Constellation Software Inc. Announces Results for the Second Quarter Ended June 30, 2015 and Declares Quarterly Dividend

TORONTO, ONTARIO--(Marketwired - July 29, 2015) - Constellation Software Inc. ( CSU.TO ) ("Constellation" or the "Company") today announced its financial results for the second quarter ended June 30, 2015 and declared a $1.00 per share dividend payable on October 5, 2015 to all common shareholders of record at close of business on September 17, 2015. 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 six months ended June 30, 2015 and the accompanying notes, our Management's Discussion and Analysis for the three and six months ended June 30, 2015, 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, 2014, 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 .

Q2 2015 Headlines:

• Revenue grew 7% (negative 4% organic growth) to $444 million compared to $416 million in Q2 2014. Changes in foreign exchange rates resulted in an approximate 6% reduction in organic growth.

• Adjusted EBITA increased $18 million or 22% to $99 million as compared to $81 million in Q2 2014. Changes in foreign exchange rates resulted in less than a 1% reduction in Adjusted EBITA margin.

• Adjusted Net Income increased 23% to $80 million ($3.76 on a diluted per share basis) from $65 million ($3.07 on a diluted per share basis) in Q2 2014.

• Net income increased 42% to $33 million ($1.54 on a diluted per share basis) from $23 million ($1.08 on a diluted per share basis) in Q2 2014.

• Eight acquisitions were completed for aggregate cash consideration of $112 million (which includes acquired cash). Deferred payments associated with these acquisitions have an estimated value of $10 million.

• Cash flows from operations were $64 million, an increase of 46%, or $20 million, compared to $44 million for the comparable period in 2014.

• The amount drawn on the Company's credit facilities increased to $298 million from $204 million in Q1 2015.

Second quarter 2015 revenue was $444 million, an increase of 7%, or $28 million, compared to $416 million for the comparable period in 2014. For the first six months of 2015 total revenues were $866 million, an increase of 7%, or $56 million, compared to $811 million for the comparable period in 2014. The increase for both the three and six month periods ended June 30, 2015 compared to the same periods in the prior year is attributable to growth from acquisitions as the Company experienced negative organic growth of growth of 4% and 3%, respectively.

Adjusted EBITA for the second quarter of 2015 was $99 million, a 22% increase compared to the prior year's second quarter Adjusted EBITA of $81 million. Second quarter 2015 Adjusted EBITA per share on a diluted basis increased 22% to $4.67, compared to $3.83 for the same period last year. Adjusted EBITA for the six month period ended June 30, 2015 was $192 million, a 34% increase over last year's Adjusted EBITA of $144 million for the same period. Adjusted EBITA per share on a diluted basis for the six month period ended June 30, 2015 increased 34% to $9.08, compared to $6.79 for the same period last year.

Adjusted Net Income for the second quarter of 2015 was $80 million, compared to the prior year's second quarter Adjusted Net Income of $65 million, a 23% increase. Second quarter 2015 Adjusted Net Income per share on a diluted basis increased 23% to $3.76 compared to $3.07 for the prior year's second quarter. Adjusted Net Income for the six month period ended June 30, 2015 was $154 million, an increase of 30% over last year's Adjusted Net Income of $118 million. Adjusted Net Income per share on a diluted basis for the six month period ended June 30, 2015 increased 30% to $7.29, compared to $5.58 for the same period in 2014.

Net income for the second quarter 2015 was $33 million compared to the prior year's second quarter net income of $23 million. Net income per share on a diluted per share basis for the second quarter of 2015 increased 42% to $1.54, compared to $1.08 for the same period of 2014. Net income for the six month period ended June 30, 2015 was $66 million, an increase of 106% over net income of $32 million for the same period in 2014. Net income per share on a diluted basis for the six month period ended June 30, 2015 increased 106% to $3.09, compared to $1.50 for the same period in 2014.

Cash flows from operations for the second quarter of 2015 were $64 million, an increase of 46%, or $20 million, compared to $44 million for the comparable period in 2014. For the first six months of 2015 cash flows from operations were $177 million, an increase of 23%, or $33 million, compared to $144 million for the comparable period in 2014.

The following table displays our revenue by reportable segment and the percentage change for the three and six months ended June 30, 2015 compared to the same periods in 2014:

	Three months ended				Period-Over-					Six months ended				Period-Over-
	June 30,				Period Change					June 30,				Period Change
	2015		2014		$		%			2015		2014		$		%
	($M, except percentages)									($M, except percentages)
Public Sector
Licenses	22.2		21.0		1.2		6	%		41.4		37.2		4.2		11	%
Professional services	78.9		81.5		(2.6	)	-3	%		153.7		156.7		(3.0	)	-2	%
Hardware and other	25.6		29.8		(4.2	)	-14	%		50.9		58.4		(7.5	)	-13	%
Maintenance and other recurring	181.6		161.4		20.2		13	%		353.1		319.2		33.9		11	%
	308.3		293.7		14.6		5	%		599.2		571.5		27.7		5	%
Private Sector
Licenses	10.9		9.4		1.5		16	%		21.9		19.6		2.3		12	%
Professional services	17.5		17.8		(0.3	)	-2	%		35.4		34.5		0.9		3	%
Hardware and other	6.4		5.3		1.1		22	%		12.1		10.5		1.7		16	%
Maintenance and other recurring	100.5		89.8		10.7		12	%		197.8		174.8		23.0		13	%
	135.3		122.2		13.0		11	%		267.2		239.3		27.9		12	%

Public Sector

For the quarter ended June 30, 2015, total revenue in the public sector reportable segment increased by 5%, or $15 million to $308 million, compared to $294 million for the quarter ended June 30, 2014. For the six months ended June 30, 2015, total revenue increased by 5%, or $28 million to $599 million, compared to $572 million for the comparable period in 2014. Total revenue growth from acquired businesses contributed approximately $30 million to our Q2 2015 revenues and $50 million to our six months ended June 30, 2015 revenues compared to the same periods in 2014, as we completed 18 acquisitions since the beginning of 2014. Organic revenue growth was negative 5% in Q2 2015 and negative 4% for the six months ended June 30, 2015 compared to the same periods in 2014. For the three and six months ended June 30, 2015, the appreciation of the US dollar against most major currencies in which the Company transacts business resulted in approximate 7% and 6% respective reductions in the public sector revenue organic growth rates compared to the comparable periods of 2014.

Private Sector

For the quarter ended June 30, 2015, total revenue in the private sector reportable segment increased 11%, or $13 million to $135 million, compared to $122 million for the quarter ended June 30, 2014. For the six months ended June 30, 2015 total revenue increased by 12%, or $28 million to $267 million, compared to $239 million for the comparable period in 2014. Total revenue growth from acquired businesses contributed approximately $16 million to our Q2 2015 revenues and $33 million to our six months ended June 30, 2015 revenues compared to the same periods in 2014, as we completed 16 acquisitions since the beginning of 2014. Organic revenue growth was negative 2% for both the three and six month periods ended June 30, 2015 compared to the same periods in 2014. For the three and six months ended June 30, 2015, the appreciation of the US dollar against most major currencies in which the Company transacts business resulted in approximate 5% and 4% respective reductions in the private sector revenue organic growth rates compared to the comparable periods of 2014.

Conference Call and Webcast

Management will host a conference call at 9:00 a.m. (ET) on Thursday, July 30, 2015 to answer questions regarding the results. The teleconference numbers are 416-340-2216 or 866-225-0198. 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 August 12, 2015. To access the replay, please dial 905-694-9451 or 800-408-3053 followed by the passcode 2063785.

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, 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:

	Three months ended					Six months ended
	June 30,					June 30,
	2015		2014			2015		2014
	($M, except percentages)					($M, except percentages)
Total revenue	443.5		415.9			866.4		810.8
Net income	32.7		23.0			65.6		31.9
Adjusted for:
Income tax expense (recovery)	16.1		10.3			27.4		18.5
Foreign exchange (gain) loss	(0.7	)	2.2			(2.5	)	2.3
TSS membership liability revaluation charge	3.4		-			9.4		-
Share in net (income) loss of equity investees	(0.3	)	(0.4	)		(0.9	)	(0.5	)
Finance and other income	(0.1	)	(1.4	)		(0.3	)	(1.9	)
Finance costs	4.6		3.5			8.9		6.8
Amortization of intangible assets	43.3		44.0			84.8		86.8
Adjusted EBITA	99.0		81.1			192.4		143.9
Adjusted EBITA margin	22	%	20	%		22	%	18	%

The following table reconciles Adjusted net income to net income:

	Three months ended					Six months ended
	June 30,					June 30,
	2015		2014			2015		2014
	($M, except percentages)					($M, except percentages)
Total revenue	443.5		415.9			866.4		810.8
Net income	32.7		23.0			65.6		31.9
Adjusted for:
Amortization of intangible assets	43.3		44.0			84.8		86.8
TSS membership liability revaluation charge	3.4		-			9.4		-
Less non-controlling interest in the Adjusted net income of TSS	(3.1	)	-			(6.3	)	-
Deferred income tax expense (recovery)	3.5		(1.9	)		1.0		(0.3	)
Adjusted net income	79.7		65.0			154.4		118.4
Adjusted net income margin	18	%	16	%		18	%	15	%

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.

CONSTELLATION SOFTWARE INC.
Condensed Consolidated Interim Statements of Financial Position
(In thousands of U.S. dollars)
(Unaudited)
		June 30,			December 31,
		2015			2014
Assets
Current assets:
	Cash	$	132,006		$	70,679
	Accounts receivable		201,752			200,056
	Work in progress		64,629			51,483
	Inventories		28,256			25,246
	Other assets		74,482			63,294
			501,125			410,758
Non-current assets:
	Property and equipment		36,394			37,227
	Deferred income taxes		60,139			60,763
	Other assets		35,382			36,942
	Intangible assets		943,446			887,435
			1,075,361			1,022,367
Total assets		$	1,576,486		$	1,433,125
Liabilities and Shareholders' Equity
Current liabilities:
	Bank indebtedness	$	160,201		$	66,326
	TSS membership liability		19,281			17,345
	Accounts payable and accrued liabilities		220,977			244,996
	Dividends payable		21,119			21,192
	Deferred revenue		436,743			347,336
	Provisions		7,494			13,399
	Acquisition holdback payments		22,974			22,665
	Income taxes payable		18,908			25,588
			907,697			758,847
Non-current liabilities:
	Bank indebtedness		132,585			149,654
	TSS membership liability		33,918			30,515
	Debentures		74,364			78,642
	Deferred income taxes		107,432			107,275
	Acquisition holdback payments		1,735			3,603
	Other liabilities		46,593			44,758
			396,627			414,447
Total liabilities			1,304,324			1,173,294
Shareholders' equity:
	Capital stock		99,283			99,283
	Accumulated other comprehensive income (loss)		(30,155	)		(19,290	)
	Retained earnings		203,034			179,838
			272,162			259,831
Total liabilities and shareholders' equity		$	1,576,486		$	1,433,125

CONSTELLATION SOFTWARE INC.
Condensed Consolidated Interim Statements of Income
(In thousands of U.S. dollars, except per share amounts)
Three and six months ended June 30, 2015 and 2014
(Unaudited)
			Three months ended June 30,						Six months ended June 30,
			2015			2014			2015			2014
Revenue
	License		$	33,026		$	30,357		$	63,351		$	56,838
	Professional services			96,410			99,350			189,116			191,160
	Hardware and other			31,994			35,056			63,042			68,848
	Maintenance and other recurring			282,080			251,168			550,892			493,934
				443,510			415,931			866,401			810,780
Expenses
	Staff			223,086			224,426			444,938			450,098
	Hardware			18,430			19,755			36,215			38,494
	Third party license, maintenance and professional services			38,412			38,196			77,212			73,515
	Occupancy			10,277			10,206			20,858			20,164
	Travel			13,839			12,535			25,649			23,950
	Telecommunications			4,305			4,152			8,391			8,097
	Supplies			10,382			9,174			19,941			17,881
	Professional fees			5,885			5,211			10,692			10,250
	Other, net			15,644			7,063			21,928			16,204
	Depreciation			4,250			4,094			8,176			8,181
	Amortization of intangible assets			43,312			43,985			84,793			86,787
				387,822			378,797			758,793			753,621
Foreign exchange loss (gain)				(743	)		2,177			(2,466	)		2,349
TSS membership liability revaluation charge				3,378			-			9,408			-
Share in net (income) loss of equity investee				(250	)		(415	)		(940	)		(535	)
Finance and other income				(62	)		(1,386	)		(320	)		(1,854	)
Finance costs				4,643			3,528			8,926			6,842
				6,966			3,904			14,608			6,802
Income before income taxes				48,722			33,230			93,000			50,357
Current income tax expense (recovery)				12,566			12,183			26,462			18,794
Deferred income tax expense (recovery)				3,502			(1,911	)		958			(291	)
Income tax expense (recovery)				16,068			10,272			27,420			18,503
Net income				32,654			22,958			65,580			31,854
Earnings per share
		Basic and diluted	$	1.54		$	1.08		$	3.09		$	1.50

CONSTELLATION SOFTWARE INC.
Condensed Consolidated Interim Statements of Comprehensive Income
(In thousands of U.S. dollars, except per share amounts)
Three and six months ended June 30, 2015 and 2014
(Unaudited)
		Three months ended June 30,						Six months ended June 30,
			2015			2014			2015			2014
Net income		$	32,654		$	22,958		$	65,580		$	31,854
Items that are or may be reclassified subsequently to net income:
	Net change in fair value of available-for-sale financial asset during the period		-			-			-			93
	Net change in fair value of derivatives designated as hedges during the period		215			-			(15	)		-
	Amounts reclassified to profit during the period related to realized gains on available-for-sale financial asset		-			(310	)		-			(574	)
	Foreign currency translation differences from foreign operations		1,073			1,318			(10,856	)		1,638
	Current income tax recovery (expense)		-			-			-			35
null

Deferred income tax recovery (expense) (64 ) - 6 (12 ) Other comprehensive (loss) income for the period, net of income tax 1,224 1,008 (10,865 ) 1,180 Total comprehensive income for the period $ 33,878 $ 23,966 $ 54,715 $ 33,034

CONSTELLATION SOFTWARE INC.
Condensed Consolidated Interim Statements of Changes in Equity
(In thousands of U.S. dollars)
(Unaudited)
Six months ended June 30, 2015
			Capital stock			Accumulated other comprehensive income/(loss)									Total accumulated other comprehensive income/(loss)			Retained earnings			Total
						Cumulative translation account			Amounts related to gains/losses on derivatives designed as hedges			Amounts related to gains/losses on available-for-sale financial assets
Balance at January 1, 2015		$	99,283		$	(18,880	)	$	(410	)	$	-		$	(19,290	)	$	179,838		$	259,831
Total comprehensive income for the year
Net income			-			-			-			-			-			65,580			65,580
Other comprehensive income (loss)
Net change in fair value of available-for-sale financial asset during the year			-			-			-			-			-			-			-
Net change in fair value of derivatives designated as hedges during the year			-			-			(15	)		-			(15	)		-			(15	)
Amounts reclassified to profit during the year related to realized gains on available-for-sale financial assets			-			-			-			-			-			-			-
Foreign currency translation differences from foreign operations			-			(10,856	)		-			-			(10,856	)		-			(10,856	)
Current tax recovery (expense)			-			-			-			-			-			-			-
Deferred tax recovery (expense)			-			-			6			-			6			-			6
Total other comprehensive income (loss) for the year			-			(10,856	)		(9	)		-			(10,865	)		-			(10,865	)
Total comprehensive income (loss) for the year			-			(10,856	)		(9	)		-			(10,865	)		65,580			54,715
Transactions with owners, recorded directly in equity
	Dividends to shareholders of the Company		-			-			-			-			-			(42,384	)		(42,384	)
Balance at June 30, 2015		$	99,283		$	(29,736	)	$	(419	)	$	-		$	(30,155	)	$	203,034		$	272,162

CONSTELLATION SOFTWARE INC.
Condensed Consolidated Interim Statements of Changes in Equity
(In thousands of U.S. dollars)
(Unaudited)
Six months ended June 30, 2014
			Capital stock			Accumulated other comprehensive income/(loss)									Total accumulated other comprehensive income/(loss)			Retained earnings			Total
						Cumulative translation account			Amounts related to gains/losses on derivatives designed as hedges			Amounts related to gains/losses on available-for-sale financial assets
Balance at January 1, 2014		$	99,283		$	(32	)	$	-		$	481		$	449		$	166,267		$	265,999
Total comprehensive income for the year
Net income			-			-			-			-			-			31,854			31,854
Other comprehensive income (loss)
Net change in fair value of available-for-sale financial assets during the year			-			-			-			93			93			-			93
Amounts reclassified to profit during the year related to realized gains on available-for-sale financial assets			-			-			-			(574	)		(574	)		-			(574	)
Foreign currency translation differences from foreign operations			-			1,638			-			-			1,638			-			1,638
Current tax recovery (expense)			-			35			-			-			35			-			35
Deferred tax recovery (expense)			-			(12	)		-						(12	)		-			(12	)
Total other comprehensive income for the period			-			1,661			-			(481	)		1,180			-			1,180
Total comprehensive income for the period			-			1,661			-			(481	)		1,180			31,854			33,034
Transactions with owners, recorded directly in equity
	Dividends to shareholders of the Company		-			-			-			-			-			(42,384	)		(42,384	)
Balance at June 30, 2014		$	99,283		$	1,629		$	-		$	-		$	1,629		$	155,737		$	256,649

CONSTELLATION SOFTWARE INC.
Condensed Consolidated Interim Statements of Cash Flows
(In thousands of U.S. dollars)
Three and six months ended June 30, 2015 and 2014
(Unaudited)
			Three months ended June 30,						Six months ended June 30,
			2015			2014			2015			2014
Cash flows from operating activities:
	Net income		$	32,654		$	22,958		$	65,580		$	31,854
	Adjustments for:
		Depreciation		4,250			4,094			8,176			8,181
		Amortization of intangible assets		43,312			43,985			84,793			86,787
		TSS membership liability revaluation charge		3,378			-			9,408			-
		Share in net (income) loss of equity investee		(250	)		(415	)		(940	)		(535	)
		Finance and other income		(62	)		(1,386	)		(320	)		(1,854	)
		Finance costs		4,643			3,528			8,926			6,842
		Income tax expense (recovery)		16,068			10,272			27,420			18,503
		Foreign exchange loss (gain)		(743	)		2,177			(2,466	)		2,349
	Change in non-cash operating working capital exclusive of effects of business combinations			(21,450	)		(28,806	)		8,489			9,090
	Income taxes paid			(17,632	)		(12,345	)		(32,250	)		(17,630	)
	Net cash flows from operating activities			64,168			44,062			176,816			143,587
Cash flows from (used in) financing activities:
	Interest paid			(3,838	)		(2,798	)		(7,429	)		(5,013	)
	Increase (decrease) in bank indebtedness, net			85,891			(36,083	)		89,391			(29,482	)
	Credit facility transaction costs			-			(5,439	)		-			(5,439	)
	Dividends paid			(21,192	)		(21,192	)		(42,384	)		(42,384	)
	Net cash flows from (used in) in financing activities			60,861			(65,512	)		39,578			(82,318	)
Cash flows from (used in) investing activities:
	Acquisition of businesses, net of cash acquired			(109,168	)		(11,063	)		(129,679	)		(21,897	)
	Post-acquisition settlement payments, net of receipts			(13,955	)		(5,673	)		(15,636	)		(8,017	)
	Proceeds from sale of available-for-sale equity securities			-			469			-			873
	Interest and dividends received			2			102			43			232
	Property and equipment purchased			(3,406	)		(4,786	)		(5,544	)		(9,004	)
	Net cash flows used in investing activities			(126,527	)		(20,951	)		(150,816	)		(37,813	)
Effect of foreign currency on cash and cash equivalents				1,687			1,233			(4,251	)		(147	)
Increase (decrease) in cash and cash equivalents				189			(41,168	)		61,327			23,309
Cash, beginning of period				131,817			142,444			70,679			77,967
Cash, end of period			$	132,006		$	101,276		$	132,006		$	101,276