TORONTO, Aug. 06, 2020 (GLOBE NEWSWIRE) -- Constellation Software Inc. (TSX:CSU) (“Constellation” or the “Company”) today announced its financial results for the second quarter ended June 30, 2020 and declared a $1.00 per share dividend payable on October 9, 2020 to all common shareholders of record at close of business on September 18, 2020. 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, 2020 and the accompanying notes, our Management Discussion and Analysis for the three and six months ended June 30, 2020 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, 2019, 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

Our board remain both grateful and impressed by the Constellation employees who continue to re-think, re-invent and re-imagine how they support each other and our customers through the many challenges created by COVID-19.

Q2 2020 Headlines:

  • Revenue grew 9% (negative 8% organic growth, negative 7% after adjusting for changes in foreign exchange rates) to $922 million compared to $846 million in Q2 2019. 
  • Net income increased 12% to $83 million ($3.90 on a diluted per share basis) from $73 million ($3.45 on a diluted per share basis) in Q2 2019.
  • Impairment of intangible and other non-financial assets was $4 million in Q2 2020 versus nil in Q2 2019.
  • A number of acquisitions were completed for aggregate cash consideration of $67 million (which includes acquired cash).  Deferred payments associated with these acquisitions have an estimated value of $17 million resulting in total consideration of $84 million.
  • Cash flows from operations (“CFO”) were $237 million, an increase of 370%, or $186 million, compared to $50 million for the comparable period in 2019.
  • Free cash flow available to shareholders1 (“FCFA2S”) increased $178 million to $190 million compared to $12 million for the same period in 2019.  
  • CFO and FCFA2S were positively impacted by the deferral of approximately $29 million of tax instalment payments to the second half of 2020 in conjunction with the certain government’s COVID-19 relief programs. 
  • The Company determined that certain of its subsidiaries qualified for an estimated aggregate amount of $17 million of grants from various government authorities, and recognized such amounts as a reduction to expenses in the quarter.
  • On May 20, 2020 the Company entered into a binding agreement with IJssel B.V. to purchase 100% of the shares of Topicus.com B.V., a Netherlands-based diversified vertical market software provider.  The transaction is currently expected to close in 2020, subject to the satisfaction of certain closing conditions.
  • Subsequent to June 30, 2020, the Company completed or entered into agreements to acquire a number of businesses for aggregate cash consideration of $64 million (which includes acquired cash).  Deferred payments associated with these acquisitions have an estimated value of $14 million resulting in total consideration of $78 million. 

1. See Non-IFRS measures.  

Total revenue for the quarter ended June 30, 2020 was $922 million, an increase of 9%, or $76 million, compared to $846 million for the comparable period in 2019.  For the first six months of 2020 total revenues were $1,875 million, an increase of 13%, or $210 million, compared to $1,665 million for the comparable period in 2019.  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 8% and negative 5% respectively, negative 7% and negative 4% respectively after adjusting for the impact of changes in the valuation of the US dollar against most major currencies in which the Company transacts business.

Net income for the quarter ended June 30, 2020 was $83 million compared to net income of $73 million for the same period in 2019.  On a per share basis, this translated into a net income per diluted share of $3.90 in the quarter ended June 30, 2020 compared to net income per diluted share of $3.45 for the same period in 2019.  For the six months ended June 30, 2020, net income was $166 million or $7.81 per diluted share compared to $160 million or $7.54 per diluted share for the same period in 2019.

For the quarter ended June 30, 2020, CFO increased $186 million to $237 million compared to $50 million for the same period in 2019 representing an increase of 370%.  For the first six months of 2020, CFO increased $263 million to $597 million compared to $334 million during the same period in 2019, representing an increase of 79%. 

For the quarter ended June 30, 2020, FCFA2S increased $178 million to $190 million compared to $12 million for the same period in 2019.  For the first six months of 2020, FCFA2S increased $238 million to $501 million compared to $263 million during the same period in 2019, representing an increase of 91%.   

CFO and FCFA2S for the three and six months ended June 30, 2020 were positively impacted by the deferral of approximately $29 million of tax instalment payments to the second half of 2020 in conjunction with certain government’s COVID-19 relief programs.

The Company is closely monitoring the impact of COVID-19 on all aspects of its business. COVID-19 was declared a global pandemic by the World Health Organization on March 11, 2020. The COVID-19 pandemic has had disruptive effects in countries in which the Company operates and has adversely impacted many of its business units’ operations to date, including through the cancellation by certain customers of their ongoing software maintenance contracts and the suspension or cancellation of new software purchases.  The pandemic may also have an adverse impact on many of the Company’s customers, including their ability to satisfy ongoing payment obligations to the Company, which could increase the Company’s bad debt exposure. The future impacts of the pandemic and any resulting economic impact are largely unknown and rapidly evolving. It is possible that the COVID-19 pandemic, the measures taken by the governments of countries affected and the resulting economic impact may continue to adversely affect the Company’s results of operations, cash flows and financial position as well as its customers in future periods, and this impact could be material.

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
June 30,		   Six months ended
June 30,		  
   2020 2019    2020 2019   
  ($ in millions, except percentages) ($ in millions, except percentages) 
            
Net cash flows from operating activities  237 50    597 334   
Adjusted for:           
Interest paid on lease obligations  (2)(2)   (4)(4)  
Interest paid on other facilities  (5)(7)   (14)(15)  
Credit facility transaction costs  (0)-    (0)-   
Payments of lease obligations  (16)(13)   (30)(23)  
TSS membership liability revaluation charge  (17)(8)   (35)(18)  
Property and equipment purchased  (6)(8)   (13)(15)  
Interest and dividends received  0 0    0 3   
            
Free cash flow available to shareholders  190 12    501 263   
            
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, 2020December 31, 2019June 30, 2019
            
Assets         
            
Current assets:         
 Cash      $585 $316 $214 
 Accounts receivable      393  422  368 
 Unbilled revenue      103  110  105 
 Inventories       32  31  45 
 Other assets      207  184  183 
          1,319  1,062  915 
            
Non-current assets:        
 Property and equipment     78  78  69 
 Right of use assets      241  234  211 
 Deferred income taxes      45  45  48 
 Other assets      73  72  66 
 Intangible assets 2,011  1,997  1,621 
          2,448  2,425  2,014 
            
Total assets      $3,767 $3,488 $2,929 
            
Liabilities and Shareholders' Equity      
            
Current liabilities:        
 CSI facility      $98 $63 $- 
 Debt without recourse to Constellation Software Inc.   3  57  11 
 TSS membership liability     93  86  69 
 Accounts payable and accrued liabilities    480  529  400 
 Dividends payable      21  21  22 
 Deferred revenue      938  788  802 
 Provisions       10  13  17 
 Acquisition holdback payables     72  76  53 
 Lease obligations      67  62  54 
 Income taxes payable      95  36  25 
          1,879  1,732  1,452 
            
Non-current liabilities:        
 Debt without recourse to Constellation Software Inc.   159  153  106 
 TSS membership liability     164  136  121 
 Debentures       210  222  222 
 Deferred income taxes      243  246  202 
 Acquisition holdback payables     29  25  15 
 Lease obligations      193  187  170 
 Other liabilities      98  101  76 
          1,095  1,069  913 
            
Total liabilities       2,974  2,800  2,365 
            
            
Shareholders' equity:        
 Capital stock      99  99  99 
 Accumulated other comprehensive income (loss)   (57)  (40)  (32) 
 Retained earnings      752  628  497 
          794  687  564 
            
            
Total liabilities and shareholders' equity    $3,767 $3,488 $2,929 
            


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, 2020 and 2019      
Unaudited           
       Three months ended June 30, Six months ended June 30,
        2020   2019   2020   2019 
              
              
Revenue             
License    $51  $61  $108  $113 
Professional services    170   164   347   322 
Hardware and other    35   41   77   77 
Maintenance and other recurring   666   581   1,342   1,152 
        922   846   1,875   1,665 
              
Expenses             
Staff       480   437   990   882 
Hardware       22   22   45   43 
Third party license, maintenance and professional services       77   73   156   142 
Occupancy       8   9   17   17 
Travel, telecommunications, supplies, software and equipment 31   49   82   93 
Professional fees       13   11   26   22 
Other, net       0   15   5   36 
Depreciation       25   21   51   42 
Amortization of intangible assets       96   75   190   151 
        752   713   1,562   1,428 
              
              
Foreign exchange loss (gain)   10   13   4   15 
TSS membership liability revaluation charge  17   8   35   18 
Finance and other expense (income)   (1)  (0)  (2)  (3)
Bargain purchase gain    (0)  -   (0)  (28)
Impairment of intangible and other non-financial assets 4   -   8   - 
Finance costs     10   9   22   18 
        39   30   67   19 
              
Income before income taxes    131   103   246   218 
              
Current income tax expense (recovery)   70   42   115   78 
Deferred income tax expense (recovery)       (22)  (12)  (34)  (20)
Income tax expense (recovery)       48   30   80   58 
              
Net income     83   73   166   160 
              
Earnings per share          
Basic and diluted    $3.90  $3.45  $7.81  $7.54 
              
              


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, 2020 and 2019      
Unaudited           
       Three months ended June 30, Six months ended June 30,
        2020  2019  2020   2019
              
Net income    $83 $73 $166  $160
              
Items that are or may be reclassified subsequently to net income:       
              
Foreign currency translation differences from foreign operations 13  8  (17)  4
              
Deferred income tax recovery (expense) -  -  -   -
              
Other comprehensive (loss) income for the period, net of income tax 13  8  (17)  4
              
Total comprehensive income (loss) for the period$96 $81 $149  $164
              


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, 2020    
   Capital
stock		Accumulated other
comprehensive income (loss)		Retained earningsTotal
    Cumulative translation account  
       
Balance at January 1, 2020$  99 $  (40)$  628  $  687  
       
Total comprehensive income for the period:    
       
Net income  - -  166  166 
       
Other comprehensive income (loss)    
       
Foreign currency translation differences from    
 foreign operations - (17) -  (17)
       
Total other comprehensive income (loss)    
 for the period   -     (17)   -      (17)
       
Total comprehensive income (loss) for the period   -     (17)   166     149  
       
Transactions with owners, recorded directly in equity    
Dividends to shareholders of the Company - -  (42) (42)
       
Balance at June 30, 2020$  99 $  (57)$  752  $  794  
       


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 earningsTotal
    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 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 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, 2020 and 2019        
Unaudited           
        Three months ended June 30, Six months ended June 30,
         2020   2019   2020   2019 
               
Cash flows from operating activities:       
 Net income   $83  $73  $166  $160 
 Adjustments for:         
  Depreciation   25   21   51   42 
  Amortization of intangible assets 96   75   190   151 
  TSS membership liability revaluation charge 17   8   35   18 
  Finance and other expense (income) (1)  (0)  (2)  (3)
  Bargain purchase (gain) (0)  -   (0)  (28)
  Impairment of intangible and other non-financial assets 4   -   8   - 
  Finance costs   10   9   22   18 
  Income tax expense (recovery) 48   30   80   58 
  Foreign exchange loss (gain) 10   13   4   15 
 Change in non-cash operating assets and liabilities       
  exclusive of effects of business combinations (35)  (130)  100   (7)
 Income taxes paid (19)  (49)  (57)  (88)
 Net cash flows from operating activities 237   50   597   334 
               
Cash flows from (used in) financing activities:       
 Interest paid on lease obligations  (2)  (2)  (4)  (4)
 Interest paid on other facilities  (5)  (7)  (14)  (15)
 Increase (decrease) in CSI facility  100   -   35   - 
 Increase (decrease) in revolving credit under debt facilities without recourse to CSI -   11   (55)  (40)
 Proceeds from issuance of term debt under facilities without recourse to CSI 15   -   15   - 
 Repayments of term debt under facilities without recourse to CSI (3)  (1)  (4)  (1)
 Credit facility transaction costs (0)  -   (0)  - 
 Payments of lease obligations  (16)  (13)  (30)  (23)
 Distribution to TSS minority owners  -   -   -   (11)
 Dividends paid (21)  (445)  (42)  (466)
 Net cash flows from (used in) in financing activities 67   (457)  (100)  (560)
               
Cash flows from (used in) investing activities:       
 Acquisition of businesses (68)  (82)  (175)  (130)
 Cash obtained with acquired businesses  10   10   24   35 
 Post-acquisition settlement payments, net of receipts (23)  (12)  (55)  (37)
 Purchases of other investments  (1)  (6)  (2)  (6)
 Interest, dividends and other proceeds received 1   1   1   3 
 Property and equipment purchased (6)  (8)  (13)  (15)
 Net cash flows from (used in) investing activities (87)  (97)  (220)  (149)
               
Effect of foreign currency on       
 cash and cash equivalents 5   1   (9)  0 
               
Increase (decrease) in cash 221   (503)  269   (375)
               
Cash, beginning of period 364   717   316   589 
               
Cash, end of period$585  $214   585   214 
               

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Source: Constellation Software Inc.

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