Constellation Software Inc. and Topicus.Com Inc. Announce Results for Topicus.com Inc. for the First Quarter Ended March 31, 2021

TORONTO, May 04, 2021 (GLOBE NEWSWIRE) — Topicus.com Inc. (TSXV:TOI) in a joint release with Constellation Software Inc. (TSX:CSU) today announced financial results for Topicus.com Inc. (“Topicus” or the “Company”) for the first quarter ended March 31, 2021. Please note that all amounts referred to in this press release are in Euros 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, 2021 and the accompanying notes, our Management Discussion and Analysis for the three months ended March 31, 2021 and the Annual Consolidated Financial Statements of Constellation Software Netherlands Holding Cooperatief U.A. (the “Topicus Coop” or “CSNH”) for the year ended December 31, 2020, which we prepared in accordance with International Financial Reporting Standards (“IFRS”) and the Company’s 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 Topicus.com Inc.’s website www.topicus.com. Additional information about Topicus.com Inc. is also available on SEDAR at www.sedar.com.

Q1 2021 Headlines:

  • Revenue increased 50% (7% organic growth) to €179.6 million compared to €119.8 million in Q1 2020.  
  • A €2,456.8 million expense related to the increase in fair value of redeemable preferred securities was incurred in the quarter, €2,442.1 million of which is non-cash related. Fair value of the preferred securities is primarily dependent on the price movement of Topicus’ Subordinate Voting Shares.
  • Earnings decreased to a net loss of €2,436.1 million (€52.40 on a diluted per share basis) from net income of €17.5 million (€0.15 on a diluted per share basis) in Q1 2020 primarily resulting from the €2,456.8 million redeemable preferred securities expense.
  • On January 5, 2021, the Company acquired 100% of the shares of Topicus.com B.V. from Ijssel B.V. (“Ijssel”). The Company paid cash of €133.6 million to Ijssel. Furthermore, the Company issued 5,842,882 Topicus Coop Preference Units to Ijssel for an initial subscription price of €83.8 million plus an additional subscription amount of €27.6 million which will be paid by Ijssel to the Company in May 2021. The Company also issued 5,842,882 Topicus Coop Ordinary Units to Ijssel. The aggregate consideration totalled €217.4 million.
  • Additional acquisitions were completed for aggregate cash consideration of €13.0 million (which includes acquired cash). Deferred payments associated with these acquisitions have an estimated value of €0.7 million resulting in total consideration of €13.7 million.
  • Cash flows from operations (“CFO”) increased €39.4 million to €159.8 million compared to €120.4 million in Q1 2020 representing an increase of 33%.
  • Free cash flow available to shareholders1 (“FCFA2S”) increased €14.8 million to €91.5 million compared to €76.7 million in Q1 2020 representing an increase of 19%.

Total revenue for the quarter ended March 31, 2021 was €179.6 million, an increase of 50%, or €59.8 million, compared to €119.8 million for the comparable period in 2020. The increase for the three-month period compared to the same period in the prior year is primarily attributable to growth from acquisitions as the Company experienced organic growth of 7%.

On January 4, 2021 and January 5, 2021, the Company completed a corporate reorganization and acquired Topicus.com B.V. (the “Combination”). In connection with the Combination, the Company issued 39,412,385 Preferred Shares to Constellation Software Inc. and 19,665,642 Topicus Coop Preference Units to Joday Investments II B.V. and certain individual investors affiliated therewith (being the previous minority owners of CSNH), and in connection with the acquisition of Topicus.com B.V. on January 5, 2021, the Company issued 5,842,882 Topicus Coop Preference Units to Ijssel, collectively the “Preferred Securities”. The Preferred Securities are non-voting and under certain conditions are redeemable at the option of the holder for a redemption price of approximately €19.06 per security. The redemption price may either be settled in cash or through the issuance of a variable number of Subordinate Voting Shares or Topicus Coop Ordinary Units, as applicable, of equal value, or any combination thereof. The Preferred Securities are also convertible into Subordinate Voting Shares or Topicus Ordinary Units, as applicable, at a conversion ratio of 1:1. The Preferred Securities holders will also be entitled to a fixed annual cumulative dividend of 5% per annum on the initial Preferred Securities value of approximately €19.06 per security.

The Preferred Securities will be recorded at fair value at the end of each reporting period. The change in fair value of the Preferred Securities is recorded as redeemable preferred securities expense (income) in the condensed consolidated interim statements of income. Based on the Preferred Securities conversion right, the value of the Preferred Securities is primarily dependent on the price movement of Topicus’ Subordinate Voting Shares. At March 31, 2021 the market price of Topicus’ Subordinate Voting Share closed at CAD$82.54 or approximately €55.89. The increase in value from €19.06 to €55.89 multiplied by the 64.9 million Preferred Securities outstanding equals approximately €2,391.2 million. The difference between €2,391.2 million and the fair value of €2,456.8 million primarily relates to the impact of share price volatility and optionality and the accrued dividend of €14.7 million.

As the threshold for the mandatory conversion or redemption of all Preferred Securities was reached on April 29, 2021, it is expected that the holders will provide their notification for conversion no later than May 29, 2021 at which time the associated liability excluding accrued dividends will be extinguished.

Further descriptions of the significant terms and conditions of the Preferred Securities are described in Note 9 to the Company’s Unaudited Condensed Consolidated Interim Financial Statements for the three month period ended March 31, 2021.

Net loss for the quarter ended March 31, 2021 was €2,436.1 million compared to net income of €17.5 million for the same period in 2020 primarily resulting from the €2,456.8 million redeemable preferred securities expense, €2,442.1 million of which is non-cash related. On a per share basis, this translated into a net loss per diluted share of €52.40 in the quarter ended March 31, 2021 compared to net income per diluted share of €0.15 for the same period in 2020.

For the quarter ended March 31, 2021, CFO increased €39.4 million to €159.8 million compared to €120.4 million for the same period in 2020 representing an increase of 33%.  

For the quarter ended March 31, 2021, FCFA2S increased €14.8 million to €91.5 million compared to €76.7 million for the same period in 2020 representing an increase of 19%.

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 Topicus 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 Topicus 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, and property and equipment purchased, and includes interest and dividends received. The portion of this amount applicable to non-controlling interests is then deducted. Topicus believes that FCFA2S is useful supplemental information as it provides an indication of the uncommitted cash flow that is available to shareholders if Topicus does not make any acquisitions, or investments, and does not repay any debts. While Topicus could use the FCFA2S to pay dividends or repurchase shares, Topicus’ objective is to invest all of our FCFA2S in acquisitions which meet Topicus’ 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,  
  2021 2020
  (€ in millions, except percentages)
       
Net cash flows from operating activities   159.8   120.4  
Adjusted for:      
Interest paid on lease obligations   (0.2 ) (0.2 )
Interest paid on other facilities   (1.5 ) (1.4 )
Credit facility transaction costs   (2.2 )  
Payments of lease obligations   (4.3 ) (3.2 )
Property and equipment purchased   (0.8 ) (0.7 )
Interest and dividends received      
         
    150.7   114.9  
Less amount attributable to      
Non-controlling interests   (59.2 ) (38.3 )
       
Free cash flow available to shareholders   91.5   76.7  
       
Due to rounding, certain totals may not foot.      

About Topicus.com Inc.

Topicus’ subordinate voting shares are listed on the Toronto Venture Stock Exchange under the symbol “TOI”. Topicus acquires, manages and builds vertical market software businesses.

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
[email protected]
www.topicus.com

SOURCE: TOPICUS.COM INC.

Topicus.com Inc.  
Condensed Consolidated Interim Statements of Financial Position      
(In thousands of euros, except per share amounts. Due to rounding, numbers presented may not foot.)
       
Unaudited      
  March 31, 2021 December 31, 2020 March 31, 2020
       
Assets      
       
Current assets:      
Cash 86,278   55,635   86,592  
Accounts receivable 71,079   46,644   55,878  
Unbilled revenue 22,553   12,609   11,704  
Inventories 568   375   396  
Other assets 53,900   14,461   32,905  
  234,377   129,724   187,475  
       
Non-current assets:      
Property and equipment 15,797   8,782   8,159  
Right of use assets 58,742   50,517   42,795  
Deferred income taxes 5,035   1,946   942  
Other assets 4,908   3,956   3,614  
Intangible assets 710,942   446,213   389,058  
  795,424   511,415   444,567  
       
Total assets 1,029,801   641,139   632,042  
       
Liabilities and Members’ Equity      
       
Current liabilities:      
Revolving credit facility and current portion of term loans 24,625   19,482    
Redeemable preferred securities 3,694,452      
Accounts payable and accrued liabilities 133,481   97,386   95,736  
Deferred revenue 193,158   59,721   151,372  
Provisions 1,198   1,222   1,354  
Acquisition holdback payables 11,040   12,601   5,247  
Lease obligations 15,676   13,953   8,537  
Income taxes payable 14,520   12,576   9,443  
  4,088,150   216,941   271,689  
       
Non-current liabilities:      
Term loans 96,613   32,572   32,351  
Deferred income taxes 139,751   79,958   69,604  
Acquisition holdback payables   608   887  
Lease obligations 44,194   37,154   33,598  
Other liabilities 10,014   9,225   4,467  
  290,573   159,518   140,907  
       
Total liabilities 4,378,723   376,459   412,596  
       
       
Shareholders’ Equity (Deficiency):      
Capital stock 39,412   39,412   39,412  
Other equity (991,700 )    
Accumulated other comprehensive income (loss) (899 ) (1,409 ) (769 )
Retained earnings (deficit) (1,962,757 ) 138,572   107,755  
Non-controlling interests (432,979 ) 88,106   73,048  
  (3,348,921 ) 264,680   219,446  
       
       
       
Total liabilities and shareholders’ equity 1,029,801   641,139   632,042  
Topicus.com Inc.      
Condensed Consolidated Interim Statements of Income (Loss)      
(In thousands of euros, except per share amounts. Due to rounding, numbers presented may not foot.)
       
       
Unaudited      
  Three months ended March 31,
  2021   2020
       
Revenue      
License 4,930     3,197  
Professional services 48,589     28,270  
Hardware and other 1,345     1,261  
Maintenance and other recurring 124,733     87,040  
  179,596     119,769  
Expenses      
Staff 98,817     60,964  
Hardware 634     749  
Third party license, maintenance and professional services 15,721     10,593  
Occupancy 1,373     862  
Travel, telecommunications, supplies, software and equipment 4,212     3,798  
Professional fees 2,520     1,937  
Other, net 1,422     1,463  
Depreciation 6,231     4,211  
Amortization of intangible assets 20,411     11,772  
  151,341     96,349  
       
Redeemable preferred securities expense (income) 2,456,796      
Finance and other expenses (income) 3,018     1,954  
  2,459,814     1,954  
       
Income before income taxes (2,431,559 )   21,466  
       
Current income tax expense (recovery) 10,363     6,665  
Deferred income tax expense (recovery) (5,788 )   (2,690 )
Income tax expense (recovery) 4,575     3,976  
       
Net income (loss) (2,436,134 )   17,490  
       
Net income (loss) attributable to:      
Equity holders of Topicus (2,065,123 )   11,668  
Non-controlling interests (371,011 )   5,822  
Net income (loss) (2,436,134 )   17,490  
       
Weighted average shares      
Basic shares outstanding 39,412,386     39,412,386  
Diluted shares outstanding 129,322,452     118,156,055  
       
Earnings (loss) per common share of Topicus      
Basic (52.40 )   0.30  
Diluted (52.40 )   0.15  
       
Topicus.com Inc.      
Condensed Consolidated Interim Statements of Comprehensive Income (Loss)      
(In thousands of euros, except per share amounts. Due to rounding, numbers presented may not foot.)
       
       
Unaudited      
  Three months ended March 31,
  2021   2020
       
Net income (loss) (2,436,134 )   17,490  
       
Items that are or may be reclassified subsequently to net income:      
       
Foreign currency translation differences from foreign operations and other 607     (439 )
       
Other comprehensive (loss) income for the period, net of income tax 607     (439 )
       
Total comprehensive income (loss) for the period (2,435,528 )   17,051  
       
Total other comprehensive income (loss) attributable to:      
Equity holders of Topicus 413     (293 )
Non-controlling interests 194     (146 )
Total other comprehensive income (loss) 607     (439 )
       
Total comprehensive income (loss) attributable to:      
Equity holders of Topicus (2,064,711 )   11,375  
Non-controlling interests (370,817 )   5,676  
Total comprehensive income (loss) (2,435,528 )   17,051  
Topicus.com Inc.              
Condensed Consolidated Interim Statement of Changes in Shareholders’ Equity (Deficiency)        
(In thousands of euros, except per share amounts. Due to rounding, numbers presented may not foot.)
               
Unaudited              
Three months ended March 31, 2021              
  Attributable to equity holders of Topicus    
  Capital Stock Other equity Accumulated other comprehensive (loss) income Retained earnings (Deficit) Total Non-controlling interests Total equity
               
Balance at January 1, 2021 39,412   (1,409 ) 138,572   176,575   88,106   264,680  
               
Total comprehensive income for the period:              
               
Net income (loss)     (2,065,123 ) (2,065,123 ) (371,011 ) (2,436,134 )
               
Other comprehensive income (loss)              
               
Foreign currency translation differences from              
foreign operations and other   413     413   194   607  
               
Total other comprehensive income (loss)              
for the period   413     413   194   607  
               
Total comprehensive income (loss) for the period   413   (2,065,123 ) (2,064,711 ) (370,817 ) (2,435,528 )
               
Transactions with owners, recorded directly in equity              
               
Issuance of Topicus Coop Ordinary Units to non-controlling interests 9,770   127     9,896   (9,896 )  
               
Net acquisition of non-controlling interest associated with acquisitions and other movements   (29 ) 220   191   2,602   2,793  
               
Issuance of redeemable preferred securities (1,001,469 )     (1,001,469 ) (124,797 ) (1,126,267 )
               
Dividends to shareholders of the Company     (36,425 ) (36,425 ) (18,175 ) (54,600 )
               
Balance at March 31, 2021 39,412 (991,700 ) (899 ) (1,962,757 ) (2,915,943 ) (432,979 ) (3,348,921 )
Topicus.com Inc.              
Condensed Consolidated Interim Statement of Changes in Shareholders’ Equity (Deficiency)        
(In thousands of euros, except per share amounts. Due to rounding, numbers presented may not foot.)
               
Unaudited              
Three months ended March 31, 2020              
               
  Attributable to equity holders of Topicus    
  Capital Stock Other equity Accumulated other comprehensive (loss) income Retained earnings (deficit) Total Non-controlling interests Total equity
               
Balance at January 1, 2020 39,412 (477 ) 96,087 135,022   67,372   202,395  
               
Total comprehensive income for the period:              
               
Net income (loss)   11,668 11,668   5,822   17,490  
               
Other comprehensive income (loss)              
               
Foreign currency translation differences from              
foreign operations and other (293 ) (293 ) (146 ) (439 )
               
Total other comprehensive income (loss) for the period (293 ) (293 ) (146 ) (439 )
               
Total comprehensive income (loss) for the period   (293 ) 11,668 11,375   5,676   17,051  
               
Balance at March 31, 2020 39,412 (769 ) 107,755 146,398   73,048   219,446  
Topicus.com Inc.      
Condensed Consolidated Interim Statements of Cash Flows      
(In thousands of euros, except per share amounts. Due to rounding, numbers presented may not foot.)
       
       
Unaudited      
  Three months ended March 31,
  2021   2020
       
Cash flows from operating activities:      
Net income (loss) (2,436,134 )   17,490  
Adjustments for:      
Depreciation 6,231     4,211  
Amortization of intangible assets 20,411     11,772  
Redeemable preferred securities expense (income) 2,456,796      
Finance and other expenses (income) 3,018     1,954  
Income tax expense (recovery) 4,575     3,976  
Change in non-cash operating assets and liabilities      
exclusive of effects of business combinations 112,914     97,470  
Income taxes (paid) received (8,008 )   (16,480 )
Net cash flows from operating activities 159,803     120,392  
       
Cash flows from (used in) financing activities:      
Interest paid on lease obligations (203 )   (213 )
Interest paid on other facilities (1,550 )   (1,418 )
Increase (decrease) in Revolving credit facility 5,032     (50,000 )
Proceeds from issuance of term loans 65,843      
Credit facility transaction costs (2,245 )    
Payments of lease obligations (4,323 )   (3,156 )
Dividends paid (54,600 )    
Net cash flows from (used in) in financing activities 7,954     (54,787 )
       
Cash flows from (used in) investing activities:      
Acquisition of businesses (146,648 )   (7,058 )
Cash obtained with acquired businesses 14,968     1,719  
Post-acquisition settlement payments, net of receipts (4,668 )   (1,150 )
Interest, dividends and other proceeds received     100  
Property and equipment purchased (766 )   (660 )
Net cash flows from (used in) investing activities (137,115 )   (7,049 )
       
Effect of foreign currency on      
cash and cash equivalents (0 )   0  
       
Increase (decrease) in cash 30,643     58,556  
       
Cash, beginning of period 55,635     28,036  
       
Cash, end of period 86,278     86,592  

 

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