Reading Time: 8 minutes

TORONTO, Aug. 06, 2020 (GLOBE NEWSWIRE) — Constellation Software Inc. (TSX:CSU) (“Constellation” or the “Company”) today announced its financial results for the second quarter ended June 30, 2020 and declared a $1.00 per share dividend payable on October 9, 2020 to all common shareholders of record at close of business on September 18, 2020. 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, 2020 and the accompanying notes, our Management Discussion and Analysis for the three and six months ended June 30, 2020 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, 2019, 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

Our board remain both grateful and impressed by the Constellation employees who continue to re-think, re-invent and re-imagine how they support each other and our customers through the many challenges created by COVID-19.

Q2 2020 Headlines:

  • Revenue grew 9% (negative 8% organic growth, negative 7% after adjusting for changes in foreign exchange rates) to $922 million compared to $846 million in Q2 2019. 
  • Net income increased 12% to $83 million ($3.90 on a diluted per share basis) from $73 million ($3.45 on a diluted per share basis) in Q2 2019.
  • Impairment of intangible and other non-financial assets was $4 million in Q2 2020 versus nil in Q2 2019.
  • A number of acquisitions were completed for aggregate cash consideration of $67 million (which includes acquired cash).  Deferred payments associated with these acquisitions have an estimated value of $17 million resulting in total consideration of $84 million.
  • Cash flows from operations (“CFO”) were $237 million, an increase of 370%, or $186 million, compared to $50 million for the comparable period in 2019.
  • Free cash flow available to shareholders1 (“FCFA2S”) increased $178 million to $190 million compared to $12 million for the same period in 2019.  
  • CFO and FCFA2S were positively impacted by the deferral of approximately $29 million of tax instalment payments to the second half of 2020 in conjunction with the certain government’s COVID-19 relief programs. 
  • The Company determined that certain of its subsidiaries qualified for an estimated aggregate amount of $17 million of grants from various government authorities, and recognized such amounts as a reduction to expenses in the quarter.
  • On May 20, 2020 the Company entered into a binding agreement with IJssel B.V. to purchase 100% of the shares of Topicus.com B.V., a Netherlands-based diversified vertical market software provider.  The transaction is currently expected to close in 2020, subject to the satisfaction of certain closing conditions.
  • Subsequent to June 30, 2020, the Company completed or entered into agreements to acquire a number of businesses for aggregate cash consideration of $64 million (which includes acquired cash).  Deferred payments associated with these acquisitions have an estimated value of $14 million resulting in total consideration of $78 million. 

1. See Non-IFRS measures.  

Total revenue for the quarter ended June 30, 2020 was $922 million, an increase of 9%, or $76 million, compared to $846 million for the comparable period in 2019.  For the first six months of 2020 total revenues were $1,875 million, an increase of 13%, or $210 million, compared to $1,665 million for the comparable period in 2019.  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 8% and negative 5% respectively, negative 7% and negative 4% 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.

Net income for the quarter ended June 30, 2020 was $83 million compared to net income of $73 million for the same period in 2019.  On a per share basis, this translated into a net income per diluted share of $3.90 in the quarter ended June 30, 2020 compared to net income per diluted share of $3.45 for the same period in 2019.  For the six months ended June 30, 2020, net income was $166 million or $7.81 per diluted share compared to $160 million or $7.54 per diluted share for the same period in 2019.

For the quarter ended June 30, 2020, CFO increased $186 million to $237 million compared to $50 million for the same period in 2019 representing an increase of 370%.  For the first six months of 2020, CFO increased $263 million to $597 million compared to $334 million during the same period in 2019, representing an increase of 79%. 

For the quarter ended June 30, 2020, FCFA2S increased $178 million to $190 million compared to $12 million for the same period in 2019.  For the first six months of 2020, FCFA2S increased $238 million to $501 million compared to $263 million during the same period in 2019, representing an increase of 91%.   

CFO and FCFA2S for the three and six months ended June 30, 2020 were positively impacted by the deferral of approximately $29 million of tax instalment payments to the second half of 2020 in conjunction with certain government’s COVID-19 relief programs.

The Company is closely monitoring the impact of COVID-19 on all aspects of its business. COVID-19 was declared a global pandemic by the World Health Organization on March 11, 2020. The COVID-19 pandemic has had disruptive effects in countries in which the Company operates and has adversely impacted many of its business units’ operations to date, including through the cancellation by certain customers of their ongoing software maintenance contracts and the suspension or cancellation of new software purchases.  The pandemic may also have an adverse impact on many of the Company’s customers, including their ability to satisfy ongoing payment obligations to the Company, which could increase the Company’s bad debt exposure. The future impacts of the pandemic and any resulting economic impact are largely unknown and rapidly evolving. It is possible that the COVID-19 pandemic, the measures taken by the governments of countries affected and the resulting economic impact may continue to adversely affect the Company’s results of operations, cash flows and financial position as well as its customers in future periods, and this impact could be material.

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 TSS membership liability revaluation charge, and property and equipment purchased, and includes interest and dividends received.  Constellation believes that FCFA2S is useful supplemental information as it provides an indication of the uncommitted cash flow that is available to shareholders if Constellation does not make any acquisitions, or investments, and does not repay any debts.  While Constellation could use the FCFA2S to pay dividends or repurchase shares, Constellation’s objective is to invest all of our FCFA2S in acquisitions which meet Constellation’s 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,
   
      2020   2019         2020   2019      
    ($ in millions, except percentages)   ($ in millions, except percentages)  
                       
Net cash flows from operating activities     237   50         597   334      
Adjusted for:                      
Interest paid on lease obligations     (2 ) (2 )       (4 ) (4 )    
Interest paid on other facilities     (5 ) (7 )       (14 ) (15 )    
Credit facility transaction costs     (0 )         (0 )      
Payments of lease obligations     (16 ) (13 )       (30 ) (23 )    
TSS membership liability revaluation charge     (17 ) (8 )       (35 ) (18 )    
Property and equipment purchased     (6 ) (8 )       (13 ) (15 )    
Interest and dividends received     0   0         0   3      
                       
Free cash flow available to shareholders     190   12         501   263      
                       
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, 2020 December 31, 2019 June 30, 2019
                       
Assets                  
                       
Current assets:                  
  Cash             $ 585   $ 316   $ 214  
  Accounts receivable             393     422     368  
  Unbilled revenue             103     110     105  
  Inventories               32     31     45  
  Other assets             207     184     183  
                    1,319     1,062     915  
                       
Non-current assets:                
  Property and equipment           78     78     69  
  Right of use assets             241     234     211  
  Deferred income taxes             45     45     48  
  Other assets             73     72     66  
  Intangible assets   2,011     1,997     1,621  
                    2,448     2,425     2,014  
                       
Total assets             $ 3,767   $ 3,488   $ 2,929  
                       
Liabilities and Shareholders’ Equity            
                       
Current liabilities:                
  CSI facility             $ 98   $ 63   $  
  Debt without recourse to Constellation Software Inc.       3     57     11  
  TSS membership liability           93     86     69  
  Accounts payable and accrued liabilities         480     529     400  
  Dividends payable             21     21     22  
  Deferred revenue             938     788     802  
  Provisions               10     13     17  
  Acquisition holdback payables           72     76     53  
  Lease obligations             67     62     54  
  Income taxes payable             95     36     25  
                    1,879     1,732     1,452  
                       
Non-current liabilities:                
  Debt without recourse to Constellation Software Inc.       159     153     106  
  TSS membership liability           164     136     121  
  Debentures               210     222     222  
  Deferred income taxes             243     246     202  
  Acquisition holdback payables           29     25     15  
  Lease obligations             193     187     170  
  Other liabilities             98     101     76  
                    1,095     1,069     913  
                       
Total liabilities               2,974     2,800     2,365  
                       
                       
Shareholders’ equity:                
  Capital stock             99     99     99  
  Accumulated other comprehensive income (loss)       (57)     (40)     (32)  
  Retained earnings             752     628     497  
                    794     687     564  
                       
                       
Total liabilities and shareholders’ equity         $ 3,767   $ 3,488   $ 2,929  
                       

CONSTELLATION SOFTWARE INC.            
Condensed Consolidated Interim Statements of Income            
(In millions of U.S. dollars, except per share amounts.  Due to rounding, numbers presented may not foot.)
                           
Three and six months ended June 30, 2020 and 2019            
Unaudited                      
              Three months ended June 30,   Six months ended June 30,
                2020       2019       2020       2019  
                           
                           
Revenue                          
License         $ 51     $ 61     $ 108     $ 113  
Professional services         170       164       347       322  
Hardware and other         35       41       77       77  
Maintenance and other recurring       666       581       1,342       1,152  
                922       846       1,875       1,665  
                           
Expenses                          
Staff               480       437       990       882  
Hardware               22       22       45       43  
Third party license, maintenance and professional services               77       73       156       142  
Occupancy               8       9       17       17  
Travel, telecommunications, supplies, software and equipment   31       49       82       93  
Professional fees               13       11       26       22  
Other, net               0       15       5       36  
Depreciation               25       21       51       42  
Amortization of intangible assets               96       75       190       151  
                752       713       1,562       1,428  
                           
                           
Foreign exchange loss (gain)       10       13       4       15  
TSS membership liability revaluation charge     17       8       35       18  
Finance and other expense (income)       (1 )     (0 )     (2 )     (3 )
Bargain purchase gain         (0 )           (0 )     (28 )
Impairment of intangible and other non-financial assets   4             8        
Finance costs           10       9       22       18  
                39       30       67       19  
                           
Income before income taxes         131       103       246       218  
                           
Current income tax expense (recovery)       70       42       115       78  
Deferred income tax expense (recovery)               (22 )     (12 )     (34 )     (20 )
Income tax expense (recovery)               48       30       80       58  
                           
Net income           83       73       166       160  
                           
Earnings per share                    
Basic and diluted         $ 3.90     $ 3.45     $ 7.81     $ 7.54  
                           
                           

CONSTELLATION SOFTWARE INC.              
Condensed Consolidated Interim Statements of Comprehensive Income            
(In millions of U.S. dollars, except per share amounts.  Due to rounding, numbers presented may not foot.)
                           
Three and six months ended June 30, 2020 and 2019            
Unaudited                      
              Three months ended June 30,   Six months ended June 30,
                2020     2019     2020       2019
                           
Net income         $ 83   $ 73   $ 166     $ 160
                           
Items that are or may be reclassified subsequently to net income:              
                           
Foreign currency translation differences from foreign operations   13     8     (17 )     4
                           
Deferred income tax recovery (expense)                
                           
Other comprehensive (loss) income for the period, net of income tax   13     8     (17 )     4
                           
Total comprehensive income (loss) for the period $ 96   $ 81   $ 149     $ 164
                           

CONSTELLATION SOFTWARE INC.      
Condensed Consolidated Interim Statements 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, 2020        
      Capital
stock
Accumulated other
comprehensive income (loss)
Retained earnings Total
        Cumulative translation account    
             
Balance at January 1, 2020 $   99 $   (40 ) $   628   $   687  
             
Total comprehensive income for the period:        
             
Net income           166     166  
             
Other comprehensive income (loss)        
             
Foreign currency translation differences from        
  foreign operations     (17 )       (17 )
             
Total other comprehensive income (loss)        
  for the period     –      (17 )     –        (17 )
             
Total comprehensive income (loss) for the period     –      (17 )     166       149  
             
Transactions with owners, recorded directly in equity        
Dividends to shareholders of the Company         (42 )   (42 )
             
Balance at June 30, 2020 $   99 $   (57 ) $   752   $   794  
             

CONSTELLATION SOFTWARE INC.      
Condensed Consolidated Interim Statements 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, 2019        
             
      Capital
stock
Accumulated other
comprehensive income (loss)
Retained earnings Total
        Cumulative translation account    
             
Balance at January 1, 2019 $   99 $    (37 ) $   804   $   866  
             
Total comprehensive income for the period:        
             
Net income     –      –        160       160  
             
Other comprehensive income (loss)        
             
Foreign currency translation differences from        
  foreign operations     –      4       –        4  
             
Total other comprehensive income (loss) for the period     –      4       –        4  
             
Total comprehensive income for the period     –      4       160       164  
             
Transactions with owners, recorded directly in equity        
  Dividends to shareholders of the Company     –      –        (466 )     (466 )
             
Balance at June 30, 2019 $   99 $   (32 ) $   497   $   564  
             

 

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.)
                             
Three and six months ended June 30, 2020 and 2019                
Unaudited                      
                Three months ended June 30,   Six months ended June 30,
                  2020       2019       2020       2019  
                             
Cash flows from operating activities:              
  Net income       $ 83     $ 73     $ 166     $ 160  
  Adjustments for:                  
    Depreciation       25       21       51       42  
    Amortization of intangible assets   96       75       190       151  
    TSS membership liability revaluation charge   17       8       35       18  
    Finance and other expense (income)   (1 )     (0 )     (2 )     (3 )
    Bargain purchase (gain)   (0 )           (0 )     (28 )
    Impairment of intangible and other non-financial assets   4             8        
    Finance costs       10       9       22       18  
    Income tax expense (recovery)   48       30       80       58  
    Foreign exchange loss (gain)   10       13       4       15  
  Change in non-cash operating assets and liabilities              
    exclusive of effects of business combinations   (35 )     (130 )     100       (7 )
  Income taxes paid   (19 )     (49 )     (57 )     (88 )
  Net cash flows from operating activities   237       50       597       334  
                             
Cash flows from (used in) financing activities:              
  Interest paid on lease obligations     (2 )     (2 )     (4 )     (4 )
  Interest paid on other facilities     (5 )     (7 )     (14 )     (15 )
  Increase (decrease) in CSI facility     100             35        
  Increase (decrease) in revolving credit under debt facilities without recourse to CSI         11       (55 )     (40 )
  Proceeds from issuance of term debt under facilities without recourse to CSI   15             15        
  Repayments of term debt under facilities without recourse to CSI   (3 )     (1 )     (4 )     (1 )
  Credit facility transaction costs   (0 )           (0 )      
  Payments of lease obligations     (16 )     (13 )     (30 )     (23 )
  Distribution to TSS minority owners                       (11 )
  Dividends paid   (21 )     (445 )     (42 )     (466 )
  Net cash flows from (used in) in financing activities   67       (457 )     (100 )     (560 )
                             
Cash flows from (used in) investing activities:              
  Acquisition of businesses   (68 )     (82 )     (175 )     (130 )
  Cash obtained with acquired businesses     10       10       24       35  
  Post-acquisition settlement payments, net of receipts   (23 )     (12 )     (55 )     (37 )
  Purchases of other investments     (1 )     (6 )     (2 )     (6 )
  Interest, dividends and other proceeds received   1       1       1       3  
  Property and equipment purchased   (6 )     (8 )     (13 )     (15 )
  Net cash flows from (used in) investing activities   (87 )     (97 )     (220 )     (149 )
                             
Effect of foreign currency on              
  cash and cash equivalents   5       1       (9 )     0  
                             
Increase (decrease) in cash   221       (503 )     269       (375 )
                             
Cash, beginning of period   364       717       316       589  
                             
Cash, end of period $ 585     $ 214       585       214  
                             

Powered by WPeMatico