TORONTO, May 01, 2019 (GLOBE NEWSWIRE) -- Constellation Software Inc. (TSX:CSU) (“Constellation” or the “Company”) today announced its financial results for the first quarter ended March 31, 2019 and declared a $1.00 per share dividend payable on July 8, 2019 to all common shareholders of record at close of business on June 14, 2019. 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, 2019 and the accompanying notes, our Management Discussion and Analysis for the three months ended March 31, 2019 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, 2018, 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 2019 Headlines:

  • Revenue grew 14% (negative 1% organic growth, positive 3% after adjusting for changes in foreign exchange rates) to $819 million compared to $718 million in Q1 2018.
  • Adjusted EBITA increased $21 million or 13% to $179 million as compared to $159 million in Q1 2018.
  • Net income increased 5% to $87 million ($4.09 on a diluted per share basis) from $83 million ($3.90 on a diluted per share basis) in Q1 2018.
  • Adjusted net income decreased 11% to $127 million ($5.97 on a diluted per share basis) from $143 million ($6.73 on a diluted per share basis) in Q1 2018.
  • A number of acquisitions were completed for aggregate cash consideration of $47 million (which includes acquired cash).  Deferred payments associated with these acquisitions have an estimated value of $22 million resulting in total consideration of $70 million.
  • Cash flows from operations were $284 million, an increase of 10%, or $26 million, compared to $258 million for the comparable period in 2018.

Total revenue for the quarter ended March 31, 2019 was $819 million, an increase of 14%, or $100 million, compared to $718 million for the comparable period in 2018. The increase is primarily attributable to growth from acquisitions as the Company experienced organic growth of negative 1%, positive 3% 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. 

For the quarter ended March 31, 2019, Adjusted EBITA increased to $179 million compared to $159 million for the same period in 2018 representing an increase of 13%.  Adjusted EBITA margin was 22% for both periods.   Included in the Q1 2019 results was an EBITA loss of $13 million relating to a business acquired in Q4 2018.  The seller of that business capitalized the balance sheet on closing with cash in the amount of €47 million ($53 million) that will be utilized to fund expected losses generated by the business.  Based on current estimates an EBITA loss of approximately $20 million inclusive of restructuring costs, will be recorded by the business in the full year 2019 results.  There was no current income tax recovery recorded in Q1 2019 associated with these losses.     

Net income for the quarter ended March 31, 2019 was $87 million compared to net income of $83 million for the same period in 2018.  On a per share basis this translated into a net income per diluted share of $4.09 in the quarter ended March 31, 2019 compared to net income per diluted share of $3.90 for the same period in 2018.

For the quarter ended March 31, 2019, Adjusted net income decreased to $127 million from $143 million for the same period in 2018, representing a decrease of 11%.  Adjusted net income margin was 15% for the quarter ended March 31, 2019 and 20% for the same period in 2018.  Excluding the impact of the $1 million unrealized foreign exchange loss in Q1 2019, and the $14 million unrealized foreign exchange gain and an $8 million financial liability accrual reversal recorded to finance and other income in Q1 2018, the margins would have been 16% and 17% for Q1 2019 and Q1 2018 respectively.   

For the quarter ended March 31, 2019 Cash flows from operations were $284 million, an increase of 10%, or $26 million, compared to $258 million for the comparable period in 2018. 

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

      
 Three months
ended March 31,
Period-Over-
Period Change
Organic
Growth
      
 20192018$%%
 ($M, except percentages)
Public Sector     
Licenses34295 18%-7%
Professional services12211111 10%-7%
Hardware and other30264 14%-2%
Maintenance and other recurring36432044 14%1%
 54948664 13%-2%
      
Private Sector     
Licenses19154 24%7%
Professional services36315 15%-1%
Hardware and other66(0)-1%-12%
Maintenance and other recurring20818028 16%2%
 26923336 16%2%
      
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 months ended March 31, 2018.

Public Sector

For the quarter ended March 31, 2019, total revenue in the public sector reportable segment increased 13%, or $64 million to $549 million, compared to $486 million for the quarter ended March 31, 2018.  For purposes of calculating organic growth, estimated pre-acquisition revenues included from the relevant companies acquired in 2018 and 2019 was $73 million for the three months ended March 31, 2018.  Organic revenue growth was negative 2% for the three months ended March 31, 2019 compared to the same period in 2018, and positive 2% 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 March 31, 2019, total revenue in the private sector reportable segment increased 16%, or $36 million to $269 million, compared to $233 million for the quarter ended March 31, 2018.  For purposes of calculating organic growth, estimated pre-acquisition revenues included from the relevant companies acquired in 2018 and 2019 was $32 million for the three months ended March 31, 2018.  Organic revenue growth was 2% in for the three months ended March 31, 2019 compared to the same period in 2018, and 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.

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

The term ‘‘Adjusted EBITA’’ refers to net income before adjusting for finance and other income, bargain purchase gain, finance costs, income taxes, share in net income or loss of equity investees, impairment of non-financial assets, amortization, TSS membership liability revaluation charge, and foreign exchange gain or loss.  The Company believes that Adjusted EBITA 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 intangible asset amortization and the other items listed above.  ‘‘Adjusted EBITA margin’’ refers to the percentage that Adjusted EBITA for any period represents as a portion of total revenue for that period.

‘‘Adjusted net income’’ means net income adjusted for non-cash expenses (income) such as amortization of intangible assets, deferred income taxes, the TSS membership liability revaluation charge, and certain other expenses (income), and excludes the portion of the adjusted net income of Total Specific Solutions (TSS) B.V. (“TSS”) attributable to the minority owners of TSS.  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, the TSS membership liability revaluation charge, and certain other non-cash expenses (income) incurred or recognized by the Company from time to time, and adjusts for the portion of TSS’ Adjusted net income not attributable to shareholders of Constellation.  ‘‘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 EBITA and Adjusted net income are not recognized measures under IFRS and, accordingly, readers are cautioned that Adjusted EBITA 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 EBITA and Adjusted net income may differ from other issuers and, accordingly, Adjusted EBITA and Adjusted net income may not be comparable to similar measures presented by other issuers.  Adjusted EBITA includes 100% of the Adjusted EBITA of TSS.

The following table reconciles Adjusted EBITA to net income:

     
  Three months ended
March 31,
 
  20192018 
  ($M, except percentages) 
     
Total revenue 819 718  
     
Net income 87 83  
Adjusted for:    
Income tax expense (recovery) 28 19  
Foreign exchange (gain) loss 1 (14) 
TSS membership liability revaluation charge 10 7  
Finance and other income (3)(9) 
Bargain purchase gain (28)(0) 
Finance costs 9 5  
Amortization of intangible assets 75 69  
     
Adjusted EBITA 179 159  
Adjusted EBITA margin 22%22% 
     
Due to rounding, certain totals may not foot and certain percentages may not reconcile.
     

The following table reconciles Adjusted net income to net income:

     
  Three months ended
March 31,
 
  20192018 
  ($M, except percentages) 
     
Total revenue 819 718  
     
Net income 87 83  
Adjusted for:    
Amortization of intangible assets 75 69  
TSS membership liability revaluation charge 10 7  
Bargain purchase gain (28)(0) 
Less non-controlling interest in the Adjusted    
net income of TSS (9)(7) 
Deferred income tax expense (recovery) (8)(8) 
     
Adjusted net income 127 143  
Adjusted net income margin 15%20% 
     
Due to rounding, certain totals may not foot and certain percentages may not reconcile.
 

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.
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, 2019 December 31, 2018 
    
Assets  
    
Current assets:  
 Cash$717 $589 
 Accounts receivable 362  362 
 Unbilled revenue 97  80 
 Inventories 39  34 
 Other assets 165  143 
   1,380  1,207 
    
Non-current assets:  
 Property and equipment 67  67 
 Right of use assets 209  - 
 Deferred income taxes 48  47 
 Other assets 65  64 
 Intangible assets 1,556  1,549 
   1,944  1,728 
    
Total assets$3,324 $2,935 
    
Liabilities and Shareholders' Equity  
    
Current liabilities:  
 CSI facility$- $- 
 Debt without recourse to Constellation Software Inc. 1  51 
 TSS membership liability 65  67 
 Accounts payable and accrued liabilities 388  464 
 Dividends payable 445  21 
 Deferred revenue 877  657 
 Provisions 19  7 
 Acquisition holdback payables 47  47 
 Lease obligations 51  - 
 Income taxes payable 38  30 
   1,931  1,344 
    
Non-current liabilities:  
 Debt without recourse to Constellation Software Inc. 104  102 
 TSS membership liability 114  117 
 Debentures 218  215 
 Deferred income taxes 195  192 
 Acquisition holdback payables 12  25 
 Lease obligations 170  - 
 Other liabilities 74  74 
   888  725 
    
Total liabilities 2,820  2,069 
    
    
Shareholders' equity:  
 Capital stock 99  99 
 Accumulated other comprehensive income (loss) (40) (37)
 Retained earnings 445  804 
   505  866 
    
    
    
Total liabilities and shareholders' equity$3,324 $2,935 
    

 

  
CONSTELLATION SOFTWARE INC.
Condensed Consolidated Interim Statements of Income
(In millions of U.S. dollars, except per share amounts.  Due to rounding, numbers presented may not foot.)
   
Three months ended March 31, 2019 and 2018  
Unaudited  
 Three months ended March 31,
 2019 2018 
   
   
Revenue  
License$53 $44 
Professional services 158  142 
Hardware and other 36  33 
Maintenance and other recurring 572  500 
  819  718 
   
Expenses  
Staff 445  389 
Hardware 21  18 
Third party license, maintenance and professional services 69  61 
Occupancy 9  19 
Travel, telecommunications, supplies, software and equipment 44  42 
Professional fees 11  10 
Other, net 21  13 
Depreciation 21  7 
Amortization of intangible assets 75  69 
  715  628 
   
   
Foreign exchange loss (gain) 1  (14)
TSS membership liability revaluation charge 10  7 
Finance and other expense (income) (3) (9)
Bargain purchase (gain) (28) (0)
Finance costs 9  5 
  (11) (11)
   
Income before income taxes 115  101 
   
Current income tax expense (recovery) 36  26 
Deferred income tax expense (recovery) (8) (8)
Income tax expense (recovery) 28  19 
   
Net income 87  83 
   
Earnings per share  
Basic and diluted$4.09 $3.90 
   
   

 

   
CONSTELLATION SOFTWARE INC.
Condensed Consolidated Interim Statements of Comprehensive Income
(In millions of U.S. dollars, except per share amounts.  Due to rounding, numbers presented may not foot.)
   
Three months ended March 31, 2019 and 2018  
Unaudited  
 Three months ended March 31,
  2019  2018 
   
Net income$87 $83 
   
Items that are or may be reclassified subsequently to net income:  
   
Foreign currency translation differences from foreign operations (3) (4)
   
Deferred income tax recovery (expense) -  - 
   
Other comprehensive (loss) income for the period, net of income tax (3) (4)
   
Total comprehensive income (loss) for the period$83 $78 
   

 

   
CONSTELLATION SOFTWARE INC.
Condensed Consolidated Interim Statements 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, 2019    
 Capital
stock

 Accumulated other
comprehensive income/(loss)
Retained earnings
 Total
 
  Cumulative translation account   
     
Balance at January 1, 2019$   99  $   (37)$   804  $   866  
     
Total comprehensive income for the period:    
     
Net income -  -  87  87 
     
Other comprehensive income (loss)    
     
Foreign currency translation differences from    
foreign operations -  (3) -  (3)
     
Total other comprehensive income (loss)    
for the period   -      (3)   -      (3)
     
Total comprehensive income (loss) for the period   -      (3)   87     83  
     
Transactions with owners, recorded directly in equity    
Dividends to shareholders of the Company -  -  (445) (445)
     
Balance at March 31, 2019$   99  $   (40)$   445  $   505  
     

 

 
CONSTELLATION SOFTWARE INC.
Condensed Consolidated Interim Statements 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, 2018    
     
 Capital
stock

 Accumulated other comprehensive income/(loss)Retained earnings
 Total
 
  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 -  -  83  83 
     
Other comprehensive income (loss)    
     
Foreign currency translation differences from    
foreign operations -  (4) -  (4)
     
Total other comprehensive income for the period   -      (4)   -      (4)
     
Total comprehensive income for the period   -      (4)   83     78  
     
Transactions with owners, recorded directly in equity    
Dividends to shareholders of the Company -  -  (21) (21)
     
Balance at March 31, 2018$   99  $   (31)$   570  $   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.)
     
Three months ended March 31, 2019 and 2018  
Unaudited  
   Three months ended March 31,
   2019 2018 
     
Cash flows from operating activities:  
 Net income$87 $83 
 Adjustments for:  
  Depreciation 21  7 
  Amortization of intangible assets 75  69 
  TSS membership liability revaluation charge 10  7 
  Finance and other expense (income) (3) (9)
  Bargain purchase (gain) (28) (0)
  Finance costs 9  5 
  Income tax expense (recovery) 28  19 
  Foreign exchange loss (gain) 1  (14)
 Change in non-cash operating assets and liabilities  
  exclusive of effects of business combinations 123  147 
 Income taxes paid (38) (55)
 Net cash flows from operating activities 284  258 
     
Cash flows from (used in) financing activities:  
 Interest paid on lease obligations (2) - 
 Interest paid on other facilities (8) (5)
 Increase (decrease) in New CNH Facility, net (51) (58)
 Repayments of Acceo facility (0) - 
 Repayments of lease obligations (10) - 
 Distribution to TSS minority owners (11) - 
 Dividends paid (21) (21)
 Net cash flows from (used in) in financing activities (103) (84)
     
Cash flows from (used in) investing activities:  
 Acquisition of businesses (47) (320)
 Cash obtained with acquired businesses 25  23 
 Post-acquisition settlement payments, net of receipts (26) (17)
 Interest, dividends and other proceeds received 3  1 
 Property and equipment purchased (7) (4)
 Net cash flows from (used in) investing activities (52) (317)
     
Effect of foreign currency on  
 cash and cash equivalents (1) 2 
     
Increase (decrease) in cash 128  (141)
     
Cash, beginning of period 589  489 
     
Cash, end of period$717 $348