Constellation Software Inc. Announces Results for the First Quarter Ended March 31, 2011

TORONTO, ONTARIO--(Marketwire - May 4, 2011) - Constellation Software Inc. (TSX:CSU) ("Constellation" or the "Company") today announced its financial results for the three months ended March 31, 2011. Please note that all dollar amounts referred to in this press release are U.S. Dollars unless otherwise stated.

The following press release should be read in conjunction with the Unaudited Condensed Consolidated Interim Financial Statements for the three months ended March 31, 2011 and the accompanying notes, and with our annual Consolidated Financial Statements and our annual MD&A for the year ended December 31, 2010 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 2011 Highlights:

• Revenue grew 23% compared to Q1 2010. Organic revenue growth was 5% in Q1 2011 compared to negative 6% in Q1 2010.
• Adjusted EBITDA grew 47% compared to Q1 2010.
• Adjusted EBITDA margin was 20% in Q1 2011 compared to 16% in Q1 2010.
• Adjusted net income grew 43% compared to Q1 2010.
• Cash flow from operations grew 107% compared to Q1 2010.
• Two acquisitions, and a 50% investment in a third company, were completed in the quarter for net cash consideration of $10 million, and holdbacks related to prior acquisitions of $1 million were paid.
• Subsequent to March 31, 2011, the Company completed four acquisitions for aggregate cash consideration of $10 million plus holdbacks of $1 million.

First quarter revenue was $178 million, an increase of 23%, or $33 million, compared to $145 million for the comparable period in 2010.

Adjusted EBITDA for the first quarter 2011 was $35 million, a 47% increase compared to the prior year's first quarter Adjusted EBITDA of $24 million. First quarter Adjusted EBITDA per share on a fully diluted basis increased 47% to $1.65, compared to $1.13 for the same period last year.

Adjusted net income for the first quarter 2011 was $27 million, compared to the prior year's first quarter Adjusted net income of $19 million, a 43% increase. First quarter Adjusted net income per share on a fully diluted basis increased 43% to $1.28 compared to $0.89 for the prior year's first quarter.

Net income for the first quarter 2011 was $64 million, compared to the prior year's first quarter net income of $8 million. First quarter net income per share on a fully diluted basis increased 700% to $3.03 compared to $0.38 for the prior year's first quarter. The significant increase in net income in the first quarter of 2011 was due to an increase in deferred income tax recovery of $52 million compared to the same period in 2010. The increase in income tax recovery was primarily due to the transfer of certain intangible assets from one subsidiary to another during the period. A deferred tax asset was recorded on the increase in fair market value arising on the sale of intellectual property between entities within the Company at the purchaser's tax rate notwithstanding that the gains are not otherwise recorded for financial reporting. The deferred income tax recovery being recorded through profit or loss represents the amount of these deferred income tax deductions that the Company has determined will be utilized for income tax purposes in the future. These deductions will be available to the Company over a fifteen year period and, as such, the Company expects a reduction in the current income tax rate in 2011 as a percent of Adjusted net income before tax as compared to 2010.

The following table displays our revenue by reportable segment and the percentage change for the three months ended March 31, 2011 compared to the same periods in 2010:

Public Sector

For the quarter ended March 31, 2011, total revenue in the public sector reportable segment increased 18%, or $20 million, to $131 million, compared to $111 million for the quarter ended March 31, 2010. The increase was significant across all revenue types other than professional services which decreased 4%, or $2 million, to $33 million, compared to $35 million for the quarter ended March 31, 2010. Revenue growth from acquired businesses was significant as we completed eleven acquisitions since the beginning of 2010 in our public sector segment. It is estimated that acquisitions completed since the beginning of 2010 contributed approximately $16 million to our Q1 2011 revenues. Revenues increased organically by 4% or $5 million in Q1 2011 compared to the same period in 2010.

Private Sector

For the quarter ended March 31, 2011, total revenue in the private sector reportable segment increased 39%, or $13 million, to $47 million, compared to $34 million for the quarter ended March 31, 2010. Revenue growth from acquired businesses was significant for the three month period as we completed thirteen acquisitions since the beginning of 2010 in our private sector segment. It is estimated that acquisitions completed since the beginning of 2010 contributed approximately $10 million to our Q1 2011 revenues. Revenues increased organically by 9% or $3 million in Q1 2011 compared to the same period in 2010.

Constellation's bank indebtedness, net of cash, increased to $55 million at March 31, 2011 as compared to $15 million at December 31, 2010, mainly due to a $42 million dividend payment. Following the Board of Directors decision on April 4, 2011 to undertake a review of strategic alternatives for the Company with the objective of enhancing shareholder value, the Company suspended negotiations of a new $250 million credit facility with a new syndicate of lenders that would have replaced the existing $160 million facility. There is no defined timeline for this strategic review and there can be no assurance that this review will result in any specific action. The negotiations for the new credit facility will not resume until the outcome of the review is completed.

Outlook

For fiscal 2011, the Company expects gross revenue to be in the range of $725 million to $750 million and Adjusted EBITDA to be in the range of $145 million to $170 million. These statements are "forward looking statements" and are based on various assumptions which management believes are reasonable under the current circumstances. Although management believes the assumptions are reasonable in the current circumstances, they are subject to various risks and uncertainties and there are several factors that could cause actual results to differ materially from those specified above. See "Forward Looking Statements".

Conference Call and Webcast

Management will host a conference call at 8:30 a.m. (ET) on Thursday, May 5, 2011 to answer questions regarding the results. The teleconference numbers are 416-695-6616 or 800-355-4959. The call will also be webcast live and archived on Constellation's web site at www.csisoftware.com.

A replay of the conference call will be available as of 11:30 a.m. ET the same day until 11:59 p.m. ET on May 19, 2011. To access the replay, please dial 905-694-9451 or 800-408-3053 followed by the passcode 6571482#.

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. Specifically, the statements included under "Outlook" above are forward looking and are based on the assumptions that revenue growth will be in the range of 15%-19% for fiscal 2011 (which includes the impact of all companies acquired to date and a moderate increase in organic growth over the recent performance of the Company), Adjusted EBITDA margins will be in the range of 20-23% for fiscal 2011 (which represents a moderate increase over the recent performance of the Company), no material acquisitions will be completed during the remainder of fiscal 2011 and general economic and market conditions will remain consistent with those in effect on May 4, 2011. Forward looking statements involve significant risks and uncertainties, and 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, including the risk that revenue can fluctuate significantly based on the demand for our software products, level of product and price competition, the geographical mix of our sales together with fluctuations in foreign currency, changes in mix and pricing of software solutions that our customers demand, our ability to successfully implement projects, order cancellations, renewal of maintenance agreements with customers, and patterns of spending and changes in budgeting cycles of our customers, and the risk that Adjusted EBITDA can fluctuate significantly based on the pricing and mix of software solutions that we sell, our customer demand, the geographical mix of our sales and cost base together with fluctuations in foreign currency exchange rates, and employee bonuses which are based on the performance of the Company. 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

This press release includes certain measures which have not been prepared in accordance with IFRS such as Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted net income margin.

The term "Adjusted EBITDA" refers to net income before deducting finance income, finance costs, income taxes, depreciation, amortization, and foreign exchange loss (gain). The Company believes that Adjusted EBITDA is useful supplemental information as it provides an indication of the results generated by the Company's main business activities prior to taking into consideration how those activities are financed and taxed and also prior to taking into consideration asset depreciation and the other items listed above. "Adjusted EBITDA margin" refers to the percentage that Adjusted EBITDA for any period represents as a portion of total revenue for that period.

"Adjusted net income" means net income plus non-cash expenses (income) such as amortization of intangible assets, deferred income taxes, and certain other expenses (income). The Company believes that Adjusted net income is useful supplemental information as it provides an indication of the results generated by the Company's main business activities prior to taking into consideration amortization of intangible assets, deferred income taxes, and certain other non-cash expenses (income) incurred by the Company from time to time. "Adjusted net income margin" refers to the percentage that Adjusted net income for any period represents as a portion of total revenue for that period.

Adjusted EBITDA and Adjusted net income are not recognized measures under IFRS and, accordingly, shareholders are cautioned that Adjusted EBITDA and Adjusted net income should not be construed as alternatives to net income determined in accordance with IFRS. The Company's method of calculating Adjusted EBITDA and Adjusted net income may differ from other issuers and, accordingly, Adjusted EBITDA and Adjusted net income may not be comparable to similar measures presented by other issuers.

About Constellation Software Inc.

Constellation's common shares are listed on the Toronto Stock Exchange under the symbol "CSU". Constellation Software is an international provider of market leading software and services to a number of industries across both the public and private sectors. The Company acquires, manages and builds vertical market software businesses that provide mission-critical software solutions to address the specific needs of its customers in those industries.