Constellation Software Inc. Announces Results for the Third

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TORONTO, Nov. 04, 2021 (GLOBE NEWSWIRE) — Constellation Software Inc. (TSX:CSU) (“Constellation” or the “Company”) today announced its financial results for the third quarter ended September 30, 2021 and declared a $1.00 per share dividend payable on January 11, 2022 to all common shareholders of record at close of business on December 20, 2021. 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, 2021 and the accompanying notes, our Management Discussion and Analysis for the three and nine months ended September 30, 2021 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, 2020, 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

Q3 2021 Headlines:

Revenue grew 30% (7% organic growth, 5% after adjusting for changes in foreign exchange rates) to $1,299 million compared to $1,003 million in Q3 2020.
Net income attributable to common shareholders decreased 13% to $107 million ($5.04 on a diluted per share basis) from $122 million ($5.76 on a diluted per share basis) in Q3 2020.
A number of acquisitions were completed for aggregate cash consideration of $126 million (which includes acquired cash). Deferred payments associated with these acquisitions have an estimated value of $47 million resulting in total consideration of $173 million.
Cash flows from operations (“CFO”) were $292 million, an increase of 25%, or $58 million, compared to $234 million for the comparable period in 2020.
Free cash flow available to shareholders¹ (“FCFA2S”) increased $45 million to $226 million compared to $181 million for the same period in 2020.
Subsequent to September 30, 2021, the Company completed or entered into agreements to acquire a number of businesses for aggregate cash consideration of $329 million. Deferred payments associated with these acquisitions have an estimated value of $41 million resulting in total consideration of $370 million.

Total revenue for the quarter ended September 30, 2021 was $1,299 million, an increase of 30%, or $296 million, compared to $1,003 million for the comparable period in 2020. For the first nine months of 2021 total revenues were $3,724 million, an increase of 29%, or $846 million, compared to $2,878 million for the comparable period in 2020. 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 7% and 9% respectively, and 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.

The net income attributable to common shareholders of CSI for the quarter ended September 30, 2021 was $107 million compared to net income of $122 million for the same period in 2020. On a per share basis this translated into a net income per diluted share of $5.04 in the quarter ended September 30, 2021 compared to net income per diluted share of $5.76 for the same period in 2020. For the nine months ended September 30, 2021, net income attributable to common shareholders of CSI was $186 million or $8.79 per diluted share compared to $288 million or $13.58 per diluted share for the same period in 2020. There was no change in the number of shares outstanding.

For the quarter ended September 30, 2021, CFO increased $58 million to $292 million compared to $234 million for the same period in 2020 representing an increase of 25%. For the first nine months of 2021, CFO increased $127 million to $959 million compared to $831 million during the same period in 2020, representing an increase of 15%.

For the quarter ended September 30, 2021, FCFA2S increased $45 million to $226 million compared to $181 million for the same period in 2020. For the first nine months of 2021, FCFA2S decreased $43 million to $639 million compared to $682 million during the same period in 2020, representing a decrease of 6%.

The directors of Constellation have unanimously agreed to appoint John Billowits, a current director and former Chief Executive Officer of Constellation’s Vela operating group, as the Chair of the Board of Directors of the Company. Mark Leonard will continue in his current position as the President of the Company and (apart from relinquishing his duties as Chairman) his role and responsibilities within Constellation will remain unchanged. Mr. Leonard stated: “John brings intimate knowledge of the business of Constellation and had the deep respect of all of our directors and operating group managers, and so I’m very happy to leave the duties of Chair in John’s very capable hands.”

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 TSS membership liability revaluation charge, and property and equipment purchased, and includes interest and dividends received. Constellation believes that FCFA2S is useful supplemental information as it provides an indication of the uncommitted cash flow that is available to shareholders if Constellation does not make any acquisitions, or investments, and does not repay any debts. While Constellation could use the FCFA2S to pay dividends or repurchase shares, Constellation’s objective is to invest all of our FCFA2S in acquisitions which meet Constellation’s 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,
		2021		2020			2021		2020
	($ in millions, except percentages)					($ in millions, except percentages)

Net cash flows from operating activities		292		234			959		831
Adjusted for:
Interest paid on lease obligations		(2	)	(2	)		(7	)	(6	)
Interest paid on other facilities		(12	)	(8	)		(30	)	(22	)
Credit facility transaction costs		(0	)	(0	)		(4	)	(0	)
Payments of lease obligations		(21	)	(17	)		(61	)	(47	)
IRGA / TSS membership liability revaluation charge		(25	)	(20	)		(107	)	(55	)
Property and equipment purchased		(7	)	(5	)		(18	)	(19	)
Interest and dividends received		1		0			1		0

		226		181			732		682
Less amount attributable to
Non-controlling interests		1					(93	)	–

Free cash flow available to shareholders		226		181			639		682

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.
Consolidated 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, 2021			December 31, 2020			September 30, 2020

Assets

Current assets:
	Cash	$	961		$	758		$	565
	Accounts receivable		512			483			420
	Unbilled revenue		144			98			102
	Inventories		32			27			30
	Other assets		278			219			217
			1,929			1,585			1,333

Non-current assets:
	Property and equipment		91			86			80
	Right of use assets		252			251			239
	Deferred income taxes		63			52			50
	Other assets		94			75			79
	Intangible assets		3,006			2,325			2,097
			3,506			2,790			2,546

Total assets		$	5,434		$	4,375		$	3,879

Liabilities and Shareholders’ Equity

Current liabilities:
	Debt with recourse to Constellation Software Inc.	$	137		$	113		$	104
	Debt without recourse to Constellation Software Inc.		54			28			4
	Redeemable preferred securities		7			–			–
	Accounts payable and accrued liabilities		720			666			535
	Dividends payable		21			21			21
	Deferred revenue		1,168			962			917
	Provisions		11			12			11
	Acquisition holdback payables		92			85			71
	Lease obligations		81			74			68
	Income taxes payable		86			78			90
			2,377			2,040			1,821

Non-current liabilities:
	Debt with recourse to Constellation Software Inc.		550			421			397
	Debt without recourse to Constellation Software Inc.		325			199			169
	Deferred income taxes		393			285			253
	Acquisition holdback payables		49			37			30
	Lease obligations		195			201			191
	Other liabilities		145			146			116
			1,656			1,288			1,155

Total liabilities			4,034			3,328			2,976


Shareholders’ equity:
	Capital stock		99			99			99
	Other equity		(162	)		–			–
	Accumulated other comprehensive income (loss)		(69	)		(31	)		(49	)
	Retained earnings		1,103			980			852
	Non-controlling interests		429			–			–
			1,401			1,048			902


Total liabilities and shareholders’ equity		$	5,434		$	4,375		$	3,879

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.)

Three and nine months ended September 30, 2021
Unaudited
		Three months ended September 30,						Nine months ended September 30,
			2021			2020			2021			2020


Revenue
License		$	69		$	57		$	206		$	166
Professional services			256			187			747			534
Hardware and other			45			45			127			122
Maintenance and other recurring			929			713			2,643			2,056
			1,299			1,003			3,724			2,878

Expenses
Staff			676			504			1,982			1,493
Hardware			25			25			71			70
Third party license, maintenance and professional services			113			82			317			237
Occupancy			10			9			30			26
Travel, telecommunications, supplies, software and equipment			46			32			129			114
Professional fees			21			15			53			41
Other, net			21			5			41			10
Depreciation			31			26			90			77
Amortization of intangible assets			134			103			376			293
			1,077			800			3,087			2,362


Foreign exchange loss (gain)			(5	)		1			(3	)		5
IRGA/TSS Membership liability revaluation charge			25			20			107			55
Finance and other expense (income)			(4	)		(2	)		(9	)		(4	)
Bargain purchase gain			(1	)		(0	)		(1	)		(0	)
Impairment of intangible and other non-financial assets			1			3			7			11
Redeemable preferred securities expense (income)			–			–			295			–
Finance costs			18			13			50			34
			34			34			446			101

Income (loss) before income taxes			188			168			190			414

Current income tax expense (recovery)			70			62			209			177
Deferred income tax expense (recovery)			(4	)		(16	)		(43	)		(50	)
Income tax expense (recovery)			67			46			166			127

Net income (loss)			121			122			24			288

Net income (loss) attributable to:
Common shareholders of Constellation Software Inc.			107			122			186			288
Non-controlling interests			15			–			(162	)		–
Net income (loss)			121			122			24			288

Earnings per common share of Constellation Software Inc.
	Basic and diluted	$	5.04		$	5.76		$	8.79		$	13.58


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.)

Three and nine months ended September 30, 2021
Unaudited
	Three months ended September 30,					Nine months ended September 30,
		2021			2020		2021			2020

Net income (loss)	$	121		$	122	$	24		$	288

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

Foreign currency translation differences from foreign operations and other		(21	)		8		(39	)		(9	)

Other comprehensive income (loss) for the period, net of income tax		(21	)		8		(39	)		(9	)

Total comprehensive income (loss) for the period	$	100		$	130	$	(15	)	$	279

Total other comprehensive income (loss) attributable to:
Common shareholders of Constellation Software Inc.		(13	)		8		(19	)		(9	)
Non-controlling interests		(8	)		–		(19	)		–
Total other comprehensive income (loss)	$	(21	)	$	8	$	(39	)	$	(9	)

Total comprehensive income (loss) attributable to:
Common shareholders of Constellation Software Inc.		93			130		167			279
Non-controlling interests		7			–		(182	)		–
Total comprehensive income (loss)	$	100		$	130	$	(15	)	$	279


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, 2021
	Equity Attributable to Shareholders of CSI
	Capital stock		Other equity			Accumulated other comprehensive income (loss)			Retained earnings			Total			Non-controlling interests			Total equity

Balance at January 1, 2021	$	99	$	–		$	(31	)	$	980		$	1,048			–		$	1,048

Total comprehensive income (loss) for the period:

Net income (loss)		–		–			–			186			186			(162	)		24

Other comprehensive income (loss)

Foreign currency translation differences from foreign operations and other		–		–			(19	)		–			(19	)		(19	)		(39	)


Total other comprehensive income (loss) for the period		–		–			(19	)		–			(19	)		(19	)		(39	)

Total comprehensive income (loss) for the period		–		–			(19	)		186			167			(182	)		(15	)

Transactions with owners, recorded directly in equity

Special dividend of Topicus Subordinate Voting Shares		–		(141	)		(16	)		–			(157	)		157			–

Issuance of Topicus Coop Ordinary Units to non-controlling interests		–		(21	)		(2	)		–			(23	)		23			–

Net acquisition of non-controlling interest associated with acquisitions and other movements		–		1			–			1			1			1			3

Dividends to shareholders of the Company		–					–			(64	)		(64	)		–			(64	)

Reclassification of redeemable preferred securities of Topicus Coop from liabilities to non-controlling interest		–		–			–			–			–			434			434

Accrued dividends to preference unit holders of Topicus Coop		–		–			–			–			–			(5	)		(5	)

Balance at September 30, 2021	$	99	$	(162	)		(69	)	$	1,103		$	972		$	429		$	1,401

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, 2020

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

Balance at January 1, 2020	$	99	$	–	$	(40	)	$	628		$	687		$	–	$	687

Total comprehensive income (loss) for the period:

Net income (loss)		–		–		–			288			288			–		288

Other comprehensive income (loss)

Foreign currency translation differences from foreign operations and other		–		–		(9	)		–			(9	)		–		(9	)

Total other comprehensive income (loss) for the period		–		–		(9	)		–			(9	)		–		(9	)

Total comprehensive income (loss) for the period		–		–		(9	)		288			279			–		279

Transactions with owners, recorded directly in equity
Dividends to shareholders of the Company		–				–			(64	)		(64	)		–		(64	)

Balance at September 30, 2020	$	99	$	–	$	(49	)	$	852		$	902		$	–	$	902

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 nine months ended September 30, 2021
Unaudited
			Three months ended September 30,						Nine months ended September 30,
				2021			2020			2021			2020

Cash flows from (used in) operating activities:
	Net income (loss)		$	121		$	122		$	24		$	288
	Adjustments for:
		Depreciation		31			26			90			77
		Amortization of intangible assets		134			103			376			293
		IRGA/TSS Membership liability revaluation charge		25			20			107			55
		Finance and other expense (income)		(4	)		(2	)		(9	)		(4	)
		Bargain purchase (gain)		(1	)		(0	)		(1	)		(0	)
		Impairment of intangible and other non-financial assets		1			3			7			11
		Redeemable preferred securities expense (income)		–			–			295			–
		Finance costs		18			13			50			34
		Income tax expense (recovery)		67			46			166			127
		Foreign exchange loss (gain)		(5	)		1			(3	)		5
	Change in non-cash operating assets and liabilities exclusive of effects of business combinations			(47	)		(32	)		53			69
	Income taxes paid			(48	)		(66	)		(196	)		(123	)
	Net cash flows from (used in) operating activities			292			234			959			831

Cash flows from (used in) financing activities:
	Interest paid on lease obligations			(2	)		(2	)		(7	)		(6	)
	Interest paid on debt			(12	)		(8	)		(30	)		(22	)
	Increase (decrease) in CSI facility			–			(100	)		–			(65	)
	Increase (decrease) in revolving credit debt facilities without recourse to CSI			12			–			24			(55	)
	Proceeds from issuance of term debt facilities without recourse to CSI			6			7			140			22
	Repayments of term debt facilities without recourse to CSI			(2	)		(1	)		(4	)		(5	)
	Credit facility transaction costs			(0	)		(0	)		(4	)		(0	)
	Payments of lease obligations			(21	)		(17	)		(61	)		(47	)
	Distribution to the Joday Group			–			–			(22	)		–
	Dividends paid			(21	)		(21	)		(64	)		(64	)
	Net cash flows from (used in) in financing activities			(41	)		(143	)		(29	)		(242	)

Cash flows from (used in) investing activities:
	Acquisition of businesses			(130	)		(123	)		(736	)		(298	)
	Cash obtained with acquired businesses			28			31			112			55
	Post-acquisition settlement payments, net of receipts			(16	)		(24	)		(101	)		(79	)
	Receipt of additional subscription amount from the sellers of Topicus.com B.V.			–			–			33			–
	Purchases of other investments			(14	)		–			(15	)		(2	)
	Proceeds from sales of other investments			8			–			8			–
	Interest, dividends and other proceeds received			1			1			4			2
	Property and equipment purchased			(7	)		(5	)		(18	)		(19	)
	Net cash flows from (used in) investing activities			(131	)		(120	)		(713	)		(340	)

Effect of foreign currency on cash and cash equivalents				(10	)		8			(13	)		(1	)

Increase (decrease) in cash				110			(21	)		203			249

Cash, beginning of period			$	851		$	585		$	758		$	316

Cash, end of period				961		$	565		$	961		$	565

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