TORONTO, Feb. 13, 2020 (GLOBE NEWSWIRE) -- Constellation Software Inc. (TSX:CSU) (“Constellation” or the “Company”) today announced its financial results for the fourth quarter and year ended December 31, 2019 and declared a $1.00 per share dividend payable on April 7, 2020 to all common shareholders of record at close of business on March 16, 2020. 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 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, 2019, 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.

Q4 2019 Headlines:

  • Revenue grew 15% (negative 3% organic growth, negative 2% after adjusting for changes in foreign exchange rates) to $956 million compared to $831 million in Q4 2018. 
  • Net income decreased 49% to $92 million ($4.34 on a diluted per share basis) from $179 million ($8.46 on a diluted per share basis) in Q4 2018.  Excluding the amortization of intangible assets expense and bargain purchase gains net income decreased 1%.
  • A number of acquisitions were completed for aggregate cash consideration of $141 million (which includes acquired cash).  Deferred payments associated with these acquisitions have an estimated value of $33 million resulting in total consideration of $175 million.
  • Cash flows from operations (“CFO”) (after adjusting for the impact of IFRS 16 Leases, which was adopted on January 1, 2019) were $236 million, an increase of 13%, or $28 million, compared to $208 million for the comparable period in 2018.
  • Free cash flow available to shareholders (“FCFA2S”) increased $14 million to $193 million compared to $180 million for the same period in 2018 representing an increase of 8%.   
  • Subsequent to December 31, 2019, the Company completed or entered into agreements to acquire a number of businesses for aggregate cash consideration of $63 million (which includes acquired cash).  Deferred payments associated with these acquisitions have an estimated value of $42 million resulting in total consideration of $104 million. 

2019 Headlines:

  • Revenue grew 14% (negative 1% organic growth, positive 1% after adjusting for changes in foreign exchange rates) to $3,490 million compared to $3,060 million in 2018. 
  • Net income decreased 12% to $333 million ($15.73 on a diluted per share basis) from $379 million ($17.91 on a diluted per share basis) in 2018.  Excluding the amortization of intangible assets expense and bargain purchase gains net income increased 5%.
  • A number of acquisitions were completed for aggregate cash consideration of $549 million (which includes acquired cash).  Deferred payments associated with these acquisitions have an estimated value of $139 million resulting in total consideration of $688 million.
  • Cash flows from operations (“CFO”) (after adjusting for the impact of IFRS 16 Leases, which was adopted on January 1, 2019) were $708 million, an increase of 7%, or $46 million, compared to $662 million for the comparable period in 2018.
  • Free cash flow available to shareholders (“FCFA2S”) increased $32 million to $590 million compared to $559 million for the same period in 2018 representing an increase of 6%.   

Total revenue for the quarter ended December 31, 2019 was $956 million, an increase of 15%, or $125 million, compared to $831 million for the comparable period in 2018.  For the year ended December 31, 2019 total revenues were $3,490 million, an increase of 14%, or $430 million, compared to $3,060 million for the comparable period in 2018.  The increase for both the three and twelve 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 negative 3% and negative 1% respectively, negative 2% and positive 1% after adjusting for the impact of changes in the valuation of the US dollar against most major currencies in which the Company transacts business.

Net income for the quarter ended December 31, 2019 was $92 million compared to net income of $179 million for the same period in 2018.  On a per share basis, this translated into a net income per diluted share of $4.34 in the quarter ended December 31, 2019 compared to net income per diluted share of $8.46 for the same period in 2018.  For the year ended December 31, 2019, net income was $333 million or $15.73 per diluted share compared to $379 million or $17.91 per diluted share for the same period in 2018.

For the quarter ended December 31, 2019, CFO increased $46 million to $255 million compared to $208 million for the same period in 2018 representing an increase of 22%.  For the year ended December 31, 2019, CFO increased $105 million to $767 million compared to $662 million during the same period in 2018, representing an increase of 16%.  In conjunction with the Company’s adoption of IFRS 16 on January 1, 2019, lease obligation and interest payments that have historically been deducted from CFO are now recorded as a component of cash flows used in financing activities.  For the three and twelve months ended December 31, 2019 lease obligation and interest payments totaled $19 million and $59 million respectively.  If lease obligation and interest payments were deducted from CFO for the three and twelve months ended December 31, 2019 the increase in CFO would have been 13% and 7% over the same periods in 2018.

For the quarter ended December 31, 2019, FCFA2S increased $14 million to $193 million compared to $180 million for the same period in 2018 representing an increase of 8%.  For the year ended December 31, 2019, FCFA2S increased $32 million to $590 million compared to $559 million during the same period in 2018, representing an increase of 6%.  The primary reason for the large variance between the 6% growth in FCFA2S and the 14% revenue growth for the year-ended December 31, 2019 is that FCFA2S includes the impact of changes in non-cash operating assets and liabilities exclusive of effects of business combinations or “changes in non-cash operating working capital”.  For the year ended December 31, 2019 there was $28 million of cash used in non-cash operating working capital compared to $14 million of cash generated from non-cash operating working capital for the same period in 2018. 

The following table displays our revenue by reportable segment and the percentage change for the three and twelve months ended December 31, 2019 compared to the same periods in 2018:

               
   Three months ended
December 31,
Period-Over-
Period Change
Organic
Growth
 Year ended
December 31,
Period-Over-
Period Change
Organic
Growth
 
               
   20192018$%% 20192018$%% 
   ($ in millions, except percentages) ($ in millions, except percentages) 
 Public Sector             
 Licenses 41338 24%-4% 14312122 18%-7% 
 Professional services 14713215 12%-8% 52247151 11%-7% 
 Hardware and other 4251(9)-17%-25% 143146(3)-2%-13% 
 Maintenance and other recurring42534085 25%3% 1,5441,309235 18%2% 
   65555699 18%-2% 2,3532,047305 15%-2% 
               
 Private Sector             
 Licenses 2124(4)-15%-20% 83776 8%-3% 
 Professional services 4141(0)0%-8% 1511447 5%-7% 
 Hardware and other 972 26%-2% 30282 7%-8% 
 Maintenance and other recurring23020228 14%0% 873763110 14%1% 
   30027526 9%-3% 1,1381,013125 12%-1% 
               
 Due to rounding, certain totals may not foot and certain percentages may not reconcile.        

For purposes of calculating organic growth, estimated pre-acquisition revenue from the relevant companies acquired in 2018 and 2019 was added to actual reported revenue for the three and twelve months ended December 31, 2018.

Public Sector

For the quarter ended December 31, 2019, total revenue in the public sector reportable segment increased 18%, or $99 million to $655 million, compared to $556 million for the quarter ended December 31, 2018.  For the year ended December 31, 2019, total revenue increased by 15%, or $305 million to $2,353 million, compared to $2,047 million for the comparable period in 2018.  For purposes of calculating organic growth, estimated pre-acquisition revenues included from the relevant companies acquired in 2018 and 2019 was $115 million and $351 million for the three and twelve month periods ended December 31, 2019, respectively.  Organic revenue growth was negative 2% for both the three and twelve months ended December 31, 2019 compared to the same periods in 2018, and negative 1% and 0% respectively after adjusting for the impact of changes in the valuation of the US dollar against most major currencies in which the Company transacts business. 

Private Sector

For the quarter ended December 31, 2019, total revenue in the private sector reportable segment increased 9%, or $26 million to $300 million, compared to $275 million for the quarter ended December 31, 2018.  For the year ended December 31, 2019, total revenue increased by 12%, or $125 million to $1,138 million, compared to $1,013 million for the comparable period in 2018. For purposes of calculating organic growth, estimated pre-acquisition revenues included from the relevant companies acquired in 2018 and 2019 was $36 million and $132 million for the three and twelve month periods ended December 31, 2019, respectively.  Organic revenue growth was negative 3% and negative 1% for the three and twelve months ended December 31, 2019 respectively compared to the same periods in 2018, and negative 2% and positive 2% respectively after adjusting for the impact of changes in the valuation of the US dollar against most major currencies in which the Company transacts business.

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
December 31,
   Year ended
December 31,
  
    2019 2018    2019 2018   
   ($ in millions, except percentages) ($ in millions, except percentages) 
             
 Net cash flows from operating activities  255 208    767 662   
 Adjusted for:           
 Interest paid on lease obligations  (2)-    (7)-   
 Interest paid on other facilities  (8)(7)   (31)(24)  
 Credit facility transaction costs  (2)(1)   (3)(4)  
 Payments of lease obligations  (17)-    (51)-   
 TSS membership liability revaluation charge  (22)(18)   (52)(55)  
 Property and equipment purchased  (10)(7)   (34)(25)  
 Interest and dividends received  0 4    3 5   
             
 Free cash flow available to shareholders  193 180    590 559   
             
 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.)
           
           
         December 31, 2019December 31, 2018
           
Assets        
           
Current assets:        
 Cash      $316 $589 
 Accounts receivable      422  362 
 Unbilled revenue      110  80 
 Inventories       31  34 
 Other assets      184  143 
          1,062  1,207 
           
Non-current assets:       
 Property and equipment     78  67 
 Right of use assets      234  - 
 Deferred income taxes      45  47 
 Other assets      72  64 
 Intangible assets 1,997  1,549 
          2,425  1,728 
           
Total assets      $3,488 $2,935 
           
Liabilities and Shareholders' Equity    
           
Current liabilities:       
 CSI facility      $63 $- 
 Debt without recourse to Constellation Software Inc.   57  51 
 TSS membership liability     86  67 
 Accounts payable and accrued liabilities    529  464 
 Dividends payable      21  21 
 Deferred revenue      788  657 
 Provisions       13  7 
 Acquisition holdback payables     76  47 
 Lease obligations      62  - 
 Income taxes payable      36  30 
          1,732  1,344 
           
Non-current liabilities:       
 Debt without recourse to Constellation Software Inc.   153  102 
 TSS membership liability     136  117 
 Debentures       222  215 
 Deferred income taxes      246  192 
 Acquisition holdback payables     25  25 
 Lease obligations      187  - 
 Other liabilities      101  74 
          1,069  725 
           
Total liabilities       2,800  2,069 
           
           
Shareholders' equity:       
 Capital stock      99  99 
 Accumulated other comprehensive income (loss)   (40) (37)
 Retained earnings      628  804 
          687  866 
           
           
Total liabilities and shareholders' equity   $3,488 $2,935 
           


CONSTELLATION SOFTWARE INC.
Consolidated Statements of Income   
(In millions of U.S. dollars, except per share amounts.  Due to rounding, numbers presented may not foot.)
    
    
    
 Years ended December 31,
  2019   2018 
    
    
Revenue   
License$226  $198 
Professional services 673   616 
Hardware and other 173   175 
Maintenance and other recurring 2,417   2,072 
  3,490   3,060 
    
Expenses   
Staff 1,797   1,565 
Hardware 101   96 
Third party license, maintenance and professional services 300   265 
Occupancy 35   78 
Travel, telecommunications, supplies, software and equipment 201   181 
Professional fees 49   39 
Other, net 73   52 
Depreciation 92   27 
Amortization of intangible assets 331   279 
  2,979   2,582 
    
    
Foreign exchange loss (gain) 11   (3)
TSS membership liability revaluation charge 52   55 
Finance and other expense (income) (4)  (17)
Bargain purchase gain (45)  (69)
Finance costs 42   26 
  55   (8)
    
Income before income taxes 456   486 
    
Current income tax expense (recovery) 164   127 
Deferred income tax expense (recovery) (41)  (20)
Income tax expense (recovery) 123   106 
    
Net income 333   379 
    
Earnings per share   
Basic and diluted$15.73  $17.91 
    


CONSTELLATION SOFTWARE INC.    
Consolidated Statements of Comprehensive Income    
(In millions of U.S. dollars, except per share amounts.  Due to rounding, numbers presented may not foot.)
           
     
           
        Years ended December 31,
         2019   2018 
           
Net income     $333  $379 
           
Items that are or may be reclassified subsequently to net income:    
           
Foreign currency translation differences from foreign operations  (4)  (10)
           
Deferred income tax recovery (expense)  -   - 
           
Other comprehensive (loss) income for the period, net of income tax  (4)  (10)
           
Total comprehensive income (loss) for the period $330  $369 


CONSTELLATION SOFTWARE INC.  
Consolidated Statements of Changes in Equity  
(In millions of U.S. dollars, except per share amounts.  Due to rounding, numbers presented may not foot.)
       
       
Year ended December 31, 2019    
   Capital
stock
Accumulated other
comprehensive (loss) income
Retained earningsTotal
       
    Cumulative translation account 
       
Balance at January 1, 2019$  99 $  (37)$  804  $  866  
       
Total comprehensive income for the period:    
       
Net income  - -  333  333 
       
Other comprehensive income (loss)    
       
Foreign currency translation differences from    
 foreign operations - (4) -  (4)
       
Total other comprehensive income (loss)    
 for the period   -     (4)   -      (4)
       
Total comprehensive income (loss) for the period   -     (4)   333     330  
       
Transactions with owners, recorded directly in equity    
Dividends to shareholders of the Company - -  (509) (509)
       
Balance at December 31, 2019$  99 $  (40)$  628  $  687  


CONSTELLATION SOFTWARE INC.  
Consolidated Statements of Changes in Equity  
(In millions of U.S. dollars, except per share amounts.  Due to rounding, numbers presented may not foot.)
       
       
Year ended December 31, 2018    
       
   Capital
stock
Accumulated other
comprehensive (loss) income
Retained earningsTotal
       
    Cumulative translation account 
       
Balance at January 1, 2018$  99 $  (27)$  532  $  604  
       
Impact of change in accounting policy - -  (23) (23)
       
Total comprehensive income for the period:    
       
Net income - -  379  379 
       
Other comprehensive income (loss)    
       
Foreign currency translation differences from    
 foreign operations - (10) -  (10)
       
Total other comprehensive income for the period   -     (10)   -      (10)
       
Total comprehensive income for the period   -     (10)   379     369  
       
Transactions with owners, recorded directly in equity    
Dividends to shareholders of the Company - -  (85) (85)
       
Balance at December 31, 2018$  99 $  (37)$  804  $  866  


CONSTELLATION SOFTWARE INC.   
Consolidated Statements of Cash Flows   
(In millions of U.S. dollars, except per share amounts.  Due to rounding, numbers presented may not foot.)
           
    
           
        Years ended December 31,
         2019   2018 
           
Cash flows from operating activities:   
 Net income   $333  $379 
 Adjustments for:     
  Depreciation   92   27 
  Amortization of intangible assets 331   279 
  TSS membership liability revaluation charge 52   55 
  Finance and other expense (income) (4)  (17)
  Bargain purchase (gain) (45)  (69)
  Finance costs   42   26 
  Income tax expense (recovery) 123   106 
  Foreign exchange loss (gain) 11   (3)
 Change in non-cash operating assets and liabilities   
  exclusive of effects of business combinations (28)  14 
 Income taxes paid (140)  (135)
 Net cash flows from operating activities 767   662 
           
Cash flows from (used in) financing activities:   
 Interest paid on lease obligations  (7)  - 
 Interest paid on other facilities  (31)  (24)
 Increase (decrease) in CSI facility  65   - 
 Increase (decrease) in revolving credit under debt facilities without recourse to CSI 5   (46)
 Proceeds from issuance of term debt under facilities without recourse to CSI 49   110 
 Repayments of term debt under facilities without recourse to CSI (2)  (1)
 Credit facility transaction costs (3)  (4)
 Payments of lease obligations  (51)  - 
 Distribution to TSS minority owners  (11)  - 
 Dividends paid (509)  (85)
 Net cash flows from (used in) in financing activities (496)  (49)
           
Cash flows from (used in) investing activities:   
 Acquisition of businesses (549)  (523)
 Cash obtained with acquired businesses  118   118 
 Post-acquisition settlement payments, net of receipts (74)  (80)
 Purchases of other investments  (11)  (3)
 Interest, dividends and other proceeds received 6   5 
 Property and equipment purchased (34)  (25)
 Net cash flows from (used in) investing activities (544)  (508)
           
Effect of foreign currency on   
 cash and cash equivalents 1   (6)
           
Increase (decrease) in cash (273)  100 
           
Cash, beginning of period 589   489 
           
Cash, end of period$316  $589