Information Services Corporation - Management Reports 2021

==> picture [612 x 552] intentionally omitted <==

Management's Discussion and Analysis

March 16, 2021 Year Ended December 31, 2020

==> picture [65 x 64] intentionally omitted <==

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

1	Overview ..................................................................................................................................... 4
2	Consolidated Financial Analysis ................................................................................................. 11
3	Business Segment Analysis ........................................................................................................ 17
4	Summary of Consolidated Quarterly Results .............................................................................. 43
5	Business Strategy ...................................................................................................................... 44
6	Financial and Capital Management ............................................................................................ 45
7	Business Risks ............................................................................................................................ 50
8	Accounting Policies, Financial Measures and Controls ............................................................... 53

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

INTRODUCTION

This Management’s Discussion and Analysis (“MD&A”) for Information Services Corporation (“ISC”) discusses our financial and operating performance, business indicators and outlook from management’s viewpoint.

This document should be read in its entirety and is intended to complement and supplement ISC’s audited Consolidated Financial Statements (“Financial Statements”) for the years ended December 31, 2020, and 2019. Additional information, including our Annual Information Form for the year ended December 31, 2020, is available on the Company’s website at www.company.isc.ca and in the Company’s profile on SEDAR at www.sedar.com.

This MD&A contains information from the Financial Statements for the years ended December 31, 2020, 2019, and 2018, prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IAS Board”). The financial information that appears throughout our MD&A is consistent with the Financial Statements.

This MD&A also includes certain measures, which have not been prepared in accordance with IFRS, such as EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin and free cash flow. Rather, these measures are provided as additional information to complement those IFRS measures. Refer to section 8.8 “Non-IFRS financial measures”. Refer to section 2 “Consolidated Financial Analysis” for a reconciliation of EBITDA and adjusted EBITDA to net income.

Unless otherwise noted, or unless the context indicates otherwise, “ISC”, the “Company”, “we”, “us” and “our” refer to Information Services Corporation and its subsidiaries. Any statements in this MD&A made by, or on behalf of, management are made in such persons’ capacities as officers of ISC and not in their personal capacities.

The Financial Statements are presented in Canadian dollars (“CAD”). In this MD&A, all references to “$” or “dollars” are to Canadian dollars and amounts are stated in Canadian dollars unless otherwise indicated.

This MD&A contains forward-looking information and should be read in conjunction with the “Caution Regarding Forward-Looking Information” that follows. This MD&A is current as of March 16, 2021.

A reference made in this MD&A to other documents or to information or documents available on a website does not constitute the incorporation by reference into this MD&A of such other documents or such other information or documents available on such website, unless otherwise stated.

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.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

CAUTION REGARDING FORWARD-LOOKING INFORMATION

Certain statements in this MD&A and certain information incorporated by reference herein contains forwardlooking information within the meaning of applicable Canadian securities laws. The purpose of the forwardlooking information is to provide a description of management’s expectations regarding future events or developments and may not be appropriate for other purposes.

Forward-looking information which may be found in this MD&A includes, without limitation, that contained in the “Outlook” section hereof, and management’s expectations, intentions and beliefs concerning the anticipated integration and growth of the Paragon (as that term is defined herein) business, the industries in which we operate, business strategy and strategic direction, growth opportunities, integration, contingent consideration, development and completion of projects, the competitive landscape, seasonality, our future financial position and results of operations, capital and operating expectations, projected costs, the impact of certain payments to the Government of Saskatchewan, access to financing, debt levels, free cash flow, expectations for meeting future cash requirements, the economy and the real estate market, reporting currency and currency fluctuations, dividend expectations, market trends and other plans and objectives of or involving ISC. The words may , will , would, should, could, expect, plan, intend, anticipate, believe, estimate, predict, strive, strategy, continue, likely, potential or the negative or other variations of these words or other comparable words or phrases are intended to identify forward-looking information.

Forward-looking information is based on estimates and assumptions made by us in light of ISC’s experience and perception of historical trends, current conditions and expected future developments, as well as other factors that ISC believes are appropriate and reasonable in the circumstances. There can be no assurance that such estimates and assumptions will prove to be correct. Certain assumptions with respect to our ability to implement our business strategy and compete for business (other than our exclusive service offerings to the Government of Saskatchewan), and market our technology assets and capabilities, our ability to integrate the Paragon business on terms consistent with our expectations and the business of Paragon performing in a manner consistent with our expectations, as well as business, economic, market and other conditions, availability of financing, currency exchange rates, consumer confidence, interest rates, level of unemployment, inflation, liabilities, income taxes and our ability to attract and retain skilled staff, are material factors in preparing forward-looking information.

Forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those expressed or implied by such forward-looking information. Factors that could cause our actual results or events to differ materially from those expressed or implied by such forward-looking information include, without limitation, operational, economic, market, financial, competitive, regulatory, technological and other risks (including those arising from public health concerns such as COVID-19) detailed from time to time in the filings made by the Company, including those detailed in our Annual Information Form for the year ended December 31, 2020, and the Financial Statements, copies of which are available on our website at www.company.isc.ca and in the Company’s profile filed on SEDAR at www.sedar.com. You should consider these factors carefully. We caution that the foregoing list is not exhaustive. Other events or circumstances could cause actual results to differ materially from those estimated or projected and expressed in, or implied by, this forward-looking information. See section 7.2 “Business risks and risk management”.

Furthermore, unless otherwise stated, the forward-looking information contained in this MD&A is made as of the date of this MD&A. We have no intention and undertake no obligation to update or revise any forwardlooking 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.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

1 Overview

Our financial performance for the year remained strong amid COVID-19, and the resiliency of our business, in general, was evident throughout 2020. Our 2020 first-quarter results showed continued growth over last year but were muted by the impact of COVID-19 in the last weeks of the quarter. We experienced an impact from COVID-19 in the second quarter but again delivered strong results in the face of the economic conditions created by the pandemic.

For the third quarter, our performance remained strong, partly due to increased transactions in both Registry Operations and Services, combined with the measures implemented to continue to reduce our operating costs and mitigate the impact of the pandemic at the start of the second quarter. We also completed several initiatives.

We acquired substantially all of the assets of Paragon Inc. (“Paragon”), whose primary focus is the facilitation and co-ordination of asset recovery on behalf of many of Canada’s major banks. The acquisition strengthened our current service offering, and we now offer our clients a complete solution in the credit life cycle.
We completed a soft launch of our newest technology platform, Registry Complete, a unified and streamlined platform that enables customers to search and register with various ministries across Canada in a secure cloud-based environment. The platform allows our customers to take advantage of expanded Application Programming Interface (“API”) service offerings, improved tools, faster turnaround and a greater array of services in the legal and due diligence space.
We expanded our credit facility to refinance amounts under the previous facilities and to provide the Company with additional room for future growth opportunities, capital expenditures, and general corporate purposes.

Performance in the fourth quarter surged as transaction levels continued to improve across much of our Registry Operations segment, which remains a significant part of ISC’s business. We continue to refine this segment's efficiency to preserve EBITDA and free cash flow while still maintaining best-in-class customer service. Our Services segment also saw a strong quarter, up over last year due to organic, new customer growth and the additional revenue from our new Recovery Solutions division following Paragon's acquisition. Technology Solutions continued well, despite the impact on some implementations' timing during the year from pandemic restrictions. We still completed scheduled implementations for existing clients while we continued to develop new relationships with prospective clients.

Based on the strength of our existing businesses, the continued execution of our growth strategy, and the actions we took at the start of the pandemic to mitigate the impact on our business, we were able to deliver excellent results in 2020. Despite the continued uncertainty created by the pandemic[1] , we expect the robust nature of our business and our focus on growth will stand us in good stead in 2021.

1 For further information relating to the impact of COVID-19, refer to section 1.3 “Outlook” and section 7 “Business Risks”.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

1.1 Consolidated highlights

2020 CONSOLIDATED RESULTS

==> picture [468 x 180] intentionally omitted <==

----- Start of picture text -----

Revenue Net income Earnings per share, diluted
$136.7M $20.9M $1.18
+3% vs 2019 +8% vs 2019 +7% vs 2019
EBITDA [1] Adjusted EBITDA [1] Free Cash Flow [1] Dividends Paid
$43.6M $47.5M $36.2M $14.0M
+12% vs 2019 +19% vs 2019 +21% vs 2019
----- End of picture text -----

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.

On January 1, 2020, a new methodology was adopted for allocating corporate costs to the operating segments. Management believes this revised methodology more closely reflects the level of shared service provided to the operating segments in the current year. This change also impacts certain related party revenues.

Effective July 1, 2020, we recategorized our reporting to facilitate the inclusion of our new Recovery Solutions division following the acquisition of the assets of Paragon, which closed on July 31, 2020. We believe this will provide readers with a more comprehensive understanding of our Services segment. Our offerings are generally categorized into three divisions, namely “Corporate Solutions”, “Regulatory Solutions”, and “Recovery Solutions”.

ISC® Management’s Discussion and Analysis

For the Fourth Quarter and Year Ended December 31, 2020

SELECT FINANCIAL INFORMATION

The select annual financial information set out for the years ended December 31, 2020, 2019, and 2018, is derived from the Financial Statements and has been prepared on a consistent basis. In the opinion of the Company’s management, such financial data reflects all adjustments necessary for a fair presentation of the results for those periods.

f the results for those periods.
			Year ended		December 31,
(thousands of CAD dollars)		2020	2019		2018
Revenue	$	136,723$	132,968	$	119,131
Net income		20,883	19,400		18,637
EBITDA1	$	43,612$	39,026	$	38,124
Adjusted EBITDA1		47,498	40,028		35,578
EBITDA margin (% of revenue)1		31.9%	29.3%		32.0%
Adjusted EBITDA margin (% of revenue)1		34.7%	30.1%		29.9%
Free cash flow1	$	36,235$	29,996	$	27,411
Dividend declared per share	$	0.80$	0.80	$	0.80
Earnings per share, basic		1.19	1.11		1.06
Earnings per share, diluted		1.18	1.11		1.06
				As at	December 31,
		2020	2019		2018
Total assets	$	242,300$	171,579	$	173,682
Total non-current liabilities	$	92,963$	32,683	$	36,420

1 EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin and free cash flow are not recognized as measures under IFRS and do not have a standardized meaning prescribed by IFRS and, therefore, they may not be comparable to similar measures reported by other companies; refer to section 8.8 “Non-IFRS financial measures”. Refer to section 2 “Consolidated Financial Analysis” for a reconciliation of EBITDA and adjusted EBITDA to net income. Refer to section 6.1 “Cash flow” for a reconciliation of free cash flow.

ISC has generated very strong results over the past three years across all metrics. Our overall results for 2020 are up well over last year despite the global pandemic that dominated most of the year.

Revenue continued to climb and was up to $136.7 million in 2020 from $133.0 million, despite the impacts of COVID-19 in 2020.
The strength of our Registry Operations was evident in the third and fourth quarter as it rebounded from lower levels in the second quarter from the restrictions imposed around the pandemic.
Revenue growth in 2020 continued to come from our Services segment, through strong organic new customer acquisitions, the addition of new services and technologies for all customers, and the addition of our Recovery Solutions services following the acquisition of Paragon.
These results demonstrate the strength and resiliency of our business, with Adjusted EBITDA up 19 per cent (Services EBITDA is up 118 per cent and 70 per cent for the quarter and year, respectively).
Free cash flow was also strong, up 21 per cent over 2019, to record levels in 2020.

ISC® Management’s Discussion and Analysis

For the Fourth Quarter and Year Ended December 31, 2020

Consolidated Revenue for the year ended December 31, (CAD$ millions)

==> picture [430 x 123] intentionally omitted <==

----- Start of picture text -----

2018 2019 2020
119.1 133.0 136.7
----- End of picture text -----

Consolidated EBITDA and Adjusted EBITDA and Related Margins[1] for the year ended December 31,

==> picture [106 x 8] intentionally omitted <==

----- Start of picture text -----

EBITDA Adjusted EBITDA
----- End of picture text -----

==> picture [432 x 136] intentionally omitted <==

----- Start of picture text -----

(CAD$ millions) 34.7%
31.9%
30.1%
29.3%
32.0%
29.9%
2018 2019 2020
38.1 35.6 39.0 40.0 43.6 47.5
----- End of picture text -----

1 2018 EBITDA contains a one-time gain of $3.6 million for the adjustment to the fair value estimate of the contingent consideration associated with our AVS Systems Inc. acquisition.

Percentages represent EBITDA and adjusted EBITDA margins.

Consolidated Free Cash Flow for the year ended December 31,

(CAD$ millions)

==> picture [434 x 118] intentionally omitted <==

----- Start of picture text -----

2018 2019 2020
27.4 30.0 36.2
----- End of picture text -----

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

FOURTH QUARTER CONSOLIDATED HIGHLIGHTS

Revenue was $39.0 million for the quarter, an increase of $1.1 million compared to the fourth quarter of 2019 largely due to a strong quarter in our Registry Operations, continued new customer growth in Services, and the addition of our new Recovery Solutions revenue with the acquisition of Paragon.
Net income was $7.9 million or $0.45 per basic and diluted share compared to $7.3 million or $0.42 per basic and diluted share in the fourth quarter of 2019. The year-over-year increase is due to the increased revenue in Services and Registry Operations, combined with savings from expense reduction measures implemented in 2020 in response to the pandemic.
EBITDA was $15.7 million compared to $12.3 million for the same quarter last year, again due to increased revenue in Services and Registry Operations and reduced operating expenses, resulting in a strong EBITDA margin for the fourth quarter of 40.2 per cent compared to 32.5 per cent last year.
Adjusted EBITDA was $16.2 million for the quarter compared to $12.7 million in the same quarter last year. Adjusted EBITDA margin was 41.5 per cent compared to 33.4 per cent last year.
Free cash flow for the quarter was $12.7 million, an increase of $3.1 million compared to the fourth quarter of 2019 due to higher results of operations.
On November 4, 2020, our Board declared a quarterly cash dividend of $0.20 per Class A Limited Voting Share (“Class A Share”), paid on January 15, 2021, to shareholders of record as of December 31, 2020.

YEAR-END CONSOLIDATED HIGHLIGHTS

Revenue for the year was $136.7 million, an increase of $3.7 million compared to $133.0 million for the previous year, despite the impacts of COVID-19 in 2020. The increase was due to the higher revenue generated by Services from new customer growth, and the new Recovery Solutions revenue.
Net income was $20.9 million or $1.19 per basic share and $1.18 per diluted share compared to $19.4 million or $1.11 per basic share and diluted share last year. The increase was the result of our increased revenue combined with savings from expense reduction measures implemented in 2020 in response to the pandemic.
EBITDA for the year was $43.6 million compared to $39.0 million last year, an increase of $4.6 million, with an EBITDA margin for the year of 31.9 per cent compared to 29.3 per cent for 2019.
Adjusted EBITDA was $47.5 million for the year, up from $40.0 million last year, with an Adjusted EBITDA margin of 34.7 per cent for 2020 compared to 30.1 per cent last year.
Free cash flow for the year increased to $36.2 million, compared to $30.0 million for the same period last year, as a result of the high cash flow nature of our business and strong operational results across our segments.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

On July 31, 2020, the Company’s Services segment, through its wholly owned subsidiary, ESC, acquired substantially all of the assets used in the business of Paragon Inc. for $70.0 million.
On August 5, 2020, the Company entered into a new credit agreement in connection with its secured credit facility (the "Credit Facility"). The aggregate amount available under the new Credit Facility is $150.0 million, up from $80.0 million.
During the year, we launched our newest technology platform, Registry Complete, a unified and streamlined platform that enables organizations to search and register with the various ministries across Canada in a secure cloud-based environment.
Completed the deployment of new technology for the Companies Registration Office (Ireland) and began deployment of modules for the Irish Aviation Authority.

1.2 Subsequent events

On January 27, 2021, the Company announced that the membership of Saskatchewan Government and General Employees’ Union Local 2214 ratified a new collective agreement with respect to ISC’s in-scope employees. The new six-year agreement runs to September 30, 2025.
Subsequent to the end of the fourth quarter, we successfully implemented new technology for the Registry of Joint Stock Companies in Nova Scotia.
On March 16, 2021, our Board declared a quarterly cash dividend of $0.20 per Class A Share, payable on or before April 15, 2021, to shareholders of record as of March 31, 2021.

1.3 Outlook

The following section includes forward-looking information, including statements related to the industries in which we operate, growth opportunities, our future financial position and results of operations, capital and operating expectations, the expected impact of the addition of the assets used in the business of Paragon and the expected impact of COVID-19. Refer to “Caution Regarding Forward-Looking Information”.

Despite excellent performance in 2020, the uncertainty surrounding the impacts of COVID-19 remain for 2021 as we manage through new, additional or extended pandemic response measures. However, we are well positioned to manage through this in 2021 and expect our results will reflect that. Our long-term strategy remains centred on delivering value for shareholders through the consistent performance of our existing business and the execution of appropriate growth opportunities, including acquisition targets that are complementary to or add value to existing lines of business.

In our Registry Operations and Services segments, we expect our volumes to be lower than normal in 2021, as the pace of recovery of the Canadian economy may be uneven and is dependent on how long the pandemic continues.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

Despite this, we are continuing to invest in the technology supporting our Services segment and transition away from legacy platforms to optimize the customer experience through automation of the delivery of services and reduce our cost of delivery. As well, we expect the strong EBITDA margin profile of the recently acquired Recovery Solutions division of our Services segment to positively impact our consolidated EBITDA margin profile in 2021.

In our Technology Solutions segment, project implementation work continues for multiple clients. As mentioned in our previous 2020 reporting, we have been able to work remotely during the pandemic. However, some ongoing implementations which we expected to be complete in 2020 were delayed due to the pandemic and are now expected to be complete in 2021. For example, subsequent to the end of the fourth quarter, we successfully completed the implementation for the Registry of Joint Stock Companies in Nova Scotia. In addition, we commenced implementation planning for our newest customer, the islands of Bonaire, St. Eustatius and Saba (the “BES Islands”), following the award of a contract in December 2020.

The uncertainty surrounding the duration and potential outcomes of the COVID-19 pandemic remains for the foreseeable future. While we have demonstrated strong results for 2020 and have positioned the Company to manage through this situation, we continue to be unable, at this time, to predict the full impact on our financial results in 2021. Therefore, we will not be providing guidance for the coming year.

ISC® Management’s Discussion and Analysis

For the Fourth Quarter and Year Ended December 31, 2020

2 Consolidated Financial Analysis

Consolidated revenue was up 2.8 per cent for the three months and year ended December 31, 2020, compared to the same periods last year. Net income was also up in the quarter and year-to-date compared to last year due to increased revenue in Services.

2.1 Consolidated statements of comprehensive income

	Three	Months Ended	December 31,	December 31,		Year Ended	December 31,	December 31,
(thousands of CAD dollars)		2020		2019		2020		2019
Revenue
Registry Operations	$	19,452	$	18,069	$	69,535	$	70,399
Services		15,744		13,515		56,398		51,131
Technology Solutions		3,815		6,352		10,782		11,416
Corporate and other		2		6		8		22
Total revenue		39,013		37,942		136,723		132,968
Expenses
Wages and salaries		10,314		11,578		40,165		41,689
Cost of goods sold		7,799		8,236		31,271		31,171
Depreciation and amortization		3,837		2,697		12,865		11,400
Information technology services		2,117		2,549		7,896		8,796
Occupancy costs		880		786		3,004		3,485
Professional and consulting services		1,151		1,351		6,784		4,281
Financial services		779		462		2,654		2,138
Other		279		649		1,337		2,382
Total expenses		27,156		28,308		105,976		105,342
Net income before items noted below		11,857		9,634		30,747		27,626
Finance (expense) income
Interest income		(192)		71		172		283
Interest expense		(924)		(359)		(2,217)		(1,529)
Net finance expense		(1,116)		(288)		(2,045)		(1,246)
Income before tax		10,741		9,346		28,702		26,380
Income tax expense		(2,870)		(1,999)		(7,819)		(6,980)
Net income		7,871		7,347		20,883		19,400
Other comprehensive income (loss)
Unrealized gain (loss) on translation of
financial statements of foreign operations		(69)		78		732		(538)
Change in fair value of marketable
securities, net of tax		-		(77)		(31)		29
Other comprehensive income (loss) for the
period		(69)		1		701		(509)
Total comprehensive income	$	7,802	$	7,348	$	21,584	$	18,891

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

2.2 Consolidated revenue

Consolidated Revenue[1] for the three months ended December 31,

Consolidated Revenue[1] for the year ended December 31,

==> picture [173 x 121] intentionally omitted <==

----- Start of picture text -----

17% 10%
Technology Solutions
Services
40% Registry Operations
35%
48% 50% +3%
2019 2020
----- End of picture text -----


17%	10%				9%	8%
		Technology Solutions					Technology Solutions
		Services					Services
35%	40%	Registry Operations			38%	41%	Registry Operations
48%	50%	+3%			53%	51%	+3%
2019	2020				2019	2020
1Corporate and other and Inter-segment eliminations are excluded.
		Three Months Ended		December 31,			Year Ended December 31,
(thousands of CAD dollars)			2020		2019		2020		2019
Registry Operations		$	19,452	$	18,069	$	69,535	$	70,399
Services			15,744		13,515		56,398		51,131
Technology Solutions			3,815		6,352		10,782		11,416
Corporate and other			2		6		8		22
Total revenue		$	39,013	$	37,942	$	136,723	$ 132,968

Total revenue increased during the quarter as a result of:

higher revenue in our Registry Operations segment, from a combination of (i) increased regular land transfers and mortgage registrations, combined with higher average land values in the quarter, despite overall transactions remaining constant and (ii) an increase in “high-value” property registration revenue, where each registration generates revenue of $10,000 or more; and
continued organic, new customer growth in Services, as well as a full quarter of revenue from our Recovery Solutions division.

These increases were partially offset by the decreased revenue in Technology Solutions as delivery against milestones on signed contracts was delayed during the year.

Total revenue for the year was up as a result of the organic growth in Services and the addition of our Recovery Solutions. The strong showing in our Registry Operations segment in the third and fourth quarters, despite the impact of the pandemic, showed the resiliency of our business and helped ensure the strong 2020 results.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

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)

==> picture [234 x 129] intentionally omitted <==

----- Start of picture text -----

28.3
27.2
20%
19%
Other
28% 29% Cost of goods sold
Depreciation and amortization
10% 14%
Employee expenses
42% 38%
2019 2020
----- End of picture text -----

==> picture [120 x 141] intentionally omitted <==

----- Start of picture text -----

105.3 106.0
20% 20%
30% 30%
11% 12%
39% 38%
2019 2020
----- End of picture text -----

	Three	Months Ended	December 31,	December 31,		Year Ended December 31,	Year Ended December 31,	Year Ended December 31,
(thousands of CAD dollars)		2020		2019		2020		2019
Wages and salaries	$	10,314	$	11,578	$	40,165	$	41,689
Cost of goods sold		7,799		8,236		31,271		31,171
Depreciation and amortization		3,837		2,697		12,865		11,400
Information technology services		2,117		2,549		7,896		8,796
Occupancy costs		880		786		3,004		3,485
Professional and consulting services		1,151		1,351		6,784		4,281
Financial services		779		462		2,654		2,138
Other		279		649		1,337		2,382
Total expenses	$	27,156	$	28,308	$	105,976	$	105,342

Consolidated expenses were $27.2 million for the fourth quarter, a decrease of $1.2 million compared to the same quarter last year and were flat at $106.0 million for the year.

The decrease in the quarter was due to decreases in wages and salaries (as a result of pandemic related reductions), cost of goods sold for slightly lower collateral management products, and information technology services. Depreciation and amortization in the quarter was up as a result of the Paragon acquisition.

The year-over-year results showed similar reductions in wages and salaries from pandemic related actions, offset by increases in professional and consulting services and depreciation and amortization from our acquisition of Paragon.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

2.4 Consolidated net income

==> picture [458 x 162] intentionally omitted <==

----- Start of picture text -----

Consolidated Net Income Consolidated Net Income
for the three months ended December 31, for the year ended December 31,
(CAD$ millions) (CAD$ millions)
7.9
20.9
7.3
19.4
+7% +8%
2019 2020 2019 2020
----- End of picture text -----

Net income for the quarter was $7.9 million or $0.45 per basic and diluted share, an increase of 7 per cent compared to the fourth quarter of 2019. For the year, net income was $20.9 million or $1.19 per basic share and $1.18 per diluted share, up 8 per cent compared to last year.

2.5 Consolidated EBITDA and Adjusted EBITDA

==> picture [463 x 167] intentionally omitted <==

----- Start of picture text -----

Consolidated EBITDA and Adjusted EBITDA Consolidated EBITDA and Adjusted EBITDA
for the three months ended December 31, for the year ended December 31,
(CAD$ millions) (CAD$ millions)
47.5
16.2
EBITDA 40.0 EBITDA
12.7 Adjustments Adjustments
43.6
15.7
39.0
12.3
+28%
+19%
0.4 0.5 1.0 3.9
2019 2020 2019 2020
----- End of picture text -----

EBITDA for the fourth quarter of 2020 was $15.7 million compared to $12.3 million for the same quarter last year, up 27 per cent as a result of organic new customer growth and the first full quarter of revenue from Recovery Solutions in Services, as well as the continued impact of cost reductions across our segments made earlier in the year. Similarly, adjusted EBITDA was $16.2 million for the quarter compared to $12.7 million last year, with only minor adjustments for stock-based compensation and integration costs during the quarter.

ISC® Management’s Discussion and Analysis

For the Fourth Quarter and Year Ended December 31, 2020

For the year, EBITDA was $43.6 million compared to $39.0 million last year, an increase of 12 per cent, as a result of the same strong operational performance and growth outlined above. Adjusted EBITDA was $47.5 million for the year compared to $40.0 million last year, up 19 per cent, with higher adjustments in 2020 as compared to 2019 for stock-based compensation and acquisition and integration costs.

integration costs.
	Three	Months Ended	December 31,	Year Ended	December 31,
(thousands of CAD dollars)		2020	2019	2020	2019
Net income	$	7,871$	7,347$	20,883$	19,400
Depreciation and amortization		3,837	2,697	12,865	11,400
Net finance expense		1,116	288	2,045	1,246
Income tax expense		2,871	1,998	7,819	6,980
EBITDA	$	15,695$	12,330$	43,612$	39,026
Adjustments
Stock-based compensation expense		248	269	1,046	370
Stock option expense		38	81	222	466
Acquisition and integration costs		207	-	2,618	164
Gain on disposal of property, plant and		-	4	-	2
equipment assets
Adjusted EBITDA	$	16,188$	12,684$	47,498$	40,028
EBITDA margin (% of revenue)		40.2%	32.5%	31.9%	29.3%
Adjusted EBITDA margin (% of revenue)		41.5%	33.4%	34.7%	30.1%

2.6 Consolidated finance costs

Net finance expense was $1.1 million and $2.0 million for the quarter and the year, respectively, up compared to last year due to increased fees on our new Credit Facility which was entered into on August 5, 2020.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

2.7 Tax provision

The Company is subject to federal and provincial income taxes at an estimated combined statutory rate of 27.0 per cent (2019 – 27.0 per cent). Income tax expense varies from the amounts that would be computed by applying the statutory income tax rate to earnings before taxes for the following reasons:

	Year Ended	December 31,
(thousands of CAD dollars)	2020	2019
Net income before tax	$ 28,702	$ 26,380
Combined statutoryincome tax rate	27.0%	27.0%
Expected income tax expense	7,750	7,122
Increase (decrease) in income tax resulting from:
Non-taxable items	-	(20)
Non-deductible expenses	67	279
Foreign income tax rate differential	(278)	105
Adjustment to prior years’ deferred tax assets	269	(382)
Other	11	(124)
Income tax expense	$ 7,819	$ 6,980

In assessing the recovery of deferred income tax assets, management considers whether it is more likely than not that the deferred income tax assets will be realized. The recognition and measurement of the current and deferred income tax assets and liabilities involves dealing with uncertainties in the application of complex tax regulations and in the assessment of the recoverability of the deferred income tax assets. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences are deductible.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

3 Business Segment Analysis

Headquartered in Canada, ISC is the leading provider of registry and information management services for public data and records. Throughout our history, we have delivered value to our clients by providing solutions to manage, secure and administer information.

ISC currently has three operating segments:

Registry Operations delivers registry and information services on behalf of governments and private sector organizations.
Services delivers products and services that utilize public records and data to provide value to customers in the financial and legal sectors.
Technology Solutions provides the development, delivery and support of registry (and related) technology solutions.

The balance of our corporate activities and shared services are reported as Corporate and other.

3.1 Registry Operations

When providing registry and information services to governments and private sector organizations, we work with those clients to support their policies and execute procedures to ensure the integrity of the data and manage the information technology, data management and authentication processes.

Most significantly, Registry Operations provides services on behalf of the Province of Saskatchewan under a 20-year Master Service Agreement (“MSA”), in effect until 2033, and is the exclusive full-service solution provider of the Saskatchewan Land Registry (including the Saskatchewan Land Titles Registry (“Land Titles Registry”), the Saskatchewan Land Surveys Directory (“Land Surveys”) and Saskatchewan Geomatics services (“Geomatics”), collectively the “Land Registry”), the Saskatchewan Personal Property Registry (“Personal Property Registry”) and the Saskatchewan Corporate Registry (“Corporate Registry”). Additional information about the MSA is available in our Annual Information Form for the year ended December 31, 2020, on our website at www.company.isc.ca and in the Company’s profile on SEDAR at www.sedar.com.

Competitors in this segment include infrastructure funds and private equity firms as well as information services companies, registry software providers and other such information-based companies that develop and provide software platforms to manage registry and related information services. These types of companies may compete with ISC by acting as, or partnering with, businesses that can provide other required processes, such as customer service and delivery, in conjunction with software platforms to provide full-service solutions.

Registry Operations experiences moderate seasonality, primarily because land titles revenue fluctuates in line with real estate transaction activity in Saskatchewan. Typically, our second and third quarters generate higher revenue during the fiscal year when real estate activity is traditionally highest.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

Saskatchewan Land Registry

The Land Titles Registry issues titles to land and registers transactions affecting titles, including changes of ownership and the registration of interests in land, in Saskatchewan.

Revenue for the Land Titles Registry is earned through registration, search and maintenance fees. Registration fees are either a flat fee or value-based, calculated as a percentage of the value of the land and/or property being registered. Approximately 84 per cent of all Land Titles Registry registration transactions were submitted online in 2020.

We typically charge a flat fee per transaction for search and maintenance transactions. However, in certain instances, we may charge a negotiated fee for a customized search or maintenance transaction such as certain mineral certification or bulk data requests.

Because the Land Titles Registry revenue is comprised of both residential and non-residential activity, mortgage rates and business lending rates may affect revenue. Changes in land values, provincial population and mortgage qualifying requirements also affect the housing market, which, in turn, influences changes of ownership and revenue.

Land Surveys registers land survey plans and creates a representation of Saskatchewan land parcels in the cadastral parcel mapping system. Revenue related to all Land Survey services is earned as a flat fee per transaction.

Geomatics manages geographic data related to the cadastral parcel mapping system, which is integrated with the Land Titles Registry and Land Surveys. Fees for Geomatics services are typically negotiated per transaction, based on the type and nature of services required.

Saskatchewan Personal Property Registry

The Personal Property Registry is a notice-based public registry in which security interests and other certain interests in personal property (property other than land, buildings and other property affixed to land) may be registered.

Customers are charged flat fees per transaction, and the automated web-based system enables real-time completion of search and registration services as well as minimizes operational effort to deliver services.

General provincial economic drivers, including automotive sales, interest rates and the strength of commercial activity across the province, influence the revenue in the Personal Property Registry.

Customers complete almost all searches in the registry online. The high online usage is stable, with minimal numbers of end-use consumers needing staff assistance to complete their transactions.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

Saskatchewan Corporate Registry

The Corporate Registry is a province-wide system for registering business corporations, non-profit corporations, co-operatives, sole proprietorships, partnerships and business names. Every corporation must be registered in the Corporate Registry to maintain its legal status and carry on business within Saskatchewan.

Transactions are billed as flat fees. Unlike other registries, the Company earns most of its fees in the Corporate Registry in relation to maintenance services provided to business entities that file annual returns or wish to make changes to their structure or profile.

Approximately 92 per cent of all registrations in the Corporate Registry were submitted online in 2020.

REGISTRY OPERATIONS REVENUE

==> picture [460 x 169] intentionally omitted <==

----- Start of picture text -----

Registry Operations Revenue Registry Operations Revenue
for the three months ended December 31, for the year ended December 31,
(CAD$ millions) (CAD$ millions)
70.4 69.6
18.1 19.5 2% 0%
0%
6%
15% 15%
14% Other Other
14% 15%
15% 13% Corporate Registry Corporate Registry
13% Personal Property Registry Personal Property Registry
Land Registry Land Registry
73% 69% 70%
66%
+8% (1%)
2019 2020 2019 2020
----- End of picture text -----

	Three Months Ended December 31,	Three Months Ended December 31,	Three Months Ended December 31,	Three Months Ended December 31,		Year Ended December 31,	Year Ended December 31,	Year Ended December 31,
(thousands of CAD dollars)		2020		2019		2020		2019
Land Registry	$	14,119	$	11,968	$	48,694	$	48,901
Personal Property Registry		2,625		2,383		10,055		10,154
Corporate Registry		2,709		2,604		10,537		10,230
Other		32		1,114		280		1,114
Registry Operations revenue	$	19,485	$	18,069	$	69,568	$	70,399

Revenue for Registry Operations was 19.5 million for the quarter, up compared to $18.1 million in the fourth quarter of 2019 and, for the year, was $69.6 million, flat compared to 2019.

The implementation of COVID-19 related restrictions in Saskatchewan began in mid-March and impacted the segment in April and May. As Saskatchewan began the first phase of its re-opening plan in June, activity in the segment began to move upward and remained stable throughout the third quarter. Building on that stabilization, volumes in the fourth quarter showed further improvement, with results in all registries or surpassing 2019 levels.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

Other revenue consists mainly of fees associated with a change order pursuant to the MSA to continue the development of our technology systems that support the registries. At the end of June 2020, the Multijurisdictional Registry Access Service (“MRAS”) went into operation in the Saskatchewan Corporate Registry along with the other initiating provinces of British Columbia, Alberta, Manitoba, Quebec and Corporations Canada. It enables businesses in Canada to register seamlessly in select provinces and territories without having to provide the same information to each jurisdiction. Under the MSA, the Company owns the intellectual property during the term of the MSA and amortization of the intangible asset commenced in the third quarter of 2020 when the development was complete.

==> picture [435 x 154] intentionally omitted <==

----- Start of picture text -----

Registry Operations Revenue
for the year ended December 31,
(CAD$ millions)
80.0
70.3 70.4 69.6
10.0 10.2 10.5
60.0
10.2 10.2 10.1
Other
40.0
Corporate Registry
50.0 48.9 48.7 Personal Property Registry
20.0
Land Registry
0.0
2018 2019 2020
----- End of picture text -----

Note: Values may not add due to rounding.

The top five customers for Registry Operations accounted for 19.7 per cent of the total segment revenue for 2020. Of those customers, no single customer accounted for more than 10.0 per cent of total Registry Operations revenue.

Saskatchewan Land Registry

For the fourth quarter, revenue for the Land Registry was $14.1 million, up by $2.2 million or 18.0 per cent compared to the same period in 2019, due to strong results from the Land Titles Registry.

Most of the revenue generated from the Land Registry is from the Land Titles Registry and is derived from value-based (ad valorem) fees. Land Titles Registry revenue for the quarter was $13.4 million, an increase of $2.2 million or 19.5 per cent compared to the same period in 2019, even though overall transaction volumes remained flat year-over-year. The increase was due to an increase in regular land transfers and mortgage registrations during the quarter relative to the same period in 2019, combined with higher average land values for the regular land transfers in the fourth quarter, which positively impacted the revenue.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

Saskatchewan Land Registry Revenue for the year ended December 31, 2020

Saskatchewan Land Registry Revenue for the year ended December 31, 2019

==> picture [405 x 125] intentionally omitted <==

----- Start of picture text -----

4.3%
4.7%
93.6% Land Titles Registry 92.7%
Geomatics
Land Surveys Directory
2.1% 2.6%
----- End of picture text -----

High-value property registration revenue was $1.6 million in the fourth quarter, a rise of $0.5 million compared to $1.1 million in the fourth quarter of 2019. Each high-value registration generates revenue of $10,000 or more.

The following graphs show the Land Registry revenue by type of transaction and the overall transaction volume, respectively. Typically, the second and third quarters generate the most revenue for the Land Registry. Given the impact of COVID-19 restrictions on our business in the second quarter, we observed lower revenue in that quarter and higher revenue in the third and fourth quarter, contrary to our historical pattern of seasonality. For more information on seasonality, refer to section 4 “Summary of Consolidated Quarterly Results”.

==> picture [438 x 217] intentionally omitted <==

----- Start of picture text -----

Saskatchewan Land Registry Revenue by Type
(CAD$ millions)
Registration Search Maintenance / Services Total
16.0
14.1
14.0 13.2 13.0 0.5
0.6 12.4 12.0 0.6 1.8
12.0 11.3 1.9 0.6 0.5 11.2 1.8
0.8 1.9 1.7 10.4 0.6
10.0 0.5
1.8 1.7
1.8
8.0
6.0 11.8
10.7 10.7
9.9 9.7
4.0 8.8 8.0 8.9
2.0
0.0
Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020
----- End of picture text -----

Note: Values may not add due to rounding.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

==> picture [447 x 201] intentionally omitted <==

----- Start of picture text -----

Saskatchewan Land Registry Transaction Volume
(Number of transactions)
220,000
190,000
160,000
130,000
100,000
Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020
186,898 210,087 195,638 181,420 177,711 171,237 179,602 181,861
----- End of picture text -----

As noted, revenue-generating transactions in the Land Titles Registry remained flat for the fourth quarter. While the volume of regular land transfers, mortgage registrations and title searches improved by 18.7 per cent, 15.7 per cent and 2.4 per cent, respectively, volumes declined in other land titles transaction types, mostly offsetting this growth.

For the year, total Land Registry revenue was $48.7 million in 2020, flat compared 2019. Of that, the Land Titles Registry revenue was $45.6 million compared to $45.4 million in 2019. High-value property registration revenue was lower in 2020 at $3.8 million compared to revenue of $4.3 million in 2019. Each high-value registration generated revenue of $10,000 or more.

==> picture [450 x 175] intentionally omitted <==

----- Start of picture text -----

Saskatchewan Land Registry Revenue by Type Saskatchewan Land Registry Transaction Volume
for the year ended December 31, for the year ended December 31,
(CAD$ millions) (Number of transactions)
Registration Search Maintenance
900,000
50.0 48.9 48.7
2.3 2.4 2.2 800,000
7.3 7.3 7.0
700,000
600,000
40.4 39.1 39.5
500,000
400,000
2018 2019 2020 2018 2019 2020
816,367 774,043 710,411
----- End of picture text -----

Note: Values may not add due to rounding from maintenance transactions that were too small to display in chart.

Overall, revenue-generating transactions in the Land Titles Registry fell 7.9 per cent in 2020 compared to 2019 due to COVID-19, which impacted the second quarter of 2020. While the volume of regular land

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

transfers and mortgage registrations in 2020 increased by 1.0 per cent and 6.6 per cent, respectively, title search volumes declined in 2020 by 7.0 per cent. The decline in title searches, along with decreases in other land titles transaction types, more than offset the previously mentioned growth and is the main reason overall volumes are down this year.

The main customers of the Land Registry include law firms, financial institutions, governments, surveyors, developers, resource companies as well as the general public. For 2020, our top 20 Land Registry customers represented nearly 41.2 per cent of revenue, and our top 100 Land Titles Registry customers denoted 77.1 per cent of revenue.

Saskatchewan Personal Property Registry

For the fourth quarter of 2020, volume for the Personal Property Registry was down slightly by 1.8 per cent compared to the same period in 2019. Revenue was $2.6 million, up $0.2 million compared to the same quarter in 2019.

Registration revenue in the quarter was up by 10.6 per cent from 2019, despite volumes being down 1.7 per cent. Average term-length for personal property security registration setups was comparable to the same quarter in 2019.

Search revenue improved by 9.0 per cent for the fourth quarter despite weaker volumes, down 2.0 per cent compared to last year.

Additionally, pricing changes contributed to maintenance revenue growing by 10.7 per cent compared to the same quarter in 2019 even though volumes were flat.

The following graph illustrates the typical pattern of seasonality, in that revenue for the fourth quarter is usually lower compared to the third quarter. For 2020, note the lower revenue in the second quarter of this year due to COVID-19 related restrictions.

ISC® Management’s Discussion and Analysis

For the Fourth Quarter and Year Ended December 31, 2020

==> picture [447 x 202] intentionally omitted <==

----- Start of picture text -----

Saskatchewan Personal Property Registry Revenue by Type
(CAD$ millions) Registration Search Maintenance Total
3.5
2.8 2.8
3.0 2.7 2.6
2.4 2.4 0.3
2.3 0.3 0.3
2.5 2.2 0.3
0.2 0.3 0.6
2.0 0.3 0.7 0.6 0.3 0.7
0.6 0.5
0.6 1.9
1.5 1.8 1.8 0.6 1.7
1.5 1.5
1.4 1.3
1.0
0.5
0.0
Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020
----- End of picture text -----

Note: Values may not add due to rounding.

==> picture [449 x 200] intentionally omitted <==

----- Start of picture text -----

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
Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020
105,141 123,418 119,682 109,286 103,373 103,241 113,398 107,306
----- End of picture text -----

Annual revenue for the Personal Property Registry was $10.1 million in 2020, flat compared to 2019. Overall volumes for 2020 declined by 6.6 per cent compared to the previous year, with the decline most prevalent in the second quarter when COVID-19 related restrictions had the greatest impact on the local economy. Registration, search and maintenance volumes dropped 6.9 per cent, 6.9 per cent and 4.1 per cent, respectively. Personal property security registration setup volumes decreased in 2020 by 4.4 per cent compared to 2019.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

Pricing changes made in late August helped offset the year-over-year volume decreases. Registration revenue was flat compared to 2019, while search revenue was lower by 3.4 per cent in 2020. These declines in revenue were partly offset by higher maintenance revenue in 2020, up 1.2 per cent compared to 2019.

==> picture [188 x 180] intentionally omitted <==

----- Start of picture text -----

Saskatchewan Personal Property Registry
Revenue by Type
for the year ended December 31,
(CAD$ millions)
Registration Search Maintenance
10.2 10.2 10.1
1.3 1.1 1.1
2.2 2.5 2.4
6.7 6.5 6.5
2018 2019 2020
----- End of picture text -----

==> picture [226 x 183] intentionally omitted <==

----- Start of picture text -----

Saskatchewan Personal Property Registry
Transaction Volume
for the year ended December 31,
(Number of transactions)
500,000
400,000
300,000
200,000
2018 2019 2020
462,917 457,527 427,318
----- End of picture text -----

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 represented about 83.0 per cent of the revenue for 2020, while the top 100 produced 94.3 per cent of revenue.

Saskatchewan Corporate Registry

Revenue for the Corporate Registry for the fourth quarter was $2.7 million, flat compared to the same period in 2019, with a 3.0 per cent growth in overall transaction volumes. Registration, search and maintenance revenue grew by 9.0 per cent, 0.9 per cent and 2.6 per cent, respectively, in the quarter compared to 2019. Year-over-year increases in the incorporation and registration of new business entities drove registration revenue growth, while increases in the filing of annual returns and renewals drove maintenance revenue growth.

As of December 31, 2020, there were approximately 75,358 active Saskatchewan Business Corporations registered with the Corporate Registry compared to approximately 74,647 as at December 31, 2019.

The following graph illustrates the Corporate Registry revenue by type of transaction. Despite the impact of COVID-19 restrictions on the other registries, quarterly revenue in this registry continues to mirror the typical pattern of seasonality.

ISC® Management’s Discussion and Analysis

For the Fourth Quarter and Year Ended December 31, 2020

==> picture [454 x 227] intentionally omitted <==

----- Start of picture text -----

Saskatchewan Corporate Registry Revenue by Type
(CAD$ millions) Registration Search Maintenance Total
3.0 2.9
2.7 2.7
2.6
2.5 2.5 2.4 2.5 2.4
2.0
1.5
1.6
1.7 1.5 1.5 1.6 1.9 1.6 1.5
1.0
0.3
0.4 0.4 0.3 0.3 0.4 0.3 0.3
0.5
0.6 0.6 0.6 0.7 0.6 0.6 0.6 0.7
0.0
Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020
----- End of picture text -----

Note: Values may not add due to rounding.

The following graph shows the transaction volumes for the Corporate Registry by quarter.

==> picture [454 x 205] intentionally omitted <==

----- Start of picture text -----

Saskatchewan Corporate Registry Transaction Volume
(Number of transactions)
100,000
80,000
60,000
40,000
20,000
0
Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020
92,001 90,067 82,098 83,129 92,674 83,274 76,905 85,641
----- End of picture text -----

Transaction volumes for the fourth quarter grew by 3.0 per cent compared to the same period last year. Specifically, registration, search and maintenance volumes rose by 14.0 per cent, 1.6 per cent and 3.0 per cent, respectively, compared to the same period in 2019.

Annual transaction volumes for the year were down 2.5 per cent compared to 2019. While registration volume grew by 1.4 per cent, search and maintenance volume declined by 3.3 per cent and 2.0 per cent,

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

respectively, compared to 2019. Following the re-opening of the Saskatchewan economy in June, the third and fourth quarters saw year-over-year growth in incorporations and registrations, as well as annual return and renewal activity.

Annual revenue for the Corporate Registry was $10.5 million, up 3.0 per cent compared to 2019. In 2020, registration and maintenance revenue improved by 4.2 per cent and 4.1 per cent, respectively, compared to 2019. More specifically, 2020 revenue from the incorporation and registration of new business entities, up 5.3 per cent, drove registration revenue growth, while revenue from the filing of annual returns and renewals, up 6.1 per cent for the year, drove maintenance revenue growth. Pricing changes made in the third quarter of 2019 contributed to revenue increases in both categories as well. This growth was somewhat offset by a reduction of search revenue, down 4.0 per cent compared to 2019.

Saskatchewan Corporate Registry Revenue by Type for the year ended December 31,

Saskatchewan Corporate Registry Transaction Volume for the year ended December 31,

==> picture [444 x 163] intentionally omitted <==

----- Start of picture text -----

(CAD$ millions) (Number of transactions)
Registration Search Maintenance
400,000
10.5
10.0 10.2
300,000
6.1 6.3 6.6
200,000
1.4 1.4 1.3
2.5 2.5 2.6
100,000
2018 2019 2020 2018 2019 2020
345,371 347,295 338,494
----- End of picture text -----

Note: Values may not add due to rounding.

For the Corporate Registry, customers include law firms, companies in the financial sector, as well as the Government of Saskatchewan. They also include businesses such as corporations, non-profit corporations, co-operatives and sole proprietorships that were, or will be, registered in the Corporate Registry. The top 20 Corporate Registry customers delivered nearly 31.9 per cent of revenue for 2020 and the top 100 customers encompassed about 49.8 per cent of revenue.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

REGISTRY OPERATIONS EXPENSES AND EBITDA

==> picture [225 x 169] intentionally omitted <==

----- Start of picture text -----

Registry Operations EBITDA
for the three months ended December 31,
(CAD$ millions)
10.6
9.0
+18%
2019 2020
----- End of picture text -----

==> picture [227 x 168] intentionally omitted <==

----- Start of picture text -----

Registry Operations EBITDA
for the year ended December 31,
(CAD$ millions)
34.1 34.6
+2%
2019 2020
----- End of picture text -----

	Three Months Ended December 31,	Three Months Ended December 31,	Three Months Ended December 31,	Three Months Ended December 31,		Year Ended December 31,	Year Ended December 31,	Year Ended December 31,
(thousands of CAD dollars)		2020		20191		2020		20191
Revenue	$	19,485	$	18,069	$	69,568	$	70,399
Total expenses2		8,882		9,048		34,955		36,309
EBITDA	$	10,603	$	9,021	$	34,613	$	34,090

1 On January 1, 2020, a new methodology was adopted for allocating corporate costs to the operating segments. Management believes this revised methodology more closely reflects the level of shared services provided to the operating segments in the current year. Certain related party revenues are also impacted by this change. Had the methodology change not been made, Registry Operations EBITDA in the quarter is estimated to have been $11,131 thousand and year-to-date is estimated to have been $36,180 thousand.

2 Total expenses exclude interest, taxes, depreciation and amortization.

EBITDA for Registry Operations for the fourth quarter was $10.6 million, up 18 per cent compared to the same period last year and was $34.6 million for the year, up 2 per cent compared to last year. The increase for the quarter was reflective of the re-opening of the Saskatchewan economy in June and the increase in economic activity that followed. The increase for the year was due to decreased expenses overall, including measures implemented to reduce our operating costs and mitigate the impact of the pandemic at the start of the second quarter, which more than offset the slight decline in revenue.

More specifically, the reduction in expenses in the quarter was due to lower technology solutions costs, while the reduction year-to-date was also aided by lower costs for technology solutions as well as reduced wages and salaries and occupancy costs related to the closure of three customer service centres in 2019. These were partially offset by an increase in the allocation of corporate costs due to the methodology change made this year that management believes more closely reflects the level of shared services provided to the operating segments.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

3.2 Services

Services delivers solutions uniting public records data, customer authentication, corporate services, collateral management and asset recovery to support registration, due diligence and lending practices of clients across Canada.

Effective July 1, 2020, we have recategorized our reporting to include our new Recovery Solutions division from the Paragon acquisition, which closed on July 31, 2020. We believe this will provide readers with a more comprehensive understanding of our Services segment.

Our offerings are generally categorized into three divisions, namely “Corporate Solutions”, “Regulatory Solutions”, and “Recovery Solutions”. The table below sets out the various offerings provided by our Services segment.

Category	Offering	Software	Products
Corporate Solutions	Incorporation Services	Business Complete Custom in-house	Nationwide Business Name Registration and Renewals SecurityFilings and Registrations
	Corporate Supplies	Custom in-house	Minute Books Seals and Stamps Corporate Legal Packages
Regulatory Solutions	Know-Your-Customer (“KYC”)	SIDni®, AttestaNet® LEV®	Individual Identification Legal Entity Validation Beneficial Ownership Validation Account Onboarding Services US & International Corporate EntityValidation
	Public Records Searches	Custom in-house Registry Complete	Corporate Profile or Business Name Searches NUANS1Searches PPSA2Searches Real Estate Searches Vital Statistics Searches
	Collateral Management	Custom in-house (AVS)	PPSA2/RDPRM3Search & Registrations Bank Act Filing Notice of Security Interest (Fixture) Registrations US UCC4Search & Filings
Recovery Solutions	Asset Recovery	Repo>>Connect	Fully managed service across Canada and the US Identification, retrieval and disposition of movable assets

1 A NUANS® report is a search which provides a comprehensive comparison of proposed corporate, business or trademark names with existing names already in use by other businesses and corporations. NUANS® name reports reserve the proposed name for 90 days providing the time necessary to prepare and file incorporation, extra-provincial registrations, amalgamations or other relevant corporate filings. 2 Personal Property Security Act. 3 Registre des Droits Personnels et Réels Mobiliers (translated as Register of Personal and Real Movable Rights).

4 Uniform Commercial Code.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

Competition

Our competitors vary by market and geography. They primarily include other intermediaries and suppliers to lenders and legal professionals.

Corporate Solutions

Corporate Solutions captures revenue from nationwide search, business name registration and corporate filing services sold to legal professionals or the general public directly or indirectly through our government relationships. It also captures revenue from our corporate supplies business. Our customers include legal professionals, the consumer market and the general public.

Incorporation Services

We provide a convenient, cost-effective method to incorporate businesses online or through our staffassisted process. Leveraging our online technology platforms, eService and Business Complete, we service legal customers and the general public through a team of experienced law clerks in both Ontario and Quebec.
We hold one of the two exclusive licences under the Ontario Business Information System, which allows us to access the Ontario Corporate Registry electronically on behalf of clients. We have nonexclusive licences to do the same in all other provincial and federal (Corporations Canada) corporate registries across Canada.
In addition to incorporations, various other corporate filings are often required to operate a business. Items such as amendments to a company’s governing articles, amalgamations, the continuance of a company, a change in registered address or changes to a board of directors. We also provide online and real-time NUANS and business name searches, registered agents of service and corporate document preparation to assist in the organization and maintenance of a business.

Corporate Supplies

We provide a comprehensive array of corporate supplies to help companies organize and maintain their corporate legal documents. This is primarily done through the most common corporate supplies in packaged or individual formats, including customized corporate minute books, corporate seals/embossers, by-laws and share certificates, as well as a large variety of rubber and self-inking stamps.

Regulatory Solutions

Regulatory Solutions captures revenue from our KYC, collateral management and general due diligence service offerings. We use our proprietary platform to assist clients with intuitive business rules and advanced automation to deliver regulatory services to support their credit/banking and legal processes. We leverage the public registry data to provide insights and improved customer experience through a single technology. We supplement all our technology with deep subject-matter knowledge offered through our legal professionals located in three locations (Montreal, QC, Toronto, ON, and Vernon, BC).

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

During the year, we completed a soft launch of our newest technology platform, Registry Complete, a unified and streamlined platform that enables legal organizations to search and register with the various ministries across Canada in a secure cloud-based environment. This enhanced service allows legal organizations to take advantage of expanded Application Programming Interface (“API”) service offerings, improved tools, faster turnaround and a greater array of services in the pursuit of exceptional and expedient due diligence checks and client service. It also addresses key operational gaps in the modern legal industry landscape.

Our customers include non-legal customers, such as financial institutions and auto and equipment finance companies.

Know-Your-Customer

We support legal and financial institution due diligence activities for compliance purposes through the KYC verification (corporate and individual), public records search and registration services across Canada. Clients can obtain numerous reports and intelligence to verify and authenticate customer data to comply with their internal customer onboarding policies mandated by FINTRAC[1] /Anti-Money Laundering regulations. Using a web-based tool and associated APIs that provide real-time access to validate and verify an individual or business’s existence, our KYC services aggregates information from multiple trusted sources to provide reliable and accurate identification of an individual and/or a business and its principals.

Collateral Management

In order to ensure or ‘perfect’ a security interest against the personal property of a debtor, secured parties need to register in the statutory registry under the applicable personal property legislation. Registering provides the secured party with statutory protection and priority against other parties with competing security interests against the applicable movable collateral. Once a secured party has been paid out, or the security against the debtor is otherwise terminated, registrations (or liens) are then discharged and removed from the applicable security legislation.
We service the adjudication and complete the loan fulfilment process, which involves detailed searches and registrations to be completed to perfect the security interest. We have invested in our technology, processes, and innovation to ensure we support customer and industry digitization strategies. This allows us to offer a complete lien registry solution that reaches further than the traditional registry submission services and includes PPSA/RDPRM searches and management, fixture filings, garage/repair liens, and US Uniform Commercial Code (“UCC”) Filings.

1 Financial Transactions and Reports Analysis Centre of Canada.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

Public Records Search Services/Due Diligence

Our public records search offerings include corporate profiles, business name searches, NUANS, PPSA searches, security searches, real estate searches, and birth, death and marriage certificate searches.
Due diligence is an essential component of most merger and acquisition and financing transactions, where searches are performed to obtain a complete understanding of all legal obligations associated with a person or business. In the course of a due diligence undertaking, law firms, lenders and/or other professional advisors will often order a series of public records searches to verify third-party information. These searches are commonly referred to as security (or securities) searches.
We provide security searches that can be conducted against an individual, business or corporation, property and assets across the country. Searches will reveal both present and historical information relating to debts and liabilities, pending and potential lawsuits, bankruptcy, liens, judgments, and sales of assets across Canada.

Recovery Solutions

On July 31, 2020, we completed the acquisition of substantially all of the assets used in the business of Paragon, a technology-enabled asset recovery business, which now forms the basis of our Recovery Solutions division. Recovery Solutions offers a fully managed service across Canada and the US, which aids in facilitating and co-ordinating asset recovery on behalf of our clients. Asset recovery involves identification, retrieval, and disposal of movable assets such as automobiles, boats, aircraft, and other forms of portable physical assets used as collateral security for primarily consumer-focused credit transactions.

Our clients enjoy a complete turnkey solution where our team manages every step in the recovery process, including co-ordinating bailiffs, investigators and auctions. Our customers include most of the major banks who are involved in lending in the movable asset market in Canada.

The addition of Recovery Solutions strengthens our previous offerings and means that we are now able to offer our clients a complete solution in the credit life cycle, from origination to recovery. By connecting the registrations from our existing Services offerings to our new Recovery Solutions offering, our clients can leverage our lien registry services platform to optimize an early stage portfolio assessment to validate the borrower identity and ensure that their security on the asset in their portfolio is perfected.

Our process also allows us to increase recoveries through our superior supply chain management experience and performance management of bailiffs, investigators and auctions.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

Revenue

We earn revenue through transaction fees for search and registration services provided through incorporation, KYC, public records and due diligence, and collateral management services. All government fees associated with the service are either embedded in the transaction or management service fee or charged in addition to the service transaction fee. Additional revenue is earned in Recovery Solutions through management fees and commissions earned by the provision of asset recovery services. Corporate supplies are charged a per-unit fee in the same manner as a retail transaction product.

Key drivers for our revenue include increased regulatory and compliance requirements; the growing trend towards outsourcing business processes and services to realize cost savings and focus on core business activities; economic activity which can affect credit lending, mergers, acquisitions, incorporations and various new business startup activities; and economic conditions impacting consumer behaviour which can affect the financing or default of new and used movable property in our collateral management and asset recovery business.

Our revenue in Corporate Solutions and Recovery Solutions is reasonably diversified and has little seasonality; instead, it fluctuates in line with general economic drivers. In particular, our collateral management services experiences seasonality aligned to vehicle and equipment financing cycles, which are generally more robust in the second and fourth quarters. Recovery Solutions does not have specific seasonality but is countercyclical to our other business in that it can perform better in poor economic conditions. Some smaller categories of products or services can have some seasonal variation, increasing slightly during the second and fourth quarters.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

SERVICES REVENUE

==> picture [445 x 157] intentionally omitted <==

----- Start of picture text -----

Services Revenue Services Revenue
for the three months ended December 31, for the year ended December 31,
(CAD$ millions) (CAD$ millions)
56.4
15.7 51.2 7%
13.5 12% Recovery Solutions 10% 9% Recovery Solutions
9%
10%
Corporate Solutions Corporate Solutions
Regulatory Solutions Regulatory Solutions
90% 85%
89% 79% +16% +10%
2019 2020 2019 2020
----- End of picture text -----

Services Revenue

for the three months ended December 31, (CAD$ millions)

Note: Internal related party and other revenue not displayed in graph. Values may not add due to rounding.

	Three Months Ended December 31,	Three Months Ended December 31,	Three Months Ended December 31,	Three Months Ended December 31,		Year ended December 31,	Year ended December 31,	Year ended December 31,
(thousands of CAD dollars)		2020		2019		2020		2019
Regulatory Solutions	$	12,396	$	12,093	$	47,730	$	45,985
Recovery Solutions		1,821		-		3,721		-
Corporate Solutions		1,495		1,348		4,911		5,023
Internal relatedparties and other		33		78		40		222
Services revenue	$	15,745	$	13,519	$	56,402	$	51,230

Revenue for Services was $15.7 million for the fourth quarter, a rise of 16 per cent compared to the same period in 2019. Revenue was up in the fourth quarter compared to the same period last year due to organic growth in Regulatory and Corporate Solutions as we onboarded new customers, as well as additional revenue from Recovery Solutions.

For the year ended December 31, 2020, revenue in the Services segment was $56.4 million compared to $51.2 million last year, representing an increase of 10 per cent. Annual revenue is up over last year due to the organic growth in Regulatory Solutions and new revenue from Recovery Solutions, which offset a reduction in overall volumes seen earlier in the year following the implementation of COVID-19 restrictions.

ISC® Management’s Discussion and Analysis

For the Fourth Quarter and Year Ended December 31, 2020

==> picture [472 x 216] intentionally omitted <==

----- Start of picture text -----

Services Revenue by Type
Services Revenue by Type
for the year ended December 31,
for the year ended December 31, 2020
(CAD$ millions)
Regulatory Solutions Corporate Solutions Recovery Solutions Total Regulatory Solutions Corporate Solutions
Recovery Solutions
56.4
51.0 3.7
4.9
5.0
42.4 6.6%
8.7%
4.8
46.0 47.7
37.6
84.7%
2018 2019 2020
----- End of picture text -----

Note: Internal related parties and other revenue not displayed in graph.

Regulatory Solutions

Revenue in Regulatory Solutions for the fourth quarter was $12.4 million, an increase of 2.5 per cent compared to $12.1 million for the same period of 2019. Revenue grew slightly in the quarter as a result of organic new customer acquisitions which more than offset the COVID-19 related transaction decline.

For the year, revenue was $47.7 million compared to $46.0 million for the same period last year, an increase of 3.8 per cent, rebounding in the last half of the year following the impact to the economy from COVID-19 restrictions.

Recovery Solutions

Revenue in Recovery Solutions in the fourth quarter was $1.8 million. In 2020, revenue for Recovery Solutions was $3.7 million, following the acquisition of substantially all of the assets of Paragon on July 31 of this year. Historically, the recovery industry trends lower in the fourth quarter due to temporary pausing of recovery efforts leading up to and during the holidays.

Corporate Solutions

Corporate Solutions revenue for the quarter was $1.5 million, an increase of 10.9 per cent compared to the fourth quarter of 2019. Revenue rose due to increased corporate filing volumes versus the previous year.

For the year, annual revenue was $4.9 million, flat compared to $5.0 million last year, with the impact from COVID-19 offsetting new growth.

ISC® Management’s Discussion and Analysis

For the Fourth Quarter and Year Ended December 31, 2020

Our Services revenue for the last eight quarters is shown in the following graph.

==> picture [465 x 218] intentionally omitted <==

----- Start of picture text -----

Services Revenue by Type
(CAD$ millions) Regulatory Solutions Corporate Solutions Recovery Solutions Total
18.0
16.4
15.7
16.0
1.9
14.0 13.7 12.9 13.4 1.1 1.8
1.3 1.3 11.8 12.4 1.5
12.0 11.0 1.1 1.0
1.3
10.0 1.3
8.0
13.4
6.0 12.4 11.8 12.1 11.4 12.4
10.6
9.7
4.0
2.0
0.0
Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020
----- End of picture text -----

Note: Internal related parties and other revenue not displayed in graph. Values may not add due to rounding.

For 2020, the top 20 Services customers accounted for approximately 76.5 per cent of the revenue, while the top 100 Services customers comprised nearly 89.5 per cent of revenue. No single customer accounted for more than 25.0 per cent of Services revenue in the period.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

SERVICES EXPENSES AND EBITDA

==> picture [459 x 184] intentionally omitted <==

----- Start of picture text -----

Services EBITDA Services EBITDA
for the three months ended December 31, for the year ended December 31,
(CAD$ millions) (CAD$ millions)
4.1
12.1
7.1
1.9
+118% +70%
2019 2020 2019 2020
----- End of picture text -----

	Three Months Ended December 31,	Three Months Ended December 31,	Three Months Ended December 31,	Three Months Ended December 31,		Year Ended December 31,	Year Ended December 31,	Year Ended December 31,
(thousands of CAD dollars)		2020		20191		2020		20191
Revenue	$	15,745	$	13,519	$	56,402	$	51,230
Total expenses2		11,679		11,656		44,327		44,119
EBITDA	$	4,066	$	1,863	$	12,075	$	7,111

1 On January 1, 2020, a new methodology was adopted for allocating corporate costs to the operating segments. Management believes this revised methodology more closely reflects the level of shared services provided to the operating segments in the current year. Certain related party revenues are also impacted by this change. Had the methodology change not been made, Services EBITDA in the quarter is estimated to have been $3,519 thousand and year-to-date is estimated to have been $10,001 thousand.

2 Total expenses exclude interest, taxes, depreciation and amortization.

EBITDA for Services was $4.1 million for the quarter compared to $1.9 million for the same period last year and was $12.1 million year-to-date compared to $7.1 million last year. The increase in the quarter and year-to-date was due to the increased revenue from organic growth and the acquisition of Paragon in July 2020.

For the quarter, Services expenses were $11.7 million, flat compared to the same period in 2019. Expenses were $44.3 million for the year compared to $44.1 million last year. The increase was related to the acquisition of Paragon in the third quarter of 2020, partially offset by our cost management activities, as well as the methodology change for allocating corporate costs to the operating segments this year.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

3.3 Technology Solutions

Technology Solutions provides the development, delivery and support of registry (and related) technology solutions, generating revenue through the following:

sale of software licences related to our technology platforms;
provision of technology solution definition and implementation services; and
provision of monthly hosting, support and maintenance services.

We offer RegSys — a complete registry solution that provides a readily transferable technology platform capable of serving a wide range of registry needs. RegSys is a multi-register platform that delivers the flexibility, scalability and features that enable public sector organizations to deliver enhanced services to businesses and citizens.

With a full suite of integrated modules that provide core functionality for submission, enforcement and enquiry processing, RegSys delivers solutions enabling the provision of core services to citizens in a userfriendly, efficient manner across multiple access points. The RegSys solution has also been used to manage other legal registers such as intellectual property, securities, licences, charities, Uniform Commercial Code and pension schemes.

Competitors in this segment include technology services organizations that provide application development, systems integration and/or application management services. This includes large multinationals or local niche players, both of which we can partner with to complement our offering depending on the clients’ needs.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

TECHNOLOGY SOLUTIONS REVENUE

==> picture [223 x 166] intentionally omitted <==

----- Start of picture text -----

Technology Solutions Revenue
for the three months ended December 31,
(CAD$ millions)
9.3
32%
6.2
Internal parties
38% Third parties
68%
62%
(34%)
2019 2020
----- End of picture text -----

Technology Solutions Revenue for the year ended December 31, (CAD$ millions)

	9.3
							24.2
	32%	38% 6.2		Internal parties Third parties			53%	48% 20.6	Internal parties Third parties
	68%
		62%		(34%)			47%	52%	(15%)
	2019	2020					2019	2020
			Three Months Ended		December 31,			Year Ended December 31,
(thousands of CAD dollars)				2020		20191		2020		20191
Third parties			$	3,815	$	6,352	$	10,782	$	11,416
Internal relatedparties				2,380		2,981		9,769		12,830
Technology Solutions			$	6,195	$	9,333	$	20,551	$	24,246
revenue

1 On January 1, 2020, a new methodology was adopted for allocating corporate costs to the operating segments. Management believes this revised methodology more closely reflects the level of shared services provided to the operating segments in the current year. Certain related party revenues are also impacted by this change.

Revenue in Technology Solutions was $6.2 million for the quarter, a decrease of $3.1 million compared to $9.3 million for the same period in 2019. The decrease in the quarter compared to last year was a result of the large number of milestones that were achieved and recognized in the prior year period. As shown in the following graph, a more normalized level of revenue was recorded in the fourth quarter of 2020 and throughout the year.

Internal related party revenue in any quarter is dependent on resources used or consumed internally, particularly in Registry Operations. Our intent is to continue to service the needs of internal customers as efficiently and effectively as possible, including the provision of service via related party resources; therefore, this figure may continue to decline over time, particularly as we pursue additional external revenue.

ISC® Management’s Discussion and Analysis

For the Fourth Quarter and Year Ended December 31, 2020

Technology Solutions Revenue by Type

(CAD$ millions)

==> picture [443 x 189] intentionally omitted <==

----- Start of picture text -----

Third Party Revenue Related Party Revenue
10.0 9.3
8.0 3.0
6.2
6.0
4.9 4.9 5.1 6.4 4.7 4.9 4.8 2.4
4.0
3.0 3.4 2.4 2.5 2.4
3.5 3.8
2.0
2.2 2.4 2.3
2.0
1.7
1.4
0.0
Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020
----- End of picture text -----

Note: Values may not add due to rounding.

Revenue in our Technology Solutions segment was $20.6 million for the year ended December 31, 2020, compared to $24.2 million in 2019, a decrease of $3.6 million.

Revenue from external parties was $10.8 million compared to $11.4 million in the same period in 2019. Revenue from external third parties decreased slightly in 2020 versus 2019, as delivery against milestones on signed contracts was delayed during the year.

Internal related party revenue year-to-date decreased as we continued to reduce our internal support costs through continuous improvement in providing application maintenance and operations services.

==> picture [432 x 189] intentionally omitted <==

----- Start of picture text -----

Technology Solutions Revenue Technology Solutions Revenue
for the year ended December 31, for the year ended December 31, 2020
(CAD$ millions)
Third parties Internal related parties Third parties Internal related parties
24.2
21.2
20.6
12.8
47.5%
9.8 52.5%
14.8
11.4 10.8
6.4
2018 2019 2020
----- End of picture text -----

Note: Values may not add due to rounding.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

TECHNOLOGY SOLUTIONS EXPENSES AND EBITDA

==> picture [212 x 167] intentionally omitted <==

----- Start of picture text -----

Technology Solutions EBITDA
for the three months ended December 31,
(CAD$ millions)
2.6
2.5
(4%)
2019 2020
----- End of picture text -----

==> picture [213 x 162] intentionally omitted <==

----- Start of picture text -----

Technology Solutions EBITDA
for the year ended December 31,
(CAD$ millions)
4.4
2.3
+91%
2019 2020
----- End of picture text -----

	Three	Months Ended December 31,	Months Ended December 31,	Months Ended December 31,		Year Ended December 31,	Year Ended December 31,	Year Ended December 31,
(thousands of CAD dollars)		2020		20191		2020		20191
Revenue	$	6,195	$	9,333	$	20,551	$	24,246
Total expenses2		3,710		6,778		16,116		21,965
EBITDA	$	2,485	$	2,555	$	4,435	$	2,281

1 On January 1, 2020, a new methodology was adopted for allocating corporate costs to the operating segments. Management believes this revised methodology more closely reflects the level of shared services provided to the operating segments in the current year. Certain related party revenues are also impacted by this change. Had the methodology change not been made, Technology Solutions EBITDA in the quarter is estimated to have been $2,420 thousand and year-to-date is estimated to have been $4,509 thousand.

2 Total expenses exclude interest, taxes, depreciation and amortization.

EBITDA for Technology Solutions was $2.5 million for the quarter compared to $2.6 million in the fourth quarter of 2019 and was $4.4 million for the year compared to $2.3 million last year.

For the quarter, Technology Solutions expenses were down $3.0 million compared to the same period in 2019 and were down $5.8 million for the year compared to 2019. The decreases were due to less expenses and related milestones versus last year, management cost reduction activities including measures implemented to reduce our operating costs and mitigate the impact of the pandemic at the start of the second quarter, lower information services costs as well as lower corporate allocated costs due to the methodology change made in 2020.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

3.4 Corporate and other

Corporate and other includes expenses related to our corporate activities and shared services functions. The Company previously included eliminations of inter-segment revenue and costs in Corporate and other. These are now presented separately in the Financial Statements and therefore excluded below. Management believes this format provides a more transparent representation of the Corporate and other activities.

activities.
	Three Months Ended December 31,					Year Ended December 31,
(thousands of CAD dollars)		2020		2019		2020		2019
Third parties	$	2	$	6	$	8	$	22
Internal relatedparties1		35		10		140		32
Corporate and other revenue	$	37	$	16	$	148	$	54
Total expenses1, 2		(1,496)		(1,266)		(7,659)		(4,510)
EBITDA	$	(1,459)	$	(1,250)	$	(7,511)	$	(4,456)

1 On January 1, 2020, a new methodology was adopted for allocating corporate costs to the operating segments. Management believes this revised methodology more closely reflects the level of shared services provided to the operating segments in the current year. Certain related party revenues are also impacted by this change. Had the methodology change not been made, Corporate and other EBITDA in the quarter is estimated to have been ($1,374) thousand, and year-to-date is estimated to have been ($7,078) thousand.

2 Total expenses exclude interest, taxes, depreciation and amortization.

EBITDA for the quarter decreased slightly compared to the same quarter last year, as a result of small integration costs in the fourth quarter of 2020. For the year, EBITDA decreased by $3.0 million compared to last year from increased share-based compensation expense, increased professional and consulting services related to the acquisition of Paragon, the expansion of our Credit Facility and the exploration of other growth initiatives, and less corporate allocated costs moved to our other segments due to the change in the corporate allocation methodology. These increases were partially offset by reduced discretionary spending in response to cost management activities to mitigate the impact of the pandemic.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

4 Summary of Consolidated Quarterly Results

The following table sets out select quarterly results for the past eight quarters. As outlined earlier, Registry Operations experiences moderate seasonality, primarily because Land Titles revenue fluctuates in line with real estate transaction activity in Saskatchewan. Typically, our second and third quarters generate higher revenue during the fiscal year when real estate activity is traditionally highest.

In Services, our Corporate and Regulatory Solutions services revenue is relatively diversified and has little seasonality; instead, it fluctuates in line with general economic drivers. That said, our collateral management services do experience some seasonality aligned to vehicle and equipment financing cycles, which are generally stronger in the second and fourth quarters. Our Recovery Solutions revenue also does not have specific seasonality but is countercyclical to our other business in that it can perform better in poor economic conditions. Some smaller categories of products or services can have some seasonal variation, increasing slightly during the second and fourth quarters.

Technology Solutions does not experience seasonality but does fluctuate due to the timing of projectrelated revenue. The balance of our corporate activities and shared services functions do not experience seasonality. Expenses are generally consistent from quarter to quarter but can fluctuate due to the timing of project-related or acquisition activities. As a result, our EBITDA margin fluctuates in line with the cumulative impact of the above factors.

At this time, the Company is unable to predict how its historical pattern of seasonality may be impacted due to the ongoing uncertainty of the pandemic.

	2020	2020	2019
(thousands of CAD dollars)	Q4 Q3	Q2 Q1	Q4 Q3 Q2	Q1
Revenue Expenses	$39,013$37,120 27,15629,707	$30,993 $29,596 24,592 24,521	$37,942 $32,175 $34,244 28,308 26,888 26,308	$28,607 23,838
Net income before items noted below Net finance (expense)/income Change in contingent consideration	11,8577,413 (1,116) (397) - -	6,401 5,075 (258) (274) - -	9,634 5,287 7,936 (288) (422) (277) - - -	4,769 (259) -
Income before tax Income tax expense	10,7417,016 (2,870) (1,980)	6,143 4,801 (1,638) (1,331)	9,346 4,865 7,659 (1,999) (1,607) (1,875)	4,510 (1,499)
Net income	$ 7,871 $5,036	$4,505$3,470	$7,347 $3,258$5,784	$3,011
Other comprehensive income (loss)	(69) 331	(226) 666	1 (133) (56)	(321)
Total comprehensive income	$ 7,802 $5,367	$4,279$4,136	$7,348 $3,125$5,728	$2,690
EBITDA margin Adjusted EBITDA margin Earnings per share, basic Earningsper share,diluted	40.2% 29.4% 41.5% 35.6% $ 0.45$ 0.29 $ 0.45 $ 0.29	29.5% 26.5% 32.9% 26.7% $ 0.26 $ 0.20 $ 0.26$ 0.20	32.5% 26.7% 31.4% 33.4% 26.9% 31.8% $ 0.42 $ 0.19 $ 0.33 $ 0.42$ 0.19$ 0.33	25.7% 27.3% $ 0.17 $ 0.17

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

5 Business Strategy

STRATEGIC PRIORITIES

ISC’s strategy focuses on delivering value to shareholders through the consistent performance of its existing business and the execution of appropriate growth opportunities. The Company’s strategy is realized through three key functions:

operating registries on behalf of governments;
implementing and supporting registry and regulatory technology solutions; and
delivering value-add services utilizing public data and records.

Through these functions, ISC’s strategy is executed with the intent to:

deliver leading registry and regulatory services and solutions to customers around the world through existing lines of business and potential extension into adjacent opportunities through innovation and/or acquisition;
produce increasing revenue with continued emphasis on EBITDA growth; and
provide an enhanced customer experience for those interacting with ISC’s systems, people and information.

ISC’s strategy is influenced by a set of principles:

long-term orientation – strategic focus on the sustainability of the business and the services we deliver;
growth – active pursuit of attainable organic and inorganic growth;
innovation – emphasis on product and service innovation and exploration of new verticals; and
company values – prominent focus on quality of service delivery and the engagement of our customers and employees.

While the uncertainty of COVID-19 has and will continue to hamper our ability to predict any long-term implications on our strategy, the Company is well positioned to manage through this situation as outlined throughout this MD&A (also see section 1.3 “Outlook”). As such, we remain committed to our priorities, principles and long-term strategy.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

6 Financial and Capital Management

6.1 Cash flow

Our primary source of operating cash flow is generated from revenue related to our Registry Operations and Services segments. Our primary uses of funds are operational expenses, capital and other growthrelated expenditures and the payment of dividends.

Historically, ISC has financed its operations and met its capital and finance expenditure requirements through cash provided from operating activities. Most recently, the Company has also utilized borrowing to supplement cash generated from operations to finance acquisition activities. The Company believes that internally generated cash flow, supplemented by additional borrowing that may be available to us through our existing Credit Facility, will be sufficient to meet cash requirements, capital expenditures and anticipated dividend payments (refer to Note 18 in the Financial Statements, which are available on our website at www.company.isc.ca and in the Company’s profile on SEDAR at www.sedar.com for our existing Credit Facility).

Liquidity risk is managed based on financial forecasts and anticipated cash flow. The majority of cash is held with Canadian chartered banks and the risk of loss is believed to be minimal. As at December 31, 2020, the Company held $33.9 million in cash compared to $23.7 million as at December 31, 2019, an increase of $10.2 million.

The Company expects to be able to meet its cash requirements, including being able to settle current liabilities of $27.3 million (December 31, 2019 ̶ $24.7 million) and meet any unanticipated cash requirements due to changes in working capital commitments. Such changes that would affect our liquidity may arise from, among other factors, general economic conditions and the failure of one or more customers to pay their obligations. Deficiencies arising from short-term working capital requirements and capital expenditures may be financed on a short-term basis with bank indebtedness or on a permanent basis with offerings of securities.

CONSOLIDATED FREE CASH FLOW

asis with offerings of securities. ONSOLIDATED FREE CASH FLOW
	Three	Months Ended December 31,		Year Ended December 31,
(thousands of CAD dollars)		2020	2019	2020	2019
Net cash flow provided by operating activities	$	17,598$	9,481$	41,199$	23,630
Net change in non-cash working capital1		(3,962)	397	(3,521)	9,195
Cash provided by operating activities excluding working capital		13,636	9,878	37,678	32,825
Cash additions to property, plant and equipment		-	(116)	(63)	(654)
Cash additions to intangible assets		(985)	(212)	(1,380)	(2,175)
Consolidated free cash flow	$	12,651$	9,550$	36,235$	29,996

1 Refer to Note 29 of the Financial Statements for reconciliation.

ISC® Management’s Discussion and Analysis

For the Fourth Quarter and Year Ended December 31, 2020

Consolidated free cash flow for the quarter was $12.5 million compared to $9.6 million for the same quarter in 2019 and was $36.2 million for the year compared to $30.0 for 2019. The increase was due to higher cash flows provided by our operations, including changes in working capital.

The following table summarizes our sources and uses of funds for the three months and years ended December 31, 2020, and 2019:

	Three	Months Ended December 31,	Months Ended December 31,	Year Ended December 31,	Year Ended December 31,
(thousands of CAD dollars)		2020	2019	2020	2019
Net cash flow provided by operating activities	$	17,598$	9,481$	41,199$	23,630
Net cash flow used in investing activities		(925)	(257)	(71,035)	(9,311)
Net cash flow provided by (used) in financing activities		(4,894)	(4,762)	40,244	(19,086)
Effects of exchange rate changes on cash held in foreign currencies		(349)	6	(193)	(153)
Increase (decrease) in cash	$	11,430$	4,468$	10,215$	(4,920)
Cash, beginning of period		22,516	19,263	23,731	28,651
Cash, end of period	$	33,946$	23,731$	33,946$	23,731

NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES

Net cash flow provided by operating activities was $17.6 million for the quarter compared to $9.5 million for the same period last year and was $41.2 million for the year compared to $23.6 million in 2019. The increase was due to increased results of operations and net changes in working capital. Changes in working capital included reduced corporate tax instalments in 2020, the payment of contingent consideration in 2019 associated with our ERS acquisition and changes in contract liabilities and receivables due to the timing of sales contracts and higher revenue.

NET CASH FLOW USED IN INVESTING ACTIVITIES

Net cash flow used in investing activities for the quarter was $0.9 million compared to $0.3 million in the same period last year and was $71.0 million for the year compared to $9.3 million last year. The increase in the quarter was due to higher additions to intangible assets as we continue system development, while the increase in the year was due to the Paragon acquisition last quarter.

NET CASH FLOW PROVIDED BY (USED) IN FINANCING ACTIVITIES

Net cash flow used in financing activities for the quarter was $4.9 million, relatively flat compared to the same period in 2019. Annual net cash flow from proceeds was $40.2 million compared to net cash flow used in financing activities was $19.1 million in 2019. In 2019, most our cash used in financing activities was for the payment of dividends and repayment of debt, while in 2020, the amounts also included accessing our Credit Facility to fund a portion of the acquisition of Paragon.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

6.2 Capital expenditures

Capital expenditures were $1.0 million and $1.7 million for the quarter and the year, respectively, compared to $1.4 million and $3.9 million for the same periods in 2019, respectively. In 2020, capital expenditures were primarily related to the system development work across our business segments and the purchase of systems supporting our Corporate services. Following the completion of a number of corporate projects last year, capital expenditures decreased in the quarter and year ended December 31, 2020. We also reduced spending across our business segments due to the shift to remote working caused by the pandemic, as well as deferrals of certain planned initiatives.

	Three	Months Ended	December 31,	December 31,		Year Ended	December 31,	December 31,
(thousands of CAD dollars)		2020		2019		2020		2019
Registry Operations	$	-	$	796	$	249	$	1,460
Services		193		164		354		630
Technology Solutions		792		48		828		651
Corporate and other		-		434		261		1,203
Total capital expenditures	$	985	$	1,442	$	1,692	$	3,944

6.3 Debt

On August 5, 2020, the Company entered into a new Credit Facility. The aggregate amount available under the new Credit Facility is $150.0 million, up from the previous facility of $80.0 million. The new Credit Facility was used to refinance amounts under the previous facilities, with the balance available to the Company for future growth opportunities, capital expenditures, and for general corporate purposes. The new agreement, which added an additional Canadian chartered bank as a lender, was an extinguishment of debt for accounting purposes. The Company recognized costs of $362 thousand related to the extinguishment of the previous credit facilities. For further information on our Credit Facility, refer to Note 18 in the Financial Statements which are available on our website at www.company.isc.ca and in the Company’s profile on SEDAR at www.sedar.com.

At December 31, 2020, our debt was $76.3 million compared to $18.0 million at December 31, 2019. Noncash drawings, consisting of letters of credit and similar, were approximately $0.2 million (2019 — $0.2 million).

The Company was in compliance with all covenants throughout the period. The amount of borrowing costs capitalized during 2020 and 2019 was nil.

ISC® Management’s Discussion and Analysis

For the Fourth Quarter and Year Ended December 31, 2020

6.4 Total assets

Total assets were $242.3 million at December 31, 2020, compared to $171.6 million at December 31, 2019.

	Registry			Technology	Technology	Corporate	As at December 31,
(thousands of CAD dollars)	Operations		Services		Solutions	and other	2020
Total assets excluding intangibles, goodwill and cash	$ 25,758	$	13,952	$	5,505	$ 14,466	$ 59,681
Intangibles	1,288		63,203		4,332	2,395	71,218
Goodwill	1,200		67,372		8,883	-	77,455
Cash	-		-		-	33,946	33,946
Total assets	$ 28,246	$	144,527	$	18,720	$ 50,807	$ 242,300
	Registry			Technology		Corporate	As at December 31,
(thousands of CAD dollars)	Operations		Services		Solutions	and other	2019
Total assets excluding intangibles, goodwill and cash	$ 26,384	$ 10,951		$	6,467	$ 17,321	$ 61,123
Intangibles	3,803		31,647		4,525	1,221	41,196
Goodwill	1,200		35,715		8,614	-	45,529
Cash	-		-		-	23,731	23,731
Total assets	$ 31,387	$ 78,313		$	19,606	$ 42,273	$ 171,579

6.5 Working capital

At December 31, 2020, working capital was $28.1 million compared to $17.7 million at December 31, 2019. The increase in working capital is primarily the result of higher results of operations, reduced corporate tax instalments in 2020, the payment of contingent consideration in 2019 associated with our ERS acquisition and changes in contract liabilities and receivables due to the timing of sales contracts and higher revenue.

	As at December 31,	As at December 31,	As at December 31,	As at December 31,
(thousands of CAD dollars)		2020		2019
Current assets	$	55,383	$	42,333
Current liabilities		(27,289)		(24,655)
Working capital	$	28,094	$	17,678

6.6 Outstanding share data

The number of issued and outstanding Class A Shares as at December 31, 2020, was 17.5 million and the number of issued and outstanding share options as of December 31, 2020, was 1,548,247. These amounts are unchanged as of the filing date.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

6.7 Common share dividend

On November 4, 2020, our Board declared a quarterly cash dividend of $0.20 per Class A Share, paid on January 15, 2021, to shareholders of record as of December 31, 2020.

6.8 Commitments

The Company has commitments over the next five years that include future minimum payments for leasing of office space, an information technology service agreement with Information Systems Management Canada Corporation (“ISM”), other management services contracts and a commitment to the Government of Saskatchewan under the MSA. The following table summarizes our commitments as of December 31, 2020:

(thousands of CAD dollars)	2021	2022	2023	2024	2025	Thereafter	Total
Office leases1	$ 1,177	$ 973	$ 937	$ 956	$ 200	$ 1,007	$ 5,250
Information technology2and other service agreements	3,225	2,989	2,800	-	-	-	9,014
Master Service Agreement3	500	500	500	500	500	4,000	6,500
Total	$ 4,902	$ 4,462	$ 4,237	$ 1,456	$ 700	$ 5,007	$ 20,764

1 The Company leases all of its office space and certain office equipment. The office spaces have lease terms of between two and ten years, with various options to extend. The office equipment leases relate to photocopiers and have lease terms of three years. The Company does not have an option to purchase the leased assets at the expiry of the lease period.

2 The Company has a service agreement related to Information Technology with ISM, including lease commitments for computer equipment where the Company has taken the exemption for low-value assets. Other service agreements relate to service contracts associated with corporate and shared services infrastructure.

3 The MSA requires the Company to pay the Government of Saskatchewan the sum of $0.5 million annually, in a single instalment payable on or before March 1, in each calendar year of the term for a 20-year period expiring on May 30, 2033.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

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, 2020, consist of cash, short-term investments, trade and other receivables, accounts payable and accrued liabilities excluding share-based accrued liabilities, and longterm debt.

The Company does not currently use any form of derivative financial instruments to manage our exposure to credit risk, interest rate risk, market risk or foreign currency exchange risk. Refer to Note 23 of the Financial Statements for information pertaining to financial instruments and related risk management.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying values of cash, short-term investments, trade and other receivables, accounts payable and accrued liabilities excluding share-based accrued liabilities approximate fair value due to their immediate or relatively short-term maturity. With long-term debt, ISC has amended and restated its borrowings under the Credit Facility, which is managed with prime loans, short-term bankers’ acceptance, letters of credit or letters of guarantee. These borrowings will bear interest at a base rate of prime plus applicable margin varying between 0.45 per cent and 1.00 per cent per annum. The Company is not exposed to significant interest rate risk because interest bearing financial instruments are at a low level relative to total assets and equity.

CREDIT RISK

Credit risk is the risk that one party to a transaction will fail to discharge an obligation and cause the other party to incur a financial loss. The Company extends credit to its customers in the normal course of business and is exposed to credit risk in the event of non-performance by customers but does not anticipate such non-performance would be material. The Company monitors the credit risk and credit rating of customers on a regular basis. The Company has significant concentration of credit risk among government sectors. Its customers are predominantly provincial, federal and municipal government ministries and agencies, and its private sector customers are diverse.

The majority of cash is held with Canadian chartered banks and the Company believes the risk of loss to be minimal. The maximum exposure to credit risk at December 31, 2020, is $51.0 million (December 31, 2019 — $36.9 million) equal to the carrying value of the Company’s financial assets, those being cash at $33.9 million (December 31, 2019 — $23.7 million), short-term investments at $52 thousand (December 31, 2019 — $0.5 million) and trade and other receivables at $17.0 million (December 31, 2019 — $12.6 million). Quarterly reviews of the aged receivables are completed. The Company expects to fully collect the carrying value on all outstanding receivables. Therefore, the risk to the Company is low.

LIQUIDITY RISK

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s cash resources are managed based on financial forecasts and anticipated cash flows.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

MARKET RISK

The Company’s exposure to market risk is limited to the DSU, share appreciation rights and performance share unit liabilities whose fair values are affected by equity prices.

INTEREST RATE RISK

Interest rate risk arises from the effect of changes in prevailing interest rates on the Company’s financial instruments. The Company is subject to interest rate risks on its debt. This debt bears interest at rates that float, which can vary with changes in prime borrowing rates. The Company manages interest rate risk by monitoring its balance sheet, cash flows and the effect of market changes in interest rates. The Company has the option of using short-term bankers’ acceptance notes to lock in rates at any time.

FOREIGN CURRENCY EXCHANGE RISK

The Company operates internationally and is exposed to fluctuations in various currencies, with the euro being the most material. Movements in foreign currencies against the Canadian dollar may impact revenue, the value of assets and liabilities and affect the Company’s profit and loss. The Company’s exposure to other currencies is not significant at the end of the period.

7.2 Business risks and risk management

All companies are exposed to risk and are required to mitigate risks on a daily and long-term basis. A key component of creating strong and sustainable corporate performance is to balance risk and reward.

ISC considers risks that may affect the Company’s ability to achieve its goals and objectives on an ongoing basis and implements processes to manage those risks. ISC is continuously monitoring numerous existing and emerging risks. Our corporate strategies and plans are designed to implement effective risk mitigation or management approaches on an ongoing basis.

The Board oversees ISC’s Enterprise Risk Management (“ERM”) framework. This includes ensuring appropriate management systems are in place to ensure ISC’s risks are prudently managed.

The senior leadership team is accountable for providing executive oversight of ISC’s ERM activities, including the ongoing identification and assessment of risks and the development of mitigation strategies to manage the corporate risks facing the Company.

The following is a high-level list of ISC’s key business risks. A complete list of risk factors is contained in the Company’s Annual Information Form available on the Company’s website at www.company.isc.ca and in the Company’s profile on SEDAR at www.sedar.com.

ISC® Management’s Discussion and Analysis

For the Fourth Quarter and Year Ended December 31, 2020

	There is a risk that ISC could experience unplanned outages, unauthorized
Cyber and Data Security	access, or unplanned disclosure of confidential information or loss of critical
	corporate or customer data due to a cybersecurity incident.
	There is a risk that ISC’s information technology systems and services,
	including applications, may become ineffective, inadequate, unreliable or
Technology Infrastructure and	incapable of effectively facilitating current and future requirements to
Applications	support our business needs and the achievement of our strategic goals. We
	also rely on third-party service providers for aspects of our IT infrastructure
	and the provision of critical IT-related services.
	ISC may be ineffective in its ability to compete against current or future
	competitors, in some cases given others’ potential advantage having more
Competition	innovative products, greater longevity in the market, access to low cost capital, private ownership, etc. or as a result of ISC’s potential requirement
	to receive service or other approvals from the Office of Public Registry
	Administration or other regulators.
	There is a risk that ISC’s current revenue sources are not significantly
Revenue Diversification	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.
	Inability to comply with the requirements in customer contracts, including
Compliance with Customer Contracts	the Master Service Agreement with the Government of Saskatchewan, could result in the loss/termination of customer contracts as well as
	impacting ISC’s reputation and future growth strategies.
	There is a risk that acquisitions are not fully aligned with ISC’s lines of
Acquisitions	business or appropriately and efficiently integrated with ISC’s operations,
	brand and information technology systems.
	There is a risk that ISC’s business model and resourcing mix will not allow
Cost/Efficiency/Profitability	ISC to achieve cost efficiencies in new or existing product lines or be sufficiently nimble to take advantage of business development
	opportunities or adapt to volume changes within its business.
	Changes in the condition of the economy, including those arising from public
	health concerns relating to emerging diseases such as COVID-19, could also
Economic Conditions	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.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

8 Accounting Policies, Financial Measures and Controls

8.1 Off-balance sheet arrangements

The Company had no off-balance sheet arrangements as at December 31, 2020.

8.2 Related party transactions

Routine operating transactions with related parties are settled at agreed upon exchange amounts under normal trade terms. Refer to Note 25 in the Financial Statements, which are available on our website at www.company.isc.ca and in the Company’s profile on SEDAR at www.sedar.com for information pertaining to transactions with related parties.

8.3 Critical accounting estimates

ISC’s critical accounting estimates are contained in Note 2 of the Financial Statements under the summary of use of estimates and judgments and include references to:

the carrying value, impairment and estimated useful lives of property, plant and equipment;
the carrying value, impairment and estimated useful lives of intangible assets and goodwill;
the allocation of the purchase price for the Paragon acquisition;
the recoverability of deferred tax assets; and
the amount and timing of revenue from contracts from customers recognized over time with milestones.

The preparation of the Financial Statements, in conformity with IFRS, requires management to make estimates and underlying assumptions and judgments that affect the accounting policies and reported amounts of assets, liabilities, revenue and expenses.

Estimates and underlying assumptions are reviewed on an ongoing basis. Actual results may differ from these estimates. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Critical accounting estimates and judgments are those that have a significant risk of causing material adjustment.

8.4 Changes in accounting policies

The Company has adopted the following new and revised standards, along with any consequential amendments, effective January 1, 2020, or on such date as they became applicable. These changes were made in accordance with the applicable transitional provisions. Refer to Note 2 of the Financial Statements for further information pertaining to the adoption and changes in these policies.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

Standard Description

Amendments to	The amendments to IFRS 3 result in a change to the definition of a business which:	The amendments to IFRS 3 result in a change to the definition of a business which:
IFRS 3_– Definition_
of a Business	•	clarifies that to be considered a business, an acquired set of activities and assets must
		include, at a minimum, an input and a substantive process that together significantly
		contribute to the ability to create outputs;
	•	narrows the definitions of a business and of outputs by focusing on goods and services
		provided to customers and by removing the reference to reduce costs;
	•	adds guidance and illustrative examples to help entities assess whether a substantive
		process has been acquired;
	•	removes the assessment of whether market participants are capable of replacing any
		missing inputs or processes and continuing to produce outputs; and
	•	adds an optional concentration test that permits a simplified assessment of whether an
		acquired set of activities and assets is not a business.

	process has been acquired; • removes the assessment of whether market participants are capable of replacing any missing inputs or processes and continuing to produce outputs; and • adds an optional concentration test that permits a simplified assessment of whether an acquired set of activities and assets is not a business.
	This change will impact the analysis of business combinations. The Company has adopted this
	amendment to IFRS 3 from January 1, 2020 and has applied this to the acquisitions completed during
	2020.
Amendments to	The amendments in Definition of Material (Amendments to IAS 1 and IAS 8) clarify the definition of
IAS 1 and IAS 8 –	“material” and align the definition used in the Conceptual Framework and the standards.
Definition of
Material	The change in definition may impact the quantity and level of detail of disclosures in the Company’s
	financial statements. The amendment is prospective, and the Company has not been affected upon
	transition.

The IAS Board and International Financial Reporting Interpretations Committee (“IFRIC”) issued the following new standards and amendments to standards and interpretations, which become effective for future periods.

Proposed		Effective
Standard	Description	Date
Amendments to IAS 1 – Classification of Liabilities as	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, 2023
Current or Non-
current	The amendments clarify that the classification of liabilities as current or non-current is
	based on rights that are in existence at the end of the reporting period, specify that
	classification is unaffected by expectations about whether an entity will exercise its
	right to defer settlement of a liability, explain that rights are in existence if covenants
	are complied with at the end of the reporting period, and introduce a definition of
	‘settlement’ to make clear that settlement refers to the transfer to the counterparty
	of cash, equity instruments, other assets or services.
	The amendments are applied retrospectively for annual periods beginning on or after
	January 1, 2023, with early application permitted. This amendment is currently being
	assessed by the Company to determine the impact.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

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).	January 1, 2022
	The amendments apply to contracts for which the entity has not yet fulfilled all its
	obligations at the beginning of the annual reporting period in which the entity first
	applies the amendments. Comparatives are not restated. Instead, the entity shall
	recognize the cumulative effect of initially applying the amendments as an adjustment
	to the opening balance of retained earnings or other component of equity, as
	appropriate, at the date of initial application.
	The amendments are effective for annual periods beginning on or after January 1,
	2022, with early application permitted. This amendment is currently being assessed
	by the Company to determine the impact.
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 IFRIC 21_Levies_, the acquirer applies IFRIC 21 to	January 1, 2022
	determine whether the obligating event that gives rise to a liability to pay the levy has
	occurred by the acquisition date.
	Finally, the amendments add an explicit statement that an acquirer does not recognize
	contingent assets acquired in a business combination.
	The amendments are effective for business combinations for which the date of
	acquisition is on or after the beginning of the first annual period beginning on or after
	January 1, 2022. Early application is permitted if an entity also applies all other updated
	references (published together with the updated Conceptual Framework) at the same
	time or earlier.
	This change will impact the analysis of business combinations. The amendment is
	prospective, and the Company does not expect to be affected upon transition.

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”.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

8.6 Internal controls over financial reporting

The Company’s management, including the President and Chief Executive Officer and the Executive VicePresident and Chief Financial Officer, is responsible for establishing and maintaining appropriate internal controls over financial reporting. Internal controls over financial reporting have been designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with IFRS.

The design scope of internal controls over financial reporting has been limited to exclude controls, policies and procedures of Paragon, having been acquired less than 365 days prior to December 31, 2020. See section 8.7 “Disclosure controls and procedures” for Paragon’s contribution to the Financial Statements.

During the year, the Company implemented a new financial reporting system for ISC and its subsidiaries to align the entire organization on a common system and platform. These changes were implemented to improve the operational effectiveness and efficiency of the Company’s financial reporting. The amendments to accounting processes and resource modifications have resulted in a material change to ISC’s internal controls over financial reporting; however, key business operating systems for the ISC and ESC Corporate Services Ltd. legal entities were not part of the change.

Other than as described above, no changes in our internal controls over financial reporting that have occurred during the period have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

It should be noted that all internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

8.7 Disclosure controls and procedures

The Company’s management, including the President and Chief Executive Officer and the Executive VicePresident and Chief Financial Officer, is responsible for establishing and maintaining appropriate disclosure controls and procedures. Disclosure controls and procedures are designed to provide reasonable assurance that relevant information is gathered and reported to senior management, including the President and Chief Executive Officer and the Executive Vice-President and Chief Financial Officer, on a timely basis so that appropriate decisions can be made regarding public disclosures.

The design scope of disclosure controls and procedures has been limited to exclude controls, policies and procedures of Paragon, having been acquired less than 365 days prior to December 31, 2020.

The contribution of Paragon to the Financial Statements for the year ended December 31, 2020, was approximately 3.0 per cent of revenue and 4.0 per cent of expenses. Paragon contributed 8.0 per cent of current assets, 36.0 per cent of non-current assets and 7.0 per cent of current liabilities.

ISC® Management’s Discussion and Analysis For the Fourth Quarter and Year Ended December 31, 2020

8.8 Non-IFRS financial measures

This MD&A includes certain measures, which have not been prepared in accordance with IFRS, such as EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin and free cash flow. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our financial performance from management’s perspective, to provide investors with supplemental measures of our operating performance and, thus, highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS financial measures.

Management also uses non-IFRS measures to facilitate operating performance comparisons from period to period, prepare annual operating budgets and assess our ability to meet our future capital expenditure and working capital requirements.

Accordingly, these non-IFRS measures should not be considered in isolation or as a substitute for analysis of our financial information reported under IFRS. Such measures do not have any standardized meaning prescribed by IFRS and, therefore, may not be comparable to similar measures presented by other companies.

8.9 Non-IFRS financial measures definition

EBITDA is defined as earnings before interest, taxes, depreciation and amortization expense. Adjusted EBITDA adjusts EBITDA for stock-based compensation expense or income, stock option expense, transactional gains or losses on assets, asset impairment charges, and acquisition and integration costs. These measures, in addition to net income and income from operations, measure business performance and cash flow generation because it removes cash flow fluctuations caused by the above adjustments. Furthermore, we use adjusted EBITDA for business planning purposes and to evaluate and price potential acquisitions. In addition to use by management, we also believe these measures are widely used by securities analysts, investors and others to evaluate the financial performance of the Company and for comparing our results with those of other companies. EBITDA margin and adjusted EBITDA margin are calculated as a percentage of overall revenue.

Free cash flow is used as a financial measure in our evaluation of liquidity and financial strength. Adjusting for the swings in non-cash working capital items due to seasonality or other timing issues and cash additions to property, plant and equipment and intangible assets, free cash flow assists in the long-term assessment of liquidity and financial strength. This measurement is useful as an indicator of our ability to service our debt, meet other payment obligations and make strategic investments. Free cash flow does not represent residual cash flow available for discretionary expenditures.

AI assistant

Information Services Corporation — Management Reports 2021

47141_rns_2021-03-16_5c9573a9-9148-49b9-b14f-62abe6691393.pdf

Management's Discussion and Analysis

Table of Contents

INTRODUCTION

RESPONSIBILITY FOR DISCLOSURE

CAUTION REGARDING FORWARD-LOOKING INFORMATION

1 Overview

1.1 Consolidated highlights

SELECT FINANCIAL INFORMATION

Consolidated Revenue for the year ended December 31, (CAD$ millions)

Consolidated EBITDA and Adjusted EBITDA and Related Margins[1] for the year ended December 31,

Consolidated Free Cash Flow for the year ended December 31,

FOURTH QUARTER CONSOLIDATED HIGHLIGHTS

YEAR-END CONSOLIDATED HIGHLIGHTS

1.2 Subsequent events

1.3 Outlook

2 Consolidated Financial Analysis

2.1 Consolidated statements of comprehensive income

2.2 Consolidated revenue

2.3 Consolidated expenses

2.4 Consolidated net income

2.5 Consolidated EBITDA and Adjusted EBITDA

2.6 Consolidated finance costs

2.7 Tax provision

3 Business Segment Analysis

3.1 Registry Operations

Saskatchewan Land Registry

Saskatchewan Personal Property Registry

Saskatchewan Corporate Registry

REGISTRY OPERATIONS REVENUE

Saskatchewan Land Registry

Saskatchewan Personal Property Registry

Saskatchewan Corporate Registry

Saskatchewan Corporate Registry Revenue by Type for the year ended December 31,

REGISTRY OPERATIONS EXPENSES AND EBITDA

3.2 Services

Competition

Corporate Solutions

Regulatory Solutions

Know-Your-Customer

Collateral Management

Recovery Solutions

Revenue

SERVICES REVENUE

Services Revenue

Regulatory Solutions

Recovery Solutions

Corporate Solutions

SERVICES EXPENSES AND EBITDA

3.3 Technology Solutions

TECHNOLOGY SOLUTIONS REVENUE

Technology Solutions Revenue by Type

TECHNOLOGY SOLUTIONS EXPENSES AND EBITDA

3.4 Corporate and other

4 Summary of Consolidated Quarterly Results

5 Business Strategy

STRATEGIC PRIORITIES

6 Financial and Capital Management

6.1 Cash flow

CONSOLIDATED FREE CASH FLOW

NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES

NET CASH FLOW USED IN INVESTING ACTIVITIES

NET CASH FLOW PROVIDED BY (USED) IN FINANCING ACTIVITIES

6.2 Capital expenditures

6.3 Debt

6.4 Total assets

6.5 Working capital

6.6 Outstanding share data

6.7 Common share dividend

6.8 Commitments

7 Business Risks

7.1 Financial instruments and financial risks

FAIR VALUE OF FINANCIAL INSTRUMENTS

CREDIT RISK

LIQUIDITY RISK

MARKET RISK

INTEREST RATE RISK

FOREIGN CURRENCY EXCHANGE RISK

Information Services Corporation Management Reports 2021