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Constellation Software Inc. Announces Results for the Fourth Quarter and Year Ended December 31, 2020 and Declares Quarterly Dividend

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TORONTO, Feb. 12, 2021 (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, 2020 and declared a $1.00 per share dividend payable on April 9, 2021 to all common shareholders of record at close of business on March 16, 2021. 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, 2020, 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 continues to applaud the efforts of our employees during the disruption caused by COVID-19. We’d like to thank those who have gone beyond the call of duty in supporting their colleagues and our customers.

Q4 2020 Headlines:

  • Revenue grew 14% (1% organic growth, negative 1% after adjusting for changes in foreign exchange rates) to $1,091 million compared to $956 million in Q4 2019.  
  • Net income increased 62% to $149 million ($7.02 on a diluted per share basis) from $92 million ($4.34 on a diluted per share basis) in Q4 2019.
  • A number of acquisitions were completed for aggregate cash consideration of $179 million (which includes acquired cash). Deferred payments associated with these acquisitions have an estimated value of $60 million resulting in total consideration of $239 million.
  • Cash flows from operations (“CFO”) was $355 million, an increase of 39%, or $100 million, compared to $255 million for the comparable period in 2019.
  • Free cash flow available to shareholders (“FCFA2S”) increased $113 million to $307 million compared to $193 million for the same period in 2019 representing an increase of 59%.
  • The Company determined that certain of its subsidiaries qualified for an estimated aggregate amount of $11 million of grants from various government authorities, and recognized such amounts as a reduction to expenses in the quarter.
  • On January 5, 2021, the Company completed its purchase of 100% of the shares of Topicus.com B.V. (“Topicus B.V.”), a Netherlands-based diversified vertical market software provider and in connection with the closing of the acquisition, the TSS operating group has been spun out of Constellation and now operates, together with Topicus, as a separate public company.

2020 Headlines:

  • Revenue grew 14% (negative 3% organic growth, negative 3% after adjusting for changes in foreign exchange rates) to $3,969 million compared to $3,490 million in 2019.
  • Net income increased 31% to $436 million ($20.59 on a diluted per share basis) from $333 million ($15.73 on a diluted per share basis) in 2019.
  • A number of acquisitions were completed for aggregate cash consideration of $477 million (which includes acquired cash). Deferred payments associated with these acquisitions have an estimated value of $151 million resulting in total consideration of $628 million.
  • Cash flows from operations (“CFO”) was $1,186 million, an increase of 55%, or $419 million, compared to $767 million for the comparable period in 2019.
  • Free cash flow available to shareholders (“FCFA2S”) increased $399 million to $989 million compared to $590 million for the same period in 2019 representing an increase of 68%.
  • The Company determined that certain of its subsidiaries qualified for an estimated aggregate amount of $41 million of grants from various government authorities, and recognized such amounts as a reduction to expenses in the year.  

Total revenue for the quarter ended December 31, 2020 was $1,091 million, an increase of 14%, or $135 million, compared to $956 million for the comparable period in 2019. For the year ended December 31, 2020 total revenues were $3,969 million, an increase of 14%, or $479 million, compared to $3,490 million for the 2019 fiscal year. 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 1% and negative 3% respectively, negative 1% and negative 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.

Net income for the quarter ended December 31, 2020 was $149 million compared to net income of $92 million for the same period in 2019. On a per share basis, this translated into a net income per diluted share of $7.02 in the quarter ended December 31, 2020 compared to net income per diluted share of $4.34 for the same period in 2019. For the year ended December 31, 2020, net income was $436 million or $20.59 per diluted share compared to $333 million or $15.73 per diluted share for the 2019 fiscal year.

For the quarter ended December 31, 2020, CFO increased $100 million to $355 million compared to $255 million for the same period in 2019 representing an increase of 39%. For the year ended December 31, 2020, CFO increased $419 million to $1,186 million compared to $767 million for the 2019 fiscal year, representing an increase of 55%.

For the quarter ended December 31, 2020, FCFA2S increased $113 million to $307 million compared to $193 million for the same period in 2019 representing an increase of 59%. For the year ended December 31, 2020, FCFA2S increased $399 million to $989 million compared to $590 million for the 2019 fiscal year, representing an increase of 68%.

Spin-Out of Topicus.com Inc.

On January 5, 2021, the Company completed its purchase of 100% of the shares of Topicus.com B.V. (“Topicus B.V.”), a Netherlands-based diversified vertical market software provider and in connection with the closing of the acquisition, the TSS operating group has been spun out of Constellation and now operates, together with Topicus, as a separate public company. (collectively, the “Spin-Out Transactions”).

In connection with the completion of the Spin-Out Transactions, on January 4, 2021, all of Constellation’s common shareholders of record on December 28, 2020 received, by way of a dividend-in-kind, 1.859817814 subordinate voting shares of Topicus.com (the “Spin-Out Shares”) for each common share of Constellation held.  

Constellation’s equity interest in TSS prior to the Spin-Out Transactions was 66.7%. Constellation’s equity interest in Topicus.com after completion of the Spin-Out Transactions on a fully diluted basis is approximately 30.4%. In addition, Constellation as the holder of a super voting share is entitled to that number of votes that equals 50.1% of the aggregate number of votes attached to all of the outstanding voting shares at such time. As a result of the super voting share Constellation will consolidate Topicus.com.

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
December 31,
      Year ended
December 31,
 
      2020 2019       2020 2019  
    ($ in millions, except percentages)   ($ in millions, except percentages)
                     
Net cash flows from operating activities                355        255               1,186        767  
Adjusted for:                    
Interest paid on lease obligations                  (2)          (2)                    (8)          (7)  
Interest paid on other facilities                (10)          (8)                   (32)         (31)  
Credit facility transaction costs                  (1)          (2)                    (2)          (3)  
Payments of lease obligations                (19)        (17)                   (66)         (51)  
TSS membership liability revaluation charge                (10)        (22)                   (65)         (52)  
Property and equipment purchased                  (6)        (10)                   (25)         (34)  
Interest and dividends received                   0            0                      1            3  
                     
Free cash flow available to shareholders                307        193                  989        590  
                     
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.  
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, 2020   December 31, 2019  
                     
Assets                
                     
Current assets:                
  Cash             $ 758   $ 316  
  Accounts receivable             483     422  
  Unbilled revenue             98     110  
  Inventories               27     31  
  Other assets             219     184  
                    1,585     1,062  
                     
Non-current assets:              
  Property and equipment           86     78  
  Right of use assets             251     234  
  Deferred income taxes           52     45  
  Other assets             75     72  
  Intangible assets   2,325     1,997  
                    2,790     2,425  
                     
Total assets             $ 4,375   $ 3,488  
                     
Liabilities and Shareholders’ Equity        
                     
Current liabilities:              
  CSI facility             $   $ 63  
  Debt without recourse to Constellation Software Inc.     28     57  
  TSS membership liability           113     86  
  Accounts payable and accrued liabilities         666     529  
  Dividends payable             21     21  
  Deferred revenue             962     788  
  Provisions               12     13  
  Acquisition holdback payables           85     76  
  Lease obligations             74     62  
  Income taxes payable           78     36  
                    2,040     1,732  
                     
Non-current liabilities:              
  Debt without recourse to Constellation Software Inc.     199     153  
  TSS membership liability           198     136  
  Debentures             223     222  
  Deferred income taxes           285     246  
  Acquisition holdback payables           37     25  
  Lease obligations             201     187  
  Other liabilities             146     101  
                    1,288     1,069  
                     
Total liabilities               3,328     2,800  
                     
                     
Shareholders’ equity:              
  Capital stock             99     99  
  Accumulated other comprehensive income (loss)     (31 )   (40 )
  Retained earnings             980     628  
                    1,048     687  
                     
                     
                     
Total liabilities and shareholders’ equity       $ 4,375   $ 3,488  
                     
CONSTELLATION SOFTWARE INC.        
Consolidated Statements of Income        
(In millions of U.S. dollars, except per share amounts. Due to rounding, numbers presented may not foot.)  
                     
         
                     
              Years ended December 31,  
                2020       2019    
                     
                     
Revenue                
License         $ 234     $ 226    
Professional services         751       673    
Hardware and other         169       173    
Maintenance and other recurring       2,815       2,417    
                3,969       3,490    
                     
Expenses                
Staff           2,050       1,797    
Hardware           97       101    
Third party license, maintenance and professional services               330       300    
Occupancy           35       35    
Travel, telecommunications, supplies, software and equipment               152       201    
Professional fees         60       49    
Other, net           13       73    
Depreciation           105       92    
Amortization of intangible assets       403       331    
                3,246       2,979    
                     
                     
Foreign exchange loss (gain)       2       11    
TSS membership liability revaluation charge   65       52    
Finance and other expense (income)     (4 )     (4 )  
Bargain purchase gain         (2 )     (45 )  
Impairment of intangible and other non-financial assets   12          
Finance costs           46       42    
                120       55    
                     
Income before income taxes       603       456    
                     
Current income tax expense (recovery)     221       164    
Deferred income tax expense (recovery)     (55 )     (41 )  
Income tax expense (recovery)       167       123    
                     
Net income           436       333    
                     
Earnings per share              
Basic and diluted       $ 20.59     $ 15.73    
                     
CONSTELLATION SOFTWARE INC.        
Consolidated Statements of Comprehensive Income        
(In millions of U.S. dollars, except per share amounts. Due to rounding, numbers presented may not foot.)  
                     
         
                     
              Years ended December 31,  
                2020     2019    
                     
Net income         $ 436   $ 333    
                     
Items that are or may be reclassified subsequently to net income:        
                     
  Foreign currency translation differences from foreign operations and other   9     (4 )  
                     
Other comprehensive income (loss) for the period, net of income tax   9     (4 )  
                     
Total comprehensive income (loss) for the period $ 445   $ 330    
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, 2020          
      Capital
stock
Accumulated other comprehensive
income (loss)
Retained earnings Total  
        Cumulative translation account and other      
               
Balance at January 1, 2020 $ 99 $ (40 ) $ 628   $ 687  
               
Total comprehensive income for the period:          
               
Net income           436     436  
               
Other comprehensive income (loss)          
               
Foreign currency translation differences from          
  foreign operations and other     9         9  
               
Total other comprehensive income (loss)          
  for the period     9         9  
               
Total comprehensive income (loss) for the period     9     436     445  
               
Transactions with owners, recorded directly in equity          
  Dividends to shareholders of the Company         (85 )   (85)  
               
Balance at December 31, 2020 $ 99 $ (31 ) $ 980   $ 1,048  
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, 2019          
               
      Capital
stock
Accumulated other comprehensive
income (loss)
Retained earnings Total  
        Cumulative translation account and other      
               
Balance at January 1, 2019 $ 99 $ (37 ) $ 804   $ 866  
               
Total comprehensive income for the period:          
               
Net income         333     333  
               
Other comprehensive income (loss)          
               
Foreign currency translation differences from          
  foreign operations and other     (4 )       (4)  
               
Total other comprehensive income (loss) for the period     (4 )       (4)  
               
Total comprehensive income (loss) for the period     (4 )   333     330  
               
Transactions with owners, recorded directly in equity          
  Dividends to shareholders of the Company         (509 )   (509)  
               
Balance at December 31, 2019 $ 99 $ (40 ) $ 628   $ 687  
               
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.)
                   
                   
                   
              Years ended December 31,
                2020       2019  
                   
Cash flows from operating activities:      
  Net income     $ 436     $ 333  
  Adjustments for:        
    Depreciation     105       92  
    Amortization of intangible assets   403       331  
    TSS membership liability revaluation charge   65       52  
    Finance and other expense (income)   (4 )     (4 )
    Bargain purchase (gain)   (2 )     (45 )
    Impairment of intangible and other non-financial assets   12        
    Finance costs     46       42  
    Income tax expense (recovery)   167       123  
    Foreign exchange loss (gain)   2       11  
  Change in non-cash operating assets and liabilities      
    exclusive of effects of business combinations   117       (28 )
  Income taxes paid   (162 )     (140 )
  Net cash flows from (used in) operating activities   1,186       767  
                   
Cash flows from (used in) financing activities:      
  Interest paid on lease obligations   (8 )     (7 )
  Interest paid on other facilities   (32 )     (31 )
  Increase (decrease) in CSI facility   (65 )     65  
  Increase (decrease) in revolving credit under debt facilities without recourse to CSI   (31 )     5  
  Proceeds from issuance of term debt under facilities without recourse to CSI   48       49  
  Repayments of term debt under facilities without recourse to CSI   (6 )     (2 )
  Credit facility transaction costs   (2 )     (3 )
  Payments of lease obligations   (66 )     (51 )
  Distribution to TSS minority owners         (11 )
  Dividends paid   (85 )     (509 )
  Net cash flows from (used in) in financing activities   (247 )     (496 )
                   
Cash flows from (used in) investing activities:      
  Acquisition of businesses   (477 )     (549 )
  Cash obtained with acquired businesses   97       118  
  Post-acquisition settlement payments, net of receipts   (105 )     (74 )
  Purchases of other investments   (4 )     (11 )
  Interest, dividends and other proceeds received   2       6  
  Property and equipment purchased   (25 )     (34 )
  Net cash flows from (used in) investing activities   (512 )     (544 )
                   
Effect of foreign currency on      
  cash and cash equivalents   15       1  
                   
Increase (decrease) in cash   442       (273 )
                   
Cash, beginning of period   316       589  
                   
Cash, end of period $ 758     $ 316  
                   

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