Constellation Software Inc. Announces Results for the Fourth Quarter and Year Ended December 31, 2023 and Declares Quarterly Dividend

Bay Street

8 months ago

TORONTO, March 06, 2024 (GLOBE NEWSWIRE) — Constellation Software Inc. (TSX:CSU) (“Constellation” or the “Company”) today announced its financial results for the fourth quarter and year ended December 31, 2023 and declared a $1.00 per share dividend payable on April 15, 2024 to all common shareholders of record at close of business on March 28, 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 annual Consolidated Financial Statements, prepared in accordance with IFRS Accounting 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.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.

Q4 2023 Headlines:

Revenue grew 26% (6% organic growth, 4% after adjusting for changes in foreign exchange rates) to $2,323 million compared to $1,847 million in Q4 2022.
Net income attributable to common shareholders decreased 7% to $141 million ($6.64 on a diluted per share basis) from $152 million ($7.19 on a diluted per share basis) in Q4 2022.
A number of acquisitions were completed for aggregate cash consideration of $376 million (which includes acquired cash). Deferred payments associated with these acquisitions have an estimated value of $86 million resulting in total consideration of $463 million.
Cash flows from operations (“CFO”) was $511 million, an increase of 28%, or $110 million, compared to $400 million for the comparable period in 2022.
Free cash flow available to shareholders¹ (“FCFA2S”) increased $35 million to $325 million compared to $290 million for the same period in 2022 representing an increase of 12%.
Subsequent to December 31, 2023, the Company completed or has open commitments to acquire a number of businesses for aggregate cash consideration of $513. Deferred payments associated with these acquisitions have an estimated value of $141 resulting in total consideration of $654.

2023 Headlines:

Revenue grew 27% (5% organic growth, 5% after adjusting for changes in foreign exchange rates) to $8,407 million compared to $6,622 million in 2022.
Net income attributable to common shareholders increased 10% to $565 million ($26.67 on a diluted per share basis) from $512 million ($24.18 on a diluted per share basis) in 2022.
A number of acquisitions were completed for total consideration of $2,609 million including holdbacks and contingent consideration.
Cash flows from operations (“CFO”) was $1,779 million, an increase of $481 million, compared to $1,297 million for the comparable period in 2022.
Free cash flow available to shareholders (“FCFA2S”) increased $307 million to $1,160 million compared to $853 million for the same period in 2022 representing an increase of 36%.

Total revenue for the quarter ended December 31, 2023 was $2,323 million, an increase of 26%, or $475 million, compared to $1,847 million for the comparable period in 2022. For the year ended December 31, 2023 total revenues were $8,407 million, an increase of 27%, or $1,785 million, compared to $6,622 million for the comparable period in 2022. The increase for both the three and twelve 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 6% and 5% respectively, 4% and 5% 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.

Net income attributable to common shareholders of CSI for the quarter ended December 31, 2023 was $141 million compared to $152 million for the same period in 2022. On a per share basis this translated into a net income per diluted share of $6.64 in the quarter ended December 31, 2023 compared to net income per diluted share of $7.19 for the same period in 2022. For the twelve months ended December 31, 2023, net income attributable to common shareholders of CSI was $565 million or $26.67 per diluted share compared to $512 million or $24.18 per diluted share for the same period in 2022. There was no change in the number of shares outstanding.

For the quarter ended December 31, 2023, CFO increased $110 million to $511 million compared to $400 million for the same period in 2022 representing an increase of 28%. For the twelve months ended December 31, 2023, CFO increased $481 million to $1,779 million compared to $1,297 million for the same period in 2022 representing an increase of 37%.

For the quarter ended December 31, 2023, FCFA2S increased $35 million to $325 million compared to $290 million for the same period in 2022 representing an increase of 12%. For the twelve months ended December 31, 2023, FCFA2S increased $307 million to $1,160 million compared to $853 million for the same period in 2022 representing an increase of 36%.

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 December 31,					Year ended December 31,
		2023		2022			2023		2022
	($ in millions)					($ in millions)

Net cash flows from operating activities		511		400			1,779		1,297
Adjusted for:
Interest paid on lease obligations		(3	)	(3	)		(11	)	(11	)
Interest paid on other facilities		(37	)	(26	)		(133	)	(74	)
Proceeds from sale of interest rate cap		–		–			5		–
Credit facility transaction costs		(2	)	(4	)		(5	)	(7	)
Payments of lease obligations		(31	)	(25	)		(109	)	(94	)
IRGA / TSS membership liability revaluation charge		(58	)	(23	)		(152	)	(112	)
Property and equipment purchased		(13	)	(14	)		(42	)	(41	)
Interest and dividends received		2		0			3		1

		369		306			1,333		958
Less amount attributable to
Non-controlling interests		(44	)	(16	)		(173	)	(105	)

Free cash flow available to shareholders		325		290			1,160		853

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.
Consolidated Statements of Financial Position
(In millions of U.S. dollars, except per share amounts. Due to rounding, numbers presented may not foot.)

		December 31, 2023			December 31, 2022

Assets

Current assets:
	Cash	$	1,284		$	811
	Accounts receivable		1,146			892
	Unbilled revenue		326			219
	Inventories		51			48
	Other assets		538			497
			3,345			2,466

Non-current assets:
	Property and equipment		142			128
	Right of use assets		312			283
	Deferred income taxes		107			159
	Other assets		286			174
	Intangible assets		6,707			4,662
			7,554			5,406

Total assets		$	10,899		$	7,872

Liabilities and Shareholders’ Equity

Current liabilities:
	Debt with recourse to Constellation Software Inc.	$	861		$	505
	Debt without recourse to Constellation Software Inc.		225			316
	Redeemable preferred securities		814			–
	Accounts payable and accrued liabilities		1,432			1,083
	Dividends payable		21			21
	Deferred revenue		1,757			1,482
	Provisions		9			11
	Acquisition holdback payables		174			159
	Lease obligations		112			96
	Income taxes payable		90			99
			5,495			3,772

Non-current liabilities:
	Debt with recourse to Constellation Software Inc.		863			567
	Debt without recourse to Constellation Software Inc.		1,385			586
	Deferred income taxes		625			465
	Acquisition holdback payables		87			73
	Lease obligations		236			218
	Other liabilities		246			258
			3,442			2,167

Total liabilities			8,938			5,938


Shareholders’ equity:
	Capital stock		99			99
	Accumulated other comprehensive income (loss)		(99	)		(150	)
	Retained earnings		1,876			1,763
	Non-controlling interests		85			221
			1,961			1,933



Total liabilities and shareholders’ equity		$	10,899		$	7,872

CONSTELLATION SOFTWARE INC.
Consolidated Statements of Income (loss)
(In millions of U.S. dollars, except per share amounts. Due to rounding, numbers presented may not foot.)

	Year ended December 31,
		2023			2022


Revenue
License	$	386		$	320
Professional services		1,766			1,381
Hardware and other		268			233
Maintenance and other recurring		5,985			4,688
		8,407			6,622

Expenses
Staff		4,493			3,539
Hardware		158			134
Third party license, maintenance and professional services		810			626
Occupancy		51			49
Travel, telecommunications, supplies, software and equipment		398			307
Professional fees		151			114
Other, net		138			154
Depreciation		162			143
Amortization of intangible assets		859			676
		7,219			5,740


Foreign exchange loss (gain)		43			(56	)
IRGA/TSS Membership liability revaluation charge		152			112
Finance and other expense (income)		(34	)		0
Bargain purchase gain		(54	)		(16	)
Impairment of intangible and other non-financial assets		26			7
Redeemable preferred securities expense (income)		597			–
Finance costs		192			110
		922			156

Income (loss) before income taxes		265			725

Current income tax expense (recovery)		370			403
Deferred income tax expense (recovery)		(166	)		(228	)
Income tax expense (recovery)		204			175

Net income (loss)		62			551

Net income (loss) attributable to:
Common shareholders of Constellation Software Inc.		565			512
Non-controlling interests		(503	)		38
Net income (loss)		62			551

Earnings per common share of Constellation Software Inc.
Basic and diluted	$	26.67		$	24.18

CONSTELLATION SOFTWARE INC.
Consolidated Statements of Comprehensive Income (loss)
(In millions of U.S. dollars, except per share amounts. Due to rounding, numbers presented may not foot.)

	Year ended December 31,
		2023			2022

Net income (loss)	$	62		$	551

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

Foreign currency translation differences from foreign operations and other, net of tax		51			(90	)

Other comprehensive income (loss), net of income tax		51			(90	)

Total comprehensive income (loss)	$	113		$	460

Total other comprehensive income (loss) attributable to:
Common shareholders of Constellation Software Inc.		38			(79	)
Non-controlling interests		13			(12	)
Total other comprehensive income (loss)	$	51		$	(90	)

Total comprehensive income (loss) attributable to:
Common shareholders of Constellation Software Inc.		603			433
Non-controlling interests		(490	)		27
Total comprehensive income (loss)	$	113		$	460

CONSTELLATION SOFTWARE INC.
Consolidated Statement of Changes in Equity
(In millions of U.S. dollars, except per share amounts. Due to rounding, numbers presented may not foot.)

Year ended December 31, 2023
		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, 2023		$	99	$	–	$	(150	)	$	1,763		$	1,713			221		$	1,933

Total comprehensive income (loss):

Net income (loss)			–		–		–			565			565			(503	)		62

Other comprehensive income (loss)

Foreign currency translation differences from
	foreign operations and other, net of tax		–		–		38			–			38			13			51


Total other comprehensive income (loss)			–		–		38			–			38			13			51

Total comprehensive income (loss)			–		–		38			565			603			(490	)		113

Transactions with owners, recorded directly in equity

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

Non-controlling interests arising from business combinations			–		–		–			–			–			2			2

Acquisition of non-controlling interests			–		–		–			–			–			(2	)		(2	)

Conversion of Lumine Special Shares to subordinate voting shares of Lumine			–		–		–			–			–			5			5

Other movements in non-controlling interests			–		–		0			15			15			(17	)		(2	)

Other distributions and movements in equity			–		–		2			(4	)		(3	)		–			(3	)

Dividends to shareholders of the Company			–		–		–			(85	)		(85	)		–			(85	)

Balance at December 31, 2023		$	99	$	–	$	(99	)	$	1,876		$	1,877		$	85		$	1,961

CONSTELLATION SOFTWARE INC.
Consolidated Statement of Changes in Equity
(In millions of U.S. dollars, except per share amounts. Due to rounding, numbers presented may not foot.)

Year ended December 31, 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):

Net income (loss)			–		–			–			512			512			38			551

Other comprehensive income (loss)

Foreign currency translation differences from
	foreign operations and other, net of tax		–		–			(79	)		–			(79	)		(12	)		(90	)

Total other comprehensive income (loss)			–		–			(79	)		–			(79	)		(12	)		(90	)

Total comprehensive income (loss)			–		–			(79	)		512			433			27			460

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 movements			–		305			(5	)		–			301			(301	)		–

Non-controlling interests arising from business combinations			–		–			–			–			–			41			41

Other movements in non-controlling interests			–		–			–			2			2			(6	)		(4	)

Dividends to shareholders of the Company			–		–			–			(85	)		(85	)		–			(85	)

Reclassification of other equity to retained earnings			–		(127	)		–			127			–			–			–

Balance at December 31, 2022		$	99	$	–		$	(150	)	$	1,763		$	1,713		$	221		$	1,933

CONSTELLATION SOFTWARE INC.
Consolidated Statements of Cash Flows
(In millions of U.S. dollars, except per share amounts. Due to rounding, numbers presented may not foot.)

			Year ended December 31,
				2023			2022

Cash flows from (used in) operating activities:
	Net income (loss)		$	62		$	551
	Adjustments for:
		Depreciation		162			143
		Amortization of intangible assets		859			676
		IRGA/TSS Membership liability revaluation charge		152			112
		Finance and other expense (income)		(34	)		0
		Bargain purchase (gain)		(54	)		(16	)
		Impairment of intangible and other non-financial assets		26			7
		Redeemable preferred securities expense (income)		597			–
		Finance costs		192			110
		Income tax expense (recovery)		204			175
		Foreign exchange loss (gain)		43			(56	)
	Change in non-cash operating assets and liabilities
		exclusive of effects of business combinations		(36	)		(60	)
	Income taxes paid			(394	)		(343	)
	Net cash flows from (used in) operating activities			1,779			1,297

Cash flows from (used in) financing activities:
	Interest paid on lease obligations			(11	)		(11	)
	Interest paid on debt			(133	)		(74	)
	Proceeds from sale of interest rate cap			5			–
	Increase (decrease) in CSI facility			256			322
	Increase (decrease) in Topicus revolving credit debt facility without recourse to CSI			27			91
	Proceeds from issuance of debentures			209			–
	Proceeds from issuance of debt facilities without recourse to CSI			447			476
	Repayments of debt facilities without recourse to CSI			(282	)		(102	)
	Other financing activities			(1	)		(3	)
	Credit facility transaction costs			(5	)		(7	)
	Payments of lease obligations			(109	)		(94	)
	Distribution to the Joday Group			–			(23	)
	Dividends paid to redeemable preferred security holders			–			(7	)
	Dividends paid to common shareholders of the Company			(85	)		(85	)
	Net cash flows from (used in) in financing activities			316			483

Cash flows from (used in) investing activities:
	Acquisition of businesses			(1,609	)		(1,633	)
	Cash obtained with acquired businesses			152			216
	Post-acquisition settlement payments, net of receipts			(238	)		(149	)
	Purchases of investments and other assets			(23	)		(97	)
	Proceeds from sales of other investments and other assets			119			6
	Decrease (increase) in restricted cash			(2	)		–
	Interest, dividends and other proceeds received			4			5
	Property and equipment purchased			(42	)		(41	)
	Net cash flows from (used in) investing activities			(1,639	)		(1,694	)

Effect of foreign currency on
	cash			17			(39	)

Increase (decrease) in cash				473			48

Cash, beginning of period			$	811		$	763

Cash, end of period			$	1,284		$	811

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