Constellation Software Inc. Announces Results for the First Quarter Ended March 31, 2024 and Declares Quarterly Dividend

Bay Street

6 months ago

TORONTO, May 10, 2024 (GLOBE NEWSWIRE) — Constellation Software Inc. (TSX:CSU) (“Constellation” or the “Company”) today announced its financial results for the first quarter ended March 31, 2024 and declared a $1.00 per share dividend payable on July 11, 2024 to all common shareholders of record at close of business on June 20, 2024. 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 months ended March 31, 2024 and the accompanying notes, our Management Discussion and Analysis for the three months ended March 31, 2024 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, 2023, which can be found on SEDAR+ at www.sedarplus.com and on the Company’s website www.csisoftware.com. Additional information about the Company is also available on SEDAR+ at www.sedarplus.com.

Q1 2024 Headlines:

Revenue increased 23% (4% organic growth, 3% after adjusting for changes in foreign exchange rates) to $2,353 million compared to $1,919 million in Q1 2023.
Net income attributable to common shareholders was $105 million for Q1 2024 ($4.95 on a diluted per share basis), compared to net income attributable to common shareholders of $94 million ($4.44 on a diluted per share basis) in Q1 2023.
A number of acquisitions were completed for aggregate cash consideration of $223 million (which includes acquired cash). Deferred payments associated with these acquisitions have an estimated value of $65 million resulting in total consideration of $288 million.
Cash flows from operations (“CFO”) were $737 million, an increase of 16%, or $104 million, compared to $632 million for the comparable period in 2023.
Free cash flow available to shareholders¹ (“FCFA2S”) decreased $7 million to $446 million compared to $453 million for the same period in 2023.

Total revenue for the quarter ended March 31, 2024 was $2,353 million, an increase of 23%, or $434 million, compared to $1,919 million for the comparable period in 2023. The increase is primarily attributable to growth from acquisitions as the Company experienced organic growth of 4% in the quarter, 3% after adjusting for the impact of changes in the valuation of the US dollar against most major currencies in which the Company transacts business. For acquired companies, organic growth is calculated as the difference between actual revenues achieved by each company in the financial period following acquisition compared to the estimated revenues they achieved in the corresponding financial period preceding the date of acquisition by Constellation. Organic growth is not a standardized financial measure and might not be comparable to measures disclosed by other issuers.

The net income attributable to common shareholders of CSI for the quarter ended March 31, 2024 was $105 million compared to $94 million for the same period in 2023. On a per share basis this translated into net income per basic and diluted share of $4.95 in the quarter ended March 31, 2024 compared to $4.44 for the same period in 2023. There was no change in the number of shares outstanding.

For the quarter ended March 31, 2024, CFO increased $104 million to $737 million compared to $632 million for the same period in 2023 representing an increase of 16%.

For the quarter ended March 31, 2024, FCFA2S decreased $7 million to $446 million compared to $453 million for the same period in 2023 representing a decrease of 2%.

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, and the proceeds from sale of interest rate caps. The portion of this amount applicable to non-controlling interests is then deducted. We believe that FCFA2S is useful supplemental information as it provides an indication of the uncommitted cash flow that is available to shareholders if we do not make any acquisitions, or investments, and do not repay any debts. While we could use the FCFA2S to pay dividends or repurchase shares, our objective is to invest all of our FCFA2S in acquisitions which meet our hurdle rate.

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,
		2024		2023
	($ in millions)

Net cash flows from operating activities		737		632
Adjusted for:
Interest paid on lease obligations		(3	)	(3	)
Interest paid on other facilities		(41	)	(26	)
Proceeds from sale of interest rate cap		–		–
Credit facility transaction costs		(11	)	(2	)
Payments of lease obligations		(29	)	(25	)
IRGA / TSS membership liability revaluation charge		(81	)	(39	)
Property and equipment purchased		(10	)	(10	)
Interest and dividends received		6		1

		568		529
Less amount attributable to
Non-controlling interests		(122	)	(76	)

Free cash flow available to shareholders		446		453

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
info@csisoftware.com
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
		March 31, 2024			December 31, 2023			March 31, 2023

Assets

Current assets:
	Cash	$	2,078		$	1,284		$	1,010
	Accounts receivable		1,205			1,145			1,012
	Unbilled revenue		360			326			282
	Inventories		59			51			50
	Other assets		568			542			450
			4,270			3,348			2,803

Non-current assets:
	Property and equipment		142			143			128
	Right of use assets		311			312			285
	Deferred income taxes		157			110			108
	Other assets		308			286			182
	Intangible assets		6,734			6,682			5,324
			7,651			7,533			6,028

Total assets		$	11,921		$	10,881		$	8,831

Liabilities and Shareholders’ Equity

Current liabilities:
	Debt with recourse to Constellation Software Inc.	$	276		$	861		$	480
	Debt without recourse to Constellation Software Inc.		348			225			199
	Redeemable preferred securities		–			814			409
	Accounts payable and accrued liabilities		1,298			1,433			1,117
	Dividends payable		21			21			21
	Deferred revenue		2,267			1,757			1,995
	Provisions		8			9			9
	Acquisition holdback payables		174			173			139
	Lease obligations		113			112			98
	Income taxes payable		135			88			120
			4,640			5,493			4,585

Non-current liabilities:
	Debt with recourse to Constellation Software Inc.		1,832			863			590
	Debt without recourse to Constellation Software Inc.		1,470			1,385			793
	Deferred income taxes		633			610			496
	Acquisition holdback payables		105			86			68
	Lease obligations		235			236			217
	Other liabilities		255			246			236
			4,530			3,426			2,400

Total liabilities			9,169			8,919			6,986


Shareholders’ equity:
	Capital stock		99			99			99
	Accumulated other comprehensive income (loss)		(145	)		(99	)		(128	)
	Retained earnings		2,358			1,876			1,454
	Non-controlling interests		439			85			419
			2,752			1,961			1,845



Total liabilities and shareholders’ equity		$	11,921		$	10,881		$	8,831

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 March 31,
			2024			2023


Revenue
License		$	88		$	81
Professional services			470			411
Hardware and other			59			57
Maintenance and other recurring			1,737			1,369
			2,353			1,919

Expenses
Staff			1,293			1,068
Hardware			35			35
Third party license, maintenance and professional services			215			185
Occupancy			14			13
Travel, telecommunications, supplies, software and equipment			112			89
Professional fees			38			36
Other, net			50			38
Depreciation			44			39
Amortization of intangible assets			242			193
			2,042			1,695


Foreign exchange loss (gain)			(18	)		10
IRGA/TSS Membership liability revaluation charge			81			39
Finance and other expense (income)			(9	)		(7	)
Bargain purchase gain			(2	)		(1	)
Impairment of intangible and other non-financial assets			10			2
Redeemable preferred securities expense (income)			58			188
Finance costs			67			36
			186			267

Income (loss) before income taxes			125			(43	)

Current income tax expense (recovery)			127			103
Deferred income tax expense (recovery)			(75	)		(62	)
Income tax expense (recovery)			52			40

Net income (loss)			74			(83	)

Net income (loss) attributable to:
Common shareholders of Constellation Software Inc.			105			94
Non-controlling interests			(31	)		(177	)
Net income (loss)			74			(83	)

Earnings per common share of Constellation Software Inc.
	Basic and diluted	$	4.95		$	4.44

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 March 31,
		2024			2023

Net income (loss)	$	74		$	(83	)

Items that are or may be reclassified subsequently to net income (loss):

Foreign currency translation differences from foreign operations and other, net of tax		(48	)		16

Other comprehensive income (loss), net of income tax		(48	)		16

Total comprehensive income (loss)	$	25		$	(67	)

Total other comprehensive income (loss) attributable to:
Common shareholders of Constellation Software Inc.		(40	)		10
Non-controlling interests		(8	)		6
Total other comprehensive income (loss)	$	(48	)	$	16

Total comprehensive income (loss) attributable to:
Common shareholders of Constellation Software Inc.		65			105
Non-controlling interests		(40	)		(171	)
Total comprehensive income (loss)	$	25		$	(67	)

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
Three months ended March 31, 2024
		Equity Attributable to Common Shareholders of CSI
		Capital stock		Accumulated other comprehensive income (loss)			Retained earnings			Total			Non-controlling interests			Total equity

Balance at January 1, 2024		$	99	$	(99	)	$	1,876		$	1,877			85		$	1,961

Total comprehensive income (loss):

Net income (loss)			–		–			105			105			(31	)		74

Other comprehensive income (loss)

Foreign currency translation differences from
	foreign operations and other, net of tax		–		(40	)		–			(40	)		(8	)		(48	)


Total other comprehensive income (loss)			–		(40	)		–			(40	)		(8	)		(48	)

Total comprehensive income (loss)			–		(40	)		105			65			(40	)		25

Transactions with owners, recorded directly in equity

Non-controlling interests arising from business combinations			–		–			–			–			(0	)		(0	)

Conversion of Lumine Special Shares to subordinate voting shares of Lumine and settlement of accrued dividend on Lumine Special Shares through the issuance of subordinate voting shares of Lumine			–		–			–			–			872			872

Conversion of Lumine Preferred Shares to subordinate voting shares of Lumine and settlement of accrued dividend on Lumine Preferred Shares through the issuance of subordinate voting shares of Lumine					(6	)		400			394			(394	)		–

Other movements in non-controlling interests			–		–			(1	)		(1	)		1			0

Dividends paid to non-controlling interests			–		–			–			–			(85	)		(85	)

Dividends to shareholders of the Company			–		–			(21	)		(21	)		–			(21	)

Balance at March 31, 2024		$	99	$	(145	)	$	2,358		$	2,313		$	439		$	2,752

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
Three months ended March 31, 2023

		Equity Attributable to Common Shareholders of CSI
		Capital stock		Accumulated other comprehensive income (loss)			Retained earnings			Total			Non-controlling interests			Total equity

Balance at January 1, 2023		$	99	$	(150	)	$	1,763		$	1,713		$	221		$	1,933

Total comprehensive income (loss):

Net income (loss)			–		–			94			94			(177	)		(83	)

Other comprehensive income (loss)

Foreign currency translation differences from
	foreign operations and other, net of tax		–		10			–			10			6			16

Total other comprehensive income (loss)			–		10			–			10			6			16

Total comprehensive income (loss)			–		10			94			105			(171	)		(67	)

Transactions with owners, recorded directly in equity

Special dividend of Lumine Subordinate Voting Shares			–		12			(378	)		(366	)		366			–

Acquisition of non-controlling interests			–		–			–			–			(1	)		(1	)

Conversion of Lumine Special Shares to subordinate voting shares of Lumine			–		–			–			–			1			1

Other movements in non-controlling interests			–		0			(4	)		(4	)		4			(0	)

Dividends to shareholders of the Company			–		–			(21	)		(21	)		–			(21	)

Balance at March 31, 2023		$	99	$	(128	)	$	1,454		$	1,426		$	419		$	1,845

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 March 31,
				2024			2023

Cash flows from (used in) operating activities:
	Net income (loss)		$	74		$	(83	)
	Adjustments for:
		Depreciation		44			39
		Amortization of intangible assets		242			193
		IRGA/TSS Membership liability revaluation charge		81			39
		Finance and other expense (income)		(9	)		(7	)
		Bargain purchase (gain)		(2	)		(1	)
		Impairment of intangible and other non-financial assets		10			2
		Redeemable preferred securities expense (income)		58			188
		Finance costs		67			36
		Income tax expense (recovery)		52			40
		Foreign exchange loss (gain)		(18	)		10
	Change in non-cash operating assets and liabilities
		exclusive of effects of business combinations		208			268
	Income taxes paid			(68	)		(91	)
	Net cash flows from (used in) operating activities			737			632

Cash flows from (used in) financing activities:
	Interest paid on lease obligations			(3	)		(3	)
	Interest paid on debt			(41	)		(26	)
	Increase (decrease) in CSI facility			(578	)		(51	)
	Increase (decrease) in Topicus revolving credit debt facility without recourse to CSI			114			(11	)
	Proceeds from issuance of Senior Notes			1,000			–
	Proceeds from issuance of debt facilities without recourse to CSI			112			180
	Repayments of debt facilities without recourse to CSI			(18	)		(86	)
	Other financing activities			(2	)		2
	Dividends paid to non-controlling interests			(85	)		–
	Debt transaction costs			(11	)		(2	)
	Payments of lease obligations			(29	)		(25	)
	Distribution to the Joday Group			(64	)		–
	Principal repayments to the Joday Group pursuant to the Call Notice			(22	)		–
	Dividends paid to common shareholders of the Company			(21	)		(21	)
	Net cash flows from (used in) in financing activities			351			(43	)

Cash flows from (used in) investing activities:
	Acquisition of businesses			(223	)		(452	)
	Cash obtained with acquired businesses			35			45
	Post-acquisition settlement payments, net of receipts			(76	)		(72	)
	Purchases of investments and other assets			(0	)		(31	)
	Proceeds from sales of other investments and other assets			4			119
	Decrease (increase) in restricted cash			(11	)		–
	Interest, dividends and other proceeds received			5			3
	Property and equipment purchased			(10	)		(10	)
	Net cash flows from (used in) investing activities			(277	)		(398	)

Effect of foreign currency on
	cash			(17	)		7

Increase (decrease) in cash				794			199

Cash, beginning of period			$	1,284		$	811

Cash, end of period			$	2,078		$	1,010

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