Author Topic: CSU - Constellation Software  (Read 229989 times)

Liberty

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Re: CSU - Constellation Software
« Reply #590 on: May 07, 2019, 03:51:18 PM »
no one thinks negatively on the "bargain purchase gain" accounting here?  seems like a net income boost without merit? ... ie they paid what they paid, shouldn't be marked as if they paid more?

I'm not expert on accounting arcana, but I suspect that they're just following the rules on these types of weird transactions where you basically get paid to take a distressed asset off of the former owner's hands (which in the meantime will depress margins and FCF and uses up working capital, as well as not really count in the nominal amount of capital deployed, but I'll take real economic value creation over optics).
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Liberty

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Re: CSU - Constellation Software
« Reply #591 on: May 07, 2019, 03:53:57 PM »
Weird.  Why in the world would this be announced?

"We've offered you a crappy price for your business in the past, but we're getting less cheap. Get back in contact and we'll make you a better offer!"

Probably makes sense to do this. If they're anticipating having excess capital, it'd be better to deploy it at slightly lower rates than they've been getting in the past than to keep it as cash. It is also likely better than doing buybacks at the current valuation.

They were not seeing a lot of larger transactions. The brokers employed by the sellers were likely not calling them because they weren't known for giving top dollars. They're trying to increase their coverage of what is sold to improve the chances that they'll get some once in a while. It's an experiment that will affect few transactions, from which they will learn where to go next. The hurdle probably went from the high 20s to still somewhere in the 20s (mid? low?), so not exactly going Softbank quite yet...
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Shooter MacGavin

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Re: CSU - Constellation Software
« Reply #592 on: May 07, 2019, 05:40:22 PM »
seems like a weak quarter

https://www.csisoftware.com/docs/default-source/press-releases/csi---press-release-q1-2019---final.pdf

It's not that bad.  It's actually fairly good.

They bought a company in 4Q18 which had a 13M EBITDA loss in 1Q19 for which they got $53M from the seller to plug the hole.  Therefore normalized for that EBITDA grew almost 21%.  Depreciation expense would've been 7M but they adopted IAS16.  So there is some increased depreciation relative to last year.  This is due to the totally unnecessary right of use stuff showing up on balance sheets for leases. 

If you normalize - then you get something like a 21% growth in Adj. EPS, with $9 in excess cash on the books after subtracting the dividends payable. 

There's some fx stuff too and bargain purchase gains.  But that's my initial take.

no one thinks negatively on the "bargain purchase gain" accounting here?  seems like a net income boost without merit? ... ie they paid what they paid, shouldn't be marked as if they paid more?

they strip it where they report Adjusted Net Income.

jsgcapital13

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Re: CSU - Constellation Software
« Reply #593 on: May 07, 2019, 09:13:55 PM »
is the AGM every recorded or are there transcripts/presentation materials?

walkie518

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Re: CSU - Constellation Software
« Reply #594 on: May 08, 2019, 11:03:47 AM »
is the AGM every recorded or are there transcripts/presentation materials?
letters and calls are done

the Q & A,however, is published as are regular filings on sedar

has anyone ever compared the French and English statements?  I didn't dig through all of the figures, but did notice some discrepancies (however minor)

that said, 6x sales has been the historical multiple... 6x 2018 looks like USD $18.4B mcap (today seems to trade just south of USD $18B or CAD $24.3B)

discounting historical revenue delta might give us $3.4B of sales in 2019... if 14% is the number for the year then buying at current levels might be just under 6x sales for 2019

it doesn't look super cheap, but the mcap is small enough that growth can certainly continue and there should be plenty of available acquisitions...

given asset-light model, growth of maintenance, historical figures etc, I find value closer to USD $20B ... anyone think this is crazy or is this conservative?

Liberty

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Re: CSU - Constellation Software
« Reply #595 on: May 09, 2019, 11:29:48 AM »
Acquisition at Harris:

https://uniphyhealth.com/harris-healthcare-acquires-uniphy-health/

Quote
Uniphy Health Systems LLC, a highly-rated clinical communication and collaboration platform, has been acquired by Harris Computer Systems [...]

With the Uniphy Health Communications Platform, Harris can now offer its clients new ways to improve care coordination, physician and patient engagement. Uniphy Health’s highly-adopted mobile and desktop apps reach over 90,000 clinicians at leading healthcare providers such as Hackensack Meridian Health, UNC Health Care, Catholic Health Services of Long Island and BayCare. The solutions have at been deployed across hundreds of healthcare facilities and are EHR agnostic.

h/t @pearnick
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Liberty

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Re: CSU - Constellation Software
« Reply #596 on: May 13, 2019, 04:59:54 PM »
Recording with 4 people who've had their VMS acquired by CSU, talking about their experience of the acquisition and since:

https://csiperseus.com/explore/webinar-selling-software-business/

Via https://twitter.com/adrivalue/status/1128036592801607680
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walkie518

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Re: CSU - Constellation Software
« Reply #597 on: May 14, 2019, 03:21:50 PM »
Weird.  Why in the world would this be announced?
I'm starting to think that this is a very positive sign. 

In the '15 letter, there was talk about waiting for the right time to have the M&A teams in the subs "go loose" so to speak.  It seems that while this announcement doesn't spell anything out in great detail, it seems that Leonard might now be comfortable with the subs and how they go about those acquisitions for the company. 

Given the company's history of discipline in capital allocation, I can't see why this doesn't turn Constellation from a $24B business to a $100B business now that there are more managers able to look at more deals?

FiveSigma

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Re: CSU - Constellation Software
« Reply #598 on: May 14, 2019, 04:35:35 PM »
walkie518,

I don't think your assessment is correct.

During the recent AGM that I attended management expressed the following sentiment:
- Mark and all 6 BU managers were extremely cautious about adjusting the M&A process that took a long time to perfect
- BU managers are still describing scaling M&A (i.e., pushing down) as 'journey', 'experiment', 'try and see', etc.
- One or two BU managers legit said they take their underlings off M&A if they don't see it as their strength/passion

Finally, this reduction of hurdle will only affect large deals (small fraction of all) that would be made at the level of Mark, the board, and top-level BU managers.

I don't think there is anything in what management said to suggest that they are about to 'go loose in the subs'.

However, I do agree that overall CSU will get to $100B much faster with willingness to bag more elephants, hopefully at ROIC rates still well above the market rates.

Liberty

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Re: CSU - Constellation Software
« Reply #599 on: May 15, 2019, 04:18:09 AM »
I second what FiveSigma said. I don't think this will lead to any kind of huge step change. It's a tweak to improve coverage on larger deals, and hopefully increase success rate. They didn't give exact numbers, but it sounds like the hurdle was reduced from high 20s to mid or low 20s, so it's not like suddenly they're aiming for 12%.
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