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Press release from Marketwire

Constellation Software Inc. Announces Results for the First Quarter Ended March 31, 2012 and Declares Quarterly Dividend

Wednesday, May 02, 2012

Constellation Software Inc. Announces Results for the First Quarter Ended March 31, 2012 and Declares Quarterly Dividend17:00 EDT Wednesday, May 02, 2012TORONTO, ONTARIO--(Marketwire - May 2, 2012) - Constellation Software Inc. (TSX:CSU) ("Constellation" or the "Company") today announced its financial results for the first quarter ended March 31, 2012 and declared a $1.00 per share dividend payable on July 4, 2012 to all common shareholders of record at close of business on June 18, 2012. 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 Unaudited Condensed Consolidated Interim Financial Statements for the three months ended March 31, 2012 and the accompanying notes, and with our 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, 2011, 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.Q1 2012 Highlights:Revenue grew 10% to $195 million compared to $178 million in Q1 2011. Organic revenue growth was 3% in Q1 2012 compared to 5% in Q1 2011. Adjusted EBITDA increased $4 million or 12% to $39 million as compared to Q1 2011. Adjusted Net Income increased $5 million or 17% to $32 million ($1.50 on a diluted per share basis) from $27 million ($1.28 on a diluted per share basis) in Q1 2012. March 31, 2012 cash position (net of borrowings on our line of credit) increased to $38 million, from $33 million at December 31, 2011. The Company's $160 million credit facility was replaced with a $300 million credit facility on more favourable terms. Four acquisitions were completed in the quarter for net cash consideration of $8 million. Subsequent to March 31, 2012, the Company completed four acquisitions for aggregate cash consideration of $12 million plus holdbacks of $3 million and declared a quarterly dividend of $1.00 per share payable on July 4, 2012 to all shareholders of record as of June 18, 2012. First quarter 2012 revenue was $195 million, an increase of 10%, or $17 million, compared to $178 million for the comparable period in 2011. The increase was mainly attributable to growth from acquisitions, as organic growth from our existing businesses increased by approximately $5 million or 3% for the quarter. Adjusted EBITDA for the first quarter 2012 was $39 million, a 12% increase compared to the prior year's first quarter Adjusted EBITDA of $35 million. First quarter 2012 Adjusted EBITDA per share on a diluted basis increased 12% to $1.85, compared to $1.65 for the same period last year.Adjusted Net Income for the first quarter 2012 was $32 million, compared to the prior year's first quarter Adjusted Net Income of $27 million, a 17% increase. First quarter 2012 Adjusted Net Income per share on a diluted basis increased 17% to $1.50 compared to $1.28 for the prior year's first quarter.Net income for the first quarter 2012 was $14 million compared to the prior year's first quarter net income of $62 million. On a diluted per share basis, this translates into net income per share of $0.66 for the first quarter of 2012. This compares unfavorably to $2.95 for the same period of 2011, which included an unusual deferred income tax recovery. Excluding the deferred income tax recovery, net income increased by 46% to $12 million in the quarter ended March 31, 2012 from $8 million in the quarter ended March 31, 2011.The following table displays our revenue by reportable segment and the percentage change for the three months ended March 31, 2012 compared to the same period in 2011:Three months ended March 31,Period-Over-Period Change20122011$%($000, except percentages)Public SectorLicenses9,79010,545(755)-7%Professional services32,30233,459(1,157)-3%Hardware and other22,28921,2571,0325%Maintenance and other recurring73,85165,6898,16212%138,232130,9507,2826%Private SectorLicenses5,1504,66648410%Professional services9,8258,3301,49518%Hardware and other3,0662,75031611%Maintenance and other recurring39,00530,9368,06926%57,04646,68210,36422%Public Sector For the quarter ended March 31, 2012, total revenue in the public sector reportable segment increased 6% or $7 million, to $138 million, compared to $131 million for the quarter ended March 31, 2011. Revenue growth from acquired businesses was significant as we completed ten acquisitions since the beginning of 2011 in our public sector segment. It is estimated that acquisitions completed since the beginning of 2011 contributed approximately $5 million to our Q1 2012 revenues. Revenues increased organically by 2% or $2 million in Q1 2012 compared to the same period in 2011. The organic revenue change was primarily driven by the following:Volaris operating group (increase of approximately $2 million for the three months ended March 31, 2012). The organic growth was primarily driven from strong revenue in its PTS and agriculture verticals. Private Sector For the quarter ended March 31, 2012, total revenue in the private sector reportable segment increased by 22%, or $10 million, to $57 million, compared to $47 million for the quarter ended March 31, 2011. Revenue growth from acquired businesses was significant for the three month period as we completed twelve acquisitions since the beginning of 2011 in our private sector segment. It is estimated that acquisitions completed since the beginning of 2011 contributed approximately $7 million to our Q1 2012 revenues. Revenues increased organically by 6% or $3 million in Q1 2012 compared to the same period in 2011. The organic revenue change was primarily driven by the following:Jonas operating group (increase of approximately $3 million for the three months ended March 31, 2012). Jonas' organic growth was driven by strong sales to both existing and new customers primarily in its fitness, construction, and food service verticals. During the quarter, Constellation completed four acquisitions for total net cash consideration of approximately $8 million, and made $1 million in acquisition holdback payments. At March 31, 2012, Constellation's cash position (net of borrowings on our line of credit) increased to $38 million, from $33 million at December 31, 2011. Subsequent to March 31, 2012, the Company completed four acquisitions for aggregate cash consideration of $12 million. "Q1 was a respectable quarter across all metrics. Our businesses generated high rates of return while delivering modest organic growth." commented John Billowits, Chief Financial Officer of Constellation. "As previously noted, it was anticipated that our overall growth will slow in 2012 given the relatively small amount of capital deployed on acquisitions in 2011 and a moderation in the PTS organic revenue growth rate. However, we are optimistic about our acquisition prospects in the short term." Conference Call and Webcast Management will host a conference call at 9:00 a.m. (ET) on Thursday, May 3, 2012 to answer questions regarding the results. The teleconference numbers are 416-340-8061 or 800-396-7098. 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 11:30 a.m. ET the same day until 11:59 p.m. ET on May 17, 2012. To access the replay, please dial 905-694-9451 or 800-408-3053 followed by the passcode 3771898.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 MeasuresThe term "Adjusted EBITDA" refers to net income before adjusting for finance income, finance costs, income taxes, equity in net loss of equity investees, impairment of non-financial assets, depreciation, amortization, and foreign exchange loss (gain). The Company believes that Adjusted EBITDA 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 asset depreciation and the other items listed above. "Adjusted EBITDA margin" refers to the percentage that Adjusted EBITDA for any period represents as a portion of total revenue for that period. "Adjusted net income" means net income plus non-cash expenses (income) such as amortization of intangible assets, deferred income taxes, and certain other non-cash expenses (income). 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, and certain other non-cash expenses (income) incurred by the Company from time to time. "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 EBITDA and Adjusted net income are not recognized measures under IFRS and, accordingly, shareholders are cautioned that Adjusted EBITDA 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 EBITDA and Adjusted net income may differ from other issuers and, accordingly, Adjusted EBITDA and Adjusted net income may not be comparable to similar measures presented by other issuers. See "Results of Operations -Adjusted EBITDA" and "- Adjusted net income" for a reconciliation of Adjusted EBITDA and Adjusted net income to net income. The following table reconciles Adjusted EBITDA to net income: Three months ended March 31,20122011($000, except percentages)Total revenue$195,278$ 177,632Net income13,92462,488Adusted for:Income tax expense (recovery)3,311(50,963)Foreign exchange loss2082,065Equity in net loss of equity investees8820Finance income(1,069)(368)Finance costs1,0181,161Amortization of intangible assets19,27518,525Depreciation1,7182,126Adjusted EBITDA39,26735,034Adjusted EBITDA margin20%20%The following table reconciles Adjusted net income to net income: Three months ended March 31,20122011($000, except percentages)Total revenue$195,278$ 177,632Net income13,92462,488Adusted for:Amortization of intangible assets19,27518,525Deferred income tax recovery(1,492)(53,971)Adjusted net income31,70727,042Adjusted net income margin16%15%The following tables provide supplemental statement of operations and cash flow information for PTS: Supplemental financial information For the three months ended March 31, 2012(Unaudited)Constellation Software Inc. (excluding PTS)PTSConsolidatedRevenue$162,468$32,810$195,278Adjusted EBITDA32,6116,65639,267EBITDA as % Total Revenue20%20%20%Net Income$8,178$5,746$13,924Cash flows from operating activities:Net income$8,178$5,746$13,924Adjustments to reconcile net income to net cash flows from operations, including taxes paid: 21,780 861 22,641Change in non-cash operating working capital(6,536)(17,808)(24,344)Cash flows from operating activities$23,422$(11,201)$12,221The following table reconciles Adjusted EBITDA to net income for PTS:Adjusted EBITDA to net income reconciliation For the three months ended March 31, 2012(Unaudited)Constellation Software Inc. (excluding PTS)PTSConsolidatedTotal revenue $162,468 $32,810 $195,278Net income8,1785,74613,924Adjusted for:Income tax expense2,9143973,311Other expenses (income)6913481,039Amortization of intangible assets19,275-19,275Depreciation1,5531651,718Adjusted EBITDA32,6116,65639,267Adjusted EBITDA margin20%20%20%About Constellation Software Inc.Constellation's common shares are listed on the Toronto Stock Exchange under the symbol "CSU". Constellation Software is an international provider of market leading software and services to a number of industries across both the public and private sectors. The Company acquires, manages and builds vertical market software businesses that provide mission-critical software solutions to address the specific needs of its customers in those industries. CONSTELLATION SOFTWARE INC.Condensed Consolidated Interim Statements of Financial Position (In thousands of U.S. dollars) (Unaudited) March 31, December 31, 2012 2011AssetsCurrent assets:Cash$48,813$33,492Equity securities available-for-sale23,38221,222Accounts receivable103,100100,398Work in progress29,20926,244Inventories15,20513,539Other assets27,70225,633247,411220,528Non-current assets:Property and equipment14,40114,591Deferred income taxes101,63699,659Other assets26,20528,005Intangible assets262,756267,792404,998410,047Total assets$652,409$630,575Liabilities and Shareholders' EquityCurrent liabilities:Bank indebtedness$11,198$-Accounts payable and accrued liabilities80,158114,952Dividends payable21,192-Deferred revenue207,032181,450Provisions3,1623,555Acquired contract liabilities1,4384,750Acquisition holdback payments13,25411,378Income taxes payable7,0584,751344,492320,836Non-current liabilities:Deferred income taxes12,42311,259Acquired contract liabilities29,36528,051Acquisition holdback payments2,7232,474Other liabilities10,72511,67555,23653,459Total liabilities399,728374,295Shareholders' equity:Capital stock99,28399,283Accumulated other comprehensive income10,6306,961Retained earnings142,768150,036252,681256,280Total liabilities and shareholders' equity$652,409$630,575CONSTELLATION SOFTWARE INC.Condensed Consolidated Interim Statements of Comprehensive Income (In thousands of U.S. dollars, except per share amounts) Three months ended March 31, 2012 and 2011 (Unaudited) 20122011(Recast)Revenue$195,278$177,632ExpensesStaff105,63195,919Hardware12,22712,121Third party license, maintenance and professional services14,24612,663Occupancy4,6254,588Travel8,2466,268Telecommunications2,4972,537Supplies3,4324,163Professional fees1,8452,136Other3,2622,203Depreciation1,7182,126Amortization of intangible assets19,27518,525177,004163,249Foreign exchange loss2082,065Equity in net loss of equity investees882-Finance income(1,069)(368)Finance costs1,0181,1611,0392,858Profit before income tax17,23511,525Current income tax expense4,8033,008Deferred income tax recovery(1,492)(53,971)Income tax expense (recovery)3,311(50,963)Net income13,92462,488Net change in fair valueon available-for-sale financialassets during the period3,8483,325Net unrealized foreign exchange adjustment gain on available-for-sale financial assets during the period 121 209Amounts reclassified to profit during the period related to realized gains on available-for-sale investments (1,032 ) (334 )Foreign currency translation differences from foreign operations1,1411,103Current tax expense(78)-Deferred tax expense(331)(480)Other comprehensive income for the period, net of income tax3,6693,823Total comprehensive income for the period$17,593$66,311Earnings per shareBasic and diluted$0.66$2.95CONSTELLATION SOFTWARE INC.Condensed Consolidated Interim Statements of Changes in Equity (In thousands of U.S. dollars) Three months ended March 31, 2012 (Unaudited) Capital stockAccumulated other comprehensive income/(loss)Total accumulated other comprehensive income/(loss)Retained earningsTotalCumulative translation accountAmounts related to gains/losses on available-for-sale financial assetsBalance at January 1, 2012$99,283$182$6,779$6,961$150,036$256,280Total comprehensive income for the periodNet income13,92413,924Other comprehensive income (loss)Net change in fair valueon available-for-sale financialassets during the period3,8483,848-3,848Net unrealized foreign exchange adjustmentgain (loss) on available-for-sale financialassets during the period121121-121Amounts reclassified to profit during the periodrelated to realized gains onavailable-for-sale investments(1,032)(1,032)-(1,032)Foreign currency translation differences from foreign operations1,1411,141-1,141Current tax expense(78)(78)(78)Deferred tax expense(11)(320)(331)-(331)Total other comprehensive income for the period1,0522,6173,669-3,669Total comprehensive income for the period1,0522,6173,66913,92417,593Transactions with owners, recorded directly in equityDividends to owners of the Company(21,192)(21,192)Balance at March 31, 2012$99,283$1,234$9,396$10,630$142,768$252,681CONSTELLATION SOFTWARE INC.Condensed Consolidated Interim Statements of Changes in Equity(In thousands of U.S. dollars)Three months ended March 31, 2011(Unaudited)Capital stockAccumulated other comprehensive income/(loss)Total accumulated other comprehensive income/(loss)Retained earnings (Recast)TotalCumulative translation accountAmounts related to gains/losses on available-for-sale financial assetsBalance at January 1, 2011$99,283$432$7,143$7,575$36,193$143,051Total comprehensive income for the periodNet income62,48862,488Other comprehensive income (loss)Net change in fair valueon available-for-sale financialassets during the period3,3253,325-3,325Net unrealized foreign exchange adjustmentgain (loss) on available-for-sale financialassets during the period209209-209Amounts reclassified to profit during the periodrelated to realized gains onavailable-for-sale investments(334)(334)-(334)Foreign currency translation differences from foreign operations1,103-1,103-1,103Deferred tax expense(480)(480)-(480)Total other comprehensive income (loss) for the period1,1032,7203,823-3,823Total comprehensive income for the period1,1032,7203,82362,48866,311Transactions with owners, recorded directly in equityDividends to owners of the Company(42,384)(42,384)Balance at March 31, 2011$99,283$1,535$9,863$11,398$56,297$166,978CONSTELLATION SOFTWARE INC.Condensed Consolidated Interim Statements of Cash Flows(In thousands of U.S. dollars)Three months ended March 31, 2012 and 2011(Unaudited)20122011(Recast)Cash flows from operating activities:Net income$13,924$62,488Adjustments for:Depreciation1,7182,126Amortization of intangible assets19,27518,525Equity in net earnings of equity investees882-Finance income(1,069)(368)Finance costs1,0181,161Income tax expense (recovery)3,311(50,963)Foreign exchange loss2082,065Change in non-cash operating working capital(24,344)(13,376)Income taxes paid(2,702)(2,379)Net cash flows from operating activities12,22119,279Cash flows from financing activities:Interest paid(336)(887)Increase in other non current liabilities(200)87Increase in bank indebtedness, net13,00038,644Credit facility financing fees(1,840)-Dividends paid-(42,384)Net cash flows from financing activities10,624(4,540)Cash flows from investing activities:Acquisition of businesses, net of cash acquired(7,807)(10,391)Post-acquisition settlement payments, net of receipts(501)(1,052)Purchases of available-for-sale equity securities-(1,249)Proceeds from sale of available-for-sale equity securities1,808643Increase in restricted cash-450Interest received3837Property and equipment purchased(1,290)(2,599)Cash flows provided for (used in) investing activities(7,752)(14,161)Effect of currency translation adjustment on cash and cash equivalents228(1,346)Increase (decrease) in cash and cash equivalents15,321(768)Cash, beginning of period33,49230,911Cash, end of period$48,813$30,143FOR FURTHER INFORMATION PLEASE CONTACT: John BillowitsConstellation Software Inc.Chief Financial Officer(416) 861-2279info@csisoftware.comwww.csisoftware.com