Constellation Software : Q4 2023 Shareholders' Report

Constellation Software Inc.

FINANCIAL REPORT

Fourth Quarter Fiscal Year 2023

For the three months and fiscal year ended

December 31, 2023

CONSTELLATION SOFTWARE INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS ("MD&A")

The following discussion and analysis should be read in conjunction with the Annual Consolidated Financial Statements for the year ended December 31, 2023, which we prepared in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board (IFRS). Certain information included herein is forward-looking and based upon assumptions and anticipated results that are subject to uncertainties. Should one or more of these uncertainties materialize or should the underlying assumptions prove incorrect, actual results may vary significantly from those expected. See "Forward-Looking Statements" and "Risks and Uncertainties".

Unless otherwise indicated, all dollar amounts are expressed in U.S. dollars. All references to "$" are to U.S. dollars and all references to "C$" are to Canadian dollars. Due to rounding, certain totals and subtotals may not foot and certain percentages may not reconcile.

Additional information about Constellation Software Inc. (the "Company" or "Constellation"), including our most recently filed Annual Information Form ("AIF"), is available on SEDAR at www.sedarplus.ca.

Forward Looking Statements

Certain statements in this report may contain "forward looking" statements that involve risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company or industry to be materially different from any future results, performance or achievements expressed or implied by such forward- looking statements. Words such as "may", "will", "expect", "believe", "plan", "intend", "should", "anticipate" and other similar terminology are intended to identify forward looking statements. These statements reflect current assumptions and expectations regarding future events and operating performance as of the date of this MD&A March 6, 2024. 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, including, but not limited to, the factors discussed under "Risks and Uncertainties". Although the forward looking statements contained in this MD&A are based upon what management of the Company believes are reasonable assumptions, the Company cannot assure investors that actual results will be consistent with these forward looking statements. These forward looking statements are made as of the date of this MD&A and the Company assumes no obligation, except as required by law, to update any forward looking statements to reflect new events or circumstances. This report should be viewed in conjunction with the Company's other publicly available filings, copies of which can be obtained electronically on SEDAR at www.sedarplus.ca.

Non-IFRS Measures

This MD&A includes certain measures which have not been prepared in accordance with IFRS such as Free cash flow available to shareholders.

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.

1

FCFA2S is not a recognized measure under IFRS and may not be comparable to similar financial measures disclosed by other issuers. Accordingly, readers are cautioned that FCFA2S should not be construed as an alternative to net cash flows from operating activities. See ''Results of Operations -Free cash flow available to shareholders" for a reconciliation of FCFA2S to net cash flows from operating activities.

Corporate Reorganization

On February 22 and 23, 2023 (as part of a series of transactions relating to the acquisition of WideOrbit Inc. ("WideOrbit")), the Company's subsidiary, Lumine Group Inc. ("Lumine"), completed a corporate reorganization. After the reorganization was completed, the Company now owns 1 super voting share, 6 subordinate voting shares and 63,582,712 preferred shares of Lumine. Furthermore, the Company distributed 63,582,706 of the subordinate voting shares of Lumine to its common shareholders pursuant to a dividend-in-kind on February 23, 2023. The steps performed in conjunction with the reorganization consisted of the following:

• The Company exchanged its existing common shares and preferred shares in Lumine Group (Holdings) Inc. ("Lumine Group Holdings") for 63,582,712 subordinate voting shares ("Lumine Subordinate Voting Shares") and 55,233,745 preferred shares ("Lumine Preferred Shares") on February 22, 2023.
• Lumine and Lumine Group Holdings amalgamated on February 22, 2023.
• The Company subscribed for 8,348,967 Lumine Preferred Shares on February 22, 2023. The Lumine Preferred Shares are convertible into Lumine Subordinate Voting Shares at a rate of 1:2.43.
• Lumine had 63,582,712 Lumine Subordinate Voting shares outstanding on February 22, 2023. The Company distributed 63,582,706 of the Lumine Subordinate Voting Shares to its common shareholders pursuant to a dividend-in-kind on February 23, 2023 and continues to hold 6 Lumine Subordinate Voting Shares.

The Company holds 1 super voting share of Lumine (the "Lumine Super Voting Share"). The Lumine Super Voting Share entitles CSI to that number of votes that equals 50.1% of the aggregate number of votes attached to all the outstanding Lumine Super Voting Shares, Lumine Subordinate Voting Shares and special shares of Lumine (the "Lumine Special Shares"). As a result, the Company controls Lumine and has consolidated Lumine's financial position and results of operations. The Company reflects a non-controlling interest held by other parties in Lumine of 100% as of December 31, 2023 (December 31, 2022 - 0%).

Overview

We acquire, manage and build vertical market software ("VMS") businesses. Generally, these businesses provide mission critical software solutions that address the specific needs of our customers in particular markets. Our focus on acquiring businesses with growth potential, managing them well and then building them, has allowed us to generate significant cash flows and revenue growth during the past several years.

Our revenue consists primarily of software license fees, maintenance and other recurring fees, professional service fees and hardware sales. Software license revenue is comprised of non-recurring license fees charged for the use of software products licensed under multiple-year or perpetual arrangements. Maintenance and other recurring revenue primarily consists of fees charged for customer support on software products post-delivery and also includes recurring fees derived from combined software/support contracts, transaction revenues, managed services associated with CSI software that has been sold to the customer, and hosted software-as-a-service products. Professional service revenue consists of fees charged for implementation services, custom programming, product training, certain managed services, and consulting. Hardware and other revenue includes the resale of third party hardware as part of customized solutions, as well as sales of hardware assembled internally and the reimbursement of travel costs. Our customers typically purchase a combination of software, maintenance, professional services and hardware, although the type, mix and quantity of each vary by customer and by product.

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Expenses consist primarily of staff costs, the cost of hardware, third party licenses, maintenance and professional services to fulfill our customer arrangements, travel and occupancy costs, depreciation, and other general operating expenses.

Results of Operations

(In millions of dollars, except percentages and per share amounts) Unaudited

Revenue

Expenses

Amortization of intangible assets Foreign exchange (gain) loss

IRGA / TSS membership liability revaluation charge Finance and other expense (income)

Bargain purchase gain

Impairment of intangible and other non-financial assets Redeemable preferred securities expense (income) Finance costs

Income before income taxes

Income tax expense (recovery)

Current income tax expense (recovery)

Deferred income tax expense (recovery)

Income tax expense (recovery)

Net income (loss) attributable to:

Common shareholders of CSI

Non-controlling interests

Net income (loss)

Net cash flows from operating activities Free cash flow available to shareholders

Weighted average number of shares outstanding

Basic and diluted

Net income (loss) per share

Basic and diluted

Net cash flows from operating activities per share Basic and diluted

Free cash flow available to shareholders per share Basic and diluted

Cash dividends declared per share

Basic and diluted

Total assets

Total long-term liabilities

NM - Not meaningful

Three months ended	Period-Over-Period
	December 31,		Change
	2023		2022		$	%
	2,323		1,847		475	26%
	1,712		1,388		324	23%
	240		185		55	29%
	41		42		(1)	-3%
	58		23		35	157%
	(27)		(23)		(4)	18%
	(3)		(13)		10	NM
	22		5		17	324%
	278		-		278	NM
	59		37		23	62%
	(56)		204		(260)	NM
	54		80		(26)	-32%
	(11)		(39)		28	-71%
	43		41		2	4%
	141		152		(11)	-7%
	(241)		10		(251)	NM
	(100)		163		(262)	NM
	511		400		110	28%
	325		290		35	12%
	21.2		21.2
$	6.64	$	7.19	$	(0.54)	-8%
$	24.09	$	18.88	$	5.21	28%
$	15.33	$	13.68	$	1.65	12%
$	1.00	$	1.00	$	-	0%

	Year ended	Period-Over-Period
	December 31,		Change
	2023		2022		$	%
	8,407		6,622		1,785	27%
	6,360		5,065		1,295	26%
	859		676		184	27%
	43		(56)		100	NM
	152		112		40	36%
	(34)		0		(35)	NM
	(54)		(16)		(37)	225%
	26		7		19	294%
	597		-		597	NM
	192		110		81	74%
	265		725		(460)	-63%
	370		403		(33)	-8%
	(166)		(228)		62	-27%
	204		175		29	17%
	565		512		53	10%
	(503)		38		(542)	NM
	62		551		(489)	-89%
	1,779		1,297		481	37%
	1,160		853		307	36%
	21.2		21.2
$	26.67	$	24.18	$	2.49	10%
$	83.94	$	61.23	$	22.71	37%
$	54.75	$	40.25	$	14.50	36%
$	4.00	$	4.00	$	-	0%
	10,899		7,872		3,028	38%
	3,442		2,167		1,276	59%

Due to rounding, certain totals may not foot and certain percentages may not reconcile.

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Comparison of the three and twelve month periods ended December 31, 2023 and 2022

Revenue:

Total revenue for the quarter ended December 31, 2023 was $2,323 million, an increase of 26%, or $475 million, compared to $1,847 million for the comparable period in 2022. For the year ended December 31, 2023 total revenues were $8,407 million, an increase of 27%, or $1,785 million, compared to $6,622 million for the comparable period in 2022. The increase for both the three and twelve 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 6% and 5% respectively, 4% and 5% 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. 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. Organic growth is not a standardized financial measure and might not be comparable to measures disclosed by other issuers.

The following table displays the breakdown of our revenue according to revenue type:

					Q422
	Three months ended	Period-Over-	Proforma	Organic
	December 31,	Period Change	Adj.	Growth
					(Note 1)
	2023	2022	$	%	$	%
		($ in millions, except percentages)
Licenses	133	100	33	33%	16	15%
Professional services	476	396	80	20%	62	4%
Hardware and other	77	82	(5)	-6%	12	-17%
Maintenance and other recurring	1,637	1,270	367	29%	255	7%
$M - Millions of dollars	2,323	1,847	475	26%	345	6%

Due to rounding, certain totals may not foot and certain percentages may not reconcile.

				Q422
Year ended	Period-Over-	Proforma	Organic
December 31,	Period Change	Adj.	Growth
				(Note 2)
2023	2022	$	%	$	%
	($ in millions, except percentages)
386	320	67	21%	66	0%
1,766	1,381	385	28%	336	3%
268	233	35	15%	45	-3%
5,985	4,688	1,297	28%	930	7%
8,407	6,622	1,785	27%	1,377	5%

Note 1: Estimated pre-acquisition revenues for the three months ended December 31, 2022 from companies acquired after September 30, 2022. (Obtained from unaudited vendor financial information.)

Note 2: Estimated pre-acquisition revenues for the twelve months ended December 31, 2022 from companies acquired after December 31, 2021. (Obtained from unaudited vendor financial information.)

For comparative purposes the table below shows the quarterly organic growth as compared to the same period in the prior year by revenue type since Q4 2021. Note that the estimated revenues achieved by acquired companies in the corresponding financial period preceding the date of acquisition by Constellation may be updated in the quarter following the quarter they were acquired resulting in slight variances to previously reported figures.

				Quarter Ended
	Dec. 31	Mar. 31	Jun. 30	Sep. 30	Dec. 31	Mar. 31	Jun. 30	Sep. 30	Dec. 31
	2021	2022	2022	2022	2022	2023	2023	2023	2023
Licenses	4%	‐13%	‐21%	‐16%	‐7%	‐9%	‐1%	‐7%	15%
Professional services	6%	‐5%	‐8%	‐7%	‐9%	0%	1%	7%	4%
Hardware and other	‐12%	‐5%	‐8%	‐7%	36%	‐1%	3%	10%	‐18%
Maintenance and other recurring	5%	4%	1%	‐1%	1%	4%	6%	9%	7%
Revenue	4%	1%	‐2%	‐3%	‐1%	2%	4%	8%	6%

The following table shows the same information adjusting for the impact of foreign exchange movements.

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					Quarter Ended
	Dec. 31	Mar. 31	Jun. 30	Sep. 30	Dec. 31	Mar. 31	Jun. 30	Sep. 30	Dec. 31
	2021	2022	2022	2022	2022	2023	2023	2023	2023
Licenses	5%	‐11%	‐17%	‐11%	‐3%	‐7%	‐1%	‐9%	13%
Professional services	7%	‐2%	‐3%	‐2%	‐5%	3%	1%	4%	2%
Hardware and other	‐11%	‐3%	‐4%	1%	44%	2%	3%	6%	‐19%
Maintenance and other recurring	6%	7%	6%	5%	6%	6%	7%	7%	6%
Revenue	5%	4%	2%	2%	4%	5%	5%	6%	4%

Expenses:

The following table displays the breakdown of our expenses:

	Three months ended	Period-Over-
	December 31,	Period Change
	2023	2022	$	%
Expenses	($ in millions, except percentages)
Staff	1,202	958	244	26%
Hardware	45	46	(1)	-3%
Third party license, maintenance
and professional services	218	183	34	19%
Occupancy	14	14	(0)	-1%
Travel, Telecommunications,
Supplies & Software and equipment	113	91	22	24%
Professional fees	44	36	8	21%
Other, net	34	22	13	58%
Depreciation	42	37	5	12%
	1,712	1,388	324	23%

Due to rounding, certain totals may not foot and certain percentages may not reconcile.

Year ended	Period-Over-
December 31,	Period Change
2023	2022	$	%

($ in millions, except percentages)

4,493	3,539	954	27%
158	134	24	18%
810	626	184	29%
51	49	2	5%
398	307	91	30%
151	114	37	32%
138	154	(16)	-10%
162	143	19	13%
6,360	5,065	1,295	26%

Overall expenses for the quarter ended December 31, 2023 increased 23%, or $324 million to $1,712 million, compared to $1,388 million during the same period in 2022. As a percentage of total revenue, expenses equalled 74% for the quarter ended December 31, 2023 and 75% for the same period in 2022. During the twelve months ended December 31, 2023, expenses increased 26%, or $1,295 million to $6,360 million, compared to $5,065 million during the same period in 2022. As a percentage of total revenue, expenses equalled 76% for the twelve months ended December 31, 2023 and 76% for the same period in 2022. For the three and twelve months ended December 31, 2023 the change in valuation of the US dollar against most major currencies in which the Company transacts business resulted in an approximate 2% and 0% increase in expenses respectively compared to the comparable periods of 2022.

Staff expense - Staff expenses increased 26% or $244 million for the quarter ended December 31, 2023 and 27% or $954 million for the twelve months ended December 31, 2023 over the same periods in 2022. Staff expense can be broken down into five key operating departments: Professional Services, Maintenance, Research and Development, Sales and Marketing, and General and Administrative. Included within staff expenses for each of the above five departments are personnel and related costs associated with providing the necessary services. The table below compares the period over period variances.

5

	Three months ended	Period-Over-
	December 31,	Period Change
	2023	2022	$	%
	($ in millions, except percentages)
Professional services	272	239	33	14%
Maintenance	227	182	46	25%
Research and development	328	259	69	27%
Sales and marketing	152	122	30	25%
General and administrative	223	157	66	42%
	1,202	958	244	26%

Due to rounding, certain totals may not foot and certain percentages may not reconcile.

Year ended	Period-Over-
December 31,	Period Change
2023	2022	$	%

($ in millions, except percentages)

1,043	837	207	25%
855	675	179	27%
1,215	948	267	28%
563	453	110	24%
817	626	191	30%
4,493	3,539	954	27%

The increase in staff expenses for the three and twelve months ended December 31, 2023 was primarily due to the growth in the number of employees compared to the same periods in 2022 primarily due to acquisitions.

Hardware expenses - Hardware expenses decreased 3% or $1 million for the quarter ended December 31, 2023 and increased 18% or $24 million for the twelve months ended December 31, 2023 over the same periods in 2022 as compared with the 6% decrease and 15% increase in hardware and other revenue for the three and twelve month periods ending December 31, 2023 respectively over the comparable periods in 2022. Hardware margins for both the three and twelve months ended December 31, 2023 were 41% as compared to 43% and 42% for the comparable periods in 2022.

Third party license, maintenance and professional services expenses - Third party license, maintenance and professional services expenses increased 19% or $34 million for the quarter ended December 31, 2023 and 29% or $184 million for the twelve months ended December 31, 2023 over the same periods in 2022. The increase is primarily due to third party license, maintenance and professional services expenses of acquired businesses.

Occupancy expenses - Occupancy expenses decreased 1% or $0.1 million for the quarter ended December 31, 2023 and increased 5% or $2 million for the twelve months ended December 31, 2023 over the same periods in 2022. There are no individually material reasons for the decrease in the quarter, although certain businesses are reducing office space as a result of the increase in remote working environments. The increase year over year is primarily due to the occupancy expenses of acquired businesses.

Travel, Telecommunications, Supplies & Software and equipment expenses - Travel, Telecommunications, Supplies & Software and equipment expenses increased 24% or $22 million for the quarter ended December 31, 2023 and 30% or $91 million for the twelve months ended December 31, 2023 over the same periods in 2022. The increase in these expenses is primarily due to expenses incurred by acquired businesses.

Professional fees - Professional fees increased 21% or $8 million for the quarter ended December 31, 2023 and 32% or $37 million for the twelve months ended December 31, 2023 over the same periods in 2022. The increase in these expenses is primarily due to expenses incurred by acquired businesses, as well as fees paid to advisors in relation to certain larger more complex acquisitions.

Other, net - Other expenses increased 58% or $13 million for the quarter ended December 31, 2023 and decreased 10% or $16 million for the twelve months ended December 31, 2023 over the same periods in 2022. The following table provides a further breakdown of expenses within this category.

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Advertising and promotion Recruitment and training Bad debt expense

R&D tax credits Contingent consideration Government assistance Other expense, net

NM - Not meaningful

Three months ended	Period-Over-Period
December 31,	Change
2023	2022	$	%
($ in millions, except percentages)
30	23	7	31%
10	9	1	12%
1	2	(0)	-5%
(24)	(17)	(7)	42%
3	(4)	7	NM
(0)	(1)	0	-61%
13	9	4	45%
34	22	13	58%

Year ended	Period-Over-Period
December 31,	Change
2023	2022	$	%
($ in millions, except percentages)
111	86	25	29%
40	36	4	10%
9	7	2	35%
(52)	(40)	(12)	30%
(5)	42	(46)	NM
(1)	(2)	2	-70%
34	25	9	38%
138	154	(16)	-10%

Due to rounding, certain totals may not foot and certain percentages may not reconcile.

The contingent consideration expense amounts recorded for the three and twelve months ended December 31, 2023 related to an increase (decrease) in anticipated acquisition earnout payment accruals primarily as a result of increases (decreases) to revenue forecasts for the associated acquisitions. Revenue forecasts are updated on a quarterly basis and the related anticipated acquisition earnout payment accruals are updated accordingly.

There are no individually material reasons contributing to the remaining variances.

Depreciation - Depreciation of property and equipment increased 12% or $5 million for the quarter ended December 31, 2023 and 13% or $19 million for the twelve months ended December 31, 2023 over the same periods in 2022. The increases are primarily due to the depreciation expense associated with acquired businesses.

Other Income and Expenses:

The following table displays the breakdown of our other income and expenses:

Amortization of intangible assets Foreign exchange (gain) loss

IRGA / TSS membership liability revaluation charge Finance and other expense (income)

Bargain purchase gain

Impairment of intangible and other non-financial assets Redeemable preferred securities expense (income) Finance costs

Income tax expense (recovery)

NM - Not meaningful

Three months ended	Period-Over-
December 31,	Period Change
2023	2022	$	%
($ in millions, except percentages)
240	185	55	29%
41	42	(1)	-3%
58	23	35	157%
(27)	(23)	(4)	18%
(3)	(13)	10	-75%
22	5	17	324%
278	-	278	NM
59	37	23	62%
43	41	2	4%
711	297	413	139%

Year ended	Period-Over-
December 31,	Period Change
2023	2022	$	%

($ in millions, except percentages)

859	676	184	27%
43	(56)	100	NM
152	112	40	36%
(34)	0	(35)	NM
(54)	(16)	(37)	225%
26	7	19	294%
597	-	597	NM
192	110	81	74%
204	175	29	17%
1,985	1,007	979	97%

Due to rounding, certain totals may not foot and certain percentages may not reconcile.

Amortization of intangible assets - Amortization of intangible assets increased 29% or $55 million for the quarter ended December 31, 2023 and 27% or $184 million for the twelve months ended December 31, 2023 over the same periods in 2022. The increase in amortization expense for the three and twelve months ended December 31, 2023 is primarily attributable to an increase in the carrying amount of our intangible asset balance

7

over the twelve-month period ended December 31, 2023 as a result of acquisitions completed during this twelvemonth period.

Foreign exchange - Most of our businesses are organized geographically so many of our expenses are incurred in the same currency as our revenues, which mitigates some of our exposure to currency fluctuations. For the three and twelve months ended December 31, 2023, we realized foreign exchange losses of $41 million and $43 million respectively compared to a loss of $42 million and a gain of $56 million for the same periods in 2022. The following table provides a breakdown of these amounts.

Unrealized foreign exchange (gain) loss related to:

• revaluation of intercompany loans between entities with differing functional currencies (1)
• revaulation of the Company's unsecured subordinated floating rate debentures as a result of the appreciation (depreciation) of the Canadian dollar against the US dollar.
• revaluation of the liability associated with the IRGA (Euro denominated liability)

Remaining foreign exchange (gain) loss

NM - Not meaningful

Three months ended	Period-Over-
December 31,	Period Change
2023	2022	$	%
($ in millions, except percentages)
(1)	3	(4)	NM
10	3	7	255%
25	38	(13)	-34%
6	(1)	7	NM
41	42	(1)	-3%

Year ended	Period-Over-Period
December 31,	Change
2023	2022	$	%
($ in millions, except percentages)
5	(22)	27	NM
10	(14)	24	NM
18	(19)	37	NM
11	(1)	12	NM
43	(56)	100	NM

Due to rounding, certain totals may not foot and certain percentages may not reconcile.

(1) Offsetting amounts recorded in other comprehensive income. Net impact to Total comprehensive income for each period is nil.

The remaining foreign exchange gains and losses per the table above are primarily related to the unrealized foreign exchange translation gains and losses of certain non-US dollar denominated working capital balances to US dollars as a result of the depreciation or appreciation of the US dollar.

IRGA / TSS membership liability revaluation charge - On December 23, 2014, in accordance with the terms of the purchase and sale agreement for the initial acquisition of TSS (as defined below) by CSI, and on the basis of the term sheets attached thereto, Constellation and the Joday Group, among others, entered into a Members Agreement (the "Members Agreement") pursuant to which the Joday Group acquired 33.29% of the voting interests in Constellation Software Netherlands Holding Coöperatief U.A. (which was renamed to Topicus.com Coöperatief U.A.), a subsidiary of Constellation and the indirect owner of 100% of TSS at the time of the acquisition. Total proceeds from this transaction was €39 million ($49 million).

On January 5, 2021, the Members Agreement was terminated in conjunction with the acquisition of Topicus.com B.V., the reorganization of Topicus Coop and the execution of the IRGA. The IRGA was established to create certain contractual obligations of the parties in respect of the governance of Topicus and Topicus Coop. The Joday Group's interest in Topicus Coop now comprises 39,331,284 Topicus Coop Ordinary Units ("Topicus Coop Units") resulting in an interest of 30.29% in Topicus Coop as of December 31, 2023. The IRGA provides for transfer restrictions in respect of the Topicus Coop Units. See "Liability of CSI under the terms of the IRGA" below for further details.

The valuation of the IRGA liability (previously the TSS membership liability) increased by approximately 10% or $58 million from Q3 2023, and approximately 33% or $152 million from Q4 2022. The increases are

8

primarily the result of the growth in TSS' trailing twelve month maintenance revenue on a pro-forma basis (primarily due to acquisitions). Maintenance revenue and net tangible assets are the two main drivers in the calculation of the liability. The liability recorded on the balance sheet increased by 37% or $170 million over the twelve month period ended December 31, 2023 from $465 million to $635 million as a result of the revaluation charge of $152 million and an $18 million foreign exchange loss. The IRGA / TSS membership liability is denominated in Euros and the Euro appreciated 3% versus the US dollar during the twelve months ended December 31, 2023.

Finance and other expense (income) - Finance and other expense (income) for the three and twelve months ended December 31, 2023 was income of $27 million and $34 million respectively, compared to income of $23 million and nil respectively for the same periods in 2022. The following table provides a further breakdown of expenses (income) within this category.

	Three months ended December 31,		Year ended December 31,
		2023		2022		2023		2022
Interest income on cash	$	(2)	$	(0)	$	(3)	$	(1)
(Increase) decrease in the fair value of equity securities held for trading		(5)		(22)		(2)		16
Share in net (income) loss of equity investee		(5)		(0)		(5)		0
Finance and other income		(15)		(1)		(24)		(15)
Finance and other expense (income)	$	(27)	$	(23)	$	(34)	$	0

Finance and other income for the three months ended December 31, 2023 includes a $13 million reversal of a performance obligation that was required to be set up as part of an acquisition's purchase price accounting. The Company was able to negotiate a release of the obligation from the customer. There are no individually material reasons contributing to the remaining variances.

Bargain purchase gain - Bargain purchase gains totalling $3 million and $54 million were recorded in the three and twelve months ended December 31, 2023 respectively, compared to $13 million and $16 million for the same periods in 2022, relating to acquisitions made in the respective periods. A $49 million gain was recorded in the year ending December 31, 2023 relating to an acquisition that is expected to incur operating losses in the first year of ownership, and below average margins in the following two years. In accordance with IFRS, an accrual for these investments in the business was not recorded as part of the purchase price accounting. Also, in accordance with the IFRS relating to business combinations, the $49 million gain will be reflected in the three months ended September 30, 2023, the period in which the acquisition was made. The gain was not previously recorded in the Company's Unaudited Condensed Consolidated Interim Financial Statements for the three and nine month periods ended September 30, 2023 as the Company was finalizing the valuation of certain acquired assets. The remaining gains resulted from the fact that the fair value of the separately identifiable assets and liabilities acquired exceeded the total consideration paid, principally due to the acquisition of certain assets that will benefit the Company that had limited value to the sellers.

Impairment of intangible and other non-financial assets - Impairment expenses of $22 million and $26 million were recorded in the three and twelve month periods ended December 31, 2023 compared to $5 million and $7 million for the same periods in 2022. The expenses relate to businesses that have been unable to achieve the goals established in their respective investment theses.

Redeemable preferred securities expense - The redeemable preferred securities expense for the three and twelve month periods ended December 31, 2023 was $278 million and $597 million respectively, with no similar expense recorded for the same periods in 2022. In conjunction with the acquisition of WideOrbit, Lumine issued 10,204,294 Lumine Special Shares (the "Preferred Securities") to the sellers of WideOrbit for an initial subscription price of approximately $222 million. Holders of the Preferred Securities are entitled to convert some or all of their

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