2022
Annual Report
About us
Headquartered in Canada, ISC (TSX:ISV) is a leading provider of registry
and information management services for public data and records.
Throughout our history, we have delivered value to our clients by providing
solutions to manage, secure and administer information through our
Registry Operations, Services and Technology Solutions segments.
Our Business
We operate three segments defined by their primary type of service offerings:
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
Table of Contents
Overview
Overview
2022 Highlights ……….................................................................................................................................. ........................ 2
Letter from the Chair ......................................................................................................................................................... 4
Letter from the President and CEO .............................................................................................................................. 5
Environment, Social and Governance (ESG) and Corporate Social Responsibility (CSR) ............... 7
Management’s Discussion and Analysis ................................................................................................................ 11
Consolidated Financial Statements ...................................................................................................................... 56
Corporate Information
Board of Directors and ISC Leadership ...................................................................................................................100
Corporate Information................................................................................................................................................... 101
1
2022 ISC® Annual Report2022 ISC® Annual ReportOverview Overview
2022 Highlights
$55.2 M
in capital deployed
to support growth
and diversification
strategy
$16.2 M
in dividends
paid out to
shareholders
$45.9 M
in free cash flow
generated
INVESTED
in technology to
enhance the customer
experience in Services,
including launch of
Recovery Complete
COMPLETED
two key transactions
in line with our
commitment to
growth
REALIGNED
corporate leadership
to execute growth
strategy
2
2022 ISC® Annual ReportOverviewOverview Overview
2022 Financial Results
Revenue
Net Income
EBITDA1
Free Cash Flow1
Earnings per share (basic)
2022 Results
2021 Results
$189.9 M
$30.8 M
$60.9 M
$45.9 M
$1.75
$169.5 M
$32.1 M
$60.5 M
$44.8 M
$1.78
Revenue Distribution by Segment for the year ended December 31,
3%
5%
48%
49%
Registry Operations
Services
Technology Solutions
51%
44%
Registry Operations
Services
Technology Solutions
2022
2021
Consolidated Revenue
for the year ended December 31,
Consolidated EBITDA1 and Adjusted EBITDA1
for the year ended December 31,
(CAD millions)
(CAD millions)
40.0%
35.7%
33.9%
32.1%
36.0%
31.7%
.
7
6
3
1
.
4
9
6
1
.
9
9
8
1
2020
2021
2022
.
4
3
4
.
2
9
4
.
5
0
6
.
8
7
6
.
9
0
6
.
4
4
6
2020
2021
2022
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 of the Management’s Discussion and Analysis “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.
3
2022 ISC® Annual Report2022 ISC® Annual ReportOverview Overview
Letter from the Chair
Joel Teal, Chair, Board of Directors
As always, it is my pleasure and privilege as Chair of ISC’s Board
of Directors to have the opportunity to share some thoughts
on the year that has passed and how we view the future at the
Board level.
2022 was another year of tremendous progress, growth,
and diversification. ISC continues to build upon and fortify
our strong foundation through another year of excellent
financial performance during times of great uncertainty while
successfully transitioning to new leadership.
As you know, in early 2022, Shawn Peters assumed the role
of ISC’s President and CEO. With over a decade of experience
contributing to ISC’s financial and business successes, there
was no doubt in my mind or that of your Board’s that Shawn’s
appointment would be seamless — an ideal fit. This past year
has proven this to be true. Shawn’s strong leadership has been
evident and our results for 2022 are a reflection of that.
In terms of keeping an eye firmly fixed on ensuring that
ISC prospers in the future, as it has in the past, there were
several steps that your Board took to ensure this in 2022.
You may recall that toward the end of 2021, we announced
an increase of ISC’s annual dividend increase from $0.80
per annum to $0.92. When many organizations around the
world were reevaluating their growth strategies and looking
to shore up their balance sheets, ISC was able to maintain
its growth trajectory and a dividend to shareholders at
$0.92 for the calendar year. This reflects the strength of our
current business and affirms the organization’s commitment
to reward shareholders as ISC continues to grow. It is also
a demonstration to regularly review our capital allocation
strategy and ensure that we are deploying our capital in ways
that continue to drive shareholder value.
In addition to this, ISC is focusing on diversity in more ways
than one. One of the key highlights of the past year was the
Board’s efforts in the area of diversity and inclusion at the
Board table. In December 2022, the Board passed the Board
Diversity Policy, which recognizes the value of diversity and
inclusion as a pillar of strong governance. This policy allows
for more varied perspectives and ideas, helps to mitigate
group-think, improves oversight and decision making, and
demonstrates our commitment to diversity and inclusion at all
levels of the organization.
As part of this policy, we have committed to take steps to find
representation that reflects the diversity of the industries
and communities we operate in when assessing the quality
of candidates for board nomination or appointment. This is
a crucial step in ensuring that our company is reflective of
the communities we serve, and that ISC can make the best
decisions for our stakeholders now and in the future.
At the time of writing my annual letter to you, you will have
seen an announcement regarding the appointment of Amber
Biemans, K.C., to ISC’s Board of Directors by the Province of
Saskatchewan, along with the reappointments of Douglas
Emsley and myself, which will take effect immediately following
the Company’s 2023 annual general meeting. I am very pleased
to welcome Ms. Biemans to the Board of ISC and look forward
to working with her when her appointment takes effect. 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 Ms. Biemans’ appointment to the Board comes the
upcoming retirement of long-time board appointee and former
Chair of the Board, Tom Christiansen, who was appointed
to the Company’s Board of Directors in 2009 — prior to ISC
transitioning to a publicly traded company. As a board member
for 14 years, he was a significant contributor to ISC’s successes,
as well as the successes of Saskatchewan as a community
leader and local business owner. On behalf of the Board, I
would like to thank Tom for his many years of sage counsel. He
was instrumental in our pursuit of milestones and innovations
over the last decade and a half. We wish him the best.
This year has marked the successful start of a new era of
leadership at ISC, and I am pleased about the progress we
have made while keeping an eye always on the future. We are
excited about what is on the horizon, and I am certain that with
Shawn Peters at the helm, ably supported by his Executive
Team, we will continue to achieve much together in pursuit of
our goal to deliver value to shareholders.
Yours sincerely,
Joel Teal
Chair, Board of Directors
4
2022 ISC® Annual ReportOverviewOverview Overview
Letter from the President and CEO
Shawn B. Peters, President and CEO
As mentioned by the Chair, 2022 was a very successful year
for ISC — success that was achieved with the support of the
Board of Directors, the Executive leadership team, and every
ISC employee, from our headquarters in Regina to our offices
across Canada and in Ireland. I’m honoured to have had the
opportunity to lead such a diverse and talented group of
employees during my first year in this role.
ISC remains a robust, diverse and financially exceptional
organization fueled by a strategy for growth and a business
that consistently delivers outstanding results to all our
stakeholders. Yet again, our two core segments, Registry
Operations and Services, delivered strong results. As we
anticipated, the second half of 2022 saw Registry Operations
return to more normal, pre-pandemic behaviour while
continuing to be the superb EBITDA and free-cash-flow
generator it has always been.
For Services, 2022 marked a milestone for the business when
it exceeded Registry Operations in revenue for the first time
since we acquired ESC in October 2015. This is the culmination
of the steps we have taken to diversify the broader business,
as well as grow organically through new customer acquisition.
To drive that growth, we have invested heavily in our
technology and now have platforms like Registry Complete
and Recovery Complete, which provide all our customers with
easy access to our suite of solutions.
Last year, we noted our Technology Solutions segment was
the most impacted by the COVID-19 pandemic, and that was
evident this year as we saw weaker results in Technology
Solutions in 2022 compared to prior years. However,
with jurisdictions now able to refocus on moving various
technology-related projects forward, we are energized
about the potential of the business and have been driving
new opportunities post-COVID. As part of that, I made some
changes at the leadership level, including the appointment
of Susan Bowman as Head of ERS in July 2022. With Susan
now fully on board and focused on business performance
and our continued commitment to customer excellence, I am
confident we will see a return to growth and new contract
wins ahead.
As part of ISC’s long-term strategy to diversify our portfolio,
we completed and integrated two transactions in 2022 that
allow us to maintain market leadership in our industries and
expand our range of services and customer base. In Services,
we acquired UPLevel in February 2022, expanding our
leading role in the PPSA market credit life-cycle product suite
by adding early and late-stage collections to our portfolio.
Not only does this provide a new source of revenue, it also
maintains our market leadership and enhances our offerings
to current and future clients.
“ ISC remains a robust, diverse and
financially exceptional organization
fueled by a strategy for growth
and a business that consistently
delivers outstanding results to all
our stakeholders”.
Additionally, we expanded Registry Operations for the first
time through the acquisition of Reamined Systems Inc. — a
recognized leader in providing property tax management
infrastructure and services in the Province of Ontario.
While not a registry in the traditional sense, this business
has a similar profile to our Saskatchewan registry business,
both through its financial profile as well as its long-standing
relationship with the Province of Ontario. It highlights our
expertise in delivering a range of services on behalf of
governments, and demonstrates our expanded thinking on
growing our business. As a result, Reamined has been an
excellent complementary business to our Saskatchewan
registries.
As we go forward, the talent we have developed for acquiring
and integrating our new businesses quickly will stand us
in good stead. It is with this in mind that early in the year,
I appointed Laurel Garven as Vice President, Corporate
Development and Business Strategy, to expand our M&A
5
2022 ISC® Annual Report2022 ISC® Annual ReportOverview Overview
“ We have invested heavily in
our technology and now have
platforms like Registry Complete
and Recovery Complete, which
provide all our customers with
easy access to our suite of
solutions”.
capability and ensure that our pipeline of opportunities
remains full and high quality.
Along with our financial and mergers and acquisitions (M&A)
successes in 2022, ISC successfully continued our work-from-
home program with a view to exploring a return to work in
2023 while providing our employees with the flexibility of a
hybrid work environment in the near term. As well, during the
course of the year, I was fortunate to meet with many of our
shareholders, prospective investors and other stakeholders
across the capital markets spectrum. I would like to thank all
of them for their support during my first year as President
and CEO of ISC and reiterate my commitment to ensuring
ISC delivers value to shareholders through deliberate and
thoughtful execution. Our growth is calculated and consistent
and builds on the strength and stability of our underlying
business. That growth potential, combined with a healthy
dividend yield — makes it hard to find a better company
than ISC.
Going forward, we will continue to focus on maintaining
operational excellence and sustained growth into 2023
and beyond. We are confident our commitment to financial
excellence and customer satisfaction will continue to drive our
success and further propel ISC and our subsidiaries as leaders
in our communities and in our industries.
I am grateful for the opportunity to lead this organization,
taking care of our industry-leading talent and offering best-
in-class service to our customers at home in Saskatchewan,
across Canada and internationally. I want to thank all of you for
your support as we focus on the future, expand our horizons
and push ourselves to reach higher and further.
Yours sincerely,
Shawn B. Peters, CPA, CAA, ICD.D
President and CEO
6
2022 ISC® Annual Report Corporate Social Responsibility
Environment, Social and Governance (ESG)
and Corporate Social Responsibility (CSR)
As noted last year, ISC is committed to following responsible business
practices to strengthen workplace culture, expand opportunities,
reduce risks and enhance ISC’s corporate reputation. ISC recognizes
that over time, CSR has evolved with emergence of ESG Programs now
taking the lead insofar as how companies should manage and measure
their impact on the environment and society, as well as how they
govern themselves.
ESG: The Way Forward
In 2022, ISC commenced an exploratory review to understand our current practices and how best to apply ESG management
and reporting by completing an initial materiality assessment. Materiality assessments are a process by which an organization
determines which ESG topics are most relevant to manage. From this work, ISC is developing an ESG Program consistent with
ISC’s strategic goals and to align current and future initiatives with ESG priorities.
While ISC articulates its ESG Program, it is important to recognize that the existing CSR program is a demonstration of our
commitment to improving the social outcomes of our communities. We are building a caring culture, not just within our
Company, but extending that to the communities where we live and work – supporting organizations that mean a lot to our
employees. Our culture shows its true face in our collective actions, behaviour and beliefs. We are on the right path, but there
is always room to grow and evolve.
7
2022 ISC® Annual Report2022 ISC® Annual Report CSR: Focusing on Our People and Communities
ISC’s continued commitment to our CSR strategies is an important part of our evolving ESG approach. Our CSR efforts pay
substantial consideration to how we contribute value to the local community and environment.
Our philosophy is that when the organization chooses to do what’s right — not only for the bottom line, but also for the
communities in which we live — it builds both customer trust and employee loyalty. That is why we are diligently working
towards powering solutions for the future and in turn being a valued, socially responsible corporate citizen.
Corporate Social Responsibility
Our Approach
ISC’s corporate social responsibility strategy focuses on three key areas:
1
2
3
Community
Economy
Health and
Well-Being
Communication across the organization is critical to ensure that colleagues know about the work we are doing and how they
can support it. ISC uses a mix of internal and external communications channels to connect with our employees, partners,
customers, shareholders, suppliers and the public including media releases, corporate website announcements and social
media channels like LinkedIn.
8
2022 ISC® Annual ReportCorporate Social ResponsibilityCorporate Social Responsibility Corporate Social Responsibility
Our Achievements in 2022
We are pleased to report our progress on the three areas of our
CSR strategy:
Community
Partnerships
and
Sponsorships
$365,500
Our responsibility is aligned with our objective to lead, develop and support our people at
ISC. Our culture provides a foundation that lets us commit to fostering social development
by contributing to the sustainability of the communities in which we live and operate. Our
philanthropic approach is wide ranged and whether we donate to charities or causes, sponsor
fundraising events or have a presence in community related initiatives, these are the ways that
ISC can make a difference.
• Albert Community School, Regina
• Canadian Roots Exchange, Toronto
• Circle Project, Regina
• Daily Bread Food Bank, Toronto
• Ernestine’s Women’s Shelter, Toronto
• Grey Cup Festival 2022
• Habitat for Humanity
• Mackenzie Art Gallery
• Native Friendship Centre, Montreal
•
North Okanagan Friendship Centre,
Vernon
• Regina Food Bank
• Regina Thunder Football
• Saskatchewan Games Council
• Saskatchewan Science Centre
• Saskatchewan Sports Hall of Fame
• Timeraiser YQR Auction
• United Way of Regina
9
2022 ISC® Annual Report2022 ISC® Annual ReportCorporate Social Responsibility Corporate Social Responsibility
Economy
Partnerships
and
Sponsorships
$50,500
The challenges organizations face today are dynamic, and as time goes by, business models
are not only focused on maximizing profit but creating value for society. We believe that our
efforts in supporting the economy where we operate will lead to mutual success for ISC as well
as the communities we operate in. This is accomplished through investing in initiatives that
promote and recognize education, entrepreneurship, suppliers, and business operators that
have or will contribute to the economy moving forward.
This year, in the pursuit of building lasting relationships with Indigenous businesses and
communities, ISC collaborated with and supported Indigenous-lead businesses and events
across Canada.
•
Century Farm Family Awards,
Saskatchewan
• Four Fawns Clothing, Saskatchewan
•
•
•
JDC Business Competition, University
of Regina
Miyo-wîcîwitowin Day (Reconciliation)
Saskatchewan
National Indigenous Youth
Entrepreneurship Camp
• Nature Conservancy of Canada
• Resist Clothing Company, Ontario
•
•
Saskatchewan Chamber of Commerce
ABEX Awards
Saskatchewan Economic Development
Alliance Summit
• Strong Nations, British Columbia
•
•
University of Regina Inspiring Leadership
Forum
WESK Entrepreneurship Summit,
Saskatchewan
Health and
Well-Being
Partnerships
and
Sponsorships
$388,000
In recent years, there has been increased interest in the role played by business with CSR
strategies in promoting the health and wellbeing of internal and external stakeholders.
Employees understand the difference between social obligation and social responsibility, and
they want to work for an organization that gives back. Investing in strategies that support the
health and wellbeing of our employees and the communities where we operate contributes
to the overall good of society. ISC realizes that this strategy can have a positive impact on
employee wellbeing and morale. Having a strategy that cultivates a sense of larger purpose
and gets people involved results in happier and engaged employees who are proud to work for
the company.
•
Alzheimer Society of Saskatchewan
Minds in Motion Program and Night to
Remember Gala
• ARC Cancer Services, Dublin
•
•
Canadian Red Cross, Ukrainian
Relief Effort
Employee and Family Assistance
Program
•
Employee Health and Wellness
Initiatives
• Employee Recognition
• Hospitals of Regina Foundation
•
Jim Pattison Children’s Hospital
Radiothon, Social Media Sponsor,
Saskatoon
• STARS Air Ambulance, Saskatchewan
10
2022 ISC® Annual Report Management’s Discussion and Analysis
Management’s Discussion & Analysis
For the Fourth Quarter and Year Ended December 31, 2022
1 Overview .........................................................................13
2 Consolidated Financial Analysis .............................. 18
3 Business Segment Analysis ......................................23
4
Summary of Consolidated Quarterly Results .... 44
5 Business Strategy ........................................................45
6 Financial and Capital Management ........................45
7 Business Risks.............................................................. 49
8
Accounting Policies, Financial Measures
and Controls ...................................................................51
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, 2022, and 2021. Additional information, including our Annual
Information Form for the year ended December 31, 2022, is
available on the Company’s website at www.company.isc.ca and
in the Company’s profile on SEDAR at www.sedar.com.
This MD&A contains information from our Financial Statements for
the years ended December 31, 2022, 2021 and 2020, prepared in
accordance with International Financial Reporting Standards
(“IFRS”), as issued by the International Accounting Standards Board
(“IASB”). The financial information that appears throughout our
MD&A is consistent with the Financial Statements.
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, as applicable, 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 CAD and
amounts are stated in CAD 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 14, 2023.
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
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.
11
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and Analysis | 2022 ISC® Annual ReportFor the Fourth Quarter and Year Ended December 31, 2022 as the group of companies operating as UPLevel (“UPLevel”) and
Regulis S.A. (“Regulis”) on terms consistent with our expectations
and these businesses performing in a manner consistent with our
expectation, 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,
2022, and the Financial Statements, copies of which are available
on our website at www.company.isc.ca and in the Company’s
profile 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 contain 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 that may be found in this MD&A
includes, without limitation, that contained in the “Outlook” section
hereof, and management’s expectations, intentions, and beliefs
concerning the anticipated integration and growth of the
Reamined, UPLevel, and Regulis (as these terms are defined herein)
businesses, 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 and potential or the negative
or other variations of these words or other comparable words or
phrases, are intended to identify forward-looking information.
Forward-looking information is based on estimates and
assumptions made by us in light of ISC’s experience and perception
of historical trends, current conditions and expected future
developments, as well as other factors that ISC believes are
appropriate and reasonable in the circumstances. There can be no
assurance that such estimates and assumptions will prove to be
correct. Certain assumptions with respect to our ability to
implement our business strategy and compete for business (other
than our exclusive service offerings to the Government of
Saskatchewan) and market our technology assets and capabilities,
our ability to integrate Reamined Systems Inc. (“Reamined”) as well
12
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and AnalysisManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022 1 Overview
In 2022 ISC performed well and slightly ahead of our expectations at the beginning of the year even after adjusting for contributions from
the new businesses acquired during the year. The impact of economic tightening due to rising interest rates, which we expected to start to
impact our business in the second quarter, was deferred to the last half of 2022, and more specifically, the fourth quarter. As a result, the
strength of the business in the first half of the year combined with the contributions from our newly acquired businesses resulted in
relatively stable earnings for the year considering the exceptional results experienced in 2021, which were fueled by an influx of dollars from
pandemic-related stimulus.
In our Registry Operations business, as anticipated, we saw a return to historical pre-pandemic levels for Saskatchewan Land Registry
transactions midway through 2022, as Saskatchewan real estate levels and high-value transactions stabilized from unprecedented activity
experienced in 2021. Land Registry transactions are now reflecting normalized and seasonal levels with higher average land values. Registry
Operations also benefitted from earnings contributed for the quarter and year-to-date from the new Ontario Property Tax Assessment
Services business, Reamined, acquired in June 2022.
Services continued to deliver transaction and customer growth throughout 2022, increasing revenue for the quarter and full year by 9 per
cent and 23 per cent respectively. As a result, full-year EBITDA saw growth of 7 per cent when compared to the comparable periods in the
prior year. This resulted from a focus on technology advancements, including enhancements to the Registry Complete platform and the
release of the Recovery Complete platform. Our focus on technology along with strong customer service also led to growing our business
through existing customers, along with the acquisition and onboarding of new customers. This growth was supplemented by the
acquisition of UPLevel in February 2022, adding accounts receivable management to our Recovery Solutions suite of services and a focus
on people and technology as we ensure Services remains well positioned to continue to execute on future growth.
While Technology Solutions was most affected by COVID-19, this segment saw an increase in procurement activities in the last two quarters
of 2022. However, during the year, we saw delays to active projects resulting in weaker results in 2022 compared to 2021. Our increased
focus on working with clients to ensure that projects advance in a more timely manner is expected to yield results in the long term.
Overall, 2022 was another successful year for ISC with increases in revenue, EBITDA and free cash flow along with stable net income.
1.1 Consolidated highlights
2022 CONSOLIDATED RESULTS
Revenue
$189.9M
+12% vs 2021
Net income
Earnings per share, diluted
$30.8M
(4%) vs 2021
$1.71
(4%) vs 2021
EBITDA1
Adjusted EBITDA1
Free cash flow1
$60.9M
+1% vs 2021
$64.4M
(5%) vs 2021
$45.9M
+2% vs 2021
Dividends paid
$16.2M
+16% vs 2021
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.
13
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and Analysis | 2022 ISC® Annual ReportManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022 SELECT FINANCIAL INFORMATION
The select annual financial information set out for the years ended December 31, 2022, 2021 and 2020, 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
2022
$ 189,895
30,769
$ 60,930
64,390
32.1%
33.9%
$ 45,909
0.92
$
1.75
1.71
2022
$ 283,454
$ 88,240
Year Ended December 31,
2020
2021
$ 169,379
32,078
$ 60,532
67,815
35.7%
40.0%
$ 44,800
0.83
$
1.83
1.78
$ 136,723
20,825
$ 43,392
49,210
31.7%
36.0%
$ 36,235
0.80
$
1.19
1.18
As at December 31,
2020
2021
$ 232,498
$ 57,888
$ 241,377
$ 92,963
1 EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin and free cash flow are not recognized as measures under IFRS and do not have a standardized meaning
prescribed by IFRS and, therefore, they may not be comparable to similar measures reported by other companies; refer to section 8.8 “Non-IFRS financial measures”. Refer to
section 2 “Consolidated Financial Analysis” for a reconciliation of EBITDA and adjusted EBITDA to net income. Refer to section 6.1 “Cash flow” for a reconciliation of free cash flow.
ISC’s results over the last three years have been an indication of the resiliency of our business. Despite the challenges that arose due to the
COVID-19 pandemic, the Company performed well throughout that time, while seeing a return to more familiar pre-pandemic trends in the
second half of 2022. Our overall results for 2022 have demonstrated continued strength in an environment of economic uncertainty, high
inflation and rising interest rates. Acquisitions made during the year have continued to diversify our product offerings within our core
competencies of registries and registry related services.
• Revenue rose by 12 per cent from $169.4 million in 2021 to $189.9 million in 2022, largely as a result of additional revenue from
acquisitions during the year and growth in Services.
– Registry Operations performed as expected, with record high-value transactions in the Saskatchewan Land Registry in the first
two quarters of the year. While we did see transaction levels, including high-value transactions, return to pre-pandemic levels in the
Saskatchewan Land Registry in the latter part of the year, the addition of revenue following the acquisition of Reamined in June 2022
had a positive impact.
– Services revenue also grew in 2022 compared to 2021. This growth was driven by customer and transaction growth as customers
transitioned to our Registry Complete platform. The addition of new service offerings for our customers, including the new services to
Registry Complete, also played a key role in the growth for this segment. Further supplementing this growth was the addition of $5.8
million in new revenue contributed from the UPLevel business acquired in February 2022.
• After expenses, which included investments in people and technology intended to help drive our growth, EBITDA was $60.9 million,
up 1 per cent compared to 2021 which was $60.5 million.
• Free cash flow increased to a new record of $45.9 million in 2022, up 2 per cent over the previous record set in 2021.
14
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and AnalysisManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022
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%
33.9%
32.1%
36.0%
31.7%
.
4
3
4
.
2
9
4
.
5
0
6
.
8
7
6
.
9
0
6
.
4
4
6
2020
2021
2022
.
7
6
3
1
2020
.
4
9
6
1
2021
.
9
9
8
1
2022
Consolidated Free Cash Flow
for the year ended December 31,
(CAD millions)
.
2
6
3
2020
.
8
4
4
2021
.
9
5
4
2022
FOURTH QUARTER CONSOLIDATED HIGHLIGHTS
• Revenue was $46.1 million for the quarter, an increase of
$1.9 million or 4 per cent compared to the fourth quarter of
2021. This was due to continued transaction and customer
growth in Services, specifically in the Corporate Solutions
division, along with $1.5 million of revenue contributed from the
UPLevel business that was acquired in February 2022. Registry
Operations’ newest division, Ontario Property Tax Assessment
Services, created following the acquisition of Reamined in June
2022, contributed $3.8 million of revenue during the quarter.
This was partially offset by lower overall transaction volumes and
lower high-value transactions in the Saskatchewan Land Registry
following several increases in interest rates during 2022, which
has slowed economic activity. The consolidated revenue increase
was partially offset by a $1.6 million decline in Technology
Solutions third-party revenue during the quarter.
• Net income was $3.9 million or $0.22 per basic and diluted share
compared to $10.3 million or $0.59 per basic share and $0.57 per
diluted share in the fourth quarter of 2021. The reduction of $6.4
million in net income for the quarter can be primarily attributed
to a $2.7 million increase in share-based compensation as a result
of an increase in the Company’s share price year-over-year, a
reduction in revenues in the Saskatchewan Land Registry during
the quarter of $2.7 million due to a return of transaction volumes
to more normalized pre-pandemic levels, and reduced revenue
and earnings contributed by Technology Solutions during the
quarter.
• EBITDA was $10.8 million compared to $17.6 million for the same
quarter in 2021, due to an increase of $2.7 million in share-based
compensation during the quarter as a result of an increase in
the Company’s share price during the quarter compared to a
decrease during the same period in the prior year, a reduction
in revenues from the Saskatchewan Land Registry during the
quarter of $2.7 million due to a return of transaction volumes
to more normalized pre-pandemic levels, and reduced EBITDA
contributed by Technology Solutions of $2.6 million. These
reductions were offset by EBITDA in the quarter contributed
from acquisitions completed during the year of $1.0 million.
15
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and Analysis | 2022 ISC® Annual ReportManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022 EBITDA margin was 23.4 per cent for the quarter compared
to 39.8 per cent in 2021. The change in margin year-over-year
was driven by reduced EBITDA resulting from the above noted
factors combined with increased Services revenue, which has a
lower margin profile.
• Adjusted EBITDA was $13.5 million for the quarter compared to
$17.2 million in 2021. The decrease related to lower 2022 EBITDA
offset by the removal of higher share-based compensation
for the quarter when compared to the prior year. As a result,
adjusted EBITDA margin was 29.3 per cent compared to 38.9
per cent in 2021, with the change coming from the above noted
factors reducing adjusted EBITDA accompanied by increased
Services revenue at a lower margin.
• Free cash flow for the quarter was $7.9 million, a decrease of 43
per cent compared to the fourth quarter of 2021. The decrease
for the quarter primarily relates to results of operations that
began to experience the effects of economic tightening that
occurred throughout 2022 resulting in reduced transaction
volumes in the Saskatchewan Land Registry and reduced
contributions from Technology Solutions accompanied by
increased people and technology costs when compared to the
prior year.
• On November 2, 2022, the Board declared a quarterly cash
dividend of $0.23 per Class A Limited Voting Share (“Class A
Share”), payable on or before January 15, 2023, to shareholders of
record as of December 31, 2022.
• On December 20, 2022, the Company, through its wholly
owned subsidiary, ISC Atlantic Services Inc., acquired all of the
shares of Regulis, the Registrar designate for the International
Registry for Railway Rolling Stock, for purchase consideration of
$0.6 million (€0.4 million) with up to an additional €1.6 million to
be paid in future years as certain criteria are met. The Company
has included Regulis within the Corporate segment until the time
it commences operations.
YEAR-END CONSOLIDATED HIGHLIGHTS
• Revenue was $189.9 million for the year ended December
31, 2022, an increase of 12 per cent compared to 2021. The
revenue increase was driven by continued transaction and
customer growth in Services, specifically within the Regulatory
and Corporate Solutions divisions, combined with $5.8 million
contributed by UPLevel since its acquisition in February 2022.
Registry Operations’ Saskatchewan business experienced
a strong first half of the year, as expected, with transaction
volumes beginning to trend towards pre-pandemic levels in the
second half of the year. Registry Operations revenue was also
bolstered by $8.9 million of additional revenue from Ontario
Property Tax Assessment Services following the acquisition of
Reamined in June 2022.
• Net income was $30.8 million or $1.75 per basic share and $1.71
per diluted share compared to $32.1 million or $1.83 per basic
share and $1.78 per diluted share in 2021. Current year results
are relatively consistent when compared to the record high
net income earned in 2021. The decline relates to a reduction
in revenue in the Saskatchewan Land Registry during the year
of $3.8 million due to a return of transaction volumes to more
normalized pre-pandemic levels and reduced revenue and
earnings contributed by Technology Solutions during the year.
Partially offsetting this decline were earnings from acquisitions
made during the year and a $4.5 million decrease in year-over-
year share-based compensation due to a reduction in the
Company’s share price.
• EBITDA was $60.9 million compared to $60.5 million in 2021,
due to increased revenue in Services and Registry Operations,
a reduction in share-based compensation when compared to
the prior year due to a reduction in the Company’s share price,
offset by investments made in people and technology across
the business. EBITDA margin was 32.1 per cent for the year
compared to 35.7 per cent in 2021.
• Adjusted EBITDA was $64.4 million compared to $67.8
million in 2021. The decrease relates to lower share-based
compensation and an increase in acquisition and integration
costs offset by consistent EBITDA. Adjusted EBITDA margin
was 33.9 per cent compared to 40.0 per cent in the prior year
with the change coming from increased Services revenue,
specifically in Corporate Solutions, which is a lower margin
division of the business, and lower revenue overall in the
Saskatchewan Land Registry for the year.
• Free cash flow for the year ended December 31, 2022, was
$45.9 million, an increase of $1.1 million compared to $44.8 million
in 2021. The increase was due to results contributed by both
Registry Operations and Services accompanied by additional
EBITDA from acquisitions made during the year as well as less
capital expenditures.
• On February 14, 2022, the Company’s Services segment, through
its wholly owned subsidiary ESC, acquired all of the shares of a
group of companies operating as UPLevel. The total cash paid
related to the acquisition was $9.4 million.
• On June 1, 2022, the Company acquired all of the shares of
Reamined, a recognized leader in providing Property Tax
Assessment Services in the Province of Ontario, for total
cash paid of $45.8 million. Due to its alignment with the
Registry Operations segment, Reamined is reported as part of
Registry Operations.
1.2 Subsequent events
• On February 27, 2023, the Company announced the
appointment of Amber Biemans, K.C., to ISC’s Board of
Directors by the Province of Saskatchewan, along with the
reappointments of Joel Teal and Douglas Emsley, which will take
effect immediately following the Company’s 2023 annual general
meeting.
• On March 14, 2023, the Board declared a quarterly cash dividend
of $0.23 per Class A Share, payable on or before April 15, 2023, to
shareholders of record as of March 31, 2023.
16
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and AnalysisManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022 is refreshed interest in new and deferred projects as customers
look to reactivate initiatives paused due to COVID-19. We are
optimistic about the current state of our new business pipeline due
to the ongoing need to update technology solutions. We are in a
unique position to provide solutions that are aligned with our
customers’ needs.
The key drivers of expenses will continue to be wages and salaries,
cost of goods sold, information technology costs, and costs
associated with the pursuit of new business opportunities. With
current inflationary pressures, we continue to look at the
appropriateness of our pricing across the business (except for the
Saskatchewan Registries, where pricing is governed by the Master
Services Agreement) to maintain margins while remaining
competitive. During 2023 and as part of our corporate strategy
related to information security, we also expect to complete
certification for ISO 27001. This international certification will
demonstrate our adherence to controls in the management of
information security assets.
With these factors in mind, we expect revenue growth well over
2022 levels between $200.0 million and $205.0 million, net income
to be between $27.0 million and $32.0 million, and EBITDA1 to be
between $58.0 million and $63.0 million in 2023. Considering the
evolution of the business over the last two years, we believe adding
adjusted EBITDA to our guidance metrics will help provide a better
understanding about the performance of our business by removing
the impact from share-based compensation, acquisition expenses
or any other non-recurring costs. In 2023, we expect adjusted
EBITDA1 to be between $65.0 million and $70.0 million.
The diversification of our business remains a key part of our
strategy. As such, we will continue to look for efficiencies across the
business, drive organic growth in our Services and Technology
Solutions segments by winning new business, and explore
appropriate acquisition targets that complement or add value to
our existing lines of business.
1 EBITDA and adjusted EBITDA are not recognized as measures under IFRS and do
not have standardized meanings prescribed by IFRS and, therefore, 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 and adjusted EBITDA to net income.
1.3 Outlook
The following section includes forward-looking information,
including statements related to future results, including
revenue, net income, EBITDA and adjusted EBITDA, segment
performance, the industries in which we operate, economic activity,
growth opportunities, investments, completion of projects, ISO
27001 and acquisitions. Refer to “Caution Regarding Forward-
Looking Information”.
As the world begins to navigate post-pandemic conditions,
including a higher interest rate environment, we continue to believe
that ISC is positioned for success, given the proven robustness of
our business. The Company anticipates revenue consistency in
2023, driven by its two core segments, Registry Operations and
Services, through the addition of Ontario Property Tax Assessment
Services revenue and the continuing expansion of our Services
suite of products and services to existing customers.
The Registry Operations segment is expected to remain a strong
free cash flow contributor and a direct beneficiary of any future
upswing in economic conditions in Saskatchewan. We will continue
to monitor economic conditions, particularly any further increases
to interest rates in 2023, which can have a temporary dampening
effect on transaction volumes. However, provincial market
publications suggest the housing market is changing as consumers
adjust to higher lending rates and higher costs of living.
Saskatchewan continues to fare better than many other regions in
the country, and this is expected to persist in 2023. Based on the
data we use to model our own trends and forecasts, we agree with
this view. In addition, following the acquisition of Reamined in June
2022, and the addition of Property Tax Assessment Services to our
Registry Operations segment, we expect additional, consistent
revenue from that division – adding to the segment’s overall
revenue in 2023.
In Services, we expect to work on new opportunities with our
customers and continue our investment in Registry Complete and
Recovery Complete in 2023. With the addition of accounts
receivable management complementing asset recovery within our
Recovery Solutions suite of services, we have expanded our
product offerings in this division to support our customers all the
way through to the end of the lending life cycle. With the
introduction of Recovery Complete, our customers across all our
divisions will have access to our entire suite of products and
services, improving our revenue potential from our existing
customer base. Despite expected changes to the Ontario Business
Registry in 2023, we believe Services is sufficiently diversified for
any industry, market or economic challenges that might present in
2023. Additionally, our investments in people, technology and new
opportunities will further expand and diversify the business.
In Technology Solutions in 2023, we expect to complete and
deliver solution implementation projects deferred from 2022.
Although active projects decreased during the pandemic, there
17
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and Analysis | 2022 ISC® Annual ReportManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022 2 Consolidated Financial Analysis
Revenue was up 4 per cent and 12 per cent, respectively, for the three months and year ended December 31, 2022, compared to the
same periods in the prior year. For the quarter, net income was down by 62 per cent compared to the same quarter in 2021. This was due
to a $2.7 million increase in share-based compensation following an increase in the Company’s share price during the quarter compared to
a decrease during the prior year quarter, a reduction in revenue in the Saskatchewan Land Registry of $2.7 million due to a return of
transaction volumes to more normalized pre-pandemic levels, and reduced net income contributed by Technology Solutions during
the quarter.
On an annual basis, net income was down 4 per cent compared to the year ended December 31, 2021. The decline relates to a reduction in
revenue in the Saskatchewan Land Registry during the year of $3.8 million following a return of transaction volumes to more normalized
pre-pandemic levels and reduced revenue and earnings contributed by Technology Solutions during the year. Partially offsetting this decline
were net income from acquisitions made during the year and a $4.5 million decrease in year-over-year share-based compensation due to a
reduction in the Company’s share price.
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 income (loss)
Unrealized income (loss) on translation of
financial statements of foreign operations
Change in fair value of marketable
securities, net of tax
Other comprehensive income (loss)
Total comprehensive income
Three Months Ended December 31,
2021
2022
Year Ended December 31,
2021
2022
$ 22,605
22,441
1,047
11
46,104
15,997
12,007
4,100
3,205
1,167
1,245
601
1,074
39,396
6,708
269
(1,307)
(1,038)
5,670
(1,721)
3,949
688
–
688
4,637
$
$ 21,076
20,549
2,613
–
44,238
$ 91,721
92,306
5,849
19
189,895
$ 85,567
75,165
8,644
3
169,379
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
54,267
49,215
14,735
10,584
4,003
4,988
2,669
3,239
143,700
46,195
463
(3,640)
(3,177)
43,018
(12,249)
30,769
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
(269)
(33)
(1,048)
7
(262)
$ 10,024
11
(22)
$ 30,747
(13)
(1,061)
$ 31,017
18
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and AnalysisManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022
2.2 Consolidated revenue
Consolidated Revenue
for the three months ended December 31,
(CAD millions)
44.2
46.1
Consolidated Revenue
for the year ended December 31,
(CAD millions)
189.9
169.4
+4%
+12%
2021
2022
2021
2022
(thousands of CAD)
Registry Operations
Services
Technology Solutions
Corporate and other
Total revenue
Three Months Ended December 31,
2021
2022
Year Ended December 31,
2021
2022
$ 22,605
22,441
1,047
11
$ 46,104
$ 21,076
20,549
2,613
–
$ 44,238
$ 91,721
92,306
5,849
19
$ 189,895
$ 85,567
75,165
8,644
3
$ 169,379
Total revenue for the quarter increased by $1.9 million compared to the fourth quarter of 2021 due to:
• a full quarter of new Ontario Property Tax Assessment Services revenue in Registry Operations totalling $3.8 million contributed by
Reamined (acquired in June 2022), which offset a $2.7 million decline in Saskatchewan Land Registry revenue, following lower activity in
the Saskatchewan real estate sector, including a decline in high-value transactions; and
•
increased revenue of $1.9 million in Services, as a result of revenue from UPLevel (acquired in February 2022) contributing $1.5 million of
this increase accompanied by continued transaction and customer growth in the Segment including Recovery Solutions;
• partially offset by a reduction in Technology Solutions third-party revenue of $1.6 million during the quarter from $2.6 million in the prior
year to $1.0 million in the current year as we experienced continued delays in completion of active solution delivery projects.
Total revenue for the year increased by $20.5 million or 12 per cent compared to the prior year, again mainly due to:
•
•
increased revenue of $6.2 million in Registry Operations, of which $8.9 million relates to Ontario Property Tax Assessment Services
revenue following the acquisition of Reamined in June 2022, which offset the $3.8 million decline in Saskatchewan Land Registry revenue
for the year due to a cooling of activity in the Saskatchewan real estate sector to pre-pandemic levels following rising interest rates
throughout much of 2022;
increased revenue of $17.1 million in Services resulting primarily from transaction and customer growth in the Regulatory and Corporate
Solutions divisions as well as the addition of accounts receivable management to our product suite within our Recovery Solutions
business during the current year. Revenue contributed for the year following the acquisition of UPLevel in February 2022 was $5.8
million. Since the fourth quarter of 2021, customers have been transitioning to the Registry Complete platform, resulting in additional
value-added services made available to these customers. The response from customers continues to be extremely positive. A portion
of the increase in the Regulatory and Corporate Solutions divisions for the year was due to this transition, where customer revenue is
accounted for on a gross instead of net basis due to additional services being provided. This resulted in an increase in revenue and a
corresponding increase in cost of goods sold of $5.4 million with no change in net income or EBITDA; and
• decreased third-party revenue of $2.8 million in Technology Solutions from $8.6 million in the prior year to $5.8 million in the current
year as we experienced continued delays in completion of active solution delivery projects and fewer third-party revenue-generating
opportunities during the year due to the impact of COVID-19 delaying procurement activities.
19
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and Analysis | 2022 ISC® Annual ReportManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022
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)
39.4
19%
30%
10%
41%
29.8
16%
41%
11%
32%
Other
Costs of Goods Sold
Depreciation and Amortization
Employee Expenses
2021
2022
Note: Values may not add due to rounding.
(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
143.7
18%
34%
10%
38%
122.6
16%
33%
11%
41%
2021
2022
Other
Costs of Goods Sold
Depreciation and Amortization
Employee Expenses
Three Months Ended December 31,
2021
2022
Year Ended December 31,
2021
2022
$ 15,997
12,007
4,100
3,205
1,167
1,245
601
1,074
$ 39,396
$
9,600
12,331
3,153
2,111
946
692
559
383
$ 29,775
$ 54,267
49,215
14,735
10,584
4,003
4,988
2,669
3,239
$ 143,700
$ 48,757
40,359
13,778
7,992
3,430
3,872
3,044
1,393
$ 122,625
Total expenses were $39.4 million for the fourth quarter, an increase of $9.6 million compared to the same quarter in 2021 and were
$143.7 million for the full year compared to $122.6 million in 2021.
The increase in expenses during the quarter when compared to the fourth quarter of 2021 is due to the following:
• additional staff and other related expenses that were added following the acquisitions of UPLevel and Reamined, which contributed
•
•
$5.2 million in expenses;
increased investments in people and technology; and
increase in share-based compensation of $2.7 million compared to the fourth quarter of 2021 related to an increase in share price during
the quarter.
The year-over-year rise in expenses for the year ended December 31, 2022, compared to the prior year was due to:
•
increased wages and salaries related to key investments in people and a more competitive wage environment across the organization;
• additional staff and other related expenses that were added following the acquisitions of UPLevel and Reamined, which contributed
$14.1 million in expenses; and
•
increased cost of goods sold of $8.9 million contributed by transaction and customer growth in Services accompanied by the change in
the accounting method for revenue from net to gross as customers transitioned to the Registry Complete platform thereby accessing
more services of $5.4 million, which had no impact on EBITDA or net income.
These increases were partially offset by a reduction in share-based compensation for the year of $4.6 million when compared to 2021. The
appreciation of the share price in the prior year contributed $6.1 million of expense related to share-based compensation, while the
cumulative current year expense was $1.5 million.
20
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and AnalysisManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022
2.4 Consolidated net income
Consolidated Net Income
for the three months ended December 31,
(CAD millions)
10.3
Consolidated Net Income
for the year ended December 31,
(CAD millions)
32.1
30.8
(62)%
3.9
(4)%
2021
2022
2021
2022
Net income for the quarter was $3.9 million or $0.22 per basic share and diluted share, a decrease compared to $10.3 million or $0.59 per
basic share and $0.57 per diluted share in the fourth quarter of 2021. For the full year, net income was $30.8 million or $1.75 per basic share
and $1.71 per diluted share compared to $32.1 million or $1.83 per basic share and $1.78 per diluted share in 2021. The decrease for the
quarter was due to increased investments in people and technology and increased share-based compensation due to an increase in share
price during the quarter. The decrease for the year relates to increased revenue offset by heightened investment in people and technology
to prepare the Company for future growth.
2.5 Consolidated EBITDA and adjusted EBITDA
Consolidated EBITDA and Adjusted EBITDA
for the three months ended December 31,
(CAD millions)
17.2
17.6
13.5
10.8
2.7
EBITDA
Adjustments
(21)%
2021
2022
(0.4)
Consolidated EBITDA and Adjusted EBITDA
for the year ended December 31,
(CAD millions)
67.8
64.4
EBITDA
Adjustments
(5)%
60.5
60.9
7.3
2021
3.5
2022
21
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and Analysis | 2022 ISC® Annual ReportManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022 (thousands of CAD)
Net income
Depreciation and amortization
Net finance expense
Income tax expense
EBITDA
Adjustments
Share-based compensation expense
Stock option expense (recovery)
Acquisition and integration costs
Gain on disposal of property, plant and
equipment assets
Adjusted EBITDA
EBITDA margin (% of revenue)
Adjusted EBITDA margin (% of revenue)
Three Months Ended December 31,
2021
2022
Year Ended December 31,
2021
2022
$
3,949
4,100
1,038
1,721
$ 10,808
2,180
–
537
$ 10,286
3,153
482
3,695
17,616
$
(553)
13
150
$ 30,769
14,735
3,177
12,249
$ 60,930
1,490
(7)
1,981
$ 32,078
13,778
2,673
12,003
$ 60,532
5,972
88
1,225
(1)
$ 13,524
23.4%
29.3%
(1)
$ 17,225
39.8%
38.9%
(4)
$ 64,390
32.1%
33.9%
(2)
$ 67,815
35.7%
40.0%
EBITDA for the quarter was $10.8 million compared to $17.6 million for the fourth quarter in the prior year, primarily due to increased share-
based compensation of $2.7 million when compared to the prior year quarter, accompanied by additional investments in people and
technology. Adjusted EBITDA decreased to $13.5 million from $17.2 million in the prior year as we began to see a return to pre-pandemic activity
levels in the Saskatchewan Land Registry and an impact across the business from the economic tightening that occurred in Canada in 2022.
For the year, EBITDA was $60.9 million compared to $60.5 million in the prior year due to lower results from operations offset by reduced
share-based compensation of $4.5 million. Adjusted EBITDA for the year was $64.4 million, down 5 per cent from the comparative $67.8 million
in the prior year.
2.6 Consolidated finance costs
Net finance expense was $1.0 million for the quarter, up from the $0.5 million in the prior year due to increased long-term debt of $66.0
million as at December 31, 2022, compared to $41.0 million at the prior year-end. The net increase in long-term debt coupled with increased
interest rates in the current year has led to higher finance costs.
For the year, net finance expense was $3.2 million in 2022 compared to $2.7 million in 2021 primarily due to increased interest expenses
from our Credit Facility.
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
Year Ended December 31,
2021
2022
$ 43,018
27.0%
11,615
162
488
(6)
(10)
$ 12,249
$ 44,081
27.0%
11,902
49
39
(25)
38
$ 12,003
In assessing the recovery of deferred income tax assets, management considers whether it is probable 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.
22
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and AnalysisManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022
3 Business Segment Analysis
Headquartered in Canada, ISC is a leading provider of registry and information management services for public data and records.
Throughout our history, we have delivered value to our customers by providing solutions to manage, secure and administer information.
ISC currently has three operating segments:
Registry Operations operates
registries and provides related
services on behalf of governments
at various levels.
Services delivers value-add services
to the financial and legal sectors,
utilizing public data and records.
Technology Solutions designs,
implements and supports registry
and regulatory technology solutions.
The balance of our corporate activities and shared services are reported as Corporate and other.
Revenue by Segment1
for the three months ended December 31,
Revenue by Segment1
for the year ended December 31,
6%
46%
2%
49%
Technology Solutions
Services
Registry Operations
3%
5%
44%
49%
Technology Solutions
Services
Registry Operations
48%
49%
+4%
51%
48%
+12%
2021
2022
2021
2022
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%
71%
30%
Technology Solutions
Services
Registry Operations
79%
(39)%
3%
27%
75%
26%
72%
Technology Solutions
Services
Registry Operations
+1%
2021
2022
(9)%
2021
2022
(2)%
1 Corporate and other and Inter-segment eliminations are excluded. Values may not add due to rounding.
23
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and Analysis | 2022 ISC® Annual ReportManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022 3.1 Registry Operations
Our Registry Operations segment delivers registry and information
services on behalf of governments and private sector organizations.
This segment currently has two major clients with long-term
agreements, one agreement with the Province of Saskatchewan
and one with the Province of Ontario. We report these contracts as
sub-segments known as “Saskatchewan Registries” and “Ontario
Property Tax Assessment Services”.
For services in this segment, competitors include infrastructure
funds and private equity firms as well as information services
companies, registry software providers, and other such
information-based companies that develop and provide software
platforms to manage registry and related information services.
These types of companies may compete with ISC by acting as, or
partnering with, businesses that can provide other required
processes, such as customer service and delivery, in conjunction
with software platforms to provide full-service solutions.
Saskatchewan Registries
ISC 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, 2022,
on our website at www.company.isc.ca and in the Company’s
profile on SEDAR at www.sedar.com.
Our Saskatchewan Registries sub-segment experiences moderate
seasonality, primarily because Land Titles Registry revenue
fluctuates in line with real estate transaction activity in
Saskatchewan. Typically, the second and third quarters of the fiscal
year generate higher revenue, as that is when real estate activity is
traditionally highest; however, the COVID-19 pandemic has
disrupted our normal pattern of seasonality. Ontario Property Tax
Assessment Services does not experience seasonality, as revenue is
spread evenly throughout the year as per the agreement with the
Province of Ontario.
Saskatchewan Land Registry
The Saskatchewan Land Registry (“Land Registry”) includes the
Saskatchewan Land Titles Registry (“Land Titles Registry”),
Saskatchewan Land Surveys Directory (“Land Surveys”) and
Saskatchewan Geomatics services (“Geomatics”).
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 flat or
value-based, calculated as a percentage of the value of the land
and/or property being registered.
We typically charge a flat fee per transaction for search and
maintenance transactions. However, in certain instances, we
may charge a negotiated fee for a customized search or
maintenance transaction such as certain mineral certification
or bulk data requests.
Because the Land Titles Registry revenue comprises 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.
Approximately 88 per cent of all Land Titles Registry registration
transactions were submitted online in 2022.
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 Saskatchewan Personal Property Registry (“Personal Property
Registry”) is a notice-based public registry in which security
interests and certain other interests in personal property (property
other than land, buildings and other property affixed to land) may
be registered.
Customers are charged flat fees per transaction, and the automated
web-based system enables real-time completion of search and
registration services as well as minimizes operational effort to
deliver services.
General provincial economic drivers, including 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 Saskatchewan Corporate Registry (“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.
24
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and AnalysisManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022 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 94 per cent of all registrations in the Corporate Registry were submitted online in 2022.
Ontario Property Tax Assessment (“OPTA”) Services
ISC has an exclusive agreement with the Province of Ontario (the”OPTA Agreement”) by which Reamined provides property tax assessment
services to over 440 municipalities in Ontario, facilitating the management of property tax rates and distribution.
Reamined has provided these services to the Province of Ontario for over 25 years and, on a regular basis, has negotiated and typically
renewed up to five-year agreements with the province. These services support critical applications of information used by municipalities to
facilitate the determination of property taxes annually.
The total revenue for each year of the agreement is determined at the time of renewal and is paid monthly by the Province of Ontario to
Reamined. Should the province request any change orders during the term of the contract, the revenue from any order is based on the
scope of work agreed to by the parties and is in addition to regular revenue. OPTA Services does not experience seasonality, as revenue is
spread evenly throughout the year as per the agreement with the Province of Ontario.
All transactions were submitted online in 2022.
REGISTRY OPERATIONS REVENUE
Registry Operations Revenue
for the three months ended December 31,
(CAD millions)
21.1
13%
12%
75%
22.6
17%
12%
12%
58%
Other
Property Tax Services
Corporate Registry
Personal Property Registry
Land Registry
+7%
2021
2022
Note: Values may not add due to rounding.
(thousands of CAD)
Land Registry
Personal Property Registry
Corporate Registry
Property Tax Assessment Services
Other
Registry Operations revenue
Registry Operations Revenue
for the year ended December 31,
(CAD millions)
85.6
13%
13%
74%
91.7
10%
12%
12%
65%
2021
2022
Other
Property Tax Services
Corporate Registry
Personal Property Registry
Land Registry
+7%
Three Months Ended December 31,
2021
2022
Year Ended December 31,
2021
2022
$ 13,062
2,699
2,787
3,814
243
$ 22,605
$
$
15,742
2,563
2,771
–
–
21,076
$ 59,310
11,337
11,221
8,856
997
$ 91,721
$
63,141
10,993
11,164
–
269
$ 85,567
Revenue for Registry Operations was $22.6 million for the quarter, up $1.5 million or 7 per cent compared to $21.1 million in the fourth
quarter of 2021. The fourth quarter increase in revenue was due to new revenue following our acquisition of Reamined in June 2022. The
fourth quarter decrease in Land Registry revenue was, as expected, due to lower activity in the Saskatchewan real estate sector, as well as a
decline in revenue from high-value transactions compared to the prior year quarter.
25
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and Analysis | 2022 ISC® Annual ReportManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022
For the year, revenue for Registry Operations was $91.7 million
compared to $85.6 million in the prior year, an increase of 7 per
cent or $6.2 million. Land Registry revenue declined, as expected,
compared to 2021, while the Corporate and Personal Property
Registries experienced modest increases compared to the same
period in the prior year. Similar to last quarter, this net decrease
was offset by the addition of new revenue from Reamined of
$8.9 million.
The Government of Saskatchewan commissioned ISC to prepare
for certain updates to the Corporate Registry to support upcoming
changes to legislation. This project is accounted for in the Other
category and is expected to be completed in early 2023.
The top five customers for Registry Operations made up nearly
26 per cent of the total segment revenue year-to-date. Of those
customers, no single customer accounted for more than 10 per
cent of total Registry Operations revenue.
Saskatchewan Land Registry
Registry Operations Revenue
for the year ended December 31,
(CAD millions)
Land Registry
Personal Property Registry
Corporate Registry
Property Tax Services
Other
85.6
11.2
11.0
63.1
91.7
8.9
11.2
11.3
59.3
69.6
10.5
10.1
48.7
2020
2021
2022
Note: Values may not add due to rounding.
100.0
80.0
60.0
40.0
20.0
0.0
For the fourth quarter of 2022, revenue for the Land Registry was $13.1 million, down by $2.7 million or 17 per cent compared to the same
period in 2021. This was due to a decline in the Land Titles Registry revenue, mainly due to reduced activity in the real estate sector,
including a decline in high-value transactions, when compared to the same period in 2021.
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 $12.4 million, a decline of $2.6 million or 18 per cent compared to the record fourth quarter
in 2021. The decline was due to lower Land Titles Registry transaction volume, which decreased by 15 per cent in the fourth quarter, and
lower high-value property registration revenue, which fell by 36 per cent.
Saskatchewan Land Registry Revenue,
for the year ended December 31, 2022
Saskatchewan Land Registry Revenue,
for the year ended December 31, 2021
95.2%
3.1%
1.6%
95.1%
3.2%
1.7%
Land Titles Registry
Geomatics
Land Surveys Directory
Land Titles Registry
Geomatics
Land Surveys Directory
Note: Values may not add due to rounding.
26
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and AnalysisManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022 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. 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)
Registration
Search
Maintenance/Services
17.9
2.2
0.6
0.6
15.1
13.3
2.0
10.7
0.5
16.2
1.9
13.8
0.5
15.7
2.1
13.1
0.6
13.9
2.1
11.3
0.5
17.1
2.1
14.5
0.5
15.2
1.9
12.8
0.5
13.1
1.8
10.8
Q1 2021
Q2 2021
Q3 2021
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Note: Values may not add due to rounding.
Saskatchewan Land Registry Transaction Volume
(Number of transactions)
240,000
200,000
160,000
120,000
80,000
6
1
7
3
0
2
,
0
0
5
6
2
2
,
6
5
7
7
9
1
,
5
8
8
4
1
2
,
8
2
2
0
1
2
,
3
9
8
6
1
2
,
2
1
2
3
9
1
,
1
4
3
3
8
1
,
Q1 2021
Q2 2021
Q3 2021
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Revenue-generating transactions in the Land Titles Registry contracted by 15 per cent for the fourth quarter of 2022 when compared to a
very strong fourth quarter in 2021, including a decline in the volume of title searches compared to the same period in 2021. Title searches
make up the largest component of transaction volume, comprising 75 per cent of the volume for the registry during the quarter. Regular
land transfers and mortgage registrations volume also declined during the period, dropping by 17 per cent and 25 per cent, respectively,
when compared to a stronger fourth quarter of 2021.
For the full year, Land Registry revenue was $59.3 million in 2022, a decline of 6 per cent or $3.8 million compared to the $63.1 million
recorded in 2021, mostly due to decreased activity in the real estate sector during the second half of 2022. Of that, Land Titles Registry
revenue was $56.5 million, down 6 per cent compared to $60.1 million in 2021. This was mainly due to volume declines in regular land
transfers and mortgage registration volume, which ended the year lower, down 12 per cent and 16 per cent, respectively. Title search
volume also ended the year lower, down 4 per cent. As a result, overall transaction volumes dropped 4 per cent when compared to 2021.
The decline in volume for the year was partially offset by an increase in the average land values for regular land transfers in 2022. It is,
however, important to note that 2021 was an unusual year and consideration should be given to that when comparing 2022’s results for the
Land Registry to the prior year.
27
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and Analysis | 2022 ISC® Annual ReportManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022 The following graphs present Land Registry results over the past five years to highlight historical trends, which includes the impact of the
pandemic in 2020, the subsequent unusual performance in 2021 and the start of a return to normal, pre-pandemic conditions in the second
half of 2022.
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)
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
52.7
2.2
59.3
7.9
2.0
49.4
,
7
6
3
6
1
8
,
3
4
0
4
7
7
,
1
1
4
0
1
7
,
7
5
8
2
4
8
,
4
7
6
3
0
8
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
Note: Values may not add due to rounding.
High-value property registration revenue declined to $1.1 million during the last quarter of 2022, compared to $1.8 million in the fourth
quarter of 2021. Each high-value registration generates revenue of $10,000 or more and is typically seen in both commercial and larger
agricultural transactions. The graph below shows the last 20 quarters of high-value transaction revenue. As illustrated below, revenue from
these transactions dropped during the last two quarters, coming down from the elevated levels we had experienced over the prior five
quarters, but remained near historical averages. This is in keeping with our expectations of a return to pre-pandemic transaction levels.
Saskatchewan Land Titles Registry - High Value Transaction Revenue
(CAD)
2.076
,
1
1
0
5
6
1
1
$
,
,
3
0
4
0
5
8
$
,
5
3
8
8
3
7
$
,
4
1
1
8
3
1
1
$
,
,
0
8
7
8
2
3
1
$
,
,
5
0
5
1
9
9
$
,
8
4
6
7
2
8
$
,
5
6
1
3
4
1
1
$
,
,
2
2
4
0
5
9
$
,
2
0
3
0
5
4
$
,
9
5
5
0
5
7
$
,
4
5
9
0
3
6
1
$
,
,
3
7
4
0
8
0
1
$
,
,
5
4
3
5
9
6
1
$
,
,
9
0
1
4
8
6
1
$
,
,
8
8
6
3
6
7
1
$
,
,
5
7
0
6
7
0
2
$
,
,
4
3
7
4
3
8
1
$
,
,
5
3
8
5
1
0
1
$
,
,
8
0
5
1
2
1
1
$
,
0.000
Q1
2018
Q2
Q3
Q4
Q2
Q3
Q4
Q1
2019
Q2
Q3
Q4
Q1
2020
Q1
2021
Q2
Q3
Q4
Q2
Q3
Q4
Q1
2022
28
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and AnalysisManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022
Annual high-value property registration revenue was $6.0 million in 2022, the second-best year on record following 2021’s record-setting
$6.2 million. The first half of 2022 saw records in both the first and second quarters, while the second half of the year saw revenue from
these transactions return closer to historical pre-pandemic norms. The following graph presents the split of high-value transactions over the
past five years between commercial, agricultural and other.
The main customers of the Land Registry include law firms,
financial institutions, governments, surveyors, developers
and resource companies as well as the general public. For
2022, the top 20 Land Registry customers encompassed
just under 42 per cent of the revenue, and the top 100
Land Titles Registry customers made up about 78 per cent
of revenue.
Saskatchewan Personal Property Registry
For the fourth quarter of 2022, revenue for the Personal
Property Registry was $2.7 million, up $0.1 million or 5 per
cent compared to $2.6 million from the same quarter in
2021. Overall volume was down 1 per cent during the period
when compared to the same period of 2021. Revenue grew
at a faster pace as a result of Saskatchewan CPI pricing
adjustments that were implemented in July 2022.
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
Saskatchewan Land Titles Registry – High Value
Transaction Revenue
(CAD millions)
Commercial
Ag
Other
0.2
4.3
0.4
0.9
2.9
3.9
1.0
2.6
0.2
3.8
1.3
2.2
6.2
0.4
2.3
3.5
6.0
0.6
2.2
3.2
2018
2019
2020
2021
2022
Note: Values may not add due to rounding.
Supply chain challenges, especially semiconductor shortages, had a negative impact on new motor vehicle supply and sales throughout
Canada in 2022. Saskatchewan was not immune to this trend with sales in the province below historical averages, particularly early in the
year. However, Saskatchewan has outperformed the national trend in more recent months. The stronger new motor vehicle market has
been a factor driving registration volume to rise by 3 per cent during the last quarter of 2022 when compared to the same period in the
prior year. Accordingly, registration revenue saw an increase in the fourth quarter, up by 10 per cent compared to 2021. Registration revenue
grew at a greater rate than volume due to pricing changes, despite average term-length for registrations dropping slightly when compared
to the same quarter in 2021.
Search volume, which represented 63 per cent of the volume for the registry this quarter, decreased by 3 per cent during the quarter when
compared to the same period in the prior year. As a result, search revenue also contracted by 3 per cent for the fourth quarter of 2022
compared to the same quarter in 2021.
Maintenance revenue was flat in the fourth quarter while volume was flat compared to the same period in the prior year. This was due to a
decline in average term-length for renewals of personal property security registrations during the quarter.
The pattern of seasonality for this registry typically has higher revenue during the second and third quarter each year, illustrated by the
graph below.
Saskatchewan Personal Property Registry Revenue by Type
(CAD millions)
Registration
Search
Maintenance/Services
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
3.1
0.3
0.8
2.0
2.7
0.3
0.7
1.6
2.7
0.3
0.7
1.8
2.6
0.3
0.7
1.6
2.6
0.3
0.7
1.5
3.0
0.3
0.8
1.9
3.1
0.3
0.7
2.0
2.7
0.3
0.7
1.8
Q1 2021
Q2 2021
Q3 2021
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Note: Values may not add due to rounding.
29
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and Analysis | 2022 ISC® Annual ReportManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022
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
,
6
9
4
0
1
1
,
8
6
8
2
2
1
,
7
5
2
7
0
1
,
5
3
2
7
0
1
,
7
9
9
9
0
1
,
6
2
0
3
2
1
,
7
1
8
5
1
1
1
8
6
5
0
1
,
Q1 2021
Q2 2021
Q3 2021
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Annual revenue for the Personal Property Registry was $11.3 million in 2022, an increase of $0.3 million or 3 per cent compared to 2021.
Overall volume for 2022 increased by 1 per cent compared to the prior year largely driven by search activity, which rose by 2 per cent.
Registration volume experienced a modest increase of under 1 per cent in 2022 resulting from personal property security registration setup
volume growing by 1 per cent in 2022 when compared to 2021. Maintenance volume was flat compared to the prior year.
Pricing changes made in July 2022 resulted in a higher revenue growth rate than volume growth rate in 2022. Registration, search and
maintenance revenue rose by 4 per cent, 2 per cent and 1 per cent, respectively. Average term-length for both personal property security
registration setups and renewals saw a modest decrease in 2022 when compared to 2021.
The following tables present Personal Property Registry results over the past five years showing further trends, and the reduction in
revenue and volume that COVID-19 contributed to in 2020. It also illustrates the recovery of volume during 2021 and 2022, despite
volumes having been affected by supply chain issues impacting the availability of new vehicles during these years.
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)
10.2
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
11.3
1.2
2.9
7.3
7
1
9
2
6
4
,
7
2
5
7
5
4
,
8
1
3
7
2
4
,
6
5
8
7
4
4
,
1
2
5
4
5
4
,
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
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 accounted for about 84 per cent of the revenue in 2022, while the top 100 produced 95 per cent of the revenue.
Saskatchewan Corporate Registry
Revenue for the Corporate Registry for the fourth quarter of 2022 was $2.8 million, essentially flat compared to the same period in 2021.
Registration revenue declined by 6 per cent compared to the same period in 2021 as a result of lower levels of new entity creation in the
registry. Search revenue was flat for the fourth quarter. Maintenance revenue, the largest of the three revenue streams, was up 4 per cent,
due to annual returns and renewals, which saw increases when compared to 2021, as well as a higher volume of entity amendments
processed in the quarter.
30
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and AnalysisManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022 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
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
3.1
2.0
0.4
0.7
2.7
1.7
0.4
0.7
2.6
1.6
0.4
0.6
2.8
1.7
0.4
0.7
Q1 2021
Q2 2021
Q3 2021
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Note: Values may not add due to rounding.
The following graph shows the transaction volumes for the Corporate Registry by quarter.
Saskatchewan Corporate Registry Transaction Volume
(Number of transactions)
120,000
100,000
80,000
60,000
40,000
20,000
0
5
3
9
0
0
1
,
6
4
3
0
9
,
2
9
4
9
7
,
0
8
3
8
8
,
0
3
7
8
9
,
8
9
7
1
9
,
6
0
3
5
8
,
9
7
4
8
8
,
Q1 2021
Q2 2021
Q3 2021
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Transaction volumes for the fourth quarter were flat when compared to the same period in the prior year. The largest component of
volume, search transactions, was flat compared to the fourth quarter of 2021. Registration volume fell by 5 per cent, while maintenance
volume rose by 2 per cent compared to the same period in 2021.
For the full year, revenue for the Corporate Registry in 2022 was $11.2 million, flat when compared with 2021. During 2022, registration
revenue fell by 5 per cent when compared to 2021. More specifically, 2022 revenue from the incorporation and registration of new business
entities dropped 4 per cent and drove registration revenue decline. This was offset by increases in search and maintenance revenue, up by
2 per cent and 3 per cent, respectively, when compared to 2021. Revenue from the filing of annual returns and renewals was up over 1 per
cent for the year, which impacts maintenance revenue.
Annual transaction volume for 2022 rose by over 1 per cent compared to 2021. While registration volume dropped 7 per cent for the year,
this was offset by search and maintenance volume growth of 3 per cent and 1 per cent, respectively, compared to the prior year.
The following graphs present Corporate Registry results over the past five years illustrating further trends.
As of December 31, 2022, there were 79,007 active Saskatchewan Business Corporations registered with the Corporate Registry compared
to 77,329 as of December 31, 2021.
For the Corporate Registry, customers include law firms and companies in the financial sector, as well as the Government of Saskatchewan.
They also include 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 generated approximately 33 per cent of revenue for all of 2022 and the top
100 customers produced approximately 51 per cent of revenue.
31
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and Analysis | 2022 ISC® Annual ReportManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022 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)
10.0
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
11.2
1.5
2.8
6.9
,
1
7
3
5
4
3
,
5
9
2
7
4
3
,
4
9
4
8
3
3
,
3
5
1
9
5
3
,
3
1
3
4
6
3
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
Note: Values may not add due to rounding.
Ontario Property Tax Assessment Services
Revenue for OPTA Services in the fourth quarter was $3.8 million. Year-to-date revenue since the acquisition of Reamined in June 2022 was
$8.9 million. The total revenue for each year of the agreement with the Province of Ontario is determined at the time of renewal and is paid
monthly by the province to Reamined. Should the province request any change orders during the term of the contract, the revenue from
any change order is based on the scope of work agreed to by the parties and is in addition to regular revenue.
REGISTRY OPERATIONS EXPENSES AND EBITDA
Registry Operations EBITDA
for the three months ended December 31,
(CAD millions)
13.5
10.3
Registry Operations EBITDA
for the year ended December 31,
(CAD millions)
49.0
50.9
(24)%
+4%
2021
2022
2021
2022
(thousands of CAD)
Revenue
Total expenses1
EBITDA
Three Months Ended December 31,
2021
2022
Year Ended December 31,
2021
2022
$ 22,605
12,346
$ 10,259
$
$
21,076
7,572
13,504
$ 91,721
40,828
$ 50,893
$ 85,567
36,585
48,982
$
1 Total expenses exclude interest, taxes, depreciation and amortization.
EBITDA for Registry Operations for the fourth quarter was $10.3 million, down 24 per cent compared to the same period in the prior year
and was $50.9 million for the full year, an increase of 4 per cent compared to $49.0 million in 2021.
32
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and AnalysisManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022
The increase in expenses in the fourth quarter of 2022, resulted from an increase in corporate allocations of $2.3 million during the quarter
primarily related to share-based compensation resulting from an increase in the Company’s share price and the addition of Reamined
expenses of $2.2 million.
EBITDA for the quarter declined due to a reduction in revenue from the Land Registry as Land Registry transaction volumes and high-value
transactions trended more towards historical pre-pandemic levels following two years of historically high levels. Added to this was an
increase in corporate allocations offset by EBITDA contributed by Reamined of $1.6 million for the quarter. Registry Operations continued to
manage expenses for its Saskatchewan operations where costs remained flat year-over-year.
For the year, EBITDA has increased due to contributions from the new Ontario Property Tax Assessment Services offering acquired through
the Reamined acquisition of $4.1 million, supplemented by a reduction in share-based compensation due to a decline in the Company’s
share price during the year compared to an increase in share price during the prior year. These increases have been partially offset by a
reduction in Land Registry revenue as Saskatchewan real estate activity began to trend towards historical pre-pandemic levels in the last
half of 2022.
Registry Operations EBITDA, which continues to be above historical levels, remains a major contributor to consolidated EBITDA. This is due
to a combination of a robust Saskatchewan real estate market leading to higher transaction values, increased high-value transactions in the
first two quarters of 2022 and slightly higher transaction volumes in the Land Registry over the past two years combined with the
acquisition of Reamined in June 2022. While we expect to see continued strength in Registry Operations’ EBITDA margin, we anticipate it to
continue to trend closer to historical pre-pandemic levels in the future.
Registry Operations EBITDA Margin
for the year ended December 31,
Registry Operations EBITDA Margin
Typical margin
57.2%
48.4%
49.8%
55.5%
Higher value
transaction levels
continue to deliver
results above
typical margins
46.1%
Typical margin
2018
2019
2020
2021
2022
33
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and Analysis | 2022 ISC® Annual ReportManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022 3.2 Services
Services delivers solutions uniting public records data, customer authentication, corporate services, collateral management, asset recovery
and accounts receivable management to support registration, due diligence and lending practices of customers 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 the Services segment.
Category
Offering
Software
Products
Incorporation Services Registry Complete
Nationwide Business Name Registration and Renewals
Security Filings and Registrations
Corporate
Solutions
Corporate Supplies
Registry Complete
Custom in-house
Minute Books
Seals and Stamps
Corporate Legal Packages
Know-Your-Customer
(“KYC”) and Due
Diligence
Registry Complete
SIDni®,
AttestaNet®
LEV®
Regulatory
Solutions
Collateral
Management
Registry Complete
Individual Identification
Legal Entity Validation
Beneficial Ownership Validation
Account Onboarding Services
US & International Corporate Entity Validation
Corporate Profile or Business Name Searches
NUANS1 Searches
Real Estate Searches
Vital Statistics Searches
PPSA2 /RDPRM3 Search and Registrations
Bank Act Filing
Notice of Security Interest (Fixture) Registrations
US UCC4 Search and Filings
Asset Recovery
Repo>>Connect
Recovery Complete
Fully managed service across Canada
Identification, retrieval and disposition of movable
assets
Recovery
Solutions
Accounts Receivable
Management
FACS5
DRS6
Early-stage collection activities
Late-stage collection activities
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.
5 Flexible Automated Collections System.
6 Debt Recovery System.
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.
34
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and AnalysisManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022 Incorporation Services
• Corporate Solutions provides a convenient, cost-effective
method to incorporate businesses online or through our staff-
assisted process. Leveraging our online technology platforms,
Corporate Solutions services legal customers and the general
public through a team of experienced law clerks in Ontario
and Quebec.
• Currently, the Company holds one of the two exclusive
licences, which allows us to access the Ontario Corporate
Registry electronically on behalf of customers. Ontario has
been transitioning to a new licensing model and launched the
first phase of its new public portal on October 19, 2021. The
Company expects to continue to hold one of the two exclusive
licences until Ontario begins to roll out the partner portal (which
may begin in the first half of 2023). We believe that our strong
customer service supported by the industry leading Registry
Complete platform will allow us to differentiate our service from
the public portal. The Company also has 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. These items include
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. Corporate Solutions also
provides 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
• Corporate Solutions provides 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. The
Company uses its proprietary platform to assist customers with
intuitive business rules and advanced automation to deliver
regulatory services to support their credit/banking and legal
processes. Public registry data is leveraged to provide insights and
improved customer experience through a single technology. All our
technology is supplemented with deep subject-matter knowledge
offered through our legal professionals in three locations (Montreal,
Que.; Toronto, Ont.; and Vernon, B.C.).
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
1 Financial Transactions and Reports Analysis Centre of Canada
cloud-based environment. This enhanced service allows legal
organizations to take advantage of expanded Application
Programming Interface (“API”) service offerings, improved tools,
faster turnaround, and a greater array of services in the pursuit of
exceptional and expedient due diligence checks and customer
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 (“KYC”) and Due Diligence
• Regulatory Solutions supports 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. Customers can obtain
numerous reports and intelligence to verify and authenticate
customer data to comply with their internal customer
onboarding policies mandated by FINTRAC1/Anti-Money
Laundering regulations. Using a web-based tool and associated
APIs that provide real-time access to validate and verify an
individual’s or a business’ existence, our KYC service aggregate
information from multiple trusted sources to provide reliable
and accurate identification of an individual and/or a business and
its principals.
• Our public records search offerings include corporate profiles,
business name searches, NUANS®, PPSA searches, security
searches and real estate 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. During 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.
• Regulatory Solutions provides 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.
• Regulatory Solutions also provides account onboarding services,
which has expanded to include customer care following the
acquisition of UPLevel.
Collateral Management
• To ensure or to 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
35
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and Analysis | 2022 ISC® Annual ReportManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022 Revenue
Revenue is earned through transaction fees for search and
registration services provided through incorporation, KYC, public
records and due diligence, and collateral management services. All
government fees associated with the service are either embedded
in the transaction or management service fee or charged in addition
to the service transaction fee. Additional revenue is earned in
Recovery Solutions through management fees and commissions
earned by the provision of asset recovery and accounts receivable
management 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 start-up 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. 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 counter-cyclical to our other business in
that it can perform better in poor economic conditions.
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.
• Regulatory Solutions services the adjudication and completes
the loan fulfilment process, which involves detailed searches
and registrations to be completed to perfect the security
interest. The Company has invested in technology, processes
and innovation to ensure customer and industry digitization
strategies are supported. 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.
Recovery Solutions
Recovery Solutions offers a fully managed asset recovery service
accompanied by accounts receivable management services for our
customers. Recovery Solutions allows us to offer our customers a
complete solution in the credit life cycle, from origination to
recovery. By connecting the registrations from our other offerings
to our Recovery Solutions offering, our customers 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 customers include most of the major banks as well as credit
unions and other creditors.
Asset Recovery
• Recovery Solutions offers a fully managed service across
Canada, which aids in facilitating and co-ordinating asset
recovery on behalf of our customers. 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 customers enjoy a complete turnkey solution where
our team manages every step in the asset recovery process,
including co-ordinating bailiffs, investigators and auctions.
• Our process also allows us to increase recoveries through our
superior supply chain management experience and performance
management of bailiffs, investigators and auctions.
Accounts Receivable Management
• As a licensed collections agency, the Company performs
recovery services related to past due accounts in both a first-
party capacity representing our customers, and a third-party
collections capacity.
• Our customers receive a complete collections solution where
they can assign overdue accounts at any stage in the default
process to be pursued in a manner that is respectful to all parties
and that has delivered strong historical results.
36
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and AnalysisManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022 SERVICES REVENUE
Services Revenue
for the three months ended December 31,
(CAD millions)
Services Revenue
for the year ended December 31,
(CAD millions)
22.4
14%
17%
69%
20.5
10%
15%
75%
Recovery Solutions
Corporate Solutions
Regulatory Solutions
+9%
92.3
12%
17%
70%
75.2
13%
10%
77%
Recovery Solutions
Corporate Solutions
Regulatory Solutions
+23%
2021
2022
2021
2022
Note: Internal related parties and other revenue not displayed in 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,
2021
2022
Year Ended December 31,
2021
2022
$ 15,410
3,061
3,725
245
$ 22,441
$ 15,485
1,953
3,111
–
$ 20,549
$ 65,863
10,923
15,275
245
$ 92,306
$ 58,263
9,516
7,386
–
75,165
$
Revenue for Services was $22.4 million for the fourth quarter of 2022, an increase of 9 per cent, or $1.9 million compared to the same
period in 2021, with increases in both the Corporate Solutions and Recovery Solutions divisions. The rise in Corporate Solutions revenue
resulted from continued transaction and customer growth as customers find value in the Registry Complete platform. Recovery Solutions
saw growth due to increased assignments from asset recovery customers as well as new accounts receivable management revenue
following the acquisition of UPLevel in February 2022. Total revenue contributed for the quarter by UPLevel to Regulatory Solutions and
Recovery Solutions totalled $1.2 million.
On an annual basis, 2022 saw revenue rise by 23 per cent or $17.1 million to $92.3 million compared to the prior year’s result of $75.2 million.
During the year, the Regulatory and Corporate Solution divisions continued to drive transaction growth, new customer acquisitions and
enhanced uptake of new services by existing customers. During 2022, customers have continued to transition from our legacy platform to
our leading Registry Complete platform resulting in these customers being able to access additional value-added services. The response
from customers continues to be extremely positive and has led to an increase in revenue. Recovery Solutions has also experienced growth
year-to-date due to additional revenue from UPLevel’s accounts receivable management business. The accounts receivable management
service offering synergizes with our asset recovery services to provide our customers with a full end-to-end recovery solution, and we
continue to invest in further integration technologies to optimize the Recovery Solutions service offering. Total revenue contributed by
UPLevel during the year in both Regulatory and Recovery Solutions totalled $5.6 million. In addition, during the year, the Company has
reviewed its fee structure for all users including casual users and is making appropriate adjustments as contracts are renewed to offset
inflationary costs.
A portion of the year-over-year increase in revenue in Regulatory Solutions and Corporate Solutions relates to changes in the accounting
method for revenue from net to gross as customers were transitioned to Registry Complete, where they are able to access more value-
added services. This resulted in an increase in revenue of $5.4 million year-over-year along with corresponding increases in cost of goods
sold and therefore no impact on net income or EBITDA. The impact of this change to the fourth quarter of 2022 was not significant as
transitioning commenced in the third quarter of 2021.
37
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and Analysis | 2022 ISC® Annual ReportManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022
The following table demonstrates the growth in Services revenue over the past five years. The year-over-year revenue increases are
the result of organic growth combined with the acquisition of various value add businesses. Additionally, $5.4 million of the increase in
2022 related to the change in accounting method for revenue from net to gross as customers transitioned from legacy systems to
Registry Complete.
Services Revenue by Type
for the year ended December 31,
(CAD millions)
Regulatory Solutions
Corporate Solutions
Recovery Solutions
Services Revenue by Type
Services Revenue by Type
for the year ended December 31, 2022
for the year ended December 31, 2022
92.1
10.9
15.3
65.9
75.2
9.5
7.4
58.3
3.7
56.4
4.9
47.7
11.9%
11.9%
16.6%
16.6%
71.5%
71.5%
51.0
5.0
46.0
42.4
4.8
37.6
Regulatory Solutions
Regulatory Solutions
Corporate Solutions
Corporate Solutions
Recovery Solutions
Recovery Solutions
2018
2019
2020
2021
2022
Note: Internal related parties and other revenue not displayed in graph. Values may not add due to rounding.
Regulatory Solutions
Revenue in Regulatory Solutions for the last quarter of 2022 was $15.4 million, a modest decline of $0.1 million compared to the same period
in 2021. This decline in revenue follows the economic tightening throughout most of 2022, which is beginning to impact some customers
offset by new Regulatory Solutions revenue contributed by UPLevel during the quarter of $0.7 million. As previously stated, the accounting
impact of the transition of customers to Registry Complete did not have an impact this quarter. Revenue for the year was $65.9 million, an
increase of 13 per cent or $7.6 million compared to $58.3 million in 2021. Year-to-date revenue grew due to transaction growth, onboarding
of new customers, expansion of additional services to existing clients and new revenue of $3.6 million following the acquisition of UPLevel in
February 2022.
During 2022, $1.3 million of the increase in revenue relates to changes in the accounting method for revenue from net to gross as customers
migrated to Registry Complete where additional value-added services are available. This change resulted in an increase in revenue and a
corresponding increase in the cost of goods sold, with no change in EBITDA.
Recovery Solutions
Revenue in Recovery Solutions for the fourth quarter of 2022 was $3.1 million, an increase over the same period in 2021 of $1.1 million or 57
per cent. The growth for the quarter is attributed to additional revenue from UPLevel’s accounts receivable management business of $0.6
million in revenue, along with an increase in asset recovery revenue driven by increased assignments received throughout the quarter
compared to 2021.
On an annual basis, revenue in 2022 was $10.9 million compared to $9.5 million in 2021, an increase of 15 per cent or $1.4 million. The
increase is due to the accounts receivable management revenue of $2.0 million year-to-date from UPLevel, which was partially offset by
lower-than-expected asset recovery revenue, where although there was an increase in assignments, redemption rates were higher
throughout the year.
Corporate Solutions
Corporate Solutions revenue for the final quarter of 2022 was $3.7 million, increasing by 20 per cent or $0.6 million compared to $3.1 million
in the fourth quarter of 2021. Annual revenue was $15.3 million compared to $7.4 million in 2021, an increase of 107 per cent. This increase
for the quarter and year-to-date is due to the onboarding of new customers, accompanied by the addition of corporate filing products to
Registry Complete and the transitioning of existing customers from our legacy platform to Registry Complete, where revenue is now
recognized on a gross instead of net basis due to additional services being provided. While this change in accounting treatment did not
impact the fourth quarter of 2022, it accounted for $4.1 million of the increase during the year to both revenue and cost of goods sold with
no impact to net income or EBITDA.
38
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and AnalysisManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022 Our Services revenue by division is shown in the following graph.
Services Revenue by Type
(CAD millions)
20.1
3.2
1.4
15.5
18.3
2.3
1.2
14.8
20.5
2.0
3.1
15.5
16.2
2.1
1.6
12.5
25.0
20.0
15.0
10.0
5.0
0.0
Regulatory Solutions
Corporate Solutions
Recovery Solutions
24.9
2.4
3.7
18.7
22.7
3.0
4.3
15.4
22.2
2.4
3.5
16.3
22.2
3.1
3.7
15.4
Q1 2021
Q2 2021
Q3 2021
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Note: A change was made to the categorization of revenue between Regulatory and Recovery Solutions, resulting in previously reported values for the quarter
ended June 30, 2022 being edited. Internal related parties and other revenue not displayed in graph. Values may not add due to rounding.
The top 20 Services customers for all of 2022 accounted for almost 63 per cent of the revenue, while the top 100 Services customers
covered 80 per cent of revenue. No single customer accounted for more than 25 per cent.
SERVICES EXPENSES AND EBITDA
Services EBITDA
for the three months ended December 31,
(CAD millions)
4.0
4.0
Services EBITDA
for the year ended December 31,
(CAD millions)
18.6
17.4
0%
+7%
2021
2022
2021
2022
(thousands of CAD)
Revenue
Total expenses1
EBITDA
1 Total expenses exclude interest, taxes, depreciation and amortization.
Three Months Ended December 31,
2021
2022
Year Ended December 31,
2021
2022
$ 22,441
18,458
3,983
$
$ 20,549
16,515
4,034
$
$ 92,306
73,711
$ 18,595
75,165
$
57,788
17,377
$
EBITDA for Services was $4.0 million for the quarter, flat compared to the fourth quarter of 2021. Services EBITDA for the year was $18.6
million compared to $17.4 million in 2021. The 2022 full-year increase was due to the increased revenue from transaction and customer
growth through the year, supplemented by Registry Complete providing additional services to existing and new Regulatory and Corporate
Solutions clients. This growth in revenue was partially offset by additional people and information technology investments to support this
growth, Registry Complete, and additional expenses related to the acquisition of UPLevel.
39
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and Analysis | 2022 ISC® Annual ReportManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022
Services expenses were $18.5 million for the quarter compared to $16.5 million in the fourth quarter of 2021. For the year, expenses were
$73.7 million compared to $57.8 million in 2021. The increase in expense for the quarter was primarily due to incremental expenses from the
new UPLevel business and by increased people and information technology investments to support business growth. For the year, the
increase was due to the same referenced items for the quarter as well as increased cost of goods sold related to both the increase in
revenue and change in accounting treatment for revenue recognition due to additional services being provided to customers as they
migrated from legacy systems to Registry Complete.
As we have transitioned customers to Registry Complete where additional services are being provided, we have changed the accounting
treatment of these revenues and expenses to be on a gross instead of net basis. While this has increased revenue and cost of goods sold
with no impact on EBITDA, this change has reduced consolidated EBITDA margin for the year-to-date. While there was no notable impact
from this adjustment during the fourth quarter of 2022, the impact for the full year is $5.4 million.
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 inquiry processing, RegSys delivers
solutions enabling the provision of core services to citizens in a user-friendly, efficient manner across multiple access points. The RegSys
solution has also been used to manage other legal registers such as intellectual property, securities, licences, charities, UCC and pension
schemes.
Competitors in this segment include other registry software providers that develop and provide software platforms to manage registries.
On the technology services side, our competitors include all 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 customers’ 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)
4.9
47%
53%
3.6
71%
29%
Internal parties
Third parties
(23)%
Technology Solutions Revenue
for the year ended December 31,
(CAD millions)
18.1
52%
16.0
63%
Internal parties
Third parties
48%
37%
(12)%
2021
2022
2021
2022
40
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and AnalysisManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022 (thousands of CAD)
Third parties
Internal related parties
Technology Solutions revenue
Three Months Ended December 31,
2022
1,047
2,560
3,607
$
$
2021
2,613
2,317
4,930
$
$
Year Ended December 31,
2022
2021
$
5,849
10,168
$ 16,017
$
8,644
9,475
$ 18,119
Revenue in Technology Solutions was $3.6 million for the quarter, a decrease of $1.3 million compared to $4.9 million in the fourth quarter
of 2021.
Revenue from third parties for the quarter decreased $1.6 million compared to the fourth quarter of 2021 and decreased $2.8 million for the
full year compared to the same period in 2021. The decline in revenue in both the fourth quarter and the full year compared to the prior
periods is attributable to fewer third-party revenue-generating opportunities due to the impact of COVID-19 delaying procurement
activities. While we continue to see progress on solution delivery projects, certain milestones anticipated to be completed in the fourth
quarter of 2022 have been delayed into 2023 due to customer delays and the need to rescope the respective projects. Revenue on our
solution implementation projects will continue to be recognized in the quarters in which it is earned either through achievement of
milestones or 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 third-party
revenue.
Technology Solutions Revenue by Type
(CAD millions)
Third-Party Revenue
Related Party Revenue
8.0
6.0
4.0
2.0
0.0
6.0
2.3
3.7
3.0
2.5
4.1
2.3
1.8
4.9
2.3
2.6
Q1 2021
0.6
Q2 2021
Note: Values may not add due to rounding.
4.4
2.6
1.8
4.2
2.7
1.5
3.8
2.3
1.5
3.6
2.6
1.0
Q3 2021
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Revenue for the year was $16.0 million, a decrease of $2.1 million from $18.1 million in 2021.
Revenue from third parties was $5.8 million compared to $8.6 million in 2021. Revenue from third parties decreased in 2022 versus 2021
resulting from continued delays in active solution delivery projects.
Internal related party revenue year-to-date increased as enhanced focus has been placed on integrating and supporting new acquisitions
and heightening security across the organization.
41
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and Analysis | 2022 ISC® Annual ReportManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022
The following graphs provide 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.
Technology Solutions Revenue by Type
(CAD millions)
Technology Solutions Revenue
Technology Solutions Revenue
for the year ended December 31, 2022
for the year ended December 31, 2022
Third parties
Internal related parties
25.0
20.0
15.0
10.0
5.0
0.0
24.3
12.8
20.5
9.8
11.4
10.8
21.2
14.8
6.4
18.1
9.5
8.6
16.0
10.2
5.8
2018
2019
2020
2021
2022
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)
1.4
63.5%
63.5%
36.5%
36.5%
Third parties
Third parties
Internal related parties
Internal related parties
Technology Solutions EBITDA
for the year ended December 31,
(CAD millions)
1.8
2021
(1.2)
2022
2021
(1.4)
2022
(thousands of CAD)
Revenue
Total expenses1
EBITDA
1 Total expenses exclude interest, taxes, depreciation and amortization.
Three Months Ended December 31,
2021
2022
$
$
3,607
4,807
(1,200)
$
$
4,930
3,489
1,441
Year Ended December 31,
2021
2022
$ 16,017
17,397
(1,380)
$
$ 18,119
16,317
1,802
$
EBITDA for Technology Solutions for the quarter decreased $2.6 million, and for the year decreased $0.9 million, compared to the same
period in 2021. EBITDA decreased for the quarter and the year primarily due to lower third-party revenue on solution implementation
contracts combined with increased costs related to people and technology as increased resources are applied to complete outstanding
solution delivery projects and less salaries are capitalized when compared to the fourth quarter of 2021 due to the phase of the projects.
42
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and AnalysisManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022
Additionally, EBITDA for the quarter was further impacted by an increase in share-based compensation as a result of an increase in share
price during the quarter compared to a decrease in the prior year period, thereby increasing corporate costs allocated to the segment.
For the quarter, Technology Solutions expenses were $4.8 million, an increase of $1.3 million from $3.5 million for the fourth quarter in 2021.
Technology Solutions expenses were $17.4 million for the year, an increase of $1.1 million from $16.3 million in 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.
Following the acquisition of Regulis on December 20, 2022, the Company has included Regulis within the Corporate segment until it
commences operations. Regulis holds a contract under the Luxembourg Rail Protocol of the Cape Town Convention which provides it the
exclusive right and obligation to develop, deliver and operate the International Registry for Railway Rolling Stock for a period of 10 years
from the date the registry goes live as defined in the Luxembourg Rail Protocol. The acquisition will continue to expand the Company’s
portfolio of services and solutions to help improve the delivery of modern registry services by and for governments and intergovernmental
and private organizations.
(thousands of CAD)
Third parties
Internal related parties
Corporate and other revenue
Total expenses1
EBITDA
Three Months Ended December 31,
Year Ended December 31,
2022
11
36
47
2,281
(2,234)
$
$
$
2021
–
34
34
1,397
(1,363)
$
$
$
2022
19
145
164
7,342
(7,178)
$
$
$
2021
3
157
160
7,789
(7,629)
$
$
$
1 Total expenses exclude interest, taxes, depreciation and amortization.
EBITDA decreased compared to the same quarter in 2021, as a result of an increased staffing complement to support delivery on corporate
strategy, accompanied by an increase in share-based compensation in the current quarter as a result of an increase in the Company’s share
price during the quarter compared to a decrease in the prior year quarter.
For the year, share-based compensation expense was lower than the prior year increasing EBITDA due to a decline in the Company’s share
price year-over-year. This was partially offset by increased people and technology costs across the corporate supporting business units to
prepare the business for growth.
43
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and Analysis | 2022 ISC® Annual ReportManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022
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 Registry revenue fluctuates in line with real estate transaction activity in Saskatchewan.
Typically, the second and third quarters of the fiscal year generate higher revenue, as that is when real estate activity is traditionally highest.
OPTA Services revenue earned through Reamined does not experience seasonality, as revenue is recognized evenly throughout the year as
per the agreement with the Province of Ontario.
In Services, our Corporate Solutions and Regulatory Solutions 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 experience 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 counter-cyclical 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 current year trends 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, this segment is impacted by the timing of procurement activities largely
undertaken by governments around the world. While this was impacted by COVID-19, we have seen an increase in procurement activities
over the past two quarters.
The balance of our corporate activities and shared services functions do not experience seasonality. Expenses are generally consistent from
quarter to quarter but can fluctuate due to the timing of project-related or acquisition activities. As a result, our EBITDA margin fluctuates in
line with the cumulative impact of the above factors.
(thousands of CAD)
Q4
Q3
Q2
Q1
Q4
(restated)1
(restated)1
(restated)1
2022
2021
Q3
Q2
Q1
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
$ 46,104 $ 48,768
36,922
39,396
$ 50,870
33,919
6,708
(1,038)
5,670
(1,721)
$ 3,949 $
11,846
(1,038)
10,808
(3,052)
7,756
16,951
(666)
16,285
(4,628)
$ 11,657
688
$ 4,637 $
23.4%
29.3%
$
$
0.22 $
0.22 $
48
7,804
32.5%
34.9%
0.44
0.43
(310)
$ 11,347
40.2%
37.8%
0.66
$
0.65
$
$ 44,153 $ 44,238 $ 41,369 $ 44,623 $ 39,148
30,954
27,269
33,463
34,626
29,775
10,690
(435)
10,255
(2,848)
14,463
(482)
13,981
(3,695)
$ 7,407 $ 10,286 $
14,100
(661)
13,439
(3,706)
9,733 $
9,997
(737)
9,260
(2,749)
6,511 $
8,194
(793)
7,401
(1,853)
5,548
(448)
(262)
$ 6,959 $ 10,024 $
31.3%
33.0%
$
$
39.8%
38.9%
0.42 $
0.41 $
0.59 $
0.57 $
(4)
9,729 $
(37)
6,474 $
42.3%
41.8%
30.4%
41.5%
0.56 $
0.54 $
0.37 $
0.36 $
(759)
4,789
30.3%
37.8%
0.32
0.31
1 In the fourth quarter of 2021, the Company changed its accounting policy with respect to customization and configuration of Software-as-a-service arrangements.
44
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and AnalysisManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022
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 delivered through three key segments:
• Registry Operations, which operates registries and provides related services on behalf of governments at various levels;
• Services, which delivers value-add services to the financial and legal sectors, utilizing public data and records; and
• Technology Solutions, which designs, implements and supports registry and regulatory technology solutions.
Through our segments, 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;
• ensure an exceptional customer experience for those interacting with ISC’s systems, people and information; and
• meaningfully grow revenue with continued emphasis on corresponding EBITDA growth.
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
Innovation
Attainable organic and
inorganic growth available in
the near-term
Innovation for growth/
competitiveness and
extension into new verticals
is key given Canadian and
global market limitations
Values and
Differentiation
Laser focus on quality of
service delivery and how
we treat our customers
and employees remains
at the core
We regularly review and adjust our strategy to ensure that the Company remains well positioned in the long term, while being adaptable to
near-term factors. Our objective is to consistently execute transactions that fulfil our fundamental acquisition criteria for opportunities that
add products, services or competencies that align with our strengths and where we can add value while augmenting our strong free cash
flow and EBITDA profile.
6 Financial and Capital Management
6.1 Cash flow
Our primary source of operating cash flow is generated from revenue related to the 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. The Company has also used 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, merger and acquisition activity, and anticipated
dividend payments (refer to Note 16 in the December 31, 2022 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).
45
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and Analysis | 2022 ISC® Annual ReportManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022 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, 2022, the Company held $34.5 million in cash compared to $40.1 million as
at December 31, 2021, a decrease of $5.6 million.
The Company expects to be able to meet its cash requirements, including being able to settle current liabilities of $39.6 million (December
31, 2021 – $36.9 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
1 Refer to Note 23 of the Financial Statements for reconciliation.
Three Months Ended December 31,
2021
2022
Year Ended December 31,
2021
2022
$ 18,420
(10,224)
$
17,471
(3,142)
$ 43,536
3,837
$ 61,212
(14,185)
$
8,196
$ 14,329
$ 47,373
$
47,027
(163)
(157)
7,876
$
(10)
(587)
$ 13,732
(574)
(890)
$ 45,909
(10)
(2,217)
44,800
$
Consolidated free cash flow for the quarter was $7.9 million compared to $13.7 million for the same quarter in 2021 and was $45.9 million for
the full year compared to $44.8 million in 2021. The decrease for the quarter primarily relates to results of operations that are beginning to
be impacted by the economic tightening that has occurred throughout 2022 with reduced transaction volumes in the Saskatchewan Land
Registry and Regulatory Solutions accompanied by increased people and technology costs compared to the fourth quarter of 2021. The
increase for the full year when compared to 2021 results primarily from reduced capital spending.
The following table summarizes our sources and uses of funds for the three months and years ended December 31, 2022 and 2021:
(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
Increase (decrease) in cash
Cash, beginning of period
Cash, end of period
Three Months Ended December 31,
2021
$ 17,471
(553)
2022
$ 18,420
(563)
Year Ended December 31,
2021
61,212
(366)
2022
$ 43,536
(55,619)
$
(16,435)
(19,541)
6,247
(54,274)
$
150
1,572
32,907
$ 34,479
(133)
$
(2,756)
42,860
$ 40,104
$
211
(5,625)
40,104
$ 34,479
(414)
$
6,158
33,946
40,104
$
NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES
Net cash flow provided by operating activities was $18.4 million for the quarter compared to $17.5 million for the same period in 2021.
For the quarter, cash provided by operating activities was slightly ahead of the prior year. The increase was driven by more favourable levels
of working capital relative to the prior year’s fourth quarter, which was partly offset by reduced operating results compared to the fourth
quarter of 2021.
For the year, cash provided by operating activities was $43.5 million compared to $61.2 million in the prior year. During the year, the
Company has continued to deliver strong operating results translating into consistent cash flow; however, changes in net non-cash working
capital were an outflow of $3.8 million in the current year compared to an inflow of $14.2 million in the prior year. The working capital
variance is a net outflow of $18.0 million, which is attributable to incremental outflows across most categories, including:
46
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and AnalysisManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022
• $14.6 million is attributable to taxes. Strong results in the prior year attracted increased taxes, $7.0 million of which were paid in the
current year, and the remainder reflects a higher instalment base relative to the prior year;
• $6.4 million is attributable to share-based compensation, where liability values move with fluctuations in the share price. The closing
share price at December 31, 2022 was $24.17, which is $1.12 lower than the share price of $25.29 at December 31, 2021. In the comparable
period for 2021, the share price rose $5.38 from $19.91 at the start of the year; and
• these outflows were partially offset by $3.0 million cash inflow from other working capital items.
NET CASH FLOW USED IN INVESTING ACTIVITIES
Net cash flow used in investing activities for the quarter was $0.6 million, which is consistent with the fourth quarter of 2021. During the
fourth quarter, this spend was primarily related to the acquisition of Regulis for $0.6 million. For the year, net cash used in investing activities
increased by $55.3 million when compared to the prior year primarily related to the acquisitions of UPLevel, Reamined and Regulis for a total
of $54.7 million.
NET CASH FLOW USED IN FINANCING ACTIVITIES
Net cash flow during the quarter used in financing activities was $16.4 million compared to cash used in the prior year of $19.5 million. During
the current quarter, the Company made $10.0 million in voluntary debt prepayments, paid $4.1 million of dividend payments and settled
$0.5 million in short-term debt related to the Reamined acquisition. Most of the outflow in the fourth quarter of 2021 was attributable to
$15.0 million in voluntary debt prepayments and dividends of $3.5 million.
For the year, net cash provided by financing activities was $6.2 million, compared to net cash used in financing activities of $54.3 million in
the prior year. In 2022, this primarily relates to $40.0 million of borrowings to finance the Reamined acquisition partially offset by debt
prepayments of $15.0 million, dividends of $16.2 million and settlement of short-term debt of $0.5 million. Primary outflows in 2021 were
$35 million in voluntary debt prepayments and dividends of $14.0 million.
6.2 Capital expenditures
Capital expenditures were $0.6 million for the fourth quarter of 2022, consistent with the same period in 2021. For the full year, capital
expenditures remained consistent with the prior year at $2.5 million primarily related to system development work across our business
segments.
(thousands of CAD)
Registry Operations1
Services
Technology Solutions
Corporate and other
Total capital expenditures
Three Months Ended December 31,
Year Ended December 31,
2022
291
278
(57)
50
562
$
$
2021
30
171
396
–
597
$
$
2022
1,016
707
688
50
2,461
$
$
2021
299
557
1,640
–
2,496
$
$
1 Registry Operations includes consideration for Service concession arrangements.
6.3 Debt
At December 31, 2022, the Company’s debt was $66.0 million compared to $41.0 million at December 31, 2021. Debt of $1.5 million, that was
acquired as part of the acquisitions in 2022, was settled prior to December 31, 2022, including a deemed non-cash settlement of $1.0 million
associated with the UPLevel acquisition shortly after close.
During the quarter, the Company made a $10.0 million (2021 – $15.0 million) voluntary prepayment against its revolving facility due to
excess cash and to minimize interest expense. In addition, during the quarter, the $0.5 million of debt to the former shareholders of
Reamined was repaid.
During the year ended December 31, 2022, the Company made a total of $15.0 million of voluntary prepayments compared to prepayments
totalling $35.0 million in the prior year. The total aggregate amount available under the Credit Facility at December 31, 2022 remains at
$150.0 million.
For further information on our Credit Facility, refer to Note 16 in the December 31, 2022 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.
47
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and Analysis | 2022 ISC® Annual ReportManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022
The Company was in compliance with all covenants throughout the period. The amount of borrowing costs capitalized during 2022 and
2021 was nil.
6.4 Total assets
Total assets were $283.5 million at December 31, 2022, compared to $232.5 million at December 31, 2021.
(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
Intangibles
Goodwill
Cash
Total assets
6.5 Working capital
Registry
Operations
Services
Technology
Solutions
Corporate As at December 31,
and Other
2022
$ 23,667
32,301
21,098
–
$ 77,066
Registry
Operations
$ 23,108
1,506
1,200
-
$ 25,814
$
15,838
51,383
71,537
–
$ 138,758
Services
$
12,516
54,794
67,372
-
$ 134,682
$
4,408
4,638
8,605
–
$ 17,651
Technology
Solutions
$
4,099
4,755
8,562
-
$ 17,416
$
$
$
$
14,829
671
–
34,479
49,979
$ 58,742
88,993
101,240
34,479
$ 283,454
Corporate
and Other
As at December 31,
2021
14,470
12
-
40,104
54,586
$ 54,193
61,067
77,134
40,104
$ 232,498
At December 31, 2022, working capital was $17.6 million compared to $19.5 million at December 31, 2021.
(thousands of CAD)
Current assets
Current liabilities
Working capital
As at December 31,
2022
As at December 31,
2021
$ 57,216
(39,626)
$ 17,590
$ 56,447
(36,905)
$ 19,542
The main drivers of the $2.0 million decrease in working capital year-over-year are as follows:
(thousands of CAD)
2022 Acquisitions
Remove portion financed with long-term debt
Subtotal
Free cash flow for 2022
Financing and other items:
Repayment of long-term debt
Dividends paid
Interest and lease payments
Stock options exercised
All other
Total change in working capital
48
$ (54,671)
40,000
(14,671)
45,909
(15,000)
(16,172)
(5,442)
3,361
63
(1,952)
$
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and AnalysisManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022
6.6 Outstanding share data
The number of issued and outstanding Class A Shares as at December 31, 2022, was 17,701,498 and the number of issued and outstanding
share options as at December 31, 2022, was 1,332,017. As of March 14, 2023, the date of filing, the number of issued and outstanding Class A
Shares was 17,701,498 and the number of issued and outstanding share options was 1,332,017.
6.7 Common share dividend
On November 2, 2022, the Board declared a quarterly cash dividend of $0.23 per Class A Share paid on or before January 15, 2023, to
shareholders of record as of December 31, 2022.
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, 2022:
(thousands of CAD)
Operating leases and
non-lease component
of office leases1
Information technology2
and other service agreements
Master Service Agreement3
Total
2023
2024
2025
2026
2027
Thereafter
Total
$
1,558
$
1,418
$
631 $
366 $
303 $
705 $
4,981
4,495
500
6,553
1,724
500
$ 3,642
$
981
500
478
500
$ 2,112 $ 1,344 $
370
500
1,173 $
8,418
370
3,000
5,500
4,075 $ 18,899
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,
2022, consist of cash, 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.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of cash, 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 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.
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
49
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and Analysis | 2022 ISC® Annual ReportManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022
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, 2022, is $49.4 million (December 31, 2021 — $52.9 million), equal to the carrying value of the
Company’s financial assets, those being cash at $34.5 million (December 31, 2021 — $40.1 million) and trade and other receivables at $14.9
million (December 31, 2021 — $12.8 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, debt services ratios, future expected performance and
the effect of changes in interest rates. The Company has the option of using short-term bankers’ acceptance notes and/or derivative
instruments to lock in rates at any time.
The Company has estimated that a 100 basis point spread in interest rate for the year ended December 31, 2022 would increase/decrease
comprehensive income by $468.0 thousand (2021 — $488.0 thousand).
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, and 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.
50
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and AnalysisManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022 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 of having more innovative products, greater
longevity in the market, or 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
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.
Acquisitions
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.
Cost/Efficiency/Profitability
There is a risk that ISC’s business model and resourcing mix will not allow ISC to achieve
cost efficiencies in new or existing product lines or be sufficiently nimble to take
advantage of business development opportunities or adapt to volume changes within
its business.
Economic Conditions
Changes in the condition of the economy, including those arising from economic
tightening or public health concerns, 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.
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, 2022.
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 December 31, 2022 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.
51
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and Analysis | 2022 ISC® Annual ReportManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022 8.3 Critical accounting estimates
ISC’s critical accounting estimates are contained in Note 2 of the Financial Statements under the summary of use of estimates and
judgments and include references to:
• the carrying value, impairment and estimated useful lives of property, plant and equipment;
• the carrying value, impairment and estimated useful lives of intangible assets and goodwill;
• the allocation of the purchase price for the acquisition of UPLevel and Reamined;
• the recoverability of deferred tax assets; and
• the amount and timing of revenue from contracts from customers recognized over time.
The preparation of the Financial Statements, in conformity with IFRS, requires management to make estimates and underlying assumptions
and judgments that affect the accounting policies and reported amounts of assets, liabilities, revenue and expenses.
Estimates and underlying assumptions are reviewed on an ongoing basis. Actual results may differ from these estimates. Revisions to
accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Critical accounting
estimates and judgments are those that have a significant risk of causing material adjustment.
8.4 Changes in accounting policies
The Company has adopted the following revised standards, along with any consequential amendments, effective January 1, 2022, 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.
Proposed Standard Description
Amendments
to International
Accounting
Standard (“IAS”) 37
— Onerous Contracts
– Cost of Fulfilling a
Contract
Amendments to
IFRS 3 — Reference
to the Conceptual
Framework
The amendments specify that the “cost of fulfilling” a contract comprises the “costs that relate directly
to the contract”. Costs that relate directly to a contract consist of both the incremental costs of fulfilling
that contract (examples would be direct labour or materials) and an allocation of other costs that relate
directly to fulfilling contracts (an example would be the allocation of the depreciation charge for an item
of property, plant and equipment used in fulfilling the contract).
The amendments apply to contracts for which the entity has not yet fulfilled all its obligations at
the beginning of the annual reporting period in which the entity first applies the amendments.
Comparatives are not restated. Instead, the entity shall recognize the cumulative effect of initially
applying the amendments as an adjustment to the opening balance of retained earnings or other
component of equity, as appropriate, at the date of initial application.
This amendment will affect the assessment of and accounting for onerous contracts. The Company
has adopted this amendment to IAS 37 effective January 1, 2022, which has had no impact on the
consolidated financial statements. The Company continues to assess its contracts in accordance with the
amendments to IAS 37.
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 International Financial Reporting
Interpretations Committee (“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 Company adopted this amendment on January 1, 2022 and has applied it to acquisitions completed
during 2022.
52
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and AnalysisManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022
The IASB and IFRIC issued the following new standards and amendments to standards and interpretations, which become effective for
future periods.
Proposed Standard Description
Amendments to
IAS 1 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.
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. The Company has assessed the impact of the adoption of this amendment,
and it is not expected to have a material impact on the Company’s Consolidated
Financial Statements.
Effective Date
January 1, 2023
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. The Company has assessed the impact of the adoption of this amendment,
and it is not expected to have a material impact on the Company’s Consolidated
Financial Statements.
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.
January 1, 2024
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, 2024, with early application permitted. This amendment is currently being
assessed by the Company to determine the impact.
53
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and Analysis | 2022 ISC® Annual ReportManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022
Chief Executive Officer and the Chief Financial Officer, on a timely
basis so that appropriate decisions can be made regarding public
disclosures. Management has concluded these controls were
operating effectively as of December 31, 2022.
The design scope of disclosure controls and procedures has been
limited to exclude controls, policies and procedures of UPLevel,
which was acquired less than 365 days prior to December 31, 2022.
The contribution of UPLevel to the Financial Statements for the
three months ended December 31, 2022, was approximately 3 per
cent of revenue and 5 per cent of expenses, and for the year ended
December 31, 2022, was approximately 3 per cent of revenue and 4
per cent of expenses. At December 31, 2022, UPLevel contributed
approximately 6 per cent of current assets, 4 per cent of non-
current assets, 2 per cent of current liabilities and 1 per cent of
non-current liabilities.
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.
8.5 Financial measures and key performance
indicators
Revenue, expenses and net income are key performance indicators
the Company uses to manage its business and evaluate its financial
results and operating performance. In addition to these results,
which are reported in accordance with IFRS, certain non-IFRS
measures are supplemental indicators of operating performance
and financial position as well as for internal planning purposes.
The Company evaluates its performance against these metrics by
comparing actual results to management budgets, forecasts
and prior period results. These non-IFRS financial measures
include EBITDA, EBITDA margin, adjusted EBITDA, adjusted
EBITDA margin and free cash flow. Refer to section 8.8 “Non-IFRS
financial measures”.
8.6 Internal controls over financial reporting
The Company’s management, including the President and Chief
Executive Officer and the 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 and management has
concluded these controls were operating effectively as of
December 31, 2022.
The design scope of internal controls over financial reporting has
been limited to exclude controls, policies and procedures of
UPLevel, as it was acquired less than 365 days prior to December
31, 2022. See section 8.7 “Disclosure controls and procedures” for
UPLevel’s contribution to the Financial Statements.
Other than as described above, no changes in our internal controls
over financial reporting that have occurred during the period have
materially affected or are reasonably likely to materially affect our
internal controls over financial reporting.
It should be noted that all internal control systems, no matter
how well designed, have inherent limitations. Therefore, even
those systems determined to be effective can provide only
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
54
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and AnalysisManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022 Non-GAAP Performance
Measure
Why we use it
How we calculate it
Most comparable IFRS
financial measure
EBITDA
• To evaluate performance and
EBITDA:
Net income
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.
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
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.
Adjusted EBITDA Margin:
Adjusted EBITDA
divided by
Total revenue
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
Net cash flow provided
by operating activities
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.
55
2022 ISC® Annual Report | Management’s Discussion and AnalysisManagement’s Discussion and Analysis | 2022 ISC® Annual ReportManagement’s Discussion and AnalysisFor the Fourth Quarter and Year Ended December 31, 2022
2022 Consolidated Financial Statements
For the Year Ended December 31, 2022
Management’s Responsibility..................................... 57
13 Lease Obligations .....................................................81
Independent Auditor’s Report ...................................58
14 Tax Provision .............................................................81
Consolidated Statements of Financial Position .....61
15 Share-Based Compensation Plans ....................83
Consolidated Statements of
Comprehensive Income ...............................................62
Consolidated Statements of Changes in Equity ...63
16 Debt ............................................................................87
17
Liabilities Arising from
Financing Activities ............................................... 89
Consolidated Statements of Cash Flows ............... 64
18 Earnings Per Share ................................................ 89
Notes to the Consolidated Financial Statements ...65
19 Equity and Capital Management ....................... 89
1 Nature of the Business ..........................................65
20 Financial Instruments and Related
2 Basis of Presentation .............................................65
3
Summary of Significant
Accounting Policies ................................................67
Risk Management ................................................. 90
21 Revenue .....................................................................92
22 Related Party Transactions ..................................93
4 Trade and Other Receivables .............................. 75
23 Compensation of Key
5 Contract Assets ....................................................... 75
6 Seasonality ................................................................ 75
Management Personnel ...................................... 94
24 Segment Information ........................................... 94
7 Property, Plant and Equipment ..........................76
25 Net Change in Non-Cash
8 Right-of-use Assets ................................................ 77
9
Intangible Assets .....................................................78
10 Goodwill .....................................................................79
11 Accounts Payable and Accrued Liabilities...... 80
12 Contract Liabilities ................................................. 80
Working Capital ...................................................... 96
26 Acquisitions ............................................................. 96
27 Commitments and Contingencies .................... 99
28 Pension Expense .................................................... 99
29 Subsequent Events ............................................... 99
56
2022 ISC® Annual Report | Consolidated Financial StatementsConsolidated Financial StatementsConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022 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 accounting 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
Robert (Bob) Antochow, CPA, CA, CMA
Chief Financial Officer
March 14, 2023
57
2022 ISC® Annual Report | Consolidated Financial Statements Consolidated Financial Statements | 2022 ISC® Annual ReportConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022
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, 2022 and December 31, 2021, 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, 2022 and 2021, 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
A key audit matter is a matter that, in our professional judgment, was of most significance in our audit of the consolidated financial
statements for the year ended December 31, 2022. This matter was addressed in the context of our audit of the consolidated
financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on 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 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 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.
58
2022 ISC® Annual Report | Consolidated Financial StatementsConsolidated Financial StatementsConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022 • 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.
59
2022 ISC® Annual Report | Consolidated Financial Statements Consolidated Financial Statements | 2022 ISC® Annual ReportConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022 • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made
by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability
to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the
Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial
statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company
to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit.
We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the
audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters
in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely 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.
Chartered Professional Accountants
Regina, Saskatchewan
March 14, 2023
60
2022 ISC® Annual Report | Consolidated Financial StatementsConsolidated Financial StatementsConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022 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
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)
Retained earnings
Total shareholders’ equity
Total liabilities and shareholders’ equity
See Note 27 for Commitments and Contingencies
See accompanying Notes
Note
As at December 31,
2022
As at December 31,
2021
4
5
14
7
8
9
10
14
11
12
13
14
13
14
16
15
19
15
$
$
$
$
34,479
–
14,933
985
2,215
4,604
57,216
1,813
7,553
88,993
101,240
26,639
226,238
283,454
33,876
2,720
2,299
731
–
39,626
6,508
13,883
66,047
1,802
88,240
23,691
2,082
(377)
130,192
155,588
283,454
$
$
$
$
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
APPROVED BY THE BOARD OF DIRECTORS ON MARCH 14, 2023:
Joel Teal
Director
Tony Guglielmin
Director
61
2022 ISC® Annual Report | Consolidated Financial Statements Consolidated Financial Statements | 2022 ISC® Annual ReportConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022
Consolidated Statements of Comprehensive Income
Note
21
Year Ended December 31,
2022
Year Ended December 31,
2021
$
189,895
$
169,379
7, 8, 9
14
18
18
54,267
49,215
14,735
10,584
4,003
4,988
2,669
3,239
143,700
46,195
463
(3,640)
(3,177)
43,018
(12,249)
30,769
(33)
11
(22)
30,747
1.75
1.71
$
$
$
$
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
$
$
$
$
(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
Items that may be subsequently reclassified to net income
Unrealized loss on translation of financial statements
of foreign operations
Change in fair value of marketable securities, net of tax
Other comprehensive loss
Total comprehensive income
Earnings per share ($ per share)
Total, basic
Total, diluted
See accompanying Notes
62
2022 ISC® Annual Report | Consolidated Financial StatementsConsolidated Financial StatementsConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022
Consolidated Statements of Changes in Equity
(thousands of CAD)
Note
Balance at January 1, 2021
Net income
Other comprehensive loss
Stock option expense
Dividend declared
Balance at December 31, 2021
Balance at January 1, 2022
Net income
Other comprehensive loss
Stock option recovery
Stock options exercised
Dividend declared
Balance at December 31, 2022
See accompanying Notes
15
15
15
Accumulated
Other
Share Comprehensive
Income
Capital
Retained
Earnings
98,088
32,078
–
–
(14,525)
115,641
$
$
$
$
19,955
–
–
–
–
19,955
$
115,641
30,769
–
–
–
(16,218)
$ 130,192
$
19,955
–
–
–
3,736
–
$ 23,691
Equity
Reserve
2,376
–
–
88
–
2,464
706
–
(1,061)
–
–
(355)
$
$
$
(355)
–
(22)
–
–
–
2,464
–
–
(7)
(375)
–
(377) $ 2,082
$
$
$
$
Total
$ 121,125
32,078
(1,061)
88
(14,525)
$ 137,705
$ 137,705
30,769
(22)
(7)
3,361
(16,218)
$ 155,588
63
2022 ISC® Annual Report | Consolidated Financial Statements Consolidated Financial Statements | 2022 ISC® Annual ReportConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022
Consolidated Statements of Cash Flows
(thousands of CAD)
Operating
Net income
Add: Charges not affecting cash
Note
Year Ended December 31,
2022
Year Ended December 31,
2021
$
30,769
$
32,078
Depreciation
Amortization
Foreign exchange gain
14
Deferred tax recovery recognized in net income
Registry Operations service concession arrangements 21
7, 8
9
Gain on disposal of property, plant and equipment
Net finance expense
Stock option (recovery) expense
Net change in non-cash working capital
15
25
Net cash flow provided by operating activities
Investing
Interest received
Cash received on disposal of property, plant and equipment
Short-term investments realized
Additions to property, plant and equipment
Additions to intangible assets
7
9
(Acquisitions)/recovery on acquisitions
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 short-term debt
Repayment of long-term debt
Proceeds of long-term debt
Financing fees
Dividend paid
Stock options exercised
Net cash flow provided by (used in) financing activities
Effects of exchange rate changes on cash held in foreign currencies
(Decrease) increase in cash
Cash, beginning of year
Cash, end of year
15
26
13
13
16
16
16
16
2,920
11,815
(189)
(111)
(997)
(4)
3,177
(7)
(3,837)
43,536
463
4
49
(574)
(890)
(54,671)
(55,619)
(2,902)
(403)
(2,137)
(500)
(15,000)
40,000
–
(16,172)
3,361
6,247
211
(5,625)
40,104
34,479
$
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
$
See accompanying Notes
64
2022 ISC® Annual Report | Consolidated Financial Statements
Consolidated Financial StatementsConsolidated Financial StatementsConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022
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 Saskatchewan, British Columbia, and Ontario, and
international offices located in Ireland and Luxembourg. ISC has
three reportable segments: Registry Operations, Services and
Technology Solutions. A functional summary of these segments is
as follows:
• Registry Operations delivers registry and information 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. Additionally, through ISC’s wholly owned subsidiary,
Reamined Systems Inc. (“Reamined”), ISC provides property
tax assessment services to the Province of Ontario and its
municipalities.
• Services delivers value-add services to the financial and legal
sectors, utilizing public data and records.
• Technology Solutions designs, implements, and supports registry
and regulatory technology solutions.
The balance of our corporate activities and shared services
functions are reported as Corporate and other.
As at December 31, 2022, 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
(“IASB”).
The Company’s Board of Directors (the “Board”) authorized the
consolidated financial statements for the year ended December 31,
2022, for issue on March 14, 2023.
Basis of measurement
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 Standard (“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 ISC and its wholly owned significant operating
subsidiaries: ISC Saskatchewan Inc. (“ISC Sask”), ISC Enterprises Inc.
(“ISC Ent”), ESC Corporate Services Ltd. (“ESC”), Credit Risk
Management Canada Ltd. (“CRM”), Credit Bureau of Stratford
(1970) Limited (“CBS”), Reamined, Enterprise Registry Solutions
Limited (“ERS”), and Regulis S.A. (“Regulis”). All intragroup assets and
liabilities, equity, income, expenses and cash flows are eliminated in
full on consolidation.
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.
Use of estimates and judgments
The preparation of these consolidated financial statements, in
conformity with IFRS, requires management to make estimates
65
Notes to the Consolidated Financial Statements | 2022 ISC® Annual ReportConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022 Consolidated Financial Statements 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:
• 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 allocation of the purchase price for the acquisition of the group of companies operating as UPLevel1 (“UPLevel”) and Reamined
(Note 26);
• the recoverability of deferred tax assets (Note 14); and
• the amount and timing of revenue from contracts from customers recognized over time (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, 2022, or on such date as they became applicable. These changes were made in accordance with the
applicable transitional provisions.
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).
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.
This amendment will affect the assessment of and accounting for onerous contracts. The Company
has adopted this amendment to IAS 37 effective January 1, 2022, which has had no impact on the
consolidated financial statements. The Company continues to assess its contracts in accordance with the
amendments to IAS 37.
Amendments to
IFRS 3 — Reference
to the Conceptual
Framework
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 IFRS Interpretations Committee
(“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 Company adopted this amendment on January 1, 2022 and has applied it to acquisitions completed
during 2022.
1 The group of companies operating as UPLevel consists of CRM and CBS.
66
2022 ISC® Annual Report | Notes to the Consolidated Financial Statements
Consolidated Financial StatementsConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022
3 Summary of Significant Accounting Policies
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 and information
services to governments and private sector organizations. Revenue
under the MSA is generated by earning fees from end-use
customers through registrations, searches, maintenance
transactions and value-added services on behalf of the Province of
Saskatchewan. Property tax assessment services are provided to
the Province of Ontario and its municipalities through an exclusive
contract with the Province of Ontario, and revenue is earned over
time throughout the term of the agreement.
The majority of the associated transaction fees under the MSA 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, asset recovery and accounts receivable management
to support registration, due diligence and lending practices of
clients across Canada.
The Company categorizes its Services revenue into three
divisions, 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, due diligence and collateral management 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 Regulatory Solutions is recognized at a
point in time when services are rendered.
Recovery Solutions offers fully managed asset recovery services
across Canada and the United States, which aids in facilitating and
co-ordinating asset recovery as well as accounts receivable
management services 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. Accounts receivable management
involves the Company, as a licensed collection agency, performing
recovery services related to past due accounts in both a first-party
capacity representing our customers, and a third-party collections
capacity. Recovery Solutions revenue in our Services segment
includes administration fees and commissions earned by the
provision of asset recovery and accounts receivable management
services. Administration fee revenue is earned over time
throughout the management of each asset recovery file or in
accordance with each accounts receivable management contract.
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 (government fees are
recorded on a gross basis) as well as cost of goods sold.
67
Notes to the Consolidated Financial Statements | 2022 ISC® Annual ReportConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022 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.
Licensing revenue is determined by assessing each individual
contract to determine whether the licence obligation is distinct
from the other performance obligations within the contract. The
Company may have various types of licence obligations depending
on the contract:
•
If the licence obligation is distinct, the Company determines if the
licence should be recognized at a point in time (“right to use”) or
over time (“right to access”) throughout the licence period.
– For contracts that provide the customer with a right to use the
Company’s intellectual property (“IP”) at a point in time, licence
revenue is recognized once the technology is available for use
and the control over the right to use the IP is transferred to
the customer.
– For contracts that provide the customer with a right to access
the Company’s IP over time, licence revenue is recognized over
the licence period.
• For those contracts where the licence obligation is determined
not to be distinct from other performance obligations, the licence
revenue is allocated to the associated performance obligations
and recognized upon achievement of 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 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.
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 either over the
service period or when performance obligations are achieved. 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.
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 performance share units
(“PSUs”) and share appreciation rights (“SARs”) was approved by the
Board on May 15, 2020, and 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
68
2022 ISC® Annual Report | Notes to the Consolidated Financial StatementsConsolidated Financial StatementsConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022 in other long-term liabilities. Compensation expense is recognized in
proportion to the number of PSUs vested. At the end of each
reporting period, the estimates are reassessed based on the fair
value of the PSUs as of the reporting period. Any change in estimate
is recognized as a liability and an expense at the end of the
reporting period.
SARs are also cash-settled share-based units. The Black-Scholes
methodology is used to value each SAR grant when awarded. The
inputs used in this valuation are described below. At the end of each
reporting period, the market value of the Company’s Class A Shares
at the reporting date in excess of the SAR value multiplied by the
number of SARs vested is recognized as an obligation in other
long-term liabilities, and the offsetting amount is recorded in
compensation expense.
The Company also has a deferred share unit (“DSU”) plan and a
stock option plan, each of which is described in Note 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 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; and
• Equity volatility: based on ISC’s three-year standard deviation of
Total Shareholder Return.
Business acquisitions
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.
Business acquisitions versus asset acquisitions
Acquired businesses are assessed by management and where the
acquired operations do not consist of inputs and substantive
processes with the ability to create outputs, the definition of a
business is not met and in such cases the acquisition is treated as an
asset acquisition.
When there is contingent consideration in an asset acquisition an
accounting policy choice exists whereby an entity may recognize a
liability for the expected variable payments at the time control of
the underlying asset is obtained or they may only recognize such a
liability as the related activity that gives rise to the variability occurs.
The Company has opted to recognize the liability only when the
related activity that gives rise to the variability occurs.
69
2022 ISC® Annual Report | Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements | 2022 ISC® Annual ReportConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022 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
Shorter of lease term or useful life
Office furniture
Office equipment
Hardware
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 contracts, customer and partner
relationships, brand, non-competes, other intangible assets,
and assets under development.
Intangible assets acquired
Internal-use software, acquired contracts 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
Contracts
Customer and partner relationships
Brand, non-competes and other
Assets under development
3–15 years
3–7 years
Term of contract
5–15 years
4–15 years
N/A (not ready for use)
70
2022 ISC® Annual Report | Notes to the Consolidated Financial StatementsConsolidated Financial StatementsConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022 Impairment of tangible and intangible assets
At each statement of financial position date, the Company reviews
the carrying amounts of its tangible and intangible assets to
determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine
the extent of the impairment loss (if any). Where it is not possible to
estimate the recoverable amount of an individual asset, ISC
estimates the recoverable amount of the cash generating unit
(“CGU”) to which the asset belongs. Where a reasonable and
consistent basis of allocation can be identified, corporate assets are
also allocated to individual CGUs; otherwise, they are allocated to
the smallest group of CGUs for which a reasonable and consistent
allocation basis can be identified. Intangible assets not yet available
for use are tested for impairment annually in December and
whenever there is an indication that the asset may be impaired.
The recoverable amount is the higher of fair value less costs to sell
and value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a discount rate
that reflects current market assessments of the time value of
money and the risks specific to the asset for which the estimates of
future cash flows have not been adjusted. If the recoverable
amount of an asset (or CGU) is estimated to be less than its carrying
amount, the carrying amount of the asset (or CGU) is reduced to its
recoverable amount. An impairment loss is recognized immediately
in comprehensive income.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (or CGU) is increased to the revised estimate of
its recoverable amount, but so that the increased carrying amount
does not exceed the carrying amount that would have been
determined had no impairment loss been recognized for the asset
(or CGU) in prior years. A reversal of an impairment loss is
recognized immediately in comprehensive income.
Goodwill
Goodwill arising on the acquisition of a business represents the
excess of the purchase price over the net fair value of the
identifiable assets, liabilities and contingent liabilities of the acquired
business recognized at the date of acquisition. Goodwill is initially
recognized as an asset at cost and is subsequently measured at cost
less any accumulated impairment losses.
Impairment of goodwill
For the purpose of impairment testing, goodwill is allocated to the
CGUs expected to benefit from the synergies of the combination.
CGUs are tested for impairment annually or more frequently if
events indicate that the units may be impaired. The Company’s
operating 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.
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
(“AC”). 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 AC
Financial assets are classified at AC 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 solely comprise
payments of principal and interest. The Company’s cash, short-term
investments, and trade and other receivables are recorded at AC 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.
71
2022 ISC® Annual Report | Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements | 2022 ISC® Annual ReportConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022 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
AC
AC
Amortized cost using effective interest rate method
Amortized cost using effective interest rate method
Short-term investments – marketable
FVTOCI
FVTOCI
securities
Trade and other receivables
Liabilities
Accounts payable and accrued
liabilities excluding share-based
accrued liabilities
Long-term debt
AC
AC
AC
Impairment of financial assets
Amortized cost using effective interest rate method
Amortized cost using effective interest rate method
Amortized cost using effective interest rate method
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.
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
• payments of penalties for terminating the lease if the lease term reflects the exercise of an option to terminate the lease.
72
2022 ISC® Annual Report | Notes to the Consolidated Financial StatementsConsolidated Financial StatementsConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022
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.
Employee benefits
The Company provides pension plans for all eligible employees.
Employees make contributions to a defined contribution plan. The
Company’s obligations are limited to making regular payments to
the plan for current services. These contributions are expensed.
Foreign currency
The individual financial statements of each subsidiary entity are
presented in the currency of the primary economic environment in
which the entity operates (its functional currency). For the purpose
of the consolidated financial statements, the results and financial
position of each subsidiary entity are presented in Canadian dollars,
which is the functional currency of the parent company and the
presentation currency for the financial statements.
In preparing the individual subsidiaries’ financial statements,
transactions in currencies other than the entity’s functional
currency (foreign currencies) are recognized at the rates of
exchange prevailing at the dates of the transactions. At the end of
each reporting period, monetary items denominated in foreign
currencies are translated at the rates prevailing at that date.
Exchange differences are recognized in earnings in the period in
which they arise. Non-monetary items carried at fair value that are
denominated in foreign currencies are translated at the rates
prevailing at the date when the fair value was determined.
Non-monetary items that are measured in terms of historical cost in
a foreign currency are not translated.
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the Company’s foreign operations are
expressed in Canadian dollars using exchange rates prevailing at the
end of the reporting period. Income and expense items are
translated at the average exchange rates for the period. Foreign
currency gains and losses are recognized in other comprehensive
income. The relevant amount in the cumulative foreign currency
translation adjustment is reclassified into earnings upon disposition
or partial disposition of a foreign operation and attributed to
non-controlling interests as appropriate.
73
2022 ISC® Annual Report | Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements | 2022 ISC® Annual ReportConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022 Recent accounting pronouncements
The IASB and IFRIC issued the following new standards and amendments to standards and interpretations, which become effective for
future periods.
Proposed Standard Description
Amendments to
IAS 1 and IFRS
Practice Statement
2 — Disclosure of
Accounting Policy
Information
Amendments to
IAS 8 — Definition of
Accounting Estimates
Amendments to
IAS 12 — Deferred
Tax related to Assets
and Liabilities
arising from a Single
Transaction
Amendments
to IAS 1 —
Classification of
Liabilities as Current
or Non-current
Effective Date
January 1, 2023
January 1, 2023
The amendments to IAS 1 — Presentation of Financial Statements and IFRS Practice
Statement 2 — Making Materiality Judgements require that an entity discloses its
material accounting policies, instead of its significant accounting policies.
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. The Company has assessed the impact of the adoption of this amendment,
and it is not expected to have a material impact on the Company’s Consolidated
Financial Statements.
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. The Company has assessed the impact of the adoption of this amendment,
and it is not expected to have a material impact on the Company’s Consolidated
Financial Statements.
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.
January 1, 2024
These amendments specify that covenants to be complied with after the reporting
date do not affect the classification of debt as current or non-current at the reporting
date. Instead, the amendments require a company to disclose information about these
covenants in the notes to the financial statements.
The amendments are applied retrospectively for annual periods beginning on or after
January 1, 2024, with early application permitted. This amendment is currently being
assessed by the Company to determine the impact.
Amendments to
IFRS 16 — Lease
liability in a Sale and
Leaseback
The amendment clarifies how a seller-lessee subsequently measures sale and leaseback
transactions that satisfy the requirements in IFRS 15 to be accounted for as a sale.
January 1, 2024
The amendment is effective for annual periods beginning on or after January 1, 2024.
The Company has assessed the impact of the adoption of this amendment, and it
is not expected to have a material impact on the Company’s Consolidated Financial
Statements.
74
2022 ISC® Annual Report | Notes to the Consolidated Financial StatementsConsolidated Financial StatementsConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022 4 Trade and Other Receivables
The components of trade and other receivables are as follows:
(thousands of CAD)
Trade receivables
GST/HST/VAT receivables
Other
Total trade and other receivables
5 Contract Assets
The components of contract assets are as follows:
(thousands of CAD)
Unbilled revenue
Contract fulfilment costs
Total contract assets
December 31,
December 31,
2022
14,049
192
692
14,933
$
$
2021
12,679
61
31
12,771
$
$
December 31,
December 31,
2022
589
396
985
$
$
2021
724
142
866
$
$
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 customers. 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, will be recognized in the consolidated statements of comprehensive income. Contract fulfilment costs also include payments for
recovery services, which are reimbursed to the Company by customers that have contracted the services. Once this reimbursement occurs,
this revenue is recognized in the consolidated statements of comprehensive income on a net basis with these costs.
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 (2021 — nil).
There were no impairment losses recognized on any contract asset during the reporting period (2021 — $0.3 million). The impairment in the
prior year is included in financial services in the consolidated statements of comprehensive income.
6 Seasonality
Registry Operations experiences moderate seasonality, primarily because Land Titles revenue fluctuates in line with real estate transaction
activity in Saskatchewan. Typically, the second and third quarters of the fiscal year generate higher revenue, as that is when real estate
activity is traditionally highest. Ontario Property Tax Assessment Services revenue earned through Reamined does not experience
seasonality, as revenue is received evenly throughout the year as per the agreement with the Province of Ontario.
In Services, our Corporate Solutions and Regulatory Solutions revenue is relatively 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 experience seasonality aligned to vehicle
and equipment financing cycles, which are generally stronger in the second and fourth quarters. Recovery Solutions revenue also does not
have specific seasonality, but is counter-cyclical 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.
Technology Solutions does not experience seasonality; however, this segment is impacted by the timing of procurement activities largely
undertaken by local governments around the world. While this was impacted by COVID-19, we have seen an increase in procurement
activities throughout much of 2022.
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.
75
2022 ISC® Annual Report | Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements | 2022 ISC® Annual ReportConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022
7 Property, Plant and Equipment
(thousands of CAD)
Cost
Balance at January 1, 2021
Additions
Disposals
Foreign exchange adjustments
Balance at December 31, 2021
Acquired assets1
Additions
Disposals
Transfers
Foreign exchange adjustments
Balance at December 31, 2022
Accumulated depreciation
Balance at January 1, 2021
Depreciation
Impairment2
Disposals
Foreign exchange adjustments
Balance at December 31, 2021
Depreciation
Disposals
Foreign exchange adjustments
Balance at December 31, 2022
Carrying value
At December 31, 2021
At December 31, 2022
Leasehold
Improvements
Office
Furniture
Office
Equipment
Hardware
Assets Under
Development
Total
$ 9,896
–
(1,922)
(3)
7,971
119
–
(51)
73
–
$ 8,112
$ 8,491
361
128
(1,922)
(1)
7,057
266
(51)
–
$ 7,272
$ 3,236
–
(131)
(3)
3,102
73
9
(285)
34
–
$ 2,933
$ 3,046
50
7
(131)
(1)
2,971
45
(285)
1
$ 2,732
$
$
914
840
$
$
131
201
$
$
$
$
$
$
177
–
(16)
–
161
–
–
(5)
–
–
156
163
7
–
(16)
–
154
3
(5)
–
152
$ 3,104
–
(278)
(18)
2,808
401
468
(12)
14
8
$ 3,687
$ 2,567
260
–
(278)
(16)
2,533
394
(12)
4
$ 2,919
7
4
$
$
275
768
$
$
$
$
$
$
14
10
–
–
24
–
97
–
(121)
–
–
–
–
–
–
–
–
–
–
–
–
24
–
$ 16,427
10
(2,347)
(24)
14,066
593
574
(353)
–
8
$ 14,888
$ 14,267
678
135
(2,347)
(18)
12,715
708
(353)
5
$ 13,075
$ 1,351
$ 1,813
1 Acquired assets – see Note 26.
2 Impairment –During the third quarter of 2021, the Company made the decision to close three of its regional service centres in Saskatchewan and recorded impairments of
$0.1 million related to these regional service centres..
76
2022 ISC® Annual Report | Notes to the Consolidated Financial StatementsConsolidated Financial StatementsConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022
8 Right-of-use Assets
(thousands of CAD)
Cost
Balance at January 1, 2021
Additions and modifications
Disposals
Foreign exchange adjustments
Balance at December 31, 2021
Additions and modifications
Additions – acquisitions2
Reclass to accumulated depreciation
Foreign exchange adjustments
Balance at December 31, 2022
Accumulated depreciation
Balance at January 1, 2021
Depreciation
Impairment3
Disposals
Foreign exchange adjustments
Balance at December 31, 2021
Depreciation
Foreign exchange adjustments
Reclass from cost
Balance at December 31, 2022
Carrying value
At December 31, 2021
At December 31, 2022
Property and Equipment1
$
$
$
$
$
$
$
$
16,993
2,223
(166)
(96)
18,954
606
1,283
(2,721)
(32)
18,090
9,413
1,902
13
(166)
(69)
11,093
2,212
(47)
(2,721)
10,537
7,861
7,553
1 The Company’s right-of-use assets consist primarily of property leases associated with the lease of office space.
2 See Note 26.
3 Impairment – During the third quarter of 2021, the Company made the decision to close three of its regional service centres in Saskatchewan and recorded impairments
related to these regional service centres.
77
2022 ISC® Annual Report | Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements | 2022 ISC® Annual ReportConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022
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
$ 182,357
2,486
(1,870)
–
(560)
$ 182,413
37,794
1,887
(223)
–
135
$ 96,812 $ 4,089 $ 222,006
$
955
2,486
–
(545)
(88)
$ 2,808
–
1,887
–
(658)
52
–
–
269
–
–
–
(47)
–
–
–
(911)
39
–
–
(959)
–
(34)
5,328
–
–
–
–
$ 6,009
–
–
237
(217)
$ 6,029
–
–
–
658
32
(thousands of CAD)
Cost
$2,391 $ 65,375
$ 26,951 $ 78,502 $ 2,174
Balance at January 1, 2021
–
–
Additions
–
–
Disposals
–
–
Transfers
(58)
Foreign exchange adjustments
(163)
$ 1,398 $ 65,317
Balance at December 31, 2021 $ 26,079 $ 78,771 $ 2,011
Acquired assets1
31,466
1,000
–
–
–
–
Additions
–
(176)
–
Disposals
–
–
–
Transfers
Foreign exchange adjustments
29
–
22
Balance at December 31, 2022 $ 31,407 $ 78,724 $ 2,033 $ 6,719 $ 2,222
Accumulated depreciation
$ 17,363 $ 76,937 $ 1,267
Balance at January 1, 2021
309
3,046
Amortization
(911)
–
Disposals
Foreign exchange adjustments
(105)
–
Balance at December 31, 2021 $ 19,498 $ 77,323 $ 1,471
2,571
249
Amortization
–
Disposals
–
Foreign exchange adjustments
31
–
Balance at December 31, 2022 $ 22,069 $ 77,689 $ 1,751 $ 4,579 $
Carrying value
At December 31, 2021
At December 31, 2022
$ 11,822
$ 1,499
6,614
157
–
(959)
(34)
(28)
663 $ 18,408
7,804
217
–
(176)
–
9
704
$ 3,515
538
–
(70)
$ 3,983 $
561
–
35
$ 6,581 $ 1,448 $
$ 9,338 $ 1,035 $
413
(47)
–
386
–
–
$ 26,221 $
$
$
$ 112,403
–
11,050
–
(1,870)
–
(237)
–
$ 121,346
–
11,815
–
(223)
–
–
75
– $ 133,013
$ 2,046
540
$ 61,067
282 $ 2,140 $ 1,518 $ 70,591 $ 4,089 $ 88,993
735 $ 46,909 $ 2,808
$
1 Acquired assets – see Note 26
78
2022 ISC® Annual Report | Notes to the Consolidated Financial StatementsConsolidated Financial StatementsConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022
10 Goodwill
The components of goodwill are as follows:
(thousands of CAD)
Balance, beginning of year
Additions1
Foreign exchange adjustment
Balance, end of year
1 Acquisitions – see Note 26.
$
December 31,
2022
77,134
24,063
43
$ 101,240
$
December 31,
2021
77,455
–
(321)
77,134
$
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,
2022
21,098
71,537
8,605
$ 101,240
$
December 31,
2021
1,200
67,372
8,562
77,134
$
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 2022, annual impairment testing for this segment
used a pre-tax discount rate of 15.1 per cent (2021 — 13.7 per cent)
and a perpetual growth rate of 2.0 per cent (2021 — 2.0 per cent).
Given the 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 (2021 — 2.75 per cent)
used in the annual test. In 2022, annual impairment testing for
this segment used a pre-tax discount rate of 18.5 per cent
(2021 — 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. During the latter part of 2022, we have seen
renewed procurement activity, which has generated an active
pipeline of opportunities. Based on this renewed procurement
activity, 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 (2021 — 2.0 per cent) used in
the annual test. In 2022, annual impairment testing for this segment
used a pre-tax discount rate of 17.1 per cent (2021 — 14.9 per cent) in
its Canada-based operations and 17.1 per cent (2021 — 15.0 per cent)
in its Ireland-based operations.
79
2022 ISC® Annual Report | Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements | 2022 ISC® Annual ReportConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022
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
Consideration due to vendor1
Total accounts payable and accrued liabilities
1 See Note 26.
12 Contract Liabilities
The components of contract liabilities are as follows:
(thousands of CAD)
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
December 31,
December 31,
2022
7,444
9,765
4,221
4,071
8,149
226
33,876
$
$
2021
2,497
8,957
4,093
4,025
6,910
–
26,482
$
$
December 31,
December 31,
2022
320
2,400
2,720
$
$
2021
329
1,159
1,488
$
$
(i) Revenue that relates to Saskatchewan Registry Operations maintenance and support contracts transactions is recognized over time, while all other Saskatchewan
Registry Operations revenue is recognized at a point in time. Revenue from Reamined, acquired on June 1, 2022 (see Note 26), is classified under Registry Operations and
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 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 against commitments 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 against contractual commitments is achieved.
Revenue recognized in 2022 that was included in the contract liability balance at December 31, 2021 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 year
Year Ended December 31,
2022
314
325
$
2021
326
1,406
639
$
1,732
$
$
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.
80
2022 ISC® Annual Report | Notes to the Consolidated Financial StatementsConsolidated Financial StatementsConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022
13 Lease Obligations
(thousands of CAD)
Balance, beginning of year
Additions
Additions – acquisitions1
Interest expense
Effect of modification to lease terms
Lease payments2
Foreign exchange adjustments
Balance, end of year
Year Ended December 31,
2022
9,033
240
1,283
403
366
(2,540)
22
8,807
$
$
2021
8,852
–
–
354
2,223
(2,368)
(28)
9,033
$
$
1 See Note 26.
2 Lease payments net of interest expense represent the principal portion of lease payments reflected on the consolidated statements of cash flows.
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 considered 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,
2022
2,642
2,531
1,260
950
811
1,697
9,891
(1,084)
8,807
2,299
6,508
8,807
$
$
$
$
2021
2,201
2,056
2,010
816
829
2,426
10,338
(1,305)
9,033
1,847
7,186
9,033
$
$
$
$
The Company is subject to federal and provincial income taxes at an estimated combined statutory rate of 27.0 per cent (2021 — 27.0 per
cent).
(thousands of CAD)
Current tax expense
Deferred tax recovery
Income tax expense
Year Ended December 31,
2022
12,360
(111)
12,249
$
$
2021
13,301
(1,298)
12,003
$
$
81
2022 ISC® Annual Report | Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements | 2022 ISC® Annual ReportConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022
Income tax expense varies from the amounts that would be computed by applying the combined statutory income tax rate to earnings
before taxes for the following reasons:
(thousands of CAD)
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 assets and liabilities
Other
Income tax expense
Year Ended December 31,
2022
43,018
27.00%
11,615
162
488
(6)
(10)
12,249
$
$
2021
44,081
27.00%
11,902
49
39
(25)
38
12,003
$
$
Income tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities are as follows:
(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)
1 See Note 26.
(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 Acquisitions1
January 1,
2022
Foreign
Exchange
Net Balance
December 31,
2022
Deferred
Tax Asset
Deferred
Tax Liability
$
340 $
(1,880)
20,311
(1,376)
–
2,196
(55) $
365
39
(423)
608
(357)
2,866
(66)
–
(1)
1
–
16
2
5
$
(89) $
(290)
(9,825)
–
79
290
196
(1,806)
10,526
(1,799)
703
2,131
$
162
(1,419)
22,994
–
367
1,730
$
34
(387)
(12,468)
(1,799)
336
401
–
2,805
2,805
–
$ 22,457 $
111 $
23 $
(9,835) $
12,756
$ 26,639
$ (13,883)
Net Balance
January 1,
2021
Recognized
in Profit
or Loss
Foreign
Exchange
Movement
Acquisitions
Net Balance
December 31,
2021
Deferred
Tax Asset
Deferred
Tax Liability
$
88 $
(2,000)
20,326
(916)
2,341
$
253
105
(25)
(460)
(130)
(1) $
15
10
–
(15)
1,311
1,555
–
–
–
–
–
–
–
$
$
340
(1,880)
20,311
(1,376)
2,196
$
145
(1,621)
25,316
–
1,934
195
(259)
(5,005)
(1,376)
262
2,866
2,864
2
$ 21,150 $
1,298
$
9
$
–
$
22,457
$ 28,638
$
(6,181)
In assessing the recovery of deferred tax assets, management considers whether it is probable that the deferred tax assets will be realized.
The recognition and measurement of the current and deferred 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 tax assets. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the periods in which the temporary differences are deductible.
82
2022 ISC® Annual Report | Notes to the Consolidated Financial StatementsConsolidated Financial StatementsConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022
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.
At December 31, 2022, a deferred tax asset of $0.4 million (2021 — nil) has been recognized in respect of $2.7 million of tax losses (2021 —
nil) related to ERS. Management anticipates that ERS will earn sufficient future taxable income to utilize the tax losses, which do not expire.
A deferred tax asset of $0.3 million (2021 — nil) has been recognized at December 31, 2022, in respect of $1.3 million of tax losses (2021 — nil)
related to CRM as there are sufficient taxable temporary differences against which the unused tax losses can be utilized. The tax losses of
CRM can be carried forward 20 years.
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.
Share-based compensation expenses are recognized in wages and salaries on the consolidated statements of comprehensive income:
(thousands of CAD)
Performance share units
Share appreciation rights
Deferred share units
Stock options
Share-based compensation expense
Market price, beginning of year
Market price, end of year
Performance share units
Year Ended December 31,
2022
913
200
377
1,490
(7)
1,483
25.29
24.17
$
$
$
$
2021
1,658
3,115
1,200
5,973
88
6,061
19.91
25.29
$
$
$
$
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, currently three years, 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.
83
2022 ISC® Annual Report | Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements | 2022 ISC® Annual ReportConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022
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 years ended December 31, 2022 and 2021, are as follows:
(thousands of CAD, except number of units)
Balance at January 1, 2021
Units proportionally recognized in the
current period, from previous grants
March 25, 2021 grant
Dividend units
Balance at December 31, 2021
Total Units
Granted
75,247
–
22,900
3,114
101,261
Units
Recognized
38,585
23,762
7,619
3,114
73,080
Balance at January 1, 2022
Units proportionally recognized in the
current period, from previous grants
March 24, 2022 grant
Dividend units
PSUs redeemed
PSUs forfeited
Balance at December 31, 2022
101,261
73,080
–
21,978
3,330
(37,926)
(1,708)
86,935
20,541
7,306
3,330
(37,926)
(1,259)
65,702
Short-Term
Liability1
Long-Term
Liability2
Total
Liability3
$
1,355
$
1,165
$
2,520
$ 1,801
$
198
$
1,999
1 Included within accounts payable and accrued liabilities on the consolidated statements of financial position.
2 Included within other non-current liabilities on the consolidated statements of financial position.
3 The liability balances include the impact of estimated performance adjustments by individual grant year.
Fully Vested Units:
Balance at December 31, 2021
Balance at December 31, 2022
Units Vested
35,731
40,928
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.
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. SARs expire eight years after the grant
date.
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.
84
2022 ISC® Annual Report | Notes to the Consolidated Financial StatementsConsolidated Financial StatementsConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022
A summary of the status of the SAR plan and the changes within the years ended December 31, 2022 and 2021, are as follows:
Weighted
Average
Units Award Price
14.80
534,502 $
Balance at January 1, 2021
SARs proportionately recognized
FV Market
Price at
Reporting
Period
25.29
$
Units
Recognized
250,893
Short-Term
Liability1
Long-Term
Liability2
Total
Liability
in the year from grants
awarded in previous years
133,791 $
SARs granted March 25, 2021
SARs redeemed
(1,100) $
Balance at December 31, 2021 667,193 $
–
–
23.86
16.11
16.61
$
$
$
$
25.29
25.29
25.29
25.29
158,067
53,534
(1,100)
461,394
Balance at January 1, 2022
SARs proportionately recognized
667,193 $
16.61
$
24.17
461,394
$
1,949
$
2,381
$
4,330
–
in the year from grants
awarded in previous years
SARs granted March 24, 2022
SARs redeemed
SARs forfeited
Balance at
December 31, 2022
1 Included within accounts payable and accrued liabilities on the consolidated statements of financial position.
2 Included within other non-current liabilities on the consolidated statements of financial position.
88,410 $
(8,987) $
(21,708) $
122,100
35,556
(8,987)
(12,306)
724,908 $ 17.37 $ 24.17
24.17
24.17
24.17
24.17
–
22.81
15.22
17.17
$
$
$
$
597,757 $
Fully Vested Units:
Balance at December 31, 2021
Balance at December 31, 2022
Deferred share units
2,856
$ 1,604
$
4,460
Units Vested
193,305
343,716
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.
85
2022 ISC® Annual Report | Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements | 2022 ISC® Annual ReportConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022
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, 2022 and 2021, are as follows:
Units
Units
Recognized
Short-Term
Liability1
(thousands of CAD, except number of units)
Balance at January 1, 2021
Units proportionally recognized in the current period,
from previous grants
DSUs granted May 12, 2021
DSUs credited as a result of cash dividends paid
DSUs redeemed
Balance at December 31, 2021
Balance at January 1, 2022
Units proportionally recognized in the current period,
from previous grants
DSUs granted June 10, 2022
DSUs credited as a result of cash dividends paid
DSUs redeemed
DSUs forfeited
Balance at December 31, 2022
127,667
125,727
–
14,855
4,222
(3,601)
143,143
16,216
–
4,222
(3,601)
142,564
143,143
142,564
–
19,603
5,702
(22,411)
(324)
145,713
18,943
–
5,702
(22,411)
(324)
144,474
$
3,606
$
3,492
Units Vested2
139,313
140,604
1 Included within accounts payable and accrued liabilities on the consolidated statements of financial position.
Fully Vested Units:
Balance at December 31, 2021
Balance at December 31, 2022
2 Vesting details – The DSUs granted vest over four quarters in four equal tranches. The first tranche vests entirely in the quarter it is granted. The second tranche vests after
two quarters. The third tranche vests after three quarters. The fourth tranche vests after four quarters.
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.
The fair value of the DSUs at December 31, 2022, has been calculated using the market value of the Company’s Class A Shares on the TSX.
Stock options
The Company established a stock option plan 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, 2022 and 2021, are as follows:
2022 2021
Outstanding, beginning of year
Stock options exercised
Stock options forfeited
Outstanding, end of year
Vested and exercisable, end of year
86
Weighted Average
Weighted Average
Units
1,548,247
(201,498)
(14,732)
1,332,017
1,332,017
Exercise Price
17.27
16.68
17.85
17.35
$
$
$
$
Units
1,548,247
–
–
1,548,247
1,430,339
Exercise Price
17.27
–
–
17.27
$
$
$
$
2022 ISC® Annual Report | Notes to the Consolidated Financial StatementsConsolidated Financial StatementsConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022
The number of options outstanding by grant date as of December 31, 2022, is shown in the following table:
Options Outstanding Options Exercisable
Weighted
Average
Remaining
Contractual Years
0.6
1.6
2.4
3.4
2.1
Weighted
Average
Exercise
Price
15.04
$
17.40
$
18.85
$
$
17.85
$ 17.35
Weighted
Average
Exercise
Price
15.04
17.40
18.85
17.85
17.35
Units
Outstanding
303,451
298,509
317,341
412,716
1,332,017
Units
Outstanding
303,451
298,509
317,341
412,716
1,332,017
Expiry Date
Aug 12, 2023
Aug 12, 2024
May 17, 2025
May 16, 2026
Grant Date
Aug 12, 2015
Aug 12, 2016
May 17, 2017
May 16, 2018
$
$
$
$
$
The number of options outstanding by grant date as of December 31, 2021, is shown in the following table:
Options Outstanding Options Exercisable
Grant Date
May 14, 2014
Aug 12, 2015
Aug 12, 2016
May 17, 2017
May 16, 2018
Expiry Date
May 13, 2022
Aug 12, 2023
Aug 12, 2024
May 17, 2025
May 16, 2026
Weighted
Average
Remaining
Contractual Years
0.4
1.6
2.6
3.4
4.4
3.0
Weighted
Average
Exercise
Price
18.80
15.04
17.40
18.85
17.85
17.27
$
$
$
$
$
$
Units
Outstanding
54,799
405,951
298,509
317,341
471,647
1,548,247
Weighted
Average
Exercise
Price
18.80
15.04
17.40
18.85
17.85
17.22
$
$
$
$
$
$
Units
Outstanding
54,799
405,951
298,509
317,341
353,739
1,430,339
The carrying amount of the equity settled employee benefit reserve arising from these stock options as of December 31, 2022, totalled $2.1
million (December 31, 2021 — $2.4 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.
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 (2021 — 0.20 per cent
and 2.00 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 (2021 — 0.24 per cent and 0.40 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.
In 2022, the Company borrowed $40.0 million (2021 — nil) on its Credit Facility to assist in funding the acquisition of Reamined (see Note
26). Voluntary prepayments totalling $15.0 million were made in 2022 (2021 — $35.0 million).
Debt of $1.0 million acquired in the UPLevel acquisition (see Note 26) was settled shortly after acquisition via a non-cash transaction with
the vendor, whereby an equal and offsetting amount due from the vendor was deemed to be settled against this debt.
87
2022 ISC® Annual Report | Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements | 2022 ISC® Annual ReportConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022
Short-term debt of $0.5 million acquired with the acquisition of Reamined (see Note 26) was repaid in the fourth quarter of 2022 (2021 — nil).
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 7.09 per cent in aggregate. For the year ended December 31, 2022, an expense of $72 thousand (2021 — $18
thousand) was recognized in the consolidated statements of comprehensive income.
The Credit Facility can be used for working capital needs and for general corporate purposes.
The Credit Facility is as follows:
(thousands of CAD)
Non-current
Revolving term facility – principal component
Unamortized costs
Total long-term debt
Financing available
Revolving term facility – maximum available under Credit Facility
Used portion of the facility
Unused and available portion of the Credit Facility
December 31,
December 31,
2022
2021
$
$
$
$
66,316
(269)
66,047
$
$
41,316
(341)
40,975
150,000
(66,316)
83,684
$ 150,000
(41,316)
$ 108,684
At December 31, 2022, non-cash drawings, consisting of letters of credit and similar, were nil (2021 — nil).
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 year.
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 2022 and 2021 was nil.
88
2022 ISC® Annual Report | Notes to the Consolidated Financial StatementsConsolidated Financial StatementsConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022
17 Liabilities Arising from Financing Activities
The table below provide the reconciliation of movements of liabilities to cash flows arising from financing activities:
As at December 31,
2021
Cash Flows
Non–cash Changes
As at December 31,
2022
Interest payable
Lease obligation including current
portion and interest paid
Long–term debt
Short–term debt
Share capital
Dividends payable
$
116
$
(2,902)
9,033
40,975
–
19,955
4,025
$ 74,104
(2,540)
25,000
(500)
3,361
(16,172)
6,247
$
Dividends
Declared
–
$
–
–
–
–
16,218
$ 16,218
Other
3,165
$
2,314
72
500
375
–
6,426
$
$
379
8,807
66,047
–
23,691
4,071
$ 102,995
As at December 31,
2020
Cash Flows
Non-cash Changes
As at December 31,
2021
Interest payable
Lease obligation including current
portion and interest paid
Long–term debt
Dividends payable
$
223
$
(2,547)
8,852
76,316
3,500
$ 88,891
(2,368)
(35,359)
(14,000)
(54,274)
$
18 Earnings Per Share
Dividends
Declared
–
$
–
–
14,525
$ 14,525
Other
2,440
2,549
18
–
5,007
$
$
$
116
9,033
40,975
4,025
$ 54,149
The calculation of earnings per share is based on net income after tax and the weighted average number of shares outstanding during the
year. 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
19 Equity and Capital Management
$
2022
30,769
17,598,864
350,629
17,949,493
Year Ended December 31,
2021
$
32,078
17,500,000
517,509
18,017,509
$
$
1.75
1.71
$
$
1.83
1.78
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 17,701,498 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.
89
2022 ISC® Annual Report | Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements | 2022 ISC® Annual ReportConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022
Class A Class B
(thousands of CAD, except number of shares)
Balance at January 1, 2021
No movement
Balance at December 31, 2021
Balance at January 1, 2022
Stock options exercised for treasury shares1
Balance at December 31, 2022
Number of Shares
17,500,000
–
17,500,000
17,500,000
201,498
17,701,498
Share Capital
19,955
$
–
$
19,955
$ 19,955
3,736
$ 23,691
Number of Shares
1
–
1
1
–
1
1 See Note 15.
Dividends
Share Capital
–
$
–
–
–
–
–
$
$
$
The Company paid dividends to shareholders during the year ended December 31, 2022 of $16.2 million (2021 — $14.5 million) based on a
quarterly dividend of $0.23 per share.
Capital management
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, 2022, consists of long-term debt, share capital, employee benefit reserve, accumulated other
comprehensive income and retained earnings (comprising total shareholders’ equity).
December 31,
December 31,
(thousands of CAD)
Long-term debt
Share capital
Accumulated other comprehensive income
Equity settled employee benefit reserve
Retained earnings
Capitalization
$
2022
66,047
23,691
(377)
2,082
130,192
221,635
$
$
2021
40,975
19,955
(355)
2,464
115,641
$ 178,680
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 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, 2022, is $49.4 million (December 31, 2021 — $52.9 million), equal to the carrying value of the
Company’s financial assets, which are itemized in the table below. Quarterly reviews of the aged receivables are completed. The Company
expects to fully collect the carrying value on all outstanding receivables. Therefore, the risk to the Company is low.
90
2022 ISC® Annual Report | Notes to the Consolidated Financial StatementsConsolidated Financial StatementsConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022
The following table sets out details of cash, short-term investments 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,
December 31,
2022
34,479
–
12,662
1,342
929
49,412
$
$
2021
40,104
36
8,328
3,527
916
52,911
$
$
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
years ended December 31, 2022 and 2021. 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, 2022
December 31, 2021
+ 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
$ 641
$ 641
$ 468
$
$
$
(641)
(641)
(468)
$
$
$
669
669
488
$
$
$
(669)
(669)
(488)
* 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, 2022:
(thousands of CAD)
Long-term debt
Lease obligations
Accounts payable and accrued liabilities
Total liabilities
Carrying
Amount
$ 66,047
8,807
33,876
$ 108,730
$
Contractual
Cash Flows
83,446
9,891
33,876
$ 127,213
$
0-6
months
2,286
1,339
33,876
$ 37,501
$
7-12
months
2,324
1,303
–
$ 3,627
12+
months
$ 78,836
7,249
–
$ 86,085
Contractual cash flows for long-term debt and lease obligations includes principal and interest.
91
2022 ISC® Annual Report | Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements | 2022 ISC® Annual ReportConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022
Market risk
The carrying amount and fair value of the financial assets and financial liabilities are as follows:
Classification
Level
December 31, 2022
December 31, 2021
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
AC
FVTOCI
AC
AC
AC
L1
L2
$ 34,479
$ 34,479
$ 40,104
$ 40,104
_
14,933
_
14,933
36
12,771
36
12,771
25,727
66,047
25,727
66,192
19,572
40,975
19,572
41,272
(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, 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 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, 2022, on net monetary assets was a
decrease (increase) of $0.3 million (December 31, 2021 — $0.4 million) and on net assets was an increase (decrease) of $1.1 million
(December 31, 2021 — $1.3 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, 2022, on net monetary assets was a decrease (increase) of $0.3 million (December 31, 2021 — $0.6 million). The Company’s
exposure to other currencies is not significant at the end of the year.
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
92
Year Ended December 31,
2021
2022
$ 91,721
92,306
5,849
19
$ 189,895
$ 85,567
75,165
8,644
3
$ 169,379
2022 ISC® Annual Report | Notes to the Consolidated Financial StatementsConsolidated Financial StatementsConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022
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 revenue
Corporate and other
Over time
Registry Operations revenue
Services revenue
Technology Solutions revenue
Total revenue
Year Ended December 31,
2021
2022
$ 79,313
90,811
19
$ 170,143
12,408
1,495
5,849
$ 19,752
$ 189,895
$ 82,553
73,765
3
$ 156,321
3,014
1,400
8,644
$ 13,058
$ 169,379
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 and account
receivable management 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 2022, the
portion of Technology Solutions contract revenue recognized that was dependent on milestone achievement or percentage of completion
versus total revenue recognized was 16.0 per cent (2021 — 40.0 per cent). At December 31, 2022, 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 contracts dependent on
milestone achievement or percentage of completion, the Company expects that 76.4 per cent (2021 — 100.0 per cent) of the total will be
recognized in the next fiscal year.
Registry Operations service concession arrangement
The Company has agreed to a change pursuant to its MSA with the Government of Saskatchewan to prepare for certain updates to the
Corporate Registry to support upcoming changes to legislation. Under the MSA, the Company owns the intellectual property during the
term of the MSA.
In 2022, there was an incremental $1.0 million increase to both intangible assets and other revenue recorded in 2022 in Registry
Operations related to the project (2021 — $0.3 million). Amortization of the intangible asset is expected to commence in 2023 when
development is complete.
22 Related Party Transactions
Included in these consolidated financial statements are transactions with various Saskatchewan Crown corporations, ministries, agencies,
boards and commissions related to the Company by virtue of common control by the Government of Saskatchewan and non-Crown
corporations and enterprises subject to joint control and significant influence by the Government of Saskatchewan (collectively referred to
as “related parties”). The Company has elected to take the exemption under IAS 24 — Related Party Disclosures, which allows government-
related entities to limit the extent of disclosures about related party transactions with government or other government-related entities.
Routine operating transactions with related parties are settled at agreed-upon exchange amounts under normal trade terms. In addition,
the Company pays provincial sales tax to the Saskatchewan Ministry of Finance on all its taxable purchases. Taxes paid are recorded as part
of the cost of those purchases. Other amounts and transactions due to and from related parties and the terms of settlement are described
separately in these consolidated financial statements and the Notes thereto.
93
2022 ISC® Annual Report | Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements | 2022 ISC® Annual ReportConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022
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, President, ESC, and Head of ERS. The compensation of the key management team during the year was as follows:
(thousands of CAD)
Wages, salaries and short-term benefits
Share-based compensation
Defined contribution pension plans
Termination benefits
Total compensation
Year Ended December 31,
2021
2022
$
$
4,005
1,482
214
242
5,943
$
$
4,220
6,061
221
–
10,502
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.
24 Segment Information
Operating segments are identified as components of a company where separate discrete financial information is available for evaluation by
the chief operating decision-maker regarding allocation of resources and assessment of performance. The Company uses EBITDA and
earnings before interest and taxes (“EBIT”) as key measures of profit to assess each segment’s performance and to make decisions about
the allocation of resources.
ISC has three reportable segments – Registry Operations, Services and Technology Solutions, summarized as follows:
• Registry Operations operates registries and provides related services on behalf of governments at various levels;
• Services delivers value-added services to the financial and legal sectors, utilizing public data and records; and
• Technology Solutions designs, implements and supports registry and regulatory technology solutions.
Corporate and other includes our corporate activities and shared services functions. The Registry Operations and Services segments
operate substantially in Canada. The Technology Solutions segment operates both in Canada and in Ireland.
Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. We account for
transactions between reportable segments in the same way we account for transactions with external parties; however, we eliminate them
on consolidation.
Revenue and EBIT
For the year ended December 31, 2022
Registry
Operations
$ 91,721
–
$ 91,721
(40,828)
50,893
(2,828)
$ 48,065
$
$
$
(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
Services
92,306
–
92,306
$
Technology
Solutions
5,849
10,168
$ 16,017
Corporate
and Other
19
145
164
$
$
$
Inter-Segment
Eliminations
–
(10,313)
(10,313)
$
(73,711)
18,595
(9,645)
8,950
(17,397)
(1,380)
(1,191)
(2,571) $
$
(7,342)
(7,178)
(1,071)
(8,249)
10,313
–
–
–
$
Consolidated
Total
$ 189,895
–
$ 189,895
(128,965)
60,930
(14,735)
$ 46,195
(3,177)
(12,249)
$ 30,769
Additions to non–current
assets, including acquisitions $ 54,215
$
11,087
$
797
$
701
$
–
$ 66,800
94
2022 ISC® Annual Report | Notes to the Consolidated Financial StatementsConsolidated Financial StatementsConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022
Registry
Operations
85,567
–
85,567
$
$
(36,585)
48,982
(2,071)
46,911
$
$
$
$
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
Additions to non-current assets,
Services
75,165
–
75,165
Technology
Solutions
8,644
9,475
18,119
$
$
(57,788)
17,377
(9,206)
8,171
(16,317)
1,802
(1,405)
397
$
$
$
$
Corporate
and Other
3
157
160
$
Inter-Segment
Eliminations
–
(9,632)
(9,632)
$
Consolidated
Total
$ 169,379
–
$ 169,379
(7,789)
(7,629)
(1,096)
(8,725)
$
9,632
–
–
–
(108,847)
60,532
(13,778)
46,754
(2,673)
(12,003)
32,078
$
$
including acquisitions
$
310
$
557
$
1,640
$
–
$
(11)
$
2,496
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, 2022, revenue within Ireland was $5.0
million (2021 — $7.7 million), and the remainder was in Canada. No single customer represented more than 10.0 per cent of the total
consolidated revenue.
Assets and liabilities
As at December 31, 2022
(thousands of CAD)
Assets
Total assets, excluding
Registry
Operations
Services
Technology
Solutions
Corporate
and Other
Inter-Segment
Eliminations
Consolidated
Total
intangibles, goodwill and cash $ 23,667
32,301
Intangibles
21,098
–
$ 77,066
$ 19,093
Goodwill
Cash
Total assets
Liabilities
$
15,838
51,383
71,537
–
$ 138,758
$ 15,430
$
4,408
4,638
8,605
–
$ 17,651
6,432
$
$
14,829
671
–
34,479
$
49,979
$ 86,911
$
$
$
–
–
–
–
–
–
$ 58,742
88,993
101,240
34,479
$ 283,454
$ 127,866
As at December 31, 2021
(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
23,108
1,506
1,200
–
25,814
10,797
$
$
$
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
$
Non-current assets are held in Canada and Ireland. At December 31, 2022, non-current assets held in Ireland were $10.7 million (December
31, 2021 — $10.4 million), while the remainder were held in Canada.
95
2022 ISC® Annual Report | Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements | 2022 ISC® Annual ReportConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022
25 Net Change in Non-Cash Working Capital
The net change during the year 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
Year Ended December 31,
2021
2022
$
$
337
(1,134)
(101)
6,016
1,161
(1,824)
(8,292)
(3,837)
$
$
2,386
159
150
4,237
(433)
1,384
6,302
14,185
Income taxes paid, net of refunds received, for the year ended December 31, 2022, totalled $20.7 million (2021 — $7.0 million).
26 Acquisitions
During the year, the Company completed three acquisitions: UPLevel, Reamined and Regulis. Management’s assessment of each acquisition
under IFRS 3 concluded that the acquisitions of Reamined and UPLevel are both business combinations whereas the acquisition of Regulis
did not meet the definition of a business and, as such, was treated as an asset acquisition.
A table outlining the net cash flow related to each acquisition is provided below, followed by a table providing the allocation of the purchase
price for accounting purposes:
Asset
Net cash flows related to the acquisition Business Combinations Acquisition
(thousands of CAD)
Date acquired
Consideration paid in cash
Working capital and other post closing adjustments
Debt assumed
Transaction costs
Total consideration
Non cash deemed settlement of debt after close
Items not yet paid in cash:
Working capital and other post closing adjustments
not yet cash settled at December 31, 2022
Net cash flows related to the acquisition
Less cash balance acquired
Acquisition (net of cash acquired)
Made up of:
Acquisition through business combination
(net of cash acquired)
Acquisition through asset acquisition
(net of cash acquired)
$
$
$
$
$
UPLevel
February 14,
2022
9,000
458
(1,001)
–
8,457
1,001
$
Reamined
June 1,
2022
$ 45,900
65
–
–
$ 45,965
–
$
Regulis
December 20,
2022
564
–
–
129
693
–
$
–
693
41
652
(71)
9,387
248
9,139
(155)
$ 45,810
930
$ 44,880
9,139
$ 44,880
–
$
–
$
$
$
$
–
$ 54,019
652
$
652
Total
$ 55,464
523
(1,001)
129
$ 55,115
1,001
(226)
$ 55,890
1,219
$ 54,671
96
2022 ISC® Annual Report | Notes to the Consolidated Financial StatementsConsolidated Financial StatementsConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022
The table below presents the finalized allocation of the net purchase price for accounting purposes for the UPLevel, Reamined, and
Regulis acquisitions:
Asset
Business Combinations Acquisition
(thousands of CAD)
Assets
Cash
Trade and other receivables
Income tax recoverable
Prepaid expenses and deposits
Property, plant and equipment
Right-of-use assets
Intangible assets
Liabilities
Accounts payable and accrued liabilities
Short-term debt
Long-term debt – current portion
Lease obligations – current portion
Lease obligations
Deferred tax liability
Net assets acquired
Goodwill arising on acquisition
Total consideration allocated
Net assets acquired
Total goodwill arising on acquisition
Reamined
UPLevel
Reamined
Regulis
Total
$
$
$
$
$
248
1,049
37
126
108
189
5,420
7,177
328
-
1,001
83
106
1,367
2,885
4,292
8,457
4,292
4,165
$
930
1,481
155
679
485
1,094
31,723
$ 36,547
418
500
-
288
806
8,468
$ 10,480
$ 26,067
45,965
26,067
$ 19,898
$
$
$
$
$
41
11
-
2
-
-
651
705
12
-
-
-
-
-
12
693
693
693
-
$
1,219
2,541
192
807
593
1,283
37,794
$ 44,429
758
500
1,001
371
912
9,835
$ 13,377
$ 31,052
55,115
31,052
$ 24,063
On June 1, 2022, the Company, through a wholly owned subsidiary, acquired all of the issued and outstanding shares of Reamined by way of
a Share Purchase Agreement (“SPA”). The purchase consideration was $45.9 million, subject to working capital and other post-closing
adjustments set out in the SPA. Reamined provides property tax management infrastructure and services in the province of Ontario. The
operations are located in Ontario and service over 440 municipalities across Ontario. The acquisition expands the services provided to the
Province of Ontario, including supporting critical applications of information used by municipalities to facilitate the determination of
property taxes annually. For reporting purposes, Reamined is included in the results of the Registry Operations segment.
Goodwill arising on the acquisition included amounts in relation to the benefit of an increased market presence and competencies and the
assembled workforce of Reamined. None of the goodwill recognized is expected to be deductible for income tax purposes.
The intangible assets above consist of existing customer relationships of $26.3 million and existing technology and other items of
$5.4 million.
Trade and other receivables with a fair value of $1.5 million acquired in this transaction are estimated to be fully collectible.
Professional fees associated with the cost of the acquisition expensed during the year ended December 31, 2022, were $0.7 million, and
have been recorded in professional and consulting services expense on the consolidated statements of comprehensive income.
UPLevel
On February 14, 2022, the Company, through its wholly owned subsidiary ESC, acquired all of the shares of a group of companies operating
as UPLevel by way of a Share Purchase Agreement (“SPA”). The purchase consideration was $9.0 million, subject to working capital and
other post-closing adjustments set out in the SPA. UPLevel provides contact and accounts receivable management, debt collection and
97
2022 ISC® Annual Report | Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements | 2022 ISC® Annual ReportConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022
Personal Property Security Act (“PPSA”) search and registration services. The operations are located in Ontario and Quebec, with the ability
to serve customers across Canada. The acquisition expands ESC’s leading role in the PPSA market and augments its credit life-cycle product
suite by adding early- and late-stage collections.
The group of companies operating as UPLevel acquired during the year is made up of two operating subsidiaries: CRM and CBS. For
reporting purposes UPLevel is included in the results of the Services segment.
Goodwill arising on the acquisition included amounts in relation to the benefit of an increased market presence and competencies, related
market growth, and the assembled workforce of UPLevel. None of the goodwill recognized is expected to be deductible for income tax
purposes.
The intangible assets above consist of existing customer relationships of $4.4 million and brand of $1.0 million.
Trade and other receivables with a fair value of $1.0 million acquired in this transaction are estimated to be fully collectible.
Professional fees associated with the cost of the acquisition expensed during the year ended December 31, 2022, totalled $0.3 million, and
have been recorded in professional and consulting services expense on the statements of comprehensive income.
The revenue and net earnings of the two business combinations since their acquisition dates included in the consolidated statement of
comprehensive income for 2022 were $14.7 million and $0.4 million, respectively.
The consolidated revenue and net income for the Company and the acquirees combined for 2022, as though the acquisition date for the
business combinations that occurred during the year had been as of January 1, 2022, would have been $197.2 million and $31.6 million,
respectively.
Regulis
On December 20, 2022, the Company through a wholly owned subsidiary, acquired all of the outstanding shares of Regulis by way of a
Share Purchase Agreement (“SPA”). The purchase consideration was $0.6 million (€0.4 million) cash upfront, with another €0.6 million when
the Registry commences operations and up to €1.0 million in contingent consideration payable over a period of ten years based on a
percentage of revenue generated by the registry as set out in the SPA. Regulis holds a contract under the Luxembourg Rail Protocol of the
Cape Town Convention which provides it the exclusive right and obligation to develop, deliver and operate the International Registry for
Railway Rolling Stock (“the Registry”) for a period of ten years from the date the Registry goes live as defined in the Luxembourg Rail
Protocol. The acquisition will continue to expand the Company’s portfolio of services and solutions to help improve the delivery of modern
registry services by and for governments, intergovernmental, and private organizations. Regulis will be reported in the Company’s corporate
segment until the time it commences operations.
Regulis did not meet the definition of a business per IFRS 3 and, as such, was treated as an asset acquisition. Contingent consideration in an
asset acquisition is generally recognized when it is probable that a liability has incurred, and the amount can be reasonably estimated. None
of the milestone payments were accrued for at the time of acquisition as it was not probable that a liability had been incurred. The
milestone payments have not yet been achieved as of the date of these consolidated financial statements. Transaction costs specific to the
asset acquisition of $0.1 million have been capitalized.
98
2022 ISC® Annual Report | Notes to the Consolidated Financial StatementsConsolidated Financial StatementsConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022 27 Commitments and Contingencies
As of December 31, 2022, the Company has commitments over the next five years as follows:
(thousands of CAD)
2023
2024
2025
2026
2027
Thereafter
Total commitments
$
IT and Other
Service
Agreements1
4,495
1,724
981
478
370
370
$ 8,418
Master Service
Agreement
500
$
500
500
500
500
3,000
5,500
$
Operating Leases
and non-Lease
Component of
Office Leases
1,558
$
1,418
631
366
303
705
4,981
$
$
Total
6,553
3,642
2,112
1,344
1,173
4,075
$ 18,899
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, disclosing the lease payment commitments in Note 13.
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, 2022, the liability was nil (December 31, 2021 — nil).
28 Pension Expense
The total pension costs under the Company’s defined contribution plans for the year were $2.1 million (2021 — $1.9 million).
29 Subsequent Events
On March 14, 2023, the Board declared a quarterly cash dividend of $0.23 per Class A Share, payable on or before April 15, 2023, to
shareholders of record as of March 31, 2023.
99
2022 ISC® Annual Report | Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements | 2022 ISC® Annual ReportConsolidated Financial StatementsFor the Fourth Quarter and Year Ended December 31, 2022
Corporate Information
Corporate Information
Corporate Information
Corporate Information
Board of Directors
Joel Douglas 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
Shawn B. Peters, CPA, CA, ICD.D
President and Chief Executive Officer
Robert (Bob) Antochow, CPA, CA, CMA
Chief Financial Officer
Susan Bowman
Head of ERS
Ken Budzak
Executive Vice-President, Registry Operations
Loren Cisyk
Executive Vice-President, Technology Solutions
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
Laurel Garven
Vice-President, Corporate Development and
Business Strategy
Kathy E. Hillman-Weir, K.C.
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.
100
2022 ISC® Annual ReportOverview 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 — 17,701,498 Class A Shares as at
December 31, 2022.
The Company’s articles and the ISC Act limit ownership of
Class A Shares, including joint ownership, to no more than
15 per cent of the Class A Shares issued and outstanding.
Class B Golden Share
Issued and outstanding — 1 Golden Share as at
December 31, 2022.
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, 2022.
Preferred Shares are issuable at any time and may include
voting rights.
Corporate Information
Corporate Information
Ownership
As of March 14, 2023, the Board and management are not
aware of any shareholder who directly or indirectly owns or
exercises, or directs control over, more than 10 per cent of our
Class A Shares, other than:
a) Crown Investments Corporation of Saskatchewan (“CIC”),
which holds 5,425,000 Class A Shares representing
30.6 per cent of the issued and outstanding Class A Shares;
b) CI Investments Inc., which holds 2,453,176 Class A Shares
representing approximately 13.9 per cent of the issued and
outstanding Class A Shares; and
c) QV Investors Inc., which holds 2,215,105 Class A Shares
representing 12.5 per cent of the issued and outstanding
Class A Shares.
Auditors
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
101
2022 ISC® Annual Report2022 ISC® Annual ReportOverview Corporate Information
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
2022
2022
2022
2022
2021
2021
2021
2021
2020
2020
2020
2020
Type
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Quarterly
Ex-Dividend Date
Dec 29, 2022
Sep 29, 2022
Jun 29, 2022
Mar 30, 2022
Dec 30, 2021
Sep 28, 2021
Jun 29, 2021
Mar 30, 2021
Dec 30, 2020
Sep 29, 2020
Jun 29, 2020
Mar 30, 2020
Record Date
Dec 31, 2022
Sep 30, 2022
June 30, 2022
Mar 31, 2022
Dec 31, 2021
Sep 30, 2021
Jun 30, 2021
Mar 31, 2021
Dec 31, 2020
Sep 30, 2020
Jun 30, 2020
Mar 31, 2020
Payable Date
Amount
Jan 15, 2023
Oct 15, 2022
Jul 15, 2022
Apr 15, 2022
Jan 15, 2022
Oct 15, 2021
Jul 15, 2021
Apr 15, 2021
Jan 15, 2021
Oct 15, 2020
Jul 15, 2020
Apr 15, 2020
$0.23
$0.23
$0.23
$0.23
$0.23
$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, 2022 (“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.
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,
2022, and ISC’s audited Consolidated Financial Statements and Notes and Management’s Discussion and Analysis for the fourth
quarter and year ended December 31, 2022, 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.
102
2022 ISC® Annual ReportOverview 2022 ISC® Annual ReportOverview Information Services Corporation
300 – 10 Research Drive
Regina, Saskatchewan S4S 7J7 Canada
1 (306) 787-8179
company.isc.ca
TSX:ISV