Mr. Shawn Peters reports

ISC SECURES SASKATCHEWAN REGISTRIES EXTENSION UNTIL 2053

Information Services Corp. has executed an extension agreement with the Province of Saskatchewan to extend the term of its exclusive master service agreement until 2053. This means that the MSA between Information Services and the province will continue for the next 30 years to 2053, for a total of 40 years, which is in keeping with a concession of this nature.

The agreements extend Information Services' exclusive right to manage and operate each of the Saskatchewan Land Registry, the Saskatchewan Land Surveys Directory, the Saskatchewan Corporate Registry and the Saskatchewan Personal Property Registry.

Extension terms:

• The agreements extend Information Services' exclusive right to manage and operate the Saskatchewan registries to 2053;
• The consideration to be paid by Information Services to the province consists of:
  • An upfront cash payment of $150-million, payable on or before July 28, 2023;
  • Five cash payments of $30-million per year, totalling $150-million, commencing in July, 2024, with the final payment expected to be made in 2028; and
  • Annual contingent payments potentially payable after 2033 if volume growth for certain land registry transactions exceeds predefined benchmarks, subject to a maximum (further described below).

Financial highlights:

• Immediate new revenue enhances Information Services' scale and financial profile:
  • Under the agreements, Information Services has been granted the right to introduce and/or enhance fees on certain transactions with applicable fee adjustments expected to go into effect on July 29, 2023;
  • Fee adjustments are expected to result in estimated incremental annual revenue and adjusted EBITDA (1) (earnings before interest, taxes, depreciation and amortization) to Information Services of $17-million and $16-million, respectively;
  • Accordingly, the company expects the impact to 2023 revenue to be an increase of $7-million and 2023 adjusted EBITDA (1) to be $6-million;
  • Information Services intends to formally update its annual guidance for 2023 when it reports its financial results for the second quarter of 2023.
• The agreements are expected to generate attractive economics to Information Services' shareholders:
  • Strong plus-10-per-cent unlevered internal rate of return (5) for a high-quality infrastructure asset that is already operated by Information Services;
  • Compelling plus-30-per-cent accretion to Information Services' net asset value per share (NAVPS)(2);
  • Immediately accretive to adjusted free cash flow per share (adjusted FCFPS) (1) and adjusted earnings per share (adjusted EPS) (1).
• Information Services will continue to maintain a prudent and flexible capital structure:
  • Following financing of the upfront payment, Information Services will have pro forma net debt/LTM (last 12 months) adjusted EBITDA (3) of 4.0 times (4) (prior to the extension, net debt/LTM adjusted EBITDA was 0.6 times as at March 31, 2023);
  • Rapid deleveraging toward long-term net leverage target of 2.0 times to 2.5 times;
  • Information Services has a history of disciplined capital allocation and will continue to focus on deleveraging, maintaining and growing its dividend, and investing in growth.
• Information Services will make meaningful investments to enhance core registries:
  • A registry enhancement plan will leverage Information Services-built technology to offer best-in-class technology, security and user experience;
  • Information Services' continued development of world-class registry technology supports the company's pursuit of new registry opportunities globally while also benefiting the Saskatchewan registries.
• The contingent payment structure allows Information Services and the province to share in volume growth:
  • Information Services and the province to share in growth through annual contingent payments potentially payable by Information Services to the province between 2033 and 2053 if cumulative annual volume growth for certain Saskatchewan Land Registry transactions falls within a predetermined range, calculated in any given year as follows:
    • 25 per cent of any revenue associated with long-term volume growth between 0 per cent to 1 per cent;
    • 50 per cent of any revenue associated with long-term volume growth between 1 per cent to 3 per cent;
  • Information Services to retain unlimited upside on any incremental volume growth in excess of 3 per cent.

The MSA has also been amended and restated to, among other things, implement certain incremental terms and conditions, the objectives of which are to enhance security features and protocols for the Saskatchewan registries, contemplate emerging and future technology enhancements for the Saskatchewan registries and the services provided pursuant to the MSA, refresh and clarify governance practices and structure, adjust the registry fees chargeable by the company, and provide flexibility for change over the life of the extended term.

Shawn Peters, president and chief executive officer, commented: "The extension of our master service agreement with the province has been an important priority for us, and I would like to thank our partners in the Saskatchewan Ministry of Finance and Ministry of Justice for helping us arrive at a successful conclusion today." Mr. Peters continued: "This agreement is beneficial for all stakeholders, including the province, the people of Saskatchewan, and ISC's long-standing and extremely supportive shareholders. We look forward to continuing to serve the users of the Saskatchewan registries for the next 30 years, while executing our long-term growth strategy for the company over all."

Deputy Premier and Minister of Finance Donna Harpauer noted: "ISC's history in our province of providing quality services to people and businesses drove the extension of this agreement. Our government has confidence in ISC, a home-grown success story, and a company that will help our province continue to grow and move forward." Ms. Harpauer continued: "The payments we will receive from ISC and the ability to participate in the company's growth will help our government continue to invest in the priority programs, services and infrastructure Saskatchewan people value."

Compelling strategic rationale:

• Reinforces Information Services' position as a leading registry operator:
  • Strategic extension of the MSA keeps a successful public-private partnership in the hands of a proven management team with a best-in-class operational record;
• Unlocks value of the Saskatchewan registries:
  • The Saskatchewan registries are a valuable, high-quality infrastructure asset that Information Services has the exclusive right to operate until 2053;
• Provides Information Services with strong, stable, long-term free cash flow:
  • Predictable, high-margin revenue supported by an asset-light model drives substantial cash flow generation;
• New revenue meaningfully enhances Information Services' scale and financial profile:
  • Immediate fee adjustments significantly enhance Information Services' revenue, adjusted EBITDA (1), adjusted EBITDA margin (1), adjusted net income (1) and adjusted free cash flow (1);
• Attractive transaction economics create significant value for Information Services' shareholders:
  • Robust risk-adjusted returns (5) with low execution risk underpinned by meaningful NAVPS (2), adjusted FCFPS (1) and adjusted EPS (1) accretion;
• Long-term growth catalyst:
  • Significant incremental cash flow generation enables Information Services to accelerate its long-term organic and acquisition growth strategy.

(1) Adjusted EBITDA, adjusted EBITDA margin, adjusted net income and adjusted free cash flow are not recognized measures under IFRS (international financial reporting standards) and do not have a meaning prescribed by IFRS, and, therefore, they may not be comparable with similar measures reported by other companies. Adjusted earnings per share and adjusted free cash flow per share referenced in this news release are calculated by dividing adjusted net income and adjusted free cash flow by the average number of shares outstanding, respectively.

(2) Net asset value is a supplementary financial measure and represents the estimated fair value of each of Information Services' business segments, less its long-term debt, short-term and long-term lease liability, government of Saskatchewan liabilities, plus cash. Net asset value per share represents the net asset value divided by the number of shares outstanding.

(3) This financial ratio is a non-IFRS ratio used by management to evaluate borrowing capacity and capital allocation strategies. Pro forma net debt/LTM adjusted EBITDA is defined as pro forma net debt divided by pro forma LTM adjusted EBITDA. Pro forma net debt includes total bank debt plus lease obligations and the present value of the commitments payable to the Province of Saskatchewan pursuant to the agreements, and certain transaction-related expenses less cash. Pro forma LTM adjusted EBITDA is calculated as Information Services' net income plus net finance expense, depreciation and amortization, taxes, share-based compensation, acquisition, integration and other costs, as well as an adjustment to give effect to management's estimates of the annualized EBITDA generated by fee adjustments offset by incremental expenses.

(4) This is pro forma as at March 31, 2023.

(5) Unlevered internal rate of return is a supplementary financial measure which represents the rate of return by considering the present value of future cash flows related to this agreement extension excluding the cost of financing.

(6) Total shares outstanding at June 30, 2023, are 17,701,498.

Transaction financing

Information Services is well positioned to finance the extension with its strong balance sheet, cash flow profile and access to capital. In connection with the extension, Information Services has entered into an amended and restated credit agreement with its syndicate of lenders. The aggregate amount available under the amended and restated credit facility has been increased from $150-million to $250-million and will consist of Information Services' existing $150-million revolving credit facility plus a new $100-million revolving credit facility. In addition, Information Services will maintain access to a $100-million accordion option, providing the flexibility to upsize the aggregate revolving credit facility up to $350-million, and the consolidated-net-funded-debt-to-EBITDA financial covenant has been increased to provide additional balance sheet flexibility to Information Services. The expiry date of the amended and restated credit facility of September, 2026, remains unchanged. Royal Bank of Canada acted as administrative agent, with RBC Capital Markets and Canadian Imperial Bank of Commerce serving as joint lead arrangers and joint bookrunners for the amended and restated credit facility.

Information Services intends to finance the upfront payment and other related transaction costs by drawing on its amended and restated credit facility and with cash on hand. The subsequent payments are expected to be financed using internally generated cash flow.

Special committee of the board of directors and fairness opinion

To evaluate and approve the agreements, the board of directors formed a special committee exclusively comprising elected independent directors. RBC Capital Markets provided a fairness opinion to Information Services' special committee to the effect that, as of the date of the fairness opinion, subject to the assumptions, limitations and qualifications contained therein, the consideration to be paid by the company pursuant to the agreements is fair from a financial point of view to the company. The special committee reviewed and unanimously approved the execution of the agreements.

Advisers and counsel

RBC Capital Markets acted as financial adviser to Information Services. Stikeman Elliott LLP served as counsel to Information Services.

Note to readers

The board carries out its responsibility for review and approval of this disclosure through the special committee, which exclusively comprises independent elected directors.

Conference call and webcast

Information Services will hold an investor conference call on July 5, 2023, at 5:30 p.m. ET to discuss the transaction. Those joining the call on a listen-only basis are encouraged to join the live audio webcast, which will be available on the company's website. Participants who wish to ask a question on the live call may do so through the Information Services website or by registering through the live call website.

Once registered, participants will receive the dial-in numbers and their unique personal identification number. When dialling in, participants will input their PIN and be placed into the call. The audio file with a replay of the webcast will be available about 24 hours after the event on the company's website. The company invites media to attend on a listen-only basis.

About Information Services Corp.

Headquartered in Canada, Information Services is a leading provider of registry and information management services for public data and records. Throughout its history, Information Services has delivered value to its clients by providing solutions to manage, secure and administer information through its registry operations, services and technology solutions segments. Information Services is focused on sustaining its core business while pursuing new growth opportunities. The Class A shares of Information Services trade on the Toronto Stock Exchange under the symbol ISV.

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