TORONTO, July 26, 2018 (GLOBE NEWSWIRE) -- Constellation Software Inc. (TSX:CSU) (“Constellation” or the “Company”) today announced its financial results for the second quarter ended June 30, 2018 and declared a $1.00 per share dividend payable on October 3, 2018 to all common shareholders of record at close of business on September 14, 2018. 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, 2018 and the accompanying notes, our Management Discussion and Analysis for the three and six months ended June 30, 2018 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, 2017, 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 2018 Headlines:

  • Revenue grew 25% (4% organic growth, 1% after adjusting for changes in foreign exchange rates) to $752 million compared to $600 million in Q2 2017. 
  • Adjusted EBITA increased $21 million or 13% to $175 million as compared to $155 million in Q2 2017. 
  • Net income increased 2% to $52 million ($2.45 on a diluted per share basis) from $51 million ($2.41 on a diluted per share basis) in Q2 2017.
  • Adjusted net income increased 9% to $122 million ($5.75 on a diluted per share basis) from $12 million ($5.30 on a diluted per share basis) in Q2 2017.    
  • A number of acquisitions were completed for aggregate cash consideration of $43 million (which includes acquired cash).  Deferred payments associated with these acquisitions have an estimated value of $12 million resulting in total consideration of $55 million.
  • Cash flows from operations were $53 million, a decrease of 13%, or $7 million, compared to $60 million for the comparable period in 2017.

Total revenue for the quarter ended June 30, 2018 was $752 million, an increase of 25%, or $152 million, compared to $600 million for the comparable period in 2017.  For the first six months of 2018 total revenues were $1,471 million, an increase of 27%, or $315 million, compared to $1,155 million for the comparable period in 2017.  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 4% in both the three and six month periods, 1% after adjusting for the impact of changes in the valuation of the US dollar against most major currencies in which the Company transacts business.  The Company adopted IFRS 15 “Revenue from contracts with customers” (“IFRS 15”) effective January 1, 2018 utilizing the cumulative effect method.  Under the cumulative effect method comparative periods have not been restated; however, the quantitative differences between reported results under IFRS 15 and those that would have been reported under IAS 11 and IAS 18 (“prior IFRS”) have been disclosed.  For the three and six months ended June 30, 2018 total revenue was $1 million lower and $7 million higher respectively than it would have been under prior IFRS.  The organic growth figures included above and below exclude the impact of IFRS 15.

For the quarter ended June 30, 2018, Adjusted EBITA increased to $175 million compared to $155 million for the same period in 2017 representing an increase of 13%.  For the first six months of 2018, Adjusted EBITA increased to $334 million compared to $285 million during the same period in 2017, representing an increase of 17%.  For the three and six months ended June 30, 2018, Adjusted EBITA was $2 million lower and $8 million higher respectively, than it would have been under prior IFRS.  Adjusted EBITA margin was 23% for both the three and six months ended June 30, 2018, compared to 26% and 25% during the same periods in 2017.  Excluding the impact of IFRS 15, Adjusted EBITA margin would have been 24% and 22% for the three and six months ended June 30, 2018, respectively.  The margin decline is primarily the result of lower margins on recently acquired businesses. 

Net income for the quarter ended June 30, 2018 was $52 million compared to net income of $51 million for the same period in 2017.  On a per share basis, this translated into a net income per diluted share of $2.45 in the quarter ended June 30, 2018 compared to net income per diluted share of $2.41 for the same period in 2017.  For the six months ended June 30, 2018, net income was $135 million or $6.35 per diluted share compared to $92 million or $4.32 per diluted share for the same period in 2017.

For the quarter ended June 30, 2018, Adjusted net income increased to $122 million from $112 million for the same period in 2017, representing an increase of 9%.  Adjusted net income margin was 16% for the quarter ended June 30, 2018 and 19% for the same period in 2017.  For the quarter ended June 30, 2018, Adjusted net income was $1 million lower than it would have been under prior IFRS.  For the first six months of 2018, Adjusted net income increased to $265 million from $207 million during the same period in 2017, representing an increase of 28%.  Adjusted net income margin was 18% for both the six months ended June 30, 2018 and June 30, 2017.  For the six months ended June 30, 2018, Adjusted net income was $4 million higher than it would have been under prior IFRS.  Excluding the impact of the unrealized foreign exchange (gain) loss recorded in each of the three and six month periods ended June 30, 2017 and 2018, a $8 million financial liability accrual reversal recorded to finance and other income in Q1 2018, and the impacts of IFRS 15, the margins would have been 18% and 17% for the respective periods in 2018, and 19% and 18% for the respective periods in 2017.   

Cash flows from operations for the quarter ended June 30, 2018 were $53 million, an decrease of 13%, or $7 million, compared to $60 million for the comparable period in 2017.   

The following table displays our revenue by reportable segment and the percentage change for the three and six months ended June 30, 2018 compared to the same periods in 2017:

             
  Three months endedPeriod-Over-PeriodOrganic Six months endedPeriod-Over-PeriodOrganic
  June 30,ChangeGrowth June 30,ChangeGrowth
             
  20182017$%% 20182017$%%
  ($M, except percentages)  ($M, except percentages) 
Public Sector            
Licenses 29254 16%-8% 574611 23%-7%
Professional services 1149618 19%-2% 22518540 21%1%
Hardware and other 36351 4%-6% 62593 5%-7%
Maintenance and other recurring32225171 28%7% 642490152 31%7%
  50040694 23%3% 986780205 26%4%
             
Private Sector            
Licenses 19163 19%1% 35305 17%-1%
Professional services 392514 56%19% 704822 46%12%
Hardware and other 77(0)0%-31% 1414(1)-4%-34%
Maintenance and other recurring18614641 28%6% 36628383 29%7%
  25219458 30%6% 485375110 29%5%
             
Certain totals and percentages may not reconcile due to rounding.         
          

For purposes of calculating organic growth, estimated pre-acquisition revenue from the relevant companies acquired in 2017 and 2018 was added to actual reported revenue for the three and six months ended June 30, 2017.

Public Sector

For the quarter ended June 30, 2018, total revenue in the public sector reportable segment increased 23%, or $94 million to $500 million, compared to $406 million for the quarter ended June 30, 2017.  For the six months ended June 30, 2018, total revenue increased by 26%, or $205 million to $986 million, compared to $780 million for the comparable period in 2017.  For the three and six months ended June 30, 2018 total revenue was respectively $2 million lower and $7 million higher than it would have been under prior IFRS.   Organic growth excludes the impact of IFRS 15.  Organic revenue growth was 3% and 4%, respectively, for the three and six months ended June 30, 2018 compared to the same periods in 2017, and 0% for both periods after adjusting for the impact of changes in the valuation of the US dollar against most major currencies in which the Company transacts business.   

Private Sector

For the quarter ended June 30, 2018, total revenue in the private sector reportable segment increased 30%, or $58 million to $252 million, compared to $194 million for the quarter ended June 30, 2017.  For the six months ended June 30, 2018, total revenue increased by 29%, or $110 million to $485 million, compared to $375 million for the comparable period in 2017.  For the three and six months ended June 30, 2018 total revenue was respectively $0.2 million and $0.5 million higher than it would have been under prior IFRS.   Organic growth excludes the impact of IFRS 15.  Organic revenue growth was 6% and 5% for the three and six months ended June 30, 2018, respectively, compared to the same periods in 2017, and 4% 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.  

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

The term ‘‘Adjusted EBITA’’ refers to net income before adjusting for finance and other income, bargain purchase gain, finance costs, income taxes, share in net income or loss of equity investees, impairment of non-financial assets, amortization, TSS membership liability revaluation charge, and foreign exchange gain or loss.  The Company believes that Adjusted EBITA is useful supplemental information as it provides an indication of the results generated by the Company’s main business activities prior to taking into consideration how those activities are financed and taxed and also prior to taking into consideration intangible asset amortization and the other items listed above.  ‘‘Adjusted EBITA margin’’ refers to the percentage that Adjusted EBITA for any period represents as a portion of total revenue for that period.

‘‘Adjusted net income’’ means net income adjusted for non-cash expenses (income) such as amortization of intangible assets, deferred income taxes, the TSS membership liability revaluation charge, and certain other expenses (income), and excludes the portion of the adjusted net income of Total Specific Solutions (TSS) B.V. (“TSS”) attributable to the minority owners of TSS.  The Company believes that Adjusted net income is useful supplemental information as it provides an indication of the results generated by the Company’s main business activities prior to taking into consideration amortization of intangible assets, deferred income taxes, the TSS membership liability revaluation charge, and certain other non-cash expenses (income) incurred or recognized by the Company from time to time, and adjusts for the portion of TSS’ Adjusted net income not attributable to shareholders of Constellation.  ‘‘Adjusted net income margin’’ refers to the percentage that Adjusted net income for any period represents as a portion of total revenue for that period.

Adjusted EBITA and Adjusted net income are not recognized measures under IFRS and, accordingly, readers are cautioned that Adjusted EBITA and Adjusted net income should not be construed as alternatives to net income determined in accordance with IFRS.  The Company’s method of calculating Adjusted EBITA and Adjusted net income may differ from other issuers and, accordingly, Adjusted EBITA and Adjusted net income may not be comparable to similar measures presented by other issuers.  Adjusted EBITA includes 100% of the Adjusted EBITA of TSS.

The following table reconciles Adjusted EBITA to net income:

            
   Three months ended
June 30,
   Six months ended
June 30,
  
   2018 2017    2018 2017   
  ($M, except percentages) ($M, except percentages) 
            
Total revenue  752 600    1,471 1,155   
            
Net income  52 51    135 92   
Adjusted for:           
Income tax expense (recovery)  27 25    46 43   
Foreign exchange (gain) loss  9 2    (5)3   
TSS membership liability revaluation charge  14 15    21 29   
Share in net (income) loss of equity investees  0 (0)   (0)(0)  
Finance and other income  (1)(0)   (10)(0)  
Bargain purchase gain  (0)-    (0)-   
Finance costs  5 5    10 11   
Amortization of intangible assets  70 56    139 108   
            
Adjusted EBITA  175 155    334 285   
Adjusted EBITA margin  23%26%   23%25%  
            
Certain totals and percentages may not reconcile due to rounding.         
            
            

 The following table reconciles Adjusted net income to net income:

           
   Three months ended
June 30,
   Six months ended
June 30,
 
   20182017   20182017 
  ($M, except percentages) ($M, except percentages)
           
Total revenue  752 600    1,471 1,155  
           
Net income  52 51    135 92  
Adjusted for:          
Amortization of intangible assets  70 56    139 108  
TSS membership liability revaluation charge  14 15    21 29  
Bargain purchase gain  (0)-    (0)-  
Less non-controlling interest in the Adjusted          
net income of TSS  (6)(5)   (13)(11) 
Deferred income tax expense (recovery)  (8)(5)   (16)(11) 
           
Adjusted net income  122 112    264 207  
Adjusted net income margin  16%19%   18%18% 
           
Certain totals and percentages may not reconcile due to rounding.        
         

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 thousands of U.S. dollars)   
    
Unaudited   
  June 30, 2018 December 31, 2017 
    
Assets   
    
Current assets:   
Cash $343,566 $488,964 
Accounts receivable  329,650  316,538 
Unbilled revenue  83,808  64,109 
Inventories  29,503  23,196 
Other assets  153,484  100,098 
   940,011  992,905 
    
Non-current assets:   
Property and equipment  58,129  53,817 
Deferred income taxes  54,254  38,362 
Other assets  56,583  21,801 
Intangible assets 1,444,583  1,181,333 
   1,613,549  1,295,313 
    
Total assets $2,553,560 $2,288,218 
    
Liabilities and Shareholders' Equity   
    
Current liabilities:   
CSI Facility $- $- 
New CNH Facility  62,551  96,398 
TSS Membership Liability  55,370  49,215 
Accounts payable and accrued liabilities  347,975  379,573 
Dividends payable  21,235  21,575 
Deferred revenue  711,471  541,108 
Provisions  5,836  10,377 
Acquisition holdback payables  61,558  42,867 
Income taxes payable  30,588  31,028 
   1,296,584  1,172,141 
    
Non-current liabilities:   
TSS Membership Liability  97,403  86,575 
Debentures  224,247  236,462 
Deferred income taxes  174,118  148,961 
Acquisition holdback payables  14,924  6,480 
Other liabilities  80,173  33,521 
   590,865  511,999 
    
Total liabilities  1,887,449  1,684,140 
    
    
Shareholders' equity:   
Capital stock  99,283  99,283 
Accumulated other comprehensive income (loss)  (33,547) (26,739)
Retained earnings  600,375  531,534 
   666,111  604,078 
    
    
    
Total liabilities and shareholders' equity $2,553,560 $2,288,218 
    
    

 

CONSTELLATION SOFTWARE INC.      
Condensed Consolidated Interim Statements of Income       
(In thousands of U.S. dollars, except per share amounts)       
        
Three and six months ended June 30, 2018 and 2017       
Unaudited       
 Three months ended June 30, Six months ended June 30,
  2018   2017   2018   2017 
        
        
Revenue       
License$47,861  $40,872  $91,680  $76,004 
Professional services 152,644   120,705   294,814   233,118 
Hardware and other 43,214   41,930   75,984   73,356 
Maintenance and other recurring 508,326   396,577   1,008,026   772,932 
  752,045   600,084   1,470,504   1,155,410 
        
Expenses       
Staff 390,441   296,769   779,853   586,084 
Hardware 23,961   23,091   41,758   39,411 
Third party license, maintenance and professional services 66,611   50,539   128,082   100,542 
Occupancy 19,785   14,434   38,917   27,870 
Travel 21,006   18,068   39,273   33,892 
Telecommunications 6,296   5,267   12,446   10,335 
Supplies 4,602   3,608   9,212   7,480 
Software and equipment 13,167   9,819   26,079   19,356 
Professional fees 8,901   6,768   19,079   13,693 
Other, net 15,135   11,814   28,401   20,986 
Depreciation 6,747   5,321   13,398   10,620 
Amortization of intangible assets 69,898   55,738   138,530   108,023 
  646,550   501,236   1,275,028   978,292 
        
        
Foreign exchange loss (gain) 8,673   1,865   (5,304)  3,359 
TSS membership liability revaluation charge 13,872   15,415   20,712   28,530 
Share in net (income) loss of equity investee 2   (77)  (233)  (126)
Finance and other expense (income) (1,157)  (408)  (10,044)  (429)
Bargain purchase gain (14)  -   (119)  - 
Finance costs 5,005   5,473   10,221   10,731 
  26,381   22,268   15,233   42,065 
        
Income before income taxes 79,114   76,580   180,243   135,053 
        
Current income tax expense (recovery) 34,963   30,108   61,455   54,216 
Deferred income tax expense (recovery)   (7,844)    (4,678)    (15,751)    (10,746)
Income tax expense (recovery)   27,119     25,430     45,704     43,470 
        
Net income   51,995     51,150     134,539     91,583 
        
Earnings per share       
 Basic and diluted$  2.45  $  2.41  $  6.35  $  4.32 
        
        
        

 

CONSTELLATION SOFTWARE INC.       
Condensed Consolidated Interim Statements of Comprehensive Income       
(In thousands of U.S. dollars, except per share amounts)       
         
Three and six months ended June 30, 2018 and 2017       
Unaudited       
  Three months ended June 30, Six months ended June 30,
   2018   2017   2018   2017 
         
Net income$51,995  $51,150  $134,539  $91,583 
         
Items that are or may be reclassified subsequently to net income:       
         
Net change in fair value       
 of available-for-sale financial       
 asset during the period -   -   -   (1,314)
         
Net change in fair value       
 of derivatives designated as hedges       
 during the period -   181   -   345 
         
Amounts reclassified to profit during the period       
 related to realized losses (gains) on       
 available-for-sale financial assets -   409   -   1,288 
         
Foreign currency translation differences from foreign operations (2,642)  4,956   (6,808)  7,847 
         
Deferred income tax recovery (expense) -   (102)  -   (94)
         
Other comprehensive (loss) income for the period, net of income tax (2,642)  5,444   (6,808)  8,072 
         
Total comprehensive income (loss) for the period$49,353  $56,594  $127,731  $99,655 
                
                

 

CONSTELLATION SOFTWARE INC.
Condensed Consolidated Interim Statements of Changes in Equity 
(In thousands of U.S. dollars) 
          
          
Unaudited        
Six months ended June 30, 2018       
   Capital stockAccumulated other comprehensive
income/(loss)
Total accumulated
other comprehensive
income/(loss)
Retained
earnings
Total
          
    Cumulative
translation
account
Amounts
related to
gains/losses
on available-
for-sale
financial
assets
Amounts
related to
gains/(losses)
on derivatives
designed as
hedges
   
          
Balance at January 1, 2018$   99,283 $   (26,739)$   -  $   -  $   (26,739)$   531,534  $   604,078  
          
Impact of change in accounting policy   -    -     -    -    -     (23,314)   (23,314)
          
Total comprehensive income for the period:       
          
Net income    -    -     -    -    -     134,539    134,539 
          
Other comprehensive income (loss)       
          
Net change in fair value       
 of available-for-sale financial       
 asset during the period   -    -     -    -    -     -     -  
          
Net change in fair value       
 of derivatives designated as hedges       
 during the period   -    -     -    -    -     -     -  
          
Amounts reclassified to profit during the period       
 related to realized losses (gains) on       
 available-for-sale financial assets   -    -     -    -    -     -     -  
          
Foreign currency translation differences from       
 foreign operations   -    (6,808)   -    -    (6,808)   -     (6,808)
          
Deferred tax recovery (expense)   -    -     -    -    -     -     -  
          
Total other comprehensive income (loss)       
 for the period   -     (6,808)   -     -     (6,808)   -      (6,808)
          
Total comprehensive income (loss) for the period   -     (6,808)   -     -     (6,808)   134,539     127,731  
          
Transactions with owners, recorded directly in equity       
Dividends to shareholders of the Company   -    -     -    -    -     (42,384)   (42,384)
          
Balance at June 30, 2018$   99,283 $   (33,547)$   -  $   -  $   (33,547)$   600,375  $   666,111  
          
          

 

CONSTELLATION SOFTWARE INC.
Condensed Consolidated Interim Statements of Changes in Equity 
(In thousands of U.S. dollars) 
          
          
Unaudited        
Six months ended June 30, 2017       
          
   Capital stockAccumulated other comprehensive
income/(loss)
Total accumulated
other comprehensive
income/(loss)
Retained
earnings
Total
          
    Cumulative
translation
account
Amounts
related to
gains/losses
on available-
for-sale
financial
assets
Amounts
related to
gains/(losses)
on derivatives
designed as
hedges
   
          
Balance at January 1, 2017$   99,283 $   (35,748)$   17  $   (377)$   (36,108)$   394,334  $   457,509  
          
Total comprehensive income for the period:       
          
Net income    -    -     -     -     -     91,583    91,583 
          
Other comprehensive income (loss)       
          
Net change in fair value       
 of available-for-sale financial       
 asset during the period   -    -     (1,314)   -     (1,314)   -     (1,314)
          
Net change in fair value       
 of derivatives designated as hedges       
 during the period   -    -     -     345    345    -     345 
          
Amounts reclassified to profit during the period       
 related to realized losses (gains) on       
 available-for-sale financial assets   -    -     1,288    -     1,288    -     1,288 
          
Foreign currency translation differences from       
 foreign operations   -    7,847    -     -     7,847    -     7,847 
          
Deferred tax recovery (expense)   -    -     9    (103)   (94)   -     (94)
          
Total other comprehensive income for the period   -     7,847     (17)   242     8,072     -      8,072  
          
Total comprehensive income for the period   -     7,847     (17)   242     8,072     91,583     99,655  
          
Transactions with owners, recorded directly in equity       
Dividends to shareholders of the Company   -    -      -     -     (42,384)   (42,384)
          
Balance at June 30, 2017$   99,283 $   (27,901)$   -   $   (135)$   (28,036)$   443,533  $   514,780  
          
          

 

CONSTELLATION SOFTWARE INC.      
Condensed Consolidated Interim Statements of Cash Flows       
(In thousands of U.S. dollars)       
          
Three and six months ended June 30, 2018 and 2017       
Unaudited       
   Three months ended June 30, Six months ended June 30,
    2018   2017   2018   2017 
          
Cash flows from operating activities:       
 Net income$51,995  $51,150  $134,539  $91,583 
 Adjustments for:       
  Depreciation 6,747   5,321   13,398   10,620 
  Amortization of intangible assets 69,898   55,738   138,530   108,023 
  TSS membership liability revaluation charge 13,872   15,415   20,712   28,530 
  Share in net (income) loss of equity investee 2   (77)  (233)  (126)
  Finance and other expense (income) (1,157)  (408)  (10,044)  (429)
  Bargain purchase gain (14)  -   (119)  - 
  Finance costs 5,005   5,473   10,221   10,731 
  Income tax expense (recovery) 27,119   25,430   45,704   43,470 
  Foreign exchange loss (gain) 8,673   1,865   (5,304)  3,359 
 Change in non-cash operating assets and liabilities       
  exclusive of effects of business combinations (101,768)  (71,569)  45,257   (352)
 Income taxes paid (27,475)  (27,881)  (82,090)  (52,978)
 Net cash flows from operating activities 52,897   60,457   310,571   242,431 
          
Cash flows from (used in) financing activities:       
 Interest paid (5,267)  (5,684)  (10,535)  (11,135)
 Increase (decrease) in New CNH Facility, net 23,174   -   (34,503)  - 
 Repayments of CNH facility -   (3,929)  -   (3,929)
 Dividends paid (21,192)  (21,192)  (42,384)  (42,384)
 Net cash flows from (used in) in financing activities (3,285)  (30,805)  (87,422)  (57,448)
          
Cash flows from (used in) investing activities:       
 Acquisition of businesses, net of cash       
  acquired (26,297)  (65,362)  (322,754)  (114,199)
 Post-acquisition settlement payments, net of receipts (15,227)  (11,533)  (31,825)  (16,888)
 Proceeds from sale of available-for-sale equity securities -   815   -   2,828 
 Interest, dividends and other proceeds received 729   902   1,477   20,455 
 Property and equipment purchased (7,567)  (4,522)  (12,033)  (8,932)
 Net cash flows from (used in) investing activities (48,362)  (79,700)  (365,135)  (116,736)
          
Effect of foreign currency on       
 cash and cash equivalents (5,210)  5,923   (3,412)  8,018 
          
Increase (decrease) in cash (3,960)  (44,125)  (145,398)  76,265 
          
Cash, beginning of period 347,526   473,889   488,964   353,499 
          
Cash, end of period$343,566  $429,764  $343,566  $429,764