Mr. Jamal Baksh reports
CONSTELLATION SOFTWARE INC. ANNOUNCES RESULTS FOR THE FOURTH QUARTER AND YEAR ENDED DECEMBER 31, 2019 AND DECLARES QUARTERLY DIVIDEND
Constellation Software Inc. has released its financial results for the fourth quarter and year ended Dec. 31, 2019, and declared a $1-per-share dividend payable on April 7, 2020, to all common shareholders of record at close of business on March 16, 2020. 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 news release are in U.S. dollars unless otherwise stated.
This news release should be read in conjunction with the company's annual consolidated financial statements, prepared in accordance with international financial reporting standards (IFRS), and its annual management's discussion and analysis (MD&A) for the year ended Dec. 31, 2019, which can be found on SEDAR and on the company's website. Additional information about the company is also available on SEDAR.
Q4 2019 headlines:
- Revenue grew 15 per cent (negative 3-per-cent organic growth, negative 2 per cent after adjusting for changes in foreign exchange rates) to $956-million, compared with $831-million in Q4 2018.
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Net income decreased 49 per cent to $92-million ($4.34 on a diluted per share basis) from $179-million ($8.46 on a diluted per share basis) in Q4 2018. Excluding the amortization of intangible assets expense and bargain purchase gains net income decreased 1 per cent.
- A number of acquisitions were completed for aggregate cash consideration of $141-million (which includes acquired cash). Deferred payments associated with these acquisitions have an estimated value of $33-million resulting in total consideration of $175-million.
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Cash flows from operations (CFO) (after adjusting for the impact of IFRS 16, Leases, which was adopted on Jan. 1, 2019) were $236-million, an increase of 13 per cent, or $28-million, compared with $208-million for the comparable period in 2018.
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Free cash flow available to shareholders (FCFAS) increased $14-million to $193-million, compared with $180-million for the same period in 2018, representing an increase of 8 per cent.
- Subsequent to Dec. 31, 2019, the company completed or entered into agreements to acquire a number of businesses for aggregate cash consideration of $63-million (which includes acquired cash). Deferred payments associated with these acquisitions have an estimated value of $42-million resulting in total consideration of $104-million.
2019 headlines:
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Revenue grew 14 per cent (negative 1-per-cent organic growth, positive 1 per cent after adjusting for changes in foreign exchange rates) to $3.49-billion, compared with $3.06-billion in 2018.
- Net income decreased 12 per cent to $333-million ($15.73 on a diluted per share basis) from $379-million ($17.91 on a diluted per share basis) in 2018. Excluding the amortization of intangible assets expense and bargain purchase gains, net income increased 5 per cent.
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A number of acquisitions were completed for aggregate cash consideration of $549-million (which includes acquired cash). Deferred payments associated with these acquisitions have an estimated value of $139-million, resulting in total consideration of $688-million.
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Cash flows from operations (CFO) (after adjusting for the impact of IFRS 16, Leases, which was adopted on Jan. 1, 2019) were $708-million, an increase of 7 per cent, or $46-million, compared with $662-million for the comparable period in 2018.
- Free cash flow available to shareholders (FCFAS) increased $32-million to $590-million, compared with $559-million for the same period in 2018, representing an increase of 6 per cent.
Total revenue for the quarter ended Dec. 31, 2019, was $956-million, an increase of 15 per cent, or $125-million, compared with $831-million for the comparable period in 2018. For the year ended Dec. 31, 2019, total revenues were $3.49-billion, an increase of 14 per cent, or $430-million, compared with $3.06-billion for the comparable period in 2018. The increase for both the three- and 12-month periods compared with the same periods in the prior year is primarily attributable to growth from acquisitions as the company experienced organic growth of negative 3 per cent and negative 1 per cent, respectively, negative 2 per cent and positive 1 per cent after adjusting for the impact of changes in the valuation of the U.S. dollar against most major currencies in which the company transacts business.
Net income for the quarter ended Dec. 31, 2019, was $92-million compared with net income of $179-million for the same period in 2018. On a per-share basis, this translated into a net income per diluted share of $4.34 in the quarter ended Dec. 31, 2019, compared with net income per diluted share of $8.46 for the same period in 2018. For the year ended Dec. 31, 2019, net income was $333-million or $15.73 per diluted share compared with $379-million or $17.91 per diluted share for the same period in 2018.
For the quarter ended Dec. 31, 2019, CFO increased $46-million to $255-million, compared with $208-million for the same period in 2018, representing an increase of 22 per cent. For the year ended Dec. 31, 2019, CFO increased $105-million to $767-million, compared with $662-million during the same period in 2018, representing an increase of 16 per cent. In conjunction with the company's adoption of IFRS 16 on Jan. 1, 2019, lease obligation and interest payments that have historically been deducted from CFO are now recorded as a component of cash flows used in financing activities. For the three and 12 months ended Dec. 31, 2019, lease obligation and interest payments totalled $19-million and $59-million, respectively. If lease obligation and interest payments were deducted from CFO for the three and 12 months ended Dec. 31, 2019, the increase in CFO would have been 13 per cent and 7 per cent over the same periods in 2018.
For the quarter ended Dec. 31, 2019, FCFAS increased $14-million to $193-million, compared with $180-million for the same period in 2018, representing an increase of 8 per cent. For the year ended Dec. 31, 2019, FCFAS increased $32-million to $590-million, compared with $559-million during the same period in 2018, representing an increase of 6 per cent. The primary reason for the large variance between the 6-per-cent growth in FCFAS and the 14-per-cent revenue growth for the year ended Dec. 31, 2019, is that FCFAS includes the impact of changes in non-cash operating assets and liabilities, exclusive of effects of business combinations or changes in non-cash operating working capital. For the year ended Dec. 31, 2019, there was $28-million of cash used in non-cash operating working capital, compared with $14-million of cash generated from non-cash operating working capital for the same period in 2018.
About Constellation Software Inc.
Constellation acquires, manages and builds vertical market software businesses.
CONSOLIDATED STATEMENTS OF INCOME
(in millions of U.S. dollars, except per-share amounts)
Years ended Dec. 31,
2019 2018
Revenue
Licence $ 226 $ 198
Professional services 673 616
Hardware and other 173 175
Maintenance and other recurring 2,417 2,072
3,490 3,060
Expenses
Staff 1,797 1,565
Hardware 101 96
Third party licence, maintenance and professional services 300 265
Occupancy 35 78
Travel, telecommunications, supplies, software and equipment 201 181
Professional fees 49 39
Other, net 73 52
Depreciation 92 27
Amortization of intangible assets 331 279
2,979 2,582
Foreign exchange loss (gain) 11 (3)
TSS membership liability revaluation charge 52 55
Finance and other expense (income) (4) (17)
Bargain purchase gain (45) (69)
Finance costs 42 26
55 (8)
Income before income taxes 456 486
Current income tax expense (recovery) 164 127
Deferred income tax expense (recovery) (41) (20)
Income tax expense (recovery) 123 106
Net income 333 379
Earnings per share
Basic and diluted $ 15.73 $ 17.91
We seek Safe Harbor.
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