Constellation Software Inc. Announces Results for the Fourth Quarter and Twelve Months Ended December 31, 2006 and Declares its Annual Dividend



    TORONTO, March 7 /CNW/ - Constellation Software Inc. ("Constellation" or
the "Company") (TSX:CSU) today announced its financial results for the fourth
quarter and fiscal year ended December 31, 2006, and declared a $0.15 per
share dividend payable on March 30, 2007 to all common shareholders and class
A non-voting shareholders of record at the close of business on March 19,
2007. Please note that all dollar amounts referred to in this press release
are U.S. Dollars unless otherwise stated.
    Fourth quarter revenue was $53.5 million, an increase of 20% compared to
$44.6 million reported in the same period last year. Fourth quarter revenue
per share on a fully diluted basis increased 16% compared to the prior year's
fourth quarter. Total revenue for the twelve months ended December 31, 2006
was $210.8 million, an increase of 28% over last year's revenues of
$165.4 million. Revenue per share on a fully diluted basis for the twelve
month period increased 23% compared to 2005.
    Adjusted EBITDA for the fourth quarter was $8.4 million, a 28% increase
compared to the prior year's fourth quarter Adjusted EBITDA of $6.6 million.
Fourth quarter Adjusted EBITDA per share on a fully diluted basis increased
24% compared to the prior year's fourth quarter. Adjusted EBITDA for the
twelve month period was $30.8 million, an increase of 31% over last year's
Adjusted EBITDA of $23.5 million. Adjusted EBITDA per share on a fully diluted
basis for the twelve month period increased 27% compared to 2005.
    Adjusted Net Income for the fourth quarter was $9.0 million compared to
the prior year's fourth quarter Adjusted Net Income of $4.1 million, a 117%
increase. Fourth quarter Adjusted Net Income per share on a fully diluted
basis increased 111% compared to the prior year's fourth quarter. Adjusted Net
Income for the twelve month period was $25.9 million, an increase of 51% over
last year's Adjusted Net Income of $17.2 million. Adjusted Net Income per
share on a fully diluted basis for the twelve month period increased 46%
compared to 2005.
    Net income for the fourth quarter was $3.8 million compared to the prior
year's fourth quarter net income of $0.8 million. On a fully diluted per share
basis, this translates into net income per share of $0.18 for the fourth
quarter of 2006, compared to $0.04 in the same period of 2005. For the twelve
months, we incurred a net loss of $1.2 million or $0.06 per diluted share vs.
net income of $0.5 million or $0.03 per share last year. As noted in our Q1
earnings release, the reason for the net loss in 2006 is the $10.1 million
charge to net income recorded in Q1 2006, which was caused by the appreciation
in common shares eligible for redemption, an expense that will not be incurred
after Q1 2006.
    "We were satisfied with our overall levels of profitability and cash flow
generation," said Mark Leonard, President of Constellation. "As we highlighted
earlier in the year, we had expected to see a slowdown in our Private Sector
segment. In Q4, our Private Sector business units produced less than 1% growth
vs Q4 2005, while our Public Sector business units grew in excess of 35%. We
exceeded our long range targets for the business in 2006 and reiterate our
belief that we can still achieve the 5-year outlook as amended in our
management discussion and analysis."
    "We are pleased to announce our first dividend as a public company," said
Barry Symons, Chief Financial Officer of Constellation. "Our $0.15 per share
dividend represents an increase of 25% over the distribution of $0.12 per
share we paid in 2005, and is consistent with our growth in Adjusted EBITDA
and in line with the objectives we set out in our prospectus."
    During the quarter, Constellation made two acquisitions for total
consideration of approximately $4.3 million. Also included in the $4.3 million
are payments on holdbacks from prior acquisitions. For the twelve month
period, Constellation made a total of 10 acquisitions for total consideration
of approximately $19.3 million, including payments on holdbacks from prior
acquisitions. At December 31, 2006 the Company had cash, restricted cash and
marketable securities of $30.0 million, up from $19.8 million as of
September 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,
March 8, 2007 to discuss the results. The teleconference numbers are
416-644-3422 or 1-800-595-8550. 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 March 15, 2007. To access the rebroadcast, please dial
416-640-1917 or 1-877-289-8525 and quote the passcode 21219100 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 Dec. 31, Fiscal year ended Dec. 31,
                       --------------------------- --------------------------
                            2006          2005          2006          2005
                            ----          ----          ----          ----
                       ($000, except percentages)  ($000, except percentages)

    Total revenue           53,519        44,552       210,759       165,362
                       --------------------------- --------------------------
                       --------------------------- --------------------------

    Net income (loss)        3,832           815        (1,236)          521
    Add back:
    Income tax expense        (410)          945         1,150         3,473
    Foreign exchange
     (gain) loss              (484)          985          (595)        1,552
    Interest income           (199)          (80)         (286)         (754)
    (Gain) Loss on sale
     of short-term
     investments,
     marketable
     securities and
     other assets             (278)            0          (286)         (658)
    Other expenses (gain)        0          (115)        1,970           109
    Appreciation in
     common shares
     eligible for
     redemption                  0             0        10,093         4,528
    Amortization of
     intangible assets       5,143         3,315        17,090        12,170
    Amortization of
     capital assets            787           718         2,943         2,547

    Adjusted EBITDA          8,391         6,583        30,843        23,488
    Adjusted EBITDA
     margin                  15.7%         14.8%         14.6%         14.2%
    ---------------------------------------------- --------------------------


    The following table reconciles Adjusted net income to net income:

    ---------------------------------------------- --------------------------
                       Three months ended Dec. 31, Fiscal year ended Dec. 31,
                       --------------------------- --------------------------
                            2006          2005          2006          2005
                            ----          ----          ----          ----
                       ($000, except percentages)  ($000, except percentages)

    Total revenue           53,519        44,552       210,759       165,362
                       --------------------------- --------------------------
                       --------------------------- --------------------------

    Net income (loss)        3,832           815        (1,236)          521
    Add back:
    Appreciation in
     common shares
     eligible for
     redemption                  0             0        10,093         4,528
    Amortization of
     intangible assets       5,143         3,315        17,090        12,170

    Adjusted net income      8,975         4,130        25,947        17,219
    Adjusted net income
     margin                   16.8%          9.3%         12.3%         10.4%
    ---------------------------------------------- --------------------------


    About Constellation Software Inc.

    Constellation's common shares are listed on the Toronto Stock Exchange
under the symbol "CSU". Constellation Software is an international provider of
market leading software and services to a number of industries across both the
public and private sectors. The Company acquires, manages and builds vertical
market software businesses that provide mission-critical software solutions to
address the specific needs of its customers in those industries.



    CONSTELLATION SOFTWARE INC.
    Consolidated Balance Sheets
    (In thousands of U.S. dollars)

    December 31, 2006 and 2005
    -------------------------------------------------------------------------
                                                             2006       2005
    -------------------------------------------------------------------------
    Assets

    Current assets:
      Cash and cash equivalents (note 2)               $  25,807   $  18,285
      Restricted cash (note 3)                               858           -
      Short-term investments and marketable
       securities (note 4)                                 3,320         932
      Accounts receivable                                 32,655      27,655
      Work in progress                                    13,189      11,535
      Inventory                                              843         528
      Prepaid expenses and other current assets            5,378       3,992
      Future income taxes (note 12)                        1,153       2,359
      -----------------------------------------------------------------------
                                                          83,203      65,286

    Capital assets (note 6)                                6,385       6,446
    Future income taxes (note 12)                          3,429       3,986
    Other long-term assets                                   585         787
    Goodwill (note 8)                                     26,886      23,720
    Intangible assets (note 7)                            66,085      58,258
    -------------------------------------------------------------------------
                                                       $ 186,573   $ 158,483
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities and Shareholders' Equity

    Current liabilities:
      Accounts payable and accrued liabilities         $  41,821   $  34,653
      Deferred revenue                                    56,190      44,939
      Deferred compensation (note 14)                          -         237
      Income taxes payable                                 1,063       1,276
      -----------------------------------------------------------------------
                                                          99,074      81,105

    Future income taxes (note 12)                          8,048       9,267
    Other long-term liabilities                              635       1,464
    Deferred compensation (note 14)                            -       1,020
    Common shares eligible for redemption (note 10(d))         -      24,182
    Shareholders' equity:
      Capital stock (note 10)                             99,283      57,220
      Shareholder loans (note 11)                         (2,135)          -
      Cumulative translation adjustment                   (3,152)     (3,152)
      Deficit                                            (15,180)    (12,623)
      -----------------------------------------------------------------------
                                                          78,816      41,445
    Commitments (note 18)
    Contingencies (note 19)
    Guarantees (note 20)
    Subsequent events (note 22)
    -------------------------------------------------------------------------
                                                       $ 186,573   $ 158,483
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CONSTELLATION SOFTWARE INC.
    Consolidated Statements of Operations
    (In thousands of U.S. dollars, except share and per share amounts)

    -------------------------------------------------------------------------
                                 Three months ended     Twelve months ended
                                    December 31,            December 31,
                                 --------------------------------------------
                                    2006        2005        2006        2005
                                    (Unaudited)
    -------------------------------------------------------------------------
    Revenue                       53,519      44,552     210,759     165,362
    Cost of revenue               20,296      16,993      81,970      64,216
    -------------------------------------------------------------------------
                                  33,223      27,559     128,789     101,146

    Research and development       7,944       6,304      32,821      25,043
    Sales and marketing            6,308       6,229      25,942      22,007
    General and
     administration               10,580       8,443      39,183      30,608
    Amortization of capital
     assets                          787         718       2,943       2,547
    -------------------------------------------------------------------------
                                  25,619      21,694     100,889      80,205
    -------------------------------------------------------------------------
    Income before the
     undernoted                    7,604       5,865      27,900      20,941

    Appreciation in common
     shares eligible for
     redemption (note 6(b))            -           -      10,093       4,528
    Amortization of
     intangible assets             5,143       3,315      17,090      12,170
    Other expenses (income)            -        (115)      1,970         109
    (Gain) loss on sale of
     short-term investments,
     marketable securities
     and other assets               (278)          -        (286)       (658)
    Interest income, net            (199)        (80)       (286)       (754)
    Foreign exchange
     (gain) loss                    (484)        985        (595)      1,552
    -------------------------------------------------------------------------
    Income (loss) before
     income taxes                  3,422       1,760         (86)      3,994

    Income tax expense
    (recovery) (note 7):
      Current                       (395)        828       1,421       3,335
      Future                         (15)        117        (271)        138
      -----------------------------------------------------------------------
                                    (410)        945       1,150       3,473
    -------------------------------------------------------------------------
    Net income (loss)              3,832         815      (1,236)        521
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net income (loss) per
     share (note 8):
      Basic                         0.18        0.04       (0.06)       0.03
      Diluted                       0.18        0.04       (0.06)       0.03

    Weighted average
     number of shares
      Outstanding (in
       thousands) (note 8):
      Basic                       21,056      20,152      20,810      19,952
      Diluted                     21,192      20,544      20,810      20,392

    Outstanding at the end
     of the period                21,192      20,740      21,192      20,740
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CONSTELLATION SOFTWARE INC.
    Consolidated Statements of Cash Flows
    (In thousands of U.S. dollars)

    -------------------------------------------------------------------------
                                 Three months ended     Twelve months ended
                                    December 31,            December 31,
                                 --------------------------------------------
                                    2006        2005        2006        2005
                                    (Unaudited)
    -------------------------------------------------------------------------
    Cash flows from operating
     activities:
      Net income (loss)        $   3,832   $     815   $  (1,236)  $     521
      Adjustments to
       reconcile net income
       to net cash flows
       from operations:
        Amortization of
         capital assets              787         718       2,943       2,547
        Write off of
         capital assets                -         123           -         123
        Amortization of
         intangible assets         5,143       3,315      17,090      12,170
        Appreciation in common
         shares eligible for
         redemption                    -           -      10,093       4,528
        Deferred compensation          -           -         400         232
        Future income taxes          (15)        117        (271)        138
        (Gain) loss on sale
         of short term
         investments,
         marketable securities
         and other assets           (278)          -        (286)       (658)
        Unrealized exchange
         loss (gain)                (180)      1,049        (660)      1,621
      Change in non-cash
       operating working
       capital (note 11)           3,832       2,806         556       3,467
      -----------------------------------------------------------------------
      Cash flows from
       operating activities       13,121       8,943      28,629      24,689

    Cash flows from (used in)
     financing activities:
      Increase (decrease) in
       long term liabilities         525       1,653        (278)      1,464
      Dividends                        -           -      (1,381)     (1,150)
      Distributions to common
       shares eligible for
       redemption                      -           -        (471)       (346)
      Issue of common shares
       eligible for redemption,
       net of shareholder loans        -           3       3,806       2,045
      Redemption of common
       shares eligible for
       redemption                      -         (86)        (20)       (532)
      Repayment of shareholder
       loans                         501          24       2,975         955
      Repurchase of phantom
       shares (note 9)                 -           -      (1,657)        (62)
      Return of capital                -           -        (637)       (531)
      -----------------------------------------------------------------------
      Cash flows from (used in)
       financing activities        1,026       1,594       2,337       1,843

    Cash flows from (used in)
     investing activities:
      Acquisition of
       businesses, net of cash
       acquired (note 3)          (4,306)    (13,481)    (19,331)    (28,909)
      Additions to short-term
       investments, marketable
       securities and
       other assets                 (541)       (932)     (2,850)       (932)
      Proceeds on sale of
       short-term investments,
       marketable securities
       and other assets              748           -         748       2,111
      Restricted cash               (858)          -        (858)          -
      Other assets                    72        (773)        202        (773)
      Capital asset purchases       (263)       (764)     (2,255)     (3,463)
      -----------------------------------------------------------------------
      Cash flows used in
       investing activities       (5,148)    (15,950)    (24,344)    (31,966)

    Effect of currency
     translation adjustment
     on cash and cash
     equivalents                     260        (995)        900      (1,726)
    -------------------------------------------------------------------------
    Increase (decrease) in
     cash and cash
     equivalents                   9,259      (6,408)      7,522      (7,160)
    Cash and cash equivalents,
     beginning of period          16,548      24,693      18,285      25,445
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period             $  25,807   $  18,285   $  25,807   $  18,285
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





For further information:

For further information: Barry Symons, Chief Financial Officer, (416)
861-2279, info@csisoftware.com, www.csisoftware.com

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CONSTELLATION SOFTWARE INC.

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