TORONTO, Aug. 02, 2019 (GLOBE NEWSWIRE) -- Constellation Software Inc. (TSX:CSU) (“Constellation” or the “Company”) today announced its financial results for the second quarter ended June 30, 2019 and declared a $1.00 per share dividend payable on October 7, 2019 to all common shareholders of record at close of business on September 16, 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 and six months ended June 30, 2019 and the accompanying notes, our Management Discussion and Analysis for the three and six months ended June 30, 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.

Q2 2019 Headlines:

  • Revenue grew 12% (negative 1% organic growth, positive 2% after adjusting for changes in foreign exchange rates) to $846 million compared to $752 million in Q2 2018. 
  • Adjusted EBITA increased $33 million or 19% to $208 million as compared to $175 million in Q2 2018.  Adjusted EBITA margin was 25% as compared to 23% in Q2 2018.
  • Net income increased 41% to $73 million ($3.45 on a diluted per share basis) from $52 million ($2.45 on a diluted per share basis) in Q2 2018.
  • Adjusted net income increased 13% to $137 million ($6.49 on a diluted per share basis) from $122 million ($5.75 on a diluted per share basis) in Q2 2018.    
  • A number of acquisitions were completed for aggregate cash consideration of $82 million (which includes acquired cash).  Deferred payments associated with these acquisitions have an estimated value of $28 million resulting in total consideration of $110 million.
  • Cash flows from operations (after adjusting for the impact of IFRS 16 Leases, which was adopted on January 1, 2019) were $36 million, a decrease of 32%, or $17 million, compared to $53 million for the comparable period in 2018.
  • Subsequent to June 30, 2019, the Company completed or entered into agreements to acquire a number of businesses for aggregate cash consideration of $190 million (which includes acquired cash).  Deferred payments associated with these acquisitions have an estimated value of $30 million resulting in total consideration of $221 million. 

Total revenue for the quarter ended June 30, 2019 was $846 million, an increase of 12%, or $94 million, compared to $752 million for the comparable period in 2018.  For the first six months of 2019 total revenues were $1,665 million, an increase of 13%, or $194 million, compared to $1,471 million for the comparable period in 2018.  The increase for both the three and six 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 1% in both periods, 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.

For the quarter ended June 30, 2019, Adjusted EBITA increased to $208 million compared to $175 million for the same period in 2018 representing an increase of 19%.  For the first six months of 2019, Adjusted EBITA increased to $387 million compared to $334 million during the same period in 2018, representing an increase of 16%.  Adjusted EBITA margin was 25% and 23% for the three and six months ended June 30, 2019 respectively, compared to 23% during the same periods in 2018.

Net income for the quarter ended June 30, 2019 was $73 million compared to net income of $52 million for the same period in 2018.  On a per share basis, this translated into a net income per diluted share of $3.45 in the quarter ended June 30, 2019 compared to net income per diluted share of $2.45 for the same period in 2018.  For the six months ended June 30, 2019, net income was $160 million or $7.54 per diluted share compared to $135 million or $6.35 per diluted share for the same period in 2018.

For the quarter ended June 30, 2019, Adjusted net income increased to $137 million from $122 million for the same period in 2018, representing an increase of 13%.  Adjusted net income margin was 16% for the quarter ended June 30, 2019 and 16% for the same period in 2018.  For the first six months of 2019 and 2018, Adjusted net income was $264 million.  Adjusted net income margin was 16% for the six months ended June 30, 2019 and 18% for the same period in 2018.  Excluding the impact of the unrealized foreign exchange (gain) loss recorded in each of the three and six month periods ended June 30, 2018 and 2019, and the $7.9 million financial liability accrual reversal recorded to finance and other income in Q1 2018, the margins would have been 18% and 17% for the respective periods in 2019, and 17% for both the respective periods in 2018.

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 cash flows from operations are now recorded as a component of cash flows used in financing activities. For the three and six months ended June 30, 2019, lease obligation and interest payments totaled $15 million and $26 million respectively. Cash flows from operations for the quarter ended June 30, 2019 after deducting these lease related payments were $36 million, a decrease of 32%, or $17 million, compared to $53 million for the comparable period in 2018. Cash flows from operations for the six months ended June 30, 2019 after deducting these lease related payments were $308 million, a decrease of 1%, or $2 million, compared to $311 million for the comparable period in 2018.

The following table displays our revenue by reportable segment and the percentage change for the three and six months ended June 30, 2019 compared to the same periods in 2018:

             
  Three months ended
June 30,
Period-Over-
Period Change
Organic
Growth
 Six months ended
June 30,
Period-Over-
Period Change
Organic
Growth
             
  20192018$%% 20192018$%%
  ($M, except percentages) ($M, except percentages)
Public Sector            
Licenses 36 297 26%0% 70571322%-4%
Professional services 125 11411 10%-6% 2472252210%-6%
Hardware and other 33 36(2)-7%-17% 646212%-11%
Maintenance and other recurring 369 32247 15%1% 7326429114%1%
  564 50063 13%-2% 1,11398612713%-2%
             
Private Sector            
Licenses 25 195 27%15% 4435926%11%
Professional services 38 39(0)-1%-11% 747056%-6%
Hardware and other 7 70 1%-6% 141400%-9%
Maintenance and other recurring212 18625 14%2% 4203665315%2%
  282 25230 12%1% 5524856714%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 six months ended June 30, 2018.

Public Sector

For the quarter ended June 30, 2019, total revenue in the public sector reportable segment increased 13%, or $63 million to $564 million, compared to $500 million for the quarter ended June 30, 2018.  For the six months ended June 30, 2019, total revenue increased by 13%, or $127 million to $1,113 million, compared to $986 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 $73 million and $146 million for the three and six month periods ended June 30, 2018, respectively.  Organic revenue growth was negative 2% for both the three and six months ended June 30, 2019 compared to the same periods in 2018, 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. 

Private Sector

For the quarter ended June 30, 2019, total revenue in the private sector reportable segment increased 12%, or $30 million to $282 million, compared to $252 million for the quarter ended June 30, 2018.  For the six months ended June 30, 2019, total revenue increased by 14%, or $67 million to $552 million, compared to $485 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 $28 million and $60 million for the three and six month periods ended June 30, 2018, respectively.  Organic revenue growth was 1% for both the three and six months ended June 30, 2019 compared to the same periods in 2018, and 4% 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
June 30,
   Six months ended
June 30,
 
   2019 2018
   2019
2018
 
  ($M, except percentages) ($M, except percentages)
           
Total revenue  846 752    1,665 1,471  
           
Net income  73 52    160 135  
Adjusted for:          
Income tax expense (recovery)  30 27    58 46  
Foreign exchange (gain) loss  13 9    15 (5) 
TSS membership liability revaluation charge  8 14    18 21  
Finance and other income  (0)(1)   (3)(10) 
Bargain purchase gain  - (0)   (28)(0) 
Finance costs  9 5    18 10  
Amortization of intangible assets  75 70    151 139  
           
Adjusted EBITA  208 175    387 334  
Adjusted EBITA margin  25%23%   23%23% 
           
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 June 30,   Six months ended June 30, 
   2019
2018
   2019
2018
 
  ($M, except percentages) ($M, except percentages)
           
Total revenue  846 752    1,665 1,471  
             
Net income  73 52    160 135  
Adjusted for:            
Amortization of intangible assets  75 70    151 139  
TSS membership liability revaluation charge  8 14    18 21  
Bargain purchase gain  - (0)   (28)(0) 
Less non-controlling interest in the Adjusted            
net income of TSS  (7)(6)   (16)(13) 
Deferred income tax expense (recovery)  (12)(8)   (20)(16) 
             
Adjusted net income  137 122    264 264  
Adjusted net income margin  16%16%   16%18% 
           
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
   June 30, 2019  December 31, 2018 
         
Assets       
         
Current assets:       
 Cash $214 $589 
 Accounts receivable  368  362 
 Unbilled revenue  105  80 
 Inventories  45  34 
 Other assets  183  143 
    915  1,207 
         
Non-current assets:       
 Property and equipment  69  67 
 Right of use assets  211  - 
 Deferred income taxes  48  47 
 Other assets  66  64 
 Intangible assets 1,621  1,549 
    2,014  1,728 
         
Total assets $2,929 $2,935 
         
Liabilities and Shareholders' Equity       
         
Current liabilities:       
 CSI facility $- $- 
 Debt without recourse to Constellation Software Inc.  11  51 
 TSS membership liability  69  67 
 Accounts payable and accrued liabilities  400  464 
 Dividends payable  22  21 
 Deferred revenue  802  657 
 Provisions  17  7 
 Acquisition holdback payables  53  47 
 Lease obligations  54  - 
 Income taxes payable  25  30 
    1,452  1,344 
         
Non-current liabilities:       
 Debt without recourse to Constellation Software Inc.  106  102 
 TSS membership liability  121  117 
 Debentures  222  215 
 Deferred income taxes  202  192 
 Acquisition holdback payables  15  25 
 Lease obligations  170  - 
 Other liabilities  76  74 
    913  725 
         
Total liabilities  2,365  2,069 
         
         
Shareholders' equity:       
 Capital stock  99  99 
 Accumulated other comprehensive income (loss)  (32) (37)
 Retained earnings  497  804 
    564  866 
         
         
Total liabilities and shareholders' equity $2,929 $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 and six months ended June 30, 2019 and 2018      
Unaudited        
  Three months ended June 30, Six months ended June 30,
   2019   2018   2019   2018 
                 
                 
Revenue                
License $61  $48  $113  $92 
Professional services  164   153   322   295 
Hardware and other  41   43   77   76 
Maintenance and other recurring  581   508   1,152   1,008 
   846   752   1,665   1,471 
                 
Expenses                
Staff  437   390   882   780 
Hardware  22   24   43   42 
Third party license, maintenance and professional services  73   67   142   128 
Occupancy  9   20   17   39 
Travel, telecommunications, supplies, software and equipment 49   45   93   87 
Professional fees  11   9   22   19 
Other, net  15   15   36   28 
Depreciation  21   7   42   13 
Amortization of intangible assets  75   70   151   139 
   713   647   1,428   1,275 
                 
                 
Foreign exchange loss (gain)  13   9   15   (5)
TSS membership liability revaluation charge  8   14   18   21 
Finance and other expense (income)  (0)  (1)  (3)  (10)
Bargain purchase (gain)  -   (0)  (28)  (0)
Finance costs  9   5   18   10 
   30   26   19   15 
                 
Income before income taxes  103   79   218   180 
                 
Current income tax expense (recovery)  42   35   78   61 
Deferred income tax expense (recovery)  (12)  (8)  (20)  (16)
Income tax expense (recovery)  30   27   58   46 
                 
Net income  73   52   160   135 
                 
Earnings per share                
Basic and diluted $3.45  $2.45  $7.54  $6.35 
                 
                 

 

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 and six months ended June 30, 2019 and 2018      
Unaudited       
 Three months ended June 30, Six months ended June 30,
  2019  2018   2019  2018 
              
Net income$73 $52  $160 $135 
              
Items that are or may be reclassified subsequently to net income:             
              
Foreign currency translation differences from foreign operations 8  (3)  4  (7)
              
Deferred income tax recovery (expense) -  -   -  - 
              
Other comprehensive (loss) income for the period, net of income tax 8  (3)  4  (7)
              
Total comprehensive income (loss) for the period$81 $49  $164 $128 
              

 

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    
Six months ended June 30, 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 - -  160  160 
             
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     160     164  
             
Transactions with owners, recorded directly in equity           
 Dividends to shareholders of the Company - -  (466) (466)
             
Balance at June 30, 2019$   99 $   (32)$   497  $   564  

 

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    
Six months ended June 30, 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 - -  135  135 
             
Other comprehensive income (loss)           
             
Foreign currency translation differences from           
 foreign operations - (7) -  (7)
             
Total other comprehensive income for the period   -     (7)   -      (7)
             
Total comprehensive income for the period   -     (7)   135     128  
             
Transactions with owners, recorded directly in equity           
 Dividends to shareholders of the Company - -  (42) (42)
             
Balance at June 30, 2018$   99 $   (34)$   600  $   666  
             

 

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 six months ended June 30, 2019 and 2018       
Unaudited       
   Three months ended June 30, Six months ended June 30,
    2019   2018   2019   2018 
                  
Cash flows from operating activities:               
 Net income$73  $52  $160  $135 
 Adjustments for:               
  Depreciation 21   7   42   13 
  Amortization of intangible assets 75   70   151   139 
  TSS membership liability revaluation charge 8   14   18   21 
  Finance and other expense (income) (0)  (1)  (3)  (10)
  Bargain purchase (gain) -   (0)  (28)  (0)
  Finance costs 9   5   18   10 
  Income tax expense (recovery) 30   27   58   46 
  Foreign exchange loss (gain) 13   9   15   (5)
 Change in non-cash operating assets and liabilities               
  exclusive of effects of business combinations (130)  (102)  (7)  45 
 Income taxes paid (49)  (27)  (88)  (82)
 Net cash flows from operating activities 50   53   334   311 
                  
Cash flows from (used in) financing activities:               
 Interest paid on lease obligations (2)  -   (4)  - 
 Interest paid on other facilities (7)  (5)  (15)  (11)
 Increase (decrease) in revolving credit debt facilities without recourse to CSI 11   23   (40)  (35)
 Repayments of term debt facilities without recourse to CSI (1)  -   (1)  - 
 Repayments of lease obligations (13)  -   (23)  - 
 Distribution to TSS minority owners -   -   (11)  - 
 Dividends paid (445)  (21)  (466)  (42)
 Net cash flows from (used in) in financing activities (457)  (3)  (560)  (87)
                  
Cash flows from (used in) investing activities:               
 Acquisition of businesses (82)  (43)  (130)  (362)
 Cash obtained with acquired businesses 10   17   35   40 
 Post-acquisition settlement payments, net of receipts (12)  (15)  (37)  (32)
 Purchases of other investments (6)  -   (6)  - 
 Interest, dividends and other proceeds received 1   1   3   1 
 Property and equipment purchased (8)  (8)  (15)  (12)
 Net cash flows from (used in) investing activities (97)  (48)  (149)  (365)
                  
Effect of foreign currency on               
 cash and cash equivalents 1   (5)  0   (3)
                  
Increase (decrease) in cash (503)  (4)  (375)  (145)
                  
Cash, beginning of period 717   348   589   489 
                  
Cash, end of period 214   344   214   344