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
[phone]
[e-mail]
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