Running Head: BFIN 241 Group Project

Financial Analysis of
Constellation Software Inc.
Brooklynn Nelsen, Mike Filzwieser, Jinwen Zhang, & Alex Nguyen
BFIN 241 1A - Allen Zhu
March 31, 2014


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Executive Summary

This report presents the findings of an evaluation of the financial performance of Constellation Software
Inc., a Canadian publicly traded company, by analyzing its financial statements and stock performance
over the past four years. The purpose of the evaluation is to determine the relationship between the
performance of the company and the macro business environment. Findings are based on financial
statements provided by Constellations websites and other finance sources. In order to present our
findings to the board, shareholders, lenders, and management team, the information found was utilized
to generate recommendations to improve performance, as well as how these recommendations will
impact profitability and share price.

Constellation Software Inc. is a leader in the Technology Industry on the Toronto Stock Exchange, which
was once dominated by the smartphone maker Blackberry. They specialize in development, installation,
and customization of software in two sectors: the public sector, which includes government and
government-related customers, and the private sector, which includes commercial customers. The
company operates in Canada, USA, UK, and Europe.

The Companys strategy is to acquire, manage, and build vertical market software businesses, in order to
address the specific needs of their customers. Since the company looks to acquire companies with high
growth potential, they have been able to produce substantial cash flow and revenue growth over the
years, making them the third best-performing stock in Canada over the past five years.

Overall, in order to maximize shareholder wealth, Constellation aims to expand operations and continue
to pay dividends to its shareholders. Moving forward, Constellation will proceed in their acquisition
strategy as it has been proven very successful. In addition, to acquire more VMS business in the future,
the company should look to attain external funding through adequate sources. However, if they were to
reduce dividend payout annually, Constellation would have the required funding to finance their
investing activity.


This report is divided into three major sections: Company Description (written by Alex Nguyen), Financial Statement
Analysis (written by Brooklynn Nelsen), and Market Analysis (written by Jinwen Zhang & Mike Filzwieser). The
financial statement analysis uses financial statements taken from Constellations annual reports, as well as The
Globe and Mail Investor to justify results over a four-year period. They have been formatted in a clear and
understandable way by Brooklynn Nelsen, and properly presented as Appendices in this report.
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Table of Contents
Executive Summary ............................................................................................................... 1
Company Description ............................................................................................................ 4
History & Background ........................................................................................................................................................... 4
Industry & Operations ........................................................................................................................................................... 4
Head Office & Executive Information .............................................................................................................................. 4
Management Team....................................................................................................................................................................... 4
Board of Directors ......................................................................................................................................................................... 5
Competitors ............................................................................................................................................................................... 6
SWOT Analysis .......................................................................................................................................................................... 6
Current Events .......................................................................................................................................................................... 8
Financial Statement Analysis ................................................................................................. 9
Income Statement.................................................................................................................................................................... 9
Horizontal Analysis ...................................................................................................................................................................... 9
Vertical Analysis ......................................................................................................................................................................... 11
Balance Sheet .......................................................................................................................................................................... 12
Horizontal Analysis ................................................................................................................................................................... 12
Vertical Analysis ......................................................................................................................................................................... 14
Statement of Cash Flows ..................................................................................................................................................... 15
Ratio Analysis .......................................................................................................................................................................... 16
Profitability Ratios..................................................................................................................................................................... 16
Asset Utilization Ratios ............................................................................................................................................................ 17
Liquidity Ratios ........................................................................................................................................................................... 19
Debt Utilization Ratios............................................................................................................................................................. 20
Operating and Financial Leverage .................................................................................................................................. 21
Dividend Performance......................................................................................................................................................... 21
Working Capital...................................................................................................................................................................... 22
Net Working Capital ................................................................................................................................................................. 22
Cash Flow Cycle ........................................................................................................................................................................... 22
Market Analysis ................................................................................................................... 23
Stock Price History ................................................................................................................................................................ 23
Long Term (5 Year Trend) ..................................................................................................................................................... 23
Short Term (1 Year Trend) .................................................................................................................................................... 23
Current Month (March 2014) ............................................................................................................................................... 23
Stock Performance ................................................................................................................................................................ 24
Comparative Data: S&P/TSX Composite Index ......................................................................................................... 25
Long Term (5 Year Trend) ..................................................................................................................................................... 25
Short Term (1 Year Trend) .................................................................................................................................................... 25
Current Month (March 2014) ............................................................................................................................................... 25
Stock Index Comparison ..................................................................................................................................................... 26
Stock Prediction ..................................................................................................................................................................... 26
Company Performance ........................................................................................................................................................ 27
Forecasts ............................................................................................................................. 28
Conclusion and Recommendations ...................................................................................... 29
References .......................................................................................................................... 30
Appendix A: Current Events & News ............................................................................................................................. 30
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Appendix B: Income Statement ....................................................................................................................................... 31
Horizontal Analysis ................................................................................................................................................................... 32
Vertical Analysis ......................................................................................................................................................................... 32
Appendix C: Organic Revenue Growth - Public Transit Solutions ..................................................................... 33
Appendix D: Balance Sheet ................................................................................................................................................ 34
Horizontal Analysis ................................................................................................................................................................... 35
Vertical Analysis ......................................................................................................................................................................... 36
Appendix E: Statement of Cash Flows ........................................................................................................................... 37
Appendix F: Ratios ................................................................................................................................................................ 38
Appendix G: Geographic Information ........................................................................................................................... 39
Works Cited......................................................................................................................... 40


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Company Description
History & Background
Mr. Mark Leonard founded Constellation Software in 1995 and still serves as president today. Prior to
creating Constellation Software, he worked in venture capital business for eleven years. Mr. Leonard
holds a Bachelor of Science degree from the University of Guelph and acquired his MBA from the
University of Western Toronto. In an amazing 18 years, the company is one of the most profitable
technology companies in the world, boasting a growth percentage of over 800 percent in the last five
years. Throughout Constellations history, the company has acquired a variety of vertical market
software, as well as offering software and related professional services to various segments in both
public & private sectors. Today, Constellation serves more than 30,000 clients in countries all over the
world with 6,278 full-time employees.

(Constellation Software Inc.)
Industry & Operations
Constellation Software Inc. is classified under the Technology sector on the Toronto Stock Exchange.
Constellation can be found in the Application software industry on the TSX market and can also be
classified as technical and system software industry. The company is 1 of 8 constituents in the
S&P/TSX Capped Information Technology Index. Blackberry Limited is among the 8 competing with
Constellation. Constellation provides different products including softwares which help build homes,
public transportation, as well as for recreational purposes. The Company typically sells or licenses
software on a perpetual basis, but also licenses software for a specified period (MSN Money, 2013).
Currently, the company is one of the most prominent international software services in both private and
public industries.
Head Office & Executive Information
Constellation Software Inc. head office is located at 20 Adelaide Street East, Suite 1200, Toronto, ON
M5C 2T6, Canada. CSI also has offices located in North America, Europe, and Australia.
The companies website is: [Link]
Management Team
Mr. Mark Leonard, 58, Founder, Chairman and President: Mr. Leonard founded Constellation Software
Inc. in 1995. His early work includes working in the venture capital for eleven years. Mr. Leonard
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education background includes [Link]. from University of Guelph and his MBA from University of Western
Toronto. He has held many important roles throughout his life career, which includes serving as a
corporate banker for the United State of America and Canada.

Mr. Jamel Baksh, Chief Financial Officer: Mr. Jamel Baksh joined the company in 2003. Mr. Jamael is a
certified management accountant and holds his Bachelor of Mathematics degree from the University of
Waterloo (Constellation Software Inc.). Mr. Jamel has only held the Chief financial officer position since
March 2013. Prior taking the chief financial officer position, he held the vice president finance position
for 9 years.

Mr. Mark Miller, Chief Operating Officer: Mr. Mark Miller has been with the company for more than 15
years. Not only is he the chief Operating Officer for Constellation software Inc., but also serves as the
CEO for Volaris operating group and Trapeze group.

Mr. Benard Anzarouth, Vice President, Mergers and Acquisition: Mr. Benard joined Constellation
Software Inc. in 1995 with Mr. Leonard. Mr. Anzarouth holds a [Link]. in Electrical/Computer
Engineering from McGill University and an MBA from the European Institute of Business Administration
(Bloomberg).
Board of Directors
Name Positions Pay
Mark Leonard
President and Chairman of the Board $2.17 million
Jamel Baksh
Chief Financial Officer
Jeff Bender
Chief Executive Officer - Harris Operating Group, Director $1.42 million
John Billowits
Chief Executive Officer - Vela Operating Group $1.10 million
Michael Byrne
Chief Executive Officer - Emphasis Operating Group
Dexter Salna
President - Constellation Homebuilders Operating Group
Barry Symons
Chief Executive Officer - Jonas Operating Group
Mark Miller
Chief Operating Officer, Director; Chief Executive Officer,
Volaris Operating Group
$2.63 million
Bernard Anzarouth
Vice President - Mergers & Acquisitions
Mark Dennison
General Counsel, Secretary
Mark Thompson
General Manager - Friedman Operating Group
Stephen Scotchmer
Lead Independent Director
Robert Kittel
Director
J. Brian Aune
Independent Director
Ian McKinnon
Independent Director
(Constellation Software Inc.)
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Competitors
In a sense, Constellation has very little competitions in the market. The reasons behind this are because
Constellation typically acquires many small private companies and avoids competing with larger firm. In
addition, there are many factors that add to competition. Some of these factor includes the licensing of
VMS is based on clients specific demands and needs. As a result, competitor does not provide industry
specific solution that meets the exact needs and demand of what the client is looking for. Constellation
targets this exact need and therefore dominates the market.

The following companies are the closest competitors to Constellation:
Intact Financial
RioCan Real Estate Investment
Onex Corporation
H&R Real Estate Invest. Trust
Industrial Alliance Ins & Fin
Central Fund of Canada
Genworth MI Canada
Calloway REIT
SWOT Analysis
Past Present Expected
Strengths
Low receivable turn over
Large deferred tax
recovery*
Profitability
High EPS
Liquidity of assets
Debt to total assets
Positive Cash flow
Large Free Cash flow
Lower dividends rate
Lower cash flow
Sustainable growth rate
Profitability
Weaknesses
High average collection
period
Large foreign exchange lost
Higher average turn over
Higher turnover ratio
High variable cost
High Accounts receivable
High Inventory
Higher Accounts
receivable
Higher Inventory
Opportunities
Realized gain on AFS
financial assets
Technology is improving
Further room for acquisition
Large free cash flow for investment
opportunity
More acquisition of VMS
Financial leverage is less
elastic
Threats
Foreign Exchange lost

Increasing operating expenses
Large research & Development cost
High dividends
Large decrease in subsidiaries
Reduce dividends
Subject to tax audit




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Strengths
Constellations improved their net cash flow provided in operating activities significantly from $81.53 to
$144.79 million in 2009 to 2012. This is a significant change in cash flow from operation. Compared to
2011 and 2012, there has been a net increase by 7.81 million dollar. It is expected that Constellation will
continue to improve their net cash flow from activities. Constellation is subjected to foreign exchange
loss or gain as the company operates many of their business internationally. Because there are currency
fluctuations where the company can experience unrealized loss or possible an unrealized gain
depending on the future foreign rate.

Weakness
In the past, Constellation had large turnover ratio, but with efficient management and better credit
supplier, Constellation have improved many of their turn over ratio significantly during 2009 to 2012.
The companys health is doing very well due to their strategic acquisitions and no signs of any weakness.
There has been a decrease in current ratio by 0.19 to 0.54 from 0.73.

Opportunity
Looking at some of the companys past SWOT analysis, the company shown major improvement relating
to the financial aspect of the company. With Constellations large free cash flow, Constellation can
consider further investments and continue to acquire more vertical market software. With
Constellations past & present strategic acquisitions, Constellation continues to grow and is one of the
leading stocks in Canada.

Threats
Like any business, Constellation is subject to a tax audit according to jurisdiction in which they operate
their business. In 2012, due to the sale of a subsidiary, Canada Revenue Agency found that Constellation
owed move then $11 million in federal and provincial tax and interest. Constellation appealed with the
tax court of Canada, the result could potentially be a threat to the company in the near future. To avoid
future incidents similar to this, the company should be aware of any increase in taxable income within
their operations.

Overall
Constellation has shown exponential growth rate over the past four years. The substantial growth rate
lead to an increased revenue of $453 million to $891 million compared to $434. In terms of profitability,
net profit increased almost 8% since 2009. Although current ratio has decreased by 0.19 to 0.54,
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Investors should consider the nature of this business as a services company. Overall, the company is
managing its financial aspect very well and is in very good and stable position with signs for further
growth in the future.
Current Events
Refer to Appendix A for article links.

Acquisition of PTS from Continental
Cash flows from operations from PTS will fluctuate significantly from quarter to quarter due to the
timing of receipt of milestone payments associated with large customer contracts. PTS has contributed
$51 million in cash flows from operations since the date of acquisition and $15 million for the year
ended December 31, 2012. As part of the PTS acquisition, Constellation also assumed certain long-term
contracts that contain contingent liabilities which may, but in managements opinion are unlikely to,
exceed $1 million in the aggregate. These contingent liabilities relate to liquidated damages
contractually available to customers for breaches of contracts by PTS. The contingent liabilities
represent the maximum financial liabilities potentially due to customers less the amounts accrued in
connection with the contracts assumed on acquisition (Constellation Software Inc., 2012).

Constellation Software's Jonas Division Completes Acquisition of Shortcuts Software Limited
Constellation has announced that its Jonas division has completed the acquisition of all of the
outstanding shares of Shortcuts.

Constellation Software Inc. Announces Results for the Fourth Quarter and Year Ended December 31,
2013
Constellation released its financial results on March 6
th
2013 for the quarter and year ended December
31, 2013. As a result of this release, Constellations stock price soared 12.15% or a $28.76 increase at
market closed.

Constellation Announces Acquisition of the Business of ASA Automotive Systems
Constellation announces its complete acquisition of ASA Automotive systems, LLC on December 10,
2013. With its new acquisitions, ASA will operate through Friedman, a division of Constellation Software
Inc., and will continue further expansion.

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Financial Statement Analysis
Income Statement
Refer to Appendix B for Constellations Income Statement, as well as all horizontal and vertical
calculations for the fiscal year ended December 31, 2009 to fiscal year ended December 31, 2012.

Horizontal Analysis
Revenue
The Companys key source of revenue is comprised from software license fees, maintenance fees, and
professional service fees, with the majority of their revenue coming from the public sector.

The Company saw a 34% increase in total revenue during 2009, which was entirely due to growth from
acquisitions. Since the beginning of 2008, the company has completed 18 acquisitions in the public
sector and 16 in the private sector.

On November 2, 2009, Constellation acquired the Public Transit Solutions (PTS) business from
Continental Automotive AG. Appendix C shows the impact PTS has had on Constellations financial
results over the years. For acquired businesses, organic growth is calculated as the difference between
actual revenues achieved by each business in the financial period following acquisition compared to the
revenues they achieved in the corresponding financial period preceding the date of acquisition by
Constellation (Constellation Software Inc., 2012).

From 2009 fiscal year to 2010 fiscal year, total revenues increased by 44%. This growth was again
entirely due to growth from acquisitions. Revenue from PTS declined considerably 12 months after
acquisition. Following this successful year, Constellations revenues increased again by 22% by the end
of 2011. Not only did growth from acquisitions pay a role in this increase, but so did organic growth with
10% for the year. For the 2012 fiscal year, total revenue increased 15%. The increase was largely due to
growth from acquisitions, considering organic growth was only 1%.
Cost of Goods Sold
Due to the increase in revenue over the years, COGS has also followed the same trend. COGS are mainly
related to the delivery of professional services and maintenance.


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Gross Profit
The high for Constellation over a four-year period was in 2010 with $368.29 million is gross profit, which
was a 35% increase from 2009. Following 2010, gross profit decreased 30% in 2011 then back up 15% in
2012. The decline for the year 2011 can be attributed to
the acquisitions made during the year, which resulted in
more employees, requiring greater expenses.
Operating Expenses
Constellation has seen a steady increase in operating expenses from 2009 to 2012. The growth in
expenses has been primarily due to the growth in the number of employees as a result of acquisitions.
However, the appreciation of the Canadian dollar versus the U.S. dollar in 2010, as well as an increase
in hardware and third party license, maintenance, and professional services expenses to support both
the organic and acquisition related growth in revenue (Constellation Software Inc., 2010), has increased
operating expenses.

Amortization expenses increases from 2009 to 2011 and dropped only $0.23 million in 2012. The
increase was attributable to the increase in the carrying value of the companys intangible asset balance
as a result of the acquisitions completed during that period (Constellation Software Inc., 2011).
Operating Profit
The company has also seen a steady increase in operating profit as an affect of the steady increase in
sales and expenses.
Interest Expense
Interest expenses increased from $2.7 million in 2009, $3.85 million in 2010, and a high of $5.58 million
in 2011. The companys increased need to borrow under their existing line of credit to fund acquisitions
was the main cause of an increase in interest expenses over the years.

In 2012, Constellation implemented a new credit facility, which resulted in a lower cost of borrowing
and therefore less interest expenses for the year.
Extraordinary Gain
Extraordinary gain was only seen in 2012 primarily due to negative goodwill associated with the PTS
acquisition. Negative goodwill arose on acquisition because the fair value of the separately identifiable
assets acquired net of the liabilities acquired exceeded the total consideration paid (Constellation
Software Inc., 2012).
Number of Employees
2009 1,400
2010 3,328
2011 3,738
2012 4,576
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Income Tax
Since Constellation operates globally, they are required to calculate their tax provision in each of the
jurisdictions in which they conduct business.

In 2011, the company recorded $75.2 million in income tax recovery, which they determined would be
utilized for income tax deductions in the future.
Net Income
The growth in EBIT, the recognition of an extraordinary gain, and a decrease in income tax expense,
offset by increases in amortization of intangibles, and interest expense (Constellation Software Inc.,
2010) resulted in an increase in net income for 2010 of 300%; from $10.22 million to $41.76 million in
one year.

Constellation saw another dramatic
increase in net income of $115.4
million in 2011 as a result of growth
in EBIT, gains on sale of availablefor
sale equity securities, and a decrease
in income tax expense, offset by an
increase in amortization of intangible
assets (Constellation Software Inc.,
2011).

In 2012, net income dropped from $157.16 million to $92.64 million as a result of the deferred income
tax recovery.
Vertical Analysis
Revenue
Maintenance revenue proved to be the majority of the companys revenue in 2009 being 55.8% of total
revenue. This also proved to be true in 2010 at 53.6%, 2011 at 54.6%, and 2012 at 57.3%.

Services have been the second biggest source of revenue over the four-year period.
Cost of Goods Sold
In 2011 and 2012, COGS as a percentage of total revenue remained at 66%.
$92.64
$157.16
$41.76
$10.22
$0.00
$50.00
$100.00
$150.00
$200.00
2012 2011 2010 2009
Net Income
Net Income
(Earnings After
Taxes)
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Gross Profit
At the end of 2009, gross profit was 62% of total revenue, which was the high for the four-year period.

Over the years gross profit as a percentage of total revenue decreased due to the increase of costs
needed to fund expansion and because of lower margin revenues acquired in the PTS acquisition
(Constellation Software Inc., 2010).
Operating Expenses
Selling expenses have decreases considerably as a percentage of total revenue from 41.83% in 2009 to
12.64% in 2012.

Amortization Expenses remained constant at about 1% of total revenue from 2009 to 2012.
Operating Profit
Over the four-year period, Constellations operating profit as a percentage of total revenue has
progressively increased due to an increase in COGS offset by a larger decrease in expenses.
Interest Expense
Although interest expenses over the four years was always less then 1% of total revenues, Constellation
saw a big dip from 2011 to 2012, 0.72% to 0.18%, after the implementation of a new credit facility.
Net Income
Net income was at a high in 2011 at 20.32% of total revenue. This spike in income is entirely due to the
large tax recovery in which the company received during that year.
Balance Sheet
Refer to Appendix D for Constellations Balance Sheet, as well as all horizontal and vertical calculations
for the fiscal year ended December 31, 2009 to fiscal year ended December 31, 2012.

Horizontal Analysis
ASSETS
Cash
Throughout the four-year period, cash on hand stayed relatively consistent with the exception of 2012
with a 24% decrease. The company spent money on more inventory and new investments.

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Accounts Receivable
Unsurprisingly, accounts receivable gradually increased a total of 38% over the four-year period as a
result of all the acquisitions made. From 2011 to 2012, Constellation saw the greatest increase due to all
their acquisitions of the additional subsidiary that CSU acquired in 2012. They consolidated all the
accounts receivable of the company they invested in.
Inventory
In 2011, Constellation saw a small dip in their inventory but then saw it increase 40% the following year.
Investments
Constellation continues to invest in acquisitions year to year. However, in 2011, the company spent no
money towards their investment assets.
Capital Assets
Plant and Equipment costs from 2009 to 2010 resulted in a $19.54 million increase in capital assets.
After amortization deductions, total capital assets increased 55.88% or $5.89 million.

Constellations capital assets decreased a total of $1.84 million from 2010 to 2011 due to a cutback of
new purchases and an absence of accumulated amortization.

Following 2011, Constellation increased their spending on plant and equipment by $56.43 million and
accumulated amortization by $49.72 million, resulting in a $6.71 increase in capital assets.
LIABILITIES
Accounts Payable & Notes Payable
Accounts payable stayed relatively stable over the four-year period, other than a 27.5% increase in
2012. Notes payable were zero in 2011 since the company borrowed no money towards investment
purposes.
Total Liabilities
Total liabilities increased a total of 50% from 2011 to 2012, due to an increase in short-term borrowing
over the year.
SHAREHOLDERS EQUITY
Common Stock
Over the four-year period, no new shares were issued preserving common stock at $99.28 million from
year to year.
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Retained Earnings
In 2009, retained earnings were $9.58
million only to increase $36.25 million the
following year to $45.83 in 2010. Moving
forward to 2011, Constellation saw a vast
increase of 227.38% primarily due to the
276.34% increase in net income that year
as a result of a $75.2 million tax recovery.
In 2012, the company saw only a slight
increase from $150.04 million to $157.90
million.
Total Shareholders Equity
Total Shareholders Equity stayed consistent in 2011 and 2012 after a $106.36 million increase from 2010
to 2011, due to the huge increase in retained earnings.
Vertical Analysis
ASSETS
Cash
Constellations cash management has improved over the years considering they have less cash on hand
from year to year. This has allowed the company to invest in more acquisitions in order to expand their
operations. In 2009, the company carried 12% of total assets in cash. This decreased to 10% in 2012, 9%
in 2011, and 5% in 2012.
Accounts Receivable
Accounts receivable, as a percentage of total assets, has decreased over the four-year period as a result
of other assets.
Inventory
Inventory has stayed consistent from 2009 to 2012 at 7% of total assets.
Total Current Assets
Constellations total current assets have also decreased over the years from 45% of total assets in 2009
to 31% in 2012.

$157.90
$150.04
$45.83
$9.58
$0.00
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
$140.00
$160.00
$180.00
2012 2011 2010 2009
Retained Earnings
Retained
Earnings
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Capital Assets
Capital Assets as a function of total assets remained between 2% and 3% over the four-year period.
LIABILITIES
Constellations total liabilities fluctuated from 77% in 2009, 73% in 2010, 59% in 2011, and back up to
68% in 2012. The companys liabilities are mostly made up of short-term borrowings, which was the
primary cause of the decline over the three years.
SHAREHOLDERS EQUITY
Shareholders equity is made up of common stock and retained earnings. As a percentage of total
liabilities and shareholders equity, total shareholders equity was at a company high in 2011 at 41%.
Statement of Cash Flows
Refer to Appendix E for Constellations Statement of Cash Flows for the fiscal year ended December 31,
2009 to fiscal year ended December 31, 2012.

Operating Activities
Cash provided by operating activities increased over the four-year period as a result of Constellations
acquisitions. The company received $81.53 million in 2009, $105.04 million in 2010, $137.53 in 2011,
and $144.79 in 2012.
Investing Activities
Cash used in investing activities such as purchases of investments, offset by sale of assets, and a
decrease in plant and equipment, jumped from $43.21 million in 2011 to $109.83 million in 2012. This
increase was due to subsidiaries in 2012.
Financing Activities
Cash used in financing activities such as issuing debt and repayment of debt was at a four-year high in
2011 at $91.89 million. In 2011, Constellation paid back debt totaling $47.88 million.
Cash Balance
In 2012, cash available at the end of the period was $41.30 million, which was the most for the company
over the four-year period. For the other three years, cash balance was fairly consistent ranging from $30
million to $33 million.

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Ratio Analysis
Refer to Appendix F for all ratio calculations.

Profitability Ratios
The purpose of these ratios are to examine the effective employment of resources considering they
have a huge influence of share price performance, and thus are important to equity investors and
security analysts.

All profitability ratios for Constellation are compared to five-year industry norms ([Link], 2014).
Profit Margin
Profit margin reflects the firms pricing policies and its ability to control costs.

Constellations profit margin of
20.32% in 2011 compared to the
industry norm of 9.4% is rather
interesting. However, over the next
year, the companys profit margin
was cut in half to 10.39% due to the
large tax recovery in 2011.
This can be seen in the income
statement since net income after
tax in 2011 was $157 million and
$92.64 million in 2012.
Return on Assets
Return on Assets measures the firms overall efficiency in the use of capital. Creditors, bondholders, and
shareholders all expect that an adequate return will be achieved on their investment.

In 2011, the companys return on their assets was at a four-year high of 24.92%. Considering the
industry norm is 8.35%, this return was remarkable.

Even in 2012, Constellation managed to stay above the industry average at 11.4% return on assets. This
decline from 2011 to 2012 was primarily due to the companys increase in net income as a result of a tax
recovery made that year.
2012 2011 2010 2009
Net Profit
Margin
10.39% 20.32% 6.62% 2.33%
Gross Profit
Margin
33.51% 33.63% 58.38% 61.96%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
P
e
r
c
e
n
t

Profit
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Return on Equity
Return on equity is the return to the owners of the firm.

The industry norm of 22.12% was well below Constellations return on equity in 2010 at 27.85%, 2011 at
61.32%, and in 2012 at 35.8%. The company has accomplished some great returns over the years and
we expect this trend to continue in the future.


(Reuters, 2014)
Asset Utilization Ratios
These ratios are a primary responsibility of management because they measure the speed and efficient
of turning over assets resulting in the cash conversion cycle.

Receivables Turnover
Constellation manages to turnover its accounts receivables much faster than the majority of companies
in this industry. From 2010 to 2012, their success in extending credit and collecting debts stayed fairly
consistent at an average of 7 times.

Average Collection Period
Average Collection Period was at an all time high in 2009 of 80 days. Since then, Constellation has seen a
decrease but over the last three years it has stayed steady at an average of 52 days. Although there was
a decrease over the years, their average collection period is still within the industry norm.
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Considering Constellation deals with large,
wealthy corporations, a 52-day collection
period is plenty of time for their customers to
come up with the payment. This quick
collection period demonstrates efficient
management and has a positive influence on
cash flow.

Inventory Turnover and Holding Period
These ratios indicate sales per dollar of inventory, and the efficient of inventory-ordering and cost-
control methods.

Inventory turnover is calculated by dividing cost of sales by inventory. Since Constellation is in the
technology business, it is important for them to have a high inventory turnover since technology is
constantly changing and improving. They dont want to be stuck with inventory that becomes too old to
sell.

Over the four-year period, inventory turnover fluctuated slightly from 4.89 times in 2009, 6.51 times in
2010, 12.9 times in 2011, and 10.65 times in 2012.

Inventory holding period shows
the average number of days that
goes by between production and
sale of goods. The companys
inventory holding period
decreased dramatically from 2009
to 2011 as seen in the table
below. A low inventory-holding
period seen in 2011 of 29 days
suggested great efficiency for
Constellation in that year.

In 2012, their holding period only increased slightly to 35 days.
0.00
20.00
40.00
60.00
80.00
100.00
2012 2011 2010 2009
Average Collection Period
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
2012 2011 2010 2009
Inventory Holding
Period
Inventory
Turnover
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Accounts Payable Turnover and Payable Period
These ratios show the effective use of trade credit as opposed to bank credit.

Accounts payable turnover increased from 2009 to 2011 due to short term borrowing by the company.
However, in 2012 they managed to decrease their payable turnover to 3.88 times by decreasing
borrowing which also deduced their interest costs.

Constellation has a relatively high payable period meaning they take a long time to fulfill payments.
However, this gives the company a chance to take advantage of freed up funds by investing into short-
term securities. From 2011 to 2012, their payable period increased from 85 days to 94 days.
Capital Asset Turnover
Capital Asset Turnover is calculated by dividing sales by total capital assets.

Constellation does an exceptional job in using investment in capital assets to generate revenues. Their
capital asset turnover was at a high in 2012 at 53 times.

In 2012, it decreased to 41.84 due to a huge increase in plant and equipment.
Total Asset Turnover
Over the four-year period, Constellations asset turnover ranged from 0.93 to 1.23 times, which is high
compared to the industry average of 0.87 times.
Liquidity Ratios
Liquidity ratios are crucial in order to determine the ability of the company to pay off short-term
obligations as they come due. This can quickly impact day-to-day operations. Bankers and creditors are
the main users of these ratios to determine whether the company has the ability to generate timely cash
flows.

Current Ratio
An acceptable current ratio is 2.0 or higher. However, Constellation has ranged from 0.54 to 0.73 over
the past four years. This extremely low number is due to the companys high current liabilities compared
to its current assets. Unfortunately, this means Constellation is not liquid enough to pay off its short-
term obligations. The industry norm is 1.87 putting Constellation below the average.

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Quick Ratio
Since the quick ratio is influenced by inventory, it follows the same trends. Inventory fluctuated over the
years, which led to a fluctuation in Constellations quick ratio. In 2009, the company was at a high for
the four-year period of 0.61. Following that year, it dropped to 0.53. 2011 saw a small increase up to
0.56 but then dropped to the company low of 0.42 in 2012. Since a quick ratio of 1.0 or higher is general
an acceptable level, this puts Constellation below the average. However, this is because the company
has almost double the amount of current liabilities compared to current assets.
Debt Utilization Ratios
Debt holders examine these ratios in order to evaluate the overall debt position of the firm compared to
the asset base and earning power.

Debt to Total Assets
Since Constellation has acquired so many companies over the years it has increased its total assets as
well as its total liabilities. Over the four-year period, the companys debt to total asset ratio has general
decreased with an exception in 2012 when it increased from 59.36% to 68.15%. Generally speaking,
Constellation has a large amount of debt compared to assets, considering the prudent range is 50% or
less.
Times Interest Earned
This ratio indicates the degree to which
operating profit covers the companys
interest obligations. As seen in the graph,
the companys times interest earned has
increased over the years. However, in
2012, interest was at a four-year low,
while operating profit was at a four-year
high. This resulted in a times interest
earned ratio of 70.62 times.
70.62
15.69
9.90
7.47
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
2012 2011 2010 2009
Times Interest Earned
Times Interest
Earned
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Operating and Financial Leverage
Due to the lack of available resources, it is not possible to accurately calculate Constellations DOL.
However, we can determine their degree of financial leverage for the period 2009 to 2012.

Financial leverage can help magnify the
returns from debt. Constellations financial
leverage is found by calculating profit (EBIT)
and divided by earning before taxes (EBT).
Our group found from the year 2009 to
2012, DFL has decreased from 1.1546 to
1.0144. As a result, lower financial leverage
results in a lower risk of the company going
into bankruptcy or default. Overall, there is less concern for Constellation to be to any potential
decrease in operating result that would otherwise impact on the companys earnings.
Dividend Performance
In 2012, Constellations Board of Directors implemented a policy to pay quarterly dividends to its
shareholders in order to allow them to participate in its free cash flow, while retaining sufficient capital
to invest in acquisitions and organic growth (Constellation Software Inc., 2012). Prior to 2012,
Constellation Software Inc. only paid annual dividends. However, Constellation is restricted from paying
dividends of more than 20% of its consolidated adjusted net income as defined in the agreement and
they cannot guarantee that dividends will be declared and paid in the future (Constellation Software
Inc., 2013). Additionally when measured on a five year annualized basis, both dividend per share and
earnings per share growth ranked the highest relative to its industry peers (Reuters, 2014).
The chart below shows that the company declared and paid dividends of $0.26 per common and Class A
non-voting share in 2010, $2.00 in 2011, and $4.00 in 2012.



(MorningStar)
0.9
0.95
1
1.05
1.1
1.15
1.2
2009 2010 2011 2012
Degree of Financial Leverage (DFL)
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Working Capital
Net Working Capital
Considering Constellation is a services and software based company, it is inevitable that their assets will
not outweigh their liabilities. As seen in the table below, the companys net working capital decreased
dramatically over the years. Total current assets only increased 20% from 2009 to 2012, while their
current liabilities increased 63%, resulting in a negative net working capital over the four-year period.

Additionally, net working capital requirements can fluctuate significantly depending on contract
billings, customer deposits and inventory requirements, which may have a material positive impact on
cash flows from operations (Constellation Software Inc., 2012).
Cash Flow Cycle
Cash flow cycle consists of
the time materials are in
inventory (calculated as the inventory holding period), plus the time it takes to collect sales from clients
(calculated as the average collection period), less the time the firm is allowed to delay payment to its
suppliers (calculated as the accounts payable period).

Constellations ability to ensure that inflows and outflows of cash are properly synchronized for
transaction purposes has deteriorated over the four-year period. However, the company still has a
negative cash flow cycle as seen below, which is very desirable. Thanks to Constellations good credit
with its suppliers and strong market position, the company doesn't pay its suppliers for the goods that
it buys until after it receives payment for selling those goods. Therefore, Constellation doesn't need to
hold very much inventory and still holds onto its money for a longer time period (Investopedia, 2013).
From an investor stand point this would be considered very healthy and efficient management. Keeping
in mind Constellation sells software and services, it is expected that the company have a negative cash
flow cycle since they do not have much inventory.

Since 2009, Constellation tightened
their payment policy from about 80
days down to 54 over four-years.
However, they paid their suppliers after
252 days in 2009 and 94 days in 2012.
All numbers in millions of US$ 2012 2011 2010 2009
Total Current Assets $253.60 $220.52 $216.53 $211.00
Total Current Liabilities $472.54 $320.83 $330.94 $290.11
Net Working Capital ($218.94) ($100.31) ($114.41) ($79.11)
All numbers in days 2012 2011 2010 2009
Inventory Holding Period 34.28 28.29 56.09 74.59
Plus: Average Collection Period 53.61 47.39 53.29 79.24
Less: Accounts Payable Period 94.00 85.12 166.10 252.07
Cash Flow Cycle -6.12 -9.44 -56.73 -98.23
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Market Analysis
Stock Price History
Long Term (5 Year Trend)

Short Term (1 Year Trend)

Current Month (March 2014)

(Yahoo Finance)
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Stock Performance
Over the last five years, Constellation Software has expanded drastically. Five years ago, the stock price
hovered around $27 (US), four years later; the stock price is above $120 (US), an increase of nearly 440%!
Currently however, the stock price is over $260 (US), peaking at $265.48 (US) on March 20, 2014. The
momentum of the software industry is incredible, with no evidence of decreasing in the future. The
confidence of investment has good expectation on CSU because of its proven past. As the one of best
performing stocks in Toronto, the composite index always keep above 2% on average within current one
month performance.

With the environment of economic recovery, Constellation Software Inc. is attracting more investors. An
increase of over 800% within five years shows how wealthy the industry it is. Through analyzing the
2013 financial statement, we believe Constellation has room for improvement and has no sign of
slowing down.

(Reuters, 2014)


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Comparative Data: S&P/TSX Composite Index
Long Term (5 Year Trend)

Short Term (1 Year Trend)

Current Month (March 2014)

(Yahoo Finance)
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Stock Index Comparison
S&P/TSX Composite Index is an index of the stock prices of the largest companies on the Toronto Stock
Exchange (TSX). As seen in the previous charts, it is clear that Constellation has dominated the market
and also been a contributing factor for the growth of the S&P/TSX Composite Index.

Comparing Constellation previous years stock price, we found that the companys stock price has
experience a significant growth and increasing at a dramatic rate. In our findings, we discovered that the
stock price and Constellation curve has been moving at a much higher rate compared to the composite
index.

Constellation stock price curve has been above the industry average level. As a result, Constellation is
doing exceptionally well for its industry average. We believe due to the nature of this business and the
economy demand for technology, Constellation will continue to see an increase in their stock price.
Stock Prediction
From the inception of this project, the Constellation stock price started at $235 since the semester
started. As of April 5
th
2014, Constellation stock price increased by $45 to $280.00. By analyzing the
2013 financial statement, we believe Constellation has room for improvement and has no sign of
slowing down. Constellation has many opportunities with its large free cash flow to finance more
business opportunity or to acquire more vertical market software company. Although Constellation has
a high stock price of $280.00 (as of April 5
th
2014), we believe it is good investments for investor to
invest in Constellation Software Stocks.

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Company Performance
In order to highlight Constellations performance over the years, we have determined your return on a
$500,000 investment in the stock assuming the following three cases:
1. You purchased the stock on the first working day of September five years ago.



Shares Purchases: $500,000/$35 14,285 shares
Return: ($171.50-$35.00)* 14,285 = $1,949,902.50
Return as a Percentage: $1,949,902.50/$500,000 = 389.98%

2. You purchased the stock on the first working day of September last year.



Shares Purchased: $500,000/$171.50 2915 shares
Return: ($269.00 - $171.50)* 2915 = $284,212.50
Return as a Percentage: $284,212.50/$500,000 = 56.84%

3. You invested your funds in an interest-bearing vehicle (either in money market or capital
market).
N = 5
I/Y = 3.2
C/Y = 1
PV = 500,000
PMT = 0
CPT FV = $

If you invested $500,000 in a long-term GIC for 5 years at 3.20%* compounded interest you would
receive $85,286.48 in interest at the end of the 5 year term, for a total of $585,286.48.

*[Link]
Date Price per share
Sep 2, 2008 $35.00
Sep 3, 2013 $171.50
Date Price per share
Sep 3, 2013 $171.50
Today (9:45am - April 8, 2014) $269.00
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Forecasts

Founder and Chairman, Mark Leonard stated, Constellation will
double its size and earnings per share over the next five to 10 years
while continuing to pay a dividend. One year ago, it was
recommended investors buy into CSI, however today it is advised
that investors hold their position with the company since it is
expected to outperform the market once again. In 2013, the TSX
index for Canadian information technology companies rose 36%
fueled mainly by Constellation Software Inc.

As seen in the following forecasts, Constellation is expected to continue to grow at an average growth
rate of 35% in earnings and 30% in revenues.

EARNINGS:

REVENUE:




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Conclusion and Recommendations
As one of the best performing tech stocks in Canada over the past five years, Constellation has proven
their strategy to acquire, manage, and build vertical market software businesses successful. Considering
their stock has more then doubled over the last year, it is quite phenomenal how well the company is
run and how well their acquisitions have improved their earnings. They will continue to look for
companies to acquire with high growth potential in order to produce substation cash flow and revenue
growth in the future.

Review of Constellations horizontal, vertical, and ratio analysis revealed a shocking spike in net income
in 2011. Nevertheless, with further assessment, it was determined to be due to a substantial income tax
recovery recorded for the year. If 2011 is taken out of consideration; the company still maintains gradual
growth. 2012 should not be seen as a depressed year for Constellation just because of the tax recovery
recorded in 2011.

We believe Constellation is one of the best capital allocators in the market. With their fantastic
management team, they should certainly be able to continue to outperform the market for the
foreseeable future. However, the challenge the company may have over the next couple years is finding
big competitors that want to be acquired.

Based on our analysis of Constellations financial statements,
we have produced the following recommendations for the
board and the senior management to review in order to
enhance the results of the company and ultimately maximize
shareholder wealth. Overall, in order to maximize shareholder
wealth, Constellation should aim to expand operations and
continue to pay dividends to its shareholders. Moving
forward, Constellation should proceed in their acquisition
strategy as it has been proven very successful. In addition, to
acquire more VMS business in the future, the company should
look to attain external funding through adequate sources.
However, if they were to reduce dividend payout annually,
Constellation would have the required funding to finance
their investing activity.
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References
Appendix A: Current Events & News

Acquisition of PTS from Continental:
[Link]
m_continental_ag

Constellation Software's Jonas Division Completes Acquisition of Shortcuts Software Limited:
[Link]
shortcuts-software-limited/

Constellation Software Inc. Announces Results for the Fourth Quarter & Year Ended December 31,
2013:
[Link]

Constellation Announces Acquisition of the Business of ASA Automotive Systems:
[Link]


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Appendix B: Income Statement

Income Statement
Constellation Software Inc.
For 2009 through 2012
(all numbers in millions of US$)
2012 2011 2010 2009
Sales $891.23 $773.34 $630.86 $437.94
Less Cost of Goods Sold (COGS) $592.59 $513.30 $262.57 $166.61
Gross Profit $298.64 $260.04 $368.29 $271.33
Selling Expense $112.68 $91.85 $251.86 $183.21
Amortization Expense $7.64 $7.87 $6.04 $3.81
Other ($66.04) ($72.78) ($72.28) ($64.15)
Operating Profit (EBIT) $112.28 $87.54 $38.11 $20.16
Interest Expense $1.59 $5.58 $3.85 $2.70
Earnings Before Taxes (EBT) $110.69 $81.96 $34.26 $17.46
Less: Taxes $18.05 ($75.20) $5.04 $7.24
Add: Extraordinary Gains $0.00 $0.00 $12.54 $0.00
Net Income (Earnings After Taxes) $92.64 $157.16 $41.76 $10.22
Less: Preferred Shares Dividends $0.00 $0.00 $0.00 $0.00
Earnings Available to Common Shareholders $92.64 $157.16 $41.76 $10.22
Divide: Common Shares Outstanding $21.19 $21.19 $21.18 $21.16
Earnings Per Share $4.37 $7.42 $1.97 $0.48

Dividend Per Share $4.00 $2.00 $0.26 $0.22
(The Globe and Mail)
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Horizontal Analysis

Horizontal Trends
Constellation Software Inc.
For 2009 through 2012
2012-2011 2011-2010 2010-2009
Amount Percent Amount Percent Amount Percent
Sales $117.89 15.24% $142.48 22.59% $192.92 44.05%
Less Cost of Goods Sold (COGS) $79.29 15.45% $250.73 95.49% $95.96 57.60%
Gross Profit $38.60 14.84% ($108.25) -29.39% $96.96 35.74%
Selling Expense $20.83 22.68% ($160.01) -63.53% $68.65 37.47%
Amortization Expense ($0.23) -2.92% $1.83 30.30% $2.23 58.53%
Other $6.74 -9.26% ($0.50) 0.69% ($8.13) 12.67%
Operating Profit (EBIT) $24.74 28.26% $49.43 129.70% $17.95 89.04%
Interest Expense ($3.99) -71.51% $1.73 44.94% $1.15 42.59%
Earnings Before Taxes (EBT) $28.73 35.05% $47.70 139.23% $16.80 96.22%
Less: Taxes $93.25
-
124.00% ($80.24)
-
1592.06% ($2.20) -30.39%
Add: Extraordinary Gains $0.00 - ($12.54) - $12.54 -
Net Income (Earnings After Taxes) ($64.52) -41.05% $115.40 276.34% $31.54 308.61%
(The Globe and Mail)

Vertical Analysis
Percent of Sales
Constellation Software Inc.
For 2009 through 2012
2012 2011 2010 2009

Sales 100.00% 100.00% 100.00% 100.00%
Less Cost of Goods Sold (COGS) 66.49% 66.37% 41.62% 38.04%
Gross Profit 33.51% 33.63% 58.38% 61.96%
Selling Expense 12.64% 11.88% 39.92% 41.83%
Amortization Expense 0.86% 1.02% 0.96% 0.87%
Other -7.41% -9.41% -11.46% -14.65%
Operating Profit (EBIT) 12.60% 11.32% 6.04% 4.60%
Interest Expense 0.18% 0.72% 0.61% 0.62%
Earnings Before Taxes (EBT) 12.42% 10.60% 5.43% 3.99%
Less: Taxes 2.03% -9.72% 0.80% 1.65%
Add: Extraordinary Gains 0.00% 0.00% 1.99% 0.00%
Net Income (Earnings After Taxes) 10.39% 20.32% 6.62% 2.33%
(The Globe and Mail)
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Appendix C: Organic Revenue Growth - Public Transit Solutions

2009
Fiscal Year Ended December 31, 2009
Constellation -3%
Constellation excluding PTS 0%
(Constellation Software Inc., 2009)

2010
Fiscal Year Ended December 31, 2010
Constellation -4%
Constellation excluding PTS 2%
(Constellation Software Inc., 2010)

2011
Fiscal Year Ended December 31, 2011
Constellation 10%
Constellation excluding PTS 6%
(Constellation Software Inc., 2011)

2012
Fiscal Year Ended December 31, 2012
Constellation 1%
Constellation excluding PTS 2%
(Constellation Software Inc., 2012)

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Appendix D: Balance Sheet
Balance Sheet
Constellation Software Inc.
For 2009 through 2012
(all numbers in millions of US$)
ASSETS 2012 2011 2010 2009
Current Assets
Cash $41.78 $54.71 $54.63 $55.57
Accounts Receivable $130.89 $100.40 $92.10 $95.08
Less: Allowance for Bad Debts $0.00 $0.00 $0.00 $0.00
Inventory $55.66 $39.78 $40.35 $34.05
Other $25.27 $25.63 $29.45 $26.30
Total Current Assets $253.60 $220.52 $216.53 $211.00
Other Assets
Investments $22.47 $0.00 $17.94 $3.60
Other $515.30 $395.45 $302.50 $246.84
Total Other Assets $537.77 $395.45 $320.44 $250.44
Capital Assets
Plant & Equipment $71.02 $14.59 $55.77 $36.23
Less: Accumulated Amortization $49.72 $0.00 $39.34 $25.69
Total Capital Assets $21.30 $14.59 $16.43 $10.54
Total Assets $812.67 $630.56 $553.40 $471.98
LIABILITIES
Current Liabilities
Accounts Payable $152.62 $119.70 $119.49 $115.06
Notes Payable $44.36 $0.00 $47.29 $43.10
Accrued Expenses $0.00 $0.00 $0.00 $0.00
Other $275.56 $201.13 $164.16 $131.95
Total Current Liabilities $472.54 $320.83 $330.94 $290.11
Long-term Liabilities
Mortgage $0.00 $0.00 $0.00 $0.00
Other $81.33 $53.46 $72.54 $73.83
Total Long-term Liabilities $81.33 $53.46 $72.54 $73.83
Total Liabilities $553.87 $374.29 $403.48 $363.94
SHAREHOLDERS' EQUITY
Preferred Stock $0.00 $0.00 $0.00 $0.00
Common Stock $99.28 $99.28 $99.28 $99.28
Retained Earnings $157.90 $150.04 $45.83 $9.58
Other $1.62 $6.96 $4.81 ($0.80)
Total Shareholders' Equity $258.80 $256.28 $149.92 $108.06
Total Liabilities & Equity $812.67 $630.57 $553.40 $472.00
(The Globe and Mail)
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Horizontal Analysis
Horizontal Trends
Constellation Software Inc.
For 2009 through 2012
(all numbers in millions of US$)
ASSETS 2012-2011 2011-2010 2010-2009
Current Assets Amount Percent Amount Percent Amount Percent
Cash ($12.93) -23.63% $0.08 0.15% ($0.94) -1.69%
Accounts Receivable $30.49 30.37% $8.30 9.01% ($2.98) -3.13%
Less: Allowance for Bad Debts $0.00 - $0.00 - $0.00 -
Inventory $15.88 39.92% ($0.57) -1.41% $6.30 18.50%
Other ($0.36) -1.40% ($3.82) -12.97% $3.15 11.98%
Total Current Assets $33.08 15.00% $3.99 1.84% $5.53 2.62%
Other Assets
Investments $22.47 - ($17.94) - $14.34 398.33%
Other $119.85 30.31% $92.95 30.73% $55.66 22.55%
Total Other Assets $142.32 35.99% $75.01 23.41% $70.00 27.95%
Capital Assets
Plant & Equipment $56.43 - ($41.18) - $19.54 53.93%
Less: Accumulated Amortization $49.72 - ($39.34) - $13.65 53.13%
Total Capital Assets $6.71 - ($1.84) - $5.89 55.88%
Total Assets $182.11 28.88% $77.16 13.94% $81.42 17.25%
LIABILITIES 2012-2011 2011-2010 2010-2009
Current Liabilities Amount Percent Amount Percent Amount Percent
Accounts Payable $32.92 27.50% $0.21 0.18% $4.43 3.85%
Notes Payable $44.36 - ($47.29) - $4.19 9.72%
Accrued Expenses $0.00 - $0.00 - $0.00 -
Other $74.43 37.01% $36.97 22.52% $32.21 24.41%
Total Current Liabilities $151.71 47.29% ($10.11) -3.05% $40.83 14.07%
Long-term Liabilities
Mortgage $0.00 - $0.00 - $0.00 -
Other $27.87 52.13% ($19.08) -26.30% ($1.29) -1.75%
Total Long-term Liabilities $27.87 52.13% ($19.08) -26.30% ($1.29) -1.75%
Total Liabilities $179.58 47.98% ($29.19) -7.23% $39.54 10.86%
SHAREHOLDERS' EQUITY
Preferred Stock $0.00 - $0.00 - $0.00 -
Common Stock $0.00 - $0.00 - $0.00 -
Retained Earnings $7.86 5.24% $104.21 227.38% $36.25 378.39%
Other ($5.34) -76.72% $2.15 44.70% $5.61 -701.25%
Total Shareholders' Equity $2.52 0.98% $106.36 70.94% $41.86 38.74%
Total Liabilities & Equity $182.10 28.88% $77.17 13.94% $81.40 17.25%
(The Globe and Mail)
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Vertical Analysis
Vertical Analysis
Constellation Software Inc.
For 2009 through 2012
(all numbers in percent)
ASSETS 2012 2011 2010 2009
Current Assets
Cash 5% 9% 10% 12%
Accounts Receivable 16% 16% 17% 20%
Less: Allowance for Bad Debts 0% 0% 0% 0%
Inventory 7% 6% 7% 7%
Other 3% 4% 5% 6%
Total Current Assets 31% 35% 39% 45%
Other Assets
Investments 3% 0% 3% 1%
Other 63% 63% 55% 52%
Total Other Assets 66% 63% 58% 53%
Capital Assets
Plant & Equipment 9% 2% 10% 8%
Less: Accumulated Amortization 6% 0% 7% 5%
Total Capital Assets 3% 2% 3% 2%
Total Assets 100% 100% 100% 100%
LIABILITIES
Current Liabilities
Accounts Payable 19% 19% 22% 24%
Notes Payable 5% 0% 9% 9%
Accrued Expenses 0% 0% 0% 0%
Other 34% 32% 30% 28%
Total Current Liabilities 58% 51% 60% 61%
Long-term Liabilities
Mortgage 0% 0% 0% 0%
Other 10% 8% 13% 16%
Total Long-term Liabilities 10% 8% 13% 16%
Total Liabilities 68% 59% 73% 77%
SHAREHOLDERS' EQUITY
Preferred Stock 0% 0% 0% 0%
Common Stock 12% 16% 18% 21%
Retained Earnings 19% 24% 8% 2%
Other 0% 1% 1% 0%
Total Shareholders' Equity 32% 41% 27% 23%
Total Liabilities & Equity 100% 100% 100% 100%
(The Globe and Mail)
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Appendix E: Statement of Cash Flows

Statement of Cash Flows
Constellation Software Inc.
For 2009 through 2012
(all numbers in millions of US$)
Operating Activities* 2012 2011 2010 2009
Cash Flow from Operations $185.95 $168.68 $95.52 $70.11
Changes in Non-Cash Working Capital: Current Assets & Liabilities ($17.39) ($15.90) $9.52 $11.42
Other ($23.77) ($15.25) $0.00 $0.00
Net Change in Non-Cash Working Capital ($41.16) ($31.15) $9.52 $11.42
Net Cash Provided by Operating Activities $144.79 $137.53 $105.04 $81.53

Investing Activites
Purchase of Investments ($0.21) ($5.94) ($20.04) ($7.03)
Sale of Assets $34.98 $14.27 $4.08 $0.00
Decrease in Plant & Equipment ($14.38) ($7.35) ($7.09) ($3.72)
Decrease in Subsidiaries ($112.88) ($40.51) ($90.63) ($37.70)
Other ($17.34) ($3.68) $9.12 ($5.76)
Net Cash Used in Investing Activites ($109.83) ($43.21) ($104.56) ($54.21)

Financing Activities
Issue of Debt $41.05 $0.00 $4.52 $0.00
Repayment of Debt ($2.08) ($47.88) $0.00 ($17.76)
Other ($66.31) ($44.01) ($5.32) ($5.28)
Net Cash Used in Financing Activities ($27.34) ($91.89) ($0.80) ($23.04)
Other Activities $0.19 $0.15 ($2.03) ($1.44)

Net Increase (Decrease) in Cash During the Period $7.81 $2.58 ($2.35) $2.84
Cash Balance at the Beginning of the Period $33.49 $30.91 $33.25 $30.40
Cash Balance at the End of the Period $41.30 $33.49 $30.90 $33.24
(The Globe and Mail)

*Net Income & Amortization were not added because they were not important for the calculations


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Appendix F: Ratios

Comprehensive Ratio Analysis
Constellation Software Inc.
For 2009 through 2012
RATIOS 2012 2011 2010 2009
Chapter 2 Ratios
Earnings Per Share (EPS) $4.37 $7.42 $1.97 $0.48
Payout Ratio 91.49% 26.97% 13.19% 45.55%
P/E Ratio 54.31 32.01 120.42 491.59
Dividend Yield 1.68% 0.84% 0.11% 0.09%
Market Value/Book Value 42.95% 47.06% 13.92% 3.48%
Chapter 3 Ratios
Profitability Ratios
Net Profit Margin 10.39% 20.32% 6.62% 2.33%
Gross Profit Margin 33.51% 33.63% 58.38% 61.96%
Return on Assets (ROA) Investment (ROI) 11.40% 24.92% 7.55% 2.17%
Return on Equity (ROE) 35.80% 61.32% 27.85% 9.46%
Equity Multiplier 3.14 2.46 3.69 4.37
Asset Utilization Ratios
Receivables Turnover 6.81 7.70 6.85 4.61
Average Collection Period 53.61 47.39 53.29 79.24
Inventory Turnover 10.65 12.90 6.51 4.89
Inventory Holding Period 34.28 28.29 56.09 74.59
Accounts Payable Turnover 3.88 4.29 2.20 1.45
Accounts Payables Period 94.00 85.12 166.10 252.07
Capital Asset Turnover 41.84 53.00 38.40 41.55
Total Asset Turnover 1.10 1.23 1.14 0.93
Liquidity Ratios
Current Ratio 0.54 0.69 0.65 0.73
Quick Ratio 0.42 0.56 0.53 0.61
Debt Utilization Ratios
Debt to Total Assets 68.15% 59.36% 72.91% 77.11%
Times Interest Earned 70.62 15.69 9.90 7.47
2012 2011 2010 2009
Cash Flow Cycle -6.12 -9.44 -56.73 -98.23
(The Globe and Mail)

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Appendix G: Geographic Information


(Constellation Software Inc., 2012)
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