TORONTO, May 9 /CNW/ - Constellation Software Inc. (TSX: CSU) ("Constellation" or the "Company") today announced its financial results for the first quarter ended March 31, 2007. Please note that all dollar amounts referred to in this press release are U.S. Dollars unless otherwise stated.
Q1 2007 Year over Year Results:
- Revenue up 9% - Adjusted EBITDA up 16% - Adjusted Net Income up 38% (to $0.33 on a per share basis) - Completed three acquisitions
Q1 2007 Results
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First quarter revenue increased 9% to $55.9 million compared to $51.2 million reported in the same period last year. Revenue per share on a fully diluted basis increased 7% compared to the prior year's first quarter.
"During the first quarter, we produced reasonable levels of profitability and late in the quarter we closed one of the largest acquisitions in our history. We had organic revenue contraction of approximately 1% but it was masked by 10% acquired growth," said Mark Leonard, President of Constellation. "Several of our private sector businesses that are related to the housing sector are experiencing shrinking revenues or are growing more slowly than previously. We also saw revenues decline in our Trapeze operating group during Q1. Despite our lower short-term performance, we continue to believe that we will achieve the 20% revenue growth per share that we targeted in our 2006-2010 objectives."
Adjusted EBITDA for the first quarter increased 16% to $8.4 million compared to the prior year's first quarter Adjusted EBITDA of $7.2 million. First quarter Adjusted EBITDA per share on a fully diluted basis increased 14% compared to the prior year's first quarter.
First quarter Adjusted Net Income increased 38% to $7.0 million ($0.33 on a per share basis) over the prior year's first quarter Adjusted Net Income of $5.1 million ($0.25 on a per share basis). First quarter Adjusted Net Income per share on a fully diluted basis increased 35% compared to the prior year's first quarter.
Net income for the first quarter was $2.6 million compared to the prior year's first quarter net loss of $8.7 million. On a fully diluted per share basis, this translates into net income per share of $0.12 for the first quarter of 2007, compared to a net loss of $0.43 in the same period of 2006. As previously noted, the reason for the net loss in the first quarter of 2006 was the $10.1 million charge to net income caused by the appreciation in common shares eligible for redemption ("ACSER"). ACSER was a non-cash expense which occurred during the first quarter of 2006 and will not be repeated now that we have completed our initial public offering.
During the quarter, Constellation made three acquisitions for total net cash consideration of approximately $14.6 million. Included in the $14.6 million are payments related to holdbacks from prior acquisitions. At March 31, 2007, the Company had cash, restricted cash and marketable securities of $13.4 million, down from $30.0 million as of December 31, 2006. The Company continues to seek further organic growth opportunities and acquisitions.
Conference Call and Webcast
Management will host a conference call at 8:30 a.m. (ET) on Thursday, May 10, 2007 to discuss the Company's operating results. The teleconference numbers are 416-644-3425 or 1-800-590-1817. The call will also be webcast live and archived on Constellation's web site at www.csisoftware.com.
A taped rebroadcast will be available to listeners following the call until 12 a.m. on May 17, 2007. To access the rebroadcast, please dial 416-640-1917 or 1-877-289-8525 and quote the passcode 21228878, followed by the number sign.
Annual General Meeting
The Annual General Meeting of shareholders will be held at 10 a.m. (ET) on Thursday, May 10, 2007 at McCarthy Tetrault's office located at the Dominion Centre, Suite 4700 in Toronto, Ontario. Following the formal meeting, management will provide a brief presentation and take questions from the audience.
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. These statements reflect current assumptions and expectations regarding future events and operating performance and speak only as of the date hereof. 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 are made as of the date hereof and Constellation assumes no obligation to update any forward looking statements to reflect new events or circumstances.
Non-GAAP Measures
The term "Adjusted EBITDA" refers to net income before deducting interest, taxes, depreciation, amortization, appreciation in common shares eligible for redemption, other expenses and foreign exchange, and before including gain on sale of short-term investments, marketable securities and other assets. Constellation 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. The term "Adjusted Net Income" means net income plus appreciation in common shares eligible for redemption and amortization of intangible assets. 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 appreciation in common shares eligible for redemption (which will no longer be included in net income for periods following the closing of our IPO) and prior to taking into consideration amortization of intangibles as these are non-cash expenses that do not necessarily reflect the economic value of our acquisitions.
Adjusted EBITDA and Adjusted Net Income are not recognized measures under GAAP 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 GAAP as an indicator of the financial performance of the Company or as a measure of the Company's liquidity and cash flows. 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.
The following table reconciles Adjusted EBITDA to net income:
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Three months ended
Mar. 31,
--------------------------
2007 2006
($000, except percentages)
Total revenue 55,893 51,220
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Net income (loss) 2,602 (8,656)
Add back:
Income tax expense 1,003 415
Foreign exchange loss 7 263
Interest expense (income) (115) (59)
Gain on sale of short-term investments,
marketable securities and other assets (234) (8)
Other expenses 0 884
Appreciation in common shares eligible for
redemption 0 10,093
Amortization of intangible assets 4,434 3,661
Depreciation 692 636
Adjusted EBITDA 8,389 7,229
Adjusted EBITDA margin 15.0% 14.1%
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The following table reconciles Adjusted net income to net income:
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Three months ended
Mar. 31,
--------------------------
2007 2006
($000, except percentages)
Total revenue 55,893 51,220
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--------------------------
Net income (loss) 2,602 (8,656)
Add back:
Appreciation in common shares eligible
for redemption 0 10,093
Amortization of intangible assets 4,434 3,661
Adjusted net income 7,036 5,098
Adjusted net income margin 12.6% 10.0%
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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.
Interim Consolidated Balance Sheets
(In thousands of U.S. dollars)
-------------------------------------------------------------------------
March 31, December 31,
2007 2006
-------------------------------------------------------------------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 9,808 $ 25,807
Restricted cash - 858
Short-term investments and marketable
securities
- available for sale 3,587 3,320
Accounts receivable 42,673 32,655
Work in progress 13,168 13,189
Inventory 1,594 1,434
Prepaid expenses and other current assets 10,521 4,787
Future income taxes 1,914 1,153
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83,265 83,203
Property and equipment 8,855 6,385
Future income taxes 2,600 3,429
Other long-term assets 895 585
Goodwill 28,752 26,886
Intangible assets 81,991 66,085
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$ 206,358 $ 186,573
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Liabilities and Shareholders' Equity
Current liabilities:
Bank indebtedness $ 2,422 $ -
Accounts payable and accrued liabilities 32,262 37,024
Acquisition holdback payments 8,716 4,797
Deferred revenue 69,405 56,190
Income taxes payable 3,965 1,063
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116,770 99,074
Future income taxes 8,985 8,048
Acquisition holdback payments 231 231
Other long-term liabilities 956 404
Shareholders' equity:
Capital stock 99,283 99,283
Shareholder loans (1,790) (2,135)
Accumulated other comprehensive income (2,320) (3,152)
Deficit (15,757) (15,180)
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79,416 78,816
Subsequent event
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$ 206,358 $ 186,573
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CONSTELLATION SOFTWARE INC.
Interim Consolidated Statements of Operations
(In thousands of U.S. dollars, except per share amounts)
-------------------------------------------------------------------------
Three months ended
March 31,
2007 2006
-------------------------------------------------------------------------
(Unaudited)
Revenue $ 55,893 $ 51,220
Cost of revenue 21,516 20,338
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34,377 30,882
Research and development 8,910 8,192
Sales and marketing 7,042 6,408
General and administration 10,036 9,053
Depreciation 692 636
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26,680 24,289
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Income before the undernoted 7,697 6,593
Appreciation in common shares eligible for
redemption - 10,093
Amortization of intangible assets 4,434 3,661
Other expenses - 884
Gain on sale of short-term investments,
marketable securities and other assets (234) (8)
Interest expense (income) (115) (59)
Foreign exchange loss 7 263
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Income (loss) before income taxes 3,605 (8,241)
Income taxes (recovery):
Current 1,157 710
Future (154) (295)
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1,003 415
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Net income (loss) $ 2,602 $ (8,656)
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Income (loss) per share:
Basic $ 0.12 $ (0.43)
Diluted 0.12 (0.43)
Weighted average number of shares outstanding:
Outstanding (in thousands):
Basic 21,093 20,232
Diluted 21,192 20,232
Outstanding at the end of the period 21,192 21,036
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CONSTELLATION SOFTWARE INC.
Interim Consolidated Statements of Cash Flows
(In thousands of U.S. dollars)
-------------------------------------------------------------------------
Three months ended
March 31,
2007 2006
-------------------------------------------------------------------------
(Unaudited)
Cash flows from operating activities:
Net income (loss) $ 2,602 $ (8,656)
Adjustments to reconcile net income to
net cash flows from operations:
Depreciation 692 636
Amortization of intangible assets 4,434 3,661
Loss on appreciation of common shares
eligible for redemption - 10,093
Deferred compensation - 400
Future income taxes (154) (295)
Gain on sale of short-term investments,
marketable securities and other assets (234) (8)
Unrealized exchange loss (gain) (16) 243
Change in non-cash operating working capital (8,922) (6,971)
-----------------------------------------------------------------------
Cash flows from (used) in operating activities (1,598) (897)
Cash flows from financing activities:
Increase (decrease) in long-term liabilities (230) 4
Increase in bank indebtedness 2,422 1,100
Dividends (3,179) (1,381)
Distributions to common shares eligible
for redemption - (471)
Issue of common shares eligible for
redemption, net of shareholder loans - 2,899
Redemption of common shares eligible for
redemption - (14)
Issuance of shareholder loans (447) -
Repayment of shareholder loans 792 1,910
Return of capital - (637)
-----------------------------------------------------------------------
Cash flows from (used in) financing
activities (642) 3,410
Cash flows from investing activities:
Acquisition of businesses, net of cash
acquired (14,617) (3,433)
Reduction (increase) to short-term
investments, marketable securities and
other assets 801 (1,156)
Decrease in restricted cash 858 -
Decrease (increase) in other assets (310) 19
Property and equipment purchased (517) (687)
-----------------------------------------------------------------------
Cash flows from (used) in investing
activities (13,785) (5,257)
Effect of currency translation adjustment on
cash and cash equivalents 26 (193)
-------------------------------------------------------------------------
Increase (decrease) in cash and cash
equivalents (15,999) (2,937)
Cash and cash equivalents, beginning of period 25,807 18,285
-------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 9,808 $ 15,348
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