Constellation Software Inc Announces Results for the Third

TORONTO, Nov. 04, 2021 (GLOBE NEWSWIRE) â€" Constellation Software Inc. (TSX:CSU) (“Constellation” or the “Company”) today announced its financial results for the third quarter ended September 30, 2021 and declared a $1.00 per share dividend payable on January 11, 2022 to all common shareholders of record at close of business on December 20, 2021. This dividend has been designated as an eligible dividend for the purposes of the Income Tax Act (Canada). Please note that all dollar amounts referred to in this press release are in U.S. Dollars unless otherwise stated.

The following press release should be read in conjunction with the Company’s Unaudited Condensed Consolidated Interim Financial Statements for the three and nine months ended September 30, 2021 and the accompanying notes, our Management Discussion and Analysis for the three and nine months ended September 30, 2021 and with our annual Consolidated Financial Statements, prepared in accordance with International Financial Reporting Standards (“IFRS”) and our annual Management’s Discussion and Analysis for the year ended December 31, 2020, which can be found on SEDAR at www.sedar.com and on the Company’s website www.csisoftware.com. Additional information about the Company is also available on SEDAR at www.sedar.com

Q3 2021 Headlines:

Revenue grew 30% (7% organic growth, 5% after adjusting for changes in foreign exchange rates) to $1,299 million compared to $1,003 million in Q3 2020.  

Net income attributable to common shareholders decreased 13% to $107 million ($5.04 on a diluted per share basis) from $122 million ($5.76 on a diluted per share basis) in Q3 2020.

A number of acquisitions were completed for aggregate cash consideration of $126 million (which includes acquired cash). Deferred payments associated with these acquisitions have an estimated value of $47 million resulting in total consideration of $173 million.

Cash flows from operations (“CFO”) were $292 million, an increase of 25%, or $58 million, compared to $234 million for the comparable period in 2020.

Free cash flow available to shareholders1 (“FCFA2S”) increased $45 million to $226 million compared to $181 million for the same period in 2020.

Subsequent to September 30, 2021, the Company completed or entered into agreements to acquire a number of businesses for aggregate cash consideration of $329 million. Deferred payments associated with these acquisitions have an estimated value of $41 million resulting in total consideration of $370 million.

Total revenue for the quarter ended September 30, 2021 was $1,299 million, an increase of 30%, or $296 million, compared to $1,003 million for the comparable period in 2020. For the first nine months of 2021 total revenues were $3,724 million, an increase of 29%, or $846 million, compared to $2,878 million for the comparable period in 2020. The increase for both the three and nine month periods compared to the same periods in the prior year is primarily attributable to growth from acquisitions as the Company experienced organic growth of 7% and 9% respectively, and 5% for both periods after adjusting for the impact of changes in the valuation of the US dollar against most major currencies in which the Company transacts business.

The net income attributable to common shareholders of CSI for the quarter ended September 30, 2021 was $107 million compared to net income of $122 million for the same period in 2020. On a per share basis this translated into a net income per diluted share of $5.04 in the quarter ended September 30, 2021 compared to net income per diluted share of $5.76 for the same period in 2020. For the nine months ended September 30, 2021, net income attributable to common shareholders of CSI was $186 million or $8.79 per diluted share compared to $288 million or $13.58 per diluted share for the same period in 2020. There was no change in the number of shares outstanding.

For the quarter ended September 30, 2021, CFO increased $58 million to $292 million compared to $234 million for the same period in 2020 representing an increase of 25%. For the first nine months of 2021, CFO increased $127 million to $959 million compared to $831 million during the same period in 2020, representing an increase of 15%.

For the quarter ended September 30, 2021, FCFA2S increased $45 million to $226 million compared to $181 million for the same period in 2020.   For the first nine months of 2021, FCFA2S decreased $43 million to $639 million compared to $682 million during the same period in 2020, representing a decrease of 6%.

The directors of Constellation have unanimously agreed to appoint John Billowits, a current director and former Chief Executive Officer of Constellation’s Vela operating group, as the Chair of the Board of Directors of the Company. Mark Leonard will continue in his current position as the President of the Company and (apart from relinquishing his duties as Chairman) his role and responsibilities within Constellation will remain unchanged. Mr. Leonard stated: “John brings intimate knowledge of the business of Constellation and had the deep respect of all of our directors and operating group managers, and so I’m very happy to leave the duties of Chair in John’s very capable hands.”

Forward Looking Statements

Certain statements herein may be “forward looking” statements that involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Constellation or the industry to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to vary significantly from the results discussed in the forward looking statements. These forward looking statements reflect current assumptions and expectations regarding future events and operating performance and are made as of the date hereof and Constellation assumes no obligation, except as required by law, to update any forward looking statements to reflect new events or circumstances.

Non-IFRS Measures

Free cash flow available to shareholders ‘‘FCFA2S’’ refers to net cash flows from operating activities less interest paid on lease obligations, interest paid on other facilities, credit facility transaction costs, repayments of lease obligations, the TSS membership liability revaluation charge, and property and equipment purchased, and includes interest and dividends received. Constellation believes that FCFA2S is useful supplemental information as it provides an indication of the uncommitted cash flow that is available to shareholders if Constellation does not make any acquisitions, or investments, and does not repay any debts. While Constellation could use the FCFA2S to pay dividends or repurchase shares, Constellation’s objective is to invest all of our FCFA2S in acquisitions which meet Constellation’s hurdle rate.

FCFA2S is not a recognized measure under IFRS and, accordingly, readers are cautioned that FCFA2S should not be construed as an alternative to net cash flows from operating activities.

The following table reconciles FCFA2S to net cash flows from operating activities:

      Three months ended
September 30,       Nine months ended
September 30,         2021   2020         2021   2020         ($ in millions, except percentages)   ($ in millions, except percentages)                       Net cash flows from operating activities     292   234         959   831     Adjusted for:                     Interest paid on lease obligations     (2 ) (2 )       (7 ) (6 )   Interest paid on other facilities     (12 ) (8 )       (30 ) (22 )   Credit facility transaction costs     (0 ) (0 )       (4 ) (0 )   Payments of lease obligations     (21 ) (17 )       (61 ) (47 )   IRGA / TSS membership liability revaluation charge     (25 ) (20 )       (107 ) (55 )   Property and equipment purchased     (7 ) (5 )       (18 ) (19 )   Interest and dividends received     1   0         1   0                                 226   181         732   682     Less amount attributable to                       Non-controlling interests     1           (93 ) â€"                           Free cash flow available to shareholders     226   181         639   682                           Due to rounding, certain totals may not foot.                                          

About Constellation Software Inc.

Constellation’s common shares are listed on the Toronto Stock Exchange under the symbol “CSU”. Constellation acquires, manages and builds vertical market software businesses.

For further information:

Jamal Baksh
Chief Financial Officer
(416) 861-9677
info@csisoftware.com
www.csisoftware.com

SOURCE: CONSTELLATION SOFTWARE INC.

                  CONSTELLATION SOFTWARE INC. Consolidated Statements of Financial Position       (In millions of U.S. dollars, except per share amounts. Due to rounding, numbers presented may not foot.)                         Unaudited                                     September 30, 2021 December 31, 2020 September 30, 2020                         Assets                                           Current assets:                     Cash             $ 961   $ 758   $ 565     Accounts receivable             512     483     420     Unbilled revenue             144     98     102     Inventories               32     27     30     Other assets             278     219     217                       1,929     1,585     1,333                           Non-current assets:                   Property and equipment           91     86     80     Right of use assets             252     251     239     Deferred income taxes           63     52     50     Other assets             94     75     79     Intangible assets   3,006     2,325     2,097                       3,506     2,790     2,546                           Total assets             $ 5,434   $ 4,375   $ 3,879                           Liabilities and Shareholders’ Equity                                   Current liabilities:                   Debt with recourse to Constellation Software Inc.     $ 137   $ 113   $ 104     Debt without recourse to Constellation Software Inc.     54     28     4     Redeemable preferred securities         7     â€"     â€"     Accounts payable and accrued liabilities         720     666     535     Dividends payable             21     21     21     Deferred revenue             1,168     962     917     Provisions               11     12     11     Acquisition holdback payables           92     85     71     Lease obligations             81     74     68     Income taxes payable           86     78     90                       2,377     2,040     1,821                           Non-current liabilities:                   Debt with recourse to Constellation Software Inc.       550     421     397     Debt without recourse to Constellation Software Inc.     325     199     169     Deferred income taxes           393     285     253     Acquisition holdback payables           49     37     30     Lease obligations             195     201     191     Other liabilities             145     146     116                       1,656     1,288     1,155                           Total liabilities               4,034     3,328     2,976                                                   Shareholders’ equity:                   Capital stock             99     99     99     Other equity             (162 )   â€"     â€"     Accumulated other comprehensive income (loss)       (69 )   (31 )   (49 )   Retained earnings             1,103     980     852     Non-controlling interests           429     â€"     â€"                       1,401     1,048     902                                                   Total liabilities and shareholders’ equity       $ 5,434   $ 4,375   $ 3,879                           CONSTELLATION SOFTWARE INC.   Condensed Consolidated Interim Statements of Income (loss)         (In millions of U.S. dollars, except per share amounts. Due to rounding, numbers presented may not foot.)                                 Three and nine months ended September 30, 2021         Unaudited                     Three months ended September 30,   Nine months ended September 30,                   2021       2020       2021       2020                                                                 Revenue                         License         $ 69     $ 57     $ 206     $ 166     Professional services         256       187       747       534     Hardware and other         45       45       127       122     Maintenance and other recurring       929       713       2,643       2,056                     1,299       1,003       3,724       2,878                                   Expenses                         Staff           676       504       1,982       1,493     Hardware           25       25       71       70     Third party license, maintenance and professional services   113       82       317       237     Occupancy           10       9       30       26     Travel, telecommunications, supplies, software and equipment   46       32       129       114     Professional fees         21       15       53       41     Other, net           21       5       41       10     Depreciation           31       26       90       77     Amortization of intangible assets       134       103       376       293                     1,077       800       3,087       2,362                                                                 Foreign exchange loss (gain)       (5 )     1       (3 )     5     IRGA/TSS Membership liability revaluation charge   25       20       107       55     Finance and other expense (income)     (4 )     (2 )     (9 )     (4 )   Bargain purchase gain         (1 )     (0 )     (1 )     (0 )   Impairment of intangible and other non-financial assets   1       3       7       11     Redeemable preferred securities expense (income)   â€"       â€"       295       â€"     Finance costs           18       13       50       34                     34       34       446       101                                   Income (loss) before income taxes       188       168       190       414                                   Current income tax expense (recovery)     70       62       209       177     Deferred income tax expense (recovery)     (4 )     (16 )     (43 )     (50 )   Income tax expense (recovery)       67       46       166       127                                   Net income (loss)         121       122       24       288                                   Net income (loss) attributable to:                     Common shareholders of Constellation Software Inc.   107       122       186       288     Non-controlling interests         15       â€"       (162 )     â€"     Net income (loss)         121       122       24       288                                   Earnings per common share of Constellation Software Inc.                   Basic and diluted       $ 5.04     $ 5.76     $ 8.79     $ 13.58                                                     CONSTELLATION SOFTWARE INC.   Condensed Consolidated Interim Statements of Comprehensive Income (Loss)         (In millions of U.S. dollars, except per share amounts. Due to rounding, numbers presented may not foot.)                                 Three and nine months ended September 30, 2021         Unaudited                     Three months ended September 30,   Nine months ended September 30,                   2021       2020     2021       2020                                   Net income (loss)       $ 121     $ 122   $ 24     $ 288                                   Items that are or may be reclassified subsequently to net income (loss):                                                 Foreign currency translation differences from foreign operations and other   (21 )     8     (39 )     (9 )                                 Other comprehensive income (loss) for the period, net of income tax   (21 )     8     (39 )     (9 )                                 Total comprehensive income (loss) for the period $ 100     $ 130   $ (15 )   $ 279                                   Total other comprehensive income (loss) attributable to:                 Common shareholders of Constellation Software Inc.   (13 )     8     (19 )     (9 )   Non-controlling interests         (8 )     â€"     (19 )     â€"     Total other comprehensive income (loss) $ (21 )   $ 8   $ (39 )   $ (9 )                                 Total comprehensive income (loss) attributable to:                 Common shareholders of Constellation Software Inc.   93       130     167       279     Non-controlling interests         7       â€"     (182 )     â€"     Total comprehensive income (loss)     $ 100     $ 130   $ (15 )   $ 279                   CONSTELLATION SOFTWARE INC.       Condensed Consolidated Interim Statement of Changes in Equity     (In millions of U.S. dollars, except per share amounts. Due to rounding, numbers presented may not foot.)                     Unaudited                 Nine months ended September 30, 2021                     Equity Attributable to Shareholders of CSI           Capital
stock Other equity Accumulated
other
comprehensive
income (loss) Retained
earnings Total Non-controlling
interests Total equity                     Balance at January 1, 2021 $ 99 $ â€"   $ (31 ) $ 980   $ 1,048     â€"   $ 1,048                       Total comprehensive income (loss) for the period:                                   Net income (loss)   â€"   â€"     â€"     186     186     (162 )   24                       Other comprehensive income (loss)                                   Foreign currency translation differences from foreign operations and other   â€"   â€"     (19 )   â€"     (19 )   (19 )   (39 )                                     Total other comprehensive income (loss) for the period
  â€"   â€"     (19 )   â€"     (19 )   (19 )   (39 )                     Total comprehensive income (loss) for the period   â€"   â€"     (19 )   186     167     (182 )   (15 )                     Transactions with owners, recorded directly in equity                                   Special dividend of Topicus Subordinate Voting Shares   â€"   (141 )   (16 )   â€"     (157 )   157     â€"                       Issuance of Topicus Coop Ordinary Units to non-controlling interests   â€"   (21 )   (2 )   â€"     (23 )   23     â€"                       Net acquisition of non-controlling interest associated with acquisitions and other movements   â€"   1     â€"     1     1     1     3                       Dividends to shareholders of the Company   â€"     â€"     (64 )   (64 )   â€"     (64 )                     Reclassification of redeemable preferred securities of Topicus Coop from liabilities to non-controlling interest   â€"   â€"     â€"     â€"     â€"     434     434                       Accrued dividends to preference unit holders of Topicus Coop   â€"   â€"     â€"     â€"     â€"     (5 )   (5 )                     Balance at September 30, 2021 $ 99 $ (162 )   (69 ) $ 1,103   $ 972   $ 429   $ 1,401                       CONSTELLATION SOFTWARE INC.    Condensed Consolidated Interim Statement of Changes in Equity       (In millions of U.S. dollars, except per share amounts. Due to rounding, numbers presented may not foot.)                         Unaudited           Nine months ended September 30, 2020                               Equity Attributable to Shareholders of CSI             Capital
stock Other equity Accumulated
other
comprehensive
income (loss) Retained
earnings Total Non-controlling
interests Total equity                         Balance at January 1, 2020 $ 99 $ â€" $ (40 ) $ 628   $ 687   $ â€" $ 687                           Total comprehensive income (loss) for the period:                                       Net income (loss)   â€"   â€"   â€"     288     288     â€"   288                           Other comprehensive income (loss)                                       Foreign currency translation differences from foreign operations and other   â€"   â€"   (9 )   â€"     (9 )   â€"   (9 )                         Total other comprehensive income (loss) for the period   â€"   â€"   (9 )   â€"     (9 )   â€"   (9 )                         Total comprehensive income (loss) for the period   â€"   â€"   (9 )   288     279     â€"   279                           Transactions with owners, recorded directly in equity                   Dividends to shareholders of the Company   â€"     â€"     (64 )   (64 )   â€"   (64 )                         Balance at September 30, 2020 $ 99 $ â€" $ (49 ) $ 852   $ 902   $ â€" $ 902                           CONSTELLATION SOFTWARE INC. Condensed Consolidated Interim Statements of Cash Flows        (In millions of U.S. dollars, except per share amounts. Due to rounding, numbers presented may not foot.)                               Three and nine months ended September 30, 2021         Unaudited                            Three months ended September 30,   Nine months ended September 30,                   2021       2020       2021       2020                                 Cash flows from (used in) operating activities:                 Net income (loss)     $ 121     $ 122     $ 24     $ 288     Adjustments for:                       Depreciation       31       26       90       77       Amortization of intangible assets   134       103       376       293       IRGA/TSS Membership liability revaluation charge   25       20       107       55       Finance and other expense (income)   (4 )     (2 )     (9 )     (4 )     Bargain purchase (gain)   (1 )     (0 )     (1 )     (0 )     Impairment of intangible and other non-financial assets     1       3       7       11       Redeemable preferred securities expense (income)     â€"       â€"       295       â€"       Finance costs       18       13       50       34       Income tax expense (recovery)   67       46       166       127       Foreign exchange loss (gain)   (5 )     1       (3 )     5     Change in non-cash operating assets and liabilities exclusive of effects of business combinations   (47 )     (32 )     53       69     Income taxes paid   (48 )     (66 )     (196 )     (123 )   Net cash flows from (used in) operating activities   292       234       959       831                                 Cash flows from (used in) financing activities:                 Interest paid on lease obligations     (2 )     (2 )     (7 )     (6 )   Interest paid on debt       (12 )     (8 )     (30 )     (22 )   Increase (decrease) in CSI facility     â€"       (100 )     â€"       (65 )   Increase (decrease) in revolving credit debt facilities without recourse to CSI   12       â€"       24       (55 )   Proceeds from issuance of term debt facilities without recourse to CSI   6       7       140       22     Repayments of term debt facilities without recourse to CSI   (2 )     (1 )     (4 )     (5 )   Credit facility transaction costs   (0 )     (0 )     (4 )     (0 )   Payments of lease obligations     (21 )     (17 )     (61 )     (47 )   Distribution to the Joday Group     â€"       â€"       (22 )     â€"     Dividends paid   (21 )     (21 )     (64 )     (64 )   Net cash flows from (used in) in financing activities   (41 )     (143 )     (29 )     (242 )                               Cash flows from (used in) investing activities:                 Acquisition of businesses   (130 )     (123 )     (736 )     (298 )   Cash obtained with acquired businesses     28       31       112       55     Post-acquisition settlement payments, net of receipts   (16 )     (24 )     (101 )     (79 )   Receipt of additional subscription amount from the sellers of Topicus.com B.V.     â€"       â€"       33       â€"     Purchases of other investments     (14 )     â€"       (15 )     (2 )   Proceeds from sales of other investments     8       â€"       8       â€"     Interest, dividends and other proceeds received   1       1       4       2     Property and equipment purchased   (7 )     (5 )     (18 )     (19 )   Net cash flows from (used in) investing activities   (131 )     (120 )     (713 )     (340 )                               Effect of foreign currency on cash and cash equivalents   (10 )     8       (13 )     (1 )                               Increase (decrease) in cash   110       (21 )     203       249                                 Cash, beginning of period $ 851     $ 585     $ 758     $ 316                                 Cash, end of period   961     $ 565     $ 961     $ 565                                

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