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Constellation Software Inc. Announces Results for the First Quarter Ended March 31, 2023 and Declares Quarterly Dividend

TORONTO, May 15, 2023 (GLOBE NEWSWIRE) — Constellation Software Inc. (TSX:CSU) (“Constellation” or the “Company”) today announced its financial results for the first quarter ended March 31, 2023 and declared a $1.00 per share dividend payable on July 11, 2023 to all common shareholders of record at close of business on June 20, 2023. 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 months ended March 31, 2023 and the accompanying notes, our Management Discussion and Analysis for the three months ended March 31, 2023 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, 2022, 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

Q1 2023 Headlines:

  • Revenue increased 34% (2% organic growth, 5% after adjusting for changes in foreign exchange rates) to $1,919 million compared to $1,431 million in Q1 2022.
  • Net income attributable to common shareholders was $94 million for Q1 2023 ($4.44 on a diluted per share basis), compared to net income attributable to common shareholders of $98 million ($4.63 on a diluted per share basis) in Q1 2022.
  • A number of acquisitions were completed for aggregate cash consideration of $452 million (which includes acquired cash). In conjunction with the acquisition of WideOrbit Inc., the Company issued 10,204,294 Special Shares to the seller for an initial subscription price of $222. Deferred payments associated with these acquisitions have an estimated value of $44 million resulting in total consideration of $718 million.
  • Cash flows from operations (“CFO”) were $632 million, an increase of 27%, or $134 million, compared to $498 million for the comparable period in 2022.
  • Free cash flow available to shareholders1 (“FCFA2S”) increased $129 million to $453 million compared to $324 million for the same period in 2022.

Total revenue for the quarter ended March 31, 2023 was $1,919 million, an increase of 34%, or $488 million, compared to $1,431 million for the comparable period in 2022. The increase is primarily attributable to growth from acquisitions as the Company experienced organic growth of 2% in the quarter, 5% after adjusting for the impact of changes in the valuation of the US dollar against most major currencies in which the Company transacts business. For acquired companies, organic growth is calculated as the difference between actual revenues achieved by each company in the financial period following acquisition compared to the estimated revenues they achieved in the corresponding financial period preceding the date of acquisition by Constellation. Organic growth is not a standardized financial measure and might not be comparable to measures disclosed by other issuers.

The net income attributable to common shareholders of CSI for the quarter ended March 31, 2023 was $94 million compared to net income of $98 million for the same period in 2022. On a per share basis this translated into net income per basic and diluted share of $4.44 in the quarter ended March 31, 2023 compared to $4.63 for the same period in 2022. There was no change in the number of shares outstanding.

For the quarter ended March 31, 2023, CFO increased $134 million to $632 million compared to $498 million for the same period in 2022 representing an increase of 27%.

For the quarter ended March 31, 2023, FCFA2S increased $129 million to $453 million compared to $324 million for the same period in 2022 representing an increase of 40%.

  1.  See Non-IFRS measures. 

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 IRGA / TSS membership liability revaluation charge, and property and equipment purchased, and includes interest and dividends received. The portion of this amount applicable to non-controlling interests is then deducted. We believe that FCFA2S is useful supplemental information as it provides an indication of the uncommitted cash flow that is available to shareholders if we do not make any acquisitions, or investments, and do not repay any debts. While we could use the FCFA2S to pay dividends or repurchase shares, our objective is to invest all of our FCFA2S in acquisitions which meet our 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 March 31,  
    2023   2022    
  ($ in millions)
         
Net cash flows from operating activities   632   498    
Adjusted for:        
Interest paid on lease obligations   (3 ) (2 )  
Interest paid on other facilities   (26 ) (10 )  
Credit facility transaction costs   (2 ) (1 )  
Payments of lease obligations   (25 ) (22 )  
IRGA / TSS membership liability revaluation charge   (39 ) (27 )  
Property and equipment purchased   (10 ) (8 )  
Interest and dividends received   1   0    
         
    529   429    
Less amount attributable to        
Non-controlling interests   (76 ) (105 )  
         
Free cash flow available to shareholders   453   324    
         
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
[email protected]
www.csisoftware.com

SOURCE: CONSTELLATION SOFTWARE INC.

CONSTELLATION SOFTWARE INC.      
Condensed Consolidated Interim Statements of Financial Position      
(In millions of U.S. dollars, except per share amounts. Due to rounding, numbers presented may not foot.)
         
Unaudited      
    March 31, 2023 December 31, 2022 March 31, 2022
         
Assets      
         
Current assets:      
  Cash $ 1,010   $ 811   $ 996  
  Accounts receivable   1,014     880     660  
  Unbilled revenue   287     231     164  
  Inventories   50     48     41  
  Other assets   448     497     443  
      2,808     2,467     2,305  
         
Non-current assets:      
  Property and equipment   129     128     98  
  Right of use assets   285     283     278  
  Deferred income taxes   106     160     66  
  Other assets   182     172     107  
  Intangible assets   5,354     4,673     3,644  
      6,056     5,416     4,193  
         
Total assets $ 8,864   $ 7,883   $ 6,499  
         
Liabilities and Shareholders’ Equity      
         
Current liabilities:      
  Debt with recourse to Constellation Software Inc. $ 480   $ 505   $ 142  
  Debt without recourse to Constellation Software Inc.   199     316     124  
  Redeemable preferred securities   409          
  Accounts payable and accrued liabilities   1,117     1,083     772  
  Dividends payable   21     21     21  
  Deferred revenue   1,994     1,485     1,536  
  Provisions   9     11     12  
  Acquisition holdback payables   140     161     119  
  Lease obligations   98     96     85  
  Income taxes payable   118     104     119  
      4,584     3,781     2,931  
         
Non-current liabilities:      
  Debt with recourse to Constellation Software Inc.   590     567     560  
  Debt without recourse to Constellation Software Inc.   793     586     443  
  Deferred income taxes   529     466     448  
  Acquisition holdback payables   68     76     60  
  Lease obligations   217     217     218  
  Other liabilities   237     257     200  
      2,434     2,170     1,930  
         
Total liabilities   7,018     5,950     4,860  
         
         
Shareholders’ equity:      
  Capital stock   99     99     99  
  Other equity            
  Accumulated other comprehensive income (loss)   (128 )   (150 )   (62 )
  Retained earnings   1,454     1,763     1,410  
  Non-controlling interests   419     221     191  
      1,845     1,933     1,638  
         
         
         
Total liabilities and shareholders’ equity $ 8,864   $ 7,883   $ 6,499  
         

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.)
         
       
Unaudited      
    Three months ended March 31,
      2023       2022  
         
         
Revenue      
License $ 81     $ 69  
Professional services   411       270  
Hardware and other   57       47  
Maintenance and other recurring   1,369       1,045  
      1,919       1,431  
         
Expenses      
Staff   1,068       783  
Hardware   35       27  
Third party license, maintenance and professional services   185       122  
Occupancy   13       11  
Travel, telecommunications, supplies, software and equipment   89       56  
Professional fees   36       24  
Other, net   38       35  
Depreciation   39       32  
Amortization of intangible assets   193       146  
      1,695       1,236  
         
         
Foreign exchange loss (gain)   10       0  
IRGA/TSS Membership liability revaluation charge   39       27  
Finance and other expense (income)   (7 )     (2 )
Bargain purchase gain   (1 )     (1 )
Impairment of intangible and other non-financial assets   2       1  
Redeemable preferred securities expense (income)   188        
Finance costs   36       19  
      267       44  
         
Income (loss) before income taxes   (43 )     151  
         
Current income tax expense (recovery)   103       99  
Deferred income tax expense (recovery)   (62 )     (58 )
Income tax expense (recovery)   40       40  
         
Net income (loss)   (83 )     111  
         
Net income (loss) attributable to:      
Common shareholders of Constellation Software Inc.   94       98  
Non-controlling interests   (177 )     13  
Net income (loss)   (83 )     111  
         
Earnings per common share of Constellation Software Inc.      
  Basic and diluted $ 4.44     $ 4.63  
         

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.)
       
       
Unaudited      
  Three months ended March 31,
    2023       2022  
       
Net income (loss) $ (83 )   $ 111  
       
Items that are or may be reclassified subsequently to net income (loss):      
       
Foreign currency translation differences from foreign operations and other, net of tax   16       6  
       
Other comprehensive income (loss), net of income tax   16       6  
       
Total comprehensive income (loss) $ (67 )   $ 116  
       
Total other comprehensive income (loss) attributable to:      
Common shareholders of Constellation Software Inc.   10       9  
Non-controlling interests   6       (3 )
Total other comprehensive income (loss) $ 16     $ 6  
       
Total comprehensive income (loss) attributable to:      
Common shareholders of Constellation Software Inc.   105       107  
Non-controlling interests   (171 )     9  
Total comprehensive income (loss) $ (67 )   $ 116  
       

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              
Three months ended March 31, 2023              
    Equity Attributable to Common Shareholders of CSI    
    Capital stock Other equity Accumulated other
comprehensive
income (loss)
Retained earnings Total Non-controlling
interests
Total equity
                 
Balance at January 1, 2023 $ 99 $   $ (150 ) $ 1,763   $ 1,713     221   $ 1,933  
                 
Total comprehensive income (loss):              
                 
Net income (loss)             94     94     (177 )   (83 )
                 
Other comprehensive income (loss)              
                 
Foreign currency translation differences from              
  foreign operations and other, net of tax         10         10     6     16  
                 
               
Total other comprehensive income (loss)         10         10     6     16  
                 
Total comprehensive income (loss)         10     94     105     (171 )   (67 )
                 
Transactions with owners, recorded directly in equity              
                 
Special dividend of Lumine Subordinate Voting Shares         12     (378 )   (366 )   366      
                 
Acquisition of non-controlling interests                     (1 )   (1 )
                 
Conversion of Lumine Special Shares to subordinate voting shares of Lumine                     1     1  
                 
Other movements in non-controlling interests         0     (4 )   (4 )   4     (0 )
                 
Dividends to shareholders of the Company             (21 )   (21 )       (21 )
                 
Balance at March 31, 2023 $ 99 $   $ (128 ) $ 1,454   $ 1,426   $ 419   $ 1,845  
                 

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              
Three months ended March 31, 2022              
                 
    Equity Attributable to Common Shareholders of CSI    
    Capital stock Other equity Accumulated other comprehensive income (loss) Retained earnings Total Non-controlling interests Total equity
                 
Balance at January 1, 2022 $ 99 $ (179 ) $ (66 ) $ 1,206   $ 1,061   $ 460   $ 1,521  
                 
Total comprehensive income (loss):              
                 
Net income (loss)             98     98     13     111  
                 
Other comprehensive income (loss)              
                 
Foreign currency translation differences from              
  foreign operations and other, net of tax         9         9     (3 )   6  
                 
Total other comprehensive income (loss)         9         9     (3 )   6  
                 
Total comprehensive income (loss)         9     98     107     9     116  
                 
Transactions with owners, recorded directly in equity              
                 
Conversion of redeemable preferred securities to subordinate voting shares of Topicus.com Inc. and ordinary units of Topicus Coop and other movements     305     (5 )       301     (301 )    
                   
Non-controlling interests arising from business combinations               23     23  
                   
Other movements in non-controlling interests         (0 )   (0 )   (0 )   (1 )
                   
Dividends to shareholders of the Company (note 12)             (21 )   (21 )       (21 )
                   
Reclassification of other equity to retained earnings     (127 )     127            
                 
Balance at March 31, 2022 $ 99 $   $ (62 ) $ 1,410   $ 1,447   $ 191   $ 1,638  
                 

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.)
           
           
Unaudited      
      Three months ended March 31,
        2023       2022  
           
Cash flows from (used in) operating activities:      
  Net income (loss) $ (83 )   $ 111  
  Adjustments for:      
    Depreciation   39       32  
    Amortization of intangible assets   193       146  
    IRGA/TSS Membership liability revaluation charge   39       27  
    Finance and other expense (income)   (7 )     (2 )
    Bargain purchase (gain)   (1 )     (1 )
    Impairment of intangible and other non-financial assets   2       1  
    Redeemable preferred securities expense (income)   188        
    Finance costs   36       19  
    Income tax expense (recovery)   40       40  
    Foreign exchange loss (gain)   10       0  
  Change in non-cash operating assets and liabilities      
    exclusive of effects of business combinations   268       169  
  Income taxes paid   (91 )     (44 )
  Net cash flows from (used in) operating activities   632       498  
           
Cash flows from (used in) financing activities:      
  Interest paid on lease obligations   (3 )     (2 )
  Interest paid on debt   (26 )     (10 )
  Increase (decrease) in CSI facility   (51 )      
  Increase (decrease) in Topicus revolving credit debt facility without recourse to CSI   (11 )     57  
  Proceeds from issuance of debt facilities without recourse to CSI   180       83  
  Repayments of debt facilities without recourse to CSI   (86 )     (7 )
  Other financing activities   2        
  Credit facility transaction costs   (2 )     (1 )
  Payments of lease obligations   (25 )     (22 )
  Distribution to the Joday Group         (23 )
  Dividends paid to redeemable preferred security holders         (7 )
  Dividends paid to common shareholders of the Company   (21 )     (21 )
  Net cash flows from (used in) in financing activities   (43 )     47  
           
Cash flows from (used in) investing activities:      
  Acquisition of businesses   (452 )     (214 )
  Cash obtained with acquired businesses   45       38  
  Post-acquisition settlement payments, net of receipts   (72 )     (33 )
  Purchases of investments and other assets   (31 )     (96 )
  Proceeds from sales of other investments   119       3  
  Interest, dividends and other proceeds received   3       0  
  Property and equipment purchased   (10 )     (8 )
  Net cash flows from (used in) investing activities   (398 )     (309 )
           
Effect of foreign currency on      
  cash   7       (2 )
           
Increase (decrease) in cash   199       233  
           
Cash, beginning of period $ 811     $ 763  
           
Cash, end of period $ 1,010     $ 996  
           

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