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Constellation Software Inc. Announces Results for the Third Quarter Ended September 30, 2014 and Declares Quarterly Dividend

TORONTO, ONTARIO — (Marketwired) — 10/30/14 — Constellation Software Inc. (TSX: CSU) (“Constellation” or the “Company”) today announced its financial results for the third quarter ended September 30, 2014 and declared a $1.00 per share dividend payable on January 5, 2015 to all common shareholders of record at close of business on December 17, 2014. 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, 2014 and the accompanying notes, our Management–s Discussion and Analysis for the three and nine months ended September 30, 2014, 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, 2013, which can be found on SEDAR at and on the Company–s website . Additional information about the Company is also available on SEDAR at .

Q3 2014 Headlines:

Third quarter 2014 revenue was $419 million, an increase of 33%, or $103 million, compared to $316 million for the comparable period in 2013. For the first nine months of 2014 total revenues were $1,230 million, an increase of 41%, or $359 million, compared to $871 million for the comparable period in 2013. The increase for both the three and nine month periods ended September 30, 2014 compared to the same periods in the prior year is mainly attributable to growth from acquisitions, however, the Company did experience positive organic growth of 4% and 5%, respectively.

Adjusted EBITA for the third quarter of 2014 was $100 million, a 73% increase compared to the prior year–s third quarter Adjusted EBITA of $58 million. Third quarter 2014 Adjusted EBITA per share on a diluted basis increased 73% to $4.73, compared to $2.74 for the same period last year. Adjusted EBITA for the nine month period ended September 30, 2014 was $244 million, a 55% increase over last year–s Adjusted EBITA of $158 million for the same period. Adjusted EBITA per share on a diluted basis for the nine month period ended September 30, 2014 increased 55% to $11.52, compared to $7.44 for the same period last year. Adjusted EBITA for the three and nine months ended September 30, 2014 was positively impacted by the items listed above and similar items were not recorded in 2013.

Adjusted Net Income for the third quarter of 2014 was $69 million, compared to the prior year–s third quarter Adjusted Net Income of $54 million, a 28% increase. Third quarter 2014 Adjusted Net Income per share on a diluted basis increased 28% to $3.27 compared to $2.55 for the prior year–s third quarter. Adjusted Net Income for the nine month period ended September 30, 2014 was $188 million, an increase of 36% over last year–s Adjusted Net Income of $138 million. Adjusted Net Income per share on a diluted basis for the nine month period ended September 30, 2014 increased 36% to $8.86, compared to $6.49 for the same period in 2013. Adjusted net income was positively impacted by the same items as Adjusted EBITA listed above on an after tax basis.

Net income for the third quarter 2014 was $32 million compared to the prior year–s third quarter net income of $22 million. On a diluted per share basis, this translates into net income per share of $1.51 for the third quarter of 2014 compared to $1.05 for the same period of 2013. Net income for the nine month period ended September 30, 2014 was $64 million, an increase of 26% over net income of $51 million for the same period in 2013. Net income per share on a diluted basis for the nine month period ended September 30, 2014 increased 26% to $3.01, compared to $2.39 for the same period in 2013. Net income was positively impacted by the same items as Adjusted EBITA listed above on an after tax basis.

Cash flows from operations for the third quarter of 2014 were $101 million, an increase of 15%, or $13 million, compared to $88 million for the comparable period in 2013. For the first nine months of 2014 cash flows from operations were $245 million, an increase of 75%, or $105 million, compared to $139 million for the comparable period in 2013. The increase for both the three and nine month periods compared to the same periods in the prior year is mainly attributable to growth from acquisitions.

The following table displays our revenue by reportable segment and the percentage change for the three and nine months ended September 30, 2014 compared to the same periods in 2013:

Comparative figures have been reclassified to conform to the current year–s presentation.

Public Sector

For the quarter ended September 30, 2014, total revenue in the public sector reportable segment increased by 39%, or $83 million to $295 million, compared to $212 million for the quarter ended September 30, 2013. For the nine months ended September 30, 2014, total revenue increased by 50%, or $288 million to $866 million, compared to $579 million for the comparable period in 2013. Revenue growth from acquired businesses contributed approximately $75 million to our Q3 2014 revenues and $259 million to our nine months ended September 30, 2014 revenues compared to the same periods in 2013, as we completed 26 acquisitions since the beginning of 2013. Organic revenue growth was 4% in Q3 2014 and 5% for the nine months ended September 30, 2014 compared to the same periods in 2013.

Private Sector

For the quarter ended September 30, 2014, total revenue in the private sector reportable segment increased 20%, or $20 million to $124 million, compared to $104 million for the quarter ended September 30, 2013. For the nine months ended September 30, 2014 total revenue increased by 25%, or $72 million to $363 million, compared to $292 million for the comparable period in 2013. Revenue growth from acquired businesses contributed approximately $17 million to our Q3 2014 revenues and $57 million to our nine months ended September 30, 2014 revenues compared to the same periods in 2013, as we completed 19 acquisitions since the beginning of 2013. Revenues increased organically by 3% in Q3 2014 and 5% for the nine months ended September 30, 2014 compared to the same periods in 2013.

Conference Call and Webcast

Management will host a conference call at 9:00 a.m. (ET) on Monday, November 3, 2014 to answer questions regarding the results. The teleconference numbers are 416-340-2216 or 866-226-1792. The call will also be webcast live and archived on Constellation–s website at .

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 14, 2014. To access the replay, please dial 905-694-9451 or 800-408-3053 followed by the passcode 9393313.

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, 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, and certain other expenses (income). 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, and certain other non-cash expenses (income) incurred or recognized by the Company from time to time. “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.

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.

SOURCE: CONSTELLATION SOFTWARE INC.

Contacts:
Constellation Software Inc.
Jamal Baksh
Chief Financial Officer
(416) 861-9677

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