12
16
13
14
15
16
28
18
19
15
28
16
18
17
22
17
$
$
$
23,731
475
12,648
1,623
1,736
2,120
42,333
2,998
9,668
41,196
45,529
29,855
129,246
171,579
18,096
1,436
1,845
810
–
2,000
468
24,655
8,967
–
7,543
16,000
173
32,683
19,955
2,153
5
92,128
114,241
171,579
$
$
$
$
$
28,651
448
8,964
1,414
5
2,091
41,573
3,795
11,558
40,704
44,310
31,742
132,109
173,682
17,118
2,599
1,778
2,561
2,322
2,000
–
28,378
10,457
–
7,963
18,000
–
36,420
19,955
1,687
514
86,728
108,884
173,682
$
$
$
$
31,265
301
7,510
–
–
1,913
40,989
4,504
10,308
47,022
44,473
34,992
141,299
182,288
16,522
1,407
1,859
3,223
–
1,500
–
24,511
9,081
15,723
9,407
20,060
–
54,271
19,955
1,070
390
82,091
103,506
182,288
APPROVED BY THE BOARD OF DIRECTORS ON MARCH 17, 2020:
Joel Teal
Director
46
Tony Guglielmin
Director
2019 ISC® Annual Report | Consolidated Financial Statements
Consolidated Statements of Comprehensive Income
Note
24
Year Ended December 31,
2019
Year Ended December 31,
2018 (restated*)
$
132,968
$
119,131
(thousands of CAD dollars)
Revenue
Expenses
Wages and salaries
Cost of goods sold
Depreciation and amortization
Information technology services
Occupancy costs
Professional and consulting services
Financial services
Other
Total expenses
Net income before items noted below
Finance income (expense)
9, 10, 11
Interest income
Interest expense
Net finance (expense)
Change in contingent consideration
Income before tax
Income tax expense
Net income
Other comprehensive income (loss)
Items that may be subsequently reclassified to net income
Unrealized (loss) gain on translation of financial
4
28
28
16
statements of foreign operations
Change in fair value of marketable securities,
net of tax
Other comprehensive (loss) income
Total comprehensive income
Earnings per share ($ per share)
Total, basic
Total, diluted
*See Note 2
See accompanying Notes
21
21
41,689
31,171
11,400
8,796
3,485
4,281
2,138
2,382
105,342
27,626
283
(1,529)
(1,246)
–
26,380
(6,980)
19,400
(538)
29
(509)
18,891
1.11
1.11
$
$
$
$
37,842
25,084
11,775
8,479
3,369
4,785
2,302
2,713
96,349
22,782
416
(1,189)
(773)
3,567
25,576
(6,939)
18,637
232
(108)
124
18,761
1.06
1.06
$
$
$
$
47
2019 ISC® Annual Report | Consolidated Financial Statements
Consolidated Statements of Changes in Equity
Retained
Earnings
Accumulated Other
Comprehensive
Income
Share
Capital
$
82,556
(465)
82,091
18,637
–
–
(14,000)
86,728
$
$ 86,728
19,400
–
–
(14,000)
$ 92,128
$ 19,955
–
19,955
–
–
–
–
$ 19,955
$ 19,955
–
–
–
–
$ 19,955
$
$
$
$
390
–
390
-
124
–
–
514
514
–
(509)
–
–
5
Equity
Reserve
1,070
–
1,070
-
-
617
–
1,687
$
$
$
1,687
–
–
466
–
$ 2,153
Total
$ 103,971
(465)
103,506
18,637
124
617
(14,000)
$ 108,884
$ 108,884
19,400
(509)
466
(14,000)
$ 114,241
(thousands of CAD dollars)
Note
Balance at January 1, 2018,
as audited
Impact of IFRS 16
Restated balance at January 1, 2018
Restated net income for the period
Other comprehensive income
Stock option expense
Dividend declared
Restated balance at December 31, 2018
17
Balance at January 1, 2019
Net income
Other comprehensive income
Stock option expense
Dividend declared
Balance at December 31, 2019
17
See accompanying Notes
48
2019 ISC® Annual Report | Consolidated Financial Statements
Consolidated Statements of Cash Flows
(thousands of CAD dollars)
Operating
Net income
Add: Charges not affecting cash
Year Ended December 31, Year Ended December 31,
Note
2019
2018 (restated**)
$
19,400
$
18,637
Depreciation
Amortization
Foreign exchange (gain) loss
Deferred tax expense recognized in net income
Service concession arrangements
Loss on disposal of property, plant and equipment
Recovery of MARS* project expenses
Net finance expense
Stock option expense
Change in contingent consideration
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
Short-term investments
Additions to property, plant and equipment
Additions to intangible assets
Net cash outflow on acquisition in subsidiary
Net cash flow used in investing activities
Financing
Interest paid
Interest paid on right-of-use assets
9, 10
11
24
11
17
28
29
28
Principal repayments on lease obligations
Repayment of long-term debt
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 Note 2
See accompanying Notes
3,690
7,710
(59)
1,484
(1,114)
2
–
1,246
466
–
(9,195)
23,630
283
3
–
(654)
(2,175)
(6,768)
(9,311)
(833)
(486)
(1,767)
(2,000)
(14,000)
(19,086)
(153)
(4,920)
28,651
23,731
$
3,090
8,685
58
1,792
–
82
19
773
617
(3,567)
(217)
29,969
416
–
(250)
(548)
(2,227)
(11,330)
(13,939)
(807)
(399)
(1,863)
(1,560)
(14,000)
(18,629)
(15)
(2,614)
31,265
28,651
$
49
2019 ISC® Annual Report | Consolidated Financial Statements
1 Nature of the Business
Information Services Corporation is the parent company of its
subsidiary group (collectively, the “Company”, or “ISC”) and is
a Canadian corporation with its Class A Limited Voting Shares
(“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 is a provider of registry and information
management services for public data and records. The
Company has regional service centres across Saskatchewan
and has offices in Regina, SK, Toronto, ON, Montreal, QC,
Vernon, BC, and Dublin, Ireland. ISC has three reportable
segments: Registry Operations, Services and Technology
Solutions. A functional summary of these segments is as
follows:
• Registry Operations delivers registry services on behalf of
governments and private sector organizations. Currently,
through this segment, ISC provides registry and information
services on behalf of the Province of Saskatchewan under
a 20-year Master Service Agreement (“MSA”), in effect until
2033.
• Services delivers products and services that utilize public
records and data to provide value to customers in the
financial and legal sectors.
• Technology Solutions provides the development, delivery
and support of registry (and related) technology solutions.
The balance of our corporate activities and shared services
functions are reported as Corporate and other.
As at December 31, 2019, ISC’s principal revenue generating
segments were Registry Operations and Services.
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, 2019, for issue on March 17, 2020.
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.
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
The consolidated financial statements incorporate the
financial statements of Information Services Corporation
and its wholly owned significant operating subsidiaries: ISC
Saskatchewan Inc. (“ISC Sask”), ISC Enterprises Inc. (“ISC Ent”),
ESC Corporate Services Ltd. (“ESC”) and Enterprise Registry
Solutions Limited (“ERS”). All intragroup assets and liabilities,
equity, income, expenses and cash flows are eliminated in full
on consolidation.
50
2019 ISC® Annual Report | Notes to the Consolidated Financial Statements 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 9);
• the carrying value, impairment and estimated useful lives
of intangible assets (Note 11) and goodwill (Note 12);
• the recoverability of deferred tax assets (Note 16); and
• the amount and timing of revenue from contracts from
customers recognized over time with milestones (Note 24)
and the associated carrying value of assets recognized from
the costs incurred to fulfil the contracts (Note 7).
The relevant accounting policies in Note 3 contain further
details on the use of these estimates and assumptions.
Changes in accounting policies
The Company has adopted the following new and revised
standards, along with any consequential amendments,
effective January 1, 2019, or on such date as they became
applicable. These changes were made in accordance with the
applicable transitional provisions.
Leases
On January 1, 2019, the Company adopted IFRS 16 – Leases
(“IFRS 16”) using the full retrospective method and, therefore,
the comparative information has been restated and reported
under IFRS 16, with an impact to opening retained earnings.
IFRS 16 supersedes previous accounting standards for leases,
including IAS 17 – Leases (“IAS 17”).
IFRS 16 introduces a single, on balance sheet lease accounting
model for lessees. The Company, as a lessee, recognizes a right-
of-use asset and a lease liability at the lease commencement
date. The right-of-use asset is initially measured at cost, which
comprises the initial amount of the lease liability adjusted for
any lease payments made at or before the commencement
date, plus any initial direct costs incurred and an estimate
of costs to dismantle and remove the underlying asset or to
restore the underlying asset or the site on which it is located,
less any lease incentives received. There are recognition
exemptions for short-term leases (lease term of twelve
months or less) and leases of low-value items (such as tablet
and personal computers, small items of office furniture,
equipment and telephones). The Company has chosen to
use these exemptions and recognize a lease expense on a
straight-line basis as permitted by IFRS 16. For tablet and
personal computers, this expense is recognized in information
technology expenses and, for small items of office furniture,
equipment and telephones, this expense is recognized in
occupancy expenses.
The right-of-use asset is subsequently depreciated using the
straight-line method from the commencement date to the
earlier of the end of the useful life of the right-of-use asset
or the end of the lease term. The estimated useful lives of
the right-of-use assets are determined on the same basis as
those of property and equipment. In addition, the right-of-use
asset is periodically reduced by impairment losses, if any, and
adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of
the lease payments that are not paid at the commencement
date, discounted using the interest rate implicit in the lease
or, if that rate cannot be readily determined, the Company’s
incremental borrowing rate. Generally, the Company uses the
incremental borrowing rate as a discount rate.
Lease payments included in the measurement of the lease
liability are comprised of the following:
• fixed payments, including in-substance fixed payments;
• variable lease payments that depend on an index or a
rate, initially measured using the index or rate as at the
commencement date;
• amounts expected to be payable under a residual value
guarantee; and
• the exercise price under a purchase option that the
Company is reasonably certain to exercise and lease
payments in an optional renewal period, if the Company is
reasonably certain not to terminate early.
The lease liability is measured at amortized cost using the effective
interest method. It is remeasured when there is a change in future
lease payments arising from a change in an index or rate, if there
is a change in the Company’s estimate of the amount expected to
be payable under the residual value guarantee, or if the Company
changes its assessment of whether it will exercise a purchase,
extension or termination option.
In situations where the lease liability is remeasured, the
incremental amount of the remeasurement is also reflected
as an adjustment to the right-of-use asset. However, if the
carrying amount of the right-of-use asset is reduced to zero
and there is a further reduction in the measurement of the
lease liability, any remaining amount of the remeasurement is
recognized in profit or loss.
51
2019 ISC® Annual Report | Notes to the Consolidated Financial Statements Reconciliation of consolidated statements of income for the year ended December 31, 2018
Below is the effect of transition to IFRS 16 on our consolidated statements of income for the year ended December 31, 2018.
(thousands of CAD dollars, unaudited)
Revenue
Total expenses excluding depreciation and amortization
Depreciation and amortization
Total expenses
Net income before items noted below
Net finance (expense)
Change in contingent consideration
Income before tax
Income tax expense
Net income
2018
(as reported)
$ 119,131
86,836
9,867
96,703
22,428
(374)
3,567
25,621
(6,950)
18,671
$
Impact of IFRS 16
$
$
–
(2,262)
1,908
(354)
354
(399)
–
(45)
11
(34)
Jan. 1, 2019
$ 119,131
84,574
11,775
96,349
22,782
(773)
3,567
25,576
(6,939)
18,637
$
Reconciliation of consolidated statements of financial position as at January 1, 2018, and December 31, 2018
Below is the effect of transition to IFRS 16 on our consolidated statements of financial position as at January 1, 2018, and December 31, 2018.
As at January 1, 2018
As at December 31, 2018
As previously
As previously
reported Adjustments
Restated
reported Adjustments
Restated
$
–
34,837
136,988
$ 171,825
(thousands of CAD dollars, unaudited)
Assets
Right-of-use assets
Deferred tax asset
Other current and non-current assets
Total assets
Liabilities
Current portion of lease obligations
Lease obligations
Deferred tax liability
Other current and non-current liabilities
Total current and non-current liabilities
Shareholders’ equity
19,955
Share capital
1,070
Equity settled employee benefit reserve
390
Accumulated other comprehensive income
82,556
Retained earnings
Total shareholders’ equity
103,971
Total liabilities and shareholders’ equity $ 171,825
–
–
9,419
58,435
67,854
$
$ 10,308
155
–
$ 10,463
$ 10,308
34,992
136,988
$ 182,288
$
–
31,580
130,382
$ 161,962
$ 11,558
162
–
$ 11,720
$ 11,558
31,742
130,382
$ 173,682
$ 1,859
9,081
(12)
–
10,928
–
–
–
(465)
(465)
$ 10,463
$
1,859
9,081
9,407
58,435
78,782
19,955
1,070
390
82,091
103,506
$ 182,288
$
–
–
7,979
44,600
52,579
19,955
1,687
514
87,227
109,383
$ 161,962
$ 1,778
10,457
(16)
-
12,219
–
–
–
(499)
(499)
$ 11,720
$
1,778
10,457
7,963
44,600
64,798
19,955
1,687
514
86,728
108,884
$ 173,682
3 Summary of Significant Accounting Policies
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
52
2019 ISC® Annual Report | Notes to the Consolidated Financial Statements
residual value over the estimated productive life of each asset.
The useful life of each asset is as follows:
Leasehold improvements
Office furniture
Office equipment
Hardware
Term of lease
2-10 years
2-10 years
3-4 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
Internal-use software and business solutions acquired are
carried at cost less accumulated amortization and any
accumulated impairment losses. Internal-use software,
business solutions, customer and partner relationships, brand,
non-competes, and other intangible assets acquired through
business combinations are initially recorded at their fair values
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 expenditures
for 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 using the
straight-line method 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
consolidated statements of comprehensive income.
Internal-use software
3-15 years
3-7 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.
53
2019 ISC® Annual Report | Notes to the Consolidated Financial Statements
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 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 12.
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 values, except
the deferred tax assets and liabilities which 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.
Revenue
The Company recognizes revenue at either a point in time
or over time as determined by an analysis of the terms
and performance conditions of each individual customer
contract on a contract-by-contract basis. The individual
contract terms determine whether, when and the amount of
the revenue recognized.
The Company considers and assesses enforceability,
collectability, contract combinations and modifications as part
of the revenue recognition process.
The revenue recognition policies associated with each of the
Company’s revenue streams are as follows:
54
2019 ISC® Annual Report | Notes to the Consolidated Financial Statements Registry Operations revenue
Our Registry Operations segment delivers registry services to
governments and private sector organizations. Our revenue
is generated by providing registry and information services to
end-users on behalf of the Province of Saskatchewan under
the MSA. The majority of revenue is generated by earning
fees from end-use customers through registrations, searches,
maintenance transactions and value-added services.
services to our customers. For this access, our Services
segment usually pays a fee to the government. Where we
provide simple searches to our customers, government
fees are not included in our revenue (record government
fees on a net basis). Where our services include a number of
collateral management services, government fees are a key
input to these services and are recorded in revenue (record
government fees on a gross basis).
The majority of the associated transaction fees are based on a
flat or value-based, stand-alone selling price for each distinct
service which is recognized at a point in time. There is a smaller
amount of fees generated under the MSA related to programs
and other registries whereby the Company earns an annual
operating fee or hosting and management fees versus revenue
per transaction. Revenue from annual operating fees and
hosting and management contracts is recognized over time on
a monthly basis.
A smaller portion of revenue in the Saskatchewan Land
Registry is value-added services and relates to our Geomatics
business. Geomatics revenue is contract dependent, based on
the distinct goods or service promised to the customer, and
is either recognized at a point in time or over time for support
and maintenance contracts.
Technology Solutions revenue
Our Technology Solutions segment provides the development,
delivery and support of registry (and related) technology
solutions. We generate revenue through the following:
• Sale of software licences related to the technology platform;
• Provision of technology solution definition and
implementation services; and
• Provision of monthly hosting, support and
maintenance services.
Licencing revenue is determined by assessing each individual
contract to determine whether the licence obligation is
distinct from the other performance obligations within the
contract. The Company may have various types of licence
obligations depending on the contract:
Amounts received from customers in advance of the
satisfaction of our performance obligations are recorded as
“contract liabilities” on our consolidated statements of financial
position. Amounts in “contract liabilities” are recognized into
revenue as we render services to our customers.
•
If the licence obligation is distinct, the Company determines
if the licence should be recognized at a point in time (“right
to use”) or over time (“right to access”) throughout the
licence period.
– For contracts that provide the customer a right to use the
Services revenue
Our Services segment delivers solutions uniting public record
data, customer authentication, corporate legal services and
collateral management services to support lending practices
to clients with business across Canada. We classify revenue in
two categories, namely Legal Support Services and Financial
Support Services.
Legal Support Services captures revenue related to services
provided to legal professionals directly or indirectly from
nationwide search and registration services and through the
sale of supplies to help companies organize and maintain
their corporate legal documents. Revenue for Legal Support
Services is recognized at a point in time when services are
rendered or goods are delivered.
Financial Support Services captures revenue related to services
provided to financial and credit institutions to support their
due diligence activities for compliance and credit granting
services, including collateral management services. Revenue
for Financial Support Services is recognized at a point in time
when services are rendered.
Most of our Services revenue involves interacting with
government registries to access public records to provide
Company’s intellectual property (“IP”) at a point in time,
licence revenue is recognized once the technology is
available for use and the control over the right to use the
IP is transferred to the customer.
– For contracts that provide the customer a right to access
the Company’s IP over time, licence revenue is recognized
over the licence period.
• For those contracts where the licence obligation is
determined not to be distinct from other performance
obligations, the licence revenue is allocated to the
associated performance obligations and recognized
upon achievement of the milestones applicable to
those obligations.
The Company is currently allocating the majority of its licence
revenue along with the associated performance obligations
and recognizing it upon achievement of the milestones
applicable to those obligations.
Solution definition and implementation services revenue is
recognized either at a point in time or over time using the
output method, based on an assessment of the contract’s
stand-alone selling price allocated to the performance
milestones within the contract.
55
2019 ISC® Annual Report | Notes to the Consolidated Financial Statements Hosting, support and maintenance revenue is recognized
according to the delivery of the performance obligations in
the contract and the stand-alone selling price allocated to the
obligations. These services may be provided through either
fixed price, deliverable-based contracts or fee-for-service
contracts. Hosting contracts generally result in linear monthly
revenue recognition over the term of the contract. Service
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. Service revenue from time and material
contracts is recognized at the contractual rates as labour hours
are delivered and direct expenses are incurred.
Amounts received from customers in advance of the
satisfaction of our performance obligations are recorded as
“contract liabilities” on our consolidated statements of financial
position. Amounts in “contract liabilities” are recognized
into revenue as we render services or achieve performance
milestones. Costs the Company incurs related to the fulfilment
of a contract but prior to reaching a performance milestone are
recorded as a “contract asset” on the consolidated statements
of financial position. Once the milestone is achieved, these
costs are recorded in the consolidated statements of
comprehensive income.
Service concession arrangements
Service concession arrangements are contracts between
the Company and government entities and can involve the
design, build, finance, operation, and maintenance of public
infrastructure in which the government entity controls:
• the services provided by the Company under the concession
arrangement; and
• a significant residual interest in the infrastructure.
The Company recognizes an intangible asset arising from a
service concession arrangement when it has a right to charge
for the usage of the concession infrastructure. The intangible
asset is measured at fair value upon initial recognition and
is then amortized over its expected useful life. Amortization
commences when the infrastructure is available for use.
Revenue related to construction or upgrade services under a
concession arrangement is recognized based on the stage of
completion of the work performed.
Employee benefits
The Company provides pension plans for all eligible
employees.
Saskatchewan employees make contributions to the Public
Employees Pension Plan, a defined contribution plan. The
Company’s obligations are limited to making regular payments
to the plan for current services. These contributions are
expensed.
ESC and ERS employees have an option to make contributions
to a defined contribution plan. The Company’s obligations are
limited to matching employee contributions up to a maximum
of 5.0 per cent of salary. These contributions are expensed.
Financial instruments
The Company’s financial assets are categorized into the
following measurement categories: measured at amortized
cost (“AC”), fair value through other comprehensive income
(“FVTOCI”), and fair value through profit and loss (“FVTPL”).
Financial liabilities are measured at amortized cost.
IFRS 9 – Financial Instruments (“IFRS 9”) replaces the “incurred
loss” model in IAS 39 – Financial Instruments: recognition and
measurement (“IAS 39”) with a forward-looking “expected
credit loss” model for determining impairment or recognition
of credit losses on financial assets measured at AC or FVTOCI.
There is no impact to ISC as credit losses are historically low
as most customers with credit are governments, banking
institutions, and legal firms with strong credit.
Below is a summary showing the classification and
measurement bases of our financial instruments as at
January 1, 2018, as a result of adopting IFRS 9.
56
2019 ISC® Annual Report | Notes to the Consolidated Financial Statements Financial Instrument
IFRS 9
Classification
Measurement
Assets
Cash
Short-term investments (GICs)
Short-term investments –
marketable securities
Trade and other receivables
Contract assets – unbilled
revenue
Liabilities
Accounts payable and
accrued liabilities
AC
AC
FVTOCI
AC
AC
AC
AC
AC
FVTOCI
AC
AC
Amortized cost using effective interest rate method
Contingent consideration1
FVTPL
FVTPL
Provisions
Lease obligations
Long-term debt
AC
AC
AC
Amortized cost using effective interest rate method
Amortized cost using effective interest rate method
Amortized cost using effective interest rate method
1 Contingent consideration related to the AVS Systems Inc. (“AVS”) acquisition – see Note 28.
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.
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.
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 plans
The Company has established share-based compensation
plans to provide directors and management of the Company
with the opportunity to participate in the long-term success
of ISC and to promote a greater alignment of interests
between its directors, management and shareholders.
A long-term incentive plan utilizing performance share units
(“PSUs”) and share appreciation rights (“SARs”) was approved
by the Board on May 15, 2019, which is described in Note 17.
PSUs are cash-settled share-based units. The Company has
recognized an obligation at an estimated amount based
on the arithmetic average of the official closing prices per
share on the TSX on the five days immediately preceding the
grant date which is recorded in other long-term liabilities.
Compensation expense is recognized in proportion to the
number of PSUs vested. At the end of each reporting period,
the estimates are reassessed based on the fair value of the
PSUs as of the reporting period. Any change in estimate is
recognized as a liability and an expense at the end of the
reporting period.
SARs are also cash-settled share-based units. The Black-
Scholes methodology is used to value each SAR grant when
awarded. The inputs used in this valuation are described
below. At the end of each reporting period, the market
57
2019 ISC® Annual Report | Notes to the Consolidated Financial Statements 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 translated at the rates
prevailing at that date. Exchange differences are recognized
in earnings in the period in which they arise. Non-monetary
items carried at fair value that are denominated in foreign
currencies are translated at the rates prevailing at the date
when the fair value was determined. Non-monetary items that
are measured in terms of historical cost in a foreign currency
are not translated.
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
the 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.
value of the Company’s Class A Shares at the reporting date
in excess of the SAR value multiplied by the number of
SARs vested is recognized as an obligation in other long-
term liabilities and the offsetting amount is recorded in
compensation expense.
The Company also has a deferred share unit (“DSU”) plan and
a stock option plan, each of which is described in Note 17.
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 reassessed 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 reassessed based
on the fair value of the DSUs with any change in estimate
recognized in the obligation and expense.
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. It is anticipated
that no new stock options will be awarded in the near term.
The existing stock options will remain outstanding until
exercised, expired or terminated.
The Company has used the following variables as inputs in
the Black-Scholes methodology for the valuation of the SARs
and the stock options. The inputs are subject to review as
applicable.
• Option term: the maximum duration before expiry
• Risk-free rate: estimated based on 10-year Canada bond rate
• Dividend yield: based on ISC’s 3-year average annual
yield rate
• Equity volatility: based on ISC’s 3-year standard deviation of
Total Shareholder Return
58
2019 ISC® Annual Report | Notes to the Consolidated Financial Statements Recent accounting pronouncements
The IAS Board and International Financial Reporting Interpretations Committee (“IFRIC”) issued the following new standards and
amendments to standards and interpretations, which become effective for future periods.
Proposed Standard Description
Amendments to
IFRS 3 – Definition of
a Business
The amendments to IFRS 3 result in a change to the definition of a business which:
• clarifies that to be considered a business, an acquired set of activities and assets must
include, at a minimum, an input and a substantive process that together significantly
contribute to the ability to create outputs;
Effective Date
January 1,
2020
• narrows the definitions of a business and of outputs by focusing on goods and services
provided to customers and by removing the reference to an ability to reduce costs;
• adds guidance and illustrative examples to help entities assess whether a substantive
process has been acquired;
• removes the assessment of whether market participants are capable of replacing any
missing inputs or processes and continuing to produce outputs; and
• adds an optional concentration test that permits a simplified assessment of whether an
acquired set of activities and assets is not a business.
This change will impact the analysis of business combinations. The amendment is
prospective and the Company does not expect to be affected upon transition.
Amendments to
IAS 1 and IAS 8 –
Definition of Material
The amendments in Definition of Material (Amendments to IAS 1 and IAS 8) clarify the
definition of “material” and align the definition used in the Conceptual Framework and
the standards.
January 1,
2020
The change in definition may impact the quantity and level of detail of disclosures in the
Company’s financial statements. The amendment is prospective and the Company does not
expect to be affected upon transition.
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 in 2019 and 2018.
Interest income earned in 2019 is $283 thousand (2018 – $416 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,
2019
400
75
475
$
$
December 31,
2018
400
48
448
$
GICs consist of one-year certificates issued by and held as collateral by a Canadian chartered bank at an interest rate of
0.50 per cent per annum with maturity dates occurring in January 2020, June 2020 and September 2020. Marketable securities
consist of an investment in less than 5.0 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 in 2017.
59
2019 ISC® Annual Report | Notes to the Consolidated Financial Statements
6 Trade and Other Receivables
The components of trade and other receivables are as follows:
December 31, December 31,
2018
2019
$ 12,320
134
194
$ 7,884
353
727
$ 12,648
$ 8,964
(thousands of CAD dollars)
Trade receivables
GST/HST/VAT receivables
Other
Total trade and other
receivables
7 Contract Assets
The components of contract assets are as follows:
(thousands of CAD dollars)
Unbilled revenue
Contract fulfilment costs
Total contract assets
December 31, December 31,
2018
2019
$
1,420
203
$ 1,623
$
636
778
$ 1,414
Unbilled revenue is uninvoiced amounts due from customers
under Technology Solutions contracts that arise when the
Company meets performance-related milestones. At the point
the Company invoices the amounts, they are reclassified into
trade receivables.
Contract fulfilment costs are costs the Company incurs related
to the fulfilment of Technology Solutions contracts but prior
to reaching a performance milestone. Once the performance
milestone is achieved, these costs, along with the associated
revenue, will be recognized in the consolidated statements of
comprehensive income.
The Company does not have any contract acquisition costs
at the end of the reporting period and did not recognize any
amortization of contract acquisition costs during the period
(2018 – nil).
There were no impairment losses recognized on any contract
asset during the reporting period (2018 – nil).
8 Seasonality
Our Registry Operations segment experiences moderate
seasonality, primarily because Saskatchewan 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. In our Services segment, our
core legal and financial services revenue is fairly diversified
and has little seasonality; rather, it fluctuates in line with the
general economic drivers. Our collateral management services
experience some seasonality aligned to vehicle and equipment
financing cycles, which are generally stronger in the second
and fourth quarters. Some smaller categories of products or
services can have some seasonal variation, increasing slightly
during the second and fourth quarters. Our Technology
Solutions segment does not experience seasonality but
can fluctuate due to the timing of project-related revenue.
The balance of our corporate activities and shared services
functions, reported under Corporate and other, do not
experience seasonality. Expenses are generally consistent
from quarter to quarter, but can fluctuate due to the timing of
project-related or acquisition activities.
60
2019 ISC® Annual Report | Notes to the Consolidated Financial Statements
9 Property, Plant And Equipment
(thousands of CAD dollars)
Cost
Balance at December 31, 2017
Additions
Disposals
Transfers
Foreign exchange adjustments
Balance at December 31, 2018
Acquired assets
Additions
Disposals
Transfers
Foreign exchange adjustments
Balance at December 31, 2019
Accumulated depreciation
Balance at December 31, 2017
Depreciation
Disposals
Foreign exchange adjustments
Balance at December 31, 2018
Depreciation
Impairment1
Disposals
Foreign exchange adjustments
Balance at December 31, 2019
Carrying value
At December 31, 2018
At December 31, 2019
1 Impairment – see Note 19.
Leasehold
Improvements
Office
Furniture
Office
Equipment
Hardware
Assets Under
Development
Total
$ 10,828
24
(616)
134
–
$ 10,370
–
–
(43)
–
(3)
$ 10,324
$ 7,298
786
(536)
–
$ 7,548
589
368
(43)
–
$ 8,462
$ 3,214
69
(2)
–
1
$ 3,282
11
12
(67)
24
(3)
$ 3,259
$ 2,739
148
(1)
–
$ 2,886
174
–
(63)
(1)
$ 2,996
$ 2,822
$ 1,862
$
$
396
263
$
$
$
$
$
$
$
$
195
4
(6)
4
–
197
–
–
(3)
–
–
194
136
21
(7)
–
150
22
–
(3)
–
169
$ 2,628
217
(188)
162
6
$ 2,825
12
38
(382)
580
(15)
$ 3,058
$ 2,253
227
(187)
2
$ 2,295
301
–
(380)
(6)
$ 2,210
47
25
$
$
530
848
$
$
$
$
$
$
$
$
65
234
–
(300)
1
–
–
604
–
(604)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
$ 16,930
548
(812)
–
8
$ 16,674
23
654
(495)
–
(21)
$ 16,835
$ 12,426
1,182
(731)
2
$ 12,879
1,086
368
(489)
(7)
$ 13,837
$ 3,795
$ 2,998
61
2019 ISC® Annual Report | Notes to the Consolidated Financial Statements
10 Right-of-use Assets
(thousands of CAD dollars)
Cost
Balance at January 1, 2018
Additions
Disposals
Foreign exchange adjustments
Balance at December 31, 2018
Additions
Disposals
Foreign exchange adjustments
Balance at December 31, 2019
Accumulated depreciation
Balance at January 1, 2018
Depreciation
Disposals
Foreign exchange adjustments
Balance at December 31, 2018
Depreciation
Impairment2
Disposals
Foreign exchange adjustments
Balance at December 31, 2019
Carrying value
At December 31, 2018
At December 31, 2019
1 The Company’s right-of-use assets consist primarily of property leases associated with the lease of office space.
2 Impairment – see Note 19.
Property and Equipment1
$
$
$
$
$
$
$
$
14,820
3,124
(276)
40
17,708
401
(527)
(78)
17,504
4,512
1,908
(276)
6
6,150
2,063
173
(527)
(23)
7,836
11,558
9,668
62
2019 ISC® Annual Report | Notes to the Consolidated Financial Statements
11 Intangible Assets
Internal Use
Software –
Internal Use
Software –
Business
Internally Solutions –
Solutions – Brand, Non-
Competes,
Internally
Acquired Developed
Contracts,
Customer
& Partner
Assets
Under
Other Relationships Development
Business
Acquired Developed
(thousands of CAD dollars)
Cost
2,113 $ 1,867 $ 2,257 $ 27,312 $ 1,880 $ 138,568
Balance at December 31, 2017 $ 25,793 $ 77,346 $
2,227
–
Additions
(492)
–
Disposals
–
–
Transfers
Foreign exchange adjustments
192
77
Balance at December 31, 2018 $ 25,835 $ 77,137 $ 2,190 $ 4,243 $ 2,279 $ 27,339 $ 1,472 $ 140,495
1,902
–
(2,317)
7
–
–
2,317
59
325
(283)
–
–
–
(209)
–
–
–
–
–
22
–
–
–
27
Total
5,228
–
Acquired assets
3,289
–
Additions
(1,268)
–
Disposals
–
–
Transfers
Foreign exchange adjustments
(411)
(152)
Balance at December 31, 2019 $ 29,417 $ 76,880 $ 2,038 $ 5,415 $ 2,412 $ 28,286 $ 2,885 $ 147,333
4,051
413
(984)
102
–
1,001
–
–
–
(54)
–
2,876
–
(1,409)
(54)
–
–
(27)
1,307
(108)
–
–
(257)
–
–
176
–
–
–
(43)
Accumulated Depreciation
Balance at December 31, 2017 $ 10,368 $ 76,241 $
Amortization
Disposals
Recovery of MARS* expenses
Foreign exchange adjustments
Balance at December 31, 2018 $ 14,216 $ 76,508 $
4,131
(283)
–
–
476
(209)
–
–
Amortization
Disposals
Foreign exchange adjustments
Balance at December 31, 2019 $ 16,603 $ 76,569 $
3,371
(984)
–
318
(257)
–
288 $ 1,598 $
319
–
–
17
624 $ 2,074 $ 1,194 $ 5,175 $
554 $ 2,497 $
631
–
–
9
2,673
–
–
5
455
–
19
2
–
–
–
–
–
–
$ 91,546
8,685
(492)
19
33
$ 99,791
286
688
309
–
(27)
–
(49)
(24)
(10)
884 $ 2,725 $ 1,456
2,738
–
(13)
$ 7,900 $
7,710
–
(1,268)
–
–
(96)
– $ 106,137
Carrying Value
At December 31, 2018
At December 31, 2019
$ 11,619 $
$ 12,814 $
629 $ 1,566 $ 2,169 $ 1,085 $ 22,164 $
311 $ 1,154 $ 2,690 $
1,472 $ 40,704
956 $ 20,386 $ 2,885 $ 41,196
* Mineral Administration Registry Saskatchewan
63
2019 ISC® Annual Report | Notes to the Consolidated Financial Statements
12 Goodwill
The components of goodwill are as follows:
(thousands of CAD dollars)
December 31, December 31,
2018
2019
$
Balance, beginning of the year
Additions1
Purchase price adjustment relating
to AVS acquisition1
Foreign exchange adjustment
Balance, end of year
44,310
1,517
$ 44,473
–
–
(298)
$ 45,529
(315)
152
$ 44,310
1 Acquisitions – see Note 28.
During 2019, the Company changed its CGU classification
due to a change in operations of the business and established
new CGUs aligned with its operating segments. The annual
impairment testing for the year ended December 31, 2018, was
completed using legal entities as CGUs. Management believes
this new CGU classification better reflects the group of assets
that are largely independent of cash inflows from other assets
or groups of assets. The Company now considers its CGUs, as
aligned with its operation segments, as follows:
• Registry Operations
• Services
• Technology Solutions
Goodwill allocations have consequentially been realigned with
the new CGUs during the year. This has resulted in $4.6 million
of goodwill being reallocated to Technology Solutions from
Registry Operations for both the current and comparative
periods.
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, December 31,
2018
2019
$ 1,200
Registry Operations
35,715
Services
Technology Solutions
8,614
Balance at December 31, 2019 $ 45,529
$ 1,200
34,198
8,912
$ 44,310
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.
In 2019, the Company used the traditional cash flow
approach for determining value in use for the Registry
Operations segment, while value in use for each of
the Services and Technology Solutions segments was
64
determined using the expected cash flow approach. In
all cases, the operating and investing cash flows of the
segments utilized the Company’s most recent multi-year
plan. The multi-year plan is for a three-year period, with
assumptions based on experience and future expectations
for business performance.
Registry Operations
Key assumptions for this segment include the performance
of the Saskatchewan economy, revenue growth, related party
costs, and corporate cost allocations required to support
infrastructure as well as future technological investment in,
and related to, this infrastructure. In 2019, annual impairment
testing for this segment utilized a pre-tax discount rate of
12.9 per cent and a perpetual growth rate of 2.0 per cent.
Given the large and strong cash flow in Registry Operations
relative to the size of goodwill, the risk of impairment is remote
and, as a result, the traditional cash flow approach was used
for this segment.
Services
Key assumptions for this segment include the performance
of the Canadian economy, revenue growth including
attracting new customers and adding incremental value to
existing customers, related party costs, and corporate cost
allocations required to support infrastructure, as well as future
technological investment in, and related to, this infrastructure.
Performance during the multi-year planning period is
consistent with past performance, which experienced growth
in operating cash flow in excess of the perpetual growth
rate of 2.0 per cent used in the annual test. In 2019, annual
impairment testing for this segment utilized a pre-tax discount
rate of 15.2 per cent.
Technology Solutions
Key assumptions for this segment include revenue growth
including the ability to attract new customers, actual contract
delivery performance compared to the level of performance
anticipated when the contract was negotiated, the level of
support required by related party customers, direct employee
costs, and corporate cost allocations required to support
infrastructure as well as future technological investment in, and
related to, intellectual property. Performance during the multi-
year planning period is consistent with past performance,
which experienced growth in operating cash flow in excess of
the perpetual growth rate of 2.0 per cent used in the annual
test. In 2019, annual impairment testing for this segment
utilized a pre-tax discount rate of 15.8 per cent.
In 2018, pre-tax discount rates using legal entities as CGUs
were 14.3 to 15.6 per cent and the perpetual growth rate for
each CGU was 2.0 per cent.
2019 ISC® Annual Report | Notes to the Consolidated Financial Statements
13 Accounts Payable and Accrued Liabilities
The components of accounts payable and accrued liabilities are as follows:
(thousands of CAD dollars)
Trade payables
Accrued liabilities
Customer deposits
Dividend payable
Total accounts payable and accrued liabilities
14 Contract Liabilities
The components of contract liabilities are as follows:
(thousands of CAD dollars)
December 31,
2019
December 31,
2018
$
733
10,327
3,536
3,500
$ 18,096
$
$
1,349
8,506
3,763
3,500
17,118
December 31,
2019
December 31,
2018
Amounts received in advance of Registry Operations transaction,
maintenance and support contracts (i)
Amounts received in advance of Technology Solutions support and delivery contracts (ii)
Total contract liabilities
$
331
1,105
$ 1,436
$
$
322
2,277
2,599
(i) Revenue that relates to Registry Operations transactions is recognized at a point in time. Revenue that relates to Registry Operations maintenance and support contracts is
recognized over time. A contract liability is recognized for payments received from end-use customers in advance of services being provided and is recognized into revenue
either at the point in time the service is rendered or over the service period.
(ii) Revenue that relates to Technology Solutions contracts is recognized over time as the performance obligations in the contract are achieved. These obligations may be based on a
time period or on performance-based milestones identified in the contract. A contract liability is recognized for payments received from customers in advance and is recognized
into revenue either over the service period or when performance milestones are achieved.
Revenue recognized in 2019 that was included in the contract liability balance at December 31, 2018:
(thousands of CAD dollars)
Registry Operations transaction, maintenance and support contracts
Technology Solutions support and delivery contracts
Total revenue recognized that was included in the balance at the
beginning of the period
Year Ended December 31,
2018
2019
$
322
1,942
$
243
665
$ 2,264
$
908
The Company has elected to apply the practical expedient as per IFRS 15 B16 and does not disclose the value of unsatisfied
performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which the
Company recognizes revenue at the amount to which it has the right to invoice for services performed.
15 Lease Obligations
(thousands of CAD dollars)
Balance, beginning of year
Additions
Interest expense
Effect of modification to lease terms
Lease payments1
Foreign exchange adjustments
Balance, end of year
Year Ended December 31,
2018
2019
$ 12,235
24
486
375
(2,253)
(55)
$ 10,812
$ 10,940
–
399
3,124
(2,262)
34
$ 12,235
1 Lease payments net of interest expense represents the principal portion of lease payments reflected on the consolidated statements of cash flows.
65
2019 ISC® Annual Report | Notes to the Consolidated Financial Statements
The Company’s lease obligations consist primarily of property leases associated with the lease of office space. Expenses for
short-term leases and leases of low-dollar value items are not material. There are no variable lease payments which are not
included in the measurement of lease obligations. All extension options have been included in the measurement of lease
obligations.
The following table presents the contractual undiscounted cash flows for lease obligations:
(thousands of CAD dollars)
Year 1
Year 2
Year 3
Year 4
Year 5
Thereafter
Balance, end of year
Unearned interest
Balance, end of year
Reflected as:
Lease obligations – current portion
Lease obligations
Balance, end of year
16 Tax Provision
Year Ended December 31,
2018
2019
$
2,276
2,374
1,845
1,715
1,710
2,693
$ 12,613
(1,801)
$ 10,812
$
2,261
2,239
2,300
1,766
1,619
4,274
$ 14,459
(2,224)
$ 12,235
1,845
8,967
$ 10,812
1,778
10,457
$ 12,235
The Company is subject to federal and provincial income taxes at an estimated combined statutory rate of 27.0 per cent
(2018 – 27.0 per cent).
(thousands of CAD dollars)
Current tax expense
Deferred tax expense
Income tax expense
* See Note 2
Year Ended December 31,
2018 (restated*)
2019
$
$
5,496
1,484
6,980
$
$
5,147
1,792
6,939
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:
Non-taxable items
Non-deductible expenses
Foreign income tax differential
Adjustment to prior years’ deferred tax assets
Impact of change in tax rate
Unrecognized tax asset relating to current year losses
Other
Income tax expense
* See Note 2
66
Year Ended December 31,
2018 (restated*)
2019
$ 26,380
27.00%
7,122
(20)
279
105
(382)
–
–
(124)
$ 6,980
$ 25,576
27.00%
6,906
(963)
429
447
(235)
(5)
350
10
6,939
$
2019 ISC® Annual Report | Notes to the Consolidated Financial Statements
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
Right-of-use assets
Intangible assets
Non-capital losses
Other assets
Lease obligations
Net deferred tax assets (liabilities)
(thousands of CAD dollars)
Property, plant and equipment
Right-of-use assets
Intangible assets
Non-capital losses
Other assets
Lease obligations
Net deferred tax assets (liabilities)
* See Note 2
Net Balance Recognized
in Profit
or Loss Movement
Foreign
$
$
Net Balance
Exchange December 31,
2019
154
– $
(2,531)
5
21,214
17
200
–
440
–
(5)
2,835
17 $ 22,312
(32) $
462
(2,058)
200
280
(336)
(1,484) $
January 1,
2019
186
(2,998)
23,255
–
160
3,176
$ 23,779 $
$
Net Balance
January 1,
2018 (restated*)
201
(2,628)
23,552
1,372
293
2,795
$ 25,585
Recognized
in Profit
or Loss
$
$
(12) $
(366)
(285)
(1,372)
(134)
377
(1,792) $
Movement
Foreign
Net Balance
Exchange December 31,
2018
186
(2,998)
23,255
–
160
3,176
23,779
(3) $
(4)
(12)
–
1
4
(14) $
$
Deferred
Tax Asset
97
(2,312)
28,825
200
440
2,605
$ 29,855
Deferred
Tax Liability
57
$
(219)
(7,611)
–
–
230
(7,543)
$
Deferred
Tax Asset
171
(2,719)
31,153
–
256
2,881
31,742
$
$
Deferred
Tax Liability
15
(279)
(7,898)
–
(96)
295
(7,963)
$
$
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 income tax asset. Upon acquisition of AVS in 2017, the value of the acquired assets was greater on an
accounting basis than on a tax basis, resulting in a deferred income tax liability.
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 income 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 income 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.
At December 31, 2019, a deferred income tax asset of $0.2 million (2018 – nil) has been recognized in respect of $1.6 million of tax
losses (2018 – $3.9 million) related to ERS as there are sufficient taxable temporary differences available against which the unused
tax losses can be utilized. These tax losses do not expire.
17 Share-Based Compensation Plans
The Company has established share-based compensation plans to provide directors and management of the Company with the
opportunity to participate in the long-term success of ISC and to promote a greater alignment of interests between its directors,
management and shareholders.
67
2019 ISC® Annual Report | Notes to the Consolidated Financial Statements
Performance share units
Starting in 2019, PSUs are granted with the objective of recognizing and rewarding management for performance and retention.
A PSU is a notional unit equivalent to a Class A Share granted by the Company to the participant entitling such participant to
receive the PSU payment value, which is conditional on the attainment of specific PSU performance criteria.
PSU awards vest at the end of the specified vesting period if the performance conditions determined by the Board in the grant
agreement are met. PSUs earn dividend equivalent units in the form of additional PSUs at the same rate as dividends on Class A
Shares. The cash redemption value of the PSUs is equivalent to the market value of the Class A Shares when redemption takes
place multiplied by a multiplier based on the grant agreement and the performance against the performance conditions as
specified. The maximum PSU payout multiplier is 150.0 per cent.
On the settlement date, the Company delivers to each participant a cash payment equal to the redemption value of the PSU.
A summary of the status of the PSU plan and the changes within the period ended December 31, 2019, are as follows:
PSUs granted November 18, 2019
PSUs credited as a result of cash dividends paid
Balance at December 31, 2019
Units
32,585.00
415.32
33,000.32
Weighted Average
Award Price
16.11
$
15.69
$ 16.10
The Company has recognized an obligation at an estimated amount based on the arithmetic average of the official closing
prices per share on the TSX on the five days immediately preceding the grant date. Compensation expense is recognized in
proportion to the number of PSUs vested. At the end of each reporting period, the estimates are reassessed based on the fair
value of the PSUs as of the reporting period. Any change in estimate is recognized as a liability and an expense at the end of
the reporting period.
The share-based compensation expense related to the PSUs for the twelve months ended December 31, 2019, totalled
$173 thousand. The total carrying amount of the liability arising from the PSUs as of December 31, 2019, totalled
$173 thousand.
Share appreciation rights
Starting in 2019, SARs are granted with the objective of recognizing and rewarding management for creating sustainable,
long-term shareholder value, as well as retention. A SAR is a right granted by the Company to a participant to receive a
payment in cash equal to any appreciation in the Class A Shares in excess of the SAR price at the grant date during a specified
period.
SAR awards vest and become exercisable at a rate of 25.0 per cent on each anniversary of the grant date beginning with the
first anniversary, unless an alternate vesting schedule is specified by the Board at the time of the award.
The participant is able to exercise the SARs as they vest. The cash redemption value of the SARs is equivalent to the excess of
the market value of the Class A Shares at the exercise date over the SAR price in the grant agreement.
On the settlement date, the Company delivers to each participant a cash payment equal to the redemption value of the SARs.
A summary of the status of the SAR plan and the changes within the twelve months ended December 31, 2019, are as
follows:
SARs granted November 18, 2019
Balance at December 31, 2019
Units
243,116.00
243,116.00
Weighted Average
Award Price
$
16.11
$ 16.11
The share price at December 31, 2019, was below the original grant date price of the only existing grant awarded and, therefore,
no share-based compensation expense or liability was recorded related to the SARs for the period ending December 31, 2019.
Deferred share units
The Company has established a DSU plan to provide directors 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 and shareholders. The Board may award DSUs at its
68
2019 ISC® Annual Report | Notes to the Consolidated Financial Statements
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 in the form of additional DSUs at the same rate as dividends on 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 years ended December 31, 2019 and 2018, are as follows:
Balance at December 31, 2017
DSUs granted May 16, 2018
DSUs redeemed August 15, 2018
DSUs credited as a result of cash dividends paid
Balance at December 31, 2018
DSUs granted November 14, 2019
DSUs credited as a result of cash dividends paid
Balance at December 31, 2019
Units
58,074.60
17,706.00
(6,905.45)
3,239.00
72,114.15
22,351.00
3,848.00
98,313.15
Weighted Average
Award Price
17.37
$
17.85
17.50
16.58
17.44
15.97
16.07
$ 17.05
$
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 reassessed 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.
Share-based compensation expense related to the DSUs for the twelve months ended December 31, 2019, totalled
$371 thousand (2018 – $157 thousand). The total carrying amount of the liability arising from the DSUs as of December 31, 2019,
totalled $1.5 million (December 31, 2018 – $1.1 million). 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, 2019, has been calculated using the market value of the Company’s Class A Shares on
the TSX.
Stock options
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 years ended December 31, 2019 and 2018, are
as follows:
Balance at December 31, 2017
Stock options granted during the year
Balance at December 31, 2018
Stock options granted during the year
Balance at December 31, 2019
Units
1,076,600
471,647
1,548,247
–
1,548,247
Average
Exercise Price
17.01
$
17.85
17.27
–
17.27
$
$
The outstanding share options at the end of the period had a weighted average exercise price of $17.27 (December 31, 2018
– $17.27). The number of options exercisable at the end of the period was 961,217 (December 31, 2018 – 587,851) and had a
69
2019 ISC® Annual Report | Notes to the Consolidated Financial Statements
weighted average exercise price of $16.78 (December 31, 2018 – $16.50) based on a range of exercise prices from $15.04 to $18.85
(December 31, 2018 – $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:
Spot price
Expected volatility
Risk-free interest rate
Dividend yield
Expected life (days)
Fair value
May 16, 2018
May 17, 2017
August 15, 2016
August 12, 2015
May 13, 2014
$
$
17.85
19.93%
2.00%
4.83%
2,920
1.73
$
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 determination of the variables used in the Black-Sholes valuation method are described in the summary of significant
accounting policies section in Note 3.
Compensation expense is recognized in proportion to the amount of stock options vested. Share-based compensation expense
related to the stock options for the twelve months ended December 31, 2019, totalled $466 thousand (2018 – $617 thousand).
The total carrying amount of the equity settled employee benefit reserve arising from these stock options as of December 31,
2019, totalled $2.1 million (December 31, 2018 – $1.7 million).
18 Debt
In 2018, the Company entered into a new amended and restated credit agreement (the “Credit Facilities”). The aggregate
amount available under the Credit Facilities is now $80.0 million, comprised of (i) a $10.0 million committed revolving
operating facility (“Facility 1”) for general corporate purposes and (ii) a $70.0 million delayed draw term loan facility (“Facility
2”), $20.0 million of which was used to refinance the previous credit facilities under the original agreement, with the balance
available to the Company for future growth opportunities.
Facility 1 will mature on November 6, 2021, unless renewed prior to that time and is repayable by ISC upon demand by
the lender and the lender may terminate at any time. Facility 2 is repayable by ISC through quarterly payments, which
commenced January 2019, and matures on November 6, 2021, unless renewed prior to that time. At December 31, 2019, the
Company had nil cash drawings on Facility 1 (2018 – nil). At December 31, 2019, non-cash drawings, consisting of letters of
credit and similar, were approximately $0.2 million (2018 – $0.2 million).
Facility 2 is subject to quarterly instalments at 2.5 per cent of original drawings (currently $0.5 million per quarter) with
borrowings repayable in full on November 6, 2021.
Borrowings under the Credit Facilities will 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 0.45 per cent
and 2.25 per cent per annum depending on the type of advance and the Company’s leverage ratio. The Company is also
required to pay a commitment fee quarterly in arrears, at the rate between 0.29 per cent and 0.40 per cent per annum,
depending on the Company’s leverage ratio and the unutilized and uncancelled portions of the Credit Facilities.
(thousands of CAD dollars)
Term loans
Revolving facility
Term loan facility
Current portion
Long-term portion
Total long-term debt
December 31,
2019
December 31,
2018
$
–
$
–
2,000
16,000
$ 18,000
2,000
18,000
$ 20,000
The Credit Facilities contain financial covenants, 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 year.
70
2019 ISC® Annual Report | Notes to the Consolidated Financial Statements
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 and a deed of movable hypothec in the amount of $17.25 million registered in
the province of Quebec.
The amount of borrowing costs capitalized during 2019 and 2018 was nil.
19 Provisions
The following table presents the movement in provisions during the period:
(thousands of CAD dollars)
Balance, December 31, 2018
Additions
Utilizations and settlements
Total provisions
Restructuring
Provision
Other
Provisions
$
$
–
643
(321)
322
$
$
–
160
(14)
146
$
$
Total
–
803
(335)
468
During the year, the Company made the decision to close three of its regional service centres in Saskatchewan in addition to
other services. The restructuring provision primarily consists of severance, site decommissioning and contract termination costs.
The other provisions related to costs expected to be incurred under site contracts as a result of the closure decision. Management
expects to settle the provisions within the next twelve months.
In the year, the Company also recorded impairments of leasehold improvements and right-of-use assets related to these regional
service centres that aggregate to $541 thousand (2018 – nil).
20 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)
Interest paid on right-of-use assets (a)
Payments on lease obligations (b)
Repayment of long-term debt (c)
Dividends paid (d)
Net cash flow used in financing activities
Year Ended December 31,
2018 (restated*)
2019
$
(833)
(486)
(1,767)
(2,000)
(14,000)
$ (19,086)
$
$
(807)
(399)
(1,863)
(1,560)
(14,000)
(18,629)
Interest payable
Lease obligation including
current portion
Long-term debt including
current portion
Dividends payable
As at December 31,
2018 (restated*)
Cash Flows
Non-cash
Changes
Dividends Declared
As at December 31,
2019
Other
$
–
$
(1,319) (a)
$
12,235
(1,767) (b)
–
–
$
1,522
$
203
344
10,812
20,000
3,500
$ 35,735
(2,000) (c)
(14,000) (d)
(19,086)
$
$
–
14,000
14,000
–
–
1,866
$
18,000
3,500
32,515
$
71
2019 ISC® Annual Report | Notes to the Consolidated Financial Statements
As at January 1,
2018 (restated*)
Cash Flows
Non-cash Changes
As at December 31,
2018 (restated*)
Dividends Declared
Other
$
–
$
(1,206) (a)
$
10,940
(1,863) (b)
–
–
$
1,206
$
–
3,158
12,235
21,560
3,500
$ 36,000
(1,560) (c)
(14,000) (d)
(18,629)
$
$
–
14,000
14,000
–
–
4,364
$
$
20,000
3,500
35,735
Interest payable
Lease obligation including
current portion
Long-term debt including
current portion
Dividends payable
* See Note 2
21 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
* See Note 2
22 Equity and Capital Management
Year Ended December 31,
2018 (restated*)
2019
$ 19,400
17,500,000
26,963
17,526,963
$ 18,637
17,500,000
42,455
17,542,455
$
$
1.11
1.11
$
$
1.06
1.06
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 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.
(thousands of CAD dollars, except number of shares)
Balance at January 1, 2018
No movement
Balance at December 31, 2018
Balance at January 1, 2019
No movement
Balance at December 31, 2019
Capital management
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
1
–
1
1
–
1
Share Capital
–
$
–
–
–
–
–
$
$
$
The Company’s objective in managing capital is to ensure that adequate resources are available to fund organic growth
and to enable it to undertake future growth opportunities while continuing as a going concern. The Company’s capital is
composed of debt and shareholders’ equity.
72
2019 ISC® Annual Report | Notes to the Consolidated Financial Statements
Operating cash flows are used to provide sustainable cash dividends to shareholders and fund capital expenditures in
support of organic growth. In addition, operating cash flows, supplemented throughout the year with the operating facility
if necessary, are used to fund working capital requirements.
Equity and the available but undrawn portion of the term facility will assist in financing future growth opportunities.
The Company’s capital at December 31, 2019, 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
* See Note 2
$
December 31,
2019
18,000
19,955
5
2,153
92,128
$ 132,241
December 31,
2018 (restated*)
$ 20,000
19,955
514
1,687
86,728
$ 128,884
23 Financial Instruments and Related Risk Management
The Company does not currently 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, 2019, is $36.9 million (December 31, 2018 – $38.1 million) equal to the
carrying value of the Company’s financial assets, which are itemized in the table below. 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:
(thousands of CAD dollars)
Cash
Short-term investments
Trade and other receivables:
- current
- up to three months past due date
- greater than three months past due date
Total credit risk
Interest rate risk
December 31,
2019
$ 23,731
475
8,743
3,203
702
$ 36,854
December 31,
2018
$ 28,651
448
6,287
2,171
506
$ 38,063
Interest rate risk is the risk arising from the effect of changes in prevailing interest rates on the Company’s financial instruments.
The Company is subject to interest rate risks on its debt (Note 18). This debt bears interest at rates that float, which can vary in
accordance with changes in prime borrowing rates. The Company manages interest rate risk by monitoring its balance sheet, cash
flows and the effect of market changes in interest rates. The Company has the option of using short-term bankers’ acceptance
notes to lock in rates at any time.
73
2019 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, 2019, and 2018. As the sensitivity is hypothetical, it should be used with caution. The
Company is not exposed to significant interest rate risk.
(thousands of CAD dollars)
December 31, 2019
December 31, 2018
+ 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
$
$
$
188
188
138
$
$
$
(188)
(188)
(138)
$
$
$
209
209
154
$
$
$
(209)
(209)
(154)
* 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, 2019:
(thousands of CAD dollars)
Long-term debt
Accounts payable and accrued liabilities
Total liabilities
Carrying
Amount
$ 18,000
18,096
$ 36,096
Contractual
Cash Flows
$ 19,573
18,096
$ 37,669
0-6
months
$
1,454
18,096
$ 19,550
$
7-12
months
1,437
–
$ 1,437
12+
months
$ 16,682
–
$ 16,682
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)
Financial assets
Cash
Short-term investments
GICs
Marketable securities
Trade and other receivables
Contract assets – unbilled revenue
Financial liabilities
Accounts payable and
accrued liabilities
Lease obligations1
Long-term debt
Provisions
Other liabilities
Classification
Level
December 31, 2019
December 31, 2018
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
AC
AC
FVTOCI
AC
AC
AC
AC
AC
AC
AC
L2
L2
L1
L2
L2
L2
L2
L2
L2
L2
$ 23,731
$ 23,731
$ 28,651
$ 28,651
400
75
12,648
1,420
18,096
10,812
18,000
468
173
400
75
12,648
1,420
18,096
18,000
468
173
400
48
8,964
636
400
48
8,964
636
17,118
12,235
20,000
–
–
17,118
20,000
–
–
1 The fair value of lease obligations is not required to be disclosed.
Fair value of financial instruments
The carrying values of cash, short-term investments, trade and other receivables, contract assets – unbilled revenue, accounts
payable and accrued liabilities approximate fair value due to their immediate or relatively short-term maturity. With long-term
debt, ISC has amended and restated its borrowings under the Credit Facilities, which is managed with prime loans, short-term
bankers’ acceptance, letter of credit or letter of guarantee. These borrowings will bear interest at a base rate of prime plus
applicable margin varying between 0.45 per cent and 1.00 per cent per annum. The Company is not exposed to significant
interest rate risk because interest bearing financial instruments are at a low level relative to total assets and equity.
74
2019 ISC® Annual Report | Notes to the Consolidated Financial Statements
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 10.0 per cent in the euro relative to the Canadian dollar as at December
31, 2019, on net monetary assets was a decrease (increase) of $386 thousand (December 31, 2018 – $23 thousand) and on
net assets was an increase (decrease) of $1.2 million (December 31, 2018 – $0.7 million). The Company’s exposure to other
currencies is negligible at the end of the period.
24 Revenue
The Company derives its revenue from the transfer of goods or services at either a point in time or over time. This is
consistent with the revenue from third parties’ information that is disclosed for each reportable segment under IFRS 8 –
Operating Segments (see Note 27). The following table presents our revenue disaggregated by revenue type. Sales and usage
tax are excluded from revenue.
Segment revenue
(thousands of CAD dollars)
Registry Operations
Land Registry (Land Titles Registry, Land Surveys, and Geomatics)
Personal Property Registry
Corporate Registry
Other
Services
Technology Solutions
Corporate and other
Total revenue
The following table presents our revenue disaggregated by timing of revenue recognition:
Timing of revenue recognition
(thousands of CAD dollars)
At a point in time
Registry Operations revenue
Land Registry (Land Titles Registry, Land Surveys, and Geomatics)
Personal Property Registry
Corporate Registry
Services revenue
Corporate and other
Over time
Registry Operations revenue
Land Registry (Land Titles Registry, Land Surveys, and Geomatics)
Corporate Registry
Other
Technology Solutions revenue
Total revenue
Year Ended December 31,
2018
2019
$ 48,901
10,154
10,230
1,114
51,131
11,416
22
$ 132,968
$ 50,031
10,190
10,038
–
42,360
6,442
70
$ 119,131
Year Ended December 31,
2018
2019
$ 46,972
10,154
9,373
51,131
22
$ 117,652
1,929
857
1,114
11,416
$ 15,316
$ 132,968
$ 48,137
10,190
9,198
42,360
70
$ 109,955
1,894
840
–
6,442
9,176
$
$ 119,131
75
2019 ISC® Annual Report | Notes to the Consolidated Financial Statements
In the “Over time” category, the Land Registry and Corporate
Registry contracts primarily result in linear revenue recognition
over the life of the contract. Likewise, the support and
maintenance portion of contracts related to Technology
Solutions revenue primarily results in linear revenue
recognition over the life of the contract. Conversely, revenue
recognition associated with the licence and solution definition
and implementation portion of contracts is dependent on
milestone achievement. In 2019, the portion of Technology
Solutions contract revenue recognized that was dependent on
milestone achievement versus total revenue recognized was
76.0 per cent (2018 – 55.0 per cent). At December 31, 2019,
the Company has contracts where the milestone is either in
progress or is expected to be satisfied in the near term. For the
unsatisfied portion of milestone-based contracts, the Company
expects that 73.0 per cent (2018 – 98.0 per cent) of the total
will be recognized in the next fiscal year, with the remaining
27.0 per cent (2018 – 2.0 per cent) recognized in the following
fiscal year.
Service concession arrangement
The Company entered into a change order pursuant to its
MSA with the Government of Saskatchewan to continue
the development of its registry systems. Under the MSA, the
Company owns the IP during the term of the MSA.
As at December 31, 2019, the development associated with
the change order is approximately 85 per cent complete
and the Company has recorded an intangible asset under
development in the amount of $1.5 million and recognized
$1.1 million of revenue in other revenue in Registry
Operations in 2019 related to the project. Amortization of the
intangible asset is expected to commence in 2020 when the
development is complete.
25 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.
26 Compensation of Key Management
Personnel
Key management personnel includes the directors, 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,
2018
2019
Wages, salaries and short-term benefits $ 3,832
1,009
Share-based compensation
202
Defined contribution plan
$ 5,043
Total compensation
$ 3,811
774
205
$ 4,790
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.
27 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 uses EBITDA and earnings before
interest and taxes (“EBIT”) as key measures of profit for the
purpose of assessing performance of each segment and to
make decisions about the allocation of resources. EBITDA is
calculated as income before depreciation and amortization,
net finance expense, and income tax expense. EBIT is
calculated as income after depreciation and amortization
expense but before gain or loss on disposition of property,
plant and equipment, net finance expense, and income tax
expense.
Effective January 1, 2018, ISC has three reportable segments
– Registry Operations, Services, and Technology Solutions.
A functional summary of these three segments is:
• Registry Operations delivers registry services on behalf of
governments and private sector organizations.
• Services delivers products and services that utilize public
records and data to provide value to customers in the
financial and legal sectors.
• Technology Solutions provides the development, delivery
and support of registry (and related) technology solutions.
76
2019 ISC® Annual Report | Notes to the Consolidated Financial Statements
Corporate and other includes our corporate activities and shared services functions, share of profit (loss) in associate not included
in operating segments, and eliminations of inter-segment revenue and costs. The Registry Operations and Services segments
operate substantially in Canada. The Technology Solutions segment operates both in Canada and Ireland.
We have restated our 2018 comparative segment results for the adoption of IFRS 16 using the full retrospective method (see Note 2).
Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
We account for transactions between reportable segments in the same way we account for transactions with external parties;
however, we eliminate them on consolidation.
Revenue and EBIT
For the year ended December 31, 2019
(thousands of CAD dollars)
Revenue from third parties
Plus: inter–segment revenue
Total revenue
Expenses excluding depreciation
and amortization
EBITDA
Depreciation and amortization
Impairment
EBIT
Net finance (expense)
Income tax expense
Net income
Additions to non–current assets,
Registry
Operations
$ 70,399
–
$ 70,399
(36,309)
34,090
(2,039)
(541)
$ 31,510
Services
$ 51,131
99
$ 51,230
(44,119)
7,111
(5,326)
–
1,785
$
Technology
Solutions
$ 11,416
12,830
$ 24,246
(21,965)
2,281
(1,729)
–
552
$
$
Corporate
and other
22
(12,929)
$ (12,907)
Consolidated
Total
$ 132,968
–
$ 132,968
8,451
(4,456)
(1,765)
–
(6,221)
$
(93,942)
39,026
(10,859)
(541)
$ 27,626
(1,246)
(6,980)
$ 19,400
including acquisitions
$ 1,460
$ 7,398
$
651
$ 1,203
$ 10,712
For the year ended December 31, 2018
(thousands of CAD dollars)
Revenue from third parties
Plus: inter-segment revenue
Total revenue
Expenses excluding depreciation
and amortization
Change in contingent consideration
EBITDA
Depreciation and amortization
EBIT
Net finance (expense)
Income tax expense
Net income
Additions to non-current assets,
Registry
Operations
$ 70,259
–
$ 70,259
(37,868)
–
32,391
(2,070)
$ 30,321
Services
$ 42,360
24
$ 42,384
(35,856)
3,567
10,095
(6,320)
3,775
$
Technology
Solutions
$
6,442
14,783
$ 21,225
(20,732)
–
493
(1,478)
(985)
$
Corporate
and other
70
(14,807)
(14,737)
$
$
Consolidated
Total
$ 119,131
–
$ 119,131
9,882
–
(4,855)
(1,907)
(6,762)
$
(84,574)
3,567
38,124
(11,775)
$ 26,349
(773)
(6,939)
$ 18,637
including acquisitions
$
451
$
96
$
1,428
$
485
$
2,460
Inter-segment revenues are charged among segments at arm’s-length rates, based on rates charged to third parties. Total
consolidated revenue is attributed to customers within Ireland and Canada. For the twelve months ended December 31, 2019,
revenue within Ireland was $9.7 million (2018 – $5.2 million) and the remainder was in Canada. No single customer represented
more than 10.0 per cent of the total consolidated revenue.
77
2019 ISC® Annual Report | Notes to the Consolidated Financial Statements
Assets and liabilities
As at December 31, 2019
(thousands of CAD dollars)
Assets
Total assets, excluding intangibles,
goodwill and cash
Intangibles
Goodwill1
Cash
Total assets
Liabilities
As at December 31, 2018
(thousands of CAD dollars)
Assets
Total assets, excluding intangibles,
goodwill and cash
Intangibles
Goodwill1
Cash
Total Assets
Liabilities
Registry
Operations
Services
Technology
Solutions
Corporate
and other
Consolidated
Total
$
$
$
$
$
$
26,384
3,803
1,200
–
31,387
8,848
$ 10,951
31,647
35,715
–
$ 78,313
$ 11,013
$
6,467
4,525
8,614
–
$ 19,606
$ 4,171
$ 17,321
1,221
–
23,731
$ 42,273
$ 33,306
$
$
$
61,123
41,196
45,529
23,731
171,579
57,338
Registry
Operations
Services
Technology
Solutions
Corporate
and other
Consolidated
Total
29,258
4,054
1,200
–
34,512
9,412
8,269
$
30,815
34,198
–
$ 73,282
$ 11,354
$
3,999
5,418
8,912
–
$ 18,329
8,253
$
$ 18,491
417
–
28,651
$ 47,559
$ 35,779
$
$
$
60,017
40,704
44,310
28,651
173,682
64,798
1 In 2019, $4.6 million of goodwill was reallocated to Technology Solutions from Registry Operations for both the current and comparative periods. See Note 12 for further
information.
Non-current assets are held in Canada and Ireland. At December 31, 2019, non-current assets held in Ireland were $8.8 million
(December 31, 2018 – $10.0 million) while the remainder were held in Canada.
28 Acquisitions
On February 15, 2019, the Company through its wholly owned subsidiary ESC, acquired substantially all of the assets of Securefact
Transaction Services, Inc. (“Securefact”), for $6.8 million by way of an asset purchase agreement. Securefact is located in Toronto,
ON, and is engaged in the business of providing public record search and registration services. This acquisition broadens the
Company’s portfolio of know-your-customer technology solutions and services.
This acquisition is a business combination to which IFRS 3 – Business Combinations applies. A table outlining the net cash flow
related to the acquisition is provided below.
Net cash outflow related to the acquisition
(thousands of CAD dollars)
Consideration paid in cash
Less: cash balance acquired
Total net cash outflow related to the acquisition
2019
$
6,768
–
$ 6,768
78
2019 ISC® Annual Report | Notes to the Consolidated Financial Statements
The table below presents the final allocation of the net purchase price for accounting purposes which is unchanged from the
preliminary allocation which was previously prepared.
(thousands of CAD dollars)
Assets
Property, plant and equipment
Intangible assets
Net assets acquired
Goodwill arising on acquisition
Total consideration allocated
Net assets acquired
Total goodwill arising on acquisition
Final
$
23
5,228
$ 5,251
6,768
5,251
$ 1,517
The goodwill of $1.5 million arising on the acquisition included amounts in relation to the benefit of an increased market
presence and competencies, related market growth, and the assembled workforce of Securefact. All of the goodwill recognized is
expected to be deductible for income tax purposes.
The intangible assets above consist of technology of $4.1 million, customer contracts of $1.0 million and brand of $0.2 million.
Professional fees associated with the cost of the acquisition expensed during the year ended December 31, 2019, were
$0.2 million.
The revenue and net loss of the acquiree since the acquisition date included in the consolidated statements of comprehensive
income for 2019, were $1.5 million and $(0.4) million, respectively.
The consolidated revenue and comprehensive income for the Company and the acquiree combined for 2019, as though the
acquisition date for the business combination occurred during the year had been as of January 1, 2019, would have been
$133.3 million, unaudited and $18.6 million, unaudited, respectively.
Contingent consideration
As part of the AVS acquisition completed in 2017, the Company agreed to pay additional consideration contingent upon the
realization of future business. In 2018, the Company, through its wholly owned subsidiary ESC, entered into an agreement to
amend the AVS Share Purchase Agreement to provide for the early settlement of the AVS contingent consideration on November
15, 2018, for an amount of $11.0 million paid in cash.
As part of the ERS acquisition completed in 2017, the Company agreed to pay up to €5.0 million in consideration contingent
upon the retention of existing leadership and the 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.
A continuity of contingent consideration related to the ERS and AVS acquisitions is presented below:
(thousands of CAD dollars)
Balance, beginning of the period
Remuneration expense through wages and salaries
Accretion recognized in interest expense
Change in AVS contingent consideration
Early settlement of AVS contingent consideration
Settlement of ERS contingent consideration
Foreign exchange adjustment
Balance, end of the period
Current portion
Long–term portion
December 31,
2019
December 31,
2018
$
$
$
$
2,322
766
8
–
–
(2,937)
(159)
–
–
–
–
$
$
$
$
15,723
1,290
6
(3,567)
(11,000)
–
(130)
2,322
2,322
–
2,322
79
2019 ISC® Annual Report | Notes to the Consolidated Financial Statements
29 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
Contract assets
Accounts payable and accrued liabilities
Contract liabilities
Contingent consideration
Provisions and other liabilities
Income taxes
Net change in non-cash working capital
Year Ended December 31,
2018
2019
$
$
(3,657)
(32)
(321)
867
(1,039)
(2,171)
641
(3,483)
(9,195)
$
$
(1,583)
(195)
(1,414)
1,108
1,150
1,290
–
(573)
(217)
Income taxes paid, net of refunds received, for the twelve months ended December 31, 2019, totalled $9.0 million
(2018 – $5.7 million).
30 Commitments and Contingencies
As of December 31, 2019, the Company has commitments over the next five years as follows:
(thousands of CAD dollars)
2020
2021
2022
2023
2024
Thereafter
Total commitments
IT and Other
Service
Agreements1
3,415
$
2,912
2,829
2,675
-
-
$ 11,831
Master Service
Agreement
500
$
500
500
500
500
4,500
7,000
$
Non-Lease
Component of
Office Leases
1,177
$
1,175
968
932
951
1,186
6,389
$
$
Total
5,092
4,587
4,297
4,107
1,451
5,686
$ 25,220
1 Includes minimum lease commitments for low-value assets not recognized under IFRS 16.
Information technology and other service agreements
The Company has a service agreement related to Information Technology (“IT”) with Information Systems Management Canada
Corporation, including lease commitments for computer equipment where the Company has taken the exemption for low value
assets. Other service agreements relate to service contracts associated with corporate and shared service infrastructure.
Master Service Agreement
Pursuant to the MSA with the Government of Saskatchewan dated May 30, 2013, the Company was appointed, on an exclusive
basis, to manage and operate the Saskatchewan Land Titles Registry, Saskatchewan Land Surveys Directory, Saskatchewan
Personal Property Registry and Saskatchewan 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.
Non-lease component of office leases
The Company leases all of its office space and certain office equipment. The office spaces have lease terms of between two
and ten years, with various options to extend. The office equipment leases relate to photocopiers and 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.
The Company separates the lease and non-lease components of office space, accounting for the lease payment commitments
in Note 15.
80
2019 ISC® Annual Report | Notes to the Consolidated Financial Statements
2019 ISC® Annual Report | Notes to the Consolidated Financial Statements
Contingencies
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, 2019, the liability was nil (December 31, 2018 – nil).
At times, in the normal course of operations, the Company will enter into an indemnity agreement with a surety company to provide
a surety bond required under a contract with a customer. As at December 31, 2019, the aggregate amount outstanding of the surety
bond total was nil (December 31, 2018 – $1.7 million).
31 Pension Expense
The total pension costs under the Company’s defined contribution plans for the year were $1.8 million (2018 – $1.7 million).
32 Subsequent Events
On March 17, 2020, the Board declared a quarterly cash dividend of $0.20 per Class A Share, payable on or before April 15, 2020, to
shareholders of record as of March 31, 2020.
81
Board of Directors
Joel Teal
Saskatoon, Saskatchewan
Director since: 2013
Chair of the Board of Directors
Karyn Brooks
Calgary, Alberta
Director since: 2016
Member of the Audit Committee
Tom Christiansen
Swift Current, Saskatchewan
Director since: 2009
Member of the Compensation Committee
Doug Emsley
Regina, Saskatchewan
Director since: 2013
Chair of the Compensation Committee
Tony Guglielmin
Vancouver, British Columbia
Director since: 2013
Chair of the Audit Committee
Scott Musgrave
Lloydminster, Alberta
Director since: 2010
Member of the Audit Committee
Iraj Pourian
Vancouver, British Columbia
Director since: 2016
Member of the Governance and Nominating Committee
Laurie Powers
Regina, Saskatchewan
Director since: 2018
Member of the Compensation Committee
Heather Ross
Toronto, Ontario
Director since: 2018
Member of the Governance and Nominating Committee
Dion E. Tchorzewski
Regina, Saskatchewan
Director since: 2013
Chair of the Governance and 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
Ken Budzak
Executive Vice-President, Registry Operations
Loren Cisyk
Executive Vice-President, Technology Solutions
Dennis White
Vice-President, Marketing and Business Development
Clare Colledge
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.
82
2019 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
Authorized - the Company’s authorized share capital consists
of an unlimited number of Class A Limited Voting Shares
(“Class A Shares”), one Class B Golden Share (“Golden Share”)
and an unlimited number of Preferred Shares.
Class A Limited Voting Shares
Issued and outstanding – 17,500,000 Class A Shares as at
December 31, 2019.
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 as at
December 31, 2019.
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 Share has no pre-emptive, redemption, purchase
or conversion rights and is not eligible to receive dividends
declared by the Company.
Preferred Shares
Issued and outstanding – Nil as at December 31, 2019.
Preferred Shares are issuable at any time and may include
voting rights.
As at March 17, 2020, 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
(b) CI Investments, Inc. which holds 2,392,310 Class A Shares
representing approximately 13.7 per cent of the issued
and outstanding Class A Shares.
Auditor
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 in North America:
www.astfinancial.com
inquiries@astfinancial.com
Regulatory Filings
The Company’s filings are available through the System
for Electronic Document Analysis and Retrieval (SEDAR)
at www.sedar.com.
Investor Contact Information
Jonathan Hackshaw
Director, Investor Relations & Capital Markets
Toll-free in North America:
Outside North America:
investor.relations@isc.ca
1 (855) 341-8363
1 (306) 798-1137
83
2019 ISC® Annual Report Dividends on Class A Shares
The Company has a practice of paying an annual dividend of $0.80 per Class A Share to be payable on a quarterly basis. Our
objective is to achieve dividend growth over time while balancing our strategic business priorities.
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 based on our cash available for distribution, our financial requirements, any
restrictions imposed by our credit facilities, the requirements of any future financings and other factors existing at the time. The
table below shows annual dividends per Class A Share that have been declared by the Board subsequent to the initial public
offering in 2013:
Year
2019
Type
Quarterly
2018
Quarterly
2017
Quarterly
2016
Quarterly
2015
Quarterly
2014
Quarterly
2013
Quarterly
Ex-Dividend Date
Dec 30, 2019
Sep 27, 2019
Jun 27, 2019
Mar 28, 2019
Dec 28, 2018
Sep 28, 2018
Jun 28, 2018
Mar 28, 2018
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, 2019
Sep 30, 2019
Jun 30, 2019
Mar 31, 2019
Dec 31, 2018
Sep 30, 2018
Jun 30, 2018
Mar 31, 2018
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, 2020
Oct 15, 2019
Jul 15, 2019
Apr 15, 2019
Jan 15, 2019
Oct 15, 2018
Jul 15, 2018
Apr 15, 2018
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
$0.20
$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.
84
2019 ISC® Annual Report
Non-IFRS Financial Measures
This report also includes certain measures, which have not been prepared in accordance with International
Financial Reporting Standards (IFRS), such as EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA
margin. Rather, these measures are provided as additional information to complement IFRS measures. Refer
to sections 8.5 “Financial measures and key performance indicators”; 8.8 “Non-IFRS financial measures”;
8.9 “Non-IFRS financial measures definition”; and 2.5 “Consolidated EBITDA and Adjusted EBITDA” in ISC’s
Management’s Discussion and Analysis for the fourth quarter and year ended December 31, 2019, included
herein for further information, copies of which are filed on SEDAR at www.sedar.com.
Cautionary Note Regarding Forward-Looking Information
This report contains forward-looking information within the meaning of applicable Canadian securities
legislation including, without limitation, statements related to the industries in which we operate, growth
opportunities and our future financial position and results including expected revenue, EBITDA margin
and EBITDA. 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 or implied by such
forward-looking information. Important factors that could cause actual results to differ materially from
the Company’s plans or expectations include risks relating to changes in the condition of the economy,
including those arising from public health concerns, reliance on key customers and licences, dependence
on key projects and clients, securing new business and fixed-price contracts, identification of viable
growth opportunities, implementation of our growth strategy, competition and other risks detailed from
time to time in the filings made by the Company including those detailed in ISC’s Annual Information Form
for the year ended December 31, 2019, and ISC’s audited Consolidated Financial Statements and Notes and
Management’s Discussion and Analysis for the fourth quarter and year ended December 31, 2019, included
herein, copies of which are filed on SEDAR at www.sedar.com.
The forward-looking information in this report is made as of the date hereof and, except as required under
applicable securities laws, ISC assumes no obligation to update or revise such information to reflect new
events or circumstances.
company.isc.ca
TSX:ISV
Information Services Corporation
300 - 10 Research Drive
Regina, Saskatchewan S4S 7J7 Canada
1 (306) 787-8179