TORONTO, May 07, 2020 (GLOBE NEWSWIRE) -- Constellation Software Inc. (TSX:CSU) (“Constellation” or the “Company”) today announced its financial results for the first quarter ended March 31, 2020 and declared a $1.00 per share dividend payable on July 10, 2020 to all common shareholders of record at close of business on June 19, 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 months ended March 31, 2020 and the accompanying notes, our Management Discussion and Analysis for the three months ended March 31, 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

We would like to acknowledge and thank all of our employees for their selflessness and continued commitment and support of each other and our customers during COVID-19 and the many challenges it has created.  We remain focused on ensuring that our employees and their families are safe and healthy.

Q1 2020 Headlines:     

  • Revenue grew 16% (negative 2% organic growth, 0% after adjusting for changes in foreign exchange rates) to $953 million compared to $819 million in Q1 2019. 
  • Net income decreased 4% to $83 million ($3.91 on a diluted per share basis) from $87 million ($4.09 on a diluted per share basis) in Q1 2019.  Excluding the bargain purchase gain recorded in Q1 2019 net income increased 42%.
  • Impairment of intangible and other non-financial assets was $5 million in Q1 2020 versus nil in Q1 2019.
  • A number of acquisitions were completed for aggregate cash consideration of $107 million (which includes acquired cash).  Deferred payments associated with these acquisitions have an estimated value of $48 million resulting in total consideration of $155 million.
  • Cash flows from operations (“CFO”) were $361 million, an increase of 27%, or $76 million, compared to $284 million for the comparable period in 2019.
  • Free cash flow available to shareholders1 (“FCFA2S”) increased $60 million to $311 million compared to $250 million for the same period in 2019 representing an increase of 24%.   

Total revenue for the quarter ended March 31, 2020 was $953 million, an increase of 16%, or $134 million, compared to $819 million for the comparable period in 2019. The increase is primarily attributable to growth from acquisitions as the Company experienced organic growth of negative 2%, 0% 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 acquired companies, organic growth is calculated as the difference between actual revenues achieved by each company in the financial period following acquisition compared to the estimated revenues they achieved in the corresponding financial period preceding the date of acquisition by Constellation. 

Net income for the quarter ended March 31, 2020 was $83 million compared to net income of $87 million for the same period in 2019.  On a per share basis this translated into a net income per diluted share of $3.91 in the quarter ended March 31, 2020 compared to net income per diluted share of $4.09 for the same period in 2019.

For the quarter ended March 31, 2020, CFO increased $76 million to $361 million compared to $284 million for the same period in 2019 representing an increase of 27%. 

An impairment expense of $5 million was recorded in the three month period ended March 31, 2020 primarily relating to three businesses acquired during 2019.  Primarily due to the near-term impact, as well as the yet uncertain but probable longer-term impact of the COVID-19 pandemic, the forecasted cash flows for these businesses have declined significantly from the forecasted cash flows at the time of acquisition.  There was no similar expense recorded for the same period in 2019.  

For the quarter ended March 31, 2020, FCFA2S increased $60 million to $311 million compared to $250 million for the same period in 2019 representing an increase of 24%. 

The Company is closely monitoring the impact of the 2019 novel coronavirus, or 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.

1. See Non-IFRS Measures

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
March 31,		 
   2020 2019  
  ($ in millions, except percentages)
      
Net cash flows from operating activities  361 284  
Adjusted for:     
Interest paid on lease obligations  (2)(2) 
Interest paid on other facilities  (8)(8) 
Payments of lease obligations  (14)(10) 
TSS membership liability revaluation charge  (18)(10) 
Property and equipment purchased  (7)(7) 
Interest and dividends received  0 3  
      
Free cash flow available to shareholders  311 250  
      
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    
   March 31, 2020  December 31, 2019  March 31, 2019  
      
Assets    
      
Current assets:    
 Cash$364 $316 $717  
 Accounts receivable 455  422  362  
 Unbilled revenue 104  110  97  
 Inventories 32  31  39  
 Other assets 209  184  165  
   1,163  1,062  1,380  
      
Non-current assets:    
 Property and equipment 78  78  67  
 Right of use assets 233  234  209  
 Deferred income taxes 46  45  48  
 Other assets 70  72  65  
 Intangible assets 1,987  1,997  1,556  
   2,414  2,425  1,944  
      
Total assets$3,577 $3,488 $3,324  
      
Liabilities and Shareholders' Equity    
      
Current liabilities:    
 CSI facility$- $63 $-  
 Debt without recourse to Constellation Software Inc. 2  57  1  
 TSS membership liability 90  86  65  
 Accounts payable and accrued liabilities 453  529  388  
 Dividends payable 21  21  445  
 Deferred revenue 1,035  788  877  
 Provisions 10  13  19  
 Acquisition holdback payables 78  76  47  
 Lease obligations 59  62  51  
 Income taxes payable 60  36  38  
   1,809  1,732  1,931  
      
Non-current liabilities:    
 Debt without recourse to Constellation Software Inc. 143  153  104  
 TSS membership liability 145  136  114  
 Debentures 203  222  218  
 Deferred income taxes 250  246  195  
 Acquisition holdback payables 30  25  12  
 Lease obligations 191  187  170  
 Other liabilities 87  101  74  
   1,049  1,069  888  
      
Total liabilities 2,858  2,800  2,820  
      
      
Shareholders' equity:    
 Capital stock 99  99  99  
 Accumulated other comprehensive income (loss) (70) (40) (40) 
 Retained earnings 690  628  445  
   719  687  505  
      
Total liabilities and shareholders' equity$3,577 $3,488 $3,324  
      


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 months ended March 31, 2020 and 2019    
Unaudited    
 Three months ended March 31, 
  2020   2019  
     
     
Revenue    
License$57  $53  
Professional services 178   158  
Hardware and other 42   36  
Maintenance and other recurring 676   572  
  953   819  
     
Expenses    
Staff 510   445  
Hardware 23   21  
Third party license, maintenance and professional services 79   69  
Occupancy 9   9  
Travel, telecommunications, supplies, software and equipment 51   44  
Professional fees 14   11  
Other, net 5   21  
Depreciation 25   21  
Amortization of intangible assets 94   75  
  810   715  
     
     
Foreign exchange loss (gain) (6)  1  
TSS membership liability revaluation charge 18   10  
Finance and other expense (income) (0)  (3) 
Bargain purchase gain -   (28) 
Impairment of intangible and other non-financial assets 5   -  
Finance costs 11   9  
  28   (11) 
     
Income before income taxes 115   115  
     
Current income tax expense (recovery) 44   36  
Deferred income tax expense (recovery) (12)  (8) 
Income tax expense (recovery) 33   28  
     
Net income 83   87  
     
Earnings per share    
Basic and diluted$3.91  $4.09  
     


    
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 months ended March 31, 2020 and 2019   
Unaudited   
 Three months ended March 31,
  2020   2019 
    
Net income$83  $87 
    
Items that are or may be reclassified subsequently to net income:   
    
  Foreign currency translation differences from foreign operations (30)  (3)
    
  Deferred income tax recovery (expense) -   - 
    
Other comprehensive (loss) income for the period, net of income tax (30)  (3)
    
Total comprehensive income (loss) for the period$53  $83 
    


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     
Three months ended March 31, 2020     
  Capital
stock		  Accumulated other comprehensive income (loss)  Retained earnings  Total  
    Cumulative translation account    
      
Balance at January 1, 2020$ 99 $ (40)$ 628 $ 687  
      
Total comprehensive income for the period:     
      
Net income -  -  83  83  
      
Other comprehensive income (loss)     
      
Foreign currency translation differences from     
  -  (30) -  (30) 
      
Total other comprehensive income (loss)     
  -  (30) -  (30) 
      
Total comprehensive income (loss) for the period -  (30) 83  53  
      
Transactions with owners, recorded directly in equity     
  Dividends to shareholders of the Company -  -  (21) (21) 
      
Balance at March 31, 2020$ 99 $ (70)$ 690 $ 719  
      


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     
Three months ended March 31, 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 -  -  87  87  
      
Other comprehensive income (loss)     
      
Foreign currency translation differences from     
  -  (3) -  (3) 
      
Total other comprehensive income (loss) for the period -  (3) -  (3) 
      
Total comprehensive income for the period -  (3) 87  83  
      
Transactions with owners, recorded directly in equity     
  Dividends to shareholders of the Company -  -  (445) (445) 
      
Balance at March 31, 2019$ 99 $ (40)$ 445 $ 505  
      


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 months ended March 31, 2020 and 2019   
Unaudited   
   Three months ended March 31,
    2020   2019 
      
Cash flows from operating activities:   
 Net income$83  $87 
 Adjustments for:   
  Depreciation 25   21 
  Amortization of intangible assets 94   75 
  TSS membership liability revaluation charge 18   10 
  Finance and other expense (income) (0)  (3)
  Bargain purchase (gain) -   (28)
  Impairment of intangible and other non-financial assets 5   - 
  Finance costs 11   9 
  Income tax expense (recovery) 33   28 
  Foreign exchange loss (gain) (6)  1 
 Change in non-cash operating assets and liabilities   
  exclusive of effects of business combinations 136   123 
 Income taxes paid (38)  (38)
 Net cash flows from operating activities 361   284 
      
Cash flows from (used in) financing activities:   
 Interest paid on lease obligations (2)  (2)
 Interest paid on other facilities (8)  (8)
 Increase (decrease) in CSI facility (65)  - 
 Increase (decrease) in revolving credit under debt facilities without recourse to CSI (55)  (51)
 Repayments of term debt under facilities without recourse to CSI (1)  (0)
 Payments of lease obligations (14)  (10)
 Distribution to TSS minority owners -   (11)
 Dividends paid (21)  (21)
 Net cash flows from (used in) in financing activities (167)  (103)
      
Cash flows from (used in) investing activities:   
 Acquisition of businesses (107)  (47)
 Cash obtained with acquired businesses 14   25 
 Post-acquisition settlement payments, net of receipts (32)  (26)
 Purchases of other investments (1)  - 
 Interest, dividends and other proceeds received 0   3 
 Property and equipment purchased (7)  (7)
 Net cash flows from (used in) investing activities (133)  (52)
      
Effect of foreign currency on   
 cash and cash equivalents (13)  (1)
      
Increase (decrease) in cash 48   128 
      
Cash, beginning of period 316   589 
      
Cash, end of period 364   717 
      

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Source: Constellation Software Inc.

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