CEO.CA Chairman's Briefing

TORONTO, ONTARIO--(Marketwired - Oct. 26, 2016) - Constellation Software Inc. (TSX:CSU) ("Constellation" or the "Company") today announced its financial results for the third quarter ended September 30, 2016 and declared a $1.00 per share dividend payable on January 5, 2017 to all common shareholders of record at close of business on December 16, 2016. 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 and nine months ended September 30, 2016 and the accompanying notes, our Management's Discussion and Analysis for the three and nine months ended September 30, 2016, 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, 2015, 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.

Q3 2016 Headlines:

• Revenue grew 19% (4% organic growth, 5% after adjusting for changes in foreign exchange rates) to $546 million compared to $460 million in Q3 2015. 
• Adjusted EBITA increased $20 million or 17% to $140 million as compared to $120 million in Q3 2015. 
• Adjusted Net Income increased 22% to $121 million ($5.70 on a diluted per share basis) from $99 million ($4.67 on a diluted per share basis) in Q3 2015.
• Net income increased 48% to $68 million ($3.18 on a diluted per share basis) from $46 million ($2.16 on a diluted per share basis) in Q3 2015.
• Fifteen acquisitions were completed for aggregate cash consideration of $42 million (which includes acquired cash). Deferred payments associated with these acquisitions have an estimated value of $8 million.
• Cash flows from operations were $138 million, an increase of 31%, or $33 million, compared to $105 million for the comparable period in 2015.

Third quarter 2016 revenue was $546 million, an increase of 19%, or $85 million, compared to $460 million for the comparable period in 2015. For the first nine months of 2016 total revenues were $1,561 million, an increase of 18%, or $235 million, compared to $1,327 million for the comparable period in 2015. The increase for both the three and nine month periods ended September 30, 2016 compared to the same periods in the prior year is mainly attributable to growth from acquisitions as the Company experienced organic growth of 4% and 1% respectively, 5% and 3% respectively after adjusting for the impact of the net appreciation of the US dollar against most major currencies in which the Company transacts business. 

Adjusted EBITA for the third quarter of 2016 was $140 million, a 17% increase compared to the prior year's third quarter Adjusted EBITA of $120 million. Third quarter 2016 Adjusted EBITA per share on a diluted basis increased 17% to $6.63, compared to $5.68 for the same period last year. Adjusted EBITA for the nine month period ended September 30, 2016 was $379 million, a 21% increase over last year's Adjusted EBITA of $313 million for the same period. Adjusted EBITA per share on a diluted basis for the nine month period ended September 30, 2016 increased 21% to $17.87, compared to $14.76 for the same period last year.

Adjusted Net Income for the third quarter of 2016 was $121 million, compared to the prior year's third quarter Adjusted Net Income of $99 million, a 22% increase. Third quarter 2016 Adjusted Net Income per share on a diluted basis increased 22% to $5.70 compared to $4.67 for the prior year's third quarter. Adjusted Net Income for the nine month period ended September 30, 2016 was $273 million, an increase of 8% over last year's Adjusted Net Income of $253 million. Adjusted Net Income per share on a diluted basis for the nine month period ended September 30, 2016 increased 8% to $12.89, compared to $11.95 for the same period in 2015. Adjusted net income margin was 22% for the quarter ended September 30, 2016 and 21% for the same period in 2015. Adjusted net income margin was 17% in the first nine months of 2016 and 19% for the same period in 2015.

Net income for the third quarter 2016 was $68 million, an increase of 48% over the prior year's third quarter net income of $46 million. Net income per share on a diluted per share basis for the third quarter of 2016 increased 48% to $3.18, compared to $2.16 for the same period of 2015. Net income for the nine month period ended September 30, 2016 was $141 million, an increase of 27% over net income of $111 million for the same period in 2015. Net income per share on a diluted basis for the nine month period ended September 30, 2016 increased 27% to $6.66, compared to $5.25 for the same period in 2015.

Cash flows from operations for the third quarter of 2016 were $138 million, an increase of 31%, or $33 million, compared to $105 million for the comparable period in 2015. For the first nine months of 2016 cash flows from operations were $357 million, an increase of 27%, or $75 million, compared to $282 million for the comparable period in 2015.

The following table displays our revenue by reportable segment and the percentage change for the three and nine months ended September 30, 2016 compared to the same periods in 2015:

Public Sector

For the quarter ended September 30, 2016, total revenue in the public sector reportable segment increased by 16%, or $51 million to $368 million, compared to $318 million for the quarter ended September 30, 2015. For the nine months ended September 30, 2016, total revenue increased by 14%, or $125 million to $1,045 million, compared to $919 million for the comparable period in 2015. For purposes of calculating organic growth, pre-acquisition revenues included from the 37 companies acquired since the beginning of 2015 were $39 million and $117 million for the three and nine month periods ended September 30, 2015, respectively. Organic revenue growth was 4% and 1% respectively for the three and nine months ended September 30, 2016 compared to the same periods in 2015, and 5% and 2% respectively after adjusting for the impact of the net appreciation of the US dollar against most major currencies in which the Company transacts business. 

Private Sector

For the quarter ended September 30, 2016, total revenue in the private sector reportable segment increased 24%, or $35 million to $178 million, compared to $143 million for the quarter ended September 30, 2015. For the nine months ended September 30, 2016 total revenue increased by 27%, or $109 million to $517 million, compared to $408 million for the comparable period in 2015. For purposes of calculating organic growth, pre-acquisition revenues included from the 25 companies acquired since the beginning of 2015 were $30 million and $100 million for the three and nine month periods ended September 30, 2015, respectively. Organic revenue growth was 2% and 1% respectively for the three and nine months ended September 30, 2016 compared to the same periods in 2015, and 4% and 3% respectively after adjusting for the impact of the net appreciation of the US dollar against most major currencies in which the Company transacts business.

Conference Call and Webcast

Management will host a conference call at 7:30 a.m. (ET) on Thursday, October 27, 2016 to answer questions regarding the results. The teleconference numbers are 416-340-2218 or 866-223-7781. 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 November 10, 2016. To access the replay, please dial 905-694-9451 or 800-408-3053 followed by the passcode 7796883.

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

The term "Adjusted EBITA" refers to net income before adjusting for finance and other income, bargain purchase gain, finance costs, income taxes, share in net income or loss of equity investees, impairment of non-financial assets, amortization, TSS membership liability revaluation charge, and foreign exchange gain or loss. The Company believes that Adjusted EBITA 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 intangible asset amortization and the other items listed above. "Adjusted EBITA margin" refers to the percentage that Adjusted EBITA for any period represents as a portion of total revenue for that period. Previously the Company has reported "Adjusted EBITDA" in certain financial disclosures, but has determined that Adjusted EBITA is a more meaningful measure going forward. Adjusted EBITDA refers to Adjusted EBITA as defined above then further excludes depreciation. The Company uses depreciation as a proxy for the cash flows used to purchase property and equipment required to support the Company's main business activities. As such, the Company believes Adjusted EBITA is a more useful measure then Adjusted EBITDA.

"Adjusted net income" means net income adjusted for non-cash expenses (income) such as amortization of intangible assets, deferred income taxes, the TSS membership liability revaluation charge, and certain other expenses (income), and excludes the portion of the adjusted net income of Total Specific Solutions (TSS) B.V. ("TSS") attributable to the minority owners of TSS. 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, the TSS membership liability revaluation charge, and certain other non-cash expenses (income) incurred or recognized by the Company from time to time, and adjusts for the portion of TSS' Adjusted net income not attributable to shareholders of Constellation. "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 EBITA and Adjusted net income are not recognized measures under IFRS and, accordingly, readers are cautioned that Adjusted EBITA 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 EBITA and Adjusted net income may differ from other issuers and, accordingly, Adjusted EBITA and Adjusted net income may not be comparable to similar measures presented by other issuers. Adjusted EBITA includes 100% of the Adjusted EBITA of TSS.

The following table reconciles Adjusted EBITA to net income:

The following table reconciles Adjusted net income to net income:

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.