TORONTO, Feb. 14, 2018 (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, 2017 and declared a $1.00 per share dividend payable on April 5, 2018 to all common shareholders of record at close of business on March 16, 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 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.

Q4 2017 Headlines:

  • Revenue grew 22% (8% organic growth, 5% after adjusting for changes in foreign exchange rates) to $688 million compared to $564 million in Q4 2016. 
  • Adjusted EBITA increased $23 million or 15% to $175 million as compared to $151 million in Q4 2016. 
  • Net income increased 16% to $76 million ($3.59 on a diluted per share basis) from $66 million ($3.10 on a diluted per share basis) in Q4 2016.
  • Adjusted net income increased 15% to $141 million ($6.63 on a diluted per share basis) from $122 million ($5.75 on a diluted per share basis) in Q4 2016. 
  • A number of acquisitions were completed for aggregate cash consideration of $84 million (which includes acquired cash).  Deferred payments associated with these acquisitions have an estimated value of $22 million resulting in total consideration of $106 million.
  • Cash flows from operations were $163 million, an increase of 22%, or $29 million, compared to $134 million for the comparable period in 2016.
  • Subsequent to December 31, 2017, the Company completed a number of acquisitions for aggregate cash consideration of $278 million (which includes acquired cash).  Deferred payments associated with these acquisitions have an estimated value of $42 million resulting in total consideration of $320 million.
  • Subsequent to February 14, 2018 the Company policy will be to only issue press releases for acquisitions having an aggregate purchase price of $50 million or more.

2017 Headlines:

  • Revenue grew 17% (3% organic growth, 3% after adjusting for changes in foreign exchange rates) to $2,479 million compared to $2,125 million in 2016.
  • Adjusted EBITA increased $91 million or 17% to $621 million as compared to $530 million in 2016. 
  • Net income increased 7% to $222 million ($10.47 on a diluted per share basis) from $207 million ($9.76 on a diluted per share basis) in 2016.
  • Adjusted net income increased 17% to $463 million ($21.84 on a diluted per share basis) from $395 million ($18.64 on a diluted per share basis) in 2016.
  • A number of acquisitions were completed for aggregate cash consideration of $269 million (which includes acquired cash).  Deferred payments associated with these acquisitions have an estimated value of $60 million resulting in total consideration of $329 million.
  • Cash flows from operations were $528 million, an increase of 8%, or $37 million, compared to $491 million for the comparable period in 2016. 

Total revenue for the quarter ended December 31, 2017 was $688 million, an increase of 22%, or $124 million, compared to $564 million for the comparable period in 2016.  For the year ended December 31, 2017 total revenues were $2,479 million, an increase of 17%, or $354 million, compared to $2,125 million for the comparable period in 2016.  The increase for both the three and twelve month periods ended December 31, 2017 is primarily attributable to growth from acquisitions as the Company experienced organic growth of 8% and 3% respectively, 5% 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.

For the quarter ended December 31, 2017, Adjusted EBITA increased to $175 million compared to $151 million for the same period in 2016 representing an increase of 15%.  Adjusted EBITA margin was 25% for the quarter ended December 31, 2017 and 27% for the same period in 2016.  For the year ended December 31, 2017, Adjusted EBITA increased to $621 million compared to $530 million during the same period in 2016, representing an increase of 17%.  Adjusted EBITA margin was 25% for both the years ended December 31, 2017 and 2016. 

Net income for the quarter ended December 31, 2017 was $76 million compared to net income of $66 million for the same period in 2016.  On a per share basis this translated into a net income per diluted share of $3.59 in the quarter ended December 31, 2017 compared to net income per diluted share of $3.10 for the same period in 2016.  For the year ended December 31, 2017, net income was $222 million or $10.47 per diluted share compared to $207 million or $9.76 per diluted share for the same period in 2016.

For the quarter ended December 31, 2017, Adjusted net income increased to $141 million from $122 million for the same period in 2016, representing an increase of 15%.  Adjusted net income margin was 20% for the quarter ended December 31, 2017 and 22% for the same period in 2016.  For the year ended December 31, 2017, Adjusted net income increased to $463 million from $395 million during the same period in 2016, representing an increase of 17%.  Adjusted net income margin was 19% for both the years ended December 31, 2017 and 2016.

Cash flows from operations for the quarter ended December 31, 2017 were $163 million, an increase of 22%, or $29 million, compared to $134 million for the comparable period in 2016.  Cash flows from operations for the year ended December 31, 2017 were $528 million, an increase of 8%, or $37 million, compared to $491 million for the comparable period in 2016.   

The following table displays our revenue by reportable segment and the percentage change for the three and twelve month periods ended December 31, 2017 compared to the same periods in 2016:

            
   Three months ended
December 31,
Period-Over-
Period Change
Organic
Growth
 Year ended
December 31,
Period-Over-
Period Change
Organic
Growth 
 
   20172016$%% 20172016$%%  
   ($M, except percentages)  ($M, except percentages)  
 Public Sector             
 Licenses 3225727%3% 107881922%-6% 
 Professional services 112941819%7% 3983445416%3% 
 Hardware and other 43321032%21% 1391201815%8% 
 Maintenance and other recurring2872325423%7% 1,04687617019%4% 
   4733848923%8% 1,6891,42826118%4% 
               
 Private Sector             
 Licenses 1814426%14% 6455916%5% 
 Professional services 2823521%9% 100901011%1% 
 Hardware and other 86122%-3% 292726%-7% 
 Maintenance and other recurring1611362518%6% 5985247314%4% 
   2151803519%7% 7906979313%3% 
                
 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 2016 and 2017 was added to actual reported revenue for the three and twelve month periods ended December 31, 2017.

Public Sector

For the quarter ended December 31, 2017, total revenue in the public sector reportable segment increased 23%, or $89 million to $473 million, compared to $384 million for the quarter ended December 31, 2016.  For the year ended December 31, 2017, total revenue increased by 18%, or $261 million to $1,689 million, compared to $1,428 million for the comparable period in 2017.  Organic revenue growth was 8% and 4% respectively for the three and twelve month periods ended December 31, 2017 compared to the same periods in 2016, and 5% 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.   

Private Sector

For the quarter ended December 31, 2017, total revenue in the private sector reportable segment increased 19%, or $35 million to $215 million, compared to $180 million for the quarter ended December 31, 2016.  For the year ended December 31, 2017, total revenue increased by 13%, or $94 million to $790 million, compared to $697 million for the comparable period in 2016.  Organic revenue growth was 7% and 3% respectively for the three and twelve month periods ended December 31, 2017 compared to the same periods in 2016, and 5% 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.  

Conference Call and Webcast
Management will host a conference call at 8:00 a.m. (ET) on Thursday, February 15, 2018 to answer questions regarding the results.  The teleconference numbers are 647-788-4919 or 877-291-4570.  The call will also be webcast live and archived on Constellation’s website at www.csisoftware.com. 

A replay of the conference call will be available as of 12:30 p.m. ET the same day until 11:59 p.m. ET on March 1, 2018. To access the replay, please dial 416-621-4642 or 800-585-8367 followed by the passcode 2869957.

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
December 31,
   Year ended
December 31,
  
    2017 2016    2017 2016   
   ($M, except percentages) ($M, except percentages) 
             
 Total revenue  688 564    2,479 2,125   
             
 Net income  76 66    222 207   
 Adjusted for:           
 Income tax expense (recovery)  30 20    99 80   
 Foreign exchange (gain) loss  (2)1    9 26   
 TSS membership liability revaluation charge  10 8    50 22   
 Share in net (income) loss of equity investees  (0)0    (0)(5)  
 Finance and other income  (1)(8)   (3)(11)  
 Bargain purchase gain  (5)-    (10)-   
 Finance costs  5 5    25 22   
 Amortization of intangible assets  63 59    230 191   
             
 Adjusted EBITA  175 151    621 530   
 Adjusted EBITA margin  25%27%   25%25%  
             
 Certain totals and percentages may not reconcile due to rounding.         
             

The following table reconciles Adjusted net income to net income:

           
    Three months ended
December 31,
   Year ended
December 31,
  
    2017 2016    2017 2016   
   ($M, except percentages) ($M, except percentages)    
             
 Total revenue  688 564    2,479 2,125   
             
 Net income  76 66    222 207   
 Adjusted for:           
 Amortization of intangible assets  63 59    230 191   
 TSS membership liability revaluation charge  10 8    50 22   
 Bargain purchase gain  (5)-    (10)-   
 Less non-controlling interest in the Adjusted           
 net income of TSS  (6)(5)   (22)(19)  
 Deferred income tax expense (recovery)  3 (5)   (8)(5)  
             
 Adjusted net income  141 122    463 395   
 Adjusted net income margin  20%22%   19%19%  
             
 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.    
Consolidated Statements of Financial Position      
(In thousands of U.S. dollars)       
  
         December 31, 2017December 31, 2016 
            
Assets         
            
Current assets:         
 Cash      $488,964 $353,499  
 Equity securities available-for-sale     -  4,236  
 Accounts receivable, net     316,538  243,554  
 Work in progress      64,109  56,541  
 Inventories       23,196  19,667  
 Other assets      100,098  96,181  
          992,905  773,678  
            
Non-current assets:        
 Property and equipment     53,817  46,395  
 Deferred income taxes      38,362  49,863  
 Other assets      21,801  19,782  
 Intangible assets 1,181,333  993,743  
          1,295,313  1,109,783  
            
Total assets      $2,288,218 $1,883,461  
            
Liabilities and Shareholders' Equity     
            
Current liabilities:        
 CSI Facility      $- $-  
 New CNH Facility      96,398  -  
 CNH Facility      -  7,361  
 TSS Membership Liability     49,215  26,435  
 Accounts payable and accrued liabilities    379,573  291,697  
 Dividends payable      21,575  21,051  
 Deferred revenue      541,108  460,975  
 Provisions       10,377  7,955  
 Acquisition holdback payables     42,867  17,056  
 Income taxes payable      31,028  40,634  
          1,172,141  873,164  
            
Non-current liabilities:        
 CNH Facility      -  115,336  
 TSS Membership Liability     86,575  46,502  
 Debentures       236,462  223,870  
 Deferred income taxes      148,961  129,585  
 Acquisition holdback payables     6,480  855  
 Other liabilities      33,521  36,640  
          511,999  552,788  
            
Total liabilities       1,684,140  1,425,952  
            
            
Shareholders' equity:        
 Capital stock      99,283  99,283  
 Accumulated other comprehensive income (loss)   (26,739) (36,108) 
 Retained earnings      531,534  394,334  
            
            
            
Total liabilities and shareholders' equity   $2,288,218 $1,883,461  
            

 

   
CONSTELLATION SOFTWARE INC.  
Consolidated Statements of Income     
(In thousands of U.S. dollars, except per share amounts)   
          
       Years ended December 31,
        2017   2016 
          
Revenue         
License    $170,384  $142,534 
Professional services    498,195   434,488 
Hardware and other    167,636   147,749 
Maintenance and other recurring   1,643,206   1,400,315 
        2,479,421   2,125,086 
          
Expenses         
Staff       1,236,874   1,058,989 
Hardware       92,666   82,304 
Third party license, maintenance and professional services       212,604   192,703 
Occupancy       58,885   51,696 
Travel       73,632   61,745 
Telecommunications       21,949   21,674 
Supplies       16,120   9,820 
Software and equipment       42,936   36,547 
Professional fees       31,311   28,249 
Other, net       48,644   28,963 
Depreciation       22,576   22,376 
Amortization of intangible assets       230,494   190,574 
        2,088,691   1,785,640 
          
          
Foreign exchange loss (gain)   8,611   25,990 
TSS membership liability revaluation charge 49,912   21,635 
Share in net (income) loss of equity investee (369)  (5,317)
Finance and other expense (income)   (3,176)  (10,834)
Bargain purchase gain    (9,918)  - 
Finance costs     24,788   21,573 
        69,848   53,047 
          
Income before income taxes   320,882   286,399 
          
Current income tax expense (recovery)   106,476   84,943 
Deferred income tax expense (recovery)       (7,562)  (5,328)
Income tax expense (recovery)       98,914   79,615 
          
Net income     221,968   206,784 
          
Earnings per share      
Basic and diluted   $10.47  $9.76 
          
          

 

    
CONSTELLATION SOFTWARE INC.   
Consolidated Statements of Comprehensive Income   
(In thousands of U.S. dollars, except per share amounts)   
          
       Years ended December 31,
        2017   2016 
          
Net income    $221,968  $206,784 
          
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)  5,224 
          
Net change in fair value      
 of derivatives designated as hedges    
 during the period    538   468 
          
Amounts reclassified to profit during the period   
 related to realized losses (gains) on    
 available-for-sale financial assets   1,288   (5,204)
          
Foreign currency translation differences from foreign operations 9,009   (2,134)
          
Deferred income tax recovery (expense)  (152)  (143)
          
Other comprehensive (loss) income for the period, net of income tax 9,369   (1,789)
          
Total comprehensive income (loss) for the period$231,337  $204,995 
          

 

      
CONSTELLATION SOFTWARE INC.     
Consolidated Statements of Changes in Equity       
(In thousands of U.S. dollars)       
          
Year ended December 31, 2017       
   Capital
stock
Accumulated 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  - -  -  -  -  221,968  221,968 
          
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 - -  -  538  538  -  538 
          
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 - 9,009  -  -  9,009  -  9,009 
          
Deferred tax recovery (expense) - -  9  (161) (152) -  (152)
          
Total other comprehensive income (loss)       
 for the period -   9,009   (17) 377   9,369   -    9,369  
          
Total comprehensive income (loss) for the period -   9,009   (17) 377   9,369   221,968   231,337  
          
Transactions with owners, recorded directly in equity       
Dividends to shareholders of the Company - -  -  -  -  (84,768) (84,768)
          
Balance at December 31, 2017$99,283 $(26,739)$-   $-   $(26,739)$531,534  $604,078  
          

 

      
CONSTELLATION SOFTWARE INC.     
Consolidated Statements of Changes in Equity    
(In thousands of U.S. dollars)       
          
Year ended December 31, 2016       
          
   Capital stockAccumulated other comprehensive
income/(loss)
Total accumulated
other comprehensive
income/(loss)
Retained earningsTotal
    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, 2016$99,283 $(33,614)$-   $(705)$(34,319)$272,318  $337,282  
          
Total comprehensive income for the period:       
          
Net income  - -  -  -  -  206,784  206,784 
          
Other comprehensive income (loss)       
          
Net change in fair value       
 of available-for-sale financial       
 asset during the period - -  5,224  -  5,224  -  5,224 
          
Net change in fair value       
 of derivatives designated as hedges       
 during the period - -  -  468  468  -  468 
          
Amounts reclassified to profit during the period       
 related to realized losses (gains) on       
 available-for-sale financial assets - -  (5,204) -  (5,204) -  (5,204)
          
Foreign currency translation differences from       
 foreign operations - (2,134) -  -  (2,134) -  (2,134)
          
Deferred tax recovery (expense) - -  (3) (140) (143) -  (143)
          
Total other comprehensive income for the period -   (2,134) 17   328   (1,789) -    (1,789)
          
Total comprehensive income for the period -   (2,134) 17   328   (1,789) 206,784   204,995  
          
Transactions with owners, recorded directly in equity       
Dividends to shareholders of the Company - -   -  -  (84,768) (84,768)
          
Balance at December 31, 2016$99,283 $(35,748)$17  $(377)$(36,108)$394,334  $457,509  
          

 

   
CONSTELLATION SOFTWARE INC.  
Consolidated Statements of Cash Flows    
(In thousands of U.S. dollars)     
           
        Years ended December 31,
         2017   2016 
           
Cash flows from operating activities:    
 Net income   $221,968  $206,784 
 Adjustments for:     
  Depreciation   22,576   22,376 
  Amortization of intangible assets  230,494   190,574 
  TSS membership liability revaluation charge 49,912   21,635 
  Share in net (income) loss of equity investee (369)  (5,317)
  Finance and other expense (income) (3,176)  (10,834)
  Bargain purchase gain   (9,918)  - 
  Finance costs   24,788   21,573 
  Income tax expense (recovery)  98,914   79,615 
  Foreign exchange loss (gain)  8,611   25,990 
 Change in non-cash operating working capital   
  exclusive of effects of business combinations (15,149)  (16,496)
 Income taxes paid   (100,894)  (45,019)
 Net cash flows from operating activities 527,757   490,881 
           
Cash flows from (used in) financing activities:   
 Interest paid    (22,144)  (22,867)
 Increase (decrease) in New CNH Facility, net 94,846   - 
 Repayments of CNH facility  (138,177)  (8,709)
 Credit facility transaction costs  (2,450)  (1,212)
 Dividends paid   (84,768)  (84,768)
 Net cash flows from (used in) in financing activities (152,693)  (117,556)
           
Cash flows from (used in) investing activities:   
 Acquisition of businesses, net of cash   
  acquired    (225,147)  (152,310)
 Post-acquisition settlement payments, net of receipts (30,866)  (25,791)
 Purchases of available-for-sale equity securities -   (27,707)
 Proceeds from sale of available-for-sale equity securities 2,828   28,491 
 Interest, dividends and other proceeds received 22,993   1,729 
 Property and equipment purchased  (19,711)  (19,098)
 Net cash flows from (used in) investing activities (249,903)  (194,686)
           
Effect of foreign currency on     
 cash and cash equivalents  10,304   (3,611)
           
Increase (decrease) in cash and cash equivalents 135,465   175,028 
           
Cash, beginning of period   353,499   178,471 
           
Cash, end of period  $488,964  $353,499