Information Services
Annual Report 2021

Plain-text annual report

Annual Report 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. Highlights Revenue Net Income EBITDA1 2021 Results 2020 Results Revenue Distribution by Segment for the year ended December 31, $169.4 M $136.7 M $32.1 M $20.8 M* $60.5 M $43.4 M* 2021 5% 8% 51% 44% 51% 41% Free Cash Flow1 $44.8 M $36.2 M Earnings per share (diluted) $1.78 $1.18 *as restated • Ratified new six-year collective agreement with the membership of SGEU Local 2214 with respect to in-scope employees of ISC, ending September 30, 2025. 5% • Filed a preliminary short form base shelf prospectus with the securities regulatory authorities in each province and territory of Canada, other than Quebec. The filing allows ISC to make offerings of common shares, preferred shares, debt securities, subscription receipts, units, warrants or any combination thereof of up to $200 million during the 25 months ending June 4, 2023. 51% 44% • Entered into an amended and extended credit facility agreement relating to the existing credit facility. The aggregate amount under the credit facility is $150 million. The term was extended to September 17, 2026. In addition, the amended agreement simplified the pricing structure. Registry Operations Services Technology Solutions 2020 8% 51% 200 41% 150 100 • Increased the expected annual dividend on Class A Limited Voting Shares from $0.80 to $0.92. Registry Operations Services Technology Solutions 2 2021 ISC® Annual Report 50 0 200 150 100 50 0 80 70 60 50 40 30 20 10 0 EBITDA Adjusted EBITDA 80 70 60 50 40 30 20 10 0 EBITDA Adjusted EBITDA 5% 5% 51% 51% 44% 44% Our Business 8% 8% 51% We operate three segments defined by their primary type of service offerings. 41% 41% 51% Registry Operations Delivery of registry services on behalf of governments and private sector organizations. Services Delivery of products and services that utilize public records and data to provide value to customers in the legal and financial sectors. 80 Technology Solutions 70 Development, delivery and support of registry (and related) technology solutions. 80 70 1 2 3 200 200 150 150 100 100 50 0 Consolidated Revenue for the year ended December 31, 50 (CAD millions) 0 60 50 40 30 20 10 0 60 50 40 30 Consolidated EBITDA1 and Adjusted EBITDA1 and Related Margins1 for the year ended December 31, 20 10 (CAD millions) 0 EBITDA EBITDA Adjusted EBITDA Adjusted EBITDA 36.0% 31.7% 29.3% 30.1% 40.0% 35.7% . 0 3 3 1 . 7 6 3 1 . 4 9 6 1 . 0 9 3 . 0 0 4 . 4 3 4 . 2 9 4 . 5 0 6 . 8 7 6 2019 2020 2021 2019 2020 2021 * 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. Contents 2 4 5 7 9 About Us Letter from the Chair Letter from the President and CEO Corporate Social Responsibility Management’s Discussion and Analysis 54 2021 Consolidated Financial Statements 100 Board of Directors and ISC Leadership 101 Corporate Information 3 2021 ISC® Annual ReportLetter from the Chair Joel Teal Chair, Board of Directors The last year was another successful one for ISC and I am as confident as I ever have been that our business foundation is strong, our people are talented and dedicated, and we will continue to deliver exceptional results. As Board Chair, I have always considered it important to have an eye on the future and ensuring that ISC is prepared. However, I also believe it is as important to deliberate on the past and ensure that the foundation we have built remains intact as we continue to build. As I’ve reflected on 2021, it was a year of exceptional financial performance in the face of continued uncertainty. Looking back even further, “exceptional” or “great” financial performance has been a consistent theme since ISC became a publicly traded company in July 2013. There are many factors that have contributed to our success but, in particular, I would like to recognize in my letter to you this year the contribution of Jeff Stusek, now former President and CEO of ISC. As you know, in the fourth quarter of 2021, we announced that Jeff Stusek had decided to step down from his role as President and CEO. Throughout his tenure, Jeff was a determined, committed and guiding force in achieving all that we have, especially since we went public in 2013. His calm and determined manner has been synonymous with his leadership and he has led the Company through a time of transformational change and helped create a highly successful, well- positioned and diversified business. 4 Now as I think to the future, we are well positioned because of the strength of the leadership team Jeff assembled. As the Board contemplated who should be appointed as President and CEO, our succession plan came into focus. Shawn Peters is a well- rounded and experienced executive with strong strategic acumen who has proven to be an exceptional leader since joining ISC in April 2012. The Board and I are confident that, under his leadership and through his deep familiarity with the Company, ISC will continue to grow in a strategic manner and deliver long-term value to shareholders. In addition to our excellent financial performance and Shawn’s appointment we also achieved a number of other milestones including the announcement of an increase to our expected annual dividend of the Class A Limited Voting Share, from $0.80 to $0.92. The decision to increase the dividend reflects the strength of the Company’s current business and affirms the Board’s commitment to continue to reward shareholders as ISC grows. Looking forward to our annual general meeting, all of our current Board members who are not appointed by the Government of Saskatchewan have agreed to stand for election again and we intend to keep the number of Board members to 10. All our Board members are very experienced business leaders and I look forward to working with them again in 2022. 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. With Shawn now at the helm of ISC, we are at the start of a new era for the Company. However, the cornerstone of what ISC is about – “being in it for the long term” – remains. This means that our focus on long-term, rather than short-term, success is a guiding principle. This will ensure that ISC will continue to thrive and with even greater success. The Board and I are excited to be working with Shawn and know that he will lead ISC to even greater heights. The last year was another successful one for ISC and I am as confident as I ever have been that our business foundation is strong, our people are talented and dedicated, and we will continue to deliver exceptional results. Yours sincerely, Joel Teal Chair, Board of Directors 2021 ISC® Annual ReportLetter from the President and CEO Shawn B. Peters President and CEO Looking ahead, ISC will stay focused on delivering excellence within our existing businesses, by providing outstanding customer service to our clients and by taking care of our people. As our Chair noted in his letter, 2021 was indeed a remarkable year for ISC. Not only did we continue to grow our Services business in the face of a global pandemic, but we also delivered outstanding results in our Saskatchewan-based registries. Much of this success was fuelled by robust economic activity in the markets in which we operate and contributions from our organic growth strategies, especially in Services. the commencement of potential new opportunities. As a result, we saw weaker results in Technology Solutions in 2021 compared to prior years. Despite this, we’re confident about the potential of the business and are investing to help drive new opportunities, including with jurisdictions that are able to re-focus on moving their various technology-related projects forward, post-COVID. In Registry Operations, the year was driven by a strong Saskatchewan real estate sector, resulting in increased transaction levels over the prior year, accompanied by higher average land values transacted through the Saskatchewan Land Registry and record high- value transactions. During the year, we also saw increases in the Saskatchewan Corporate and Personal Property Registries, again underscored by higher transaction volumes. Services revenue was also up, a combination of favourable economic conditions and continued organic growth across our product lines. In addition, we successfully transitioned many of our existing customers from our legacy platform to our new Registry Complete platform, giving them access to a more comprehensive suite of services. Technology Solutions continues to be impacted by COVID-19, which slowed our progress on active projects and In addition to our financial success, we also executed on a number of key initiatives to support the business and our continued growth. We completed our integration of Paragon, acquired in August 2020, and are actively optimizing the technology for an even more efficient operation and enhanced client experience. For a second year, we very successfully continued our work-from-home program, combined with providing in-person customer support where required, to ensure the health and safety of our staff and customers, without sacrificing our service levels. As part of our ongoing support of our Saskatchewan employees, in January we ratified a new six-year collective agreement with the membership of SGEU Local 2214 with respect to in-scope employees of ISC. We reinforced our capital allocation strategy with the filing of a preliminary short form base shelf prospectus, which allows ISC to make offerings of debt and equity instruments of up to $200 million. We entered into an amended and extended credit facility agreement for $150 million, and as our Chair also mentioned in his letter, we increased our annual dividend in recognition of the ongoing strength of the business, and our confidence in our forward strategy. Overall, it has been an extremely successful year for ISC with increases in revenue, net income, EBITDA and free cash flow. The performance of our overall business in uncertain economic environments, our ability to adapt to and take advantage of changing consumer behaviours (including those during COVID-19), and our relentless pursuit of organic growth, where available to us, were on full display in 2021, and are evident in our Management’s Discussion & Analysis and our Financial Statements, which follow. My appointment as President and CEO on February 1, 2022, marks a new era for me and for ISC. I thoroughly enjoyed the past 10 years as ISC’s Chief Financial Officer and I’m excited to bring my energy and enthusiasm for our business to my new role. I wish to thank our Chair and the Board for their confidence in me. I would also like to thank Jeff Stusek for his support over the years and for facilitating such a smooth transition. 5 2021 ISC® Annual ReportLetter from the President and CEO As we start this journey together, I would like to take the opportunity to acknowledge all of our employees for their commitment and dedication to ISC. Together, we have accomplished a lot over the past few years and have grown into a unique company that combines the strength of our Saskatchewan business with opportunities across Canada and around the world. ISC is certainly a different company than when I joined 10 years ago. Looking ahead, ISC will stay focused on delivering excellence within our existing businesses, by providing outstanding customer service to our clients and by taking care of our people. I’m excited about the opportunities ahead and I see continued strength across our business. I’m looking forward to building upon that strength with further customer acquisitions and expanded products and services, while putting our balance sheet to work and executing on our acquisition strategy. Yours sincerely, Shawn B. Peters, CPA, CA, ICD.D President and CEO 6 2021 ISC® Annual ReportCorporate Social Responsibility ISC is proud to support programs, causes and initiatives that make a difference in people’s lives and have an impact on the communities we serve. Once again, ISC and our employees demonstrated that we are a socially responsible corporate neighbour. In 2021, we invested over $145,000 in support of non-profit organizations, community events and cultural programs. Our partnerships and sponsorships Habitat for Humanity Saskatchewan In 2021, ISC entered into a three-year partnership with Habitat for Humanity Saskatchewan. Through this partnership, ISC will help fund the construction of two Habitat homes in Regina, and one Habitat home in Saskatoon, to help families build a place they can call home. Nature Conservancy of Canada – Summer Internship Sponsor ISC once again partnered with Nature Conservancy of Canada (NCC) to support its Saskatchewan Legacy Stewardship Project, helping NCC to achieve its science and stewardship goals. Our sponsorship provides funding for an intern position as well as a donation of Geomatics Information System (GIS) data. This year, the ISC-funded GIS summer intern developed a paperless mobile survey data collection tool for NCC. Saskatchewan Games Council – Provincial Partner ISC is proud to partner with the Saskatchewan Games Council, supporting the Saskatchewan Winter Games. More than 2,000 athletes, coaches and officials will participate in this event, with the goal of moving on to even higher levels of sport, including the Olympic Games, Paralympic Games and North American Indigenous Games. Jim Pattison Children’s Hospital – Radiothon This year, ISC was a Power-Hour sponsor for the Jim Pattison Children’s Hospital radiothon and matched all donations made during that hour. This gave ISC the unique opportunity to showcase our community spirit while helping to provide hope and healing to Saskatchewan kids and families. Albert Community School In 2021, ISC continued its sponsorship of Albert Community School in Regina. Funding provides supplies for the school’s nutrition program, which feeds over 200 students daily and 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. 7 2021 ISC® Annual ReportOur Dedicated Spirit of Giving United Way In 2021, ISC continued its tradition of supporting United Way through our workplace fundraising campaign. While pandemic restrictions remained in place, ISC employees came together online and delivered another impressive campaign. Through personal giving and participating in online events, employees raised $17,303, which was matched and topped up by ISC for a total donation of $40,000. Environmental, Social and Governance (ESG) We are committed to following sustainable and responsible business practices, including those relating to ESG matters, to strengthen workplace culture, expand opportunities, reduce risks and enhance ISC’s corporate reputation. ISC takes pride in giving back to the communities in which we operate and having robust corporate governance practices. We passionately support programs, causes and initiatives that make a difference to the people and places we serve. ISC is also aware of the increased interest by a wide range of stakeholders in ESG. These three factors are important in investor and shareholder confidence, in customers’ decision making, to employees who value working with organizations that support these goals, and to the communities in which the Company operates. Century Family Farm Awards As the safekeeper of original land title documentation, ISC annually celebrates Saskatchewan’s agricultural history with the Century Family Farm Awards program. The award recognizes family-owned farms that have operated in the province for 100 years or more. In 2021, the program received nearly 200 applications. Due to pandemic restrictions, each recipient received their award by mail again this year, including a copy of the original land title issued to their ancestor who homesteaded the land. 8 2021 ISC® Annual Report Community Food Banks This year, ISC chose to honour the communities we serve by making donations to local food banks during the holiday season: • Food Banks of Saskatchewan • Food Banks of BC – Vernon, BC • Daily Bread Food Bank – Toronto, ON • Moisson Montreal – Montreal, QC • Crosscare – Dublin, Ireland Life, Culture and Growth ISC is a proud supporter of events and activities that enhance culture, economic growth and life events. Events and organizations supported by ISC in 2021 included: • Heritage Festival of Saskatoon • Saskatchewan Science Centre • Canadian Mental Health Association • Dress for Success • Women Entrepreneurs of Saskatchewan • Women of the Dawn Counselling Centre • YouthBiz Student Awards • Saskatchewan Prairie Conservation Action Plan Speaker Series • Hill Business Students’ Society In Honour of the National Day for Truth and Reconciliation The Government of Canada has designated September 30 as the National Day for Truth and Reconciliation. This day answers one of the 94 calls to action of The Truth and Reconciliation Commission, commemorating the history of residential schools and the ongoing intergenerational impacts they continue to have on Indigenous communities in Canada. In recognition of this National Day for Truth and Reconciliation, ISC was proud to support and make a donation to these deserving organizations: • North Okanagan Friendship Center Society • Rainbow Youth Centre • Gord Downie & Chanie Wenjack Fund • Native Friendship Centre of Montreal Management’s Discussion & Analysis For the Fourth Quarter and Year Ended December 31, 2021 Contents 1 2 3 4 5 6 7 8 Overview ............................................................................................................................................... 11 Consolidated Financial Analysis ........................................................................................................... 16 Business Segment Analysis ...................................................................................................................21 Summary of Consolidated Quarterly Results .........................................................................................41 Business Strategy ................................................................................................................................. 42 Financial and Capital Management....................................................................................................... 43 Business Risks ......................................................................................................................................46 Accounting Policies, Financial Measures and Control ...........................................................................49 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, 2021, and 2020. Additional information, including our Annual Information Form for the year ended December 31, 2021, 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, 2021, 2020, and 2019, 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” for discussion of why we use these measures and their most closely related IFRS measures within the Financial Statements. Refer to section 2 “Consolidated Financial Analysis” for a reconciliation of EBITDA and adjusted EBITDA to net income and section 6.1 “Cash flow” for a reconciliation of free cash flow. 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 15, 2022. 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. 9 For the Fourth Quarter and Year Ended December 31, 2021 Management’s Discussion and Analysis | 2021 ISC® Annual Report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, 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, 2021, 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 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 10 2021 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 20211 Overview ISC delivered strong results throughout 2021, fuelled by robust economic activity in the markets in which we operate and contributions from our organic growth strategies, especially in Services. This has resulted in increased profitability across our Registry Operations and Services segments. In Registry Operations, the fourth quarter and full-year performance have been driven by a strong Saskatchewan real estate sector, resulting in increased transaction levels, accompanied by higher average land values in the Land Registry and record high-value transactions. During the year, we also saw increases in the Corporate and Personal Property Registries, again underscored by higher transaction volumes. Our Services segment similarly experienced increased revenues in the fourth quarter and during the year. This was due to a combination of favourable economic conditions and continued organic growth across our product lines, and the transition of many of our existing customers from our legacy platform to our new Registry Complete platform, giving them access to a more comprehensive suite of services. In 2021, we had a full year of stable Recovery Solutions results compared to only five months1 in the prior year. Recovery Solutions revenue has been impacted by multiple factors present in the current Canadian COVID-19 impacted economy, including the lack of availability of new vehicles inflating prices in the used vehicle market, government support programs that existed throughout the year, low interest rates and hesitation by lenders to implement asset recovery processes due to current COVID-19 circumstances. Our Technology Solutions segment continued to be the most affected by COVID-19, which impacted our progress on active projects and the commencement of potential new opportunities. As a result, Technology Solutions saw weaker results in 2021 compared to prior years. Overall, it has been an extremely successful year for ISC with increases in revenue, net income, EBITDA, and free cash flow. The stability of our overall business in uncertain economic environments, our ability to adapt to and take advantage of changing consumer behaviours (including those during COVID-19) and our relentless pursuit of organic growth, where available to us, were on full display in 2021, and are evident in the pages that follow. 1 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. See Note 25 in the Financial Statements. 1.1 Consolidated highlights 2021 CONSOLIDATED RESULTS Revenue $169.4M +24% vs 2020 Net income $32.1M +54% vs 2020 EBITDA1 Adjusted EBITDA1 Free cash flow1 $60.5M +40% vs 2020 $67.8M +38% vs 2020 $44.8M +24% vs 2020 Earnings per share, diluted $1.78 +51% vs 2020 Dividends Paid $14.0M 1 EBITDA, adjusted EBITDA and free cash flow are not recognized as measures under IFRS and do not have a standardized meaning prescribed by IFRS and, therefore, they may not be comparable to similar measures reported by other companies; refer to section 8.8 “Non-IFRS financial measures”. Refer to section 2 “Consolidated Financial Analysis” for a reconciliation of EBITDA and adjusted EBITDA to net income. Refer to section 6.1 “Cash flow” for a reconciliation of free cash flow. 11 For the Fourth Quarter and Year Ended December 31, 2021 Management’s Discussion and Analysis | 2021 ISC® Annual ReportSELECT FINANCIAL INFORMATION The select annual financial information set out for the years ended December 31, 2021, 2020, and 2019, 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) 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 2021 $ 169,379 32,078 $ 60,532 67,815 35.7% 40.0% $ 44,800 0.83 $ 1.83 1.78 2020 (restated)2 Year Ended December 31, 2019 $ 136,723 20,825 $ 43,392 49,210 31.7% 36.0% $ 36,235 0.80 $ 1.19 1.18 $ 132,968 19,400 $ 39,026 40,028 29.3% 30.1% $ 29,996 0.80 $ 1.11 1.11 2021 2020 (restated)2 As at December 31, 2019 $ 232,498 $ 57,888 $ 241,377 $ 92,963 $ 171,579 $ 32,683 1 EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin and free cash flow are not recognized as measures under IFRS and do not have a standardized meaning prescribed by IFRS and, therefore, they may not be comparable to similar measures reported by other companies; refer to section 8.8 “Non-IFRS financial measures”. Refer to section 2 “Consolidated Financial Analysis” for a reconciliation of EBITDA and adjusted EBITDA to net income. Refer to section 6.1 “Cash flow” for a reconciliation of free cash flow. 2 During the year, the Company revised its accounting policy related to the configuration and customization costs incurred in implementing Software-as-a-service (“SaaS”) arrangements in response to the International Financial Reporting Interpretations Committee agenda decision released in April 2021. This accounting policy change resulted in the expense of formerly capitalized financial system implementation costs incurred in 2018 through 2021. This change resulted in a retroactive adjustment to expense these costs effective January 1, 2020. This change did not result in a change in basic or diluted earnings per share for the current or prior year. ISC has generated very strong results over the past three years across all metrics. Our overall results for 2021 are up well over the previous year despite the global pandemic that dominated much of 2020 and 2021. • Revenue rose by 24 per cent to $169.4 million in 2021 from $136.7 million in 2020, driven by economic strength in the Canadian markets positively impacting both Registry Operations and Services, our continued focus on organic growth in Services, and a full year of the Recovery Solutions business acquired in July 2020. • Registry Operations continued its strong performance across all registries in 2021, most notably in the Land Registry, where revenue was up 30 per cent over 2020. • Services also grew its revenue in 2021 compared to 2020 through strong new customer acquisitions, the addition of new services and technologies for all customers, and the addition of our Recovery Solutions services in the third quarter of 2020. • These results demonstrate the strength of our business, with consolidated EBITDA up 40 per cent. • Free cash flow increased to record levels at $44.8 million in 2021, up 24 per cent over 2020. 12 2021 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2021 Consolidated Revenue for the year ended December 31, (CAD millions) Consolidated EBITDA and Consolidated Adjusted EBITDA for the year ended December 31, (CAD millions) EBITDA Adjusted EBITDA 40.0% 35.7% 36.0% 31.7% . 4 3 4 . 2 9 4 . 5 0 6 . 8 7 6 29.3% 30.1% 0 0 0 9 4 3 . . 2019 2020 2021 . 0 3 3 1 2019 . 7 6 3 1 2020 . 4 9 6 1 2021 Consolidated Free Cash Flow for the year ended December 31, (CAD millions) . 0 0 3 2019 . 2 6 3 2020 . 8 4 4 2021 FOURTH QUARTER CONSOLIDATED HIGHLIGHTS • Revenue was $44.2 million for the quarter, an increase of 13 per cent compared to the fourth quarter of 2020. The increase was due to strong activity in the Saskatchewan real estate sector, which drove increased revenue in the Saskatchewan Land Registry coupled with continued organic growth in our Services segment through integrated technology-driven product offerings. • Net income was $10.3 million or $0.59 per basic share and $0.57 per diluted share compared to $7.9 million or $0.45 per basic and diluted share in the fourth quarter of 2020. The increase is due to the increased revenue in Registry Operations and Services, lower professional and consulting expenses in 2021 and a reduction in share-based compensation expense in the quarter. • EBITDA was $17.6 million compared to $15.7 million for the same quarter in 2020. This increase was largely driven by the same reasons as net income: increased revenue, lower professional and consulting expenses and a reduction in share-based compensation during the quarter. Consolidated EBITDA margin was 39.8 per cent for the quarter compared to 40.2 per cent in 2020 resulting from lower EBITDA in Technology Solutions largely due to COVID-19 impacts, and in Services, the transition of customers to the Registry Complete platform, which provides additional services, and hence changes our revenue recognition by accounting on a gross instead of net basis. Adjusted EBITDA was $17.2 million for the quarter compared to $17.0 million in the same quarter in 2020. The increase is due to the strong EBITDA, however, during the quarter, our total share-based compensation expense reduced, which caused adjusted EBITDA to be marginally lower than EBITDA. Adjusted EBITDA margin was 38.9 per cent compared to 43.6 per cent in 2020. • Free cash flow for the quarter was $13.7 million, an increase of 9 per cent compared to the fourth quarter of 2020 due to the strong free cash flow nature of the higher results of operations. • On October 13, 2021, the Board concurrently announced that Jeff Stusek had decided to step down from his role as President & Chief Executive Officer of the Company at 13 For the Fourth Quarter and Year Ended December 31, 2021 Management’s Discussion and Analysis | 2021 ISC® Annual Reportthe end of January 2022 and the appointment of Shawn Peters as President & Chief Executive Officer of ISC, effective February 1, 2022. • On November 3, 2021, our Board declared a quarterly cash dividend of $0.23 per Class A Limited Voting Share (“Class A Share”), paid on January 15, 2022, to shareholders of record as of December 31, 2021. • On December 16, 2021, the Company announced the appointment of Robert (Bob) Antochow as the Company’s Chief Financial Officer, effective February 1, 2022. • On December 22, 2021, the Company made a voluntary prepayment of $15.0 million against its long-term debt reducing its debt to $41.0 million. YEAR-END CONSOLIDATED HIGHLIGHTS • Revenue was $169.4 million for the full year, an increase of 24 per cent compared to 2020. Much like reported for the fourth quarter, the increase was due to higher revenue in Registry Operations driven by robust activity in the Saskatchewan real estate sector, increases in personal property security registrations and new business entity registrations. This was accompanied by continued organic growth in our Services segment through new customer acquisition and the use of technology, including Registry Complete, offering an integrated suite of services to our clients and a full year of operations from our new Recovery Solutions division compared to five months in the prior year. • Net income was $32.1 million or $1.83 per basic share and $1.78 per diluted share compared to $20.8 million or $1.19 per basic share and $1.18 per diluted share in 2020. The increase was the result of increased revenue in Registry Operations and Services, lower professional and consulting expenses, offset by increases in share-based compensation due to strong performance of the Company’s share price during the year, and increased expenses in both cost of goods sold and financial services due to revenue growth. • EBITDA was $60.5 million in 2021 compared to $43.4 million for the 12 months ended December 31, 2020, again due to increased revenue in Registry Operations and Services, lower professional and consulting expenses, offset by increases in share-based compensation, and increased costs in both cost of goods sold and financial services due to revenue growth. Consolidated EBITDA margin was 35.7 per cent compared to 31.7 per cent in 2020. • Adjusted EBITDA was $67.8 million compared to $49.2 million in 2020. The increase is due to strong EBITDA and the removal through adjustments of year-to-date share- based compensation and acquisition and integration costs. Adjusted EBITDA margin was 40.0 per cent compared to 36.0 per cent in 2020. • Free cash flow for the year ended December 31, 2021, was $44.8 million, an increase of $8.6 million compared to $36.2 million in 2020 due to higher results of operations and strong cash flow conversion of the business. • On September 20, 2021, ISC announced an extension to its existing credit agreement with a new maturity date of September 17, 2026. In addition, the amended agreement simplifies the pricing structure and offers better terms. The aggregate amount available under the Credit Facility remains $150.0 million. During the year, ISC made voluntary prepayments of $35.0 million against its long-term debt reducing its debt to $41.0 million. • On September 21, 2021, our Board announced that it had approved an increase in the expected annual dividend on its Class A Shares from $0.80 to $0.92, or $0.20 to $0.23 per quarter. 1.2 Subsequent events • On February 15, 2022, the Company announced that its Services segment, through its wholly-owned subsidiary ESC, acquired all of the shares of a group of companies operating as UPLevel. The purchase consideration is $9.0 million, subject to working capital and other post-closing adjustments set out in the share purchase agreement. • On March 15, 2022, our Board declared a quarterly cash dividend of $0.23 per Class A Share, payable on or before April 15, 2022, to shareholders of record as of March 31, 2022. 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 and the expected impact of COVID-19. Refer to “Caution Regarding Forward-Looking Information”. The Company expects to see continued strength in 2022 across its two largest operating segments, Registry Operations and Services. Both have benefitted from strong economic conditions in 2021, including an overall positive impact on transaction and seasonality trends during the pandemic. While the pandemic has disrupted various sectors of the Saskatchewan economy, Registry Operations has experienced exceptional results in 2021, mainly due to the robust real estate sector in Saskatchewan. While we do not expect the strong economic activity experienced in 2021 will continue indefinitely, we believe 2022 will still exceed pre-pandemic 14 2021 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2021levels. Saskatchewan’s economy and registry transactions are expected to begin to return to more normalized levels midway through 2022 and finish the year just below 2021 record levels. Consequently, we expect that Registry Operations will continue to be a robust contributor to our results in 2022, due largely to the strong cash flow this business generates on a consistent basis. Additional investments in 2022 related to people and technology will be made within this segment to ensure continued high levels of service as well as secure and efficient systems. We expect Services to continue to deliver organic growth in 2022, driven by continuous technology advancements driving operational efficiency and new product innovation. We are deliberate in growing our business with existing customers and the acquisition and onboarding of new customers, particularly with our new cloud-based Registry Complete software. A focus on investments in people and technology to advance our growth will be important. This will allow us to expand our offering to existing customers and facilitate the acquisition of new customers throughout the year. In Technology Solutions, we expect to see continued progress and completion of solution delivery projects where COVID-19 and other related delays have resulted in certain milestones being deferred to 2022. Governments are expected to continue directing their efforts to managing COVID-19, but we are seeing the re-commencement of early-stage procurement activity, which could translate into additional projects commencing later in 2022. An investment in our sales and technology development teams will be necessary to support these activities, as well as provide support across the organization on our technology initiatives. We have also begun the search to find an Irish-based leader for our Dublin subsidiary to support and drive their growth. As economic trends potentially revert to pre-COVID-19 levels, we expect our results to mildly follow suit. Over the past two years, Registry Operations has delivered exceptionally strong EBITDA, which is above historical levels. This strong EBITDA has been propelled by a combination of a robust Saskatchewan real estate market driving higher average transaction values, increased ‘high value transactions’ and slightly higher transaction volumes in the Land Registry. While we expect continued strength in Registry Operations’ EBITDA margin, we anticipate it to trend closer to pre-pandemic levels as depicted in section 3.1. Based on the previous details, in 2022 we expect revenue to be between $168.0 million and $173.0 million, net income to be between $23.0 million and $27.0 million, and EBITDA1 to be between $48.0 million and $53.0 million. Our results from the last seven quarters have demonstrated the resilience of our business to economic adversity as well as its ability to benefit from a strong economy, and we expect that to continue. The Company’s diversified range of services, pursuit of growth opportunities, and strong core offerings have positioned us well for continued success in the years to come. In keeping with our strategy, the Company will also actively explore appropriate acquisition targets in 2022 that complement or add value to our existing lines of business or provide new key service offerings that will also drive value. 1 EBITDA is not recognized as a measure under IFRS and does not have a standardized meaning prescribed by IFRS and, therefore, it 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 historical EBITDA to net income. 15 For the Fourth Quarter and Year Ended December 31, 2021 Management’s Discussion and Analysis | 2021 ISC® Annual Report2 Consolidated Financial Analysis Consolidated revenue was up 13 per cent and 24 per cent for the three months and year ended December 31, 2021, compared to the same periods in 2020. Similarly, net income was up 29 per cent and 54 per cent compared to the same periods in 2020, primarily due to increased revenue in Registry Operations and Services. 2.1 Consolidated statements of comprehensive income (thousands of CAD) 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 income (expense) Interest income Interest expense Net finance (expense) Income before tax Income tax expense Net income Other comprehensive (loss) income Un realized (loss) gain on translation of financial Three Months Ended December 31, 2020 (restated) 1,2 2021 Year Ended December 31, 2020 (restated) 1,2 2021 $ 21,076 20,549 2,613 – 44,238 $ 19,452 15,744 3,815 2 39,013 $ 85,567 75,165 8,644 3 169,379 $ 69,535 56,398 10,782 8 136,723 9,600 12,331 3,153 2,111 946 692 559 383 29,775 14,463 42 (524) (482) 13,981 (3,695) 10,286 10,680 7,799 3,767 2,117 880 785 779 279 27,086 11,927 (192) (924) (1,116) 10,811 (2,888) 7,923 48,757 40,359 13,778 7,992 3,430 3,872 3,044 1,393 122,625 46,754 140 (2,813) (2,673) 44,081 (12,003) 32,078 41,708 31,271 12,724 7,896 3,004 5,461 2,654 1,337 106,055 30,668 172 (2,217) (2,045) 28,623 (7,798) 20,825 statements of foreign operations (269) (69) (1,048) 732 Ch ange in fair value of marketable securities, net of tax Other comprehensive (loss) income for the period Total comprehensive income 7 (262) $ 10,024 – (69) 7,854 $ (13) (1,061) $ 31,017 (31) 701 $ 21,526 1 During the year, the Company changed the presentation of board compensation costs, including certain share-based compensation expenses related to the deferred share units on the consolidated statements of comprehensive income to reflect them in wages and salaries expense instead of professional and consulting services. With this change, all share-based compensation, including deferred share units, performance share units, share appreciation rights and stock options, is reflected in wages and salaries on the consolidated statements of comprehensive income. Management believes the revised presentation provides more relevant information to users. Refer to Note 2 in the Financial Statements for information on reclassifications. 2 During the year, the Company revised its accounting policy related to the configuration and customization costs incurred in implementing SaaS arrangements in response to the International Financial Reporting Interpretations Committee agenda decision released in April 2021. This accounting policy change resulted in the expense of formerly capitalized financial system implementation costs incurred in 2018 through 2021. This change resulted in a retroactive adjustment to expense these costs effective January 1, 2020. This change did not result in a change in basic or diluted earnings per share for the current or prior year. 16 2021 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2021 2.2 Consolidated revenue Consolidated Revenue for the three months ended December 31, (CAD millions) 44.2 39.0 Consolidated Revenue for the year ended December 31, (CAD millions) 169.4 136.7 +13% +24% 2020 2021 2020 2021 (thousands of CAD) Registry Operations Services Technology Solutions Corporate and other Total revenue Three Months Ended December 31, 2020 2021 Year Ended December 31, 2020 2021 $ 21,076 20,549 2,613 – $ 44,238 $ $ 19,452 15,744 3,815 2 39,013 $ 85,567 75,165 8,644 3 $ 169,379 $ 69,535 56,398 10,782 8 $ 136,723 Total revenue for the quarter increased by $5.2 million compared to the fourth quarter of 2020 as a result of: • • increased revenue of $1.6 million in Registry Operations related to the Land Registry driven by continued strong activity in the Saskatchewan real estate sector; and increased revenue of $4.8 million in Services, resulting from continued organic growth in Services and economic strength in our markets. As well, a portion of this increase results from the transition of customers to the Registry Complete platform, which provides additional services and hence changes our revenue recognition by accounting on a gross instead of net basis. This results in an increase in revenue and a corresponding increase in cost of goods sold with no change in net income or EBITDA. While this accounts for a portion of revenue growth, overall Services results are strong, as evidenced by a 44 per cent increase in EBITDA over the prior year. Total revenue for the year increased by $32.7 million or 24 per cent compared to the prior year as a result of: • • increased revenue of $16.0 million in Registry Operations, $14.4 million of which relates to the Land Registry. Additionally, both the Corporate and Personal Property Registries have demonstrated growth over 2020; and increased revenue of $18.8 million in Services, resulting from continued organic growth in Regulatory Solutions as well as an increase of $5.8 million in Recovery Solutions revenue resulting from a full 12 months of revenue in 2021 compared to five months in the prior year. A portion of the increase in Regulatory Solutions results from the transition of customers to the Registry Complete platform, which provides additional services and hence changes our revenue recognition by accounting on a gross instead of net basis. This results in an increase in revenue and a corresponding increase in cost of goods sold with no change in net income or EBITDA. While this accounts for a portion of revenue growth, Services saw strong growth in 2021, as evidenced by a 44 per cent increase in EBITDA over the prior year. These increases for the quarter and year were partially offset by reduced revenue in Technology Solutions from delays in solution implementation projects. 17 For the Fourth Quarter and Year Ended December 31, 2021 Management’s Discussion and Analysis | 2021 ISC® Annual Report 2.3 Consolidated expenses Consolidated Expenses for the three months ended December 31, (CAD millions) Consolidated Expenses for the year ended December 31, (CAD millions) 27.1 18% 29% 14% 29.8 16% 41% 11% 39% 32% 2020 2021 Other Costs of Goods Sold Depreciation and Amortization Employee Expenses 106.1 19% 29% 12% 40% 122.6 16% 33% 11% 40% 2020 2021 Other Costs of Goods Sold Depreciation and Amortization Employee Expenses (thousands of CAD) 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, 2020 (restated)1,2 2021 Year Ended December 31, 2020 (restated)1,2 2021 $ 9,600 12,331 3,153 2,111 946 692 559 383 $ 29,775 $ 10,680 7,799 3,767 2,117 880 785 779 279 27,086 $ $ 48,757 40,359 13,778 7,992 3,430 3,872 3,044 1,393 $ 122,625 $ 41,708 31,271 12,724 7,896 3,004 5,461 2,654 1,337 $ 106,055 1 During the year, the Company changed the presentation of board compensation costs, including certain share-based compensation expenses related to the deferred share units on the consolidated statements of comprehensive income to reflect them in wages and salaries expense instead of professional and consulting services. With this change, all share-based compensation, including deferred share units, performance share units, share appreciation rights and stock options, is reflected in wages and salaries on the consolidated statements of comprehensive income. Management believes the revised presentation provides more relevant information to users. Refer to Note 2 in the Financial Statements for information on reclassifications. 2 During the year, the Company revised its accounting policy related to the configuration and customization costs incurred in implementing SaaS arrangements in response to the IFRIC agenda decision released in April 2021. This accounting policy change resulted in the expense of formerly capitalized financial system implementation costs incurred in 2019 through 2021. This change resulted in a retroactive adjustment to expense these costs effective January 1, 2020. This change did not result in a change in basic or diluted earnings per share for the current or prior year. Consolidated expenses were $29.8 million for the fourth quarter, an increase of $2.7 million compared to the same quarter in 2020 and were $122.6 million for the year compared to $106.1 million in 2020. The increase in expenses during the quarter relates to increases in cost of goods sold of $4.5 million, driven by increased Services revenue during the quarter. This was offset by lower professional and consulting services than in the same period in 2020, which included expenses related to the acquisition of Paragon Inc. (“Paragon”). There was also a reduction in share-based compensation linked to the Company’s share price during the quarter which resulted in a decrease to salaries and wages expense. While there was a reduction in the share price during the quarter, the price has increased by 27 per cent year-over-year. The year-over-year rise in expenses compared to the prior year was due to increased: • wages and salaries related to additional staff in Recovery Solutions after the acquisition of Paragon in the third quarter of 2020, additional amounts under our share-based compensation plans as a result of the strong performance of the Company’s share price, and normal merit-based increases and performance compensation across our business; • cost of goods sold associated with higher revenue in Services; and • depreciation and amortization in Recovery Solutions after the acquisition of Paragon in the third quarter of 2020. The increases were partially offset by the reduction in professional and consulting services due to costs in the prior year related to the Paragon acquisition not being present in the current year. 18 2021 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2021 2.4 Consolidated net income Consolidated Net Income for the three months ended December 31, (CAD millions) 10.3 7.9 Consolidated Net Income for the year ended December 31, (CAD millions) 32.1 20.8 +30% +54% 2020 2021 2020 2021 Net income for the quarter was $10.3 million or $0.59 per basic share and $0.57 per diluted share, an increase compared to $7.9 million or $0.45 per basic and diluted share in the fourth quarter of 2020. For the year, net income was $32.1 million or $1.83 per basic share and $1.78 per diluted share compared to net income of $20.8 million or $1.19 per basic share and $1.18 per diluted share in 2020. As noted earlier, the increase in net income for the quarter and year-over-year is a result of higher revenue from Registry Operations and Services and the reduction in professional and consulting services. This was partially offset by lower revenue in Technology Solutions and year-over-year higher expenses associated with share-based compensation plans related to the strong performance of the Company’s share price this year. 2.5 Consolidated EBITDA and adjusted EBITDA Consolidated EBITDA and Adjusted EBITDA for the three months ended December 31, (CAD millions) Consolidated EBITDA and Adjusted EBITDA for the year ended December 31, (CAD millions) 17.2 17.6 17.0 15.7 EBITDA Adjustments +1% 1.3 2020 2021 (0.4) 67.8 60.5 49.2 43.4 5.8 2020 7.3 2021 EBITDA Adjustments +38% 19 For the Fourth Quarter and Year Ended December 31, 2021 Management’s Discussion and Analysis | 2021 ISC® Annual Report(thousands of CAD) Net income Depreciation and amortization Net finance expense Income tax expense EBITDA Adjustments Share-based compensation expense Stock option expense Acquisition and integration costs (Gain) loss on disposal of property, plant and equipment assets Adjusted EBITDA EBITDA margin (% of revenue) Adjusted EBITDA margin (% of revenue) Three Months Ended December 31, 2020 (restated)1 2021 Year Ended December 31, 2020 (restated)1 2021 $ 10,286 3,153 482 3,695 17,616 $ (553) 13 150 $ 7,923 3,767 1,116 2,888 $ 15,694 1,054 38 207 $ 32,078 13,778 2,673 12,003 $ 60,532 5,972 88 1,225 $ 20,825 12,724 2,045 7,798 43,392 $ 2,969 222 2,618 (1) $ 17,225 39.8% 38.9% 9 $ 17,002 40.2% 43.6% (2) $ 67,815 35.7% 40.0% 9 $ 49,210 31.7% 36.0% 1 During the year, the Company changed its accounting policy with respect to customization and configuration of SaaS arrangements. See section 1.1 “Consolidated highlights” – footnote 2 for further details. Due to our strong earning profile and margins, revenue increases translate well into strong EBITDA and adjusted EBITDA. For the fourth quarter of 2021, EBITDA was $17.6 million compared to $15.7 million for the same quarter in 2020, up 12 per cent as a result of economic strength in the markets in which we operate, organic new customer growth, and prudently managing costs throughout the year. Similarly, adjusted EBITDA was $17.2 million for the quarter compared to $17.0 million in 2020, largely due to revenue growth this year marginally offset by a reduction in share-based compensation in the quarter. For the year, EBITDA was $60.5 million compared to $43.4 million in 2020, an increase of 40 per cent, as a result of strong operational performance and growth consistent with that outlined above. Adjusted EBITDA was $67.8 million for the year compared to $49.2 million in 2020, up 38 per cent, and driven by the same strong performance. Adjustments include share-based compensation expense, which for the full year increased significantly from a 27 per cent increase in the share price during the year, and acquisition and integration costs, which were lower in 2021 as a result of less merger and acquisitions activity. 2.6 Consolidated finance costs Net finance expense was $0.5 million for the quarter, down from the $1.1 million in the prior year due to long-term debt repayments made on our Credit Facility during 2021, resulting in less debt outstanding in the quarter when compared to the fourth quarter of 2020. For the year, net finance expense was $2.7 million in 2021 compared to $2.0 million in 2020 due to increased interest expenses from our Credit Facility. A larger outstanding balance on the Credit Facility was held for the majority of 2021 compared to about five months in 2020. 20 2021 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2021 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 (2020 – 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) Net income before tax Combined statutory income tax rate Expected income tax expense Increase (decrease) in income tax resulting from: Non-deductible expenses Foreign income tax rate differential Adjustment to prior years’ deferred tax assets Other Income tax expense 2021 2020 (restated)1 $ 44,081 27.0% 11,902 49 39 (25) 38 $ 12,003 $ 28,623 27.0% 7,729 67 (278) 269 11 7,798 $ 1 During the year, the Company changed its accounting policy with respect to customization and configuration of SaaS arrangements. See section 1.1 “Consolidated highlights” – footnote 2 for further details. In assessing the recovery of deferred income tax assets, management considers whether it is more likely than not that the deferred income tax assets will be realized. The recognition and measurement of the current and deferred income tax assets and liabilities involve 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. 21 For the Fourth Quarter and Year Ended December 31, 2021 Management’s Discussion and Analysis | 2021 ISC® Annual Report Revenue by Segment1 for the three months ended December 31, Revenue by Segment1 for the year ended December 31, 6% 46% 10% 40% Technology Solutions Services Registry Operations 50% 48% +13% 5% 44% Technology Solutions Services Registry Operations 51% +24% 8% 41% 51% 2020 2021 2020 2021 1 Corporate and other and Inter-segment eliminations are excluded. Values may not add due to rounding. EBITDA by Segment1 for the three months ended December 31, EBITDA by Segment1 for the year ended December 31, 8% 21% 14% 24% Technology Solutions Services Registry Operations 71% 62% +11% 25% 72% 9% 24% 67% 3% Technology Solutions Services Registry Operations +33% 2020 2021 2020 2021 1 Corporate and other and Inter-segment eliminations are excluded. Values may not add due to rounding. 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, 2021, on our website at www.company.isc.ca and in the Company’s profile on SEDAR at www.sedar.com. Competitors in this segment include infrastructure funds and private equity firms as well as information services companies, registry software providers and other such information-based companies that develop and provide software platforms to manage registry and related information services. These types of companies may compete with ISC by acting as, or partnering with, 22 2021 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2021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 vehicle 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 the registration of business entities, including business corporations, non-profit corporations, co-operatives, sole proprietorships, partnerships and business names. Entities must maintain an active registration in the Corporate Registry to legally carry on business within Saskatchewan. Unlike other registries, the Corporate Registry earns most of its revenue from maintenance services, including annual returns and changes to corporate articles, ownership, or directorship. Approximately 93 per cent of all registrations in the Corporate Registry were submitted online in 2021. 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; however, the COVID-19 pandemic has disrupted our normal pattern of seasonality. 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 86 per cent of all Land Titles Registry registration transactions were submitted online in 2021. 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. 23 For the Fourth Quarter and Year Ended December 31, 2021 Management’s Discussion and Analysis | 2021 ISC® Annual ReportREGISTRY OPERATIONS REVENUE Registry Operations Revenue for the three months ended December 31, (CAD millions) 21.1 13% 12% 19.5 14% 13% 73% 75% Corporate Registry Personal Property Registry Land Registry +8% Registry Operations Revenue for the year ended December 31, (CAD millions) 85.6 13% 13% 74% 69.6 15% 15% 70% Corporate Registry Personal Property Registry Land Registry +23% 2020 2021 2020 2021 Note: Other revenue is not shown in the chart however included within the total. Values may not add due to rounding. (thousands of CAD) Land Registry Personal Property Registry Corporate Registry Other Registry Operations revenue Three Months Ended December 31, 2020 2021 Year Ended December 31, 2020 2021 $ $ 15,742 2,563 2,771 – 21,076 $ $ 14,119 2,625 2,709 32 19,485 $ 63,141 10,993 11,164 269 85,567 $ $ 48,694 10,055 10,537 282 69,568 $ Corporate Registry 85.6 11.2 11.0 63.1 Registry Operations Revenue for the year ended December 31, (CAD millions) 100.0 Land Registry Personal Property Registry 70.4 10.2 10.2 48.9 69.6 10.5 10.1 48.7 80.0 60.0 40.0 20.0 0.0 2019 2020 2021 Note: Other revenue is not shown in the chart however included within the total. Values may not add due to rounding. The top five customers for Registry Operations comprised just over 20 per cent of the total segment revenue for 2021. Of those customers, no single customer represented more than 10 per cent of total Registry Operations revenue. Revenue for Registry Operations was $21.1 million for the quarter, up $1.6 million or 8 per cent compared to $19.5 million in the fourth quarter of 2020. The fourth-quarter increase was primarily due to growth from the Land Registry, where volume was driven by the activity in the Saskatchewan real estate sector, and an increase in the average land values transacted through the registry, as well as strong high-value transactions. For the year, revenue was $85.6 million, a rise of $16.0 million or 23 per cent compared to $69.6 million in 2020. Other revenue consists mainly of fees associated with the Multi-jurisdictional Registry Access Service (“MRAS”), which operates in the Saskatchewan Corporate Registry and other corporate registries in Canada. It enables businesses in Canada to register seamlessly in select provinces and territories without having to provide the same information to each jurisdiction. 24 2021 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2021 Saskatchewan Land Registry Revenue for the Land Registry during the fourth quarter of 2021 was $15.7 million, up by $1.6 million or 11 per cent compared to the fourth quarter of 2020. For the year, revenue was $63.1 million in 2021 compared to $48.7 million in 2020. The increase in revenue is primarily due to the positive results in the Land Titles Registry, which continued to experience brisk activity in the real estate sector. Most of the revenue generated from the Land Registry is from the Land Titles Registry and is derived from value-based (ad valorem) fees. Land Titles Registry revenue for the quarter was $15.0 million, up $1.7 million or 12 per cent compared to the fourth quarter in 2020. The growth was primarily due to higher revenue from regular land transfers (changes of ownership), including increased high-value property registrations and title searches during the quarter relative to the same period in 2020. The real estate sector saw increases in resale volumes during the fourth quarter of 2021 when compared to the unusually high fourth quarter in 2020, meaning volumes remain well above typical levels seen during this time of year. Based on this strong activity in the sector, overall Land Titles Registry transaction volume increased by 19 per cent in the fourth quarter. Average land values for regular land transfers were also higher during the fourth quarter of 2021 compared to the same period in 2020. Saskatchewan Land Registry Revenue, for the year ended December 31, 2021 Saskatchewan Land Registry Revenue, for the year ended December 31, 2020 95.1% 3.2% 1.7% 93.6% 4.3% 2.1% Land Titles Registry Geomatics Land Surveys Directory Land Titles Registry Geomatics Land Surveys Directory Note: Values may not add due to rounding. High-value property registration revenue was again strong this period, coming in at $1.8 million in the fourth quarter. Each high- value registration generates revenue of $10,000 or more and is typically seen in both commercial and larger agricultural transactions. 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. COVID-19 restrictions resulted in lower revenue during the second quarter of 2020, after which we observed higher revenue in the third and fourth quarters, unusual compared to our historical pattern of seasonality. Results for all four quarters of 2021 are higher than we traditionally experience, although the pattern in 2021 is more indicative of our normal seasonality, as shown in the following graphs. For more information on seasonality, refer to section 4 “Summary of Consolidated Quarterly Results”. 18.0 12.0 6.0 0.0 Saskatchewan Land Registry Revenue by Type (CAD millions) 0.5 10.4 1.8 8.0 0.6 11.2 1.7 8.9 0.6 13.0 1.8 10.7 0.5 14.1 1.8 11.8 13.3 2.0 10.7 Registration Search Maintenance/Services 17.9 2.2 0.6 0.6 15.1 0.5 16.2 1.9 13.8 0.5 15.7 2.1 13.1 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Note: Values may not add due to rounding. 25 For the Fourth Quarter and Year Ended December 31, 2021 Management’s Discussion and Analysis | 2021 ISC® Annual Report Saskatchewan Land Registry Transaction Volume (Number of transactions) 240,000 200,000 160,000 120,000 80,000 , 1 1 7 7 7 1 , 7 3 2 1 7 1 , 2 0 6 9 7 1 , 1 6 8 1 8 1 , 6 1 7 3 0 2 , 0 0 5 6 2 2 , 6 5 7 7 9 1 5 8 8 4 1 2 , Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Revenue-generating transactions in the Land Titles Registry rose by 19 per cent for the fourth quarter of 2021 when compared to the same period in 2020. The volume of regular land transfers and title searches improved by 5 per cent, and 20 per cent, respectively, while the volume of mortgage registrations saw a modest decline of 1 per cent. Title searches make up the largest component of transaction volumes, comprising 75 per cent of the volume for the registry in the fourth quarter of 2021. For the year, Land Registry revenue was $63.1 million, an increase of 30 per cent or $14.4 million compared to the $48.7 million recorded in 2020. Of that, Land Titles Registry revenue was higher by 32 per cent, coming in at $60.1 million compared to $45.6 million in 2020. This was mainly due to a 19 per cent increase in transaction volumes, greater revenue from high-value property registrations, and a rise in average land values for regular land transfers during the period. The following tables present Land Registry results over the past five years to highlight historical trends, the impact of COVID-19 in 2020 and the corresponding strength in 2021. Saskatchewan Land Registry Revenue by Type for the year ended December 31, (CAD millions) Registration Search Maintenance Saskatchewan Land Registry Transaction Volume for the year ended December 31, (Number of transactions) 54.8 7.8 44.5 2.4 50.0 7.3 2.3 48.9 7.3 2.4 48.7 7.0 2.2 40.4 39.1 39.5 63.1 8.3 2.2 52.7 0 4 9 1 9 8 , 7 6 3 6 1 8 , 3 4 0 4 7 7 , 1 1 4 0 1 7 , 7 5 8 2 4 8 , 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 Note: Values may not add due to rounding from maintenance transactions that were too small to display in chart. High-value property registration revenue was a record-high $6.2 million in 2021. This represents an increase of $2.4 million compared to revenue of $3.8 million in 2020. In 2017, our previous best year on record, we saw stronger revenue due in large part to a few unusually high-value transactions. In 2020, high-value registration revenue was closer to average, however in 2021, the revenue was significantly above average as a result of increased volume of high-value transactions processed this year. 26 2021 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2021 Saskatchewan Land Titles Registry - High Value Transaction Revenue (CAD millions) 5.6 6.2 4.1 3.9 4.2 3.6 3.1 3.9 4.3 3.8 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 6.0 5.0 4.0 3.0 2.0 1.0 0.0 The following additional graph presents the split of high-value transactions over the past five years between commercial, agricultural and other. Saskatchewan Land Titles Registry – High Value Transaction Revenue (CAD millions) Commercial Ag Other 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 5.6 0.8 1.1 3.6 0.2 4.3 0.4 0.9 2.9 3.9 1.0 2.6 6.2 0.4 2.3 3.5 0.2 3.8 1.3 2.2 2017 2018 2019 2020 2021 Note: Values may not add due to rounding. Overall revenue-generating transactions in the Land Titles Registry rose by 19 per cent in 2021 compared to 2020. This was primarily due to the increase in regular land transfers, mortgage registrations and title searches, which improved by 27 per cent, 18 per cent, and 17 per cent, respectively, compared to 2020. Title searches make up the largest component of transaction volume, comprising 74 per cent of the volume for the registry. The major customers of the Land Registry include law firms, financial institutions, governments, surveyors, developers, resource companies as well as the general public. For 2021, our top 20 Land Registry customers made up over 41 per cent of revenue, and our top 100 Land Titles Registry customers represented 78 per cent of revenue. Saskatchewan Personal Property Registry For the fourth quarter of 2021, revenue for the Personal Property Registry was $2.6 million, down $0.1 million or 2 per cent compared to the same quarter in 2020. Overall volume was effectively flat during the period when compared to the fourth quarter of 2020 as a result of search volume growth offsetting declines elsewhere. Search volume, which comprises 64 per cent of the volume for the registry, grew 3 per cent during the quarter. As a result, search revenue increased by 3 per cent for the fourth quarter of 2021 compared to the same quarter in 2020. Registration revenue in the fourth quarter was negatively impacted due to supply chain issues, particularly in the new motor vehicle sales segment, reduced inventories, and limited sales. Volume dropped by 7 per cent during the quarter, and revenue was 6 per cent lower compared to 2020. Revenue declined at a lesser rate than volume due to the increases in average term-length for personal property security registration setups compared to the same quarter in 2020. Maintenance revenue increased by 5 percent in the fourth quarter due to the increase in average term-length for renewals of personal property security registrations, while volume was flat when compared to the same period in 2020. Normally, the pattern of seasonality for this registry contains higher revenue during the second and third quarters of each year. COVID-19 has impacted that trend in recent periods, where it appears to have affected customer behaviour. The registry observed stronger revenue during the last half of 2020 and the first half of 2021, as illustrated in the following graph. 27 For the Fourth Quarter and Year Ended December 31, 2021 Management’s Discussion and Analysis | 2021 ISC® Annual Report 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Saskatchewan Personal Property Registry Revenue by Type (CAD millions) Registration Search Maintenance/Services 2.2 0.3 0.6 1.3 2.4 0.3 0.5 1.5 2.8 0.3 0.6 1.9 2.6 0.3 0.7 1.7 2.7 0.3 0.7 1.6 3.1 0.3 0.8 2.0 2.7 0.3 0.7 1.8 2.6 0.3 0.7 1.6 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Note: Values may not add due to rounding. Saskatchewan Personal Property Registry Transaction Volume (Number of transactions) 130,000 120,000 110,000 100,000 90,000 80,000 70,000 60,000 50,000 3 7 3 3 0 1 , 1 4 2 3 0 1 , 8 9 3 3 1 1 , 6 0 3 7 0 1 , 6 9 4 0 1 1 , 8 6 8 2 2 1 , 7 5 2 7 0 1 , 5 3 2 7 0 1 , Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Annual revenue for the Personal Property Registry was $11.0 million in 2021, an increase of $0.9 million or 9 per cent compared to 2020. Overall volume for 2021 grew by 5 per cent compared to the previous year largely driven by search activity, which rose by 8 per cent. Registration volume was flat in 2021, while maintenance volume dropped 1 per cent. Personal property security registration setup volume was even in 2021 when compared to 2020. Pricing changes made in August of 2020 and increases in average term-length of personal property security registrations resulted in a higher revenue growth rate than volume growth rate in 2021. Registration, search, and maintenance revenue rose by 7 per cent, 16 per cent and 6 per cent, respectively. Additionally average term-length for both personal property security registration setups and renewals saw a modest increase in 2021 when compared to 2020. The following tables present Personal Property Registry results over the past five years showing further trends, the reduction in revenue and volumes that COVID-19 contributed to in 2020, as well as the recovery in 2021. Despite the recovery in volumes in 2021, these remain impacted by previously referenced supply chain issues impacting the availability of new vehicles. 28 2021 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2021 Saskatchewan Personal Property Registry Revenue by Type for the year ended December 31, (CAD millions) Registration Search Maintenance Saskatchewan Personal Property Registry Transaction Volume for the year ended December 31, (Number of transactions) 10.0 1.1 2.0 6.9 10.2 1.3 2.2 6.7 10.2 1.1 2.5 6.5 10.1 1.1 2.4 6.5 11.0 1.2 2.8 7.0 , 7 3 2 5 6 4 , 7 1 9 2 6 4 , 7 2 5 7 5 4 , 8 1 3 7 2 4 , 6 5 8 7 4 4 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 Note: Values may not add due to rounding. Customers of the Personal Property Registry are primarily in the financial sector but also include law firms. The top 20 Personal Property Registry customers encompassed about 83 per cent of the revenue for 2021, while the top 100 generated close to 95 per cent of revenue. Saskatchewan Corporate Registry Revenue for the Corporate Registry for the fourth quarter of 2021 was $2.8 million, up 2 per cent, or $62 thousand compared to the same period in 2020, while overall transaction volume grew by 3 per cent. Registration and search revenue grew by 4 per cent and 6 per cent, respectively. Maintenance revenue, the largest of the three revenue streams, was up nearly 1 per cent. As of December 31, 2021, there were 77,450 active Saskatchewan Business Corporations registered with the Corporate Registry compared to 75,248 as of December 31, 2020. The following graph illustrates the Corporate Registry revenue by type of transaction. Quarterly revenue in this registry continues to mirror the usual pattern of seasonality, as seen below. Saskatchewan Corporate Registry Revenue by Type (CAD millions) Registration Search Maintenance 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2.9 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 3.2 2.0 0.4 0.8 2.7 1.6 0.4 0.7 2.5 1.5 0.3 0.6 2.8 1.6 0.4 0.8 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Note: Values may not add due to rounding. 29 For the Fourth Quarter and Year Ended December 31, 2021 Management’s Discussion and Analysis | 2021 ISC® Annual Report The following graph shows the transaction volumes for the Corporate Registry by quarter. Saskatchewan Corporate Registry Transaction Volume (Number of transactions) 120,000 100,000 80,000 6,0000 40,000 20,000 0 4 7 6 2 9 , 4 7 2 3 8 , 5 0 9 6 7 , 1 4 6 5 8 , , 5 3 9 0 0 1 6 4 3 0 9 , 2 9 4 9 7 , 0 8 3 8 8 , Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 As mentioned earlier, transaction volume for the fourth quarter rose by 3 per cent compared to the same period in 2020. Search volume grew by 6 per cent compared to the same period in 2020. This growth offset the decline in registration volume during the quarter, which dropped 2 per cent despite revenue growth of 1 per cent. Maintenance volume was essentially flat for the quarter. On an annual basis, revenue for the Corporate Registry was $11.2 million, up 6 per cent or $0.6 million compared to 2020. In 2021, registration, search, and maintenance revenue increased by 14 per cent, 9 per cent, and 2 per cent, respectively, when compared to 2020. More specifically, 2021 revenue from the incorporation and registration of new business entities, up 16 per cent, drove registration revenue growth, while revenue from the filing of annual returns and renewals was flat for the year, which impacts maintenance revenue. Annual transaction volume for 2021 rose by 6 per cent compared to 2020. Registration, search, and maintenance volume grew by 11 per cent, 8 per cent and 2 per cent, respectively, compared to the previous year. The following tables present Corporate Registry results over the past five years demonstrating further trends, the reduction in volumes that COVID-19 contributed to in 2020, as well as strength in 2021. Saskatchewan Corporate Registry Revenue by Type for the year ended December 31, (CAD millions) Registration Search Maintenance Saskatchewan Corporate Registry Transaction Volume for the year ended December 31, (Number of transactions) 10.1 1.4 2.6 6.2 10.0 1.4 2.5 6.1 10.2 1.4 2.5 6.3 10.5 1.3 2.6 6.6 11.2 1.5 3.0 6.8 , 0 0 6 0 5 3 , 1 7 3 5 4 3 , 5 9 2 7 4 3 , 4 9 4 8 3 3 , 3 5 1 9 5 3 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 Note: Values may not add due to rounding. 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 are, were or will be, registered in the Corporate Registry. The top 20 Corporate Registry customers accounted for about 32 per cent of revenue for 2021, and the top 100 customers comprised around 50 per cent of revenue. 30 2021 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2021 REGISTRY OPERATIONS EXPENSES AND EBITDA Registry Operations EBITDA for the three months ended December 31, (CAD millions) 13.5 10.6 Registry Operations EBITDA for the year ended December 31, (CAD millions) 49.0 34.6 +27% +42% 2020 2021 2020 2021 (thousands of CAD) Revenue Total expenses1 EBITDA Three Months Ended December 31, 2020 2021 Year Ended December 31, 2020 2021 $ $ 21,076 7,572 13,504 $ 19,485 8,882 10,603 $ $ 85,567 36,585 48,982 $ $ 69,568 34,955 $ 34,613 1 Total expenses exclude interest, taxes, depreciation and amortization. EBITDA for Registry Operations for the fourth quarter was $13.5 million, up 27 per cent compared to the same period in 2020 and was $49.0 million in 2021 compared to $34.6 million in 2020. The increase was due to increased revenue across all registries, primarily the Land Registry. Expenses decreased during the quarter, primarily from reductions in share-based compensation plans expense allocated during the quarter and reductions in professional and consulting fees. For the year, expenses increased compared to last year primarily due to higher allocated share-based compensation plans expense related to the strong performance of the Company’s share price. Additionally, we experienced increased financial services costs related to increased volumes and increased employee-related costs resulting from strong performance. Over the past two years, Registry Operations has delivered exceptionally strong EBITDA, which is above historical levels. This strong EBITDA has been propelled by a combination of a robust Saskatchewan real estate market driving higher average transaction values, increased high value transactions and slightly higher transaction volumes in the Land Registry. While we expect continued strength in Registry Operations’ EBITDA margin, we anticipate it to trend closer to pre-pandemic levels as depicted in the following graph. Registry Operations EBITDA Margin for the year ended December 31, Registry Operations EBITDA Margin Typical margin 57.2% 48.4% 49.8% Additional margin from higher average value transactions 47.6% 46.1% 2017 2018 2019 2020 2021 31 For the Fourth Quarter and Year Ended December 31, 2021 Management’s Discussion and Analysis | 2021 ISC® Annual Report 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. 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 Corporate Solutions Incorporation Services Custom in-house 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 Nationwide Business Name Registration and Renewals Security Filings and Registrations 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 Id entification, retrieval and disposition of movable assets 1 A NUANS® report is a search that 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. 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. 32 2021 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2021Incorporation Services • We provide a convenient, cost-effective method to incorporate businesses online or through our staff-assisted process. Leveraging our online technology platforms we service legal customers and the general public through a team of experienced law clerks in both Ontario and Quebec. • Currently, we hold one of the two exclusive licences which allows us to access the Ontario Corporate Registry electronically on behalf of clients. Ontario intends to transition to a new licencing model and launched the first phase of their new public portal on October 19, 2021. Until the new model is fully rolled out, we expect to continue to hold one of the two exclusive licences. We also 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). Our newest technology platform, Registry Complete, is 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 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. • 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 UCC Filings. Public Records Search Services/Due Diligence • Our public records search offerings include corporate profiles, business name searches, NUANS, PPSA searches, 33 For the Fourth Quarter and Year Ended December 31, 2021 Management’s Discussion and Analysis | 2021 ISC® Annual Report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 that 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 Regulatory Solutions is reasonably diversified and has little seasonality; instead, it fluctuates in line with general economic drivers. Some smaller categories of products or services can have some seasonal variation, increasing slightly during the second and fourth quarters. 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. 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 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 that are involved in lending in the movable asset market in Canada. Recovery Solutions allows us 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’s 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 34 2021 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2021SERVICES REVENUE Services Revenue1 for the three months ended December 31, (CAD millions) 20.5 10% 15% 75% 15.7 12% 9% 79% Recovery Solutions Corporate Solutions Regulatory Solutions +31% Services Revenue1 for the year ended December 31, (CAD millions) 56.4 7% 9% 84% 75.2 13% 10% 77% 2021 Recovery Solutions Corporate Solutions Regulatory Solutions +33% 2020 2021 2020 1 Internal related parties and other revenue not displayed in the graph. Values may not add due to rounding. (thousands of CAD) Regulatory Solutions Recovery Solutions Corporate Solutions Internal related parties and other Services revenue Three Months Ended December 31, 2020 2021 Year Ended December 31, 2020 2021 $ 15,485 1,953 3,111 – $ 20,549 $ $ 12,396 1,821 1,495 33 15,745 $ 58,263 9,516 7,386 – 75,165 $ $ 47,730 3,721 4,911 40 $ 56,402 Revenue for Services was $20.5 million for the fourth quarter, an improvement of 31 per cent or $4.8 million compared to the same period in 2020. This increase was driven by continued organic growth in Regulatory and Corporate Solutions, as well as the inclusion of new revenue from Recovery Solutions. Our organic growth comes from the addition of new legal customers, increased KYC financial customers and the uptake of new services from existing customers. As we seek to improve the client experience through technology, customers transitioned through 2021 from our legacy platform to our new Registry Complete platform received a more comprehensive suite of services. The response from customers has been very positive, and as a result we have recognized increased revenue. A portion of the revenue increase in Regulatory Solutions and Corporate Solutions for both the fourth quarter and the year relates to changes in accounting for revenue as customers migrate to the Registry Complete technology, where additional value-added services are provided. This results in an increase in revenue and a corresponding increase in cost of goods sold with no change in net income or EBITDA. While this accounts for a portion of revenue growth, the Services segment has seen strong growth during the year, as evidenced by a 44 per cent increase in EBITDA over the prior year. For the year ended December 31, 2021, revenue in the Services segment was $75.2 million compared to $56.4 million in 2020, representing a boost of 33 per cent or $18.8 million. Annual revenue increases in all three revenue streams were recognized. Regulatory and Corporate Solutions experienced organic growth and new customer acquisitions. Recovery Solutions benefited from a full year of revenue realization in 2021, compared to five months in the prior year. The following table demonstrates the growth in Services revenue over the past five years. The year-over-year revenue increases have resulted from the organic growth of the business combined with the acquisition and integration of various businesses since 2017. 35 For the Fourth Quarter and Year Ended December 31, 2021 Management’s Discussion and Analysis | 2021 ISC® Annual Report Services Revenue by Type1 for the year ended December 31, (CAD millions) Services Revenue by Type1 Services Revenue by Type1 for the year ended December 31, 2021 for the year ended December 31, 2021 Regulatory Solutions Corporate Solutions Recovery Solutions 51.0 5.0 46.0 3.7 56.4 4.9 47.7 Services 75.2 9.5 7.4 58.3 42.4 4.8 37.6 2018 2019 2020 2021 14.9 14.9 2017 12.7% 12.7% 9.8% 9.8% 77.5% 77.5% Regulatory Solutions Regulatory Solutions Corporate Solutions Corporate Solutions Recovery Solutions Recovery Solutions 1 Internal related parties and other revenue not displayed in the graph. Revenue for 2017 does not display the disaggregation by revenue type as the data was not available for current Services revenue categories. Values may not add due to rounding. Regulatory Solutions Revenue in Regulatory Solutions for the fourth quarter of 2021 was $15.5 million, up 25 per cent compared to $12.4 million for the same period of 2020. Revenue grew in the quarter due to organic customer growth in the following sectors: KYC, alternative small business lending and auto financing. We also onboarded new legal customers recognizing the value add services of Registry Complete. For the year, revenue rose by 22 per cent, coming in at $58.3 million compared to $47.7 million in 2020. Revenue for the year increased because of the organic and new acquisition growth from our customer technology transition project initiative. There was also a return to normal transaction levels from the pandemic-impacted period in the prior year. A portion of this revenue increase for both the fourth quarter and the year relates to changes in accounting for revenue as customers migrate to the Registry Complete technology where additional value added services are provided. This results in an increase in revenue and corresponding increase in cost of goods sold with no change in EBITDA. Recovery Solutions Revenue in Recovery Solutions for the fourth quarter was $2.0 million, a rise over the same period in 2020 of $0.1 million. The increase was due to an increase in assignment levels as the government subsidy programs ended, accompanied by some return to improved transaction levels from the pandemic-impacted period in the prior year. On an annual basis, revenue in 2021 was $9.5 million compared to $3.7 million in the prior year. When comparing these results, it is important to remember that the assets of Paragon were acquired on July 31, 2020. Growth of Recovery Solutions revenue has been impacted by multiple factors present in the Canadian economy, including the lack of availability of new vehicles inflating prices in the used market, government support programs that existed throughout the year, low interest rates and hesitation by lenders to take action due to current COVID-19 circumstances. Corporate Solutions Corporate Solutions revenue for the quarter was $3.1 million, increasing by 108 per cent or $1.6 million compared to $1.5 million in the fourth quarter of 2020. This increase for the quarter is primarily related to the transition of customers to the Registry Complete platform, where revenue is accounted for on a gross basis instead of net accounting as a result of additional value- added services being provided. As a result of this change in accounting treatment, both revenue and cost of goods sold increased by the same amount causing no impact to net income or EBITDA. For the year, revenue increased by 50 per cent or $2.5 million, coming in at $7.4 million compared to $4.9 million in 2020. This growth is a combination of the launch of additional corporate value-add products as a result of our continued technology investment in Registry Complete combined with the change in accounting treatment of this revenue now being accounted for on a gross basis. While this change in accounting treatment increases both revenue and cost of goods sold, it has no impact on net income or EBITDA. 36 2021 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2021Our Services revenue by solution is shown in the following graph. Services Revenue by Type1 (CAD millions) Regulatory Solutions Corporate Solutions 11.8 1.3 10.6 12.4 1.0 11.4 16.4 1.9 1.1 13.4 15.7 1.8 1.5 12.4 16.2 2.1 1.6 12.5 20.1 3.2 1.4 15.5 18.3 2.3 1.2 14.8 Recovery Solutions 20.5 2.0 3.1 15.5 20.0 15.0 10.0 5.0 0.0 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 1 Internal related parties and other revenue not displayed in graph. Values may not add due to rounding. For 2021, the top 20 Services customers accounted for nearly 74 per cent of the revenue, while the top 100 Services customers comprised approximately 88 per cent of the revenue. No single customer accounted for more than 25 per cent of Services revenue in the period. SERVICES EXPENSES AND EBITDA Services EBITDA for the three months ended December 31, (CAD millions) 4.1 4.0 Services EBITDA for the year ended December 31, (CAD millions) 17.4 12.1 (1)% +44% 2020 2021 2020 2021 (thousands of CAD) Revenue Total expenses1 EBITDA Three Months Ended December 31, 2020 2021 Year Ended December 31, 2020 2021 $ 20,549 16,515 $ 4,034 $ $ 15,745 11,679 4,066 $ 75,165 57,788 17,377 $ $ 56,402 44,327 12,075 $ 1 Total expenses exclude interest, taxes, depreciation and amortization. EBITDA for Services was $4.0 million for the quarter compared to $4.1 million for the same period in 2020 and was $17.4 million in 2021 compared to $12.1 million in 2020. This 44 per cent increase in EBITDA for the year resulted from the continued use of automation and cross-selling to drive organic growth, additional new revenue from Recovery Solutions and ongoing cost management. 37 For the Fourth Quarter and Year Ended December 31, 2021 Management’s Discussion and Analysis | 2021 ISC® Annual Report Services expenses were $16.5 million for the quarter compared to $11.7 million in 2020 and were $57.8 million in 2021 compared to $44.3 million in 2020. The increase for the quarter and the year was largely due to higher cost of goods sold related to both increased revenue and changes in accounting for revenue and related cost of goods sold as customers began to use the Registry Complete technology. These increases were partially offset by savings due to continued cost management. Additionally, the year- over-year results include a full year of our Recovery Solutions division compared to five months in the prior year and an increase in corporate allocated costs mainly due to higher share-based compensation plans expense related to the strong performance of the Company’s share price in 2021. 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, licenses, charities, UCC and pension schemes. Competitors in this segment include technology services organizations that provide application development, systems integration and/or application management services. This includes large multinationals or local niche players, both of which we can partner with to complement our offering depending on the clients’ needs. Technology Solutions does not experience seasonality but does fluctuate due to the timing of project-related revenue. TECHNOLOGY SOLUTIONS REVENUE Technology Solutions Revenue for the three months ended December 31, (CAD millions) 6.2 38% 4.9 Internal parties Third parties (20)% 47% 53% 62% Technology Solutions Revenue for the year ended December 31, (CAD millions) 20.6 48% 18.1 52% Internal parties Third parties 52% 48% (12)% 2020 2021 2020 2021 (thousands of CAD) Third parties Internal related parties Technology Solutions revenue 38 Three Months Ended December 31, 2020 2021 Year Ended December 31, 2020 2021 $ 2,613 2,317 4,930 $ $ $ 3,815 2,380 6,195 $ 8,644 9,475 18,119 $ $ 10,782 9,769 $ 20,551 2021 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2021 Revenue in Technology Solutions was $4.9 million for the quarter, a decrease of $1.3 million compared to $6.2 million for the same period in 2020. Revenue from external parties for the quarter decreased $1.2 million compared to the fourth quarter of 2020 and decreased $2.1 million for the full year compared to the same period in 2020. The decrease was due to the timing of solution implementation projects, which impacts the timing of revenue recognition in the quarter and year over year compared to the same periods in 2020. Our Technology Solutions segment continues to be the most affected by COVID-19, which has impacted the commencement of potential new opportunities as well as progress on active projects as governments around the world have been responding to the pandemic. While we continue to see progress on solution delivery projects, certain milestones anticipated to be completed this year have been delayed into 2022. Revenue on our solution implementation projects will continue to be recognized in the quarters in which they are earned either through the achievement of milestones or a percentage of completion, consistent with the revenue recognition method adopted for projects. 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 fluctuate over time, particularly as we pursue additional external revenue. Technology Solutions Revenue by Type (CAD millions) 8.0 6.0 4.0 2.0 0.0 4.7 2.4 2.2 4.9 2.5 2.4 1.9 4.8 2.4 2.3 6.2 2.4 3.8 6.0 2.3 3.7 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Note: Values may not add due to rounding. Third Party Revenue Related Party Revenue 3.2 3.0 2.4 2.3 4.2 2.5 1.8 2.0 4.9 2.3 2.6 0.6 Q2 2021 Q3 2021 Q4 2021 Revenue in our Technology Solutions segment was $18.1 million for the year ended December 31, 2021, compared to $20.6 million in 2020, a decrease of $2.5 million. Revenue from external parties was $8.6 million compared to $10.8 million in 2020. Revenue from external third parties decreased in 2021 versus 2020, as delivery against milestones on signed contracts was delayed. Internal related party revenue year-to-date decreased as we continued to reduce our internal support costs through continuous improvements in providing application maintenance and operations services. The following table provides details on Technology Solutions revenue over the past five years. Technology Solutions third-party revenue has been impacted by the COVID-19 pandemic through delays in active solution delivery projects, as well as new projects coming to market as governments around the world have focused on healthcare and pandemic measures. 39 For the Fourth Quarter and Year Ended December 31, 2021 Management’s Discussion and Analysis | 2021 ISC® Annual Report Technology Solutions Revenue by Type (CAD millions) Technology Solutions Revenue Technology Solutions Revenue for the year ended December 31, 2021 for the year ended December 31, 2021 Third parties Internal related parties 25.0 20.0 15.0 10.0 5.0 0.0 20.4 21.2 16.7 14.8 24.3 12.8 20.5 9.8 11.4 10.8 6.4 3.7 2017 2018 2019 2020 2021 18.1 9.5 8.6 52.1% 52.1% 47.9% 47.9% Third parties Third parties Internal related parties Internal related parties Note: Values may not add due to rounding. TECHNOLOGY SOLUTIONS EXPENSES AND EBITDA Technology Solutions EBITDA for the three months ended December 31, (CAD millions) 2.5 Technology Solutions EBITDA for the year ended December 31, (CAD millions) 4.4 1.4 (42)% (59)% 1.8 2020 2021 2020 2021 (thousands of CAD) Revenue Total expenses1 EBITDA 1 Total expenses exclude interest, taxes, depreciation and amortization. Three Months Ended December 31, 2020 2021 Year Ended December 31, 2020 2021 $ 4,930 3,489 $ 1,441 $ $ 6,195 3,710 2,485 $ 18,119 16,317 1,802 $ $ $ 20,551 16,116 4,435 EBITDA for Technology Solutions was $1.4 million for the quarter compared to $2.5 million in the fourth quarter of 2020 and was $1.8 million for the year compared to $4.4 million in 2020. For the quarter, Technology Solutions expenses were down $0.2 million compared to the same period in 2020 and were up $0.2 million for the year compared to 2020. EBITDA was down for the quarter and the year primarily due to lower third-party revenue from the delays in completion of certain milestones on solution implementation projects. In addition, the year-to-date results were impacted by an impairment loss recorded on a customer contract and increased corporate allocated costs driven primarily by the share-based compensation plans. 40 2021 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2021 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) Third parties Internal related parties Corporate and other revenue Total expenses1 EBITDA Three Months Ended December 31, 2020 (restated)2 2021 Year Ended December 31, 2020 (restated)2 2021 $ $ $ – 34 34 (1,397) (1,363) $ $ $ 2 35 37 (1,496) (1,459) $ $ $ 3 157 160 (7,789) (7,629) $ $ $ 8 140 148 (7,879) (7,731) 1 Total expenses exclude interest, taxes, depreciation and amortization. 2 During the year, the Company changed its accounting policy with respect to customization and configuration of SaaS arrangements. See section 1.1 “Consolidated highlights” – footnote 2 for further details. EBITDA for the quarter increased compared to the same period in 2020, primarily as a result of reduced professional and consulting services and reduced share-based compensation plans expense during the quarter. For the year, the decrease in expenses results from a reduction in corporate professional and consulting expenses not allocated to the segments. 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 Solutions and Regulatory Solutions services revenue is relatively diversified and has little seasonality; instead, it fluctuates in line with general economic drivers. Some smaller categories of products or services can have some seasonal variation, increasing slightly during the second and fourth quarters. In particular, our collateral management services experiences 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. The Company has observed that its historical pattern of seasonality in Registry Operations, and to some degree in Services, has been impacted due to the COVID-19 pandemic. Although the current year trends would support historical patterns, at this time, we are uncertain if or when seasonality will fully return to historical patterns. Technology Solutions does not experience seasonality, however, it is the segment that has been most impacted by COVID-19 as a result of governments and clients being focused on responding to COVID-19. This has, therefore, resulted in delays in solution implementation as well as new business development opportunities coming to market. 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. 41 For the Fourth Quarter and Year Ended December 31, 2021 Management’s Discussion and Analysis | 2021 ISC® Annual Report (thousands of CAD) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 2021 2020 (restated)1 Revenue Expenses Net income before items noted below Net finance (expense) Income before tax Income tax expense Net income Other comprehensive (loss) income Total comprehensive income EBITDA margin Adjusted EBITDA margin Earnings per share, basic Earnings per share, diluted $ 44,238 $ 41,369 27,268 29,775 $ 44,623 34,627 14,463 (482) 13,981 (3,695) $ 10,286 $ 14,101 (661) 13,440 (3,706) 9,734 9,996 (737) 9,259 (2,749) $ 6,510 $ 39,148 $ 39,013 $ 37,120 $ 30,993 $ 29,596 24,626 29,637 30,954 24,707 27,086 8,194 (793) 7,401 (1,853) 5,548 $ 7,923 $ 11,927 (1,116) 10,811 (2,888) $ 7,483 (397) 7,086 (1,999) 5,087 $ 6,286 (258) 6,028 (1,607) 4,421 $ 4,970 (274) 4,696 (1,303) 3,393 (262) $ 10,024 $ 39.8% 38.9% $ $ 0.59 $ 0.57 $ (4) 9,730 42.3% 41.8% 0.56 0.54 (37) $ 6,473 30.4% 41.5% 0.37 $ 0.36 $ $ 30.3% 37.7% $ $ 0.32 $ 0.31 $ (759) (69) 4,789 $ 7,854 $ 331 5,418 $ (226) 4,195 $ 40.2% 43.6% 29.4% 38.0% 29.2% 33.5% 0.45 $ 0.45 $ 0.29 $ 0.29 $ 0.25 $ 0.25 $ 666 4,059 26.1% 26.8% 0.19 0.19 1 During the year, the Company changed its accounting policy with respect to customization and configuration of SaaS arrangements. See section 1.1 “Consolidated highlights” – footnote 2 for further details. 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; Company Values – prominent focus on quality of service delivery and the engagement of our customers and employees. As the jurisdictions in which we operate begin to emerge from the COVID-19 pandemic and remove restrictions, the Company remains well positioned to thrive through adherence to and execution of its priorities, principles, and long-term strategy. As always, we will review and adjust our strategy to ensure the consistent delivery of the intended outputs listed above. 42 2021 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2021 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 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 16 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, 2021, the Company held $40.1 million in cash compared to $33.9 million as at December 31, 2020, an increase of $6.2 million. The Company expects to be able to meet its cash requirements, including being able to settle current liabilities of $36.9 million (December 31, 2020 – $27.3 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) 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 Three Months Ended December 31, 2020 2021 Year Ended December 31, 2020 (restated)2 2021 $ 17,471 (3,142) $ 17,598 (3,962) $ 61,212 (14,185) $ 40,979 (3,521) $ 14,329 $ 13,636 $ 47,027 $ 37,458 (10) (587) $ 13,732 – (985) 12,651 $ (10) (2,217) 44,800 $ (63) (1,160) 36,235 $ 1 Refer to Note 26 of the Financial Statements for reconciliation. 2 During the year, the Company changed its accounting policy with respect to customization and configuration of SaaS arrangements. See section 1.1 “Consolidated highlights” – footnote 2 for further details. Consolidated free cash flow for the quarter was $13.7 million compared to $12.7 million for the same quarter in 2020 and was $44.8 million for the year compared to $36.2 million in 2020. For the quarter and year, the increase primarily relates to higher cash flows provided by our operations. For the year, this was partially offset by an increase in capital expenditures in 2021; specifically, increased spending on intangible assets in Technology Solutions for product development. 43 For the Fourth Quarter and Year Ended December 31, 2021 Management’s Discussion and Analysis | 2021 ISC® Annual Report The following table summarizes our sources and uses of funds for the three months and years ended December 31, 2021, and 2020: (thousands of CAD) Net cash flow provided by operating activities Net cash flow (used in) investing activities Net cash flow (used in) provided by financing activities Effects of exchange rate changes on cash held in foreign currencies (Decrease) increase in cash Cash, beginning of period Cash, end of period Three Months Ended December 31, 2020 2021 Year Ended December 31, 2020 (restated)1 2021 $ 17,471 (553) $ 17,598 (925) $ 61,212 (366) $ 40,979 (70,815) (19,541) (4,894) (54,274) 40,244 $ (133) (2,756) 42,860 $ 40,104 (349) 11,430 22,516 33,946 $ $ (414) 6,158 33,946 40,104 $ $ (193) 10,215 23,731 33,946 $ $ 1 During the year, the Company changed its accounting policy with respect to customization and configuration of SaaS arrangements. See section 1.1 “Consolidated highlights” – footnote 2 for further details. NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES Net cash flow provided by operating activities was $17.5 million for the quarter compared to $17.6 million for the same period last year and was $61.2 million for the year compared to $41.0 million in 2020. For the fourth quarter of 2021, net cash flow provided by operating activities is similar to last year’s quarter, as higher quarter over quarter cash flows from operations were more than offset by higher current taxes and lower cash flow from net changes in non- cash working capital. The working capital variance is primarily attributable to lower share-based compensation liabilities, due to a reduction of the share price in the quarter relative to the prior year. The increase year over year is primarily due to strong results from operations, and to a lesser extent improved cash flow from non-cash working capital items, partly offset by higher current income taxes. Improved cash flow from non-cash working capital is largely due to a reduction of receivables due to the timing of contracts and enhanced collections, increases to share-based compensation and corporate tax liabilities for items accrued but not yet paid, and partly offset by outflows associated with contract assets and contract liabilities due to timing. NET CASH FLOW USED BY INVESTING ACTIVITIES Net cash flow used in investing activities for the quarter decreased by $0.4 million compared to the same period in 2020 and $70.4 million for the year compared to 2020. For the quarter, this resulted from less additions to intangible assets, while the reduction for the year primarily resulted from the purchase of Paragon on July 31, 2020, for $70.2 million. NET CASH FLOW USED IN FINANCING ACTIVITIES Net cash flow used in financing activities for the quarter was $19.5 million, while in the same period in 2020, $4.9 million was used by financing activities. During the current quarter, the cash used in financing activities predominantly related to a $15.0 million voluntary prepayment of long-term debt. For the year, cash flow used in financing activities was $54.3 million compared to cash flows provided by financing activities in the prior year of $40.2 million. In 2021, this primarily relates to $35.0 million in voluntary debt prepayments and $14.0 million in dividends, however, in the prior year, additional borrowings were secured to finance the Paragon acquisition. 44 2021 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2021 6.2 Capital expenditures Capital expenditures were $0.6 million for the quarter, compared to $1.0 million in 2020 and were $2.5 million for the year, compared to $1.5 million in 2020. Capital expenditures in 2021 were partially related to system development work across our business segments and increased spending for product development in Technology Solutions. (thousands of CAD) Registry Operations Services Technology Solutions Corporate and other Total capital expenditures Three Months Ended December 31, 2020 2021 Year Ended December 31, 2020 (restated)1 2021 $ $ 30 171 396 – 597 $ $ – 189 791 5 985 $ $ 299 557 1,640 – 2,496 $ $ 249 350 828 45 1,472 1 During the year, the Company changed its accounting policy with respect to customization and configuration of SaaS arrangements. See section 1.1 “Consolidated highlights” – footnote 2 for further details. 6.3 Debt At December 31, 2021, our debt was $41.0 million compared to $76.3 million at December 31, 2020. During the quarter, the Company made a $15.0 million voluntary prepayment against its revolving facility due to excess cash and the desire to minimize interest expense. During the year ended December 31, 2021, the Company made a total of $35.0 million of voluntary prepayments compared to prepayments totalling $68.0 million in the prior year towards our previous facility. No new borrowings were drawn during 2021. On September 17, 2021, the Company entered into an amended and extended credit agreement in connection with its secured Credit Facility provided by its lenders. The aggregate amount available under the Credit Facility remains at $150.0 million and the term of the Credit Facility has been extended from the previous expiry date of August 5, 2022, to September 17, 2026. In addition, the amended agreement simplifies the pricing structure. For further information on our Credit Facility, refer to Note 16 in our Financial Statements, which are available on our website at www.company.isc.ca and in the Company’s profile on SEDAR at www. sedar.com. The Company was in compliance with all covenants throughout the period. The amount of borrowing costs capitalized during 2021 and 2020 was nil. 6.4 Total assets Total assets were $232.5 million at December 31, 2021, compared to $241.4 million at December 31, 2020. (thousands of CAD) Total assets excluding intangibles, goodwill and cash Intangibles Goodwill Cash Total assets (thousands of CAD) Total assets excluding intangibles, goodwill and cash Intangibles2 Goodwill Cash Total assets Registry Operations $ 23,108 1,506 1,200 – $ 25,814 Registry Operations $ 25,758 2,395 1,200 – $ 29,353 Services 12,516 54,794 67,372 – 134,682 Services 13,952 63,203 67,372 – 144,527 $ $ $ $ Technology Solutions Corporate and other As at December 31, 2021 $ 4,099 4,755 8,562 – $ 17,416 $ $ 14,470 12 – 40,104 54,586 $ $ 54,193 61,067 77,134 40,104 232,498 Technology Solutions Corporate and other As at December 31, 2020 (restated)1 $ 5,505 4,332 8,883 – $ 18,720 $ $ 14,807 24 – 33,946 48,777 $ $ 60,022 69,954 77,455 33,946 241,377 1 During the year, the Company changed its accounting policy with respect to customization and configuration of SaaS arrangements. See section 1.1 “Consolidated highlights” – footnote 2 for further details. 2 Certain prior year segment amounts have been changed to reflect the current year classifications. 45 For the Fourth Quarter and Year Ended December 31, 2021 Management’s Discussion and Analysis | 2021 ISC® Annual Report 6.5 Working capital At December 31, 2021, working capital was $19.5 million compared to $28.1 million at December 31, 2020. The decrease in working capital is primarily the result of increased trade payables, incomes taxes payable and lower trade receivables. This is offset by a larger cash balance due to increased operational cash flow, and despite $35.0 million in debt repayments during the year. (thousands of CAD) Current assets Current liabilities Working capital 6.6 Outstanding share data As at December 31, As at December 31, 2020 2021 $ 56,447 (36,905) $ 19,542 $ 55,383 (27,289) $ 28,094 The number of issued and outstanding Class A Shares as at December 31, 2021, was 17.5 million and the number of issued and outstanding share options as of December 31, 2021, was 1,548,247. These amounts are unchanged as of the filing date. 6.7 Common share dividend On November 3, 2021, our Board declared a quarterly cash dividend of $0.23 per Class A Share, paid on January 15, 2022, to shareholders of record as of December 31, 2021. 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, 2021: (thousands of CAD) 2022 2023 2024 2025 2026 Thereafter Total Operating leases and non-lease component of office leases1 Information technology2 and other service agreements Master Service Agreement3 Total $ 1,620 $ 1,149 $ 1,030 $ 298 $ 300 $ 942 $ 5,339 3,978 500 $ 6,098 3,303 500 $ 4,952 490 500 $ 2,020 13 500 811 7 500 807 – 3,500 $ 4,442 $ $ 7,791 6,000 $ 19,130 1 The Company leases all of its office space and certain office equipment. The office spaces have lease terms of between two and 10 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 service agreements related to Information Technology with various service providers, 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 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, 2021, 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 20 of the Financial Statements for information pertaining to financial instruments and related risk management. 46 2021 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2021 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 0.20 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 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, 2021, is $52.9 million (December 31, 2020 — $51.0 million), equal to the carrying value of the Company’s financial assets, those being cash at $40.1 million (December 31, 2020 — $33.9 million), short-term investments at $36 thousand (December 31, 2020 — $52 thousand) and trade and other receivables at $12.8 million (December 31, 2020 — $17.0 million). Quarterly reviews of the aged receivables are completed. The Company expects to fully collect the carrying value on all outstanding receivables. Therefore, the risk to the Company is low. LIQUIDITY RISK Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s cash resources are managed based on financial forecasts and anticipated cash flows. MARKET RISK The Company’s exposure to market risk is limited to the deferred share units, 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, followed by the US dollar. 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. 47 For the Fourth Quarter and Year Ended December 31, 2021 Management’s Discussion and Analysis | 2021 ISC® Annual Report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. The COVID-19 pandemic continues to impact Canadians and economies around the world. At the outset of the pandemic, we took swift action to ensure our customers and employees remained safe and healthy. To reduce the risk of transmission, we enabled most of our employees to work from home while we maintained continued communication and business activity virtually. Some precautions implemented to ensure our employees working from our office locations had a safe environment to work in include the implementation of social distancing procedures, availability of safety and sanitation products, and alternate arrangements for courier deliveries and pick-ups. Most of these procedures remain in place/available, and we will continue to revisit them as public health guidelines evolve. As conditions allow, we will be introducing a methodical, cautious, phased approach as we prepare our organization to adapt to our “new normal” in the workplace. However, all of our segments have remained operational throughout the pandemic, and our staff have provided service to customers virtually, either online or by telephone. In the fourth quarter, the Company implemented 48 2021 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2021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, 2021, 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. Accounting for configuration and customization costs related to implementing SaaS arrangements During the year, the Company revised its accounting policy in relation to configuration and customization costs incurred in implementing Software-as-a-service (“SaaS”) arrangements in response to the International Financial Reporting Interpretations Committee (“IFRIC”) agenda decision clarifying its interpretation of how current accounting standards apply to these types of arrangements. The Company’s accounting policy has historically been to capitalize costs related to the configuration and customization of SaaS arrangements as intangible assets in the consolidated statements of financial position. Following the issuance of this new IFRIC agenda decision, current SaaS arrangements were identified and assessed to determine if the Company has control of the software. For those arrangements where control does not exist, the Company derecognized the intangible previously capitalized. Adjustments were identified related to the capitalization of financial system implementation costs incurred in 2019 through 2021. See Note 2 of the Financial Statements for further information. The IAS Board and IFRIC issued the following new standards and amendments to standards and interpretations, which become effective for future periods. a COVID-19 Vaccination Policy (the “Policy”) for all of its employees. This Policy was implemented to ensure the health and safety of our employees and their families, our customers and all other stakeholders. Employees who choose not to be fully vaccinated or not to disclose their vaccination status will be required to provide proof of a negative test on a consistent basis, prior to entering any location maintained by ISC or any of its subsidiaries. Notwithstanding the above, any prolonged economic downturn resulting from COVID-19 could have an adverse effect on our business, results of operations and financial condition. 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, 2021. 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 22 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 about transactions with related parties. 8.3 Critical accounting estimates ISC’s critical accounting estimates are contained in Note 2 of the Financial Statements under the summary of use of estimates and judgments and include references to: • the carrying value, impairment and estimated useful lives of property, plant and equipment; • the carrying value, impairment and estimated useful lives of intangible assets and goodwill; • the recoverability of deferred tax assets; and • the amount and timing of revenue from contracts from customers recognized over time with milestones. 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. 49 For the Fourth Quarter and Year Ended December 31, 2021 Management’s Discussion and Analysis | 2021 ISC® Annual Report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. The Company does not have any onerous contracts as of December 31, 2021, and as a result will not have an adjustment to equity associated with adoption of this standard on January 1, 2022. 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 will apply it to transactions after the effective date of January 1, 2022. January 1, 2022 50 2021 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2021 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. Amendments to IAS 1 and IFRS Practice Statement 2 — Disclosure of Accounting Policy Information Amendments to IAS 8 — Definition of Accounting Estimates The amendments to IAS 1 — Presentation of Financial Statements and IFRS Practice Statement 2 — Making Material Judgements require that an entity discloses its material accounting policies, instead of its significant accounting policies. January 1, 2023 The amendment is effective for annual periods beginning on or after January 1, 2023. This change will impact disclosures in Note 2 to the Notes to the Consolidated Financial Statements. The amendments introduce a definition of accounting estimates and are intended to help entities distinguish changes in accounting policies from changes in accounting estimates. Under the new definition, accounting estimates are “monetary amounts in financial statements that are subject to measurement uncertainty”. This distinction is important because changes in accounting policies must be applied retrospectively while changes in accounting estimates are accounted for prospectively. The amendment is effective for annual periods beginning on or after January 1, 2023. This amendment is currently being assessed by the Company to determine the impact. January 1, 2023 Amendments to IAS 12 — Deferred Tax related to Assets and Liabilities arising from a Single Transaction The amendments narrow the scope of the initial recognition exemption to clarify that the initial recognition exemption does not apply to transactions in which equal amounts of deductible and taxable temporary differences arise on initial recognition. January 1, 2023 The amendment is effective for annual periods beginning on or after January 1, 2023. This amendment is currently being assessed by the Company to determine the impact. 51 For the Fourth Quarter and Year Ended December 31, 2021 Management’s Discussion and Analysis | 2021 ISC® Annual Report8.5 Financial measures and key performance 8.8 Non-IFRS financial measures This MD&A includes certain measures that 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. indicators Revenue, expenses and net income are key performance indicators the Company uses to manage its business and evaluate its financial results and operating performance. In addition to these results, which are reported in accordance with IFRS, certain non-IFRS measures are supplemental indicators of operating performance and financial position as well as for internal planning purposes. The Company evaluates its performance against these metrics by comparing actual results to management budgets, forecasts and prior period results. These non-IFRS financial measures include EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin and free cash flow. Refer to section 8.8 “Non-IFRS financial measures”. 8.6 Internal controls over financial reporting The Company’s management, including the President and Chief Executive Officer and the 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. No changes in our internal controls over financial reporting that have occurred during the period have materially affected or are reasonably likely to materially affect our internal controls over financial reporting. It should be noted that all internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. 8.7 Disclosure controls and procedures The Company’s management, including the President and Chief Executive Officer and the 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 Chief Financial Officer, on a timely basis so that appropriate decisions can be made regarding public disclosures. 52 2021 ISC® Annual Report | Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2021Most comparable IFRS financial measure Net income Non-GAAP Performance Measure Why we use it EBITDA • To evaluate performance and EBITDA Margin profitability of segments and subsidiaries as well as the conversion of revenue. • We believe that certain investors and analysts use EBITDA to measure our ability to service debt and meet other performance obligations. • EBITDA is also used as a component of determining short-term incentive compensation for employees. How we calculate it EBITDA: Net income add Depreciation and amortization, net finance expense, income tax expense EBITDA Margin: EBITDA divided by Total revenue Adjusted EBITDA • To evaluate performance and Adjusted EBITDA: Net income Adjusted EBITDA Margin profitability of segments and subsidiaries as well as the conversion of revenue while excluding non-operational and share-based volatility. • We believe that certain investors and analysts use Adjusted EBITDA to measure our ability to service debt and meet other performance obligations. EBITDA add (remove) Share-based compensation expense, stock option expense, acquisition and integration costs, gain on disposal of property, plant and equipment assets Adjusted EBITDA Margin: Adjusted EBITDA divided by Total revenue Free Cash Flow • To show cash available for debt repayment and reinvestment into the Company. • We believe that certain investors and analysts use this measure to value a business and its underlying assets. Net cash flow provided by operating activities Net cash flow provided by operating activities deduct (add) Net change in non-cash working capital, cash additions to property, plant and equipment, cash additions to intangible assets 8.9 Non-IFRS financial measures definition EBITDA is defined as earnings before interest, taxes, depreciation and amortization expense. Adjusted EBITDA adjusts EBITDA for share-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. 53 For the Fourth Quarter and Year Ended December 31, 2021 Management’s Discussion and Analysis | 2021 ISC® Annual Report 2021 Consolidated Financial Statements For the Year Ended December 31, 2021 Table of Contents Management’s Responsibility ............................................................................................................................55 Independent Auditor’s Report ...........................................................................................................................56 Consolidated Statements of Financial Position ..................................................................................................59 Consolidated Statements of Comprehensive Income ...................................................................................... 60 Consolidated Statements of Changes in Equity ................................................................................................. 61 Consolidated Statements of Cash Flows ............................................................................................................62 Notes to the Consolidated Financial Statements ...............................................................................................63 1 Nature of the Business ................................................................................................................................63 2 Basis of Presentation...................................................................................................................................63 3 Summary of Significant Accounting Policies .............................................................................................. 66 4 Trade and Other Receivables ...................................................................................................................... 77 5 Contract Assets ........................................................................................................................................... 77 6 Seasonality .................................................................................................................................................. 77 7 Property, Plant and Equipment ..................................................................................................................78 8 Right-of-use Assets .....................................................................................................................................79 9 Intangible Assets ........................................................................................................................................ 80 10 Goodwill ...................................................................................................................................................... 81 11 Accounts Payable and Accrued Liabilities ...................................................................................................82 12 Contract Liabilities ......................................................................................................................................82 13 Lease Obligations ........................................................................................................................................82 14 Tax Provision ...............................................................................................................................................83 15 Share-Based Compensation Plans ..............................................................................................................85 16 Debt.............................................................................................................................................................87 17 Liabilities Arising from Financing Activities ................................................................................................ 89 18 Earnings Per Share ..................................................................................................................................... 89 19 Equity and Capital Management ................................................................................................................ 90 20 Financial Instruments and Related Risk Management ............................................................................... 90 21 Revenue ......................................................................................................................................................93 22 Related Party Transactions ........................................................................................................................ 94 23 Compensation of Key Management Personnel ......................................................................................... 94 24 Segment Information ................................................................................................................................. 94 25 Acquisitions ................................................................................................................................................ 96 26 Net Change in Non-Cash Working Capital ...................................................................................................97 27 Government Grants ....................................................................................................................................97 28 Commitments and Contingencies.............................................................................................................. 98 29 Pension Expense ........................................................................................................................................ 98 30 Subsequent Events .................................................................................................................................... 99 54 2021 ISC® Annual Report | Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2021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. Shawn B. Peters, CPA, CA, ICD.D President and Chief Executive Officer March 15, 2022 Robert (Bob) Antochow, CPA, CA, CMA Chief Financial Officer 55 For the Fourth Quarter and Year Ended December 31, 2021 Consolidated Financial Statements | 2021 ISC® Annual Report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, 2021 and December 31, 2020, 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, 2021 and 2020, 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 Matter Key audit matter is a matter that, in our professional judgment, was of most significance in our audit of the financial statements for the year ended December 31, 2021. This matter was addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter. Goodwill- Services Segment— Refer to Notes 3 and 10 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 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 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 revenue forecasts, perpetual growth rate and the selection of the discount rate. This 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 revenue forecasts, 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 management’s historical forecasts to actual results. • Evaluated the reasonableness of management’s revenue forecasts 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. 56 2021 ISC® Annual Report | Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2021• With the assistance of fair value specialists: – Evaluated the selection of the perpetual growth rate by comparing management’s selected perpetual growth rate to forecasted 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 rate and developing a range of independent discount rates and comparing to the discount rate selected by management. Other Information Management is responsible for the other information. The other information comprises: • Management’s Discussion and Analysis • The information, other than the financial statements and our auditor’s report thereon, in the Annual Report. Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor’s report. We have nothing to report in this regard. The Annual Report is expected to be made available to us after the date of the auditor’s report. If, based on the work we will perform on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact to those charged with governance. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company’s financial reporting process. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or 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. 57 For the Fourth Quarter and Year Ended December 31, 2021 Consolidated Financial Statements | 2021 ISC® Annual Report• 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 From the matters communicated with those charged with governance, we determine those matters that regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to were of most significance in the audit of the financial statements of the current period and are therefore bear on our independence, and where applicable, related safeguards. the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes From the matters communicated with those charged with governance, we determine those matters that were of most public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe should not be communicated in our report because the adverse consequences of doing so would these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely reasonably be expected to outweigh the public interest benefits of such communication. rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of 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 15, 2022 March 15, 2022 58 2021 ISC® Annual Report | Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2021 Consolidated Statements of Financial Position (thousands of CAD) 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 (loss) income Retained earnings Total shareholders’ equity Total liabilities and shareholders’ equity *See Note 2 See Note 28 for Commitments and Contingencies See accompanying Notes As at December 31, 2021 As at December 31, 2020 (restated*) Note As at January 1, 2020 (restated*) 4 5 7 8 9 10 14 11 12 13 14 16 13 14 16 15 19 15 $ 40,104 36 12,771 866 8 2,662 56,447 1,351 7,861 61,067 77,134 28,638 176,051 $ 232,498 $ 26,482 1,488 1,847 7,008 – 80 36,905 7,186 6,181 40,975 3,546 57,888 19,955 2,464 (355) 115,641 137,705 $ 232,498 $ $ $ $ 33,946 52 17,031 1,053 476 2,825 55,383 2,160 7,580 69,954 77,455 28,845 185,994 241,377 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 98,088 121,125 241,377 $ $ $ 23,731 475 12,648 1,623 1,736 2,120 42,333 2,998 9,668 40,011 45,529 30,175 128,381 170,714 18,096 1,436 1,845 810 2,000 468 24,665 8,967 7,543 16,000 173 32,683 19,955 2,153 5 91,263 113,376 170,714 $ APPROVED BY THE BOARD OF DIRECTORS ON MARCH 15, 2022: Joel Teal Director Tony Guglielmin Director 59 For the Fourth Quarter and Year Ended December 31, 2021 Consolidated Financial Statements | 2021 ISC® Annual Report Consolidated Statements of Comprehensive Income Note 21 27 7, 8, 9 (thousands of CAD) 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 (loss) income Items that may be subsequently reclassified to net income 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 Note 2 See accompanying Notes 14 18 18 Year Ended December 31, 2021 Year Ended December 31, 2020 (restated*) $ 169,379 $ 136,723 48,757 40,359 13,778 7,992 3,430 3,872 3,044 1,393 122,625 46,754 140 (2,813) (2,673) 44,081 (12,003) 32,078 (1,048) (13) (1,061) 31,017 1.83 1.78 $ $ $ $ 41,708 31,271 12,724 7,896 3,004 5,461 2,654 1,337 106,055 30,668 172 (2,217) (2,045) 28,623 (7,798) 20,825 732 (31) 701 21,526 1.19 1.18 $ $ $ $ 60 2021 ISC® Annual Report | Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2021 Consolidated Statements of Changes in Equity Note 2 15 15 (thousands of CAD) Balance at January 1, 2020 as audited IFRIC adjustment* Restated balance at January 1, 2020 Restated net income for the period Other comprehensive income Stock option expense Dividend declared Restated balance at December 31, 2020 Balance at January 1, 2021 Net income Other comprehensive (loss) Stock option expense Dividend declared Balance at December 31, 2021 *See Note 2 See accompanying Notes Accumulated Other Share Comprehensive Income Capital Retained Earnings 92,128 (865) 91,263 20,825 – – (14,000) 98,088 $ $ $ $ 19,955 – 19,955 – – – – 19,955 Equity Reserve 2,153 – 2,153 – – 223 – 2,376 $ $ 5 – 5 – 701 – – 706 $ 98,088 32,078 – – (14,525) $ 115,641 $ 19,955 – – – – $ 19,955 $ 706 – (1,061) – – 2,376 – – 88 – (355) $ 2,464 $ $ $ $ Total $ 114,241 (865) 113,376 20,825 701 223 (14,000) $ 121,125 $ 121,125 32,078 (1,061) 88 (14,525) $ 137,705 61 For the Fourth Quarter and Year Ended December 31, 2021 Consolidated Financial Statements | 2021 ISC® Annual Report Consolidated Statements of Cash Flows (thousands of CAD) Operating Net income Year Ended December 31, 2021 Year Ended December 31, 2020 (restated*) Note $ 32,078 $ 20,825 Add: Charges not affecting cash Depreciation Amortization Foreign exchange (gain) loss Deferred tax expense recognized in net income Service concession arrangements Right-of-use asset modifications loss (Gain) 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 Recovery on acquisition post-closing adjustments 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 Financing fees Proceeds of long-term debt Repayment of operating loan Proceeds of operating loan Dividend paid Net cash flow (used in) provided by financing activities Effects of exchange rate changes on cash held in foreign currencies Increase in cash Cash, beginning of year Cash, end of year 7, 8 9 21 15 26 25 4 13 13 16 16 16 17 17 *See Note 2 See accompanying Notes 2,728 11,050 (21) (1,298) (269) – (2) 2,673 88 14,185 61,212 140 2 – (10) (2,217) – 1,719 (366) (2,547) (354) (2,014) (35,000) (359) – – – (14,000) (54,274) (414) 6,158 33,946 40,104 $ $ 2,888 9,836 325 1,483 (249) 73 9 2,045 223 3,521 40,979 172 2 395 (63) (1,160) (70,161) – (70,815) (1,365) (425) (1,920) (68,000) (362) 126,316 (9,816) 9,816 (14,000) 40,244 (193) 10,215 23,731 33,946 62 2021 ISC® Annual Report | Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2021 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 Company is a provider of registry and information management services for public data and records. The head and registered office of the Company is 300 - 10 Research Drive, Regina, Saskatchewan, S4S 7J7. The Company maintains Canadian office locations in Regina, Saskatoon, Vernon, Toronto and an international office located in Dublin, Ireland. ISC’s head office is located in Regina. The Company 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, 2021, 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, 2021, for issue on March 15, 2022. 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. 63 For the Fourth Quarter and Year Ended December 31, 2021 Notes to the Consolidated Financial Statements | 2021 ISC® Annual ReportUse of estimates and judgments The preparation of these consolidated financial statements, in conformity with IFRS, requires management to make estimates and underlying assumptions and judgments that affect the accounting policies and reported amounts of assets, liabilities, revenue and expenses. Estimates and underlying assumptions are reviewed on an ongoing basis. Actual results may differ from these estimates. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Critical accounting estimates and judgments are those that have a significant risk of causing material adjustment. Management believes that the following are the significant accounting estimates and judgments used in the preparation of the consolidated financial statements. Significant items subject to estimates and underlying assumptions include: • the carrying value, impairment and estimated useful lives of property, plant and equipment (Note 7); • the carrying value, impairment and estimated useful lives of intangible assets (Note 9) and goodwill (Note 10); • the recoverability of deferred tax assets (Note 14); and • the amount and timing of revenue from contracts from customers recognized over time with milestones (Note 21). 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 accounting pronouncements or policies and revised standards, along with any consequential amendments, effective January 1, 2021, or on such date as they became applicable. These changes were made in accordance with the applicable transitional provisions. Accounting for configuration and customization costs related to implementing SaaS arrangements During the year, the Company revised its accounting policy in relation to configuration and customization costs incurred in implementing Software-as-a-service (“SaaS”) arrangements in response to the International Financial Reporting Interpretations Committee (“IFRIC”) agenda decision clarifying its interpretation of how current accounting standards apply to these types of arrangements. The Company’s accounting policy has historically been to capitalize costs related to the configuration and customization of SaaS arrangements as intangible assets in the consolidated statements of financial position. Following the issuance of this new IFRIC agenda decision, current SaaS arrangements were identified and assessed to determine if the Company has control of the software. For those arrangements where control does not exist, the Company derecognized the intangible previously capitalized. Adjustments were identified related to the capitalization of financial system implementation costs incurred in 2019 through 2021. The adoption of the above agenda decision has resulted in recognition of costs to configure SaaS arrangements as a before-tax expense of $60 thousand in the consolidated statements of comprehensive income in the current year. In addition to the impacts noted below to the consolidated statements of income and financial position, on the consolidated statements of cash flows for the year ended December 31, 2020, additions to intangible assets were reduced by $220 thousand offset by a reduction in net income of $58 thousand, reduction in amortization of $141 thousand and deferred tax expense recognized in net income of $21 thousand. As a result of this adjustment, there is no impact on earnings per share at the end of December 31, 2021 and 2020. 64 2021 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2021Reconciliation of consolidated statements of income for the year ended December 31, 2020 Below is the effect of transition of the adoption of the IFRIC agenda decision item on our consolidated statements of income for the year ended December 31, 2020. (thousands of CAD, unaudited) Revenue Wages and salaries Depreciation and amortization Professional and consulting services Total other expense excluding the above Total expenses Net income before items noted below Net finance (expense) Income before tax Income tax expense Net income 2020 (as reported) IFRIC Adjustment $ $ 136,723 40,165 12,865 6,784 46,162 105,976 30,747 (2,045) 28,702 (7,819) 20,883 $ $ – 31 (141) 189 – 79 (79) – (79) 21 (58) 2020 Restated $ 136,723 40,196 12,724 6,973 46,162 106,055 30,668 (2,045) 28,623 (7,798) $ 20,825 Reconciliation of consolidated statements of financial position as at January 1, 2020 and December 31, 2020 Below is the effect of transition of the adoption of the IFRIC agenda decision item on our consolidated statements of financial position as at January 1, 2020 and December 31, 2020. As Previously Reported (thousands of CAD, unaudited) Assets 41,196 Intangible assets Deferred tax asset 29,855 Other current and non-current assets 100,528 Total assets $ 171,579 Liabilities Total current and non-current $ As at January 1, 2020 As at December 31, 2020 IFRIC Adjustment Restated As Previously Reported IFRIC Adjustment $ $ (1,185) 320 – (865) $ 40,011 30,175 100,528 $ 170,714 $ 71,218 28,504 142,578 $ 242,300 $ $ (1,264) $ 341 – (923) $ Restated 69,954 28,845 142,578 241,377 liabilities $ 57,338 $ $ 57,338 $ 120,252 $ – $ 120,252 Shareholders’ equity Share capital Equity settled employee benefit reserve Accumulated other comprehensive income Retained earnings Total shareholders’ equity Total liabilities and shareholders’ equity 19,955 2,153 5 92,128 114,241 – – – 19,955 19,955 2,153 2,376 – (865) (865) 5 91,263 113,376 706 99,011 122,048 – – – (923) (923) 19,955 2,376 706 98,088 121,125 $ 171,579 $ (865) $ 170,714 $ 242,300 $ (923) $ 241,377 65 For the Fourth Quarter and Year Ended December 31, 2021 Notes to the Consolidated Financial Statements | 2021 ISC® Annual Report Reclassifications On January 1, 2021, the Company changed the presentation of board compensation costs, including certain share-based compensation expenses related to the deferred shared units (“DSUs”) on the consolidated statements of comprehensive income to reflect them in wages and salaries expense instead of professional and consulting services. With this change, all share-based compensation, including DSUs, performance share units (“PSUs”), share appreciation rights (“SARs”) and stock options, is reflected in wages and salaries on the consolidated statements of comprehensive income. Management believes the revised presentation provides more relevant information to users. The impacts of the reclassification on the comparative 2020 results are as follows: (thousands of CAD) Wages and salaries Professional and consulting services All other expenses in total expenses Total expenses 2020 (restated*) 40,196 6,973 58,886 106,055 $ $ $ Year Ended December 31, 2020 (as reclassified) $ 41,708 5,461 58,886 $ 106,055 Reclassification 1,512 (1,512) – – $ *See table called “Reconciliation of consolidated statements of income for the year ended December 31, 2020” on the previous page. These reclassifications have no impact on net income or earnings per share. 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 that 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. 66 2021 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2021 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 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. 67 For the Fourth Quarter and Year Ended December 31, 2021 Notes to the Consolidated Financial Statements | 2021 ISC® Annual Report Goodwill Goodwill arising on the acquisition of a business represents the excess of the purchase price over the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquired business recognized at the date of acquisition. Goodwill is initially recognized as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Impairment of goodwill For the purpose of impairment testing, goodwill is allocated to the CGUs expected to benefit from the synergies of the combination. CGUs are tested for impairment annually or more frequently if events indicate that the units may be impaired. The Company’s reporting segments that correspond to the CGUs for impairment testing are disclosed in Note 10. When the recoverable amount of the CGU is less than the carrying amount of the CGU, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the CGU on a pro-rata basis. An impairment loss recognized for goodwill is not reversed in a subsequent year. The Company performs its annual review of goodwill in December each year. Business acquisition Business acquisitions are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated at the date of acquisition as the sum of the fair values of the assets transferred by the Company and the liabilities incurred by the Company to the former owners of the acquiree in exchange for the control of the acquiree. Acquisition costs are recognized in profit or loss as incurred. At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at their fair 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 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 12 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 68 2021 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2021• 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, and 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 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 either at 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 69 For the Fourth Quarter and Year Ended December 31, 2021 Notes to the Consolidated Financial Statements | 2021 ISC® Annual Report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), or stand-alone selling price for each distinct service that 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 from 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. The Company categorizes its Services revenue into three categories, namely Corporate Solutions, Regulatory Solutions, and Recovery 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. 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. Recovery Solutions offers a fully managed service across Canada and the United States, 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 administration fees and commissions earned by the provision of asset recovery services. Administration fee revenue is earned over time throughout the management of each asset recovery file, however, commissions and other revenue is earned at a point in time when services are delivered. In the case of commissions, they are 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. 70 2021 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2021– 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 performance 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 performance applicable to those obligations. Revenue associated with solution definition and implementation services is recognized either at a point in time or over time depending on the terms of the contract and the performance obligations therein. Most prevalent are contracts where the revenue is recognized over a period of time. The Company has an enforceable right to payment for service work done and revenue is recognized over time using either a milestone-based approach or an estimate of the proportion of costs incurred for work performed to date, relative to the total estimated cost of completing the performance obligations of the contract. Contract terms determine which method is more appropriate. Hosting, support and maintenance revenue is recognized according to the delivery of the performance obligations in the contract and the stand-alone selling price allocated to the obligations. These services may be provided through either fixed-price, deliverable-based contracts or fee-for-service contracts. Hosting contracts generally result in linear monthly revenue recognition over the term of the contract. Service revenue from fixed-price contracts to provide services is recognized by reference to the stage of completion as defined in the contract when the outcome of the contract can be estimated reliably. Service revenue from time and material contracts is recognized at the contractual rates as labour hours are delivered, and direct expenses are incurred. Amounts received from customers in advance of the satisfaction of our performance obligations are recorded as “contract liabilities” on our consolidated statements of financial position. Amounts in “contract liabilities” are recognized into revenue as we render services or achieve performance milestones. Costs the Company incurs related to the fulfilment of a contract, but prior to reaching a performance milestone are recorded as a “contract asset” on the consolidated statements of financial position. Once the milestone is achieved, these costs are recorded in the consolidated statements of comprehensive income. Service concession arrangements Service concession arrangements are contracts between the Company and government entities and can involve the design, build, finance, operation, and maintenance of public infrastructure in which the government entity controls: • the services provided by the Company under the concession arrangement; and • a significant residual interest in the infrastructure. The Company recognizes an intangible asset arising from a service concession arrangement when it has a right to charge for the usage of the concession infrastructure. The intangible asset is measured at fair value upon initial recognition and is then amortized over its expected useful life. Amortization commences when the infrastructure is available for use. Revenue related to construction or upgrade services under a concession arrangement is recognized based on the stage of completion of the work performed. Government grants 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 are 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. 71 For the Fourth Quarter and Year Ended December 31, 2021 Notes to the Consolidated Financial Statements | 2021 ISC® Annual ReportFinancial instruments Financial assets 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. (ii) Financial Assets at FVTOCI – Equity investments 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. 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 72 2021 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2021 Impairment of financial assets 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 12 months after the reporting date. Borrowing costs Borrowing costs directly attributable to the purchase, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets until the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization. All other borrowing costs are recognized in profit or loss in the period in which they are incurred. Provisions Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. Share-based compensation plans The Company has established share-based compensation plans to provide directors and management of the Company with the opportunity to participate in the long-term success of ISC and promote a greater alignment of interests between its directors, management and shareholders. A long-term incentive plan utilizing PSUs and SARs was approved by the Board on May 15, 2020, which is described in Note 15. 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 DSU plan and a stock option plan, each of which is described in Note 15. 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 73 For the Fourth Quarter and Year Ended December 31, 2021 Notes to the Consolidated Financial Statements | 2021 ISC® Annual Report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. Recent accounting pronouncements The IAS Board and IFRIC issued the following new standards and amendments to standards and interpretations, which become effective for future periods. 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 three-year average annual yield rate • Equity volatility: based on ISC’s three-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. 74 2021 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2021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. The Company does not have any onerous contracts as of December 31, 2021, and as a result will not have an adjustment to equity associated with adoption of this standard on January 1, 2022. 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 will apply it to transactions after the effective date of January 1, 2022. January 1, 2022 75 For the Fourth Quarter and Year Ended December 31, 2021 Notes to the Consolidated Financial Statements | 2021 ISC® Annual Report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. Amendments to IAS 1 and IFRS Practice Statement 2 — Disclosure of Accounting Policy Information Amendments to IAS 8 — Definition of Accounting Estimates The amendments to IAS 1 — Presentation of Financial Statements and IFRS Practice Statement 2 — Making Material Judgements require that an entity discloses its material accounting policies, instead of its significant accounting policies. January 1, 2023 The amendment is effective for annual periods beginning on or after January 1, 2023. This change will impact disclosures in Note 2 to the Notes to the Consolidated Financial Statements. The amendments introduce a definition of accounting estimates and are intended to help entities distinguish changes in accounting policies from changes in accounting estimates. Under the new definition, accounting estimates are “monetary amounts in financial statements that are subject to measurement uncertainty”. This distinction is important because changes in accounting policies must be applied retrospectively while changes in accounting estimates are accounted for prospectively. The amendment is effective for annual periods beginning on or after January 1, 2023. This amendment is currently being assessed by the Company to determine the impact. January 1, 2023 Amendments to IAS 12 — Deferred Tax related to Assets and Liabilities arising from a Single Transaction The amendments narrow the scope of the initial recognition exemption to clarify that the initial recognition exemption does not apply to transactions in which equal amounts of deductible and taxable temporary differences arise on initial recognition. January 1, 2023 The amendment is effective for annual periods beginning on or after January 1, 2023. This amendment is currently being assessed by the Company to determine the impact. 76 2021 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 20214 Trade and Other Receivables The components of trade and other receivables are as follows: (thousands of CAD) Trade receivables Consideration due from vendor1 Government grants receivable2 GST/HST/VAT receivables Other Total trade and other receivables December 31, 2021 $ 12,679 – – 61 31 $ 12,771 1 During the second quarter of 2021, working capital of $1.7 million related to the Paragon acquisition was settled (see Note 25). 2 See Note 27. 5 Contract Assets The components of contract assets are as follows: (thousands of CAD) Unbilled revenue Contract fulfilment costs Total contract assets $ December 31, 2021 724 142 866 $ $ December 31, 2020 14,247 1,919 525 284 56 17,031 $ $ December 31, 2020 349 704 1,053 $ Unbilled revenue represents the aggregate asset value on the consolidated statements of financial position of all instances where revenue has been recognized but not yet invoiced to the customer. Contract assets in this category are reclassified to trade receivables when the customer is invoiced. Contract fulfilment costs are costs the Company incurs related to the fulfilment of performance obligations in contracts where revenue is recognized over time, but prior to reaching a performance milestone. Once the milestone is achieved, these costs, along with the associated revenue, are recorded 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 (2020 — nil). During the year, the Company recognized an impairment loss of $0.3 million on unbilled revenue related to a customer contract (2020 — nil). The impairment is included in financial services in the consolidated statements of comprehensive income. 6 Seasonality Our Registry Operations segment experiences moderate seasonality, primarily because Land Titles revenue fluctuates in line with real estate transaction activity in Saskatchewan. Typically, our second and third quarters generate higher revenue during the fiscal year when real estate activity is traditionally highest. In our Services segment, our Corporate Solutions and Regulatory Solutions revenue is reasonably diversified and has little seasonality; instead, it fluctuates in line with the general economic drivers. Some smaller categories of products or services can have some seasonal variation, increasing slightly during the second and fourth quarters. In particular, our collateral management services experiences 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. The Company has observed that its historical pattern of seasonality in Registry Operations, and to some degree in Services, has been impacted due to the COVID-19 pandemic. Although the current year trends would support historical patterns, at this time, we are uncertain if or when seasonality will return to historical patterns. Our Technology Solutions segment 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, 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. 77 For the Fourth Quarter and Year Ended December 31, 2021 Notes to the Consolidated Financial Statements | 2021 ISC® Annual Report 7 Property, Plant and Equipment (thousands of CAD) Cost Balance at December 31, 2019 Acquired assets1 Additions Disposals Transfers Foreign exchange adjustments Balance at December 31, 2020 Additions Disposals Foreign exchange adjustments Balance at December 31, 2021 Accumulated depreciation Balance at December 31, 2019 Depreciation Disposals Foreign exchange adjustments Balance at December 31, 2020 Depreciation Impairment2 Disposals Foreign exchange adjustments Balance at December 31, 2021 Carrying value At December 31, 2020 At December 31, 2021 Leasehold Improvements Office Furniture Office Equipment Hardware Assets Under Development Total $ 10,324 – – (430) – 2 9,896 – (1,922) (3) $ 7,971 $ 8,462 458 (430) 1 $ 8,491 361 128 (1,922) (1) $ 7,057 $ 3,259 – – (26) – 3 3,236 – (131) (3) $ 3,102 $ 2,996 76 (26) – $ 3,046 50 7 (131) (1) $ 2,971 $ 1,405 914 $ $ $ 190 131 $ $ $ $ $ $ $ 194 – 6 (23) – – 177 – (16) – 161 169 17 (23) – 163 7 – (16) – 154 $ 3,058 3 13 (15) 30 15 3,104 – (278) (18) $ 2,808 $ 2,210 363 (15) 9 $ 2,567 260 – (278) (16) $ 2,533 14 7 $ $ 537 275 $ $ $ $ $ $ $ – – 44 – (30) – 14 10 – – 24 – – – – – – – – – – $ 16,835 3 63 (494) – 20 16,427 10 (2,347) (24) $ 14,066 $ 13,837 914 (494) 10 $ 14,267 678 135 (2,347) (18) $ 12,715 14 24 $ 2,160 $ 1,351 1 Acquired assets – see Note 25. 2 Impairment - During the third quarter of 2021, the Company made the decision to close three of its regional service centres in Saskatchewan. The Company recorded impairments of $0.1 million in leasehold improvements (2020 — nil) related to these regional service centres. 78 2021 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2021 8 Right-of-use Assets (thousands of CAD) Cost Balance at January 1, 2020 Additions and modifications Disposals Foreign exchange adjustments Balance at December 31, 2020 Additions and modifications Disposals Foreign exchange adjustments Balance at December 31, 2021 Accumulated depreciation Balance at January 1, 2020 Depreciation Disposals Foreign exchange adjustments Balance at December 31, 2020 Depreciation Impairment2 Disposals Foreign exchange adjustments Balance at December 31, 2021 Carrying value At December 31, 2020 At December 31, 2021 Property and Equipment1 $ $ $ $ $ $ $ $ 17,504 229 (811) 71 16,993 2,223 (166) (96) 18,954 7,836 1,974 (436) 39 9,413 1,902 13 (166) (69) 11,093 7,580 7,861 1 The Company’s right-of-use assets consist primarily of property leases associated with the lease of office space. 2 Impairment – During the third quarter of 2021, the Company made the decision to close three of its regional service centres in Saskatchewan. The Company recorded impairments of $13 thousand in right-of-use assets (2020 — nil) related to these regional service centres. 79 For the Fourth Quarter and Year Ended December 31, 2021 Notes to the Consolidated Financial Statements | 2021 ISC® Annual Report 9 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 Total Contracts, Customer & Partner $ 2,412 $ 28,286 $ 2,885 $ 147,333 (1,185) (1,185) – – $ 2,412 $ 28,286 $ 1,700 $ 146,148 38,120 1,409 (3,722) – 402 37,600 – (560) – 49 – 1,379 – (2,126) 2 $ $ 2,391 $ 65,375 – – – (58) $ 182,357 2,486 (1,870) – (560) $ 65,317 $ 2,808 $ 182,413 955 2,486 – (545) (88) – – – – – – – 136 260 – (320) – 39 260 – (2,726) – – – – (116) 1,738 – $ 26,951 $ 78,502 $ 2,174 $ 6,009 – – 237 (217) $ 29,417 $ 76,880 $ 2,038 $ 5,415 – 30 – 388 176 (thousands of CAD) Cost Balance at December 31, 2019 $ 29,417 $ 76,880 $ 2,038 $ 5,415 IFRIC adjustment* – Restated balance at January 1, 2020 Acquired assets1 Additions Disposals Transfers Foreign exchange adjustments Restated balance at December 31, 2020 – Additions (959) Disposals – Transfers (34) Foreign exchange adjustments Balance at December 31, 2021 $ 26,079 $ 78,771 $ 2,011 $ 6,029 $ 1,398 Accumulated depreciation Balance at December 31, 2019 $ 16,603 $ 76,569 $ Amortization Disposals Foreign exchange adjustments Restated balance at $ 17,363 $ 76,937 $ 1,267 $ 3,515 December 31, 2020 538 3,046 Amortization – (911) Disposals (70) – Foreign exchange adjustments Balance at December 31, 2021 $ 19,498 $ 77,323 $ 1,471 $ 3,983 $ Carrying value Restated balance at December 31, 2020 At December 31, 2021 $ 9,588 $ 1,565 $ $ 6,581 $ 1,448 $ 907 $ 2,494 $ 540 $ 2,046 $ 3,476 (2,716) – – (911) 39 – 157 (959) (34) 663 – – – (163) – – 269 – 484 (116) – 332 (320) 31 309 – (105) 761 – 29 386 – – 884 $ 2,725 $ 1,456 $ 7,900 $ 318 – 65 4,465 (560) 17 $ 1,499 $ 11,822 $ 6,614 – (28) $ 18,408 $ – – – – $ 106,137 9,836 (3,712) 142 $ 112,403 – 11,050 – (1,870) – (237) – – $ 121,346 955 $ 69,954 892 $ 53,553 $ 735 $ 46,909 $ 2,808 $ 61,067 1 Acquired assets – see Note 25 * See Note 2 80 2021 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2021 13.7 per cent (2020 — 12.3 per cent) and a perpetual growth rate of 2.0 per cent (2020 — 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 (2020 — 2.75 per cent) used in the annual test. In 2021, annual impairment testing for this segment used a pre- tax discount rate of 18.2 per cent (2020 — 18.2 per cent). Technology Solutions Key assumptions for this segment, which has operations in both 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. This segment has been negatively impacted by COVID-19 as local governments have deferred registry projects and redirected attention to the preservation of the health and safety of their populations. Performance during the multi- year planning period is consistent with past pre-COVID-19 performance, which experienced growth in operating cash flow in excess of the perpetual growth rate of 2.0 per cent (2020 — 2.0 per cent) used in the annual test. In 2021, annual impairment testing for this segment used a pre-tax discount rate of 14.9 per cent (2020 — 15.2 per cent) in its Canadian- based operations and 15.0 per cent (2020 — 13.3 per cent) in its Ireland-based operations. 10 Goodwill The components of goodwill are as follows: (thousands of CAD) December 31, December 31, 2020 2021 Balance, beginning of the year Additions1 Foreign exchange adjustment Balance, end of year $ 77,455 – (321) $ 77,134 $ 45,529 31,657 269 $ 77,455 1 Acquisitions – see Note 25 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) Registry Operations Services Technology Solutions Balance, end of year December 31, December 31, 2020 2021 $ 1,200 67,372 8,562 $ 77,134 $ 1,200 67,372 8,883 $ 77,455 The Company performs a goodwill impairment test annually on December 31 and whenever there is an indication of impairment. No impairment of goodwill was identified as a result of the Company’s most recent annual impairment test. The Company uses 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 used 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 2021, annual impairment testing for this segment used a pre-tax discount rate of 81 For the Fourth Quarter and Year Ended December 31, 2021 Notes to the Consolidated Financial Statements | 2021 ISC® Annual Report 11 Accounts Payable and Accrued Liabilities The components of accounts payable and accrued liabilities are as follows: (thousands of CAD) Trade payables Accrued liabilities Customer deposits Dividend payable Share-based accrued liabilities Total accounts payable and accrued liabilities 12 Contract Liabilities The components of contract liabilities are as follows: (thousands of CAD) December 31, 2021 December 31, 2020 $ 2,497 8,957 4,093 4,025 6,910 $ 26,482 $ $ 3,338 8,939 3,664 3,500 2,503 21,944 December 31, 2021 December 31, 2020 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 $ 329 1,159 $ 1,488 $ $ 326 1,698 2,024 (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 2021 that was included in the contract liability balance at December 31, 2020 is as follows: (thousands of CAD) 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 2021 $ 326 1,406 $ 331 924 $ 1,732 $ 1,255 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. 13 Lease Obligations (thousands of CAD) 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, 2020 2021 $ 8,852 – 354 2,223 (2,368) (28) $ 9,033 $ 10,812 106 425 (178) (2,345) 32 8,852 $ 1 Lease payments net of interest expense represents the principal portion of lease payments reflected on the consolidated statements of cash flows. 82 2021 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2021 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) 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 14 Tax Provision Year Ended December 31, 2020 2021 $ 2,201 2,056 2,010 816 829 2,426 $ 10,338 (1,305) $ 9,033 $ 2,342 1,798 1,663 1,659 462 2,289 $ 10,213 (1,361) 8,852 $ 1,847 7,186 $ 9,033 1,996 6,856 8,852 $ The Company is subject to federal and provincial income taxes at an estimated combined statutory rate of 27.0 per cent (2020 — 27.0 per cent). (thousands of CAD) Current tax expense Deferred tax (recovery) expense Income tax expense *See Note 2 Year Ended December 31, 2020 (restated*) 2021 $ 13,301 (1,298) $ 12,003 $ $ 6,315 1,483 7,798 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) Net income before tax Combined statutory income tax rate Expected income tax expense Increase (decrease) in income tax resulting from: Non-deductible expenses Foreign income tax differential Adjustment to prior years’ deferred tax liabilities Other Income tax expense *See Note 2 Year Ended December 31, 2020 (restated*) 2021 $ 44,081 27.00% 11,902 $ 28,623 27.00% 7,729 49 39 (25) 38 $ 12,003 67 (278) 269 11 7,798 $ 83 For the Fourth Quarter and Year Ended December 31, 2021 Notes to the Consolidated Financial Statements | 2021 ISC® Annual Report 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) Property, plant and equipment Right-of-use assets Intangible assets Goodwill Lease obligations Share-based compensation and other Net deferred tax assets (liabilities) Net Balance Recognized in Profit or Loss Movement $ Foreign $ $ Net Balance Exchange December 31, 2021 340 (1) $ (1,880) 15 20,311 10 (1,376) – 2,196 (15) – 2,866 9 $ 22,457 253 105 (25) (460) (130) 1,555 January 1, 2021 88 (2,000) 20,326 (916) 2,341 1,311 $ 21,150 $ 1,298 $ (thousands of CAD) Property, plant and equipment Right-of-use assets Intangible assets Goodwill Non-capital losses Lease obligations Share-based compensation and other Net deferred tax assets (liabilities) *See Note 2 $ Net Balance January 1, 2020 (restated*) 154 (2,531) 21,534 – 200 2,835 440 $ 22,632 Recognized in Profit or Loss (restated*) $ $ (66) $ 535 (1,194) (916) (214) (499) 871 (1,483) $ Exchange Movement Net Balance Foreign December 31, 2020 (restated*) 88 (2,000) 20,326 (916) – 2,341 1,311 21,150 - $ (4) (14) – 14 5 – 1 $ $ Deferred Tax Asset 145 (1,621) 25,316 – 1,934 2,864 $ 28,638 Deferred Tax Liability 195 $ (259) (5,005) (1,376) 262 2 (6,181) $ Deferred Tax Asset (restated*) 38 $ (1,900) 27,179 – – 2,230 1,298 $ 28,845 Deferred Tax Liability 50 (100) (6,853) (916) – 111 13 (7,695) $ $ 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. 84 2021 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2021 15 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, 2021, are as follows: Balance at December 31, 2019 PSUs granted March 26, 2020 PSUs credited as a result of cash dividends paid Balance at December 31, 2020 PSUs granted March 25, 2021 PSUs credited as a result of cash dividends paid Balance at December 31, 2021 Units 33,000.32 38,701.00 3,545.90 75,247.22 22,900.00 3,114.31 101,261.53 Weighted Average Award Price 16.10 $ 13.71 16.51 14.89 23.86 26.46 $ 17.28 $ 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, 2021, totalled $1.7 million (2020 — $0.7 million). The total carrying amount of the liability arising from the PSUs as of December 31, 2021, totalled $2.5 million (December 31, 2020 — $0.9 million). The short-term portion of the liability amount, which amounts to $1.3 million, is included within accounts payable and accrued liabilities and the remaining $1.2 million 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. 85 For the Fourth Quarter and Year Ended December 31, 2021 Notes to the Consolidated Financial Statements | 2021 ISC® Annual Report A summary of the status of the SAR plan and the changes within the year ended December 31, 2021, are as follows: Balance at December 31, 2019 SARs granted March 31, 2020 Balance at December 31, 2020 SARs granted March 25, 2021 SARs redeemed Balance at December 31, 2021 Units 243,116.00 291,386.00 534,502.00 133,791.00 (1,100.00) 667,193.00 Weighted Average Award Price 16.11 $ 13.71 14.80 23.86 16.11 $ 16.61 $ The share-based compensation expense related to the SARs for the year ended December 31, 2021, totalled $3.1 million (2020 — $1.2 million). The total carrying amount of the liability arising from SARs as of December 31, 2021, was $4.3 million (December 31, 2020 — $1.2 million). The short-term portion of the liability, which amounts to $1.9 million, is included within accounts payable and accrued liabilities and the remaining $2.4 million of the liability 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, 2021, and 2020 are as follows: Balance at December 31, 2019 DSUs granted June 30, 2020 DSUs credited as a result of cash dividends paid Balance at December 31, 2020 DSUs granted May 12, 2021 DSUs credited as a result of cash dividends paid DSUs redeemed Balance at December 31, 2021 Units 98,313.15 23,800.00 5,554.00 127,667.15 14,855.00 4,222.00 (3,601.11) 143,143.04 Weighted Average Award Price 17.05 $ 15.00 16.66 16.65 26.26 26.54 27.10 $ 17.68 $ 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, 2021, totalled $1.1 million (2020 — $1.0 million). The total carrying amount of the liability arising from the DSUs as of December 31, 2021, totalled $3.6 million (December 31, 2020 — $2.5 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, 2021, has been calculated using the market value of the Company’s Class A Shares on the TSX. 86 2021 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2021 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, 2021, and 2020 are as follows: Balance at December 31, 2019 Stock options granted during the year Balance at December 31, 2020 Stock options granted during the year Balance at December 31, 2021 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, 2020 — $17.27). The number of options exercisable at the end of the period was 1,430,339 (December 31, 2020 — 1,233,095) and had a weighted average exercise price of $17.22 (December 31, 2020 — $17.05) based on a range of exercise prices from $15.04 to $18.85 (December 31, 2020 — $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, 2021, totalled $0.1 million (2020 — $0.2 million). The total carrying amount of the equity settled employee benefit reserve arising from these stock options as of December 31, 2021, totalled $2.4 million (December 31, 2020 — $2.3 million). 16 Debt On September 17, 2021, the Company entered into an amended and extended credit agreement in connection with its secured credit facility (the “Credit Facility”) initially provided by its lenders on August 5, 2020. The maturity date of the Credit Facility was extended from August 5, 2022, to September 17, 2026. In addition, the amended agreement simplifies the pricing structure of the facility. The 2021 extension was considered to be a modification of debt for accounting purposes, whereas the August 5, 2020, agreement, which added an additional Canadian chartered bank as a lender and increased the amount available on the Credit Facility to $150.0 million from $80.0 million under the previous facility, was an extinguishment of debt for accounting purposes. The Credit Facility bears interest at a base rate of prime, bankers’ acceptance, or letter of credit fee plus a margin varying between 0.20 per cent and 2.00 per cent per annum depending on the type of advance and the performance on certain covenants (2020 — 0.75 per cent and 3.25 per cent per annum). 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 0.24 per cent and 0.40 per cent per annum depending on the performance on certain covenants (2020 — 0.35 per cent and 0.65 per cent per annum). Prior to maturity there are no mandatory repayments on the Credit Facility, except for repayments associated with significant asset sales. However, the Company may make voluntary prepayments at any time provided they are in minimum aggregate amounts of $1.0 million. The Company is amortizing costs of $0.4 million attributable to modifying the Credit Facility over the life of the facility using an effective interest rate that is currently 3.43 per cent. For the year ended December 31, 2021, an expense of $18 thousand (2020 — $0.4 million) was recognized in the consolidated statements of comprehensive income. The Credit Facility can be used for working capital needs and for general corporate purposes. 87 For the Fourth Quarter and Year Ended December 31, 2021 Notes to the Consolidated Financial Statements | 2021 ISC® Annual Report Term debt is as follows: (thousands of CAD) Non-current Revolving term facility Total non-current Total debt December 31, 2021 December 31, 2020 $ 40,975 $ 40,975 $ 40,975 $ 76,316 $ 76,316 $ 76,316 At December 31, 2021, non-cash drawings, consisting of letters of credit and similar, were nil (2020 — $0.2 million). The total unused and available portion of the Credit Facility at December 31, 2021, was $108.7 million (2020 — $73.5 million). The Credit Facility contains financial covenants that 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 2021 and 2020 was nil. 88 2021 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2021 17 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) Financing activities Interest paid Interest paid on lease obligations Principal repayments on lease obligations Repayment of long-term debt Financing fees Proceeds of long-term debt Repayment of operating loan Proceeds of operating loan Dividends paid Net cash flow (used in) provided by financing activities (a) (b) (b) (c) (c) (c) (d)1 (d)1 (e) 1 The operating loan was drawn and paid off in 2020, so no balance exists as at December 31, 2020. Year Ended December 31, 2020 2021 $ (2,547) (354) (2,014) (35,000) (359) – – – (14,000) $ (54,274) $ (1,365) (425) (1,920) (68,000) (362) 126,316 (9,816) 9,816 (14,000) 40,244 $ As at December 31, 2020 Cash Flows Non-cash Changes As at December 31, 2021 $ 223 Interest payable Lease obligation including current portion and interest paid 8,852 Long-term debt including current portion 76,316 3,500 Dividends payable $ 88,891 Dividends Declared Other $ (2,547) (a) $ – $ 2,440 $ 116 (2,368) (b) (c) (35,359) (14,000) (e) (54,274) $ $ – – 14,525 14,525 2,549 18 – 5,007 $ 9,033 40,975 4,025 54,149 $ As at December 31, 2019 Cash Flows Non-cash Changes As at December 31, 2020 $ 203 Interest payable Lease obligation including current portion and interest paid 10,812 Long-term debt including current portion 18,000 3,500 Dividends payable $ 32,515 Dividends Declared Other $ (1,365) (a) $ – $ 1,385 $ 223 (2,345) (b) 57,954 (c) (14,000) (e) 40,244 $ $ – – 14,000 14,000 385 362 – 2,132 $ $ 8,852 76,316 3,500 88,891 18 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, except number of shares and earnings per share) Net income Weighted average number of shares, basic Potential dilutive shares resulting from stock options Weighted average number of shares, diluted Earnings per share ($ per share) Total, basic Total, diluted *See Note 2 Year Ended December 31, 2020 (restated*) 2021 $ 32,078 17,500,000 517,509 18,017,509 20,825 $ 17,500,000 156,857 17,656,857 $ $ 1.83 1.78 $ $ 1.19 1.18 89 For the Fourth Quarter and Year Ended December 31, 2021 Notes to the Consolidated Financial Statements | 2021 ISC® Annual Report 19 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, except number of shares) Balance at January 1, 2020 No movement Balance at December 31, 2020 Balance at January 1, 2021 No movement Balance at December 31, 2021 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, 2021, consists of long-term debt, share capital, employee benefit reserve, accumulated other comprehensive income and retained earnings (comprising total shareholders’ equity). (thousands of CAD) Long-term debt Share capital Accumulated other comprehensive income Equity settled employee benefit reserve Retained earnings Capitalization *See Note 2 $ December 31, 2021 40,975 19,955 (355) 2,464 115,641 $ 178,680 December 31, 2020 (restated*) $ 76,316 19,955 706 2,376 98,088 $ 197,441 20 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 90 2021 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2021 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, 2021, is $52.9 million (December 31, 2020 — $51.0 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) 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, 2021 $ 40,104 36 8,328 3,527 916 $ 52,911 December 31, 2020 $ 33,946 52 9,808 5,868 1,355 $ 51,029 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 16). 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, 2021, and 2020. As the sensitivity is hypothetical, it should be used with caution. The Company is not exposed to significant interest rate risk. (thousands of CAD) December 31, 2021 December 31, 2020 + 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 $ 669 $ 669 $ 488 $ $ $ (669) (669) (488) $ $ $ 423 423 309 $ $ $ (423) (423) (309) * 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, 2021: (thousands of CAD) Long-term debt Lease obligations Accounts payable and accrued liabilities Total liabilities $ Carrying Amount 40,975 9,033 26,482 $ 76,490 $ Contractual Cash Flows 47,705 10,338 26,482 $ 84,525 $ 0-6 months 672 1,140 26,482 $ 28,294 $ 7-12 months 683 1,061 – $ 1,744 12+ months $ 46,350 8,137 – $ 54,487 Contractual cash flows for long-term debt and lease obligations includes principal and interest. 91 For the Fourth Quarter and Year Ended December 31, 2021 Notes to the Consolidated Financial Statements | 2021 ISC® Annual Report Market risk The carrying amount and fair value of the financial assets and financial liabilities are as follows: Classification Level December 31, 2021 December 31, 2020 Carrying Amount Fair Value Carrying Amount Fair Value AC FVTOCI AC AC AC L2 L1 L2 L2 L2 $ 40,104 $ 40,104 $ 33,946 $ 33,946 36 12,771 36 12,771 52 17,031 52 17,031 19,572 40,975 19,572 41,272 19,441 76,316 19,441 76,316 (thousands of CAD) Financial assets Cash Short-term investments 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 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, the Company 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 0.20 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, followed by the US dollar. 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, 2021, on net monetary assets was a decrease (increase) of $0.4 million (December 31, 2020 — $0.6 million) and on net assets was an increase (decrease) of $1.3 million (December 31, 2020 — $1.4 million). The impact of an increase (decrease) of 10.0 per cent in the US dollar relative to the Canadian dollar as at December 31, 2021, on net monetary assets was a decrease (increase) of $0.6 million (December 31, 2020 — $0.3 million). The Company’s exposure to other currencies is not significant at the end of the period. 92 2021 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2021 21 Revenue The Company derives its revenue from the transfer of goods or services either at 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 24). The following table presents our revenue disaggregated by revenue type. Sales and usage tax are excluded from revenue. Segment revenue (thousands of CAD) Registry Operations 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) At a point in time Registry Operations revenue Services revenue1 Corporate and other Over time Registry Operations revenue Services revenue1 Technology Solutions revenue Total revenue Year Ended December 31, 2020 2021 $ 85,567 75,165 8,644 3 $ 169,379 $ 69,535 56,398 10,782 8 $ 136,723 Year Ended December 31, 2020 2021 $ 82,553 73,765 3 $ 156,321 3,014 1,400 8,644 $ 13,058 $ 169,379 $ 66,462 55,700 8 $ 122,170 3,073 698 10,782 $ 14,553 $ 136,723 1 In 2021, the Company changed the presentation of some Services revenue in the Paragon business to better reflect the performance obligations in the underlying customer contracts. As a result of this change, $3.1 million of the 2020 comparatives were reclassified to the “point in time” category from the “over time” category. These reclassifications have no impact on revenue, net income or earnings per share. In the “over time” category, some Land Registry and Corporate Registry contracts result in linear revenue recognition over the life of the contract. In Services, Recovery Solutions administration fee revenue is also recognized over the life of the asset recovery file. 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 or percentage of completion. In 2021, the portion of Technology Solutions contract revenue recognized that was dependent on milestone achievement or percentage of completion versus total revenue recognized was 40.0 per cent (2020 — 69.0 per cent). At December 31, 2021, the Company has contracts where the milestone was either in progress or expected to be satisfied in the near term. For the unsatisfied portion of milestone-based contracts, the Company expects that 100.0 per cent (2020 — 100.0 per cent) of the total will be recognized in the next fiscal year. Service concession arrangement The Company entered into a change order pursuant to its MSA with the Government of Saskatchewan to continue the development of its registry systems. Under the MSA, the Company owns the IP during the term of the MSA. As at December 31, 2021, the development associated with the change order is 100.0 per cent complete (2020 — 100.0 per cent) and an incremental $0.2 million increase to both intangible assets and other revenue has been recorded in 2021 in Registry Operations related to the project (2020 — $0.2 million). The intangible asset was put into use in the third quarter of 2020 and depreciation commenced in this quarter. 93 For the Fourth Quarter and Year Ended December 31, 2021 Notes to the Consolidated Financial Statements | 2021 ISC® Annual Report 22 Related Party Transactions 24 Segment Information 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. 23 Compensation of Key Management Personnel Key management personnel includes the directors, President and Chief Executive Officer, Chief Financial Officer, Executive Vice-Presidents, Vice-Presidents and President, ESC. The compensation of the key management team during the period was as follows: (thousands of CAD) Year Ended December 31, 2020 2021 Wages, salaries and short-term benefits $ 4,220 6,061 Share-based compensation 221 Defined contribution plan $ 10,502 Total compensation $ 3,953 3,191 209 $ 7,353 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 represent amounts included in expenses during the year. Portions not paid in cash have been accrued as liabilities on the statement of financial position. 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 in both Canada and Ireland. We have restated our 2020 comparative segment results using the full retrospective method as a result of revising our accounting policy in relation to configuration and customization costs incurred in implementing SaaS arrangements in response to the IFRIC agenda decision clarifying its interpretation of how current accounting standards apply to these types of arrangements (see Note 2). Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. We account for transactions between reportable segments in the same way we account for transactions with external parties; however, we eliminate them on consolidation. 94 2021 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2021 Revenue and EBIT For the year ended December 31, 2021 (thousands of CAD) Revenue from third parties Plus: Inter-segment revenue Total revenue Expenses excluding depreciation and amortization EBITDA Depreciation and amortization EBIT Net finance (expense) Income tax expense Net income Registry Operations $ 85,567 – $ 85,567 Services $ 75,165 – $ 75,165 $ Technology Solutions 8,644 9,475 $ 18,119 Corporate and other 3 157 160 $ $ Inter-Segment Eliminations Consolidated Total – $ 169,379 (9,632) – (9,632) $ 169,379 $ $ (36,585) 48,982 (2,071) $ 46,911 (57,788) 17,377 (9,206) 8,171 $ (16,317) 1,802 (1,405) 397 $ (7,789) (7,629) (1,096) (8,725) $ $ 9,632 – – – $ $ (108,847) 60,532 (13,778) 46,754 (2,673) (12,003) 32,078 Additions to non-current assets, including acquisitions $ 310 $ 557 $ 1,640 $ – $ (11) $ 2,496 Registry Operations 69,535 33 69,568 $ $ (34,955) 34,613 (2,482) 32,131 $ $ $ $ For the year ended December 31, 2020 (thousands of CAD) Revenue from third parties Plus: Inter-segment revenue Total revenue Expenses excluding depreciation and amortization EBITDA Depreciation and amortization EBIT Net finance (expense) Income tax expense Net income Additions to non-current assets, Services 56,398 4 56,402 Technology Solutions $ 10,782 9,769 $ 20,551 Corporate and other 8 140 148 $ $ Inter-Segment Eliminations – (9,946) (9,946) $ $ Consolidated Total 136,723 – 136,723 $ $ (44,327) 12,075 (7,203) 4,872 (16,116) 4,435 (1,833) 2,602 $ $ (7,879) (7,731) (1,206) (8,937) $ 9,946 – – – (93,331) 43,392 (12,724) 30,668 (2,045) (7,798) 20,825 $ $ including acquisitions $ 249 $ 70,130 $ 828 $ 45 $ – $ 71,252 Inter-segment revenue is 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, 2021, revenue within Ireland was $7.7 million (2020 — $10.3 million), and the remainder was in Canada. No single customer represented more than 10.0 per cent of the total consolidated revenue. 95 For the Fourth Quarter and Year Ended December 31, 2021 Notes to the Consolidated Financial Statements | 2021 ISC® Annual Report Assets and liabilities As at December 31, 2021 (thousands of CAD) Assets Total assets, excluding Registry Operations Services Technology Solutions Corporate and other Inter-Segment Eliminations Consolidated Total intangibles, goodwill and cash $ 23,108 1,506 Intangibles 1,200 – $ 25,814 $ 10,797 Goodwill Cash Total assets Liabilities $ 12,516 54,794 67,372 – $ 134,682 $ 13,381 $ 4,099 4,755 8,562 – $ 17,416 $ 5,695 $ 14,470 12 – 40,104 $ 54,586 $ 64,920 $ $ $ 54,193 – $ 61,067 – 77,134 – – 40,104 – $ 232,498 94,793 – $ As at December 31, 2020 (thousands of CAD) 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 25,758 2,395 1,200 – 29,353 10,092 $ 13,952 63,203 67,372 – $ 144,527 13,270 $ $ 5,505 4,332 8,883 – $ 18,720 4,844 $ $ 14,807 24 – 33,946 $ 48,777 $ 92,046 $ $ $ – – – – – – $ $ $ 60,022 69,954 77,455 33,946 241,377 120,252 *See Note 2. In addition, certain of the prior year segment amounts have been changed to reflect the current year classifications. Non-current assets are held in Canada and Ireland. At December 31, 2021, non-current assets held in Ireland were $10.4 million (December 31, 2020 — $8.9 million), while the remainder were held in Canada. 25 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. A table outlining the net cash flow related to the acquisition is provided below. Net cash flows related to the acquisition (thousands of CAD) 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 Recovery on acquisition post-closing adjustments Total net cash flows related to the acquisition 1 See Note 4. 96 2021 2020 $ – – – – – – 1,719 1,719 $ $ $ $ (10,345) 1,719 (9,816) (50,000) (68,442) (1,719) – (70,161) 2021 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2021 The table below presents the final allocation of the net purchase price for accounting purposes for the Paragon acquisition. (thousands of CAD) 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 26 Net Change in Non-Cash Working Capital The net change during the period comprised the following: (thousands of CAD) Trade and other receivables Prepaid expenses Contract assets Accounts payable and accrued liabilities Contract liabilities Provisions and other liabilities Income taxes Net change in non-cash working capital Final $ 399 148 3 38,120 $ 38,670 1,885 $ 36,785 68,442 36,785 $ 31,657 Year Ended December 31, 2020 2021 $ 2,386 159 150 4,237 (433) 1,384 6,302 $ 14,185 $ $ (2,162) (556) 663 1,834 512 1,601 1,629 3,521 Income taxes paid, net of refunds received, for the year ended December 31, 2021, totalled $7.0 million (2020 — $4.7 million). 27 Government Grants In 2021, a government grant of $0.1 million (2020 — $0.1 million) was recognized by the Company to finance a project designed to provide simplified and unified access to business registry data on business ownership and control structures 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. The grant amount of $0.1 million (2020 — $0.1 million) was recognized as a reduction to wages and salaries expense in the year. In April 2020, the Government of Canada announced the Canada Emergency Wage Subsidy 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, 2021, the Company did not recognize a wage subsidy under this program (2020 — $0.5 million) as a reduction to wages and salary expense. The amount recognized in 2020 was received in the current year (see Note 4). 97 For the Fourth Quarter and Year Ended December 31, 2021 Notes to the Consolidated Financial Statements | 2021 ISC® Annual Report 28 Commitments and Contingencies As of December 31, 2021, the Company has commitments over the next five years as follows: (thousands of CAD) 2022 2023 2024 2025 2026 Thereafter Total commitments $ IT and Other Service Agreements1 3,978 3,303 490 13 7 – $ 7,791 Master Service Agreement 500 $ 500 500 500 500 3,500 6,000 $ Operating Leases and non-Lease Component of Office Leases 1,620 $ 1,149 1,030 298 300 942 5,339 $ $ Total 6,098 4,952 2,020 811 807 4,442 $ 19,130 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 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. 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 10 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, 2021, the liability was nil (December 31, 2020 — 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, 2021, the aggregate amount outstanding of the surety bond total was nil (December 31, 2020 — nil). 29 Pension Expense The total pension costs under the Company’s defined contribution plans for the year were $1.9 million (2020 — $1.8 million). 98 2021 ISC® Annual Report | Notes to the Consolidated Financial Statements For the Fourth Quarter and Year Ended December 31, 2021 30 Subsequent Events On February 15, 2022, the Company announced that its Services segment, through its wholly-owned subsidiary ESC, acquired all of the shares of a group of companies operating as UPLevel. The purchase consideration is $9.0 million, subject to working capital and other post-closing adjustments set out in the share purchase agreement. Given the timing of the transaction and the post- closing adjustments, the final purchase price allocation is not yet determinable. Professional fees associated with the cost of the acquisition expensed during the year were $0.1 million. On March 15, 2022, the Board declared a quarterly cash dividend of $0.23 per Class A Share, payable on or before April 15, 2022, to shareholders of record as of March 31, 2022. 99 For the Fourth Quarter and Year Ended December 31, 2021 Notes to the Consolidated Financial Statements | 2021 ISC® Annual Report Board of Directors Joel Teal Saskatoon, Saskatchewan Director since: 2013 Chair of the Board of Directors Roger Brandvold Calgary, Alberta Director since: 2021 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 ISC Leadership Iraj Pourian Vancouver, British Columbia Director since: 2016 Member of the Governance and Nominating Committee Laurie Powers Kelowna, British Columbia Director since: 2018 Member of the Audit Committee Jim Roche Ottawa, Ontario Director since: 2021 Member of the Compensation Committee Heather Ross Toronto, Ontario Director since: 2018 Member of the Governance and Nominating Committee Dion E. Tchorzewski Regina, Saskatchewan Director since: 2013 Chair of the Governance and Nominating Committee Shawn B. Peters, CPA, CA, ICD.D President and Chief Executive Officer Laurel Garven Vice-President, Corporate Development and Business Strategy Robert (Bob) Antochow, CPA, CA, CMA Kathy E. Hillman-Weir, Q.C. Chief Financial Officer Ken Budzak Executive Vice-President, Registry Operations Loren Cisyk Executive Vice-President, Technology Solutions Executive Vice-President, Chief Corporate Officer, General Counsel and Corporate Secretary Catherine McLean Vice-President, People and Culture 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. 100100 2021 ISC® Annual Report Corporate Information Head Office Suite 300 – 10 Research Drive Regina, Saskatchewan S4S 7J7 Canada Stock Exchange Listing and 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, 2021. 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, 2021. The Golden Share held by the Government of Saskatchewan has certain voting rights with respect to the location of the head office and the sale of all or substantially all of the assets of the Company. The Golden Share has no pre-emptive, redemption, purchase or conversion rights and is not eligible to receive dividends declared by the Company. Preferred Shares Issued and outstanding – nil as at December 31, 2021. Preferred Shares are issuable at any time and may include voting rights. Ownership As of March 15, 2022, 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) b) CIC, which holds 5,425,000 Class A Shares representing 31.0 per cent of the issued and outstanding Class A Shares; QV Investors Inc., which holds 2,290,736 representing 13.1 per cent of the issued and outstanding Class A Shares; and c) CI Investments Inc., which holds 1,939,970 representing 11.2 per cent of the issued and outstanding Class A shares. Auditor Deloitte LLP Suite 900 – 2103 11th Avenue Regina, Saskatchewan S4P 3Z8 Canada Transfer Agent TSX Trust Company For inquiries related to shares, dividends, changes of address: Toll-free inside North America: 1-800-387-0825 www.tsxtrust.com shareholderinquiries@tmx.com Regulatory Filings The Company’s filings are available through the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com Investor Contact Information Jonathan Hackshaw Senior Director, Investor Relations & Capital Markets Toll-free in North America: 1-855-341-8363 Outside North America: 1-306-798-1137 investor.relations@isc.ca 2021 ISC® Annual Report 101101 Dividends on Class A Shares 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 for the last three years: Year 2021 2021 2021 2021 2020 2020 2020 2020 2019 2019 2019 2019 Type Quarterly Quarterly Quarterly Quarterly Quarterly Quarterly Quarterly Quarterly Quarterly Quarterly Quarterly Quarterly Ex-Dividend Date Dec 30, 2021 Sep 28, 2021 Jun 29, 2021 Mar 30, 2021 Dec 30, 2020 Sep 29, 2020 Jun 29, 2020 Mar 30, 2020 Dec 30, 2019 Sep 27, 2019 Jun 27, 2019 Mar 28, 2019 Record Date Dec 31, 2021 Sept 30, 2021 Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Sept 30, 2020 Jun 30, 2020 Mar 31, 2020 Dec 31, 2019 Sep 30, 2019 Jun 30, 2019 Mar 31, 2019 Payable Date Amount Jan 15, 2022 Oct 15, 2021 Jul 15, 2021 Apr 15, 2021 Jan 15, 2021 Oct 15, 2020 Jul 15, 2020 Apr 15, 2020 Jan 15, 2020 Oct 15, 2019 July 15, 2019 Apr 15, 2019 $0.23 $0.20 $0.20 $0.20 $0.20 $0.20 $0.20 $0.20 $0.20 $0.20 $0.20 $0.20 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. 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, 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” in ISC’s Management’s Discussion and Analysis for the fourth quarter and year ended December 31, 2021 (“MD&A”), included herein and filed on SEDAR at www.sedar.com, for discussion of why we use these measures and their most closely related IFRS measures within the Financial Statements. Refer to section 2 “Consolidated Financial Analysis” of the MD&A for a reconciliation of EBITDA and adjusted EBITDA to net income and section 6.1 “Cash flow” of the MD&A for a reconciliation of free cash flow. 102 2021 ISC® Annual Report Cautionary Note Regarding Forward-Looking Information This report contains forward-looking information within the meaning of applicable Canadian securities legislation including, without limitation, statements related to the industries in which we operate, growth opportunities and our future financial position and results, including expected revenue, EBITDA margin and EBITDA. Forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those expressed or implied by such forward-looking information. Important factors that could cause actual results to differ materially from the Company’s plans or expectations include risks relating to changes in the condition of the economy, including those arising from public health concerns, reliance on key customers and licences, dependence on key projects and clients, securing new business and fixed-price contracts, identification of viable growth opportunities, implementation of our growth strategy, competition and other risks detailed from time to time in the filings made by the Company, including those detailed in ISC’s Annual Information Form for the year ended December 31, 2021, and ISC’s audited Consolidated Financial Statements and Notes and Management’s Discussion and Analysis for the fourth quarter and year ended December 31, 2021, 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. I S C – I n f o r m a t i o n S e r v i c e s C o r p o r a t i o n 2 0 2 1 A n n u a l R e p o r t company.isc.ca TSX:ISV Information Services Corporation 300 - 10 Research Drive Regina, Saskatchewan S4S 7J7 Canada 1 (306) 787-8179 

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