TORONTO, Nov. 8 /CNW Telbec/ - Constellation Software Inc. (TSX:CSU)
("Constellation" or the "Company") today announced its unaudited financial
results for the third quarter and nine months ended September 30, 2006. Note
all dollar amounts referred to in this press release are U.S. Dollars unless
otherwise stated.
Third quarter revenue was $53.8 million, an increase of 26%, compared to
$43.0 million reported in the same period last year. Third quarter revenue per
share on a fully diluted basis increased 22%, compared to the prior year's
third quarter. Total revenue for the current nine month period was
$157.0 million, an increase of 30% over last year. Revenue per share on a
fully diluted basis for the current nine month period increased 26% compared
to 2005.
Adjusted EBITDA for the third quarter was $7.9 million, a 12% increase
compared to the prior year's third quarter Adjusted EBITDA of $7.1 million.
Third quarter Adjusted EBITDA per share on a fully diluted basis increased 8%,
compared to the prior year's third quarter. Adjusted EBITDA for the current
nine month period was $22.5 million, an increase of 33% over last year.
Adjusted EBITDA per share on a fully diluted basis for the current nine month
period increased 29% compared to 2005.
Adjusted Net Income for the third quarter was $6.8 million, compared to
the prior year's third quarter Adjusted Net Income of $5.2 million, a 31%
increase. Third quarter Adjusted Net Income per share on a fully diluted basis
increased 26% compared to the prior year's third quarter. Adjusted Net Income
for the current nine month period was $17.0 million, an increase of 30% over
last year. Adjusted Net Income per share on a fully diluted basis for the
current nine month period increased 26% compared to 2005.
Net income for the third quarter was $2.3 million compared to the prior
year's third quarter net income of $2.1 million. On a fully diluted per share
basis, this translates into net income per share of $0.11 for the third
quarter of 2006, compared to a net income per fully diluted share of $0.10 in
the same period of 2005. For the first nine months we incurred a net loss of
$5.1 million or $0.24 per diluted share. As noted in our Q1 earnings release
the reason for the net loss is the $10.1 million charge to net income,
recorded in Q1, caused by the appreciation in common shares eligible for
redemption, an expense that will no longer be incurred after Q1 2006.
"We are reasonably pleased with the progress we made in the quarter,"
said Mark Leonard, President of Constellation. "While our year over year
revenue growth rate per share continued to track above our five year objective
of 20% per year, the growth in Adjusted EBITDA per share was considerably
weaker at 8%. The drop off in growth on the Adjusted EBITDA line is a
reflection of the unusually strong license sales that we had in Q3 2005 which
drove our Adjusted EBITDA margins in the third quarter of 2005 to the 17%
range. We continue to believe that our five year 20% growth objectives, for
both revenue per share growth and Adjusted EBITDA per share growth, are
achievable."
During the quarter Constellation made one acquisition for total
consideration of $2.5 million. At September 30, 2006 the Company had cash and
marketable securities of $19.8 million, up from $10.4 million (net of bank
debt) as of June 30, 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,
November 9, 2006 to discuss the results. The teleconference numbers are
416-644-3432 or 1-866-250-4910. 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 November 16, 2006. To access the rebroadcast, please dial
416-640-1917 or 1-877-289-8525 and quote the passcode 21207270 followed by the
number sign.
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:
--------------------- ---------------------
Three months ended Nine months ended
Sept. 30, Sept. 30,
--------------------- ---------------------
2006 2005 2006 2005
($000, except ($000, except
percentages) percentages)
Total revenue 53,809 42,648 157,240 120,810
--------------------- ---------------------
--------------------- ---------------------
Net income (loss) 2,287 2,075 (5,068) (294)
Add back:
Income tax expense 543 1,257 1,560 2,528
Foreign exchange (gain) loss (185) 272 (111) 567
Interest income (3) (293) (87) (674)
(Gain) Loss on sale of
short-term investments,
marketable securities
and other assets 0 13 (8) (658)
Other expenses (gain) 0 (10) 1,970 224
Appreciation in common shares
eligible for redemption 0 0 10,093 4,528
Amortization of intangible
assets 4,489 3,116 11,947 8,855
Amortization of capital assets 793 662 2,156 1,829
Adjusted EBITDA 7,924 7,092 22,452 16,905
Adjusted EBITDA margin 14.7% 16.6% 14.3% 14.0%
--------------------- ---------------------
The following table reconciles Adjusted net income to net income:
--------------------- ---------------------
Three months ended Nine months ended
Sept. 30, Sept. 30,
--------------------- ---------------------
2006 2005 2006 2005
($000, except ($000, except
percentages) percentages)
Total revenue 53,809 42,648 157,240 120,810
--------------------- ---------------------
--------------------- ---------------------
Net income (loss) 2,287 2,075 (5,068) (294)
Add back:
Appreciation in common shares
eligible for redemption 0 0 10,093 4,528
Amortization of intangible
assets 4,489 3,116 11,947 8,855
Adjusted net income 6,776 5,191 16,972 13,089
Adjusted net income margin 12.6% 12.2% 10.8% 10.8%
--------------------- ---------------------
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.
CONSTELLATION SOFTWARE INC.
Consolidated Balance Sheets
(In thousands of U.S. dollars)
-------------------------------------------------------------------------
September 30, December 31,
2006 2005
(unaudited)
-------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 16,548 $ 18,285
Short-term investments 3,241 932
Accounts receivable 32,742 27,655
Work in progress 13,490 11,535
Inventory 2,204 528
Prepaid expenses and other current assets 4,445 3,992
Future income taxes 1,789 2,359
-----------------------------------------------------------------------
74,459 65,286
Capital assets 6,857 6,446
Future income taxes 2,139 3,986
Other long-term assets 665 787
Goodwill 23,720 23,720
Intangible assets 67,335 58,258
-------------------------------------------------------------------------
$ 175,175 $ 158,483
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 38,544 $ 34,653
Deferred revenue 52,991 44,939
Deferred compensation - 237
Income taxes payable 1,727 1,276
-----------------------------------------------------------------------
93,262 81,105
Future income taxes 6,694 9,267
Other long-term liabilities 736 1,464
Deferred compensation - 1,020
Common shares eligible for redemption - 24,182
Shareholders' equity:
Capital stock 99,283 57,220
Shareholder loans (2,636) -
Cumulative translation adjustment (3,152) (3,152)
Deficit (19,012) (12,623)
-----------------------------------------------------------------------
74,483 41,445
-------------------------------------------------------------------------
$ 175,175 $ 158,483
-------------------------------------------------------------------------
-------------------------------------------------------------------------
CONSTELLATION SOFTWARE INC.
Consolidated Statements of Operations
(In thousands of U.S. dollars, except share and per share amounts)
Unaudited
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
-------------------------------------------
2006 2005 2006 2005
-------------------------------------------------------------------------
Revenue 53,809 42,648 157,240 120,810
Cost of revenue 21,060 16,475 61,674 47,223
-------------------------------------------------------------------------
32,749 26,173 95,566 73,587
Research and development 8,489 6,186 24,877 18,739
Sales and marketing 6,488 5,149 19,634 15,778
General and administration 9,848 7,746 28,603 22,165
Amortization of capital assets 793 662 2,156 1,829
-------------------------------------------------------------------------
25,618 19,743 75,270 58,511
-------------------------------------------------------------------------
Income before the undernoted 7,131 6,430 20,296 15,076
Appreciation in common shares
eligible for redemption - - 10,093 4,528
Amortization of intangible
assets 4,489 3,116 11,947 8,855
Other expenses (income) - (10) 1,970 224
(Gain) loss on sale of short-
term investments, marketable
securities and other assets - 13 (8) (658)
Interest income, net (3) (293) (87) (674)
Foreign exchange (gain) loss (185) 272 (111) 567
-------------------------------------------------------------------------
Income (loss) before
income taxes 2,830 3,332 (3,508) 2,234
Income tax expense (recovery):
Current (184) 1,430 1,816 2,507
Future 727 (173) (256) 21
-----------------------------------------------------------------------
543 1,257 1,560 2,528
-------------------------------------------------------------------------
Net income (loss) 2,287 2,075 (5,068) (294)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net income (loss) per share:
Basic 0.11 0.10 (0.24) (0.01)
Diluted 0.11 0.10 (0.24) (0.01)
Weighted average number of
shares Outstanding
(in thousands):
Basic 21,039 20,081 20,726 19,884
Diluted 21,192 20,428 21,021 20,340
Outstanding at the end
of the period 21,192 20,501 21,192 20,501
-------------------------------------------------------------------------
-------------------------------------------------------------------------
CONSTELLATION SOFTWARE INC.
Consolidated Statements of Cash Flows
(In thousands of U.S. dollars)
Unaudited
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
-------------------------------------------
2006 2005 2006 2005
-------------------------------------------------------------------------
Cash flows from operating
activities:
Net income (loss) $ 2,287 $ 2,075 $ (5,068) $ (294)
Adjustments to reconcile
net income to net cash
flows from operations:
Amortization of capital
assets 793 662 2,156 1,829
Amortization of
intangible assets 4,489 3,116 11,947 8,855
Loss on common shares
eligible for redemption - - 10,093 4,528
Deferred compensation - - 400 232
Future income taxes 727 (173) (256) 21
(Gain) loss on sale of
short term investments,
marketable securities
and other assets - 13 (8) (658)
Unrealized exchange
loss (gain) (241) 274 (480) 572
Change in non-cash
operating working
capital 3,546 (609) (3,276) 661
-----------------------------------------------------------------------
Cash flows from operating
activities 11,601 5,358 15,508 15,746
Cash flows from (used in)
financing activities:
Decrease in long term
liabilities (819) (106) (802) (189)
Decrease in bank debt (2,600) - - -
Dividends - - (1,381) (1,150)
Distributions to common
shares eligible for
redemption - - (471) (346)
Issue of common shares
eligible for redemption - 1,844 3,805 2,042
Redemption of common
shares eligible for
redemption - (244) (20) (446)
Repayment of shareholder
loans 262 162 2,474 931
Repurchase of phantom
shares - (62) (1,657) (62)
Return of capital - - (637) (531)
-----------------------------------------------------------------------
Cash flows from (used in)
financing activities (3,157) 1,594 1,311 249
Cash flows from (used in)
investing activities:
Acquisition of businesses,
net of cash acquired (1,298) (220) (15,025) (15,428)
Additions (reductions) to
short-term investments,
marketable securities
and other assets (831) (13) (2,309) 2,111
Other assets (31) - 130 -
Capital asset purchases (483) (845) (1,992) (2,699)
-----------------------------------------------------------------------
Cash flows used in
investing activities (2,643) (1,078) (19,196) (16,016)
Effect of currency
translation adjustment on
cash and cash equivalents 198 (330) 640 (731)
-------------------------------------------------------------------------
Increase (decrease) in cash
and cash equivalents 5,999 5,544 (1,737) (752)
Cash and cash equivalents,
beginning of period 10,549 19,149 18,285 25,445
-------------------------------------------------------------------------
Cash and cash equivalents,
end of period $ 16,548 $ 24,693 $ 16,548 $ 24,693
-------------------------------------------------------------------------
-------------------------------------------------------------------------
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