Press-Releases

Constellation Software Inc. Announces Results for the Third


TORONTO, Nov. 09, 2023 (GLOBE NEWSWIRE) — Constellation Software Inc. (TSX:CSU) (“Constellation” or the “Company”) today announced its financial results for the third quarter ended September 30, 2023 and declared a $1.00 per share dividend payable on January 11, 2024 to all common shareholders of record at close of business on December 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 nine months ended September 30, 2023 and the accompanying notes, our Management Discussion and Analysis for the three and nine months ended September 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

Q3 2023 and Subsequent Headlines:

  • Revenue grew 23% (8% organic growth, 6% after adjusting for changes in foreign exchange rates) to $2,126 million compared to $1,725 million in Q3 2022.  
  • A $37 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 increased 30% to $177 million ($8.36 on a diluted per share basis) from $136 million ($6.42 on a diluted per share basis) in Q3 2022.
  • On September 14, 2023, the Company completed the acquisition of the Optimal Blue business from Intercontinental Exchange, Inc. The Company paid cash of $201 million and assumed an estimated cash holdback payable of $1 million and a long-term promissory note payable of $500 million.
  • A number of additional acquisitions were completed for aggregate cash consideration of $187 million (which includes acquired cash). Deferred payments associated with these acquisitions have an estimated value of $37 million resulting in total consideration of $223 million.
  • Cash flows from operations (“CFO”) were $513 million, an increase of 60%, or $192 million, compared to $321 million for the comparable period in 2022.
  • Free cash flow available to shareholders1 (“FCFA2S”) increased 60% or $138 million to $367 million compared to $229 million for the same period in 2022.
  • On October 6, 2023, a total of $157 million (C$213 million) principal amount of Debentures were issued at a price of C$133.00 per C$100.00 principal amount of Debentures purchased, representing proceeds to the Company of $209 million (C$283 million) which was used by the Company to pay down indebtedness under its existing credit facility.

Total revenue for the quarter ended September 30, 2023 was $2,126 million, an increase of 23%, or $401 million, compared to $1,725 million for the comparable period in 2022. For the first nine months of 2023 total revenues were $6,084 million, an increase of 27%, or $1,309 million, compared to $4,774 million for the comparable period in 2022. The increase for both the three and nine 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 8% and 5% respectively, 6% and 5% respectively 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.

1. See Non-IFRS measures.
   

The Net income attributable to common shareholders of CSI for the quarter ended September 30, 2023 was $177 million compared to net income of $136 million for the same period in 2022. On a per share basis this translated into a net income per diluted share of $8.36 in the quarter ended September 30, 2023 compared to net income per diluted share of $6.42 for the same period in 2022. For the nine months ended September 30, 2023, net income attributable to common shareholders of CSI was $375 million or $17.68 per diluted share compared to $360 million or $16.99 per diluted share for the same period in 2022.

For the quarter ended September 30, 2023, CFO increased $192 million to $513 million compared to $321 million for the same period in 2022 representing a increase of 60%. For the first nine months of 2023, CFO increased $371 million to $1,268 million compared to $897 million during the same period in 2022, representing an increase of 41%.

For the quarter ended September 30, 2023, FCFA2S increased $138 million to $367 million compared to $229 million for the same period in 2022 representing an increase of 60%. For the nine months ended September 30, 2023, FCFA2S increased $272 million to $835 million compared to $563 million for the same period in 2022 representing an increase of 48%.  

The board of directors of Constellation announced today the appointment of Lawrence Cunningham and Dexter Salna to the Company’s Board of Directors.

Lawrence A. Cunningham is the Managing Partner of the Quality Shareholders Group (a boutique investor relations consultancy) since 2017 and Special Counsel, Mayer Brown LLP, since January 2023. Mr. Cunningham served as the Henry St. George Tucker III Research Professor of Law at George Washington University from 2007 to 2022 (elected emeritus in 2022). He has served on several public, private, and non-profit boards. He currently is a Director of Markel Group (New York Stock Exchange) and of Kelly Partners Group (Australia Stock Exchange). Mr. Cunningham also is a Trustee of the Museum of American Finance; a member of the Dean’s Council of Lerner College of Business at the University of Delaware; a member of the Editorial Board of Financial History; and a member of the Advisory Board for the Ben Graham Centre for Value Investing at Ivey Business School. Mr. Cunningham has written extensively on corporate affairs, including the best-selling book, The Essays of Warren Buffett. In 2018, he received the B. Kenneth West Lifetime Achievement Award from the National Association of Corporate Directors (NACD; in 2023, he delivered Delaware Law School’s 37th Annual F.G. Pileggi Distinguished Lecture in Corporate Law.

Dexter Salna joined Constellation in 1995 and is currently the Chairman of the Perseus operating group within Constellation and oversees its Romulus and Digital Marketing portfolios of software businesses. Prior to his current position, Mr. Salna held various senior executive positions within the Volaris operating group of Constellation.

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
September 30,
  Nine months ended
September 30,
 
  2023 2022   2023 2022  
  ($ in millions)   ($ in millions)  
             
Net cash flows from operating activities 513   321       1,268   897      
Adjusted for:            
Interest paid on lease obligations (3 ) (3 )     (8 ) (8 )    
Interest paid on other facilities (34 ) (23 )     (96 ) (49 )    
Proceeds from sale of interest rate cap (1 )       5        
Credit facility transaction costs (1 ) (0 )     (4 ) (3 )    
Payments of lease obligations (25 ) (24 )     (78 ) (69 )    
IRGA / TSS membership liability revaluation charge (25 ) (33 )     (94 ) (89 )    
Property and equipment purchased (10 ) (8 )     (29 ) (27 )    
Interest and dividends received 0   0       1   0      
             
  415   230       965   652      
Less amount attributable to
   Non-controlling interests
(47 ) (1 )     (129 ) (89 )    
             
Free cash flow available to shareholders 367   229       835   563      
             
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  
    September 30, 2023       December 31, 2022       September 30, 2022    
                         
Assets                        
                         
Current assets:                        
Cash $ 1,076     $ 811     $ 665    
Accounts receivable   994       892       719    
Unbilled revenue   329       219       225    
Inventories   56       48       46    
Other assets   497       497       474    
    2,951       2,466       2,129    
                         
Non-current assets:                        
Property and equipment   129       128       119    
Right of use assets   282       283       266    
Deferred income taxes   84       159       149    
Other assets   199       174       160    
Intangible assets   6,358       4,662       4,407    
    7,052       5,406       5,101    
                         
Total assets $ 10,004     $ 7,872     $ 7,230    
                         
Liabilities and Shareholders’ Equity                        
                         
Current liabilities:                        
Debt with recourse to Constellation Software Inc. $ 907     $ 505     $ 364    
Debt without recourse to Constellation Software Inc.   235       316       234    
Redeemable preferred securities   536                
Accounts payable and accrued liabilities   1,246       1,083       916    
Dividends payable   21       21       21    
Deferred revenue   1,778       1,482       1,426    
Provisions   8       11       9    
Acquisition holdback payables   153       159       150    
Lease obligations   103       96       93    
Income taxes payable   112       99       103    
    5,098       3,772       3,316    
                         
Non-current liabilities:                        
Debt with recourse to Constellation Software Inc.   617       567       522    
Debt without recourse to Constellation Software Inc.   1,275       586       705    
Deferred income taxes   517       465       447    
Acquisition holdback payables   87       73       62    
Lease obligations   216       218       204    
Other liabilities   238       258       273    
    2,949       2,167       2,214    
                         
Total liabilities   8,047       5,938       5,530    
                         
                         
Shareholders’ equity:                        
Capital stock   99       99       99    
Accumulated other comprehensive income (loss)   (159 )     (150 )     (227 )  
Retained earnings   1,712       1,763       1,632    
Non-controlling interests   304       221       196    
    1,957       1,933       1,700    
                         
                         
Total liabilities and shareholders’ equity $ 10,004     $ 7,872     $ 7,230    
 
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 September 30,       Nine months ended September 30,    
    2023       2022       2023       2022    
                                 
                                 
Revenue                                
License $ 84     $ 79     $ 254     $ 220    
Professional services   450       375       1,290       985    
Hardware and other   71       54       191       151    
Maintenance and other recurring   1,521       1,217       4,349       3,418    
    2,126       1,725       6,084       4,774    
                                 
Expenses                                
Staff   1,112       925       3,291       2,581    
Hardware   42       31       113       88    
Third party license, maintenance and professional services   208       167       592       443    
Occupancy   11       12       37       35    
Travel, telecommunications, supplies, software and equipment   99       80       285       215    
Professional fees   36       26       107       78    
Other, net   37       64       103       132    
Depreciation   41       38       120       105    
Amortization of intangible assets   214       177       620       491    
    1,799       1,521       5,268       4,167    
                                 
                                 
Foreign exchange loss (gain)   (23 )     (57 )     3       (98 )  
IRGA/TSS Membership liability revaluation charge   25       33       94       89    
Finance and other expense (income)   2       8       (7 )     24    
Bargain purchase gain   (0 )     (3 )     (1 )     (4 )  
Impairment of intangible and other non-financial assets   1             4       1    
Redeemable preferred securities expense (income)   37             319          
Finance costs   50       29       132       73    
    91       11       544       86    
                                 
Income (loss) before income taxes   236       193       272       521    
                                 
Current income tax expense (recovery)   99       113       315       322    
Deferred income tax expense (recovery)   (32 )     (63 )     (155 )     (189 )  
Income tax expense (recovery)   67       50       160       133    
                                 
Net income (loss)   169       143       112       388    
                                 
Net income (loss) attributable to:                                
Common shareholders of Constellation Software Inc.   177       136       375       360    
Non-controlling interests   (8 )     7       (263 )     28    
Net income (loss)   169       143       112       388    
                                 
Earnings per common share of Constellation Software Inc.
        Basic and diluted
$ 8.36     $ 6.42     $ 17.68     $ 16.99    
                                 
 
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 September 30,   Nine months ended September 30,  
    2023       2022       2023       2022    
                                 
Net income (loss) $ 169     $ 143     $ 112     $ 388    
                                 
Items that are or may be reclassified subsequently to net income (loss):                                
                                 
Foreign currency translation differences from foreign operations and other,
net of tax
  (58 )     (93 )     (27 )     (184 )  
                                 
Other comprehensive income (loss), net of income tax   (58 )     (93 )     (27 )     (184 )  
                                 
Total comprehensive income (loss) $ 111     $ 50     $ 85     $ 204    
                                 
Total other comprehensive income (loss) attributable to:                                
Common shareholders of Constellation Software Inc.   (46 )     (80 )     (21 )     (156 )  
Non-controlling interests (notes 1 and 18)   (12 )     (13 )     (6 )     (27 )  
Total other comprehensive income (loss) $ (58 )   $ (93 )   $ (27 )   $ (184 )  
                                 
Total comprehensive income (loss) attributable to:                                
Common shareholders of Constellation Software Inc.   131       56       354       204    
Non-controlling interests   (20 )     (6 )     (269 )     1    
Total comprehensive income (loss) $ 111     $ 50     $ 85     $ 204    
 
 
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
Nine months ended September 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)               375     375     (263 )   112    
                                             
Other comprehensive income (loss)                                            
                                             
Foreign currency translation differences from
      foreign operations and other, net of tax
          (21 )       (21 )   (6 )   (27 )  
                                             
                                             
Total other comprehensive income (loss)           (21 )       (21 )   (6 )   (27 )  
                                             
Total comprehensive income (loss)           (21 )   375     354     (269 )   85    
                                             
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
                      5     5    
                                             
Other movements in non-controlling interests           0     16     16     (18 )   (2 )  
                                             
Dividends to shareholders of the Company               (64 )   (64 )       (64 )  
                                             
Balance at September 30, 2023 $ 99   $   $ (159 ) $ 1,712   $ 1,653   $ 304   $ 1,957    
 
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    
Nine months ended September 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)               360     360     28     388    
                                             
Other comprehensive income (loss)                                            
                                             
Foreign currency translation differences from
      foreign operations and other, net of tax
          (156 )       (156 )   (27 )   (184 )  
                                             
Total other comprehensive income (loss)           (156 )       (156 )   (27 )   (184 )  
                                             
Total comprehensive income (loss)           (156 )   360     204     1     204    
                                             
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                             41     41    
                                             
Other movements in non-controlling interests                   2     2     (5 )   (2 )  
                                             
Dividends to shareholders of the Company (note 12)               (64 )   (64 )       (64 )  
                                             
Reclassification of other equity to retained earnings       (127 )         127                  
                                             
Balance at September 30, 2022 $ 99   $   $ (227 ) $ 1,632   $ 1,504   $ 196   $ 1,700    
 
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 September 30,   Nine months ended September 30,  
    2023       2022       2023       2022    
                                 
Cash flows from (used in) operating activities:                                
Net income (loss) $ 169     $ 143     $ 112     $ 388    
Adjustments for:                                
    Depreciation   41       38       120       105    
    Amortization of intangible assets   214       177       620       491    
    IRGA/TSS Membership liability revaluation charge   25       33       94       89    
    Finance and other expense (income)   2       8       (7 )     24    
    Bargain purchase (gain)   (0 )     (3 )     (1 )     (4 )  
    Impairment of intangible and other non-financial assets   1             4       1    
    Redeemable preferred securities expense (income)   37             319          
    Finance costs   50       29       132       73    
    Income tax expense (recovery)   67       50       160       133    
    Foreign exchange loss (gain)   (23 )     (57 )     3       (98 )  
Change in non-cash operating assets and liabilities
    exclusive of effects of business combinations
  (7 )     (8 )     23       (27 )  
Income taxes paid   (62 )     (89 )     (310 )     (279 )  
Net cash flows from (used in) operating activities   513       321       1,268       897    
                                 
Cash flows from (used in) financing activities:                                
Interest paid on lease obligations   (3 )     (3 )     (8 )     (8 )  
Interest paid on debt   (34 )     (23 )     (96 )     (49 )  
Proceeds from sale of interest rate cap   (1 )           5          
Increase (decrease) in CSI facility   175       (32 )     364       205    
Increase (decrease) in Topicus revolving credit debt facility without
recourse to CSI
  5       7       43       112    
Proceeds from issuance of debt facilities without recourse to CSI   35       22       290       447    
Repayments of debt facilities without recourse to CSI   (100 )     (17 )     (227 )     (30 )  
Other financing activities   (2 )     3       (1 )     4    
Credit facility transaction costs   (1 )     (0 )     (4 )     (3 )  
Payments of lease obligations   (25 )     (24 )     (78 )     (69 )  
Distribution to the Joday Group                     (23 )  
Dividends paid to redeemable preferred security holders                     (7 )  
Dividends paid to common shareholders of the Company   (21 )     (21 )     (64 )     (64 )  
Net cash flows from (used in) in financing activities   28       (89 )     224       516    
                                 
Cash flows from (used in) investing activities:                                
Acquisition of businesses   (389 )     (207 )     (1,233 )     (1,421 )  
Cash obtained with acquired businesses   19       42       113       190    
Post-acquisition settlement payments, net of receipts   (35 )     (39 )     (168 )     (98 )  
Purchases of investments and other assets   (1 )     (0 )     (19 )     (96 )  
Proceeds from sales of other investments and other assets               119       3    
Decrease (increase) in restricted cash   (1 )           (1 )        
Interest, dividends and other proceeds received   0       1       3       4    
Property and equipment purchased   (10 )     (8 )     (29 )     (27 )  
Net cash flows from (used in) investing activities   (416 )     (211 )     (1,216 )     (1,445 )  
                                 
Effect of foreign currency on
          cash
  (19 )     (32 )     (10 )     (67 )  
                                 
Increase (decrease) in cash   107       (11 )     265       (99 )  
                                 
Cash, beginning of period $ 970     $ 676     $ 811     $ 763    
                                 
Cash, end of period $ 1,076     $ 665     $ 1,076     $ 665    
 

Constellation Software Inc



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