Constellation Software Inc. Announces Results for the

TORONTO, Aug. 11, 2023 (GLOBE NEWSWIRE) -- Constellation Software Inc. (TSX:CSU) (“Constellation” or the “Company”) today announced its financial results for the second quarter ended June 30, 2023 and declared a $1.00 per share dividend payable on October 11, 2023 to all common shareholders of record at close of business on September 20, 2023. 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, 2023 and the accompanying notes, our Management Discussion and Analysis for the three and six months ended June 30, 2023 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, 2022, which can be found on SEDAR at www.sedarplus.ca and on the Company’s website www.csisoftware.com. Additional information about the Company is also available on SEDAR at www.sedarplus.ca

Q2 2023 and Subsequent Headlines:

Revenue grew 26% (4% organic growth, 5% after adjusting for changes in foreign exchange rates) to $2,039 million compared to $1,618 million in Q2 2022.
A $94 million expense related to the increase in fair value of redeemable preferred securities was incurred in the quarter, which is non-cash related. Fair value of the preferred securities is primarily dependent on the price movement of Lumine Group Inc.’s (TSXV:LMN) Subordinate Voting Shares.
Net income attributable to common shareholders decreased 18% to $103 million ($4.88 on a diluted per share basis) from $126 million ($5.94 on a diluted per share basis) in Q2 2022.
A number of acquisitions were completed for aggregate cash consideration of $392 million (which includes acquired cash). Deferred payments associated with these acquisitions have an estimated value of $114 million resulting in total consideration of $506 million.
Cash flows from operations (“CFO”) were $123 million, an increase of 58%, or $45 million, compared to $78 million for the comparable period in 2022.
Free cash flow available to shareholders¹ (“FCFA2S”) increased 22% or $3 million to $14 million compared to $12 million for the same period in 2022.
On July 17, 2023, the Company announced that its Perseus operating group has entered into a binding commitment with Intercontinental Exchange, Inc. and Black Knight, Inc. to acquire Black Knight’s Optimal Blue business for $700 million.
On August 3, 2023 the Company announced a rights offering pursuant to which the Company intends to distribute rights that will entitle holders of common shares of the Company on the applicable record date to purchase up to C$700 million aggregate principal amount of Debentures of the Company.

Total revenue for the quarter ended June 30, 2023 was $2,039 million, an increase of 26%, or $421 million, compared to $1,618 million for the comparable period in 2022. For the first six months of 2023 total revenues were $3,958 million, an increase of 30%, or $908 million, compared to $3,050 million for the comparable period in 2022. 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 4% and 3% respectively, 5% for both periods after adjusting for the impact of changes in the valuation of the US dollar against most major currencies in which the Company transacts business. Organic growth is not a standardized financial measure and might not be comparable to measures disclosed by other issuers.

The Net income attributable to common shareholders of CSI for the quarter ended June 30, 2023 was $103 million compared to net income of $126 million for the same period in 2022. On a per share basis this translated into a net income per diluted share of $4.88 in the quarter ended June 30, 2023 compared to net income per diluted share of $5.94 for the same period in 2022. For the six months ended June 30, 2023, net income attributable to common shareholders of CSI was $198 million or $9.32 per diluted share compared to $224 million or $10.58 per diluted share for the same period in 2022.

For the quarter ended June 30, 2023, CFO increased $45 million to $123 million compared to $78 million for the same period in 2022 representing a increase of 58%. For the first six months of 2023, CFO increased $179 million to $755 million compared to $576 million during the same period in 2022, representing a increase of 31%.

For the quarter ended June 30, 2023, FCFA2S increased $3 million to $14 million compared to $12 million for the same period in 2022 representing an increase of 22%. For the six months ended June 30, 2023, FCFA2S increased $133 million to $467 million compared to $335 million for the same period in 2022 representing an increase of 40%.

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 IRGA / TSS membership liability revaluation charge, and property and equipment purchased, and includes interest and dividends received, and the proceeds from sale of interest rate caps. The portion of this amount applicable to non-controlling interests is then deducted. We believe that FCFA2S is useful supplemental information as it provides an indication of the uncommitted cash flow that is available to shareholders if we do not make any acquisitions, or investments, and do not repay any debts. While we could use the FCFA2S to pay dividends or repurchase shares, our objective is to invest all of our FCFA2S in acquisitions which meet our 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 June 30,					Six months ended June 30,
		2023		2022			2023		2022
	($ in millions)					($ in millions)

Net cash flows from operating activities		123		78			755		576
Adjusted for:
Interest paid on lease obligations		(3	)	(3	)		(5	)	(5	)
Interest paid on other facilities		(36	)	(16	)		(62	)	(26	)
Proceeds from sale of interest rate cap		6		-			6		-
Credit facility transaction costs		(1	)	(2	)		(3	)	(3	)
Payments of lease obligations		(28	)	(23	)		(53	)	(45	)
IRGA / TSS membership liability revaluation charge		(31	)	(29	)		(69	)	(56	)
Property and equipment purchased		(9	)	(12	)		(19	)	(19	)
Interest and dividends received		0		0			1		0

		21		(7	)		550		422
Less amount attributable to
Non-controlling interests		(7	)	18			(83	)	(87	)

Free cash flow available to shareholders		14		12			467		335

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.
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, 2023			December 31, 2022			June 30, 2022

Assets

Current assets:
	Cash	$	970		$	811		$	676
	Accounts receivable		976			892			758
	Unbilled revenue		305			218			212
	Inventories		56			48			45
	Other assets		459			497			512
			2,767			2,465			2,203

Non-current assets:
	Property and equipment		128			128			128
	Right of use assets		285			283			284
	Deferred income taxes		89			159			114
	Other assets		189			172			145
	Intangible assets		5,730			4,667			4,447
			6,422			5,410			5,117

Total assets		$	9,188		$	7,875		$	7,320

Liabilities and Shareholders' Equity

Current liabilities:
	Debt with recourse to Constellation Software Inc.	$	734		$	505		$	389
	Debt without recourse to Constellation Software Inc.		283			316			206
	Redeemable preferred securities		500			-			-
	Accounts payable and accrued liabilities		1,084			1,082			883
	Dividends payable		21			21			21
	Deferred revenue		1,867			1,484			1,555
	Provisions		11			11			10
	Acquisition holdback payables		148			159			140
	Lease obligations		98			96			96
	Income taxes payable		77			99			81
			4,824			3,772			3,380

Non-current liabilities:
	Debt with recourse to Constellation Software Inc.		614			567			541
	Debt without recourse to Constellation Software Inc.		795			586			746
	Deferred income taxes		530			466			455
	Acquisition holdback payables		104			75			62
	Lease obligations		216			218			222
	Other liabilities		237			257			244
			2,496			2,169			2,269

Total liabilities			7,320			5,941			5,650


Shareholders' equity:
	Capital stock		99			99			99
	Accumulated other comprehensive income (loss)		(112	)		(150	)		(147	)
	Retained earnings		1,547			1,763			1,514
	Non-controlling interests		335			221			204
			1,868			1,933			1,670



Total liabilities and shareholders' equity		$	9,188		$	7,875		$	7,320

CONSTELLATION SOFTWARE INC.
Condensed Consolidated Interim Statements of Income (loss)
(In millions of U.S. dollars, except per share amounts. Due to rounding, numbers presented may not foot.)


Unaudited
		Three months ended June 30,						Six months ended June 30,
			2023			2022			2023			2022


Revenue
License		$	89		$	72		$	170		$	141
Professional services			428			340			840			610
Hardware and other			63			50			121			97
Maintenance and other recurring			1,459			1,156			2,828			2,201
			2,039			1,618			3,958			3,050

Expenses
Staff			1,112			873			2,179			1,656
Hardware			36			29			71			56
Third party license, maintenance and professional services			199			153			384			276
Occupancy			13			12			26			23
Travel, telecommunications, supplies, software and equipment			97			80			185			135
Professional fees			36			28			71			52
Other, net			29			32			67			68
Depreciation			40			35			79			67
Amortization of intangible assets			213			168			406			314
			1,774			1,411			3,469			2,647


Foreign exchange loss (gain)			16			(42	)		26			(42	)
IRGA/TSS Membership liability revaluation charge			31			29			69			56
Finance and other expense (income)			(2	)		18			(9	)		15
Bargain purchase gain			0			(0	)		(1	)		(1	)
Impairment of intangible and other non-financial assets			1			0			3			1
Redeemable preferred securities expense (income)			94			-			282			-
Finance costs			46			25			82			44
			186			30			453			74

Income (loss) before income taxes			79			177			36			328

Current income tax expense (recovery)			114			110			217			209
Deferred income tax expense (recovery)			(61	)		(67	)		(123	)		(126	)
Income tax expense (recovery)			53			43			93			83

Net income (loss)			26			134			(57	)		245

Net income (loss) attributable to:
Common shareholders of Constellation Software Inc.			103			126			198			224
Non-controlling interests			(78	)		8			(255	)		21
Net income (loss)			26			134			(57	)		245

Earnings per common share of Constellation Software Inc.
	Basic and diluted	$	4.88		$	5.94		$	9.32		$	10.58

CONSTELLATION SOFTWARE INC.
Condensed Consolidated Interim Statements of Comprehensive Income (Loss)
(In millions of U.S. dollars, except per share amounts. Due to rounding, numbers presented may not foot.)


Unaudited
	Three months ended June 30,						Six months ended June 30,
		2023			2022			2023			2022

Net income (loss)	$	26		$	134		$	(57	)	$	245

Items that are or may be reclassified subsequently to net income (loss):

Foreign currency translation differences from foreign operations and other, net of tax		15			(96	)		31			(91	)

Other comprehensive income (loss), net of income tax		15			(96	)		31			(91	)

Total comprehensive income (loss)	$	41		$	38		$	(26	)	$	154

Total other comprehensive income (loss) attributable to:
Common shareholders of Constellation Software Inc.		15			(85	)		26			(76	)
Non-controlling interests		0			(11	)		6			(15	)
Total other comprehensive income (loss)	$	15		$	(96	)	$	31		$	(91	)

Total comprehensive income (loss) attributable to:
Common shareholders of Constellation Software Inc.		118			41			223			148
Non-controlling interests		(77	)		(3	)		(249	)		6
Total comprehensive income (loss)	$	41		$	38		$	(26	)	$	154

CONSTELLATION SOFTWARE INC.
Condensed Consolidated Interim Statement 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, 2023
		Equity Attributable to Common Shareholders of CSI
		Capital stock		Other equity		Accumulated other comprehensive income (loss)				Retained earnings			Total			Non-controlling interests		Total equity

Balance at January 1, 2023		$	99	$	-	$	(150	)	$	1,763		$	1,713			221		$	1,933

Total comprehensive income (loss):

Net income (loss)			-		-		-			198			198			(255	)		(57	)

Other comprehensive income (loss)

Foreign currency translation differences from
	foreign operations and other, net of tax		-		-		26			-			26			6			31


Total other comprehensive income (loss)			-		-		26			-			26			6			31

Total comprehensive income (loss)			-		-		26			198			223			(249	)		(26	)

Transactions with owners, recorded directly in equity

Special dividend of Lumine Subordinate Voting Shares			-		-		12			(378	)		(366	)		366			-

Acquisition of non-controlling interests			-		-		-			-			-			(1	)		(1	)

Conversion of Lumine Special Shares to subordinate voting shares of Lumine			-		-		-			-			-			4			4

Other movements in non-controlling interests			-		-		0			6			6			(6	)		0

Dividends to shareholders of the Company			-		-		-			(42	)		(42	)		-			(42	)

Balance at June 30, 2023		$	99	$	-	$	(112	)	$	1,547		$	1,533		$	335		$	1,868

CONSTELLATION SOFTWARE INC.
Condensed Consolidated Interim Statement 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, 2022

	Equity Attributable to Common Shareholders of CSI
	Capital stock		Other equity			Accumulated other comprehensive income (loss)			Retained earnings			Total			Non-controlling interests			Total equity

Balance at January 1, 2022	$	99	$	(179	)	$	(66	)	$	1,206		$	1,061		$	460		$	1,521

Total comprehensive income (loss):

Net income (loss)		-		-			-			224			224			21			245

Other comprehensive income (loss)

Foreign currency translation differences from
foreign operations and other, net of tax		-		-			(76	)		-			(76	)		(15	)		(91	)

Total other comprehensive income (loss)		-		-			(76	)		-			(76	)		(15	)		(91	)

Total comprehensive income (loss)		-		-			(76	)		224			148			6			154

Transactions with owners, recorded directly in equity

Conversion of redeemable preferred securities to subordinate voting shares of Topicus.com Inc. and ordinary units of Topicus Coop and other movements		-		305			(5	)		-			301			(301	)		-

Non-controlling interests arising from business combinations		-											-			40			40

Other movements in non-controlling interests		-								(1	)		(1	)		(1	)		(2	)

Dividends to shareholders of the Company (note 12)		-		-			-			(42	)		(42	)		-			(42	)

Reclassification of other equity to retained earnings		-		(127	)					127			-						-

Balance at June 30, 2022	$	99	$	-		$	(147	)	$	1,514		$	1,466		$	204		$	1,670

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.)


Unaudited
				Three months ended June 30,						Six months ended June 30,
				2023			2022			2023			2022

Cash flows from (used in) operating activities:
	Net income (loss)		$	26		$	134		$	(57	)	$	245
	Adjustments for:
		Depreciation		40			35			79			67
		Amortization of intangible assets		213			168			406			314
		IRGA/TSS Membership liability revaluation charge		31			29			69			56
		Finance and other expense (income)		(2	)		18			(9	)		15
		Bargain purchase (gain)		0			(0	)		(1	)		(1	)
		Impairment of intangible and other non-financial assets		1			0			3			1
		Redeemable preferred securities expense (income)		94			-			282			-
		Finance costs		46			25			82			44
		Income tax expense (recovery)		53			43			93			83
		Foreign exchange loss (gain)		16			(42	)		26			(42	)
	Change in non-cash operating assets and liabilities
		exclusive of effects of business combinations		(238	)		(188	)		30			(18	)
	Income taxes paid			(158	)		(146	)		(249	)		(190	)
	Net cash flows from (used in) operating activities			123			78			755			576

Cash flows from (used in) financing activities:
	Interest paid on lease obligations			(3	)		(3	)		(5	)		(5	)
	Interest paid on debt			(36	)		(16	)		(62	)		(26	)
	Proceeds from sale of interest rate cap			6			-			6			-
	Increase (decrease) in CSI facility			240			237			189			237
	Increase (decrease) in Topicus revolving credit debt facility without recourse to CSI			49			48			38			105
	Proceeds from issuance of debt facilities without recourse to CSI			75			342			254			425
	Repayments of debt facilities without recourse to CSI			(42	)		(6	)		(128	)		(13	)
	Other financing activities			(2	)		2			1			2
	Credit facility transaction costs			(1	)		(2	)		(3	)		(3	)
	Payments of lease obligations			(28	)		(23	)		(53	)		(45	)
	Distribution to the Joday Group			-			-			-			(23	)
	Dividends paid to redeemable preferred security holders			-			-			-			(7	)
	Dividends paid to common shareholders of the Company			(21	)		(21	)		(42	)		(42	)
	Net cash flows from (used in) in financing activities			238			559			195			605

Cash flows from (used in) investing activities:
	Acquisition of businesses			(393	)		(1,000	)		(845	)		(1,214	)
	Cash obtained with acquired businesses			48			110			93			148
	Post-acquisition settlement payments, net of receipts			(61	)		(26	)		(133	)		(59	)
	Purchases of investments and other assets			(16	)		-			(18	)		(96	)
	Proceeds from sales of other investments and other assets			-			-			119			3
	Decrease (increase) in restricted cash			29			-			(0	)		-
	Interest, dividends and other proceeds received			0			3			3			4
	Property and equipment purchased			(9	)		(12	)		(19	)		(19	)
	Net cash flows from (used in) investing activities			(402	)		(924	)		(800	)		(1,233	)

Effect of foreign currency on
	cash			1			(33	)		8			(35	)

Increase (decrease) in cash				(40	)		(321	)		159			(87	)

Cash, beginning of period			$	1,010		$	996		$	811		$	763

Cash, end of period			$	970		$	676		$	970		$	676

Constellation Software Inc. Announces Results for the Second Quarter Ended June 30, 2023 and Declares Quarterly Dividend