TORONTO, March 15, 2023 (GLOBE NEWSWIRE) -- Lumine Group Inc. (“Lumine Group”) in a joint release with Constellation Software Inc. (TSX:CSU) (“Constellation”) today announced financial results for Lumine Group (Holdings) Inc. (the “Company”), an indirect wholly owned subsidiary of Constellation, for the fourth quarter and year ended December 31, 2022. Please note that all amounts referred to in this press release are in US dollars unless otherwise stated.
The following press release should be read in conjunction with the Company’s Annual Consolidated Financial Statements for the year ended December 31, 2022, prepared in accordance with International Financial Reporting Standards (“IFRS”), and the Lumine Group’s annual Management’s Discussion and Analysis for the year ended December 31, 2022, which can be found on SEDAR at www.sedar.com and on Lumine Group’s website www.luminegroup.com. Additional information about Lumine Group is also available on SEDAR at www.sedar.com. The information presented is based on the historical financial performance of the Company, as predecessor to Lumine Group, and does not take into account the transactions described under “Subsequent Events”.
Q4 2022 Headlines:
- Revenue grew 14% to $68.3 million compared to $59.7 million in Q4 2021 (including -2% organic growth after adjusting for foreign exchange impacts).
- Net income decreased to a loss of $1.1 million from income of $6.9 million in Q4 2021.
- The acquisition of WizTivi SAS was completed in Q4 2022 for aggregate cash consideration of $33.3 million (which includes acquired cash). Deferred payments associated with this acquisition have an estimated value of $3.1 million resulting in total consideration of $36.4 million.
- Cash flows from operations (“CFO”) decreased $8.9 million to $9.8 million compared to $18.7 million in Q4 2021 representing a decrease of 47%.
2022 Headlines:
- Revenue grew 12% to $255.7 million compared to $228.4 million in 2021 (including -3% organic growth after adjusting for foreign exchange impacts).
- Net income stayed flat year-over-year at $27.4 million ($27.5 million in 2021).
- Two acquisitions were completed in 2022 for aggregate cash consideration of $113.2 million (which includes acquired cash). Deferred payments associated with these acquisitions have an estimated value of $6.4 million resulting in total consideration of $119.6 million.
- CFO decreased $51.4 million to $34.6 million compared to $86.0 million in 2021 representing a decrease of 60%.
Total revenue for the quarter ended December 31, 2022 was $68.3 million, an increase of 14%, or $8.6 million, compared to $59.7 million for the comparable period in 2021. For the 2022 fiscal year total revenues were $255.7 million, an increase of 12%, or $27.4 million, compared to $228.4 million for the 2021 fiscal year. The increase for both the three and twelve month periods ended December 31, 2022 compared to the same periods in the prior year is primarily attributable to growth from acquisitions. The Company experienced negative organic growth of -9% for both the three and twelve month periods ended December 31, 2022, or -2% and -3%, respectively, after adjusting for foreign exchange impacts. Organic growth is not a standardized financial measure and might not be comparable to measures disclosed by other issuers.
Net loss for the quarter ended December 31, 2022 was ($1.1) million compared to net income of $6.9 million for the same period in 2021. Net income decreased by $0.1 million to $27.4 million for the year ended December 31, 2022, compared to net income of $27.5 million for the same period in 2021. The decrease in net income for the three and twelve month periods ended December 31, 2022 compared to the same periods prior year is primarily attributable to one-time fees incurred in 2022 related to the corporate reorganization, public listing, and acquisition of WideOrbit Inc. (“WideOrbit”), which are discussed further below under Subsequent Events.
For the quarter ended December 31, 2022, CFO decreased $8.9 million to $9.8 million compared to $18.7 million for the same period in 2021 representing a decrease of 47%. The decrease is mainly related to lower net income and higher income taxes paid during Q4 2022. For the twelve months ended December 31, 2022, CFO decreased $51.4 million to $34.6 million compared to $86.0 million for the same period in 2021 representing a decrease of 60%. The primary reason for the decrease is that CFO includes the impact of changes in non-cash operating assets and liabilities exclusive of effects of business combinations or, changes in non-cash operating working capital (“NCOWC”), and income taxes paid. There are many reasons contributing to the NCOWC impact variance for the Company, none of which are indicative of an underlying concern with the overall NCOWC balance. Specifically, there are no concerns with accounts receivable or unbilled revenue aging.
Subsequent Events
(a) Capital Reorganization
On February 21, 2023, Lumine Group filed articles of amendment and reorganized its share capital. Subsequent to the reorganization, Lumine Group is authorized to issue one super voting share (“Super Voting Share”), an unlimited number of subordinate voting shares (“Subordinate Voting Shares”), an unlimited number of preferred shares (“Preferred Shares”), and an unlimited number of special shares (“Special Shares”). The Preferred Shares are non-voting and are entitled to a cumulative dividend of 5% per annum and are convertible into Subordinate Voting Shares at a pre-determined ratio. The holders of the Preferred Shares are entitled to redeem some or all of their shares and receive an amount of cash equal to the initial equity value of the Preferred Shares. The Special Shares carry voting rights equivalent to Subordinate Voting Shares, with a cumulative dividend entitlement of 5% per annum and can be converted to Subordinate Voting Shares at a pre-determined ratio. The holders of the Special Shares are entitled to redeem some or all of their shares and receive an amount of cash equal to the initial equity value of the Special Shares, plus one Subordinate Voting Share for each Special Share redeemed.
Holders of Subordinate Voting Shares and the Super Voting Share are entitled to attend and vote at meetings of Lumine Group's shareholders except meetings at which only holders of a particular class are entitled to vote. Holders of Subordinate Voting Shares are entitled to one vote per share, and the holder of the Super Voting Share is entitled to that number of votes that equals 50.1% of the aggregate number of votes attached to all of the outstanding Super Voting Shares, Subordinate Voting Shares and Special Shares at such time. Other than in respect of voting rights, the Subordinate Voting Shares and the Super Voting Share have the same rights, are equal in all respects and are treated as if they were one class of shares.
As a result of the share capital reorganization, Lumine Group reclassified the one common share issued to Trapeze Software ULC (“Trapeze”), a wholly owned indirect subsidiary of Constellation, into one Super Voting Share.
(b) Acquisition of Lumine Group (Holdings) Inc.
On February 22, 2023, Lumine Group acquired the Company, a global portfolio of communications and media software companies and a wholly owned subsidiary of Trapeze. As consideration for the acquisition, Lumine Group issued 63,582,712 Subordinate Voting Shares and 55,233,745 Preferred Shares to Trapeze.
Immediately following the completion of the acquisition of the Company, Lumine Group amalgamated with the Company, with the resulting entity being Lumine Group (the “Amalgamation”). The Amalgamation is a business combination involving entities under common control in which all of the combining entities are ultimately controlled by Constellation, both before and after the reorganization transactions were completed. Business combinations involving entities under common control are outside the scope of IFRS 3 Business Combinations. Lumine Group will account for this common control transaction using book value accounting, based on the book values recognized in the financial statements of the underlying entities.
(c) Acquisition of WideOrbit Inc.
On February 22, 2023, immediately following the Amalgamation, Lumine Group completed the acquisition of 100% of the shares of WideOrbit for a purchase price of $490.0 million which was funded through a combination of cash, repayment of WideOrbit debt, and the issuance of 10,204,294 Special Shares. WideOrbit is a software business that primarily operates in the advertising market for cable networks, local television stations and radio stations. Lumine Group obtained the cash portion of the purchase price from Trapeze, in exchange for issuing it a further 8,348,967 Preferred Shares.
The gross purchase price is subject to customary adjustments, as a result of, but not limited to, minimum cash requirements of $10.0 million, target net indebtedness of $86.7 million, and claims under the representations and warranties of the acquisition agreement. Lumine Group has the ability to reduce the cash portion of the purchase consideration by $10.0 million for net indebtedness up to $96.7 million. If net indebtedness is greater than $96.7 million, excess repayment would be funded by Lumine Group and added to the gross purchase price. Pursuant to the terms of the acquisition agreement, eligible shareholders of WideOrbit elected to rollover a portion of their WideOrbit common shares into Special Shares of Lumine Group.
As of the date hereof, Lumine Group has not yet completed the initial accounting for the WideOrbit acquisition, including the fair value assessment of the assets acquired and liabilities assumed, due to the proximity of the date of acquisition to the date hereof.
(d) Spinout of Lumine Group
On February 23, 2023, Trapeze declared and paid a dividend-in-kind and distributed its 63,582,712 Subordinate Voting Shares of Lumine Group to its parent, Volaris Group Inc., who further distributed these shares to its parent Constellation. Constellation then distributed 63,582,706 Subordinate Voting Shares to its shareholders pursuant to a dividend-in-kind, resulting in Lumine Group's Subordinate Voting Shares being issued to public shareholders of Constellation.
(e) New Bank Facility
On March 2, 2023, WideOrbit entered into a revolving financing facility with a syndicate of Canadian and US financial institutions amounting to $185.0 million, to provide long-term financing in connection with the acquisition of WideOrbit. Covenants associated with this facility are monitored and reported based on the financial position and financial performance of WideOrbit. The covenants include a leverage ratio and a fixed charge coverage ratio. The loan has a maturity date of March 2, 2028 and bears an interest rate of SOFR plus applicable spreads ranging from 1.75% to 3%, based on the leverage ratio. Lumine Group does not guarantee this debt, nor are there any cross-guarantees between other subsidiaries. The credit facility is collateralized by substantially all of the assets of WideOrbit.
(f) Acquisition of Titanium Software Holdings Inc
On March 8, 2023, Lumine Group acquired 100% of the outstanding shares of Titanium Software Holdings Inc (“Titanium”) for aggregate cash consideration of $31.4 million on closing plus cash holdbacks of $14.4 million and contingent consideration with an estimated acquisition date fair value of $4.1 million for total consideration of $49.9 million. Titanium is a software company catering to the communications and media market, which is a software business similar to existing businesses operated by Lumine Group. For this arrangement, which includes a maximum, or capped, contingent consideration amount, the contingent consideration is not expected to exceed $10.0 million. The cash holdbacks are payable over a two-year period and are adjusted, as necessary, for such items as working capital or net tangible asset assessments, as defined in the agreements, and claims under the respective representations and warranties of the purchase and sale agreements.
As of the date hereof, Lumine Group had not yet completed the initial accounting for the acquisition, including the fair value assessment of the assets acquired and liabilities assumed, due to the proximity of the date of acquisition to the date hereof.
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 Lumine Group 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 Lumine Group assumes no obligation, except as required by law, to update any forward-looking statements to reflect new events or circumstances.
About Lumine Group Inc.
Lumine Group acquires, strengthens, and grows, vertical market software businesses in the communications and media industry. Learn more at www.luminegroup.com.
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.
For further information:
Jamal Baksh
Chief Financial Officer
Constellation Software Inc.
jbaksh@csisoftware.com
David Nyland
Chief Executive Officer
Lumine Group
david.nyland@luminegroup.com
| Lumine Group (Holdings) Inc. | |||||
| Consolidated Statements of Financial Position | |||||
| (In thousands of USD. Due to rounding, numbers presented may not foot.) | |||||
| December 31, 2022 | December 31, 2021 | ||||
| Assets | |||||
| Current assets: | |||||
| Cash | $ | 67,085 | $ | 27,110 | |
| Accounts receivable | 63,677 | 45,109 | |||
| Due from related parties, net | - | 111,629 | |||
| Unbilled revenue | 9,965 | 7,219 | |||
| Inventories | 60 | 26 | |||
| Other assets | 22,967 | 16,679 | |||
| 163,754 | 207,772 | ||||
| Non-current assets: | |||||
| Property and equipment | 3,138 | 2,517 | |||
| Right of use assets | 5,349 | 4,503 | |||
| Deferred income taxes | 2,931 | 3,580 | |||
| Other assets | 8,492 | 6,785 | |||
| Intangible assets and goodwill | 216,797 | 103,249 | |||
| 236,707 | 120,634 | ||||
| Total assets | $ | 400,461 | $ | 328,406 | |
| Liabilities and Equity | |||||
| Current liabilities: | |||||
| Accounts payable and accrued liabilities | $ | 63,879 | $ | 51,169 | |
| Due to related parties, net | 35,466 | - | |||
| Current portion of bank debt | 975 | - | |||
| Deferred revenue | 62,449 | 63,991 | |||
| Provisions | 22 | 27 | |||
| Acquisition holdback payables | 3,121 | 2,976 | |||
| Lease obligations | 2,069 | 2,365 | |||
| Income taxes payable | 9,464 | 5,690 | |||
| 177,445 | 126,218 | ||||
| Non-current liabilities: | |||||
| Deferred income taxes | 36,366 | 16,628 | |||
| Bank debt | 18,138 | - | |||
| Lease obligations | 4,719 | 2,250 | |||
| Other liabilities | 10,013 | 10,160 | |||
| 69,236 | 29,038 | ||||
| Total liabilities | 246,681 | 155,257 | |||
| Equity: | |||||
| Capital stock | - | - | |||
| Net parent investment | - | 169,920 | |||
| Contributed surplus | 162,692 | - | |||
| Accumulated other comprehensive income (loss) | (8,912) | 3,229 | |||
| Retained earnings (deficit) | - | - | |||
| 153,780 | 173,149 | ||||
| Subsequent events | |||||
| Total liabilities and equity | $ | 400,461 | $ | 328,406 | |
| Lumine Group (Holdings) Inc. | ||||||
| Consolidated Statements of Income (Loss) | ||||||
| (In thousands of USD, except per share amounts. Due to rounding, numbers presented may not foot.) | ||||||
| Years ended December 31, | ||||||
| 2022 | 2021 | |||||
| Revenue | ||||||
| License | $ | 38,731 | $ | 36,745 | ||
| Professional services | 49,771 | 49,836 | ||||
| Hardware and other | 7,273 | 8,969 | ||||
| Maintenance and other recurring | 159,970 | 132,806 | ||||
| 255,745 | 228,355 | |||||
| Expenses | ||||||
| Staff | 134,316 | 120,092 | ||||
| Hardware | 4,617 | 5,166 | ||||
| Third party license, maintenance and professional services | 11,040 | 10,344 | ||||
| Occupancy | 2,936 | 2,102 | ||||
| Travel, telecommunications, supplies, software and equipment | 11,610 | 8,002 | ||||
| Professional fees | 12,289 | 3,203 | ||||
| Other, net | 6,334 | 10,484 | ||||
| Depreciation | 5,303 | 5,161 | ||||
| Amortization of intangible assets | 31,836 | 25,521 | ||||
| 220,281 | 190,076 | |||||
| Finance and other expenses (income) | (414) | 744 | ||||
| (414) | 744 | |||||
| Income (loss) before income taxes | 35,878 | 37,536 | ||||
| Current income tax expense (recovery) | 15,742 | 10,829 | ||||
| Deferred income tax expense (recovery) | (7,266) | (759) | ||||
| Income tax expense (recovery) | 8,476 | 10,070 | ||||
| Net income (loss) | $ | 27,402 | $ | 27,466 | ||
| Earnings per share: | ||||||
| Basic | $ | 0.11 | N/A | |||
| Diluted | $ | 0.11 | N/A | |||
| Lumine Group (Holdings) Inc. | ||||||
| Consolidated Statements of Comprehensive Income (Loss) | ||||||
| (In thousands of USD. Due to rounding, numbers presented may not foot.) | ||||||
| Years ended December 31, | ||||||
| 2022 | 2021 | |||||
| Net income (loss) | $ | 27,402 | $ | 27,466 | ||
| Items that are or may be reclassified subsequently to net income (loss): | ||||||
| Foreign currency translation differences from foreign operations and other | (12,141) | (2,410) | ||||
| Other comprehensive (loss) income for the year, net of income tax | (12,141) | (2,410) | ||||
| Total comprehensive income (loss) for the year | $ | 15,261 | $ | 25,056 | ||
| Lumine Group (Holdings) Inc. | |||||||||
| Consolidated Statement of Changes in Equity | |||||||||
| (In thousands of USD. Due to rounding, numbers presented may not foot.) | |||||||||
| Year ended December 31, 2022 | |||||||||
| Capital stock | Contributed surplus | Accumulated other comprehensive (loss) income | Retained earnings (deficit) | Net parent investment | Total equity | ||||
| Balance at January 1, 2022 | - | - | 3,229 | - | 169,920 | 173,149 | |||
| Total comprehensive income (loss) for the year: | |||||||||
| Net income (loss) | 27,402 | 27,402 | |||||||
| Other comprehensive income (loss): | |||||||||
| Foreign currency translation differences from foreign operations and other | (12,141) | (12,141) | |||||||
| Total other comprehensive income (loss) for the year | - | - | (12,141) | - | 27,402 | 15,261 | |||
| Total comprehensive income (loss) for the year | - | - | (12,141) | - | 27,402 | 15,261 | |||
| Transactions with Parent, recorded directly in equity | |||||||||
| Capital contributions by Parent | 76,400 | 76,400 | |||||||
| Dividends to Parent | (111,030) | (111,030) | |||||||
| Acquisition of Lumine Portfolio entities | 162,692 | (162,692) | - | ||||||
| Balance at December 31, 2022 | - | 162,692 | (8,912) | - | - | 153,780 | |||
| Lumine Group (Holdings) Inc. | ||||||||
| Consolidated Statement of Changes in Equity | ||||||||
| (In thousands of USD. Due to rounding, numbers presented may not foot.) | ||||||||
| Year ended December 31, 2021 | ||||||||
| Contributed surplus | Accumulated other comprehensive (loss) income | Retained earnings (deficit) | Net parent investment | Total equity | ||||
| Balance at January 1, 2021 | - | 5,639 | - | 141,472 | 147,111 | |||
| Total comprehensive income (loss) for the year: | ||||||||
| Net income (loss) | 27,466 | 27,466 | ||||||
| Other comprehensive income (loss): | ||||||||
| Foreign currency translation differences from foreign operations and other | (2,410) | (2,410) | ||||||
| Total other comprehensive income (loss) for the year | - | (2,410) | - | 27,466 | 25,056 | |||
| Total comprehensive income (loss) for the year | - | (2,410) | - | 27,466 | 25,056 | |||
| Transactions with Parent, recorded directly in equity | ||||||||
| Non-cash capital contributions for the transfer of acquired legal entities | 14,148 | 14,148 | ||||||
| Dividends to Parent | (13,165) | (13,165) | ||||||
| Balance at December 31, 2021 | - | 3,229 | - | 169,920 | 173,149 | |||
| Lumine Group (Holdings) Inc. | ||||
| Consolidated Statements of Cash Flows | ||||
| (In thousands of USD. Due to rounding, numbers presented may not foot.) | ||||
| Years ended December 31, | ||||
| 2022 | 2021 | |||
| Cash flows from (used in) operating activities: | ||||
| Net income (loss) | 27,402 | 27,466 | ||
| Adjustments for: | ||||
| Depreciation | 5,303 | 5,161 | ||
| Amortization of intangible assets | 31,836 | 25,521 | ||
| Contingent consideration adjustments | (2,130) | 3,983 | ||
| Finance and other expenses (income) | (414) | 744 | ||
| Income tax expense (recovery) | 8,476 | 10,070 | ||
| Change in non-cash operating assets and liabilities exclusive of effects of business combinations | (26,755) | 17,265 | ||
| Income taxes (paid) received | (9,093) | (4,182) | ||
| Net cash flows from (used in) operating activities | 34,625 | 86,027 | ||
| Cash flows from (used in) financing activities: | ||||
| Interest paid on lease obligations | (204) | (153) | ||
| Interest paid on bank debt | (192) | - | ||
| Cash transferred from (to) Parent | 104,871 | (80,030) | ||
| Cash obtained with businesses acquired by Parent | - | 3,217 | ||
| Proceeds from issuance of bank debt | 19,666 | - | ||
| Repayments of bank debt | (244) | - | ||
| Transaction costs on bank debt | (316) | - | ||
| Payments of lease obligations | (2,781) | (2,669) | ||
| Net cash flows from (used in) in financing activities | 120,800 | (79,635) | ||
| Cash flows from (used in) investing activities: | ||||
| Acquisition of businesses | (113,186) | (15,926) | ||
| Cash obtained with acquired businesses | 5,295 | 2,917 | ||
| Post-acquisition settlement payments, net of receipts | (6,669) | (470) | ||
| Property and equipment purchased | (783) | (700) | ||
| Net cash flows from (used in) investing activities | (115,343) | (14,179) | ||
| Effect of foreign currency on cash and cash equivalents | (107) | (247) | ||
| Increase (decrease) in cash | 39,975 | (8,034) | ||
| Cash, beginning of period | 27,110 | 35,144 | ||
| Cash, end of period | 67,085 | 27,110 | ||
