TORONTO, Aug. 9 /CNW/ - Constellation Software Inc. (TSX:CSU)
("Constellation" or the "Company") today announced its unaudited second
quarter and six month financial results for the periods ended June 30, 2006.
Second quarter revenue was $52.2 million, an increase of 28% compared to
$40.7 million reported in the same period last year. Second quarter revenue
per share on a fully diluted basis increased 23% compared to the prior year's
second quarter. For the first six months total revenues were $103.4 million,
representing an increase of 32% over the same period last year. The increase
for both the second quarter and six-month periods were due to a combination of
strong organic growth from our existing businesses, estimated at approximately
12% for the second quarter and 14% for the six months, with the remaining 16%
growth for the second quarter and 18% for the six months being attributed to
acquisitions completed in the relevant periods.
Adjusted EBITDA for the second quarter was $7.3 million, a 40% increase
compared to the prior year's second quarter Adjusted EBITDA of $5.2 million.
Second quarter Adjusted EBITDA per share on a fully diluted basis increased
35% compared to the prior year's second quarter. For the first six months
Adjusted EBITDA was $14.5 million, representing an increase of 48% over the
same period last year.
Adjusted Net Income for the second quarter was $5.1 million compared to
the prior year's second quarter Adjusted Net Income of $4.1 million, a 25%
increase. Adjusted Net Income in the quarter was negatively impacted by the
appreciation of the Canadian Dollar. If the currency had remained stable at Q2
2005 levels, management estimates that quarterly Adjusted Net Income would
have been approximately $0.5 million higher. Second quarter Adjusted Net
Income per share on a fully diluted basis increased 20% compared to the prior
year's second quarter. For the first six months Adjusted Net Income was $10.2
million, representing an increase of 29% over the same period last year.
Net income for the second quarter was $1.3 million compared to the prior
year's second quarter net loss of $3.5 million. On a fully diluted per share
basis this translates into a net income per share of $0.06 for the second
quarter of 2006 compared to a net loss per fully diluted share of $0.17 in the
same period of 2005. For the first six months Constellation incurred a net
loss of $7.4 million or $0.36 per diluted share. As noted in our first quarter
earnings release, the reason for the net loss is the $10.1 million charge to
net income, recorded in Q1, with respect to appreciation in common shares
eligible for redemption, an expense that will no longer occur past Q1 2006.
"During the quarter we delivered good results and progress across a
number of financial metrics," said Mark Leonard, President of Constellation.
"While our year over year growth rates slowed vs. Q1, this was to be expected
as we had a tougher comparable period in Q2 given our stronger Q2 in 2005 vs
Q1 2005. Also, it should be noted that both our revenue growth per share and
Adjusted EBITDA growth per share rates during the quarter exceeded our five
year objective of 20% per annum average growth. In the future, we expect these
growth rates to continue to trend closer to the five year average targets."
During the quarter Constellation made two acquisitions for cash
consideration of $10.3 million. At June 30, 2006 the Company had cash and
marketable securities net of bank debt of $10.4 million, decreasing from $16.3
million as of March 31, 2006. The Company continues to seek further organic
growth opportunities and acquisitions.
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.
About Constellation
Constellation acquires, manages and builds vertical market software
businesses that provide mission critical software solutions. Constellation's
common shares are listed on the Toronto Stock Exchange under the symbol "CSU".
Further information about Constellation may be obtained from the Company's web
site at www.csisoftware.com.
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CONSTELLATION SOFTWARE INC.
Consolidated Balance Sheets
(In thousands of U.S. dollars)
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June 30, December 31,
2006 2005
(unaudited)
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Assets
Current assets:
Cash and cash equivalents $ 10,549 $ 18,285
Short-term investments (note 2) 2,410 932
Accounts receivable 28,766 27,655
Work in progress 13,920 11,535
Inventory 1,750 528
Prepaid expenses and other current assets 4,467 3,992
Future income taxes 2,587 2,359
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64,449 65,286
Capital assets 7,121 6,446
Future income taxes 2,617 3,986
Other long-term assets 633 787
Goodwill 23,720 23,720
Intangible assets (note 4) 67,830 58,258
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$ 166,370 $ 158,483
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Liabilities and Shareholders' Equity
Current liabilities:
Bank indebtedness (note 5) $ 2,600 $ -
Accounts payable and accrued liabilities 33,430 34,653
Deferred revenue 47,779 44,939
Deferred compensation (note 9) - 237
Income taxes payable 1,851 1,276
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85,660 81,105
Future income taxes 7,284 9,267
Other long term liabilities 1,555 1,464
Deferred compensation (note 9) - 1,020
Common shares eligible for redemption (note 6a) - 24,182
Shareholders' equity:
Capital stock (note 6a) 99,283 57,220
Shareholder loans (2,961) -
Cumulative translation adjustment (3,152) (3,152)
Deficit (21,299) (12,623)
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71,871 41,445
Subsequent events (note 12)
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$ 166,370 $ 158,483
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See accompanying notes to the unaudited interim consolidated financial
statements
CONSTELLATION SOFTWARE INC.
Consolidated Statements of Operations
(In thousands of U.S. dollars, except share and per share amounts)
Unaudited
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Three months ended Six months ended
June 30, June 30,
------------------ ------------------
2006 2005 2006 2005
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Revenue 52,211 40,700 103,431 78,163
Cost of revenue 20,276 16,021 40,614 30,748
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31,935 24,679 62,817 47,415
Research and development 8,196 6,287 16,388 12,553
Sales and marketing 6,739 5,739 13,147 10,628
General and administration 9,701 7,441 18,754 14,420
Amortization of capital assets 727 614 1,363 1,168
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25,363 20,081 49,652 38,769
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Income before the undernoted 6,572 4,598 13,165 8,646
Appreciation in common shares
eligible for redemption
(note 6(b)) - 4,528 10,093 4,528
Amortization of intangible
assets 3,796 3,017 7,457 5,739
Other expenses 1,087 232 1,970 233
Gain on sale of short-term
investments, marketable
securities and other assets - (440) (8) (671)
Interest income, net (25) (121) (84) (381)
Foreign exchange (gain) loss (189) 272 74 296
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Income (loss) before income
taxes 1,903 (2,890) (6,337) (1,098)
Income tax expense (recovery)
(note 7):
Current 1,290 484 2,000 1,077
Future (688) 82 (982) 194
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602 566 1,018 1,271
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Net income (loss) 1,301 (3,456) (7,355) (2,369)
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Net income (loss) per share
(note 8):
Basic 0.06 (0.17) (0.36) (0.12)
Diluted 0.06 (0.17) (0.36) (0.12)
Weighted average number of
shares Outstanding
(in thousands) (note 8):
Basic 20,914 19,820 20,574 19,784
Diluted 21,127 20,296 20,935 20,295
Outstanding at the end of the
period 21,192 20,281 21,192 20,281
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See accompanying notes to the unaudited interim consolidated financial
statements.
CONSTELLATION SOFTWARE INC.
Consolidated Statements of Cash Flows
(In thousands of U.S. dollars)
Unaudited
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Three months ended Six months ended
June 30, June 30,
------------------ ------------------
2006 2005 2006 2005
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Cash flows from operating
activities:
Net income (loss) $ 1,301 $ (3,456) $ (7,355) $ (2,369)
Adjustments to reconcile
net income to net cash
flows from operations:
Amortization of capital
assets 727 614 1,363 1,168
Amortization of intangible
assets 3,796 3,017 7,457 5,739
Loss on common shares
eligible for redemption - 4,528 10,093 4,528
Deferred compensation - 232 400 232
Future income taxes (688) 83 (982) 194
Gain on sale of short
term investments and
marketable securities - (440) (8) (671)
Unrealized exchange loss
(gain) (481) 272 (238) 296
Change in non-cash operating
working capital (note 11) 148 (1,845) (6,821) 1,270
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Cash flows from operating
activities 4,803 3,005 3,909 10,387
Cash flows from (used in)
financing activities:
Increase (decrease) in long
term liabilities 13 (18) 16 (83)
Increase (decrease) in bank
debt 1,500 - 2,600 -
Dividends - (1,150) (1,381) (1,150)
Distributions to common
shares eligible for
redemption - (346) (471) (346)
Issue of common shares
eligible for redemption 906 5 3,805 197
Redemption of common shares
eligible for redemption (6) (136) (20) (201)
Repayment of shareholder
loans 302 682 2,212 769
Repurchase of phantom
shares (note 9) (1,657) - (1,657) -
Return of capital - (531) (637) (531)
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Cash flows from (used in)
financing activities 1,058 (1,494) 4,467 (1,345)
Cash flows from (used in)
investing activities:
Acquisition of businesses,
net of cash acquired
(note 3) (10,293) (2,254) (13,727) (15,208)
Additions (reductions) to
short-term investments,
marketable securities and
other assets (313) 1,291 (1,478) 2,124
Other assets 135 - 161 -
Capital asset purchases (822) (943) (1,509) (1,854)
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Cash flows used in investing
activities (11,293) (1,906) (16,553) (14,938)
Effect of currency translation
adjustment on cash and cash
equivalents 633 (391) 441 (400)
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Decrease in cash and cash
equivalents (4,799) (786) (7,736) (6,296)
Cash and cash equivalents,
beginning of period 15,348 19,935 18,285 25,445
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Cash and cash equivalents,
end of period $ 10,549 $ 19,149 $ 10,549 $ 19,149
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See accompanying notes to the unaudited interim consolidated financial
statements.
Constellation Software Inc. (TSX:CSU)
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