2020 Annual Report
2020 Highlights
Revenue
Net Income
EBITDA1
Free Cash Flow1
Earnings per share (basic)
2020 Results
$136.7 M
compared to $133.0 M in 2019
$20.9 M
compared to $19.4M in 2019
$43.6 M
compared to $39.0 M in 2019
$36.2 M
compared to $30.0 M in 2019
$1.19
compared to $1.11 in 2019
Revenue Distribution by
Segment for the year ended
December 31,
2020
8%
41%
51%
• Completed the acquisition of the assets of Paragon Inc. to create the Recovery Solutions
division in the Company’s Services segment. Since 2013, ISC has deployed over $150.0 million
in capital in pursuit of its growth and diversification strategy via M&A.
• Paid $14.0 million in dividends to shareholders in 2020. Since going public, ISC has paid over
$100.0 million in dividends to shareholders (as at the year ended December 31, 2020).
• Increased the Company’s Credit Facility to $150.0 million to ensure that the Company
continues to have access to capital and the ability to act on growth opportunities as
they arise.
• Continued to execute on our technology road map for our Services segment with the soft
launch of our updated legal sector platform, Registry Complete.
• Completed the deployment and successful implementation of new technology for the
Companies Registration Office (Ireland) and the Irish Aviation Authority.
2019
9%
38%
53%
Registry Operations
Services
Technology Solutions
Consolidated Revenue
Consolidated Revenue
for the year ended December 31,
for the year ended December 31,
(CAD$ millions)
( CAD$ millions)
140.0
120.0
100.0
80.0
60.0
40.0
20.0
0.0
.
1
9
1
1
.
0
3
3
1
.
7
6
3
1
Consolidated EBITDA1 and Adjusted EBITDA1 and
Consolidated EBITDA and Adjusted EBITDA and related margins
Related Margins1 for the year ended December 31,
for the year ended December 31,
(CAD$ millions)
(CAD$ millions)
EBITDA
Adjusted EBITDA
50.0
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
32.0%
29.9%
29.3% 30.1%
34.7%
31.9%
.
1
8
3
.
6
5
3
.
0
9
3
.
0
0
4
.
6
3
4
.
5
7
4
2018
2019
2020
2018
2019
2020
* Percentages expressed represent the EBITDA and
adjusted EBITDA margin percentages, respectively.
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. For a full description of these measures, see section 8.8, Non-IFRS financial measures,
and section 8.9, Non-IFRS financial measures definition of the MD&A.
About Us
Headquartered in Canada, ISC (TSX:ISV) 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 through our Registry Operations, Services and
Technology Solutions segments.
Our Business
We operate three segments defined by their primary
type of service offerings.
1
Registry Operations
Delivery of registry services on
behalf of governments and private
sector organizations.
2
Services
Delivery of products and services
that utilize public records and data
to provide value to customers in the
legal and financial sectors.
3
Technology Solutions
Development, delivery and
support of registry (and related)
technology solutions.
Contents
About Us ...................................................1
Letter from the Chair ............................... 2
Letter from the CEO ................................. 3
Corporate Social Responsibility ............... 5
Management’s Discussion and Analysis ... 7
Consolidated Financial Statements ...... 46
Board of Directors & ISC Leadership ..... 90
Corporate Information .......................... 91
1
2020 ISC® Annual Report Letter from the Chair
since the global pandemic began: ISC is an
extremely resilient business, and this is not by
accident. It is by design.
Our entire employee base from Vernon,
BC, to Dublin, Ireland, has risen to the
challenge. Most important, I am pleased to
say that the ISC family has remained safe
and well during this time. The leadership
from Jeff Stusek and his management
team has exceeded our expectations. Their
ability to continue to execute our strategy
calmly and with purpose in a time of such
upheaval is commendable. The Board and
I are extremely pleased and proud of all
they have accomplished over the years, but
none more so than in 2020. We hope that, as
shareholders, you are too.
ISC has been and always will be, an evolving
business with the intention of growing at
a steady, prudent pace while ensuring we
do not sacrifice the quality of our products,
services and customer service while doing
so. We know that if we don’t take care of
our existing customers, acquiring new ones
won’t mean anything in the long term.
The notion of “being in it for the long term”
is the cornerstone of all that ISC is about.
We may not be the most aggressive or the
most adventurous company an investor
could invest in. However, the true sign of any
great company is one that retains a focus
on the long term rather than the short-
term gains and ensures that its businesses
remain well run and customer focused.
During 2020, we continued to strengthen
the core of our business with our largest
acquisition to date. As such, revenue streams
are closely balanced between our Registry
Operations and Services segments, while our
Technology Solutions segment continues
to head in the right direction from a
development perspective. Our ability to pivot
and meet unexpected challenges quickly
and decisively was clearly on show this year
for all to see, and that is reflected in our
excellent results.
Towards the end of last year, Scott Musgrave
advised the Board of his decision not to seek
re-election to the Board at the upcoming
AGM. Scott has been a member of ISC’s
Board since 2010 and was one of the core
members of the Board who guided ISC from
a Crown corporation to a successful publicly
traded company. On behalf of the Board of
Directors, management and shareholders,
past and present, I would like to extend our
sincere thanks for all of his efforts on the
Board as well as being an able member of
the Audit Committee.
Since learning of Scott’s decision, our
Governance and Nominating Committee
has identified two new nominees, Jim Roche
and Roger Brandvold, who have agreed to
stand for election to the Board at the AGM.
Both are experienced business leaders and
are expected to contribute significantly to
ISC in years to come. I encourage you to read
the full biographies of all the members of
the Board in the Management Information
Circular, which is available on our website at
www.company.isc.ca.
Going forward, we remain committed to
our long-term strategy with the knowledge
that it has served us well. The last year was a
tremendous success for ISC, irrespective of
the unusual challenge of having to deal with
the consequences of a global pandemic. I,
therefore, am more confident than ever that
ISC has what it takes for even greater success,
underpinned by a solid and reliable business
that is run by solid and reliable people.
Yours sincerely,
Joel Teal
Chair, Board of Directors
Joel Teal
Chair, Board of Directors
In my letter last year, I talked about being
keenly focused on our strategy of diversifying
our business to deliver a future of sustainable
growth. That focus remained as true in 2020
as it has been since 2013.
None of us could have possibly imagined
what 2020 would bring. From our perspective,
it was another year filled with great promise
and the likelihood of continued growth
for ISC, both organically and through the
execution of further acquisitions.
When COVID-19 became a reality for all of us,
the only certainty at that time was that there
were a great deal of unknowns. Would we
be able to run our business with COVID-19
restrictions in place? Would we be able to
support our employees and stakeholders?
Would there be a return to “normal” in the
foreseeable future? Those are just some of the
questions your Board of Directors, like many
across the world, asked themselves at the
start of 2020.
At the time of writing this annual letter to
you, that uncertainty persists. However,
there is one key reminder over the last year
2
2020 ISC® Annual Report
Letter from the CEO
Jeff Stusek
President and
Chief Executive Officer
As many of our shareholders know, being the
President & CEO of ISC is a point of pride for me.
I’m proud of where we’ve come from, who we
are today and who we strive to be in the future.
There will always be peaks and troughs but,
despite everything we faced in 2020, it was
a year where everything that is great about
ISC was on display for everyone to see.
First and foremost, our primary focus
has always been our people and our
customers. This has, in my opinion, been
the recipe for our success over the years.
When COVID-19 restrictions were imposed
across the jurisdictions we operate in,
every single person in our organization
rallied to the cause, making sure they were,
first, in a place of safety and, secondly,
that each one of us could continue to
serve our customers, so that they could
continue to transact business as efficiently
and as effectively as possible. Every year,
I thank my colleagues from across the
organization for their hard work, but this
year I do so with complete admiration
of their professionalism and ability to
seamlessly shift in response to an immense
challenge that none of us have ever faced
before. With colleagues like these to rely on,
there is no limit to what we will be able to
achieve once the pandemic is behind us.
When the decision was made in May to
withdraw our usual annual guidance, we
didn’t know how 2020 would turn out.
In April, the restrictions implemented
to contain the spread of COVID-19 had
impacted our business and it looked
certain to do the same in May. However,
as we all got used to doing business
remotely and most of the jurisdictions
we operate in started to re-open, the
resiliency of our business began to show
itself. Not only did we manage to beat
the consensus estimates for revenue
and EBITDA, we also saw year-over-year
increases for both our free cash flow and
earnings per share. These are no small
achievements considering the impact
COVID-19 has had on the global economy
in the last year. Most importantly, the
majority of this success came from the
ongoing performance of our existing
core businesses coupled with a focus on
cost management.
In addition to ensuring that we were able to
continue operating during the pandemic,
we also continued to execute our projects
and further the technology road map for
our Services segment with the soft launch
of our updated legal sector platform,
Registry Complete. Thus far, the reception
to Registry Complete from our existing
customers has been excellent and our new
3
2020 ISC® Annual Report In summary, there is no question that 2020
was a remarkable year for ISC even though
we all faced challenges due to the global
pandemic. Our Registry Operations business
continues to be a strong free cash flow
generator and a world-leading example of
how core public registries should be run.
Following the acquisition of Paragon and
new business wins, our Services business
became a major contributor to our free
cash flow alongside Registry Operations,
further strengthening the foundation of our
consolidated business. Technology Solutions
is continuing to gain traction as a key piece
of our portfolio by successfully completing
implementations in several jurisdictions
during the year. While the short-term
economic outlook remains uncertain, our
performance in 2020 reinforces the resilience
of our business and why, like Joel, I remain
excited about the future for ISC.
Stay safe.
Jeff Stusek
President and Chief Executive Officer
customers are also excited by its potential to
make their interactions easier.
congratulate all those involved for being able
to conduct negotiations virtually.
The acquisition of Paragon at the end of July
seems a long time ago now. As I reflect on
our performance for the year, I am extremely
proud of how we were able to make this
transaction happen in the middle of a
pandemic, all without sacrificing our usual
due diligence discipline. We have had to find
different ways to maintain our rigour, but
that was not something I was willing now,
or ever, to compromise. Six months later, we
successfully integrated the assets and people
from Paragon into our Services business such
that it’s as if they have always been with us.
Most important, our existing customers are
thrilled to have a menu of services that covers
the entire loan life cycle from origination to
recovery, and that is what matters most to us.
The robustness of our business enabled
us to maintain our dividend of $0.80
per annum, which we continued to pay
quarterly. It is important to note that the
year ended December 31, 2020, marked ISC
having paid over $100 million in dividends
to shareholders since going public in July
2013. Going forward, we will focus on
running our business while looking for
the right acquisitions at the right price.
The opportunities in front of us across all
segments are encouraging, and you can
expect further M&A from ISC in the future
at the right time.
As President & CEO, I have the privilege of
charting our course and navigating us to
the various points along the way. However,
I could not do this successfully without
the support of the Board of Directors, my
executive leadership team, all my colleagues
across the organization, shareholders and our
various stakeholders and advisors. To all of
you, I would like to express my sincere thanks
for your support as we all aim to make ISC
better every day, with long-term success at
the forefront of everything we do.
Our Technology Solutions segment also
continued to evolve and develop, and we
were able to complete the implementation
and launch of new technology for a number
of customers. Subsequent to the end of the
year, we also implemented new technology
for Nova Scotia (the Registry of Joint Stock
Companies). The completion and launch
of these implementations were just one of
the many watershed moments for ISC in
2020. In addition to the implementations,
the second aspect of our business model for
Technology Solutions in the form of ongoing
licence and maintenance fees is now a reality.
While governments have quite rightly been
focused on managing the pandemic in 2020,
we expect the pipeline for new business
to return to the same levels or higher post-
pandemic. Following these implementations
and ongoing maintenance support contracts,
I’m confident that we are well positioned
to expand the Technology Solutions
segment as governments return to focus on
technology renewal post-pandemic.
The performance of our Registry Operations
segment was as robust as it always is,
irrespective of unexpected events or
downturns. While our Services segment
has evolved to become a more meaningful
revenue contributor, especially after the
creation of Recovery Solutions in the third
quarter following the acquisition of the assets
of Paragon Inc., Registry Operations remains
a very important part of ISC’s business. Its
ability to withstand economic challenges
and continue to generate healthy free cash
flow is not to be taken lightly, and we remain
committed to ensuring that the partnership
with the Government of Saskatchewan
remains as healthy as it always has been,
well into the future. Subsequent to the end
of the fourth quarter, the membership of
SGEU Local 2214 ratified a new collective
agreement for ISC’s in-scope employees.
This was very pleasing as we value our
relationship with SGEU, and I would like to
4
2020 ISC® Annual Report Corporate Social Responsibility
ISC takes pride in giving back to the communities where we live,
work and play. We passionately support programs, causes and
initiatives that make a difference to the people and places we serve.
In 2020, we invested over
$147,000 in support of non-
profit organizations, community
initiatives and cultural programs.
While we had to pause our
in-person celebrations and
gatherings due to COVID-19
restrictions, we were pleased
to continue sponsoring several
organizations and fundraisers.
Current Multi-Year Partnerships
Nature Conservancy of Canada — Summer Internship Sponsor
ISC partnered with National Conservancy of Canada (NCC) to support its Saskatchewan Legacy Stewardship Project,
helping NCC to achieve science and stewardship goals. Since 2015, the annual sponsorship provides funding for an
intern position and a donation of Geomatics Information System (GIS) data in support of NCC’s conservation efforts.
Although the internship was paused in 2020, we have made plans to continue our sponsorship in 2021.
Saskatchewan Games Council — Provincial Partner
As a supporter of activities that benefit communities and the province of Saskatchewan, ISC is proud to partner
with the Saskatchewan Games Council. In 2020, ISC supported activities leading up to future sporting events,
which include the 2022 Winter Games. More than 2,000 athletes, coaches and officials participate in this Saskatchewan
event in preparation for higher levels of sport, including the Olympic Games, Paralympic Games, and North American
Indigenous Games. In addition, this large sporting event provides economic and tourism benefits for the host city.
Albert Community School
ISC continued its long-standing partnership with Albert Community School in Regina in 2020. Funding
provides supplies for the school’s nutrition program that feeds 250 students daily, which readies the children
for learning. Support also provides teachers with classroom resources and special care packages, including
art projects for students to take home for the holiday season.
5
2020 ISC® Annual Report Our Dedicated Spirit of Giving
Local Community Giving
We are proud to support our people and
their efforts to better the communities in
which they live. From grassroots organizations
to local chapters of national organizations,
in 2020, our employees chose to support
organizations serving social needs in their
communities. In total, $22,000 was donated
to the following charitable organizations:
• Regina Food Bank
• Saskatoon Food Bank
• Moose Jaw & District Food Bank
• The Salvation Army Swift Current Food Bank
•
Battlefords and District Food
Resource Centre
• Carmichael Outreach
• The Salvation Army
• Regina Humane Society
•
REACH – Regina Education and Action
on Child Hunger
Life, Culture and Growth
ISC is a proud supporter of events and activities
that enhance culture, economic growth and
life events. Although many in-person events
were cancelled in 2020, some organizations
held virtual fundraisers to be able to continue
their operation. Events and organizations
supported by ISC included:
• Canadian Mental Health Association
• Scotties Tournament of Hearts
• Habitat for Humanity
• STARS Air Ambulance
• Globe Theatre
• GOAL Global
• University of Regina
• Dress for Success
• Heritage Festival of Saskatoon
• Square One Centre for Entrepreneurship
• Saskatchewan Science Centre
United Way
In 2020, ISC continued its tradition of supporting United Way through our workplace
fundraising campaign. In doing their part to practise physical distancing during the
COVID-19 pandemic, employees held a virtual United Way workplace campaign.
“Many of the organizations that United Way works with serve vulnerable members
of society, providing services to people living in poverty, escaping violence,
dealing with mental health conditions, and more,” says ISC employee, Kelly Curley,
who annually supports United Way. “If my donation helps improve one person’s
circumstances, it’s well worth it!”
Through personal giving and online events, employees raised $20,725, which was
matched by ISC for a total donation of $41,450.
National Philanthropy Day Award
ISC was recognized as a leader in corporate philanthropy
with a National Philanthropy Day Award in the category of
Outstanding Corporate Philanthropist from the Association
of Fundraising Professionals – South Saskatchewan Chapter.
The association recognized local philanthropists with
a week-long virtual celebration in lieu of their annual
in-person gathering, showcasing award recipients’
fundraising achievements on the association’s website
and social media channels. ISC was able to participate in
an individual, physically distanced award presentation to
proudly receive this award.
Century Family Farm Awards
As the safekeeper of original land title documentation,
ISC annually celebrates Saskatchewan’s agricultural history
with the ISC Century Family Farm Awards program. The
award recognizes family-owned farms that have operated
in the province for 100 years or more. In 2020, the program
received more than 200 applications. As a result of
restrictions due to the global pandemic, each recipient
received their award package by mail this year, which
included a copy of the original land title issued to their
ancestor who homesteaded the land.
6
2020 ISC® Annual Report Management’s Discussion & Analysis
For the Fourth Quarter and Year Ended December 31, 2020
Table of Contents
1
2
3
4
5
6
7
8
Overview ........................................................................................................................................................................ 9
Consolidated Financial Analysis .................................................................................................................................... 13
Business Segment Analysis ........................................................................................................................................... 17
Summary of Consolidated Quarterly Results ...............................................................................................................33
Business Strategy ......................................................................................................................................................... 34
Financial and Capital Management .............................................................................................................................. 34
Business Risks .............................................................................................................................................................. 38
Accounting Policies, Financial Measures and Control ..................................................................................................41
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 years
ended December 31, 2020, and 2019. Additional information,
including our Annual Information Form for the years ended
December 31, 2020, 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, 2020, 2019, and 2018,
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 and its subsidiaries.
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 16, 2021.
A reference made in this MD&A to other documents or to
information or documents available on a website does not
constitute the incorporation by reference into this MD&A
of such other documents or such other information or
documents available on such website, unless otherwise stated.
7
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020 our expectations and the business of Paragon performing
in a manner consistent with our expectations, 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
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
such as COVID-19) 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, 2020, 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 section 7.2 “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.
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 laws. 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 anticipated integration
and growth of the Paragon (as that term is defined herein)
business, 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 of operations, 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, would, should, could,
expect, plan, intend, anticipate, believe, estimate, predict, strive,
strategy, continue, likely, potential or the negative or other
variations of these words or other comparable words or
phrases are intended to identify forward-looking information.
Forward-looking information is based on estimates and
assumptions made by us in light of ISC’s experience and
perception of historical trends, current conditions and
expected future developments, as well as other factors
that ISC believes are appropriate and reasonable in the
circumstances. There can be no assurance that such estimates
and assumptions will prove to be correct. Certain assumptions
with respect to our ability to implement our business
strategy and compete for business (other than our exclusive
service offerings to the Government of Saskatchewan), and
market our technology assets and capabilities, our ability
to integrate the Paragon business on terms consistent with
8
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020 1 Overview
Our financial performance for the year remained strong amid COVID-19, and the resiliency of our business, in general, was evident
throughout 2020. Our 2020 first-quarter results showed continued growth over last year but were muted by the impact of
COVID-19 in the last weeks of the quarter. We experienced an impact from COVID-19 in the second quarter but again delivered
strong results in the face of the economic conditions created by the pandemic.
For the third quarter, our performance remained strong, partly due to increased transactions in both Registry Operations and
Services, combined with the measures implemented to continue to reduce our operating costs and mitigate the impact of the
pandemic at the start of the second quarter. We also completed several initiatives.
• We acquired substantially all of the assets of Paragon Inc. (“Paragon”), whose primary focus is the facilitation and co-ordination
of asset recovery on behalf of many of Canada’s major banks. The acquisition strengthened our current service offering, and we
now offer our clients a complete solution in the credit life cycle.
• We completed a soft launch of our newest technology platform, Registry Complete, a unified and streamlined platform that
enables customers to search and register with various ministries across Canada in a secure cloud-based environment. The
platform allows our customers to take advantage of expanded Application Programming Interface (“API”) service offerings,
improved tools, faster turnaround and a greater array of services in the legal and due diligence space.
• We expanded our credit facility to refinance amounts under the previous facilities and to provide the Company with additional
room for future growth opportunities, capital expenditures, and general corporate purposes.
Performance in the fourth quarter surged as transaction levels continued to improve across much of our Registry Operations
segment, which remains a significant part of ISC’s business. We continue to refine this segment's efficiency to preserve EBITDA
and free cash flow while still maintaining best-in-class customer service. Our Services segment also saw a strong quarter, up over
last year due to organic, new customer growth and the additional revenue from our new Recovery Solutions division following
Paragon's acquisition. Technology Solutions continued well, despite the impact on some implementations' timing during the year
from pandemic restrictions. We still completed scheduled implementations for existing clients while we continued to develop
new relationships with prospective clients.
Based on the strength of our existing businesses, the continued execution of our growth strategy, and the actions we took at
the start of the pandemic to mitigate the impact on our business, we were able to deliver excellent results in 2020. Despite the
continued uncertainty created by the pandemic1 , we expect the robust nature of our business and our focus on growth will stand
us in good stead in 2021.
1 For further information relating to the impact of COVID-19, refer to section 1.3 “Outlook” and section 7 “Business Risks”.
1.1 Consolidated highlights
2020 CONSOLIDATED RESULTS
Revenue
$136.7M
+3% vs 2019
Net income
Earnings per share, diluted
$20.9M
+8% vs 2019
$1.18
+7% vs 2019
Dividends Paid
$14.0M
EBITDA1
Adjusted EBITDA1
Free cash flow1
$43.6M
+12% vs 2019
$47.5M
+19% vs 2019
$36.2M
+21% vs 2019
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.
9
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020 On January 1, 2020, a new methodology was adopted for allocating corporate costs to the operating segments. Management
believes this revised methodology more closely reflects the level of shared service provided to the operating segments in the
current year. This change also impacts certain related party revenues.
Effective July 1, 2020, we recategorized our reporting to facilitate the inclusion of our new Recovery Solutions division following
the acquisition of the assets of Paragon, which closed on July 31, 2020. We believe this will provide readers with a more
comprehensive understanding of our Services segment. Our offerings are generally categorized into three divisions, namely
“Corporate Solutions”, “Regulatory Solutions”, and “Recovery Solutions”.
SELECT FINANCIAL INFORMATION
The select annual financial information set out for the years ended December 31, 2020, 2019, and 2018, 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
2020
$ 136,723
20,883
$ 43,612
47,498
31.9%
34.7%
$ 36,235
0.80
$
1.19
1.18
2020
$ 242,300
$ 92,963
Year Ended December 31,
2018
2019
$ 132,968
19,400
$ 39,026
40,028
29.3%
30.1%
$ 29,996
0.80
$
1.11
1.11
$ 119,131
18,637
$ 38,124
35,578
32.0%
29.9%
$ 27,411
0.80
$
1.06
1.06
As at December 31,
2018
2019
$ 171,579
$ 32,683
$ 173,682
$ 36,420
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.
ISC has generated very strong results over the past three years across all metrics. Our overall results for 2020 are up well over last
year despite the global pandemic that dominated most of the year.
• Revenue continued to climb and was up to $136.7 million in 2020 from $133.0 million, despite the impacts of COVID-19 in 2020.
• The strength of our Registry Operations was evident in the third and fourth quarter as it rebounded from lower levels in the
second quarter from the restrictions imposed around the pandemic.
• Revenue growth in 2020 continued to come from our Services segment, through strong organic new customer acquisitions,
the addition of new services and technologies for all customers, and the addition of our Recovery Solutions services following
the acquisition of Paragon.
• These results demonstrate the strength and resiliency of our business, with Adjusted EBITDA up 19 per cent (Services EBITDA is
up 118 per cent and 70 per cent for the quarter and year, respectively).
• Free cash flow was also strong, up 21 per cent over 2019, to record levels in 2020.
10
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020
Consolidated EBITDA and Adjusted EBITDA and
Related Margins1
for the year ended December 31,
(CAD$ millions)
EBITDA
Adjusted EBITDA
34.7%
31.9%
32.0%
29.9%
29.3%
30.1%
.
1
8
3
.
6
5
3
.
0
9
3
.
0
0
4
.
6
3
4
.
5
7
4
2018
2019
2020
1 2018 EBITDA contains a one-time gain of $3.6 million for the adjustment to
the fair value estimate of the contingent consideration associated with our
AVS Systems Inc. acquisition.
Percentages represent EBITDA and adjusted EBITDA margins.
Consolidated Revenue
for the year ended December 31,
(CAD$ millions)
.
1
9
1
1
2018
.
0
3
3
1
2019
.
7
6
3
1
2020
Consolidated Free Cash Flow
for the year ended December 31,
(CAD$ millions)
40.0
20.0
.
4
7
2
2018
.
0
0
3
2019
.
2
6
3
2020
FOURTH QUARTER CONSOLIDATED HIGHLIGHTS
• Revenue was $39.0 million for the quarter, an increase of $1.1 million compared to the fourth quarter of 2019 largely due to a
strong quarter in our Registry Operations, continued new customer growth in Services, and the addition of our new Recovery
Solutions revenue with the acquisition of Paragon.
• Net income was $7.9 million or $0.45 per basic and diluted share compared to $7.3 million or $0.42 per basic and diluted share
in the fourth quarter of 2019. The year-over-year increase is due to the increased revenue in Services and Registry Operations,
combined with savings from expense reduction measures implemented in 2020 in response to the pandemic.
• EBITDA was $15.7 million compared to $12.3 million for the same quarter last year, again due to increased revenue in Services
and Registry Operations and reduced operating expenses, resulting in a strong EBITDA margin for the fourth quarter of 40.2
per cent compared to 32.5 per cent last year.
• Adjusted EBITDA was $16.2 million for the quarter compared to $12.7 million in the same quarter last year. Adjusted EBITDA
margin was 41.5 per cent compared to 33.4 per cent last year.
• Free cash flow for the quarter was $12.7 million, an increase of $3.1 million compared to the fourth quarter of 2019 due to
higher results of operations.
• On November 4, 2020, our Board declared a quarterly cash dividend of $0.20 per Class A Limited Voting Share (“Class A Share”),
paid on January 15, 2021, to shareholders of record as of December 31, 2020.
11
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020
YEAR-END CONSOLIDATED HIGHLIGHTS
• Revenue for the year was $136.7 million, an increase of
$3.7 million compared to $133.0 million for the previous year,
despite the impacts of COVID-19 in 2020. The increase was
due to the higher revenue generated by Services from new
customer growth, and the new Recovery Solutions revenue.
• Net income was $20.9 million or $1.19 per basic share
and $1.18 per diluted share compared to $19.4 million or
$1.11 per basic share and diluted share last year. The increase
was the result of our increased revenue combined with
savings from expense reduction measures implemented in
2020 in response to the pandemic.
• EBITDA for the year was $43.6 million compared to
$39.0 million last year, an increase of $4.6 million, with an
EBITDA margin for the year of 31.9 per cent compared to
29.3 per cent for 2019.
• Adjusted EBITDA was $47.5 million for the year, up from
$40.0 million last year, with an Adjusted EBITDA margin of
34.7 per cent for 2020 compared to 30.1 per cent last year.
• Free cash flow for the year increased to $36.2 million,
compared to $30.0 million for the same period last year, as
a result of the high cash flow nature of our business and
strong operational results across our segments.
• On July 31, 2020, the Company’s Services segment, through
its wholly owned subsidiary, ESC, acquired substantially
all of the assets used in the business of Paragon Inc. for
$70.0 million.
• On August 5, 2020, the Company entered into a new credit
agreement in connection with its secured credit facility (the
"Credit Facility"). The aggregate amount available under the
new Credit Facility is $150.0 million, up from $80.0 million.
• During the year, we launched our newest technology
platform, Registry Complete, a unified and streamlined
platform that enables organizations to search and register
with the various ministries across Canada in a secure cloud-
based environment.
• Completed the deployment of new technology for
the Companies Registration Office (Ireland) and began
deployment of modules for the Irish Aviation Authority.
1.2 Subsequent events
• On January 27, 2021, the Company announced that the
membership of Saskatchewan Government and General
Employees’ Union Local 2214 ratified a new collective
agreement with respect to ISC’s in-scope employees. The
new six-year agreement runs to September 30, 2025.
• Subsequent to the end of the fourth quarter, we successfully
implemented new technology for the Registry of Joint Stock
Companies in Nova Scotia.
• On March 16, 2021, our Board declared a quarterly
cash dividend of $0.20 per Class A Share, payable on
or before April 15, 2021, to shareholders of record as of
March 31, 2021.
1.3 Outlook
The following section includes forward-looking information,
including statements related to the industries in which we
operate, growth opportunities, our future financial position and
results of operations, capital and operating expectations, the
expected impact of the addition of the assets used in the business
of Paragon and the expected impact of COVID-19. Refer to
“Caution Regarding Forward-Looking Information”.
Despite excellent performance in 2020, the uncertainty
surrounding the impacts of COVID-19 remain for 2021 as
we manage through new, additional or extended pandemic
response measures. However, we are well positioned to
manage through this in 2021 and expect our results will reflect
that. Our long-term strategy remains centred on delivering
value for shareholders through the consistent performance
of our existing business and the execution of appropriate
growth opportunities, including acquisition targets that are
complementary to or add value to existing lines of business.
In our Registry Operations and Services segments, we expect
our volumes to be lower than normal in 2021, as the pace of
recovery of the Canadian economy may be uneven and is
dependent on how long the pandemic continues.
Despite this, we are continuing to invest in the technology
supporting our Services segment and transition away from
legacy platforms to optimize the customer experience through
automation of the delivery of services and reduce our cost of
delivery. As well, we expect the strong EBITDA margin profile
of the recently acquired Recovery Solutions division of our
Services segment to positively impact our consolidated EBITDA
margin profile in 2021.
In our Technology Solutions segment, project implementation
work continues for multiple clients. As mentioned in our
previous 2020 reporting, we have been able to work
remotely during the pandemic. However, some ongoing
implementations which we expected to be complete in 2020
were delayed due to the pandemic and are now expected
to be complete in 2021. For example, subsequent to the
end of the fourth quarter, we successfully completed the
implementation for the Registry of Joint Stock Companies in
Nova Scotia. In addition, we commenced implementation
12
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020 planning for our newest customer, the islands of Bonaire, St. Eustatius and Saba (the “BES Islands”), following the award of a
contract in December 2020.
The uncertainty surrounding the duration and potential outcomes of the COVID-19 pandemic remains for the foreseeable future.
While we have demonstrated strong results for 2020 and have positioned the Company to manage through this situation, we
continue to be unable, at this time, to predict the full impact on our financial results in 2021. Therefore, we will not be providing
guidance for the coming year.
2 Consolidated Financial Analysis
Consolidated revenue was up 2.8 per cent for the three months and year ended December 31, 2020, compared to the
same periods last year. Net income was also up in the quarter and year-to-date compared to last year due to increased
revenue in Services.
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
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
Three Months Ended December 31,
2019
2020
Year Ended December 31,
2019
2020
$ 19,452
15,744
3,815
2
39,013
10,314
7,799
3,837
2,117
880
1,151
779
279
27,156
11,857
(192)
(924)
(1,116)
10,741
(2,870)
7,871
(69)
–
$ 18,069
13,515
6,352
6
37,942
11,578
8,236
2,697
2,549
786
1,351
462
649
28,308
9,634
71
(359)
(288)
9,346
(1,999)
7,347
78
(77)
$ 69,535
56,398
10,782
8
136,723
$ 70,399
51,131
11,416
22
132,968
40,165
31,271
12,865
7,896
3,004
6,784
2,654
1,337
105,976
30,747
172
(2,217)
(2,045)
28,702
(7,819)
20,883
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
732
(31)
(538)
29
(69)
7,802
$
1
7,348
$
701
$ 21,584
(509)
$ 18,891
13
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020
2.2 Consolidated revenue
Consolidated Revenue1
for the three months ended December 31,
Consolidated Revenue1
for the year ended December 31,
17%
35%
48%
10%
40%
50%
Technology Solutions
Services
Registry Operations
9%
38%
8%
Technology Solutions
Services
41%
Registry Operations
+3%
53%
51%
+3%
2019
2020
2019
2020
1
Corporate and other and Inter-segment eliminations are excluded.
(thousands of CAD dollars)
Registry Operations
Services
Technology Solutions
Corporate and other
Total revenue
Three Months Ended December 31,
2019
2020
Year Ended December 31,
2020
2019
$ 19,452
15,744
3,815
2
$ 39,013
$ 18,069
13,515
6,352
6
$ 37,942
$ 69,535
56,398
10,782
8
$ 136,723
$ 70,399
51,131
11,416
22
$ 132,968
Total revenue increased during the quarter as a result of:
• higher revenue in our Registry Operations segment, from a combination of (i) increased regular land transfers and mortgage
registrations, combined with higher average land values in the quarter, despite overall transactions remaining constant and
(ii) an increase in “high-value” property registration revenue, where each registration generates revenue of $10,000 or more; and
• continued organic, new customer growth in Services, as well as a full quarter of revenue from our Recovery Solutions division.
These increases were partially offset by the decreased revenue in Technology Solutions as delivery against milestones on signed
contracts was delayed during the year.
Total revenue for the year was up as a result of the organic growth in Services and the addition of our Recovery Solutions. The
strong showing in our Registry Operations segment in the third and fourth quarters, despite the impact of the pandemic, showed
the resiliency of our business and helped ensure the strong 2020 results.
2.3 Consolidated expenses
Consolidated Expenses
for the three months ended December 31,
(CAD$ millions)
28.3
20%
28%
10%
42%
Other
Cost of goods sold
Depreciation and
amortization
Employee expenses
27.2
19%
29%
14%
38%
Consolidated Expenses
for the year ended December 31,
(CAD$ millions)
105.3
20%
30%
11%
39%
106.0
20%
Other
Cost of goods sold
Depreciation and
amortization
Employee expenses
30%
12%
38%
2019
2020
2019
2020
14
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020
(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,
2019
2020
Year Ended December 31,
2019
2020
$ 10,314
7,799
3,837
2,117
880
1,151
779
279
$ 27,156
$ 11,578
8,236
2,697
2,549
786
1,351
462
649
$ 28,308
$ 40,165
31,271
12,865
7,896
3,004
6,784
2,654
1,337
$ 105,976
$ 41,689
31,171
11,400
8,796
3,485
4,281
2,138
2,382
$ 105,342
Consolidated expenses were $27.2 million for the fourth quarter, a decrease of $1.2 million compared to the same quarter last year
and were flat at $106.0 million for the year.
The decrease in the quarter was due to decreases in wages and salaries (as a result of pandemic related reductions), cost of goods
sold for slightly lower collateral management products, and information technology services. Depreciation and amortization in
the quarter was up as a result of the Paragon acquisition.
The year-over-year results showed similar reductions in wages and salaries from pandemic related actions, offset by increases in
professional and consulting services and depreciation and amortization from our acquisition of Paragon.
2.4 Consolidated net income
Consolidated Net Income
for the three months ended December 31,
(CAD$ millions)
7.3
7.9
Consolidated Net Income
for the year ended December 31,
(CAD$ millions)
19.4
20.9
+7%
+8%
2019
2020
2019
2020
Net income for the quarter was $7.9 million or $0.45 per basic and diluted share, an increase of 7 per cent compared to the fourth
quarter of 2019. For the year, net income was $20.9 million or $1.19 per basic share and $1.18 per diluted share, up 8 per cent
compared to last year.
15
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020
2.5 Consolidated EBITDA and Adjusted EBITDA
Consolidated EBITDA and adjusted EBITDA
for the three months ended December 31,
(CAD$ millions)
12.7
12.3
16.2
15.7
EBITDA
Adjustments
+28%
Consolidated EBITDA and adjusted EBITDA
for the year ended December 31,
(CAD$ millions)
47.5
40.0
39.0
43.6
EBITDA
Adjustments
+19%
0.4
0.5
1.0
3.9
2019
2020
2019
2020
EBITDA for the fourth quarter of 2020 was $15.7 million compared to $12.3 million for the same quarter last year, up 27 per cent
as a result of organic new customer growth and the first full quarter of revenue from Recovery Solutions in Services, as well as the
continued impact of cost reductions across our segments made earlier in the year. Similarly, adjusted EBITDA was $16.2 million for
the quarter compared to $12.7 million last year, with only minor adjustments for stock-based compensation and integration costs
during the quarter.
For the year, EBITDA was $43.6 million compared to $39.0 million last year, an increase of 12 per cent, as a result of the same strong
operational performance and growth outlined above. Adjusted EBITDA was $47.5 million for the year compared to $40.0 million
last year, up 19 per cent, with higher adjustments in 2020 as compared to 2019 for stock-based compensation and acquisition and
integration costs.
(thousands of CAD dollars)
Net income
Depreciation and amortization
Net finance expense
Income tax expense
EBITDA
Adjustments
Stock-based compensation expense
Stock option expense
Acquisition and integration costs
Gain on disposal of property, plant and
equipment assets
Adjusted EBITDA
EBITDA margin (% of revenue)
Adjusted EBITDA margin (% of revenue)
2.6 Consolidated finance costs
Three Months Ended December 31,
2019
2020
Year Ended December 31,
2019
2020
$
7,871
3,837
1,116
2,871
$ 15,695
248
38
207
$
7,347
2,697
288
1,998
$ 12,330
269
81
–
–
$ 16,188
40.2%
41.5%
4
$ 12,684
32.5%
33.4%
$ 20,883
12,865
2,045
7,819
$ 43,612
1,046
222
2,618
–
$ 47,498
31.9%
34.7%
$ 19,400
11,400
1,246
6,980
$ 39,026
370
466
164
2
$ 40,028
29.3%
30.1%
Net finance expense was $1.1 million and $2.0 million for the quarter and the year, respectively, up compared to last year due to
increased fees on our new Credit Facility which was entered into on August 5, 2020.
16
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020
2.7 Tax provision
The Company is subject to federal and provincial income taxes at an estimated combined statutory rate of 27.0 per cent (2019 –
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
Other
Income tax expense
Year Ended December 31,
2019
2020
$ 28,702
27.0%
7,750
$ 26,380
27.0%
7,122
–
67
(278)
269
11
7,819
$
(20)
279
105
(382)
(124)
6,980
$
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:
• 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.
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, 2020, 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
17
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020
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.
Transactions are billed as flat fees. 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 92 per cent of all registrations in the Corporate
Registry were submitted online in 2020.
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 84 per cent of all Land Titles Registry
registration transactions were submitted online in 2020.
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.
18
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020 REGISTRY OPERATIONS REVENUE
Registry Operations Revenue
for the three months ended December 31,
(CAD$ millions)
0%
19.5
14%
13%
18.1
6%
15%
13%
66%
73%
Other
Corporate Registry
Personal Property
Registry
Land Registry
+8%
Registry Operations Revenue
for the year ended December 31,
(CAD$ millions)
2%
70.4
15%
14%
0%
69.6
15%
15%
69%
70%
Other
Corporate Registry
Personal Property
Registry
Land Registry
(1%)
2019
2020
2019
2020
(thousands of CAD dollars)
Land Registry
Personal Property Registry
Corporate Registry
Other
Registry Operations revenue
Three Months Ended December 31,
2019
2020
Year Ended December 31,
2020
2019
$ 14,119
2,625
2,709
32
$ 19,485
$
$
11,968
2,383
2,604
1,114
18,069
$ 48,694
10,055
10,537
280
$ 69,568
$
$
48,901
10,154
10,230
1,114
70,399
Revenue for Registry Operations was 19.5 million for the
quarter, up compared to $18.1 million in the fourth quarter of
2019 and, for the year, was $69.6 million, flat compared to 2019.
The implementation of COVID-19 related restrictions in
Saskatchewan began in mid-March and impacted the segment
in April and May. As Saskatchewan began the first phase of
its re-opening plan in June, activity in the segment began
to move upward and remained stable throughout the third
quarter. Building on that stabilization, volumes in the fourth
quarter showed further improvement, with results in all
registries or surpassing 2019 levels.
Other revenue consists mainly of fees associated with
a change order pursuant to the MSA to continue the
development of our technology systems that support the
registries. At the end of June 2020, the Multi-jurisdictional
Registry Access Service (“MRAS”) went into operation in
the Saskatchewan Corporate Registry along with the other
initiating provinces of British Columbia, Alberta, Manitoba,
Quebec and Corporations Canada. It enables businesses
in Canada to register seamlessly in select provinces and
territories without having to provide the same information
to each jurisdiction. Under the MSA, the Company owns
the intellectual property during the term of the MSA and
amortization of the intangible asset commenced in the third
quarter of 2020 when the development was complete.
Registry Operations Revenue
for the year ended December 31,
(CAD$ millions)
100.0
Other
Corporate Registry
Personal Property Registry
Land Registry
70.3
10.0
10.2
70.4
10.2
10.2
69.6
10.5
10.1
50.0
48.9
48.7
80.0
60.0
40.0
20.0
0.0
2018
2019
2020
Note: Values may not add due to rounding.
The top five customers for Registry Operations accounted for
19.7 per cent of the total segment revenue for 2020. 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
$14.1 million, up by $2.2 million or 18.0 per cent compared to
the same period in 2019, due to strong results from the Land
Titles Registry.
Most of the revenue generated from the Land Registry is from
the Land Titles Registry and is derived from value-based (ad
19
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020
valorem) fees. Land Titles Registry revenue for the quarter was $13.4 million, an increase of $2.2 million or 19.5 per cent compared
to the same period in 2019, even though overall transaction volumes remained flat year-over-year. The increase was due to an
increase in regular land transfers and mortgage registrations during the quarter relative to the same period in 2019, combined
with higher average land values for the regular land transfers in the fourth quarter, which positively impacted the revenue.
Saskatchewan Land Registry Revenue,
for the year ended December 31, 2020
Saskatchewan Land Registry Revenue,
for the year ended December 31, 2019
93.6%
4.3%
2.1%
Land Titles Registry
Geomatics
Land Surveys Directory
92.7%
4.7%
2.6%
High-value property registration revenue was $1.6 million in the fourth quarter, a rise of $0.5 million compared to $1.1 million in
the fourth quarter of 2019. Each high-value registration generates revenue of $10,000 or more.
The following graphs show the Land Registry revenue by type of transaction and the overall transaction volume, respectively.
Typically, the second and third quarters generate the most revenue for the Land Registry. Given the impact of COVID-19
restrictions on our business in the second quarter, we observed lower revenue in that quarter and higher revenue in the third and
fourth quarter, contrary to our historical pattern of seasonality. For more information on seasonality, refer to section 4 “Summary of
Consolidated Quarterly Results”.
Saskatchewan Land Registry Revenue by Type
(CAD$ millions)
13.2
0.6
1.9
10.7
12.4
0.6
1.9
9.9
12.0
0.5
1.7
9.7
11.3
0.8
1.8
8.8
Registration
Search
Maintenance/Services
13.0
0.6
1.8
10.7
14.1
0.5
1.8
11.8
10.4
0.5
1.8
8.0
11.2
0.6
1.7
8.9
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Q4 2020
Note: Values may not add due to rounding.
Saskatchewan Land Registry Transaction Volume
(Number of transactions)
8
9
8
6
8
1
,
7
8
0
0
1
2
,
8
3
6
5
9
1
,
0
2
4
1
8
1
,
1
1
7
7
7
1
,
7
3
2
1
7
1
,
2
0
6
9
7
1
,
1
6
8
1
8
1
,
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Q4 2020
15.0
10.0
5.0
0.0
220,000
190,000
160,000
130,000
100,000
20
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020 As noted, revenue-generating transactions in the Land Titles Registry remained flat for the fourth quarter. While the volume
of regular land transfers, mortgage registrations and title searches improved by 18.7 per cent, 15.7 per cent and 2.4 per cent,
respectively, volumes declined in other land titles transaction types, mostly offsetting this growth.
For the year, total Land Registry revenue was $48.7 million in 2020, flat compared 2019. Of that, the Land Titles Registry revenue
was $45.6 million compared to $45.4 million in 2019. High-value property registration revenue was lower in 2020 at $3.8 million
compared to revenue of $4.3 million in 2019. Each high-value registration generated revenue of $10,000 or more.
Saskatchewan Land Registry Revenue by Type
for the year ended December 31,
(CAD$ millions)
50.0
2.3
7.3
Registration
48.9
2.4
7.3
Search
Maintenance
48.7
2.2
7.0
40.4
39.1
39.5
2018
2019
2020
Saskatchewan Land Registry Transaction Volume
for the year ended December 31,
(Number of transactions)
900,000
800,000
700,000
600,000
500,000
400,000
7
6
3
6
1
8
,
2018
3
4
0
4
7
7
,
2019
1
1
4
0
1
7
,
2020
Note: Values may not add due to rounding from maintenance transactions that were too small to display in chart.
Overall, revenue-generating transactions in the Land Titles Registry fell 7.9 per cent in 2020 compared to 2019 due to COVID-19,
which impacted the second quarter of 2020. While the volume of regular land transfers and mortgage registrations in 2020
increased by 1.0 per cent and 6.6 per cent, respectively, title search volumes declined in 2020 by 7.0 per cent. The decline in title
searches, along with decreases in other land titles transaction types, more than offset the previously mentioned growth and is the
main reason overall volumes are down this year.
The main customers of the Land Registry include law firms, financial institutions, governments, surveyors, developers, resource
companies as well as the general public. For 2020, our top 20 Land Registry customers represented nearly 41.2 per cent of
revenue, and our top 100 Land Titles Registry customers denoted 77.1 per cent of revenue.
Saskatchewan Personal Property Registry
For the fourth quarter of 2020, volume for the Personal Property Registry was down slightly by 1.8 per cent compared to the same
period in 2019. Revenue was $2.6 million, up $0.2 million compared to the same quarter in 2019.
Registration revenue in the quarter was up by 10.6 per cent from 2019, despite volumes being down 1.7 per cent. Average term-
length for personal property security registration setups was comparable to the same quarter in 2019.
Search revenue improved by 9.0 per cent for the fourth quarter despite weaker volumes, down 2.0 per cent compared to last year.
Additionally, pricing changes contributed to maintenance revenue growing by 10.7 per cent compared to the same quarter in
2019 even though volumes were flat.
The following graph illustrates the typical pattern of seasonality, in that revenue for the fourth quarter is usually lower compared
to the third quarter. For 2020, note the lower revenue in the second quarter of this year due to COVID-19 related restrictions.
21
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020 Saskatchewan Personal Property Registry Revenue by Type
(CAD$ millions)
2.8
0.3
0.7
2.7
0.3
0.6
2.4
0.2
0.6
2.3
0.3
0.6
1.4
1.8
1.8
1.5
Registration
Search
Maintenance
2.8
0.3
0.6
2.6
0.3
0.7
2.4
0.3
0.5
1.5
1.9
1.7
2.2
0.3
0.6
1.3
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Q4 2020
Note: Values may not add due to rounding.
Saskatchewan Personal Property Registry Transaction Volume
(Number of transactions)
1
4
1
5
0
1
,
8
1
4
3
2
1
,
2
8
6
9
1
1
,
6
8
2
9
0
1
,
3
7
3
3
0
1
,
1
4
2
3
0
1
,
8
9
3
3
1
1
,
6
0
3
7
0
1
,
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
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Q4 2020
Annual revenue for the Personal Property Registry was $10.1 million in 2020, flat compared to 2019. Overall volumes for 2020
declined by 6.6 per cent compared to the previous year, with the decline most prevalent in the second quarter when COVID-19
related restrictions had the greatest impact on the local economy. Registration, search and maintenance volumes dropped
6.9 per cent, 6.9 per cent and 4.1 per cent, respectively. Personal property security registration setup volumes decreased in 2020
by 4.4 per cent compared to 2019.
Pricing changes made in late August helped offset the year-over-year volume decreases. Registration revenue was flat compared
to 2019, while search revenue was lower by 3.4 per cent in 2020. These declines in revenue were partly offset by higher
maintenance revenue in 2020, up 1.2 per cent compared to 2019.
Saskatchewan Personal Property Registry
Revenue by Type
for the year ended December 31,
(CAD$ millions)
Saskatchewan Personal Property Registry
Transaction Volume
for the year ended December 31,
(Number of transactions)
10.2
1.3
2.2
6.7
Registration
10.2
1.1
Search
Maintenance
10.1
1.1
2.5
6.5
2.4
6.5
2018
2019
2020
500,000
400,000
300,000
200,000
7
1
9
2
6
4
,
2018
7
2
5
7
5
4
,
2019
8
1
3
7
2
4
,
2020
Note: Values may not add due to rounding.
Note: Values may not add due to rounding.
22
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020 Customers of the Personal Property Registry are primarily in the financial sector but also include law firms. The top 20 Personal
Property Registry customers represented about 83.0 per cent of the revenue for 2020, while the top 100 produced 94.3 per cent
of revenue.
Saskatchewan Corporate Registry
Revenue for the Corporate Registry for the fourth quarter was $2.7 million, flat compared to the same period in 2019, with a 3.0
per cent growth in overall transaction volumes. Registration, search and maintenance revenue grew by 9.0 per cent, 0.9 per cent
and 2.6 per cent, respectively, in the quarter compared to 2019. Year-over-year increases in the incorporation and registration
of new business entities drove registration revenue growth, while increases in the filing of annual returns and renewals drove
maintenance revenue growth.
As of December 31, 2020, there were approximately 75,358 active Saskatchewan Business Corporations registered with the
Corporate Registry compared to approximately 74,647 as at December 31, 2019.
The following graph illustrates the Corporate Registry revenue by type of transaction. Despite the impact of COVID-19 restrictions
on the other registries, quarterly revenue in this registry continues to mirror the typical pattern of seasonality.
Saskatchewan Corporate Registry Revenue by Type
(CAD$ 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
2.4
1.5
0.3
0.6
2.6
1.6
0.3
0.7
2.9
1.9
0.4
0.6
2.5
1.6
0.3
0.6
2.4
1.5
0.3
0.6
2.7
1.6
0.3
0.7
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Q4 2020
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
6,000
40,000
20,000
0
1
0
0
2
9
,
7
6
0
0
9
,
8
9
0
2
8
,
9
2
1
3
8
,
4
7
6
2
9
,
4
7
2
3
8
,
5
0
9
6
7
,
1
4
6
5
8
,
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Q4 2020
Transaction volumes for the fourth quarter grew by 3.0 per cent compared to the same period last year. Specifically, registration,
search and maintenance volumes rose by 14.0 per cent, 1.6 per cent and 3.0 per cent, respectively, compared to the same period
in 2019.
Annual transaction volumes for the year were down 2.5 per cent compared to 2019. While registration volume grew by 1.4 per
cent, search and maintenance volume declined by 3.3 per cent and 2.0 per cent, respectively, compared to 2019. Following the
re-opening of the Saskatchewan economy in June, the third and fourth quarters saw year-over-year growth in incorporations and
registrations, as well as annual return and renewal activity.
23
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020 Annual revenue for the Corporate Registry was $10.5 million, up 3.0 per cent compared to 2019. In 2020, registration and
maintenance revenue improved by 4.2 per cent and 4.1 per cent, respectively, compared to 2019. More specifically, 2020 revenue
from the incorporation and registration of new business entities, up 5.3 per cent, drove registration revenue growth, while revenue
from the filing of annual returns and renewals, up 6.1 per cent for the year, drove maintenance revenue growth. Pricing changes
made in the third quarter of 2019 contributed to revenue increases in both categories as well. This growth was somewhat offset
by a reduction of search revenue, down 4.0 per cent compared to 2019.
Saskatchewan Corporate Registry Revenue by Type
for the year ended December 31,
(CAD$ millions)
Saskatchewan Corporate Registry Transaction Volume
for the year ended December 31,
(Number of transactions)
Registration
Search
10.0
10.2
Maintenance
10.5
6.1
1.4
2.5
2018
6.3
1.4
2.5
2019
Note: Values may not add due to rounding.
6.6
1.3
2.6
2020
400,000
300,000
200,000
100,000
1
7
3
5
4
3
,
2018
5
9
2
7
4
3
,
2019
4
9
4
8
3
3
,
2020
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 delivered nearly 31.9 per cent
of revenue for 2020 and the top 100 customers encompassed about 49.8 per cent of revenue.
REGISTRY OPERATIONS EXPENSES AND EBITDA
Registry Operations EBITDA
for the three months ended December 31,
(CAD$ millions)
10.6
9.0
Registry Operations EBITDA
for the year ended December 31,
(CAD$ millions)
34.1
34.6
+18%
+2%
2019
2020
2019
2020
.
.
(thousands of CAD dollars)
Revenue
Total expenses2
EBITDA
Three Months Ended December 31,
20191
2020
Year Ended December 31,
20191
2020
$ 19,485
8,882
$ 10,603
$
$
18,069
9,048
9,021
$ 69,568
34,955
$ 34,613
$
$
70,399
36,309
34,090
1 On January 1, 2020, a new methodology was adopted for allocating corporate costs to the operating segments. Management believes this revised methodology more closely
reflects the level of shared services provided to the operating segments in the current year. Certain related party revenues are also impacted by this change. Had the methodology
change not been made, Registry Operations EBITDA in the quarter is estimated to have been $11,131 thousand and year-to-date is estimated to have been $36,180 thousand.
2 Total expenses exclude interest, taxes, depreciation and amortization.
24
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020
EBITDA for Registry Operations for the fourth quarter was $10.6 million, up 18 per cent compared to the same period last year and
was $34.6 million for the year, up 2 per cent compared to last year. The increase for the quarter was reflective of the re-opening
of the Saskatchewan economy in June and the increase in economic activity that followed. The increase for the year was due
to decreased expenses overall, including measures implemented to reduce our operating costs and mitigate the impact of the
pandemic at the start of the second quarter, which more than offset the slight decline in revenue.
More specifically, the reduction in expenses in the quarter was due to lower technology solutions costs, while the reduction year-
to-date was also aided by lower costs for technology solutions as well as reduced wages and salaries and occupancy costs related
to the closure of three customer service centres in 2019. These were partially offset by an increase in the allocation of corporate
costs due to the methodology change made this year that management believes more closely reflects the level of shared services
provided to the operating segments.
3.2 Services
Services delivers solutions uniting public records data, customer authentication, corporate services, collateral management and
asset recovery to support registration, due diligence and lending practices of clients across Canada.
Effective July 1, 2020, we have recategorized our reporting to include our new Recovery Solutions division from the Paragon
acquisition, which closed on July 31, 2020. We believe this will provide readers with a more comprehensive understanding of our
Services segment.
Our offerings are generally categorized into three divisions, namely “Corporate Solutions”, “Regulatory Solutions”, and “Recovery
Solutions”. The table below sets out the various offerings provided by our Services segment.
Category
Offering
Software
Products
Incorporation Services
Business Complete
Custom in-house
Nationwide Business Name Registration and
Renewals
Security Filings and Registrations
Corporate
Solutions
Corporate Supplies
Custom in-house
Know-Your-Customer
(“KYC”)
SIDni®,
AttestaNet®
LEV®
Regulatory
Solutions
Public Records Searches
Custom in-house
Registry Complete
Collateral Management
Custom in-house (AVS)
Recovery
Solutions
Asset Recovery
Repo>>Connect
Minute Books
Seals and Stamps
Corporate Legal Packages
Individual Identification
Legal Entity Validation
Beneficial Ownership Validation
Account Onboarding Services
US & International Corporate Entity Validation
Corporate Profile or Business Name Searches
NUANS1 Searches
PPSA2 Searches
Real Estate Searches
Vital Statistics Searches
PPSA2 /RDPRM3 Search & Registrations
Bank Act Filing
Notice of Security Interest (Fixture) Registrations
US UCC4 Search & Filings
Fully managed service across Canada and the US
Identification, retrieval and disposition of movable
assets
1 A NUANS® report is a search which provides a comprehensive comparison of proposed corporate, business or trademark names with existing names already in use by other
businesses and corporations. NUANS® name reports reserve the proposed name for 90 days providing the time necessary to prepare and file incorporation, extra-provincial
registrations, amalgamations or other relevant corporate filings.
2 Personal Property Security Act.
3 Registre des Droits Personnels et Réels Mobiliers (translated as Register of Personal and Real Movable Rights).
4 Uniform Commercial Code.
25
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020 Competition
Our competitors vary by market and geography. They
primarily include other intermediaries and suppliers to
lenders and legal professionals.
Corporate Solutions
Corporate Solutions captures revenue from nationwide search,
business name registration and corporate filing services
sold to legal professionals or the general public directly or
indirectly through our government relationships. It also
captures revenue from our corporate supplies business. Our
customers include legal professionals, the consumer market
and the general public.
Incorporation Services
• We provide a convenient, cost-effective method to
incorporate businesses online or through our staff-assisted
process. Leveraging our online technology platforms,
eService and Business Complete, we service legal customers
and the general public through a team of experienced law
clerks in both Ontario and Quebec.
• We hold one of the two exclusive licences under the Ontario
Business Information System, which allows us to access the
Ontario Corporate Registry electronically on behalf of clients.
We have non-exclusive licences to do the same in all other
provincial and federal (Corporations Canada) corporate
registries across Canada.
•
In addition to incorporations, various other corporate
filings are often required to operate a business. Items
such as amendments to a company’s governing articles,
amalgamations, the continuance of a company, a change
in registered address or changes to a board of directors.
We also provide online and real-time NUANS and business
name searches, registered agents of service and corporate
document preparation to assist in the organization and
maintenance of a business.
Corporate Supplies
• We provide a comprehensive array of corporate supplies
to help companies organize and maintain their corporate
legal documents. This is primarily done through the most
common corporate supplies in packaged or individual
formats, including customized corporate minute books,
corporate seals/embossers, by-laws and share certificates, as
well as a large variety of rubber and self-inking stamps.
Regulatory Solutions
Regulatory Solutions captures revenue from our KYC, collateral
management and general due diligence service offerings.
We use our proprietary platform to assist clients with intuitive
business rules and advanced automation to deliver regulatory
services to support their credit/banking and legal processes.
We leverage the public registry data to provide insights and
improved customer experience through a single technology.
We supplement all our technology with deep subject-matter
knowledge offered through our legal professionals located in
three locations (Montreal, QC, Toronto, ON, and Vernon, BC).
During the year, we completed a soft launch of our newest
technology platform, Registry Complete, a unified and
streamlined platform that enables legal organizations to search
and register with the various ministries across Canada in a
secure cloud-based environment. This enhanced service allows
legal organizations to take advantage of expanded Application
Programming Interface (“API”) service offerings, improved tools,
faster turnaround and a greater array of services in the pursuit
of exceptional and expedient due diligence checks and client
service. It also addresses key operational gaps in the modern
legal industry landscape.
Our customers include non-legal customers, such as financial
institutions and auto and equipment finance companies.
Know-Your-Customer
• We support legal and financial institution due diligence
activities for compliance purposes through the KYC
verification (corporate and individual), public records
search and registration services across Canada. Clients can
obtain numerous reports and intelligence to verify and
authenticate customer data to comply with their internal
customer onboarding policies mandated by FINTRAC /Anti-
Money Laundering regulations. Using a web-based tool and
associated APIs that provide real-time access to validate and
verify an individual or business’s existence, our KYC services
aggregates information from multiple trusted sources to
provide reliable and accurate identification of an individual
and/or a business and its principals.
Collateral Management
•
In order to ensure or ‘perfect’ a security interest against
the personal property of a debtor, secured parties need to
register in the statutory registry under the applicable
personal property legislation. Registering provides the
secured party with statutory protection and priority
against other parties with competing security interests
against the applicable movable collateral. Once a secured
party has been paid out, or the security against the debtor
is otherwise terminated, registrations (or liens) are
then discharged and removed from the applicable
security legislation.
26
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020 • We service the adjudication and complete the loan
fulfilment process, which involves detailed searches and
registrations to be completed to perfect the security
interest. We have invested in our technology, processes, and
innovation to ensure we support customer and industry
digitization strategies. This allows us to offer a complete lien
registry solution that reaches further than the traditional
registry submission services and includes PPSA/RDPRM
searches and management, fixture filings, garage/repair
liens, and US Uniform Commercial Code (“UCC”) Filings.
Public Records Search Services/Due Diligence
• Our public records search offerings include corporate
profiles, business name searches, NUANS, PPSA searches,
security searches, real estate searches, and birth, death and
marriage certificate searches.
• Due diligence is an essential component of most merger
and acquisition and financing transactions, where searches
are performed to obtain a complete understanding of all
legal obligations associated with a person or business. In
the course of a due diligence undertaking, law firms, lenders
and/or other professional advisors will often order a series
of public records searches to verify third-party information.
These searches are commonly referred to as security (or
securities) searches.
• We provide security searches that can be conducted
against an individual, business or corporation, property
and assets across the country. Searches will reveal both
present and historical information relating to debts and
liabilities, pending and potential lawsuits, bankruptcy, liens,
judgments, and sales of assets across Canada.
Recovery Solutions
On July 31, 2020, we completed the acquisition of substantially
all of the assets used in the business of Paragon, a technology-
enabled asset recovery business, which now forms the basis
of our Recovery Solutions division. Recovery Solutions offers a
fully managed service across Canada and the US, which aids
in facilitating and co-ordinating asset recovery on behalf of
our clients. Asset recovery involves identification, retrieval, and
disposal of movable assets such as automobiles, boats, aircraft,
and other forms of portable physical assets used as collateral
security for primarily consumer-focused credit transactions.
Our clients enjoy a complete turnkey solution where our team
manages every step in the recovery process, including co-
ordinating bailiffs, investigators and auctions. Our customers
include most of the major banks who are involved in lending in
the movable asset market in Canada.
The addition of Recovery Solutions strengthens our previous
offerings and means that we are now able to offer our clients
a complete solution in the credit life cycle, from origination
to recovery. By connecting the registrations from our existing
Services offerings to our new Recovery Solutions offering,
our clients can leverage our lien registry services platform to
optimize an early stage portfolio assessment to validate the
borrower identity and ensure that their security on the asset in
their portfolio is perfected.
Our process also allows us to increase recoveries through
our superior supply chain management experience and
performance management of bailiffs, investigators and
auctions.
Revenue
We earn revenue through transaction fees for search and
registration services provided through incorporation, KYC,
public records and due diligence, and collateral management
services. All government fees associated with the service are
either embedded in the transaction or management service
fee or charged in addition to the service transaction fee.
Additional revenue is earned in Recovery Solutions through
management fees and commissions earned by the provision of
asset recovery services. Corporate supplies are charged a per-
unit fee in the same manner as a retail transaction product.
Key drivers for our revenue include increased regulatory
and compliance requirements; the growing trend towards
outsourcing business processes and services to realize cost
savings and focus on core business activities; economic
activity which can affect credit lending, mergers, acquisitions,
incorporations and various new business startup activities;
and economic conditions impacting consumer behaviour
which can affect the financing or default of new and used
movable property in our collateral management and asset
recovery business.
Our revenue in Corporate Solutions and Recovery Solutions
is reasonably diversified and has little seasonality; instead, it
fluctuates in line with general economic drivers. In particular,
our collateral management services experiences seasonality
aligned to vehicle and equipment financing cycles, which
are generally more robust in the second and fourth quarters.
Recovery Solutions does not have specific seasonality but is
countercyclical to our other business in that it can perform
better in poor economic conditions. Some smaller categories
of products or services can have some seasonal variation,
increasing slightly during the second and fourth quarters.
27
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020 SERVICES REVENUE
Services Revenue
for the three months ended December 31,
(CAD$ millions)
13.5
10%
89%
15.7
12%
9%
79%
Recovery Solutions
Corporate Solutions
Regulatory Solutions
+16%
Services Revenue
for the year ended December 31,
(CAD$ millions)
51.2
10%
56.4
7%
9%
90%
85%
Recovery Solutions
Corporate Solutions
Regulatory Solutions
+10%
2019
2020
2019
2020
Note: Internal related party and other revenue not displayed in graph. Values may not add due to rounding.
(thousands of CAD dollars)
Regulatory Solutions
Recovery Solutions
Corporate Solutions
Internal related parties and other
Services revenue
Three Months Ended December 31,
2019
2020
Year Ended December 31,
2019
2020
$ 12,396
1,821
1,495
33
$ 15,745
$
$
12,093
–
1,348
78
13,519
$ 47,730
3,721
4,911
40
$ 56,402
$
$
45,985
–
5,023
222
51,230
Revenue for Services was $15.7 million for the fourth quarter, a rise of 16 per cent compared to the same period in 2019. Revenue
was up in the fourth quarter compared to the same period last year due to organic growth in Regulatory and Corporate Solutions
as we onboarded new customers, as well as additional revenue from Recovery Solutions.
For the year ended December 31, 2020, revenue in the Services segment was $56.4 million compared to $51.2 million last year,
representing an increase of 10 per cent. Annual revenue is up over last year due to the organic growth in Regulatory Solutions
and new revenue from Recovery Solutions, which offset a reduction in overall volumes seen earlier in the year following the
implementation of COVID-19 restrictions.
Services Revenue by Type
for the year ended December 31,
(CAD$ millions)
Recovery Solutions
Corporate Solutions
51.0
5.0
42.4
4.8
Services Revenue by Type
for the year ended December 31, 2020
Regulatory Solutions
56.4
3.7
4.9
6.6%
8.7%
Recovery Solutions
Corporate Solutions
Regulatory Solutions
37.6
46.0
47.7
84.7%
2018
2019
2020
Note: Internal related parties and other revenue not displayed in graph.
28
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020
Regulatory Solutions
Revenue in Regulatory Solutions for the fourth quarter was $12.4 million, an increase of 2.5 per cent compared to $12.1 million for
the same period of 2019. Revenue grew slightly in the quarter as a result of organic new customer acquisitions which more than
offset the COVID-19 related transaction decline.
For the year, revenue was $47.7 million compared to $46.0 million for the same period last year, an increase of 3.8 per cent,
rebounding in the last half of the year following the impact to the economy from COVID-19 restrictions.
Recovery Solutions
Revenue in Recovery Solutions in the fourth quarter was $1.8 million. In 2020, revenue for Recovery Solutions was $3.7 million,
following the acquisition of substantially all of the assets of Paragon on July 31 of this year. Historically, the recovery industry trends
lower in the fourth quarter due to temporary pausing of recovery efforts leading up to and during the holidays.
Corporate Solutions
Corporate Solutions revenue for the quarter was $1.5 million, an increase of 10.9 per cent compared to the fourth quarter of 2019.
Revenue rose due to increased corporate filing volumes versus the previous year.
For the year, annual revenue was $4.9 million, flat compared to $5.0 million last year, with the impact from COVID-19 offsetting
new growth.
Our Services revenue for the last eight quarters is shown in the following graph.
Services Revenue by Type
(CAD$ millions)
Recovery Solutions
Corporate Solutions
Regulatory Solutions
13.7
1.3
12.9
1.1
13.4
1.3
11.8
1.3
12.4
1.0
16.4
1.9
1.1
15.7
1.8
1.5
12.4
11.8
12.1
10.6
11.4
13.4
12.4
18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
11.0
1.3
9.7
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Q4 2020
Note: Internal related parties and other revenue not displayed in graph. Values may not add due to rounding.
For 2020, the top 20 Services customers accounted for approximately 76.5 per cent of the revenue, while the top 100 Services
customers comprised nearly 89.5 per cent of revenue. No single customer accounted for more than 25.0 per cent of Services
revenue in the period.
29
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020 SERVICES EXPENSES AND EBITDA
Services EBITDA
for the three months ended December 31,
(CAD$ millions)
4.1
Services EBITDA
for the three months ended December 31,
(CAD$ millions)
12.1
1.9
7.1
+118%
+70%
2019
2020
2019
2020
(thousands of CAD dollars)
Revenue
Total expenses2
EBITDA
Three Months Ended December 31,
20191
2020
Year Ended December 31,
20191
2020
$ 15,745
11,679
4,066
$
$
$
13,519
11,656
1,863
$ 56,402
44,327
$ 12,075
$
$
51,230
44,119
7,111
1 On January 1, 2020, a new methodology was adopted for allocating corporate costs to the operating segments. Management believes this revised methodology more closely
reflects the level of shared services provided to the operating segments in the current year. Certain related party revenues are also impacted by this change. Had the methodology
change not been made, Services EBITDA in the quarter is estimated to have been $3,519 thousand and year-to-date is estimated to have been $10,001 thousand.
2 Total expenses exclude interest, taxes, depreciation and amortization.
EBITDA for Services was $4.1 million for the quarter compared to $1.9 million for the same period last year and was $12.1 million
year-to-date compared to $7.1 million last year. The increase in the quarter and year-to-date was due to the increased revenue
from organic growth and the acquisition of Paragon in July 2020.
For the quarter, Services expenses were $11.7 million, flat compared to the same period in 2019. Expenses were $44.3 million
for the year compared to $44.1 million last year. The increase was related to the acquisition of Paragon in the third quarter of
2020, partially offset by our cost management activities, as well as the methodology change for allocating corporate costs to the
operating segments this year.
3.3 Technology Solutions
Technology Solutions provides the development, delivery and support of registry (and related) technology solutions, generating
revenue through the following:
• sale of software licences related to our technology platforms;
• provision of technology solution definition and implementation services; and
• provision of monthly hosting, support and maintenance services.
We offer RegSys — a complete registry solution that provides a readily transferable technology platform capable of serving a wide
range of registry needs. RegSys is a multi-register platform that delivers the flexibility, scalability and features that enable public
sector organizations to deliver enhanced services to businesses and citizens.
With a full suite of integrated modules that provide core functionality for submission, enforcement and enquiry processing,
RegSys delivers solutions enabling the provision of core services to citizens in a user-friendly, efficient manner across multiple
access points. The RegSys solution has also been used to manage other legal registers such as intellectual property, securities,
licences, charities, Uniform Commercial Code and pension schemes.
30
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020
Competitors in this segment include technology services organizations that provide application development, systems
integration and/or application management services. This includes large multinationals or local niche players, both of which we
can partner with to complement our offering depending on the clients’ needs.
TECHNOLOGY SOLUTIONS REVENUE
Technology Solutions Revenue
for the three months ended December 31,
(CAD$ millions)
Technology Solutions Revenue
for the year ended December 31,
(CAD$ millions)
9.3
32%
68%
6.2
38%
62%
Internal Parties
Third Parties
24.2
53%
20.6
48%
Internal Parties
Third Parties
(34%)
47%
52%
(15%)
2019
2020
2019
2020
(thousands of CAD dollars)
Third parties
Internal related parties
Technology Solutions revenue
Three Months Ended December 31,
20191
2020
Year Ended December 31,
2020
20191
$
$
3,815
2,380
6,195
$
$
6,352
2,981
9,333
$ 10,782
9,769
$ 20,551
$
$
11,416
12,830
24,246
1 On January 1, 2020, a new methodology was adopted for allocating corporate costs to the operating segments. Management believes this revised methodology more closely
reflects the level of shared services provided to the operating segments in the current year. Certain related party revenues are also impacted by this change.
Revenue in Technology Solutions was $6.2 million for the quarter, a decrease of $3.1 million compared to $9.3 million for the
same period in 2019. The decrease in the quarter compared to last year was a result of the large number of milestones that were
achieved and recognized in the prior year period. As shown in the following graph, a more normalized level of revenue was
recorded in the fourth quarter of 2020 and throughout the year.
Internal related party revenue in any quarter is dependent on resources used or consumed internally, particularly in Registry
Operations. Our intent is to continue to service the needs of internal customers as efficiently and effectively as possible, including
the provision of service via related party resources; therefore, this figure may continue to decline over time, particularly as we
pursue additional external revenue.
Technology Solutions Revenue by Type
(CAD$ millions)
Related Party Revenue
Third Party Revenue
10.0
8.0
6.0
4.0
2.0
0.0
4.9
3.5
1.4
4.9
3.0
2.0
5.1
3.4
1.7
9.3
3.0
6.4
4.7
2.4
2.2
4.9
2.5
2.4
4.8
2.4
2.3
6.2
2.4
3.8
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Q4 2020
Note: Values may not add due to rounding.
31
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020
Revenue in our Technology Solutions segment was $20.6 million for the year ended December 31, 2020, compared to
$24.2 million in 2019, a decrease of $3.6 million.
Revenue from external parties was $10.8 million compared to $11.4 million in the same period in 2019. Revenue from external
third parties decreased slightly in 2020 versus 2019, as delivery against milestones on signed contracts was delayed during
the year.
Internal related party revenue year-to-date decreased as we continued to reduce our internal support costs through continuous
improvement in providing application maintenance and operations services.
Technology Solutions Revenue
for the year ended December 31,
(CAD$ millions)
Technology Solutions Revenue
for the year ended December 31,
Internal Related Parties
Third Parties
Internal Related Parties
Third Parties
21.2
14.8
6.4
2018
24.2
12.8
11.4
2019
Note: Values may not add due to rounding.
20.6
9.8
10.8
2020
47.5%
52.5%
TECHNOLOGY SOLUTIONS EXPENSES AND EBITDA
Technology Solutions EBITDA
for the three months ended December 31,
(CAD$ millions)
2.6
2.5
Technology Solutions EBITDA
for the year ended December 31,
(CAD$ millions)
4.4
2.3
(4%)
+91%
2019
2020
2019
2020
(thousands of CAD dollars)
Revenue
Total expenses2
EBITDA
Three Months Ended December 31,
20191
2020
Year Ended December 31,
20191
2020
$
$
6,195
3,710
2,485
$
$
9,333
6,778
2,555
$ 20,551
16,116
4,435
$
$
$
24,246
21,965
2,281
1 On January 1, 2020, a new methodology was adopted for allocating corporate costs to the operating segments. Management believes this revised methodology more closely
reflects the level of shared services provided to the operating segments in the current year. Certain related party revenues are also impacted by this change. Had the methodology
change not been made, Technology Solutions EBITDA in the quarter is estimated to have been $2,420 thousand and year-to-date is estimated to have been $4,509 thousand.
2 Total expenses exclude interest, taxes, depreciation and amortization.
32
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020
EBITDA for Technology Solutions was $2.5 million for the quarter compared to $2.6 million in the fourth quarter of 2019 and was
$4.4 million for the year compared to $2.3 million last year.
For the quarter, Technology Solutions expenses were down $3.0 million compared to the same period in 2019 and were down
$5.8 million for the year compared to 2019. The decreases were due to less expenses and related milestones versus last year,
management cost reduction activities including measures implemented to reduce our operating costs and mitigate the impact of
the pandemic at the start of the second quarter, lower information services costs as well as lower corporate allocated costs due to
the methodology change made in 2020.
3.4 Corporate and other
Corporate and other includes expenses related to our corporate activities and shared services functions. The Company previously
included eliminations of inter-segment revenue and costs in Corporate and other. These are now presented separately in the
Financial Statements and therefore excluded below. Management believes this format provides a more transparent representation
of the Corporate and other activities.
(thousands of CAD dollars)
Third parties
Internal related parties1
Corporate and other revenue
Total expenses1, 2
EBITDA
Three Months Ended December 31,
2019
2020
Year Ended December 31,
2019
2020
$
$
$
2
35
37
(1,496)
(1,459)
$
$
$
6
10
16
(1,266)
(1,250)
$
$
$
8
140
148
(7,659)
(7,511)
$
$
$
22
32
54
(4,510)
(4,456)
1 On January 1, 2020, a new methodology was adopted for allocating corporate costs to the operating segments. Management believes this revised methodology more closely
reflects the level of shared services provided to the operating segments in the current year. Certain related party revenues are also impacted by this change. Had the methodology
change not been made, Corporate and other EBITDA in the quarter is estimated to have been ($1,374) thousand, and year-to-date is estimated to have been ($7,078) thousand.
2 Total expenses exclude interest, taxes, depreciation and amortization.
EBITDA for the quarter decreased slightly compared to the same quarter last year, as a result of small integration costs in the fourth
quarter of 2020. For the year, EBITDA decreased by $3.0 million compared to last year from increased share-based compensation
expense, increased professional and consulting services related to the acquisition of Paragon, the expansion of our Credit Facility
and the exploration of other growth initiatives, and less corporate allocated costs moved to our other segments due to the
change in the corporate allocation methodology. These increases were partially offset by reduced discretionary spending in
response to cost management activities to mitigate the impact of the pandemic.
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 Corporate and Regulatory Solutions services revenue is relatively diversified and has little seasonality; instead, it
fluctuates in line with general economic drivers. That said, our collateral management services do experience some seasonality
aligned to vehicle and equipment financing cycles, which are generally stronger in the second and fourth quarters. Our Recovery
Solutions revenue also does not have specific seasonality but is countercyclical to our other business in that it can perform better
in poor economic conditions. 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.
At this time, the Company is unable to predict how its historical pattern of seasonality may be impacted due to the ongoing
uncertainty of the pandemic.
33
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020
(thousands of CAD dollars)
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
2020
2019
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 income
$ 39,013 $ 37,120
29,707
27,156
$ 30,993
24,592
$ 29,596 $ 37,942 $ 32,175 $ 34,244 $ 28,607
23,838
26,888
24,521
26,308
28,308
11,857
(1,116)
7,413
(397)
6,401
(258)
5,075
(274)
9,634
(288)
5,287
(422)
7,936
(277)
4,769
(259)
–
10,741
(2,870)
$ 7,871 $
–
7,016
(1,980)
5,036
–
6,143
(1,638)
$ 4,505
–
4,801
(1,331)
–
9,346
(1,999)
$ 3,470 $ 7,347 $
–
4,865
(1,607)
3,258 $
–
7,659
(1,875)
5,784 $
–
4,510
(1,499)
3,011
(loss)
(69)
Total comprehensive income
EBITDA margin
Adjusted EBITDA margin
Earnings per share, basic
Earnings per share, diluted
$ 7,802 $
40.2%
41.5%
$
$
0.45 $
0.45 $
331
5,367
29.4%
35.6%
0.29
0.29
(226)
$ 4,279
29.5%
32.9%
0.26
$
0.26
$
666
1
$ 4,136 $ 7,348 $
26.5%
26.7%
$
$
32.5%
33.4%
0.20 $
0.20 $
0.42 $
0.42 $
(133)
3,125 $
(56)
5,728 $
26.7%
26.9%
31.4%
31.8%
0.19 $
0.19 $
0.33 $
0.33 $
(321)
2,690
25.7%
27.3%
0.17
0.17
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.
While the uncertainty of COVID-19 has and will continue
to hamper our ability to predict any long-term implications
on our strategy, the Company is well positioned to manage
through this situation as outlined throughout this MD&A (also
see section 1.3 “Outlook”). As such, we remain committed to
our priorities, principles and long-term strategy.
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 and other growth-related 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
34
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020
from operations to finance acquisition activities. The Company believes that internally generated cash flow, supplemented by
additional borrowing that may be available to us through our existing Credit Facility, will be sufficient to meet cash requirements,
capital expenditures and anticipated dividend payments (refer to Note 18 in the 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 Facility).
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, 2020, the Company held $33.9 million in cash
compared to $23.7 million as at December 31, 2019, an increase of $10.2 million.
The Company expects to be able to meet its cash requirements, including being able to settle current liabilities of $27.3 million
(December 31, 2019 – $24.7 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.
CONSOLIDATED FREE CASH FLOW
(thousands of CAD dollars)
Net cash flow provided by operating activities
Net change in non-cash working capital1
Cash provided by operating activities excluding
working capital
Cash additions to property, plant and
equipment
Cash additions to intangible assets
Consolidated free cash flow
1 Refer to Note 29 of the Financial Statements for reconciliation.
Three Months Ended December 31,
2019
2020
Year Ended December 31,
2019
2020
$ 17,598
(3,962)
$
9,481
397
$ 41,199
(3,521)
$
23,630
9,195
13,636
9,878
37,678
32,825
–
(985)
$ 12,651
(116)
(212)
9,550
$
(63)
(1,380)
$ 36,235
(654)
(2,175)
29,996
$
Consolidated free cash flow for the quarter was $12.5 million compared to $9.6 million for the same quarter in 2019 and was
$36.2 million for the year compared to $30.0 for 2019. The increase was due to higher cash flows provided by our operations,
including changes in working capital.
The following table summarizes our sources and uses of funds for the three months and years ended December 31, 2020,
and 2019:
(thousands of CAD dollars)
Net cash flow provided by operating activities
Net cash flow used in investing activities
Net cash flow provided by (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,
2019
2020
Year Ended December 31,
2019
2020
$ 17,598
(925)
$
9,481
(257)
$ 41,199
(71,035)
$
23,630
(9,311)
(4,894)
(4,762)
40,244
(19,086)
(349)
$ 11,430
22,516
$ 33,946
6
4,468
19,263
23,731
$
$
(193)
$ 10,215
23,731
$ 33,946
(153)
(4,920)
28,651
23,731
$
$
NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES
Net cash flow provided by operating activities was $17.6 million for the quarter compared to $9.5 million for the same period last
year and was $41.2 million for the year compared to $23.6 million in 2019. The increase was due to increased results of operations
and net changes in working capital. Changes in working capital included reduced corporate tax instalments in 2020, the payment
of contingent consideration in 2019 associated with our ERS acquisition and changes in contract liabilities and receivables due to
the timing of sales contracts and higher revenue.
35
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020
NET CASH FLOW USED IN INVESTING ACTIVITIES
Net cash flow used in investing activities for the quarter was $0.9 million compared to $0.3 million in the same period last
year and was $71.0 million for the year compared to $9.3 million last year. The increase in the quarter was due to higher
additions to intangible assets as we continue system development, while the increase in the year was due to the Paragon
acquisition last quarter.
NET CASH FLOW PROVIDED BY (USED) IN FINANCING ACTIVITIES
Net cash flow used in financing activities for the quarter was $4.9 million, relatively flat compared to the same period in 2019.
Annual net cash flow from proceeds was $40.2 million compared to net cash flow used in financing activities was $19.1 million
in 2019. In 2019, most of our cash used in financing activities was for the payment of dividends and repayment of debt, while in
2020, the amounts also included accessing our Credit Facility to fund a portion of the acquisition of Paragon.
6.2 Capital expenditures
Capital expenditures were $1.0 million and $1.7 million for the quarter and the year, respectively, compared to $1.4 million
and $3.9 million for the same periods in 2019, respectively. In 2020, capital expenditures were primarily related to the system
development work across our business segments and the purchase of systems supporting our Corporate services. Following the
completion of a number of corporate projects last year, capital expenditures decreased in the quarter and year ended December
31, 2020. We also reduced spending across our business segments due to the shift to remote working caused by the pandemic, as
well as deferrals of certain planned initiatives.
(thousands of CAD dollars)
Registry Operations
Services
Technology Solutions
Corporate and other
Total capital expenditures
6.3 Debt
Three Months Ended December 31,
2019
2020
Year Ended December 31,
2019
2020
$
$
–
193
792
–
985
$
$
796
164
48
434
1,442
$
$
249
354
828
261
1,692
$
$
1,460
630
651
1,203
3,944
On August 5, 2020, the Company entered into a new Credit Facility. The aggregate amount available under the new Credit Facility
is $150.0 million, up from the previous facility of $80.0 million. The new Credit Facility was used to refinance amounts under
the previous facilities, with the balance available to the Company for future growth opportunities, capital expenditures, and
for general corporate purposes. The new agreement, which added an additional Canadian chartered bank as a lender, was an
extinguishment of debt for accounting purposes. The Company recognized costs of $362 thousand related to the extinguishment
of the previous credit facilities. For further information on our Credit Facility, refer to Note 18 in the 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.
At December 31, 2020, our debt was $76.3 million compared to $18.0 million at December 31, 2019. Non-cash drawings,
consisting of letters of credit and similar, were approximately $0.2 million (2019 – $0.2 million).
The Company was in compliance with all covenants throughout the period. The amount of borrowing costs capitalized during
2020 and 2019 was nil.
36
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020
6.4 Total assets
Total assets were $242.3 million at December 31, 2020, compared to $171.6 million at December 31, 2019.
(thousands of CAD dollars)
Total assets excluding intangibles,
goodwill and cash
Intangibles
Goodwill
Cash
Total assets
(thousands of CAD dollars)
Total assets excluding intangibles,
goodwill and cash
Intangibles
Goodwill
Cash
Total assets
6.5 Working capital
Registry
Operations
$ 25,758
1,288
1,200
–
$ 28,246
Registry
Operations
$ 26,384
3,803
1,200
–
$ 31,387
Services
13,952
63,203
67,372
–
144,527
Services
10,951
31,647
35,715
–
78,313
$
$
$
$
Technology
Solutions
Corporate
and other
As at December 31,
2020
$
5,505
4,332
8,883
–
$ 18,720
Technology
Solutions
$
6,467
4,525
8,614
–
$ 19,606
$
$
$
$
14,466
2,395
–
33,946
50,807
$
$
59,681
71,218
77,455
33,946
242,300
Corporate
and other
As at December 31,
2019
17,321
1,221
–
23,731
42,273
$
$
61,123
41,196
45,529
23,731
171,579
At December 31, 2020, working capital was $28.1 million compared to $17.7 million at December 31, 2019. The increase in
working capital is primarily the result of higher results of operations, reduced corporate tax instalments in 2020, the payment of
contingent consideration in 2019 associated with our ERS acquisition and changes in contract liabilities and receivables due to the
timing of sales contracts and higher revenue.
(thousands of CAD dollars)
Current assets
Current liabilities
Working capital
6.6 Outstanding share data
As at December 31, As at December 31,
2019
2020
$ 55,383
(27,289)
$ 28,094
$ 42,333
(24,655)
$ 17,678
The number of issued and outstanding Class A Shares as at December 31, 2020, was 17.5 million and the number of issued and
outstanding share options as of December 31, 2020, was 1,548,247. These amounts are unchanged as of the filing date.
6.7 Common share dividend
On November 4, 2020, our Board declared a quarterly cash dividend of $0.20 per Class A Share, paid on January 15, 2021, to
shareholders of record as of December 31, 2020.
37
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020
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, 2020:
(thousands of CAD dollars)
2021
2022
2023
2024
2025
Thereafter
Total
Office leases 1
Information technology2 and
other service agreements
Master Service Agreement3
Total
$ 1,177
$
973
$
937
$
956
$
200
1,007
$ 5,250
3,225
500
$ 4,902
2,989
500
$ 4,462
2,800
500
$ 4,237
–
500
$ 1,456
–
500
700
–
4,000
$ 5,007
$
9,014
6,500
$ 20,764
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 services infrastructure.
3 The MSA requires the Company to pay 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 for a 20-year period expiring on May 30, 2033.
7 Business Risks
CREDIT RISK
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, 2020, consist of cash, short-term investments,
trade and other receivables, accounts payable and accrued
liabilities excluding share-based accrued liabilities, and long-
term debt.
The Company does not currently 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, short-term investments, trade and
other receivables, accounts payable and accrued liabilities
excluding share-based 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 Facility, which is managed with prime loans,
short-term bankers’ acceptance, letters of credit or letters 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.
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, 2020, is
$51.0 million (December 31, 2019 — $36.9 million) equal to the
carrying value of the Company’s financial assets, those being
cash at $33.9 million (December 31, 2019 — $23.7 million),
short-term investments at $52 thousand (December 31, 2019
— $0.5 million) and trade and other receivables at $17.0 million
(December 31, 2019 — $12.6 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 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.
38
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020
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 arises 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 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 not significant 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.
39
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020
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, financial performance and financial condition.
40
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020 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, 2020, 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, 2020.
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 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 allocation of the purchase price for the
Paragon acquisition;
• the recoverability of deferred tax assets; and
• the amount and timing of revenue from contracts from
customers recognized over time with milestones.
41
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020 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;
• 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 Company has adopted this amendment
to IFRS 3 from January 1, 2020 and has applied this to the acquisitions completed during 2020.
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.
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 has not been affected
upon transition.
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 IAS
1 – Classification of
Liabilities as Current
or Non-current
The amendments to IAS 1 affect only the presentation of liabilities as current or
non-current in the statement of financial position and not the amount or timing of
recognition of any asset, liability, income or expenses, or the information disclosed
about those items.
Effective Date
January 1, 2023
The amendments clarify that the classification of liabilities as current or non-current
is based on rights that are in existence at the end of the reporting period, specify that
classification is unaffected by expectations about whether an entity will exercise its
right to defer settlement of a liability, explain that rights are in existence if covenants
are complied with at the end of the reporting period, and introduce a definition of
‘settlement’ to make clear that settlement refers to the transfer to the counterparty of
cash, equity instruments, other assets or services.
The amendments are applied retrospectively for annual periods beginning on or after
January 1, 2023, with early application permitted. This amendment is currently being
assessed by the Company to determine the impact.
42
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020 Proposed Standard
Description
Amendments to
IAS 37 – Onerous
Contracts – Cost of
Fulfilling a Contract
The amendments specify that the ‘cost of fulfilling’ a contract comprises the ‘costs that
relate directly to the contract’. Costs that relate directly to a contract consist of both
the incremental costs of fulfilling that contract (examples would be direct labour or
materials) and an allocation of other costs that relate directly to fulfilling contracts (an
example would be the allocation of the depreciation charge for an item of property,
plant and equipment used in fulfilling the contract).
Effective Date
January 1, 2022
Amendments to
IFRS 3 – Reference
to the Conceptual
Framework
The amendments apply to contracts for which the entity has not yet fulfilled all its
obligations at the beginning of the annual reporting period in which the entity first
applies the amendments. Comparatives are not restated. Instead, the entity shall
recognize the cumulative effect of initially applying the amendments as an adjustment
to the opening balance of retained earnings or other component of equity, as
appropriate, at the date of initial application.
The amendments are effective for annual periods beginning on or after January 1, 2022,
with early application permitted. This amendment is currently being assessed by the
Company to determine the impact.
The amendments update IFRS 3 so that it refers to the 2018 Conceptual Framework
instead of the 1989 Framework. They also add to IFRS 3 a requirement that, for
obligations within the scope of IAS 37, an acquirer applies IAS 37 to determine whether
at the acquisition date a present obligation exists as a result of past events. For a levy
that would be within the scope of IFRIC 21 Levies, the acquirer applies IFRIC 21 to
determine whether the obligating event that gives rise to a liability to pay the levy has
occurred by the acquisition date.
Finally, the amendments add an explicit statement that an acquirer does not recognize
contingent assets acquired in a business combination.
The amendments are effective for business combinations for which the date of
acquisition is on or after the beginning of the first annual period beginning on or after
January 1, 2022. Early application is permitted if an entity also applies all other updated
references (published together with the updated Conceptual Framework) at the same
time or earlier.
This change will impact the analysis of business combinations. The amendment is
prospective and the Company does not expect to be affected upon transition.
January 1, 2022
43
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020 8.5 Financial measures and key
performance indicators
reasonable assurance with respect to financial statement
preparation and presentation.
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 Paragon, having been acquired less than 365
days prior to December 31, 2020. See section 8.7 “Disclosure
controls and procedures” for Paragon’s contribution to the
Financial Statements.
During the year, the Company implemented a new financial
reporting system for ISC and its subsidiaries to align the
entire organization on a common system and platform. These
changes were implemented to improve the operational
effectiveness and efficiency of the Company’s financial
reporting. The amendments to accounting processes and
resource modifications have resulted in a material change to
ISC’s internal controls over financial reporting; however, key
business operating systems for the ISC and ESC Corporate
Services Ltd. legal entities were not part of the change.
Other than as described above, no changes in our internal
controls over financial reporting that have occurred during
the period have materially affected or are reasonably likely to
materially affect our internal controls over financial reporting.
It should be noted that all internal control systems, no matter
how well designed, have inherent limitations. Therefore, even
those systems determined to be effective can provide only
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
Paragon, having been acquired less than 365 days prior to
December 31, 2020.
The contribution of Paragon to the Financial Statements for
the year ended December 31, 2020, was approximately 3.0
per cent of revenue and 4.0 per cent of expenses. Paragon
contributed 8.0 per cent of current assets, 36.0 per cent of non-
current assets and 7.0 per cent of 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 financial
performance 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.
44
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020 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.
45
2020 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020 2020 Consolidated Financial Statements
For the Year Ended December 31, 2020
Table of Contents
Management’s Responsibility .............................................................................................................................................................................47
Independent Auditor’s Report ........................................................................................................................................................................... 48
Consolidated Statements of Financial Position .............................................................................................................................................52
Consolidated Statements of Comprehensive Income ................................................................................................................................53
Consolidated Statements of Changes in Equity ........................................................................................................................................... 54
Consolidated Statements of Cash Flows ..........................................................................................................................................................55
Notes to the Consolidated Financial Statements ........................................................................................................................................ 56
1
2
3
4
5
6
7
8
9
10
11
Nature of the Business ................................................................................................................................................................................ 56
Basis of Presentation ................................................................................................................................................................................... 56
Summary of Significant Accounting Policies ..................................................................................................................................... 58
Cash ....................................................................................................................................................................................................................67
Short-Term Investments .............................................................................................................................................................................67
Trade and Other Receivables ....................................................................................................................................................................67
Contract Assets ..............................................................................................................................................................................................67
Seasonality ...................................................................................................................................................................................................... 68
Property, Plant and Equipment ............................................................................................................................................................... 68
Right-of-use Assets .......................................................................................................................................................................................69
Intangible Assets ..........................................................................................................................................................................................70
12 Goodwill ...........................................................................................................................................................................................................71
13 Accounts Payable and Accrued Liabilities............................................................................................................................................72
14 Contract Liabilities ........................................................................................................................................................................................72
15
16
17
Lease Obligations ..........................................................................................................................................................................................72
Tax Provision ...................................................................................................................................................................................................73
Share-Based Compensation Plans ..........................................................................................................................................................75
18 Debt ....................................................................................................................................................................................................................77
19
20
21
22
23
24
25
Provisions .........................................................................................................................................................................................................78
Liabilities Arising from Financing Activities ........................................................................................................................................79
Earnings Per Share ........................................................................................................................................................................................79
Equity and Capital Management ............................................................................................................................................................ 80
Financial Instruments and Related Risk Management ................................................................................................................... 80
Revenue ............................................................................................................................................................................................................83
Related Party Transactions ....................................................................................................................................................................... 84
26 Compensation of Key Management Personnel ................................................................................................................................ 84
27
Segment Information ................................................................................................................................................................................. 84
28 Acquisitions .................................................................................................................................................................................................... 86
29 Net Change in Non-Cash Working Capital ......................................................................................................................................... 88
30 Government Grants ..................................................................................................................................................................................... 88
31 Commitments and Contingencies ......................................................................................................................................................... 89
32
33
Pension Expense ........................................................................................................................................................................................... 89
Subsequent Events ...................................................................................................................................................................................... 89
46
2020 ISC® Annual Report | Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020 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 16, 2021
47
2020 ISC® Annual Report | Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020 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, 2020 and December 31, 2019 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, 2020 and 2019, and its financial performance and its cash flow for the years then ended in
accordance with International Financial Reporting Standards (“IFRS”).
Basis for Opinion
We conducted our audit 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.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
consolidated financial statements for the year ended December 31, 2020. These matters were addressed in the context of
our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
Goodwill— Refer to Notes 3 and 12 to the financial statements
Key Audit Matter Description
The Company’s annual assessment for goodwill impairment involves the comparison of the recoverable amount of each
cash generating unit (“CGU”) to its carrying value. The Company determines the recoverable amount of its CGUs based on a
value in use (“VIU”) analysis under the income approach. The Company used the discounted cash flow method to determine
the recoverable amount of the Services CGU, which required management to make significant estimates and assumptions
related to future revenue forecast, related party costs, direct employee costs, corporate cost allocations, perpetual growth
rates and discount rates. The estimates and assumptions are highly sensitive to changes in customer demand and changes
in the assumptions could have a significant impact on the recoverable amount, the amount of any goodwill impairment
charge, or both. The recoverable amount of the Services CGU exceeded its carrying value as of the measurement date and no
impairment was recognized.
While there are several estimates and assumptions that are required to determine the recoverable amount of the Services
CGU, the estimates and assumptions with the highest degree of subjectivity are future revenue forecast, perpetual growth
rate and the selection of the discount rate. Auditing these estimates and assumptions required a high degree of auditor
judgment and an increased extent of effort, including the involvement of fair value specialists.
How the Key Audit Matter Was Addressed in the Audit
Our audit procedures related to the future revenue forecast, perpetual growth rate and the selection of the discount rate used
to determine the recoverable amount for the Services CGU included the following, among others:
• Evaluated management’s ability to accurately forecast by comparing actual results to management’s historical forecasts.
• Evaluated the reasonableness of management’s future revenue forecast by comparing to (1) historical results, (2) internal
communications to management and the Board of Directors, and (3) forecasted information included in Company press
releases, analyst and industry reports.
48
2020 ISC® Annual Report | Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020 • With the assistance of fair value specialists:
– Evaluated the selection of the perpetual growth rate by comparing management’s selected perpetual growth rate to
forecast inflationary and economic growth applicable to Canada.
– Evaluated the selection of the discount rate by testing the source information underlying the determination of the
discount rates and developing a range of independent discount rate and comparing to the discount rate selected by
management.
Acquisition- Customer Relationship Intangible Asset- Refer to Notes 3 and 28 to the financial statements
Key Audit Matter Description
The Company acquired Paragon Inc. (“Paragon”) and recognized the tangible and intangible assets acquired and the liabilities
assumed based on their estimated fair values, as at the date of acquisition, including a customer relationship intangible
asset. Management estimated the fair value of the customer relationships using the multi-period excess earnings method.
In determining the fair value of customer relationships, management made estimates and assumptions to forecast future
cash flows applicable to the existing customer relationships, customer attrition rates, and the discount rate. Changes in these
assumptions could have a significant impact on the fair value of the customer relationships.
While there are several estimates and assumptions that are required to determine the fair value of Paragon’s customer
relationships, the estimates and assumptions with the highest degree of subjectivity are future revenue forecasts and the
selection of the attrition rates. Auditing these estimates and assumptions required a high degree of auditor judgment and an
increased extent of effort, including the involvement of fair value specialists.
How the Key Audit Matter Was Addressed in the Audit
Our audit procedures related to the future revenue forecasts and the selection of the attrition rate used to determine the fair
value of Paragon’s customer relationships included the following, among others:
• Evaluated the reasonableness of the future revenue forecasts and attrition rates by comparing to (1) historical results, (2)
internal communications to management and the Board of Directors, and (3) forecasted information included in Company
press releases, analyst and industry reports.
• With the assistance of fair value specialists;
– Evaluated the appropriateness of the attrition rates by considering historical customer sales data, benchmarking of
comparable transactions and companies, and qualitative considerations with respect to future customer expectations.
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.
49
2020 ISC® Annual Report | Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020 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 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.
50
2020 ISC® Annual Report | Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020 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
We also provide those charged with governance with a statement that we have complied with relevant ethical
matters that may reasonably be thought to bear on our independence, and where applicable, related
requirements regarding independence, and to communicate with them all relationships and other matters that may
safeguards.
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that
From the matters communicated with those charged with governance, we determine those matters that were of most
were of most significance in the audit of the consolidated financial statements of the current period and
significance in the audit of the consolidated financial statements of the current period and are therefore the key audit
are therefore the key audit matters. We describe these matters in our auditor's report unless law or
matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report
determine that a matter should not be communicated in our report because the adverse consequences
because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of
of doing so would reasonably be expected to outweigh the public interest benefits of such
communication.
such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Brian Ralofsky.
The engagement partner on the audit resulting in this independent auditor’s report is Brian Ralofsky.
Chartered Professional Accountants
Chartered Professional Accountants
Regina, Saskatchewan
Regina, Saskatchewan
March 16, 2021
March 16, 2021
51
2020 ISC® Annual Report | Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020
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 and deposits
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
Long-term debt – current portion
Provisions
Total current liabilities
Non-current liabilities
Lease obligations
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 31 for Commitments and Contingencies
See accompanying Notes
Note
As at December 31,
2020
As at December 31,
2019
4
5
6
7
9
10
11
12
16
13
14
15
16
18
19
15
16
18
17
22
17
$
$
$
33,946
52
17,031
1,053
476
2,825
55,383
2,160
7,580
71,218
77,455
28,504
186,917
242,300
21,944
2,024
1,996
1,179
–
146
27,289
6,856
7,695
76,316
2,096
92,963
19,955
2,376
706
99,011
122,048
242,300
$
$
$
$
$
23,73
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
APPROVED BY THE BOARD OF DIRECTORS ON MARCH 16, 2021:
Joel Teal
Director
52
Tony Guglielmin
Director
2020 ISC® Annual Report | Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020
Consolidated Statements of Comprehensive Income
Note
24
30
9, 10, 11
(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)
Interest income
Interest expense
Net finance (expense)
Income before tax
Income tax expense
Net income
Other comprehensive income (loss)
Items that may be subsequently reclassified to net income
4
16
Unrealized (loss) gain on translation of financial
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 accompanying Notes
21
21
Year Ended December 31,
2020
Year Ended December 31,
2019
$
136,723
$
132,968
40,165
31,271
12,865
7,896
3,004
6,784
2,654
1,337
105,976
30,747
172
(2,217)
(2,045)
28,702
(7,819)
20,883
732
(31)
701
21,584
1.19
1.18
$
$
$
$
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
$
$
$
$
53
2020 ISC® Annual Report | Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020
Consolidated Statements of Changes in Equity
(thousands of CAD dollars)
Note
Balance at January 1, 2019
Net income
Other comprehensive (loss)
Stock option expense
Dividend declared
Balance at December 31, 2019
Balance at January 1, 2020
Net income
Other comprehensive income
Stock option expense
Dividend declared
Balance at December 31, 2020
See accompanying Notes
17
17
Retained
Earnings
$ 86,728
19,400
–
–
(14,000)
$ 92,128
$ 92,128
20,883
–
–
(14,000)
$ 99,011
Accumulated Other
Comprehensive
Income
Share
Capital
$ 19,955
–
–
–
–
$ 19,955
$ 19,955
–
–
–
–
$ 19,955
$
$
$
$
514
–
(509)
–
–
5
5
–
701
–
–
706
Equity
Reserve
1,687
–
–
466
–
2,153
$
$
$
2,153
–
–
223
–
$ 2,376
Total
$ 108,884
19,400
(509)
466
(14,000)
$ 114,241
$ 114,241
20,883
701
223
(14,000)
$ 122,048
54
2020 ISC® Annual Report | Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020
Consolidated Statements of Cash Flows
(thousands of CAD dollars)
Operating
Net income
Add: Charges not affecting cash
Depreciation
Amortization
Foreign exchange loss (gain)
Deferred tax expense recognized in net income
Service concession arrangements
Right-of-use asset modifications loss
Loss on disposal of property, plant and equipment
Net finance expense
Stock option expense
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
Acquisition through business combination
Net cash flow used in investing activities
Financing
Interest paid
Interest paid on lease obligations
Principal repayments on lease obligations
Repayment of long-term debt
Proceeds of long-term debt
Payment of fees on debt extinguishment
Repayment of operating loan
Proceeds of operating loan
Dividend paid
Net cash flow provided by (used in) financing activities
Effects of exchange rate changes on cash held in foreign currencies
Increase (decrease) in cash
Cash, beginning of year
Cash, end of year
See accompanying Notes
9, 10
11
24
17
29
28
15
15
18
18
18
18
18
Year Ended December 31,
2020
Year Ended December 31,
2019
Note
$
20,883
$
19,400
2,888
9,977
325
1,504
(249)
73
9
2,045
223
3,521
41,199
172
2
395
(63)
(1,380)
(70,161)
(71,035)
(1,365)
(425)
(1,920)
(68,000)
126,316
(362)
(9,816)
9,816
(14,000)
40,244
(193)
10,215
23,731
33,946
$
$
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
55
2020 ISC® Annual Report | Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020
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. In addition
to our head office in Regina, the Company has regional service
centres across Saskatchewan and has operations in Toronto,
ON, Etobicoke, 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, 2020, 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, 2020, for issue on March 16, 2021.
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.
Use of estimates and judgments
The preparation of these consolidated financial statements, in
conformity with IFRS, requires management to make estimates
56
2020 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020 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 allocation of the purchase price for the Paragon Inc. (“Paragon”) acquisition (Note 28);
• 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).
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, 2020, or on such date as they became applicable. These changes were made in accordance with the applicable
transitional provisions.
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;
• 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 impacts the analysis of business combinations. The Company has adopted this
amendment to IFRS 3 from January 1, 2020 and has applied this to the acquisitions completed during
2020 (see Note 28).
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.
The change in the definition may impact the quantity and level of detail of disclosures in the
Company’s financial statements. The amendment is prospective, and the Company has not been
affected upon transition.
57
2020 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020 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
that do not extend the productive life of an asset are charged
to operations when incurred. The costs of replacements and
improvements which extend the productive life are capitalized.
The cost of replacing part of an item of property, plant and
equipment is recognized in the carrying amount of the item
if it is probable that the future economic benefits embodied
within the part will flow to the Company and its cost can be
measured reliably. The carrying amount of the replaced part
is derecognized.
Depreciation is recorded on property, plant and equipment
on the straight-line basis, which is the cost of the asset less its
residual value over the estimated productive life of each asset.
The useful life of each asset is as follows:
Leasehold improvements
Office furniture
Office equipment
Hardware
Shorter of lease term or
period of usefulness
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 reliably measure 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 the derecognition of an intangible asset are
measured at the difference between the net disposal proceeds
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2020 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020
and the carrying amount of the asset and are recognized in the
consolidated statements of comprehensive income.
Internal-use software
Business solutions
3-15 years
3-7 years
Contracts
Term of contract
Customer and partner relationships
5-15 years
Brand, non-competes and other
1-15 years
Assets under development
N/A (not ready
for use)
Impairment of tangible and intangible assets
At each statement of financial position date, ISC reviews the
carrying amounts of its tangible and intangible assets to
determine whether there is any indication that those assets
have suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any). Where
it is not possible to estimate the recoverable amount of an
individual asset, ISC estimates the recoverable amount of
the cash-generating unit (“CGU”) to which the asset belongs.
Where a reasonable and consistent basis of allocation can be
identified, corporate assets are also allocated to individual
CGUs; otherwise, they are allocated to the smallest group of
CGUs for which a reasonable and consistent allocation basis
can be identified. Intangible assets not yet available for use are
tested for impairment annually in December and whenever
there is an indication that the asset may be impaired.
The recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using
a discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset
for which the estimates of future cash flows have not been
adjusted. If the 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 the 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
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2020 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020
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 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 IFRS 9 — Financial Instruments, or IAS 37
— Provisions, Contingent Liabilities and Contingent Assets, as
appropriate, with the corresponding gain or loss recognized in
net earnings or loss.
Leases
The Company assesses whether a contract is or contains a
lease at inception of the contract. The Company recognizes
a right-of-use asset and a corresponding lease obligation
for all lease arrangements in which it is the lessee, except for
short-term leases (defined as leases with a lease term of twelve
months or less) and leases of low-value assets (such as tablets
and personal computers, small items of office furniture and
telephones). For these leases, the Company recognizes the
lease payments as an operating expense on a straight-line
basis over the term of the lease unless another systematic basis
is more representative of the time pattern in which economic
benefits from the leased assets are consumed.
The lease obligation 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 uses its
incremental borrowing rate as the discount rate.
Lease payments included in the measurement of the lease
obligation 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;
• 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; and
• payments of penalties for terminating the lease if the lease
term reflects the exercise of an option to terminate the lease.
The lease obligation is presented in the consolidated
statements of financial position with current and long-term
classifications.
The lease obligation is subsequently measured by
increasing the carrying amount to reflect the interest on
the lease obligation (using the effective interest method)
and by reducing the carrying amount to reflect the lease
payments made.
The Company remeasures the lease obligation (and makes
a corresponding adjustment to the related right-of-use
asset) whenever:
• The lease term has changed, or there is a significant event
or change in circumstances resulting in a change in the
assessment of exercise of a purchase option, in which case
the lease obligation is remeasured by discounting the
revised lease payments using a revised discount rate.
• The lease payments change due to changes in an index or
rate or a change in expected payment under a guaranteed
residual value, in which cases the lease obligation is
remeasured by discounting the revised lease payment using
an unchanged discount rate (unless the lease payments
change is due to a change in a floating interest rate, in which
case a revised discount rate is used).
• A lease contract is modified, and the lease modification is
not accounted for as a separate lease, in which case the
lease obligation is remeasured based on the lease term
of the modified lease by discounting the revised lease
payments using a revised discount rate at the effective date
of the modification.
Right-of-use assets comprise the initial measurement of the
corresponding lease obligation, lease payments made at or
before the commencement day, less any lease incentives
received and any initial direct costs. They are subsequently
measured at cost less accumulated depreciation and
impairment losses.
Whenever the Company incurs an obligation for costs to
dismantle and remove a leased asset, restore the site on which
it is located or restore the underlying asset to the condition
required by the terms and conditions of the lease, a provision
is recognized and measured under IAS 37. To the extent that
the costs relate to a right-of-use asset, the costs are included in
the related right-of-use asset, unless those costs are incurred to
produce inventories.
Right-of-use assets are depreciated over the shorter period of
the lease term and the useful life of the right-of-use asset. If a
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2020 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020 lease transfers ownership of the underlying asset or the cost
of the right-of-use asset reflects that the Company expects
to exercise a purchase option, the related right-of-use asset
is depreciated over the useful life of the underlying asset. The
depreciation starts at the commencement date of the lease.
The right-of-use assets are presented as a separate line in the
consolidated statements of financial position.
The Company applies IAS 36 to determine whether a right-
of-use asset is impaired and accounts for any identified
impairment loss as described in the “Property, Plant and
Equipment” policy.
Variable rents that do not depend on an index or rate are not
included in the measurement of the lease obligation and
the right-of-use asset. The related payments are recognized
as an expense in the period in which the event or condition
that triggers those payments occurs and are included in
the line “occupancy costs” in the consolidated statements of
comprehensive income.
As a practical expedient, IFRS 16 Leases permits a lessee not
to separate non-lease components and, instead, account
for any lease and associated non-lease components as a
single arrangement. The Company has not used this practical
expedient. For contracts that contain a lease component and
one or more additional lease or non-lease components, the
Company allocates the consideration in the contract to each
lease component on the basis of the relative stand-alone price
of the lease component and the aggregate stand-alone price
of the non-lease components at amortized cost using the
effective interest method.
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:
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.
The majority of the associated transaction fees are based on
a flat price per transaction or a percentage of the transaction
value (ad valorem), 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.
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 as
revenue as we render services to our customers.
Services revenue
Our Services segment delivers solutions uniting public records
data, customer authentication, corporate services, collateral
management and asset recovery to support registration, due
diligence and lending practices of clients across Canada.
Effective July 1, 2020, we have recategorized our revenue
to classify revenue in three categories, namely Corporate
Solutions, Regulatory Solutions, and Recovery Solutions
following the acquisition of the assets of Paragon Inc., which
closed on July 31, 2020.
Corporate Solutions captures revenue from nationwide search,
business name registration and corporate filing services sold
to legal professionals or the general public directly or indirectly
through our government relationships. It also captures revenue
from our corporate supplies business. Revenue for Corporate
Solutions is recognized at a point in time when services are
rendered, or goods are delivered.
Regulatory Solutions captures revenue from our Know-Your-
Customer, collateral management and general due diligence
service offerings. We use our proprietary platform to assist
clients with intuitive business rules and advanced automation
to deliver regulatory services to support their credit/banking
and legal processes. Revenue for Financial Support Services is
recognized at a point in time when services are rendered.
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2020 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020 Recovery Solutions offers a fully managed service across
Canada and the US, which aids in facilitating and co-ordinating
asset recovery on behalf of our clients. Asset recovery involves
the identification, retrieval, and disposal of movable assets
such as automobiles, boats, aircraft, and other forms of
portable physical assets used as collateral security for primarily
consumer-focused credit transactions. Recovery Solutions
revenue in our services segment includes management
fees and commissions earned by the provision of asset
recovery services. Revenue is earned over time throughout
the management of each asset recovery file and is not
recognized until any variable component can be determined
with sufficient certainty such that a significant reversal in the
amount recognized will not occur.
Much of our Services revenue involves interacting with
government registries to access public records to provide
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) as they are passed through to our customers. 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)
as well as cost of goods sold.
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:
•
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 with a right to
use the 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 with 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.
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
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2020 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020 design, build, finance, operation, and maintenance of public
infrastructure in which the government entity controls:
Financial instruments
Financial assets
• 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.
The Company’s financial assets are classified as either financial
assets at fair value through profit or loss (“FVTPL”), fair value
through other comprehensive income (“FVTOCI”) or amortized
cost. The Company determines the classification of financial
assets at initial recognition.
(i) Financial Assets at FVTPL
Financial assets carried at FVTPL are initially recorded at fair
value and transaction costs are expensed in profit or loss.
Realized and unrealized gains and losses arising from changes
in the fair value of the financial assets held at FVTPL are
included in profit or loss in the period in which they arise. The
Company does not have any assets classified as FVTPL.
Government grants
(ii) Financial Assets at FVTOCI – Equity investments
Government grants are recognized when there is reasonable
assurance that the Company will comply with the conditions
on which they are based and that the grants will be received.
These grants are recognized as a reduction to the associated
expenses in the consolidated statements of comprehensive
income on a systematic basis over the periods in which the
Company recognizes as expenses the related costs for which
the assistance is intended to compensate. Government grants
that become receivable as compensation for expenses or
losses already incurred or for the purpose of giving immediate
financial support to the entity with no future related costs are
recognized in the consolidated statements of comprehensive
income in the period the grant becomes receivable. Any grants
that have been received but not yet eligible for recognition
in the consolidated statements of comprehensive income are
reflected as contract liabilities in the consolidated statements
of financial position.
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 assets carried at FVTOCI are initially recorded at fair
value plus transaction costs with all subsequent changes in
fair value recognized in other comprehensive income (loss).
For investments in equity instruments that are not held for
trading, the Company can make an irrevocable election
(on an instrument-by-instrument basis) at initial recognition
to classify them as FVTOCI. On the disposal of the investment,
the cumulative change in fair value remains in other
comprehensive income (loss) and is not recycled to profit
or loss.
(iii) Financial Assets at amortized cost (“AC”)
Financial assets are classified at amortized cost if the objective
of the business model is to hold the financial asset for the
collection of contractual cash flows, and the assets’ contractual
cash flows are comprised solely of payments of principal and
interest. The Company’s cash, short-term investments (GICs)
and trade and other receivables are recorded at amortized cost
as they meet the required criteria.
Financial liabilities
The Company’s financial liabilities are initially recorded at fair
value, net of transaction costs, and are subsequently measured
at amortized cost, using the effective interest method, with
interest expense recognized on an effective yield basis.
The effective interest method is a method of calculating the
amortized cost of a financial liability and of allocating interest
expenses over the corresponding period. The effective interest
rate is the rate that exactly discounts estimated future cash
payments over the expected life of the financial liability,
or, where appropriate, a shorter period, to the net carrying
amount on initial recognition.
63
2020 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020 The Company’s financial liabilities include accounts payable and accrued liabilities excluding share-based accrued liabilities and
long-term debt which are classified at amortized cost.
Below is a summary showing the classification and measurement bases of our financial instruments.
Financial Instrument
IFRS 9
Classification
Measurement
Assets
Cash
Short-term investments (GICs)
AC
AC
Short-term investments – marketable
FVTOCI
securities
Trade and other receivables
Liabilities
Accounts payable and accrued
liabilities excluding share-based
accrued liabilities
Long-term debt
AC
AC
AC
AC
AC
FVTOCI
AC
Amortized cost using effective interest rate method
Amortized cost using effective interest rate method
Impairment
The Company recognizes lifetime expected credit losses (“ECL”)
for trade and other receivables. The expected credit losses on
these financial assets are estimated based on the Company’s
historical credit loss experience, adjusted for factors that are
specific to the debtors, general economic conditions and
an assessment of both the current as well as the forecast
direction of conditions at the reporting date, including time
value of money where appropriate. The Company’s credit
losses are historically low as most customers with credit
are governments, banking institutions, and legal firms with
strong credit.
For all other financial instruments, the Company recognizes
lifetime ECL when there has been a significant increase in
credit risk since initial recognition. However, if the credit risk
on the financial instrument has not increased significantly
since initial recognition, the Company measures the loss
allowance for that financial instrument at an amount equal
to 12-month ECL.
Lifetime ECL represents the expected credit losses that will
result from all possible default events over the expected life of
a financial instrument. In contrast, 12-month ECL represents
the portion of lifetime ECL that is expected to result from
default events on a financial instrument that are possible
within twelve months after the reporting date.
Borrowing costs
those assets until 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.
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
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
64
2020 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020
ISC and 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 that are contingent
on the Company achieving specified performance criteria. A
performance factor adjustment is made if there is an over-
achievement (or under-achievement) of specified performance
criteria, resulting in additional (or fewer) PSUs being converted.
The Company has recognized an obligation at an estimated
amount based on the arithmetic average of the 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 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 at the end
of the reporting period. Compensation expense is recognized
in proportion to the number of DSUs vested. The DSUs can be
settled in cash or shares 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 number 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
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 individual subsidiaries' financial statements,
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.
65
2020 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020 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.
Effective Date
January 1,
2023
January 1,
2022
January 1,
2022
Proposed Standard Description
Amendments to IAS
1 – Classification of
Liabilities as Current
or Non-current
Amendments to
IAS 37 – Onerous
Contracts – Cost of
Fulfilling a Contract
Amendments to
IFRS 3 – Reference
to the Conceptual
Framework
The amendments to IAS 1 affect only the presentation of liabilities as current or non-current
in the statement of financial position and not the amount or timing of recognition of any
asset, liability, income or expenses, or the information disclosed about those items.
The amendments clarify that the classification of liabilities as current or non-current is based
on rights that are in existence at the end of the reporting period, specify that classification is
unaffected by expectations about whether an entity will exercise its right to defer settlement
of a liability, explain that rights are in existence if covenants are complied with at the end of
the reporting period, and introduce a definition of ‘settlement’ to make clear that settlement
refers to the transfer to the counterparty of cash, equity instruments, other assets or services.
The amendments are applied retrospectively for annual periods beginning on or after
January 1, 2023, with early application permitted. This amendment is currently being
assessed by the Company to determine the impact.
The amendments specify that the ‘cost of fulfilling’ a contract comprises the ‘costs that
relate directly to the contract’. Costs that relate directly to a contract consist of both the
incremental costs of fulfilling that contract (examples would be direct labour or materials)
and an allocation of other costs that relate directly to fulfilling contracts (an example would
be the allocation of the depreciation charge for an item of property, plant and equipment
used in fulfilling the contract).
The amendments apply to contracts for which the entity has not yet fulfilled all its
obligations at the beginning of the annual reporting period in which the entity first applies
the amendments. Comparatives are not restated. Instead, the entity shall recognize the
cumulative effect of initially applying the amendments as an adjustment to the opening
balance of retained earnings or other component of equity, as appropriate, at the date of
initial application.
The amendments are effective for annual periods beginning on or after January 1, 2022, with
early application permitted. This amendment is currently being assessed by the Company to
determine the impact.
The amendments update IFRS 3 so that it refers to the 2018 Conceptual Framework instead
of the 1989 Framework. They also add to IFRS 3 a requirement that, for obligations within the
scope of IAS 37, an acquirer applies IAS 37 to determine whether at the acquisition date a
present obligation exists as a result of past events. For a levy that would be within the scope
of IFRIC 21 Levies, the acquirer applies IFRIC 21 to determine whether the obligating event
that gives rise to a liability to pay the levy has occurred by the acquisition date.
Finally, the amendments add an explicit statement that an acquirer does not recognize
contingent assets acquired in a business combination.
The amendments are effective for business combinations for which the date of acquisition
is on or after the beginning of the first annual period beginning on or after January 1, 2022.
Early application is permitted if an entity also applies all other updated references (published
together with the updated Conceptual Framework) at the same time or earlier.
This change will impact the analysis of business combinations. The amendment is
prospective, and the Company does not expect to be affected upon transition.
66
2020 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020 4 Cash
Cash is amounts held on deposit, including all highly liquid investments readily convertible to a known amount of cash with an
original maturity of three months or less and subject to an insignificant risk of changes in value to be cash equivalents. Interest
income earned on cash amounts in 2020 is $172 thousand (2019 – $283 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,
2020
–
52
52
$
$
December 31,
2019
400
75
475
$
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.
6 Trade and Other Receivables
The components of trade and other receivables are as follows:
(thousands of CAD dollars)
Trade receivables
Consideration due from vendor1
Government grants receivable2
GST/HST/VAT receivables
Other
Total trade and other receivables
1 See Note 28 – included in this amount is $0.2 million of transition related costs.
2 See Note 30.
7 Contract Assets
The components of contract assets are as follows:
(thousands of CAD dollars)
Unbilled revenue
Contract fulfillment costs
Total contract assets
December 31,
2020
$ 14,247
1,919
525
284
56
$ 17,031
December 31,
2019
$ 12,320
–
–
134
194
$ 12,648
$
December 31,
2020
349
704
$ 1,053
$
December 31,
2019
1,420
203
1,623
$
Unbilled revenue represents 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 before 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 year (2019 – nil).
There were no impairment losses recognized on any contract asset during the year (2019 – nil).
67
2020 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020
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 corporate and
regulatory solutions revenue is reasonably diversified and has little seasonality; instead, it fluctuates in line with the general
economic drivers. In particular, our collateral management services experiences seasonality aligned to vehicle and equipment
financing cycles, which are generally more robust in the second and fourth quarters. Our recovery solutions revenue also does not
have specific seasonality but is countercyclical to our other business, in that it can perform better in poor economic conditions.
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.
9 Property, Plant and Equipment
(thousands of CAD dollars)
Cost
Balance at December 31, 2018
Acquired assets
Additions
Disposals
Transfers
Foreign exchange adjustments
Balance at December 31, 2019
Acquired assets1
Additions
Disposals
Transfers
Foreign exchange adjustments
Balance at December 31, 2020
Accumulated depreciation
Balance at December 31, 2018
Depreciation
Impairment2
Disposals
Foreign exchange adjustments
Balance at December 31, 2019
Depreciation
Disposals
Foreign exchange adjustments
Balance at December 31, 2020
Carrying value
At December 31, 2019
At December 31, 2020
1 Acquired assets – see Note 28.
2 Impairment – see Note 19.
Leasehold
Improvements
Office
Furniture
Office
Equipment
Hardware
Assets Under
Development
Total
$ 10,370
–
–
(43)
–
(3)
$ 10,324
–
–
(430)
–
2
$ 9,896
$ 7,548
589
368
(43)
–
$ 8,462
458
(430)
1
$ 8,491
$ 3,282
11
12
(67)
24
(3)
$ 3,259
–
–
(26)
–
3
$ 3,236
$ 2,886
174
–
(63)
(1)
$ 2,996
76
(26)
–
$ 3,046
$ 1,862
$ 1,405
$
$
263
190
$
$
$
$
$
$
$
$
197
–
–
(3)
–
–
194
–
6
(23)
–
–
177
150
22
–
(3)
–
169
17
(23)
–
163
25
14
$ 2,825
12
38
(382)
580
(15)
$ 3,058
3
13
(15)
30
15
$ 3,104
$ 2,295
301
–
(380)
(6)
$ 2,210
363
(15)
9
$ 2,567
$
$
848
537
$
$
$
$
$
$
$
$
–
–
604
–
(604)
–
–
–
44
–
(30)
–
14
–
–
–
–
–
–
–
–
–
–
–
14
$ 16,674
23
654
(495)
–
(21)
$ 16,835
3
63
(494)
–
20
$ 16,427
$ 12,879
1,086
368
(489)
(7)
$ 13,837
914
(494)
10
$ 14,267
$ 2,998
$ 2,160
68
2020 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020
10 Right-of-use Assets
(thousands of CAD dollars)
Cost
Balance at January 1, 2019
Additions and modifications
Disposals
Foreign exchange adjustments
Balance at December 31, 2019
Additions and modifications
Disposals
Foreign exchange adjustments
Balance at December 31, 2020
Accumulated depreciation
Balance at January 1, 2019
Depreciation
Impairment2
Disposals
Foreign exchange adjustments
Balance at December 31, 2019
Depreciation
Disposals
Foreign exchange adjustments
Balance at December 31, 2020
Carrying value
At December 31, 2019
At December 31, 2020
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
$
$
$
$
$
$
$
$
17,708
401
(527)
(78)
17,504
229
(811)
71
16,993
6,150
2,063
173
(527)
(23)
7,836
1,974
(436)
39
9,413
9,668
7,580
69
2020 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020
11 Intangible Assets
Internal Use
Software –
Internal Use
Software –
Internally
Acquired Developed
Business
Business
Solutions –
Acquired
Solutions – Brand, Non-
Competes,
Internally
Developed
Assets
Under
Other Relationships Development
Contracts,
Customer
& Partner
Total
176
–
–
–
(43)
–
–
(257)
–
–
260
–
(2,726)
–
–
2,190
–
–
–
–
(152)
–
2,876
–
(1,409)
(54)
4,051
413
(984)
102
–
$ 4,243 $ 2,279 $ 27,339 $ 1,472 $ 140,495
5,228
1,001
3,289
–
(1,268)
–
–
–
(411)
(54)
$ 2,412 $ 28,286 $ 2,885 $ 147,333
38,120
1,629
(3,722)
–
402
955 $ 183,762
(thousands of CAD dollars)
Cost
Balance at December 31, 2018 $ 25,835 $ 77,137 $
–
Acquired assets
–
Additions
(27)
Disposals
1,307
Transfers
Foreign exchange adjustments
(108)
Balance at December 31, 2019 $ 29,417 $ 76,880 $ 2,038 $ 5,415
Acquired assets1
–
–
–
30
Additions
(116)
–
Disposals
3,143
388
Transfers
Foreign exchange adjustments
176
–
Balance at December 31, 2020 $ 26,951 $ 79,907 $ 2,174 $ 6,009 $ 2,391 $ 65,375 $
Accumulated Depreciation
Balance at December 31, 2018 $ 14,216 $ 76,508 $
Amortization
Disposals
Foreign exchange adjustments
Balance at December 31, 2019 $ 16,603 $ 76,569 $
625
Amortization
(116)
Disposals
Foreign exchange adjustments
–
Balance at December 31, 2020 $ 17,363 $ 77,078 $ 1,267 $ 3,515 $ 1,499 $ 11,822 $
Carrying Value
At December 31, 2019
At December 31, 2020
624 $ 2,074 $
309
–
(49)
884 $ 2,725 $ 1,456 $ 7,900 $
318
–
65
$ 99,791
–
7,710
–
(1,268)
–
(96)
–
$ 106,137
–
9,977
–
(3,712)
–
–
142
– $ 112,544
2,885 $ 41,196
955 $ 71,218
311 $ 1,154 $ 2,690 $
907 $ 2,494 $
37,600
–
(560)
–
49
$ 12,814 $
$ 9,588 $ 2,829 $
–
1,599
–
(3,531)
2
956 $ 20,386 $
892 $ 53,553 $
260
–
(320)
–
39
3,371
(984)
–
3,476
(2,716)
–
2,738
–
(13)
4,465
(560)
17
–
–
–
–
136
1,194 $ 5,175 $
332
(320)
31
318
(257)
–
688
(27)
(10)
286
–
(24)
761
–
29
1 Acquired assets – see Note 28.
70
2020 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020
of 12.3 per cent (2019 – 12.9 per cent) and a perpetual
growth rate of 2.0 per cent (2019 – 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, corporate
cost allocations required to support infrastructure, and
future technological investment in, and related to, this
infrastructure. The estimates and assumptions with the
highest degree of subjectivity are revenue forecasts,
perpetual growth rates and discount rates. 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 2.75 per
cent (2019 – 2.0 per cent) used in the annual test. In 2020,
annual impairment testing for this segment utilized a pre-tax
discount rate of 18.2 per cent (2019 – 15.2 per cent).
Technology Solutions
Key assumptions for this segment, which has operations
both in Ireland and Canada, 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. The estimates and assumptions with the highest
degree of subjectivity are revenue forecasts, perpetual
growth rates and discount rates. 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 (2019 – 2.0 per cent) used in the annual test. In
2020, annual impairment testing for this segment utilized
a pre-tax discount rate of 15.2 per cent (2019 – 15.8 per
cent) in its Canadian-based operations and 13.3 per cent
(2019 – 14.3 per cent) in its Ireland-based operations.
12 Goodwill
The components of goodwill are as follows:
(thousands of CAD dollars)
December 31, December 31,
2019
2020
Balance, beginning of the year
Additions1
Foreign exchange adjustment
Balance, end of year
$ 45,529
31,657
269
$ 77,455
$ 44,310
1,517
(298)
$ 45,529
1 Acquisitions – see Note 28.
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)
Registry Operations
Services
Technology Solutions
Balance, end of year
December 31, December 31,
2019
2020
$ 1,200
67,372
8,883
$ 77,455
$ 1,200
35,715
8,614
$ 45,529
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 2020, 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
determined using the expected cash flow approach.
The Company uses the discounted cash flow method
to determine the recoverable amount, which required
management to make estimates and assumptions related
to revenue forecasts, related party costs, direct employee
costs, corporate cost allocations, perpetual growth rates and
discount rates. The estimates and assumptions are highly
sensitive to changes in customer demand, and changes in
the assumptions could significantly impact the recoverable
amount, the amount of any goodwill impairment charge, or
both. In all cases, the operating and investing cash flows of
the segments utilized the Company’s most recent multi-year
plan, 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, corporate cost allocations required to support
infrastructure and future technological investment in, and
related to, this infrastructure. In 2020, annual impairment
testing for this segment utilized a pre-tax discount rate
71
2020 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020
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
Share-based accrued liabilities
Total accounts payable and accrued liabilities
14 Contract Liabilities
The components of contract liabilities are as follows:
(thousands of CAD dollars)
December 31,
2020
December 31,
2019
$
3,338
8,939
3,664
3,500
2,503
$ 21,944
$
$
733
8,870
3,536
3,500
1,457
18,096
December 31,
2020
December 31,
2019
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
$
326
1,698
$ 2,024
$
$
331
1,105
1,436
(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 and other income related to Technology Solutions contracts, including government assistance, 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 2020 that was included in the contract liability balance at December 31, 2019:
(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,
$
2020
331
924
$
2019
322
1,942
$ 1,255
$
2,264
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,
2019
2020
$ 10,812
106
425
(178)
(2,345)
32
$ 8,852
$ 12,235
24
486
375
(2,253)
(55)
$ 10,812
1 Lease payments net of interest expense represents the principal portion of lease payments reflected on the consolidated statements of cash flows.
72
2020 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020
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. 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,
2019
2020
$
2,342
1,798
1,663
1,659
462
2,289
$ 10,213
(1,361)
$ 8,852
$
2,276
2,374
1,845
1,715
1,710
2,693
$ 12,613
(1,801)
$ 10,812
1,996
6,856
1,845
8,967
$ 8,852
$ 10,812
The Company is subject to federal and provincial income taxes at an estimated combined statutory rate of 27.0 per cent
(2019 — 27.0 per cent).
(thousands of CAD dollars)
Current tax expense
Deferred tax expense
Income tax expense
Year Ended December 31,
2019
2020
$
$
6,315
1,504
7,819
$
$
5,496
1,484
6,980
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 liabilities
Other
Income tax expense
Year Ended December 31,
2019
2020
$ 28,702
27.00%
7,750
–
67
(278)
269
11
$ 7,819
$ 26,380
27.00%
7,122
(20)
279
105
(382)
(124)
6,980
$
73
2020 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020
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
Goodwill
Non-capital losses
Lease obligations
Other
Net deferred tax assets (liabilities)
Net Balance Recognized
in Profit
or Loss Movement
Foreign
$
$
Net Balance
Exchange December 31,
2020
88
– $
(2,000)
(4)
19,985
(14)
(916)
–
–
14
2,341
5
–
1,311
1 $ 20,809
(66) $
535
(1,215)
(916)
(214)
(499)
871
January 1,
2020
154
(2,531)
21,214
–
200
2,835
440
$ 22,312 $ (1,504) $
(thousands of CAD dollars)
Property, plant and equipment
Right-of-use assets
Intangible assets
Non-capital losses
Lease obligations
Other
Net deferred tax assets (liabilities)
$
Net Balance
January 1,
2019
186
(2,998)
23,255
–
3,176
160
$ 23,779
Recognized
in Profit
or Loss
$
$
(32) $
462
(2,058)
200
(336)
280
(1,484) $
Movement
Foreign
Net Balance
Exchange December 31,
2019
154
(2,531)
21,214
200
2,835
440
22,312
– $
5
17
–
(5)
–
17 $
$
Deferred
Tax Asset
38
(1,900)
26,838
–
–
2,230
1,298
$ 28,504
$
Deferred
Tax Asset
97
(2,312)
28,825
200
2,605
440
$ 29,855
Deferred
Tax Liability
50
$
(100)
(6,853)
(916)
–
111
13
(7,695)
$
Deferred
Tax Liability
57
(219)
(7,611)
–
230
–
(7,543)
$
$
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 Systems Inc. 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 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 can control the timing and reversal of the temporary differences, and it is probable that such
differences will not reverse in the foreseeable future.
During 2020, ERS fully utilized its $1.6 million of tax losses, for which a deferred tax asset of $0.2 million had been recognized
in 2019 against taxable income, thus eliminating the deferred income tax asset related thereto.
74
2020 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020
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.
Performance share units
Introduced 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 attaining 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, 2020, are as follows:
Balance at December 31, 2018
PSUs granted November 18, 2019
PSUs credited as a result of cash dividends paid
Balance at December 31, 2019
PSUs granted March 26, 2020
PSUs credited as a result of cash dividends paid
Balance at December 31, 2020
Units
–
32,585.00
415.32
33,000.32
38,701.00
3,545.90
75,247.22
Weighted Average
Award Price
–
$
16.11
15.69
16.10
13.71
16.51
$ 14.89
$
$
The Company has recognized an obligation at an estimated amount based on the arithmetic average of the 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 year ended December 31, 2020, totalled $690 thousand
(2019 — $173 thousand). The total carrying amount of the liability arising from the PSUs as of December 31, 2020, totalled
$863 thousand (December 31, 2019 — $173 thousand). The liability amount is included within other non-current liabilities on
the consolidated statements of financial position.
Share appreciation rights
Introduced 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 cash
payment 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.
75
2020 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020
A summary of the status of the SAR plan and the changes within the year ended December 31, 2020, are as follows:
Balance at December 31, 2018
SARs granted November 18, 2019
Balance at December 31, 2019
SARs granted March 31, 2020
Balance at December 31, 2020
Units
–
243,116.00
243,116.00
291,386.00
534,502.00
Weighted Average
Award Price
–
$
16.11
16.11
13.71
$ 14.80
$
The share-based compensation expense related to the SARs for the year ended December 31, 2020, totalled $1.2 million
(2019 — nil). The total carrying amount of the liability arising from SARs as of December 31, 2020, was $1.2 million
(December 31, 2019 — nil). The liability amount is included within other non-current liabilities on the consolidated
statements of financial position.
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 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 redeem 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, 2020, and 2019 are as follows:
Balance at December 31, 2018
DSUs granted November 14, 2019
DSUs credited as a result of cash dividends paid
Balance at December 31, 2019
DSUs granted June 30, 2020
DSUs credited as a result of cash dividends paid
Balance at December 31, 2020
Units
72,114.15
22,351.00
3,848.00
98,313.15
23,800.00
5,554.00
127,667.15
Weighted Average
Award Price
17.44
$
15.97
16.07
17.05
15.00
16.66
$ 16.65
$
The Company has recognized an obligation 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 obligation is 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 year ended December 31, 2020, totalled $1.0 million
(2019 —$371 thousand). The total carrying amount of the liability arising from the DSUs as of December 31, 2020, totalled
$2.5 million (December 31, 2019 — $1.5 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, 2020, has been calculated using the market value of the Company’s Class A Shares
on the TSX.
76
2020 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020
Stock options
The Company established a stock option plan approved by shareholders in 2014 and subsequently amended and restated at
various points. 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, 2020, and 2019 are
as follows:
Balance at December 31, 2018
Stock options granted during the year
Balance at December 31, 2019
Stock options granted during the year
Balance at December 31, 2020
Options
1,548,247
–
1,548,247
–
1,548,247
Average
Exercise Price
17.27
$
–
17.27
–
$ 17.27
$
At the end of the period, the outstanding share options had a weighted average exercise price of $17.27 (December 31,
2019 — $17.27). The number of options exercisable at the end of the period was 1,233,095 (December 31, 2019 — 961,217)
and had a weighted average exercise price of $17.05 (December 31, 2019 — $16.78) based on a range of exercise prices from
$15.04 to $18.85 (December 31, 2019 — $15.04 to $18.85).
Compensation expense is recognized in proportion to the number of stock options vested. Share-based compensation
expense related to the stock options for the year ended December 31, 2020, totalled $223 thousand (2019 — $466 thousand).
The total carrying amount of the equity settled employee benefit reserve arising from these stock options as of December 31,
2020, totalled $2.3 million (December 31, 2019 — $2.1 million).
18 Debt
On August 5, 2020, the Company entered into a new credit agreement in connection with its secured credit facility (the
"Credit Facility"). The aggregate amount available under the new Credit Facility is $150.0 million, up from the previous
facility of $80.0 million. The new Credit Facility was used to refinance amounts under the previous facilities, with the balance
available to the Company for future growth opportunities, capital expenditures, and for general corporate purposes. The new
agreement, which added an additional Canadian chartered bank as a lender, was an extinguishment of debt for accounting
purposes. The Company recognized costs of $362,491 related to the extinguishment of the previous credit facilities.
Maturing on August 5, 2022, the Credit Facility bears interest at a base rate of prime, bankers’ acceptance, or letter of credit
fee plus a margin varying between 0.75 per cent and 3.25 per cent per annum depending on the type of advance and the
performance on certain covenants.
The Company is also required to pay a commitment fee quarterly in arrears on the unutilized portion of the Credit Facility, at a
rate between 0.35 per cent and 0.65 per cent per annum depending on the performance on certain covenants.
Prior to maturity, there are no mandatory repayments on the Credit Facility, except for repayments associated with asset
sales with proceeds exceeding $5.0 million. However, the Company may make voluntary prepayments provided they are in
minimum aggregate amounts of $1.0 million.
77
2020 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020
Term debt is as follows:
(thousands of CAD dollars)
Current
Operating loan
Revolving term facility
Non-revolving term facility
Total current
Non-current
Operating loan
Revolving term facility
Non-revolving term facility
Total non-current
Total debt
December 31,
2020
December 31,
2019
$
–
–
–
–
$
–
–
2,000
2,000
–
76,316
–
$ 76,316
$ 76,316
–
–
16,000
$ 16,000
$ 18,000
At December 31, 2020, non-cash drawings, consisting of letters of credit and similar, were approximately $0.2 million (2019
— $0.2 million). The total unused and available portion of the Credit Facility at December 31, 2020 was $73.5 million (2019 –
$59.8 million).
The Credit Facility contains financial covenants which require the Company to maintain a ratio of Consolidated Net Funded
Debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) of less than 4:1 and an EBITDA to interest
expense ratio of greater than 3:1.
The Credit Facility also contains other positive covenants, negative covenants, events of default, representations and
warranties customary for credit facilities of this nature. The Company was in compliance with all covenants throughout
the period.
The indebtedness under the Credit Facility is secured by a first ranking security interest over substantially all of the Company’s
assets (subject to the Government of Saskatchewan's security under a debenture), including security interests, pledges and
guarantees granted by certain of its subsidiaries.
The amount of borrowing costs capitalized during 2020 and 2019 was nil.
19 Provisions
The following table presents the movement in provisions during the year:
(thousands of CAD dollars)
Balance, December 31, 2018
Additions
Utilizations and settlements
Balance, December 31, 2019
Additions
Utilizations and settlements
Balance, December 31, 2020
Restructuring
Provision
Other
Provisions
$
$
$
–
643
(321)
322
–
(264)
58
$
$
$
–
160
(14)
146
–
(58)
88
$
$
$
Total
–
803
(335)
468
–
(322)
146
In 2019, the Company decided 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 relate to costs expected to be incurred under site contracts due to the closure decision. Management expects to
settle the provisions within the next twelve months.
In 2019, the Company also recorded impairments of leasehold improvements and right-of-use assets related to these regional
service centres that aggregate to $541 thousand.
78
2020 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020
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
Interest paid on right-of-use assets
Principal repayments on lease obligations
Repayment of long-term debt
Proceeds of long-term debt
Payment of fees on debt extinguishment
Repayment of operating loan
Proceeds of operating loan
Dividends paid
Net cash flow provided by (used in) financing activities
(a)
(b)
(b)
(c)
(c)
(d)
(e)1
(e)1
(f )
1 The operating loan was drawn and paid off in the year, so no balance exists as at December 31, 2020 and 2019.
Year Ended December 31,
2019
2020
$
(1,365)
(425)
(1,920)
(68,000)
126,316
(362)
(9,816)
9,816
(14,000)
$ 40,244
$
$
(833)
(486)
(1,767)
(2,000)
–
–
–
–
(14,000)
(19,086)
As at December 31,
2019
Cash Flows
Non-cash
Changes
Dividends Declared
As at December 31,
2020
Other
$
203
Interest payable
Lease obligation including current
portion and interest paid
10,812
Long-term debt including current portion 18,000
Payment of fees on debt extinguishment
–
3,500
Dividends payable
$ 32,515
$
(1,365)
(a)
$
–
$
1,385
$
223
(2,345) (b)
(c)
58,316
(362) (d)
(f )
(14,000)
40,244
$
$
–
–
–
14,000
14,000
385
–
362
–
2,132
$
8,852
76,316
–
3,500
88,891
$
As at January 1,
2019
Cash Flows
Non-cash Changes
Dividends Declared
As at December 31,
2019
Other
$
Interest payable
Lease obligation including current
portion and interest paid
12,235
Long-term debt including current portion 20,000
3,500
Dividends payable
$ 35,735
–
$
(833) (a)
$
–
$
1,036
$
203
(2,253) (b)
(2,000) (c)
(f )
(14,000)
(19,086)
$
$
–
–
14,000
14,000
830
–
–
1,866
$
$
10,812
18,000
3,500
32,515
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
Year Ended December 31,
2019
2020
$ 20,883
17,500,000
156,857
17,656,857
$
19,400
17,500,000
26,963
17,526,963
$
$
1.19
1.18
$
$
1.11
1.11
79
2020 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020
22 Equity and Capital Management
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 Crown Investments Corporation of Saskatchewan
on behalf of the Government of Saskatchewan, has certain voting rights and obligations including regarding the location
of the head office and the sale of certain 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, 2019
No movement
Balance at December 31, 2019
Balance at January 1, 2020
No movement
Balance at December 31, 2020
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.
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, 2020, consists of long-term debt, share capital, employee benefit reserve,
accumulated other comprehensive income and retained earnings (comprising total shareholders’ equity).
(thousands of CAD dollars)
Long-term debt
Share capital
Accumulated other comprehensive income
Equity settled employee benefit reserve
Retained earnings
Capitalization
$
December 31,
2020
76,316
19,955
706
2,376
99,011
$ 198,364
December 31,
2019
$ 18,000
19,955
5
2,153
92,128
$ 132,241
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.
80
2020 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020
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, 2020, is $51.0 million (December 31, 2019 — $36.9 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 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,
2020
$ 33,946
52
9,808
5,868
1,355
$ 51,029
December 31,
2019
$ 23,731
475
8,743
3,203
702
$ 36,854
Interest rate risk arises 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
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.
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, 2020, and 2019. 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, 2020
December 31, 2019
+ 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
$ 423
$ 423
$ 309
$
$
$
(423)
(423)
(309)
$
$
$
188
188
138
$
$
$
(188)
(188)
(138)
* 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, 2020:
(thousands of CAD dollars)
Long-term debt
Lease obligations
Accounts payable and accrued liabilities
Total liabilities
Carrying
Amount
$ 76,316
8,852
21,944
$ 107,112
Contractual
Cash Flows
$ 80,985
10,213
21,944
$ 113,142
$
0-6
months
1,452
1,175
21,944
$ 24,571
7-12
months
$ 1,476
1,167
–
$ 2,643
12+
months
$ 78,057
7,871
–
$ 85,928
Contractual cash flows for long-term debt and lease obligations includes principal and interest.
81
2020 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020
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
Financial liabilities
Accounts payable and accrued
liabilities excluding share-based
accrued liabilities
Long-term debt
Fair value of financial instruments
Classification
Level
December 31, 2020
December 31, 2019
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
AC
AC
FVTOCI
AC
AC
AC
L2
L2
L1
L2
L2
L2
$ 33,946
$ 33,946
$ 23,731
$ 23,731
–
52
17,031
–
52
17,031
400
75
12,648
400
75
12,648
19,441
76,316
19,441
76,316
16,639
18,000
16,639
18,000
The carrying values of cash, short-term investments, trade and other receivables, accounts payable and accrued liabilities
excluding share-based 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 Facility, which is managed with prime loans,
short-term bankers’ acceptance, letters of credit or letters 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.
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,
2020, on net monetary assets was a decrease (increase) of $631 thousand (December 31, 2019 — $386 thousand) and on
net assets was an increase (decrease) of $1.4 million (December 31, 2019 — $1.2 million). The Company’s exposure to other
currencies is not significant at the end of the period.
82
2020 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020
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 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
Services revenue
Technology Solutions revenue
Total revenue
Year Ended December 31,
2019
2020
$ 48,694
10,055
10,537
249
56,398
10,782
8
$ 136,723
$ 48,901
10,154
10,230
1,114
51,131
11,416
22
$ 132,968
Year Ended December 31,
2019
2020
$ 46,743
10,055
9,664
52,641
8
$ 119,111
$
1,951
873
249
3,757
10,782
$ 17,612
$ 136,723
$ 46,972
10,154
9,373
51,131
22
$ 117,652
$
1,929
857
1,114
–
11,416
$ 15,316
$ 132,968
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 hosting, 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 depends on
milestone achievement. In 2020, the portion of Technology Solutions contract revenue recognized that was dependent on
milestone achievement versus total revenue recognized was 69.0 per cent (2019 – 76.0 per cent). At December 31, 2020,
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 100.0 per cent (2019 – 73.0 per cent) of the total
will be recognized in the next fiscal year, with the remaining 0.0 per cent (2019 – 27.0 per cent) recognized in the following
fiscal year.
83
2020 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020
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, 2020, the development associated with
the change order is 100.0 per cent complete (2019 – 85.0
per cent) and an incremental $0.2 million increase to both
intangible assets and other revenue has been recorded
in 2020 in Registry Operations related to the project. The
intangible asset was put into use in the third quarter of 2020;
as a result, amortization commenced in the third quarter.
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 include 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,
2019
2020
Wages, salaries and short-term benefits $ 3,953
3,191
Share-based compensation
209
Defined contribution plan
$ 7,353
Total compensation
$ 3,832
1,009
202
$ 5,043
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. The values in the table above represents amounts
included in expenses during the year. Portions not paid in
cash have been accrued as liabilities on the statement of
financial position.
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
to assess each segment's performance and 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.
ISC has three reportable segments – Registry Operations,
Services, and Technology Solutions, summarized as follows:
• 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.
Corporate and other includes our corporate activities and
shared services functions. The Registry Operations and
Services segments operate substantially in Canada. The
Technology Solutions segment operates both in Canada
and Ireland.
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.
On January 1, 2020, a new methodology was adopted
for allocating corporate costs to the operating segments.
Management believes this revised methodology more
closely reflects the level of shared services provided to the
operating segments in the current year. Certain related party
84
2020 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020
revenues are also impacted by this change. The impact of the change to results in the current period is estimated in the table
that follows. The effect of the change on future periods is impracticable to estimate.
Revenue and EBIT
For the year ended December 31, 2020
(thousands of CAD dollars)
Revenue from third parties
Plus: inter-segment revenue
Total revenue
Expenses excluding depreciation
and amortization
EBITDA1
Depreciation and amortization
EBIT1
Net finance (expense)
Income tax expense
Net income
Registry
Operations
$ 69,535
33
$ 69,568
Services
$ 56,398
4
$ 56,402
Technology
Solutions
$ 10,782
9,769
$ 20,551
(34,955)
34,613
(2,482)
$ 32,131
(44,327)
12,075
(7,203)
4,872
$
(16,116)
4,435
(1,833)
2,602
$
Additions to non-current
assets, including acquisitions $
1 Had the methodology change noted above not been made, EBITDA and EBIT are estimated as:
EBITDA
EBIT
$ 36,180
$ 33,698
$ 10,001
2,798
$
$ 70,130
249
$
$
$
828
4,509
2,676
Corporate
and other
8
140
148
$
$
Inter-Segment
Eliminations
Consolidated
Total
$ 136,723
–
(9,946)
(9,946) $ 136,723
$
$
(7,659)
(7,511)
(1,347)
(8,858) $
9,946
–
–
– $
$
(93,111)
43,612
(12,865)
30,747
(2,045)
(7,819)
20,883
265
$
– $
71,472
(7,078) $
(8,425) $
– $
– $
43,612
30,747
$
$
$
$
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, including acquisitions
Registry
Operations
70,399
–
70,399
$
$
Services
51,131
99
51,230
$
$
Technology
Solutions
$ 11,416
12,830
$ 24,246
Corporate
and other
22
32
54
$
$
(36,309)
34,090
(2,039)
(541)
31,510
(44,119)
7,111
(5,326)
-
1,785
(21,965)
2,281
(1,729)
–
552
$
$
$
$
(4,510)
(4,456)
(1,765)
–
(6,221)
$
$
$
Inter-Segment
Eliminations
Consolidated
Total
132,968
–
132,968
$
(12,961)
(12,961) $
12,961
–
–
–
–
(93,942)
39,026
(10,859)
(541)
27,626
(1,246)
(6,980)
19,400
$
$
$
1,460
$
7,398
$
651
$
1,203
$
–
$
10,712
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 year ended December 31, 2020, revenue
within Ireland was $10.3 million (2019 — $9.7 million), and the remainder was in Canada. No single customer represented more
than 10.0 per cent of the total consolidated revenue.
85
2020 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020
Assets and liabilities
For the year ended December 31, 2020
(thousands of CAD dollars)
Assets
Total assets, excluding intangibles,
Registry
Operations
Services
Technology
Solutions
Corporate
and other
Inter-Segment
Eliminations
Consolidated
Total
goodwill and cash
Intangibles
Goodwill
Cash
Total Assets
Liabilities
$ 25,758
1,288
1,200
–
$ 28,246
$ 10,092
$ 13,952
63,203
67,372
–
$ 144,527
$ 13,270
$
5,505
4,332
8,883
–
$ 18,720
$ 4,844
$ 14,466
2,395
–
33,946
$ 50,807
$ 92,046
$
$
$
59,681
– $
71,218
–
77,455
–
–
33,946
– $ 242,300
– $ 120,252
For the year ended December 31, 2019
(thousands of CAD dollars)
Assets
Total assets, excluding intangibles,
$
goodwill and cash
Intangibles
Goodwill
Cash
Total Assets
Liabilities
$
$
Registry
Operations
Services
Technology
Solutions
Corporate
and other
Inter-Segment
Eliminations
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
Non-current assets are held in Canada and Ireland. At December 31, 2020, non-current assets held in Ireland were $8.9 million
(December 31, 2019 — $8.8 million), while the remainder were held in Canada.
28 Acquisitions
2020 Acquisition
On July 31, 2020, the Company’s Services segment, through its wholly owned subsidiary, ESC, acquired substantially all of
the assets used in the business of Paragon Inc. for $70.0 million, subject to customary purchase price adjustments, by way of
an asset purchase agreement. The operations are located in Etobicoke, ON, and it is a technology-enabled business whose
primary focus is the facilitation and co-ordination of asset recovery on behalf of many of Canada’s major banks. The addition
of Paragon’s assets is expected to strengthen our current service offering and means that we will be able to offer our clients a
complete solution in the credit life cycle, from origination to recovery.
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
Working capital adjustment
Consideration from operating loan
Consideration from long-term debt
Subtotal
Add (deduct) items not yet paid in cash:
Working capital not yet cash settled at December 31, 20201
Total net cash outflow related to the acquisition
1 See Note 6.
86
Total
$ 10,345
(1,719)
9,816
50,000
$ 68,442
1,719
$ 70,161
2020 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020
The table below presents the final allocation of the net purchase price for accounting purposes for the Paragon acquisition
and subsequent adjustments to finalize the purchase allocation within the measurement period.
(thousands of CAD dollars)
Assets
Trade and other receivables
Prepaid expenses and deposits
Property, plant and equipment
Intangible assets
Liabilities
Accounts payable and accrued liabilities
Net assets acquired
Goodwill arising on acquisition
Total consideration allocated
Net assets acquired
Total goodwill arising on acquisition
Preliminary
Adjustments
Final
$
$
$
$
233
63
3
38,120
38,419
1,887
36,532
68,189
36,532
31,657
$
$
$
$
166
85
–
–
251
$
399
148
3
38,120
$ 38,670
(2)
253
1,885
$ 36,785
253
253
–
68,442
36,785
$ 31,657
Goodwill arising on the acquisition relates to an increased market presence and competency, related market growth, and the
opportunities to strengthen and complement offerings with greater breadth and depth to both existing and acquired clients.
All of the goodwill recognized is expected to be deductible for income tax purposes.
The intangible assets above consist of existing customer relationships of $37.6 million, technology of $0.3 million and brand
of $0.2 million.
Trade and other receivables acquired in this transaction with a fair value of $0.4 million are estimated to be fully collectible.
Professional fees associated with the cost of the acquisition expensed during the year were $2.0 million and have been
recorded in professional and consulting services expense on the consolidated statements of comprehensive income.
The revenue and net loss of the acquiree since the acquisition date included in the consolidated statements of
comprehensive income for 2020 were $3.8 million and $0.1 million, respectively.
The consolidated revenue and comprehensive income for the Company and the acquiree combined for 2020, as though the
acquisition date for the business combination occurred during the year had been as of January 1, 2020, would have been
$143.7 million, and $18.3 million, respectively.
2019 acquisition
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.
Management has determined that the assets and processes acquired through the acquisition comprised a business and
therefore has accounted for the transaction as a business combination using acquisition accounting as per IFRS 3 – Business
Combinations.
Net cash outflow related to the acquisition
(thousands of CAD dollars)
Consideration paid in cash
Working capital adjustment
Consideration from operating loan
Consideration from long-term debt
Subtotal
Add (deduct) items not yet paid in cash:
Working capital not yet cash settled at December 31, 2020
Total net cash outflow related to the acquisition
Total
6,768
–
–
–
6,768
–
6,768
$
$
$
87
2020 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020
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
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
Final
23
5,228
5,251
6,768
5,251
1,517
$
$
$
Year Ended December 31,
2019
2020
$
$
(2,162)
(556)
663
1,834
512
–
1,601
1,629
3,521
$
$
(3,657)
(32)
(321)
867
(1,039)
(2,171)
641
(3,483)
(9,195)
Income taxes paid, net of refunds received, for the year ended December 31, 2020, totalled $4.7 million (2019 — $9.0 million).
30 Government Grants
In 2020, a government grant of $0.1 million (2019 – nil) was received by the Company to finance a project designed to
provide simplified and unified access to business registry data on business ownership and control structures system to aid
certain users in the fight against financial and economic crime. To be eligible for this funding, at the end of the project,
the Company is required to submit a final technical report and a final financial report detailing the eligible costs for
reimbursement. Of the amount initially received, $0.1 million (2019 – nil) was recognized as a reduction to wages and salaries
expense in the year. The remaining contract liabilities will be transferred against project costs to be incurred in 2021.
In April 2020, the Government of Canada announced the Canada Emergency Wage Subsidy (“CEWS”) to help employers keep
and/or retain Canadian-based employees on payrolls in response to challenges posed by the COVID-19 pandemic. For the
year ended December 31, 2020, the Company recognized approximately $0.5 million as a wage subsidy under this program
(2019 – nil) and recorded it as a reduction to wages and salary expense.
88
2020 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020
31 Commitments and Contingencies
As of December 31, 2020, the Company has commitments over the next five years as follows:
(thousands of CAD dollars)
2021
2022
2023
2024
2025
Thereafter
Total commitments
$
IT and Other
Service
Agreements1
3,225
2,989
2,800
–
–
–
9,014
$
Master Service
Agreement
500
$
500
500
500
500
4,000
6,500
$
Non-Lease
Component of
Office Leases
1,177
$
973
937
956
200
1,007
5,250
$
$
Total
4,902
4,462
4,237
1,456
700
5,007
$ 20,764
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 services 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.
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, 2020, the liability was nil (December 31, 2019 — 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, 2020, the aggregate amount outstanding
of the surety bond total was nil (December 31, 2019 — nil).
32 Pension Expense
The total pension costs under the Company’s defined contribution plans for the year were $1.8 million (2019 — $1.8 million).
33 Subsequent Events
On March 16, 2021, the Board declared a quarterly cash dividend of $0.20 per Class A Share, payable on or before April 15,
2021, to shareholders of record as of March 31, 2021.
89
2020 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2020
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 D. 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
Laurel Garven
President and Chief Executive Officer
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.
90 2020 ISC® Annual Report
Corporate Information
Head Office
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, 2020.
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, 2020.
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
Ownership
As at March 16, 2021, 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) CIC, which holds 5,425,000 Class A Shares representing
31.0 per cent of the issued and outstanding Class A Shares;
(b) QV Investors Inc., which holds 2,313,716 Class A Shares
representing 13.2 per cent of the issued and outstanding
Class A Shares1; and
(c) CI Investments Inc., which holds 1,939,970 Class A Shares
representing approximately 11.0 per cent of the issued and
outstanding Class A Shares2.
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.
Issued and outstanding – Nil as at December 31, 2020.
Investor Contact Information
Preferred Shares are issuable at any time and may include
voting rights.
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
1 Based upon a Form 62-103F3 (Required Disclosure by an Eligible Institutional Investor) filed on SEDAR on February 2, 2021, the last publicly available information disclosing
the share ownership in the Company by QV Investors Inc.
2 Based upon a Form 62-103F3 (Required Disclosure by an Eligible Institutional Investor) filed on SEDAR on November 10, 2020, the last publicly available information disclosing
the share ownership in the Company by CI Investments Inc.
2020 ISC® Annual Report
91
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
2020
Type
Quarterly
2019
Quarterly
2018
Quarterly
2017
Quarterly
2016
Quarterly
2015
Quarterly
2014
Quarterly
2013
Quarterly
Ex-Dividend Date
Dec 30, 2020
Sep 29, 2020
Jun 29, 2020
Mar 30, 2020
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 28, 2016
Sep 28, 2016
Jun 28, 2016
Mar 29, 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, 2020
Sep 30, 2020
Jun 30, 2020
Mar 31, 2020
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, 2021
Oct 15, 2020
Jul 15, 2020
Apr 15, 2020
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
$0.20
$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.
92
2020 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, 2020, 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. 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, 2020, and ISC’s
audited Consolidated Financial Statements and Notes and Management’s Discussion and Analysis for the
fourth quarter and year ended December 31, 2020, 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