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

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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