TORONTO, Nov. 04, 2022 (GLOBE NEWSWIRE) -- Constellation Software Inc. (TSX:CSU) (“Constellation” or the “Company”) today announced its financial results for the third quarter ended September 30, 2022 and declared a $1.00 per share dividend payable on January 11, 2023 to all common shareholders of record at close of business on December 20, 2022. 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, 2022 and the accompanying notes, our Management Discussion and Analysis for the three and nine months ended September 30, 2022 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, 2021, 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 2022 Headlines:

  • Revenue grew 33% (negative 3% organic growth, 2% after adjusting for changes in foreign exchange rates) to $1,725 million compared to $1,299 million in Q3 2021.
  • Net income attributable to common shareholders increased 28% to $136 million ($6.42 on a diluted per share basis) from $107 million ($5.04 on a diluted per share basis) in Q3 2021.
  • A number of acquisitions were completed for aggregate cash consideration of $207 million (which includes acquired cash). Deferred payments associated with these acquisitions have an estimated value of $61 million resulting in total consideration of $268 million.
  • Cash flows from operations (“CFO”) were $321 million, an increase of 10%, or $29 million, compared to $292 million for the comparable period in 2021.
  • Free cash flow available to shareholders1 (“FCFA2S”) increased $3 million to $229 million compared to $226 million for the same period in 2021.

Total revenue for the quarter ended September 30, 2022 was $1,725 million, an increase of 33%, or $426 million, compared to $1,299 million for the comparable period in 2021. For the first nine months of 2022 total revenues were $4,774 million, an increase of 28%, or $1,051 million, compared to $3,724 million for the comparable period in 2021. 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 negative 3% and negative 2% respectively, positive 2% and 3% 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. Organic growth is not a standardized financial measure and might not be comparable to measures disclosed by other issuers.

Net income attributable to common shareholders of CSI for the quarter ended September 30, 2022 was $136 million compared to $107 million for the same period in 2021. On a per share basis this translated into a net income per diluted share of $6.42 in the quarter ended September 30, 2022 compared to net income per diluted share of $5.04 for the same period in 2021. For the nine months ended September 30, 2022, net income attributable to common shareholders of CSI was $360 million or $16.99 per diluted share compared to $186 million or $8.79 per diluted share for the same period in 2021. There was no change in the number of shares outstanding.

For the quarter ended September 30, 2022, CFO increased $29 million to $321 million compared to $292 million for the same period in 2021 representing an increase of 10%. For the nine months ended September 30, 2022, CFO decreased $61 million to $897 million compared to $959 million for the same period in 2021 representing a decrease of 6%. The primary reasons for the decline in CFO for the nine months ended September 30, 2022 is that CFO includes the impact of changes in non-cash operating assets and liabilities exclusive of effects of business combinations or, changes in non-cash operating working capital (“NCOWC”), and income taxes paid. For the nine months ended September 30, 2022 there was $27 million of cash used in NCOWC compared to $53 million of cash generated from NCOWC for the same period in 2021. Cash used in NCOWC associated with the Company’s recently acquired Altera business unit was $32 million for the nine months ended September 30, 2022. There are many reasons contributing to the NCOWC impact variance for the Company, including Altera, none of which are indicative of an underlying concern with the overall NCOWC balance. Specifically, there are no concerns with accounts receivable or unbilled revenue aging. Income taxes paid increased 87% or $41 million for the quarter ended September 30, 2022 and 42% or $83 million for the nine months ended September 30, 2022 over the same periods in 2021. Approximate $50 million and $100 million cash tax payments were made in the three and nine month periods ending September 30, 2022 respectively relating to the deferral of R&E expenses associated with the Tax Cuts and Jobs Act.

For the quarter ended September 30, 2022, FCFA2S increased $3 million to $229 million compared to $226 million for the same period in 2021 representing an increase of 1%. For the nine months ended September 30, 2022, FCFA2S decreased $76 million to $563 million compared to $639 million for the same period in 2021 representing a decrease of 12%. The items negatively impacting CFO summarized above are the same items negatively impacting FCFA2S. On February 1, 2022, the Topicus Preferred Shares and Topicus Coop Preference Units were converted to Topicus Subordinate Voting Shares and Topicus Coop Ordinary Units respectively. As a result of this conversion the non-controlling interest in Topicus.com Inc. decreased from approximately 70% to 39%.

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 IRGA / TSS membership liability revaluation charge, and property and equipment purchased, and includes interest and dividends received. 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, 
   20222021   20222021 
  ($ in millions) ($ in millions)
           
Net cash flows from operating activities  321 292    897 959  
Adjusted for:          
Interest paid on lease obligations  (3)(2)   (8)(7) 
Interest paid on other facilities  (23)(12)   (49)(30) 
Credit facility transaction costs  (0)(0)   (3)(4) 
Payments of lease obligations  (24)(21)   (69)(61) 
IRGA / TSS membership liability revaluation charge  (33)(25)   (89)(107) 
Property and equipment purchased  (8)(7)   (27)(18) 
Interest and dividends received  0 1    0 1  
           
   230 226    652 732  
Less amount attributable to          
Non-controlling interests  (1)1    (89)(93) 
           
Free cash flow available to shareholders  229 226    563 639  
           
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, 2022 December 31, 2021 September 30, 2021 
      
Assets    
      
Current assets:    
 Cash $665 $763 $961 
 Accounts receivable  744  600  512 
 Unbilled revenue  219  140  144 
 Inventories  46  35  32 
 Other assets  473  296  278 
    2,146  1,835  1,929 
      
Non-current assets:    
 Property and equipment  121  93  91 
 Right of use assets  274  245  252 
 Deferred income taxes  155  66  63 
 Other assets  160  99  94 
 Intangible assets 4,469  3,428  3,006 
    5,179  3,931  3,506 
      
Total assets $7,325 $5,766 $5,434 
      
Liabilities and Shareholders' Equity    
      
Current liabilities:    
 Debt with recourse to Constellation Software Inc. $364 $143 $137 
 Debt without recourse to Constellation Software Inc.  234  60  54 
 Redeemable preferred securities  -  7  7 
 Accounts payable and accrued liabilities  917  832  720 
 Dividends payable  21  22  21 
 Deferred revenue  1,545  1,158  1,168 
 Provisions  9  11  11 
 Acquisition holdback payables  148  94  92 
 Lease obligations  89  79  81 
 Income taxes payable  99  56  86 
    3,425  2,461  2,377 
      
Non-current liabilities:    
 Debt with recourse to Constellation Software Inc.  522  561  550 
 Debt without recourse to Constellation Software Inc.  705  354  325 
 Deferred income taxes  465  436  393 
 Acquisition holdback payables  62  68  49 
 Lease obligations  206  190  195 
 Other liabilities  239  175  145 
    2,200  1,784  1,656 
      
Total liabilities  5,625  4,245  4,034 
      
      
Shareholders' equity:    
 Capital stock  99  99  99 
 Other equity  -  (179) (162)
 Accumulated other comprehensive income (loss)  (227) (66) (69)
 Retained earnings  1,632  1,206  1,103 
 Non-controlling interests  196  460  429 
    1,700  1,521  1,401 
      
      
      
Total liabilities and shareholders' equity $7,325 $5,766 $5,434 
      


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,
   2022   2021   2022   2021 
         
         
Revenue        
License $79  $69  $220  $206 
Professional services  375   256   985   747 
Hardware and other  54   45   151   127 
Maintenance and other recurring  1,217   929   3,418   2,643 
   1,725   1,299   4,774   3,724 
         
Expenses        
Staff  925   676   2,581   1,982 
Hardware  31   25   88   71 
Third party license, maintenance and professional services 167   113   443   317 
Occupancy  12   10   35   30 
Travel, telecommunications, supplies, software and equipment 80   46   215   129 
Professional fees  26   21   78   53 
Other, net  64   21   132   41 
Depreciation  38   31   105   90 
Amortization of intangible assets  177   134   491   376 
   1,521   1,077   4,167   3,087 
         
         
Foreign exchange loss (gain)  (57)  (5)  (98)  (3)
IRGA/TSS Membership liability revaluation charge 33   25   89   107 
Finance and other expense (income)  8   (4)  24   (9)
Bargain purchase gain  (3)  (1)  (4)  (1)
Impairment of intangible and other non-financial assets -   1   1   7 
Redeemable preferred securities expense (income) -   -   -   295 
Finance costs  29   18   73   50 
   11   34   86   446 
         
Income (loss) before income taxes  193   188   521   190 
         
Current income tax expense (recovery)  113   70   322   209 
Deferred income tax expense (recovery)  (63)  (4)  (189)  (43)
Income tax expense (recovery)  50   67   133   166 
         
Net income (loss)  143   121   388   24 
         
Net income (loss) attributable to:        
Common shareholders of Constellation Software Inc. 136   107   360   186 
Non-controlling interests  7   15   28   (162)
Net income (loss)  143   121   388   24 
         
Earnings per common share of Constellation Software Inc.       
Basic and diluted $6.42  $5.04  $16.99  $8.79 
         


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,
   2022   2021   2022   2021 
         
Net income (loss) $143  $121  $388  $24 
         
Items that are or may be reclassified subsequently to net income (loss):       
         
Foreign currency translation differences from foreign operations and other, net of tax (93)  (21)  (184)  (39)
         
Other comprehensive income (loss) for the period, net of income tax (93)  (21)  (184)  (39)
         
Total comprehensive income (loss) for the period$50  $100  $204  $(15)
         
Total other comprehensive income (loss) attributable to:        
Common shareholders of Constellation Software Inc.  (80)  (13)  (156)  (19)
Non-controlling interests  (13)  (8)  (27)  (19)
Total other comprehensive income (loss) $(93) $(21) $(184) $(39)
         
Total comprehensive income (loss) attributable to:        
Common shareholders of Constellation Software Inc.  56   93   204   167 
Non-controlling interests  (6)  7   1   (182)
Total comprehensive income (loss) $50  $100  $204  $(15)
         


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 equityAccumulated 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) for the period:       
         
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)       
 for the period -  -  (156) -  (156) (27) (184)
         
Total comprehensive income (loss) for the period -  -  (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 related 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 -  -  -  (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 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 Common Shareholders of CSI  
  Capital stock
 Other equityAccumulated 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, net of tax -  -  (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 Subordinated 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 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,
     2022   2021   2022   2021 
           
Cash flows from (used in) operating activities:       
 Net income (loss) $143  $121  $388  $24 
 Adjustments for:        
  Depreciation  38   31   105   90 
  Amortization of intangible assets 177   134   491   376 
  IRGA/TSS Membership liability revaluation charge 33   25   89   107 
  Finance and other expense (income) 8   (4)  24   (9)
  Bargain purchase (gain) (3)  (1)  (4)  (1)
  Impairment of intangible and other non-financial assets  -   1   1   7 
  Redeemable preferred securities expense (income)  -   -   -   295 
  Finance costs  29   18   73   50 
  Income tax expense (recovery) 50   67   133   166 
  Foreign exchange loss (gain) (57)  (5)  (98)  (3)
 Change in non-cash operating assets and liabilities       
  exclusive of effects of business combinations (8)  (47)  (27)  53 
 Income taxes paid (89)  (48)  (279)  (196)
 Net cash flows from (used in) operating activities 321   292   897   959 
           
Cash flows from (used in) financing activities:       
 Interest paid on lease obligations  (3)  (2)  (8)  (7)
 Interest paid on debt  (23)  (12)  (49)  (30)
 Increase (decrease) in CSI facility  (32)  -   205   - 
 Increase (decrease) in Topicus revolving credit debt facility without recourse to CSI 7   12   112   24 
 Proceeds from issuance of debt facilities without recourse to CSI 22   6   447   140 
 Repayments of debt facilities without recourse to CSI (17)  (2)  (30)  (4)
 Other financing activities 3   -   4   - 
 Credit facility transaction costs (0)  (0)  (3)  (4)
 Payments of lease obligations  (24)  (21)  (69)  (61)
 Distribution to the Joday Group  -   -   (23)  (22)
 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 (89)  (41)  516   (29)
           
Cash flows from (used in) investing activities:       
 Acquisition of businesses (207)  (130)  (1,421)  (736)
 Cash obtained with acquired businesses  42   28   190   112 
 Post-acquisition settlement payments, net of receipts (39)  (16)  (98)  (101)
 Receipt of additional subscription amount from the sellers of Topicus.com B.V.  -   -   -   33 
 Purchases of other investments  (0)  (14)  (96)  (15)
 Proceeds from sales of other investments  -   8   3   8 
 Interest, dividends and other proceeds received 1   1   4   4 
 Property and equipment purchased (8)  (7)  (27)  (18)
 Net cash flows from (used in) investing activities (211)  (131)  (1,445)  (713)
           
Effect of foreign currency on       
 cash and cash equivalents (32)  (10)  (67)  (13)
           
Increase (decrease) in cash (11)  110   (99)  203 
           
Cash, beginning of period$676  $851  $763  $758 
           
Cash, end of period$665  $961  $665  $961 
           

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Source: Constellation Software Inc.

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