Constellation Software Inc. Announces Results for the Second Quarter Ended June 30, 2022 and Declares Quarterly Dividend

TORONTO, Aug. 04, 2022 (GLOBE NEWSWIRE) — Constellation Software Inc. (TSX:CSU) (“Constellation” or the “Company”) today announced its financial results for the second quarter ended June 30, 2022 and declared a $1.00 per share dividend payable on October 11, 2022 to all common shareholders of record at close of business on September 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 six months ended June 30, 2022 and the accompanying notes, our Management Discussion and Analysis for the three and six months ended June 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

Q2 2022 Headlines:

  • Revenue grew 30% (negative 2% organic growth, 2% after adjusting for changes in foreign exchange rates) to $1,618 million compared to $1,249 million in Q2 2021.
  • Net income attributable to common shareholders increased 43% to $126 million ($5.94 on a diluted per share basis) from $88 million ($4.16 on a diluted per share basis) in Q2 2021.
  • A number of acquisitions were completed for aggregate cash consideration of $1,000 million (which includes acquired cash). Deferred payments associated with these acquisitions have an estimated value of $62 million resulting in total consideration of $1,062 million.
  • Cash flows from operations (“CFO”) were $78 million, a decrease of 55%, or $93 million, compared to $171 million for the comparable period in 2021.
  • Free cash flow available to shareholders1 (“FCFA2S”) decreased $133 million to $12 million compared to $145 million for the same period in 2021.
  • Subsequent to June 30, 2022, the Company completed or entered into agreements to acquire a number of businesses for aggregate cash consideration of $134 million (which includes acquired cash). Deferred payments associated with these acquisitions have an estimated value of $30 million resulting in total consideration of $164 million.

Total revenue for the quarter ended June 30, 2022 was $1,618 million, an increase of 30%, or $370 million, compared to $1,249 million for the comparable period in 2021. For the first six months of 2022 total revenues were $3,050 million, an increase of 26%, or $625 million, compared to $2,425 million for the comparable period in 2021. 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 2% and negative 1% respectively, 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.

The Net income attributable to common shareholders of CSI for the quarter ended June 30, 2021 was $126 million compared to net income of $88 million for the same period in 2021. On a per share basis this translated into a net income per diluted share of $5.94 in the quarter ended June 30, 2022 compared to net income per diluted share of $4.16 for the same period in 2021. For the six months ended June 30, 2022, net income attributable to common shareholders of CSI was $224 million or $10.58 per diluted share compared to $80 million or $3.76 per diluted share for the same period in 2021.

For the quarter ended June 30, 2022, CFO decreased $93 million to $78 million compared to $171 million for the same period in 2021 representing a decrease of 55%. For the first six months of 2022, CFO decreased $91 million to $576 million compared to $667 million during the same period in 2021, representing a decrease of 14%. The primary reason for the decline in CFO for the three and six months ended June 30, 2022 is the impact of changes in non-cash operating assets and liabilities exclusive of effects of business combinations. For the three and six months ended June 30, 2022 there was $188 million and $18 million of cash used in non-cash operating working capital respectively compared to $99 million of cash used and $100 million of cash generated from non-cash operating working capital for the same periods in 2021. There are many reasons contributing to the non-cash operating working capital impact variance none of which are indicative of an underlying concern with the Company’s overall non-cash operating working capital balance. Specifically, no concerns with accounts receivable or unbilled revenue aging. In addition, income taxes paid increased 50% or $49 million for the quarter ended June 30, 2022 and 28% or $41 million for the six months ended June 30, 2022 over the same periods in 2021.

For the quarter ended June 30, 2022, FCFA2S decreased $133 million to $12 million compared to $145 million for the same period in 2021. For the first six months of 2022, FCFA2S decreased $79 million to $335 million compared to $413 million during the same period in 2021, representing a decrease of 19%. 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 June 30,       Six months ended June 30,  
      2022   2021         2022   2021    
    ($ in millions, except percentages)   ($ in millions, except percentages)
                     
Net cash flows from operating activities     78   171         576   667    
Adjusted for:                    
Interest paid on lease obligations     (3 ) (2 )       (5 ) (5 )  
Interest paid on other facilities     (16 ) (9 )       (26 ) (18 )  
Credit facility transaction costs     (2 ) (2 )       (3 ) (4 )  
Payments of lease obligations     (23 ) (20 )       (45 ) (41 )  
IRGA / TSS membership liability revaluation charge     (29 ) (22 )       (56 ) (82 )  
Property and equipment purchased     (12 ) (7 )       (19 ) (11 )  
Interest and dividends received     0   1         0   1    
                     
      (7 ) 110         422   507    
Less amount attributable to                    
Non-controlling interests     18   35         (87 ) (94 )  
                     
Free cash flow available to shareholders     12   145         335   413    
                     
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
[email protected]
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, 2022 December 31, 2021 June 30, 2021
                       
Assets                  
                       
Current assets:                  
  Cash             $ 676   $ 763   $ 851  
  Accounts receivable             776     600     505  
  Unbilled revenue             236     140     137  
  Inventories               46     35     28  
  Other assets             511     296     271  
                    2,244     1,835     1,792  
                       
Non-current assets:                
  Property and equipment           129     93     93  
  Right of use assets             292     245     263  
  Deferred income taxes           97     66     58  
  Other assets             145     99     86  
  Intangible assets   4,515     3,428     3,000  
                    5,178     3,931     3,499  
                       
Total assets             $ 7,421   $ 5,766   $ 5,291  
                       
Liabilities and Shareholders’ Equity          
                       
Current liabilities:                
  Debt with recourse to Constellation Software Inc.     $ 389   $ 143   $ 131  
  Debt without recourse to Constellation Software Inc.     206     60     41  
  Redeemable preferred securities             7     7  
  Accounts payable and accrued liabilities         892     832     671  
  Dividends payable             21     22     21  
  Deferred revenue             1,669     1,158     1,222  
  Provisions               10     11     13  
  Acquisition holdback payables           142     94     78  
  Lease obligations             91     79     80  
  Income taxes payable           77     56     67  
                    3,497     2,461     2,332  
                       
Non-current liabilities:                
  Debt with recourse to Constellation Software Inc.       541     561     548  
  Debt without recourse to Constellation Software Inc.     746     354     327  
  Deferred income taxes           476     436     372  
  Acquisition holdback payables           62     68     43  
  Lease obligations             225     190     209  
  Other liabilities             203     175     139  
                    2,254     1,784     1,637  
                       
Total liabilities               5,751     4,245     3,969  
                       
                       
Shareholders’ equity:                
  Capital stock             99     99     99  
  Other equity                 (179 )   (162 )
  Accumulated other comprehensive income (loss)       (147 )   (66 )   (56 )
  Retained earnings             1,514     1,206     1,017  
  Non-controlling interests           204     460     423  
                    1,670     1,521     1,322  
                       
                       
                       
Total liabilities and shareholders’ equity       $ 7,421   $ 5,766   $ 5,291  
                       
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 June 30,   Six months ended June 30,
                2022       2021       2022       2021  
                           
                           
Revenue                      
License         $ 72     $ 71     $ 141     $ 137  
Professional services         340       254       610       491  
Hardware and other         50       43       97       82  
Maintenance and other recurring       1,156       880       2,201       1,714  
                1,618       1,249       3,050       2,425  
                           
Expenses                      
Staff           873       665       1,656       1,306  
Hardware           29       23       56       45  
Third party license, maintenance and professional services   153       109       276       205  
Occupancy           12       10       23       19  
Travel, telecommunications, supplies, software and equipment   80       44       135       83  
Professional fees         28       17       52       32  
Other, net           32       14       68       19  
Depreciation           35       30       67       59  
Amortization of intangible assets       168       124       314       242  
                1,411       1,035       2,647       2,010  
                           
                           
Foreign exchange loss (gain)       (42 )     15       (42 )     2  
IRGA/TSS Membership liability revaluation charge   29       22       56       82  
Finance and other expense (income)     18       (2 )     15       (4 )
Bargain purchase gain         (0 )     0       (1 )     0  
Impairment of intangible and other non-financial assets   0       2       1       5  
Redeemable preferred securities expense (income)         32             295  
Finance costs           25       17       44       32  
                30       86       74       413  
                           
Income (loss) before income taxes       177       128       328       2  
                           
Current income tax expense (recovery)     110       75       209       138  
Deferred income tax expense (recovery)     (67 )     (25 )     (126 )     (39 )
Income tax expense (recovery)       43       50       83       99  
                           
Net income (loss)         134       78       245       (97 )
                           
Net income (loss) attributable to:                  
Common shareholders of Constellation Software Inc.   126       88       224       80  
Non-controlling interests         8       (11 )     21       (177 )
Net income (loss)         134       78       245       (97 )
                           
Earnings per common share of Constellation Software Inc.              
Basic and diluted       $ 5.94     $ 4.16     $ 10.58     $ 3.76  
                           
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 June 30,   Six months ended June 30,  
                2022       2021       2022       2021    
                             
Net income (loss)       $ 134     $ 78     $ 245     $ (97 )  
                             
Items that are or may be reclassified subsequently to net income (loss):                
                             
Foreign currency translation differences from foreign operations and other, net of tax   (96 )     5       (91 )     (18 )  
                             
Other comprehensive income (loss) for the period, net of income tax   (96 )     5       (91 )     (18 )  
                             
Total comprehensive income (loss) for the period $ 38     $ 83     $ 154     $ (115 )  
                             
Total other comprehensive income (loss) attributable to:                  
Common shareholders of Constellation Software Inc.     (85 )     11       (76 )     (6 )  
Non-controlling interests         (11 )     (6 )     (15 )     (11 )  
Total other comprehensive income (loss)   $ (96 )   $ 5     $ (91 )   $ (18 )  
                             
Total comprehensive income (loss) attributable to:                  
Common shareholders of Constellation Software Inc.     41       99       148       73    
Non-controlling interests         (3 )     (16 )     6       (188 )  
Total comprehensive income (loss)     $ 38     $ 83     $ 154     $ (115 )  
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                
Six months ended June 30, 2022              
      Equity Attributable to Common Shareholders of CSI    
      Capital stock Other equity Accumulated
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)             224     224     21     245  
                   
Other comprehensive income (loss)              
                   
Foreign currency translation differences from              
  foreign operations and other, net of tax         (76 )       (76 )   (15 )   (91 )
                   
Total other comprehensive income (loss)              
  for the period         (76 )       (76 )   (15 )   (91 )
                   
Total comprehensive income (loss) for the period         (76 )   224     148     6     154  
                   
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                     40     40  
                   
Other movements in non-controlling interests             (1 )   (1 )   (1 )   (2 )
                   
Dividends to shareholders of the Company             (42 )   (42 )       (42 )
                   
Reclassification of other equity to retained earnings     (127 )       127              
                   
Balance at June 30, 2022 $ 99 $   $ (147 ) $ 1,514   $ 1,466   $ 204   $ 1,670  
                   
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                  
Six months ended June 30, 2021                
                     
      Equity Attributable to Common Shareholders of CSI      
      Capital stock Other equity Accumulated
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)             80     80     (177 )   (97 )  
                     
Other comprehensive income (loss)                
                     
Foreign currency translation differences from                
  foreign operations and other, net of tax         (6 )       (6 )   (11 )   (18 )  
                     
Total other comprehensive income (loss) for the period         (6 )       (6 )   (11 )   (18 )  
                     
Total comprehensive income (loss) for the period         (6 )   80     73     (188 )   (115 )  
                     
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         0     1     2     3    
                     
Dividends to shareholders of the Company             (42 )   (42 )       (42 )  
                     
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 June 30, 2021 $ 99 $ (162 ) $ (56 ) $ 1,017   $ 899   $ 423   $ 1,322    
                     
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 June 30,   Six months ended June 30,  
                  2022       2021       2022       2021    
                               
Cash flows from (used in) operating activities:                
  Net income (loss)     $ 134     $ 78     $ 245     $ (97 )  
  Adjustments for:                    
    Depreciation       35       30       67       59    
    Amortization of intangible assets   168       124       314       242    
    IRGA/TSS Membership liability revaluation charge   29       22       56       82    
    Finance and other expense (income)   18       (2 )     15       (4 )  
    Bargain purchase (gain)   (0 )     0       (1 )     0    
    Impairment of intangible and other non-financial assets     0       2       1       5    
    Redeemable preferred securities expense (income)           32             295    
    Finance costs       25       17       44       32    
    Income tax expense (recovery)   43       50       83       99    
    Foreign exchange loss (gain)   (42 )     15       (42 )     2    
  Change in non-cash operating assets and liabilities                
    exclusive of effects of business combinations   (188 )     (99 )     (18 )     100    
  Income taxes paid   (146 )     (97 )     (190 )     (149 )  
  Net cash flows from (used in) operating activities   78       171       576       667    
                               
Cash flows from (used in) financing activities:                
  Interest paid on lease obligations     (3 )     (2 )     (5 )     (5 )  
  Interest paid on debt       (16 )     (9 )     (26 )     (18 )  
  Increase (decrease) in CSI facility     237             237          
  Increase (decrease) in Topicus revolving credit debt facility without recourse to CSI   48       6       105       12    
  Proceeds from issuance of debt facilities without recourse to CSI   342       55       425       134    
  Repayments of debt facilities without recourse to CSI   (6 )     (1 )     (13 )     (2 )  
  Other financing activities   2             2          
  Credit facility transaction costs   (2 )     (2 )     (3 )     (4 )  
  Payments of lease obligations     (23 )     (20 )     (45 )     (41 )  
  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 )     (42 )     (42 )  
  Net cash flows from (used in) in financing activities   559       6       605       12    
                               
Cash flows from (used in) investing activities:                
  Acquisition of businesses   (1,000 )     (292 )     (1,214 )     (606 )  
  Cash obtained with acquired businesses     110       40       148       85    
  Post-acquisition settlement payments, net of receipts   (26 )     (39 )     (59 )     (85 )  
  Receipt of additional subscription amount from the sellers of Topicus.com B.V.           33             33    
  Purchases of other investments                 (96 )     (0 )  
  Proceeds from sales of other investments                 3          
  Interest, dividends and other proceeds received   3       1       4       3    
  Property and equipment purchased   (12 )     (7 )     (19 )     (11 )  
  Net cash flows from (used in) investing activities   (924 )     (263 )     (1,233 )     (582 )  
                               
Effect of foreign currency on                
  cash and cash equivalents   (33 )     5       (35 )     (4 )  
                               
Increase (decrease) in cash   (321 )     (81 )     (87 )     94    
                               
Cash, beginning of period $ 996     $ 932     $ 763     $ 758    
                               
Cash, end of period $ 676     $ 851     $ 676     $ 851    
                               


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