Constellation Software : Q4 2024 Financial Statements

Published: 2025-03-07 17:09:23 ET CSU.TO

Consolidated Financial Statements (In U.S. dollars)

CONSTELLATION

SOFTWARE INC.

For the years ended December 31, 2024 and 2023

KPMG LLP

Vaughan Metropolitan Centre

100 New Park Place

Suite 1400

Vaughan, ON Canada L4K 0J3

Telephone (905) 265-5900

Fax (905) 265-6390

www.kpmg.ca

INDEPENDENT AUDITOR'S REPORT

To the Shareholders of Constellation Software Inc.

Opinion

We have audited the consolidated financial statements of Constellation Software Inc. (the Entity), which comprise:

(Hereinafter referred to as the "financial statements").

In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated financial position of the Entity as at December 31, 2024 and December 31, 2023, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board.

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the "Auditor's Responsibilities for the Audit of the Financial Statements" section of our auditor's report.

We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

KPMG LLP, an Ontario limited liability partnership and member firm of the KPMG global organization of independent member firms affiliated

with KPMG International Limited, a private English company limited by guarantee. KPMG Canada provides services to KPMG LLP.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the year ended December 31, 2024. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

We have determined the matter described below to be the key audit matters to be communicated in our auditor's report.

Determination of distinct professional services performance obligation in customer contracts containing multiple performance obligations and estimation of hours to complete for certain percentage-of-completion ("POC") arrangements

Description of the matter

We draw attention to Notes 2(d) and 3(k) to the financial statements. The Entity has recognized revenue of $10,066 million. A portion of revenue is associated with customer contracts that contain multiple products and services such as software licenses, maintenance and other recurring services, professional services, and hardware. The Entity uses significant judgment to assess whether professional services sold in a customer contract are considered distinct and should be accounted for as separate performance obligations. Revenue from the license of software that involves complex implementation or customization that is not distinct, and/or includes sales of hardware that is not distinct, is recognized as a combined performance obligation using the percentage-of-completion (POC) method based primarily on labour hours. The Entity applies significant judgment to determine the estimated hours to completion which affect the timing of recognition of revenue for professional services and non-distinct license and/or hardware.

Why the matter is a key audit matter

We identified the determination of distinct professional services performance obligations in customer contracts containing multiple performance obligations and the estimation of hours to complete for certain POC arrangements, being contracts where revenue recognition is based on estimated hours to completion, as a key audit matter. Significant auditor judgment was required to evaluate the Entity's significant judgments of whether professional services are distinct or non-distinct and the estimated hours to completion for arrangements that are completed over an extended period. There was significant auditor effort, involving more senior professionals, required to address this matter.

How the matter was addressed in the audit

The primary procedures we performed to address this key audit matter included the following:

We evaluated the design, and tested the operating effectiveness of certain controls over revenue recognition including controls related to the Entity's process to identify distinct professional services performance obligations in certain customer contracts and controls over the estimation of hours to completion for POC arrangements, inclusive of executed contract amendments and change orders.

For a selection of new customer contracts, we assessed the Entity's determination of distinct/non-distinct professional services performance obligations, if any, by examining the contract source documents, comparing to the Entity's past assessments for similar contracts, and practices observed in the Entity's industry.

For a selection of POC arrangements where revenue recognition is based on the estimated hours to completion, we interviewed operational personnel responsible for the contract. We obtained an understanding of the original estimated hours to completion and any increase or decrease to the estimated hours to completion as the contract progresses and inspected correspondence such as project planning documents and change requests, if any, between the Entity and its customers.

In addition, we assessed the Entity's historical ability to accurately estimate hours to completion by performing an analysis of a selection of completed contracts to compare actual hours incurred upon completion to the initial estimated hours to completion.

Other Information

Management is responsible for the other information. Other information comprises:

Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit and remain alert for indications that the other information appears to be materially misstated.

We obtained the information included in Management's Discussion and Analysis filed with the relevant Canadian Securities Commissions as at the date of this auditor's report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in the auditor's report.

We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Entity's ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Entity's financial reporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit.

We also:

The engagement partner on the audit resulting in this auditor's report is Anuj Madan. Vaughan, Canada

March 7, 2025

CONSTELLATION SOFTWARE INC.

Consolidated Statements of Financial Position

(In millions of U.S. dollars, except per share amounts. Due to rounding, numbers presented may not foot.)

December 31, 2024

December 31, 2023

Assets

Current assets:

Cash

1,980

1,284

Accounts receivable (note 21)

1,292

1,138

Unbilled revenue (note 22)

369

325

Inventories (note 5)

Other assets (note 6)

597

541

4,294

3,339

Non-current assets:

Property and equipment (note 7)

223

142

Right of use assets (note 8)

328

312

Deferred income taxes (note 16)

219

108

Other assets (note 6)

329

286

Intangible assets (note 9)

7,470

6,675

8,569

7,523

Total assets

12,863

10,862

Liabilities and Shareholders' Equity

Current liabilities:

Debt with recourse to Constellation Software Inc. (note 10)

303

861

Debt without recourse to Constellation Software Inc. (note 11)

319

225

Redeemable preferred securities (note 12)

814

Accounts payable and accrued liabilities

1,589

1,427

Dividends payable (note 17)

Deferred revenue (note 22)

1,967

1,757

Provisions (note 13)

Acquisition holdback payables

225

168

Lease obligations (note 14)

115

112

Income taxes payable (note 15)

111

4,672

5,483

Non-current liabilities:

1,855

863

Debt with recourse to Constellation Software Inc. (note 10)

Debt without recourse to Constellation Software Inc. (note 11)

1,689

1,385

Deferred income taxes (note 16)

673

604

Acquisition holdback payables

134

Lease obligations (note 14)

252

236

Other liabilities (note 6)

300

242

4,903

3,418

Total liabilities

9,575

8,901

Shareholders' equity (note 17):

Capital stock

Accumulated other comprehensive income (loss)

(224)

(99)

Retained earnings

2,919

1,876

Non-controlling interests (notes 1, 12 and 28)

493

3,288

1,961

Subsequent events (notes 17 and 29)

Total liabilities and shareholders' equity

12,863

10,862

See accompanying notes to the consolidated financial statements.

CONSTELLATION SOFTWARE INC.

Consolidated Statements of Income (loss)

(In millions of U.S. dollars, except per share amounts. Due to rounding, numbers presented may not foot.)

Years ended December 31,

2024

2023

Revenue

License

393

386

Professional services

1,975

1,766

Hardware and other

302

268

Maintenance and other recurring

7,396

5,985

10,066

8,407

Expenses

Staff

5,322

4,493

Hardware

169

158

Third party license, maintenance and professional services

960

810

Occupancy

Travel, telecommunications, supplies, software and equipment

502

398

Professional fees

178

151

Other, net

182

138

Depreciation (note 7 and 8)

182

162

Amortization of intangible assets (note 9)

1,044

859

8,602

7,219

Foreign exchange loss (gain)

(26)

IRGA/TSS Membership liability revaluation charge (note 10)

183

152

Finance and other expense (income) (note 18)

(60)

(34)

Bargain purchase gain (note 4)

(10)

(54)

Impairment of intangible and other non-financial assets (note 9)

Redeemable preferred securities expense (income) (note 12)

597

Finance costs (note 18)

280

192

452

922

Income (loss) before income taxes

1,011

265

Current income tax expense (recovery) (note 15)

525

370

Deferred income tax expense (recovery) (note 16)

(281)

(166)

Income tax expense (recovery)

244

204

Net income (loss)

767

Net income (loss) attributable to:

Common shareholders of Constellation Software Inc. (notes 1 and 28)

731

565

Non-controlling interests (notes 1, 12 and 28)

(503)

Net income (loss)

767

Earnings per common share of Constellation Software Inc.

Basic and diluted (note 19)

34.48

26.67

See accompanying notes to the consolidated financial statements.

CONSTELLATION SOFTWARE INC.

Consolidated Statements of Comprehensive Income (loss)

(In millions of U.S. dollars, except per share amounts. Due to rounding, numbers presented may not foot.)

Years ended December 31,

20242023

Net income (loss)

767

Items that are or may be reclassified subsequently to net income (loss):

Foreign currency translation differences from foreign operations and other, net of tax

(135)

Other comprehensive income (loss), net of income tax

(135)

Total comprehensive income (loss)

633

113

Total other comprehensive income (loss) attributable to:

Common shareholders of Constellation Software Inc. (notes 1 and 28)

(119)

Non-controlling interests (notes 1, 12 and 28)

(16)

Total other comprehensive income (loss)

(135)

Total comprehensive income (loss) attributable to:

Common shareholders of Constellation Software Inc. (notes 1 and 28)

612

603

Non-controlling interests (notes 1, 12 and 28)

(490)

Total comprehensive income (loss)

633

113

See accompanying notes to the consolidated financial statements.

CONSTELLATION SOFTWARE INC.

Consolidated Statement of Changes in Equity

(In millions of U.S. dollars, except per share amounts. Due to rounding, numbers presented may not foot.)

Year ended December 31, 2024

Equity Attributable to Common Shareholders of CSI

Non-controlling

Total equity

Capital

Accumulated

Retained

Total

stock

other

earnings

interests

comprehensive

income (loss)

Balance at January 1, 2024

(99)

1,876

1,877

1,961

Total comprehensive income (loss):

Net income (loss)

731

767

Other comprehensive income (loss)

Foreign currency translation differences from

foreign operations and other, net of tax

(119)

(16)

(135)

Total other comprehensive income (loss)

(119)

(16)

(135)

Total comprehensive income (loss)

(119)

731

612

633

Transactions with owners, recorded directly in equity

Non-controlling interests arising from business combinations

(0)

Conversion of Lumine Special Shares to subordinate voting shares of

Lumine and settlement of accrued dividend on Lumine Special Shares

through the issuance of subordinate voting shares of Lumine (note 12)

872

Conversion of Lumine Preferred Shares to subordinate voting shares of

Lumine and settlement of accrued dividend on Lumine Preferred Shares

through the issuance of subordinate voting shares of Lumine (note 1)

(6)

400

394

(394)

Other movements in non-controlling interests

(2)

(4)

Dividends paid to non-controlling interests (note 28)

(89)

Dividends to shareholders of the Company (note 17)

(85)

Balance at December 31, 2024

(224)

2,919

2,795

493

3,288

See accompanying notes to the consolidated financial statements.

Disclaimer

Constellation Software Inc. published this content on March 07, 2025, and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on March 07, 2025 at 22:08:21.317.