Toronto software company Constellation Software Inc. announced fourth quarter and year-end financial results, pointing to US$891 million in revenues in 2012, up 15% year over year. Contributing to the company’s overall financial picture were 35 acquisitions completed for an aggregate consideration of US$141 million. Constellation is a portfolio investment of Canadian buyout firm OMERS Private Equity, which has backed the company since 2000.

PRESS RELEASE

Constellation Software Inc. Announces Results for the Fourth Quarter and Year Ended December 31, 2012 and Declares Quarterly Dividend

TORONTO, ONTARIO–(Marketwire – March 6, 2013) – Constellation Software Inc. (TSX:CSU) (“Constellation” or the “Company”) today announced its financial results for the fourth quarter and fiscal year ended December 31, 2012 and declared a $1.00 per share dividend payable on April 4, 2013 to all common shareholders of record at the close of business on March 18, 2013. 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 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, 2012, 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.

2012 Highlights:

•Revenue grew 15% to $891 million compared to $773 million in 2011
•Adjusted EBITDA increased $17 million or 10% to $186 million as compared to 2011
•Adjusted net income increased $32 million or 23% to $172 million ($8.13 on a fully diluted per share basis) from $140 million ($6.63 on a fully diluted per share basis) in 2011
•Thirty-five acquisitions were completed for aggregate cash consideration of $141 million (which includes acquired cash and acquired bank indebtedness) plus cash holdbacks of $29 million and estimated value of contingent consideration of $10 million
•Cash flows from operations increased $7 million or 5% to $145 million from $138 million in 2011 $35 million in cash proceeds was received and a $21 million gain was realized relating to the sale of investments

Q4 2012 Highlights:

•Revenue grew 32% to $261 million compared to $198 million in Q4 2011. Organic revenue growth was 8% compared to 7% in Q4 2011
•Adjusted EBITDA grew 15% to $54 million compared to Q4 2011
•Adjusted net income grew 55% to $62 million compared to Q4 2011
•Thirteen acquisitions were completed in the quarter for aggregate cash consideration of $62 million (which includes acquired cash and acquired bank indebtedness) plus cash holdbacks of $8 million and estimated value of contingent consideration of $2 million
Additional Highlights:

•Subsequent to December 31, 2012, the Company completed six acquisitions for aggregate cash consideration of $32 million
•For Q1 2013, the Company expects gross revenue to be in the range of $245 million to $260 million and expects Adjusted EBITDA margin to be in the range of 14% to 18%
Fourth quarter 2012 revenue was $261 million, an increase of 32%, or $63 million, compared to $198 million for the comparable period in 2011. For fiscal year 2012, total revenue was $891 million, an increase of 15%, or $118 million, compared to $773 million for the 2011 fiscal year. The increase for the quarter ended December 31, 2012 relative to the same period in the prior year is largely attributed to growth from acquisitions as organic growth was 8%. The increase for fiscal year 2012 is mainly attributed to growth from acquisitions as organic growth was 1% compared to fiscal year 2011.

Net income for the quarter ended December 31, 2012 increased $21 million to $40 million from $19 million for the same period in 2011. On a fully diluted per share basis this translated into Net income per share of $1.89 in the quarter ended December 31, 2012 compared to Net income per share of $0.92 in the quarter ended December 31, 2011. Net income for the year ended December 31, 2012 was $93 million compared to $157 million in fiscal year 2011. For the year ended December 31, 2012, Net income was reduced due to income tax expense of $18 million compared to income tax recovery of $75 million in 2011. The income tax recovery for the year ended December 31, 2011 was primarily due to a transfer of certain intangible assets from one subsidiary to another. In the prior year, a deferred tax asset was recorded on the increase in fair market value arising on the sale of intellectual property between entities within the Company at the rate of tax of the entity that acquired the assets notwithstanding that the gains are not otherwise recorded for accounting and financial reporting on consolidation. The deferred income tax recovery recorded through profit or loss represented the amount of these deferred income tax deductions that the Company determined was probable of being utilized for income tax deduction purposes in the future. Excluding the deferred income tax recovery, Net income for the year ended December 31, 2012 increased $24 million to $87 million from $63 million in fiscal year 2011. Net income per share on a fully diluted basis for the year increased to $4.11 from $2.99 in fiscal year 2011.

Adjusted EBITDA for the quarter ended December 31, 2012 increased 15% to $54 million compared to $47 million for the same period in 2011. On a fully diluted per share basis this translated into Adjusted EBITDA per share of $2.56 in the quarter ended December 31, 2012 compared to Adjusted EBITDA per share of $2.24 in the quarter ended December 31, 2011. Adjusted EBITDA for the year ended December 31, 2012 increased $17 million to $186 million from $169 million in fiscal year 2011. Adjusted EBITDA per share on a fully diluted basis for the year increased to $8.77 from $7.96 in fiscal year 2011.

Adjusted net income for the quarter ended December 31, 2012 increased 55% to $62 million compared to $40 million for the same period in 2011. On a fully diluted per share basis this translated into Adjusted net income per share of $2.94 in the quarter ended December 31, 2012 compared to Adjusted net income per share of $1.90 in the quarter ended December 31, 2011. The increase in Adjusted net income for the quarter ended December 31, 2012 is largely due to the gains on sales of available-for-sale financial assets. Adjusted net income for the year ended December 31, 2012 increased $32 million, or 23%, to $172 million from $140 million in fiscal year 2011. Adjusted net income per share on a fully diluted basis for the year increased to $8.13 from $6.63 in fiscal year 2011.

Net indebtedness (bank indebtedness less cash) of $3 million, increased by $37 million for the year primarily due to acquisitions. For the year ended December 31, 2012, thirty-five acquisitions were completed, and combined with post-acquisition settlement payments resulted in cash outflows of $139 million. In the prior year, twenty-two acquisitions were completed for net cash consideration, when combined with post-acquisition settlement payments, resulted in cash outflows of $46 million.

Public Sector

For the quarter ended December 31, 2012, total revenue in the public sector reportable segment increased by 31%, or $44 million to $189 million, compared to $145 million for the quarter ended December 31, 2011. For the year ended December 31, 2012, total revenue increased by 11%, or $64 million to $636 million, compared to $572 million in 2011. Revenue growth from acquired businesses contributed approximately $34 million to our Q4 2012 revenues and $67 million to our year ended December 31, 2012 revenues compared to the same periods in 2011. We have completed 28 acquisitions since the beginning of 2011, 10 of which were acquired in fiscal year 2011. Organic revenues increased by 7% in Q4 2012 and were unchanged in the year ended December 31, 2012 compared to the same periods in 2011. Excluding PTS, organic revenues increased 7% in Q4 2012 and 1% in the year ended December 31, 2012 respectively, compared to the same periods in 2011.

Constellation acquired the Public Transit Solutions business (“PTS”) from Continental Automotive AG (“Continental”) on November 2, 2009. Given the substantial amount of non-recurring revenue historically earned by PTS, gross revenue from PTS has fluctuated significantly in the past and will continue to do so in the future.

Private Sector

For the quarter ended December 31, 2012, total revenue in the private sector reportable segment increased 33%, or $18 million to $72 million, compared to $54 million for the quarter ended December 31, 2011. For the year ended December 31, 2012 total revenue increased by 27%, or $53 million to $255 million, compared to $202 million for the comparable period in 2011. Revenue growth from acquired businesses contributed approximately $14 million to our Q4 2012 revenues and $42 million to our year ended December 31, 2012 revenues compared to the same periods in 2011. We have completed 29 acquisitions since the beginning of 2011, 12 of which were acquired in fiscal year 2011. Revenues increased organically by 8% in Q4 2012 and by 6% for the year ended December 31, 2012 compared to the same periods in 2011.

Outlook

For Q1 2013, the Company expects gross revenue to be in the range of $245 million to $260 million and expects Adjusted EBITDA margin to be in the range of 14% to 18%. These statements are “forward looking statements” and are based on the following assumptions which management believes are reasonable under the current circumstances including (i) Revenue growth will be in the range of 26% to 33% for Q1 2013, which includes the impact of all companies acquired to date; (ii) the European acquisitions that the Company completed during the second half of 2012 and in the first quarter of 2013 will likely have negative Adjusted EBITDA in Q1 2013, and in aggregate, the European (including UK) operations of the Company will generate single digit Adjusted EBITDA margins during the quarter; (iii) North American hiring by the Company during Q1 2013 will be increased to provide additional professional services capacity to address backlog and to staff new investments in growth initiatives; (iv) no material acquisitions will be completed during the remainder of Q1 2013; and (iv) general economic and market conditions will remain consistent with those in effect on March 6, 2013. Although management believes these assumptions are reasonable in the current circumstances, they are subject to various risks and uncertainties and there are several factors that could cause actual results to differ materially from those specified above. See “Forward Looking Statements” below and also the Company’s Management Discussion and Analysis for the year ended December 31, 2012.

Appointment of New Board Members

The Company also announced today that it has increased the size of its board of directors to eight members and has appointed Mark Miller, Chief Operating Officer of the Company and Chief Executive Officer of the Volaris Operating Group, and Jeff Bender, Chief Executive Officer of the Harris Operating Group, as new directors of the Company.

About Constellation Software Inc.

Constellation Software acquires, manages and builds vertical market software businesses that provide mission-critical software solutions.

CONSTELLATION SOFTWARE INC.

Contact Information

Constellation Software Inc.
John Billowits
Chief Financial Officer
(416) 861-2279
[email protected]
www.csisoftware.com

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