Constellation Software Inc. Announces Results for the

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

	2019	2018	$		%		%		2019	2018	$	%		%
	($M, except percentages)								($M, except percentages)
Public Sector
Licenses	36	29	7		26	%	0	%	70	57	13	22	%	-4	%
Professional services	125	114	11		10	%	-6	%	247	225	22	10	%	-6	%
Hardware and other	33	36	(2	)	-7	%	-17	%	64	62	1	2	%	-11	%
Maintenance and other recurring	369	322	47		15	%	1	%	732	642	91	14	%	1	%
	564	500	63		13	%	-2	%	1,113	986	127	13	%	-2	%

Private Sector
Licenses	25	19	5		27	%	15	%	44	35	9	26	%	11	%
Professional services	38	39	(0	)	-1	%	-11	%	74	70	5	6	%	-6	%
Hardware and other	7	7	0		1	%	-6	%	14	14	0	0	%	-9	%
Maintenance and other recurring	212	186	25		14	%	2	%	420	366	53	15	%	2	%
	282	252	30		12	%	1	%	552	485	67	14	%	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

Constellation Software Inc. Announces Results for the Second Quarter Ended June 30, 2019 and Declares Quarterly Dividend