Author Topic: CSU - Constellation Software  (Read 228089 times)

Liberty

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 11366
  • twitter.com/libertyRPF
    • twitter.com/libertyRPF
Re: CSU - Constellation Software
« Reply #620 on: July 10, 2019, 04:36:37 PM »
Constellation Real Estate Group Acquires offrs.com

http://www.constellationreg.com/press-creg-acquires-offrs/

Quote
Constellation Data Solutions Inc., part of the Constellation Real Estate Group (CREG), announced today that it has acquired offrs.com (offrs), a market-leader in predictive analytics and lead generation in real estate.
offrs leverages Big Data and its proprietary machine learning algorithm to predict future home sales and transactions, otherwise known as “Smart Data”. offrs distributes its Smart Data to real estate agents and other financial verticals including mortgage and title companies.
“With data and artificial intelligence at the forefront of innovation in the real estate industry, offrs’ robust platform, predictive analytics and Smart Data deliver truly advanced data and insights that move the industry forward,” said Scott Smith, President of Constellation Real Estate Group. “offrs has a strong team with powerful technology, and we’re excited to welcome them to the Constellation Real Estate Group portfolio.”
"Most haystacks don't even have a needle." |  I'm on Twitter  | This podcast episode is a must-listen


Liberty

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 11366
  • twitter.com/libertyRPF
    • twitter.com/libertyRPF
Re: CSU - Constellation Software
« Reply #621 on: July 12, 2019, 12:56:04 PM »
Volaris acquisition:

https://www.enlightenmentmag.com/news/windward-software-owners-retire-sell-business-to-volaris-group

https://www.windwardsoftware.com/company/about-us.html

Quote
We are specialists in inventory control, point of sale, invoicing and accounting software systems for the retail and customer service industries. Using a series of soft switches, Windward Software ERP software adapts to the way you do business. Unlike many of our competitors, we don’t believe that a company should have to change its existing business practices to suit a software package.

Windward Software has been in the business since 1984, and our client base includes businesses throughout the world. Our clients are based in Canada, United States, Australia, Barbados, Cayman Islands, Jamaica, Bermuda, Philippines, Malaysia, Brunei and many others.

h/t @pearnick
"Most haystacks don't even have a needle." |  I'm on Twitter  | This podcast episode is a must-listen

jschembs

  • Sr. Member
  • ****
  • Posts: 353
Re: CSU - Constellation Software
« Reply #622 on: July 12, 2019, 04:51:47 PM »
Volaris acquisition:

https://www.enlightenmentmag.com/news/windward-software-owners-retire-sell-business-to-volaris-group

https://www.windwardsoftware.com/company/about-us.html

Quote
We are specialists in inventory control, point of sale, invoicing and accounting software systems for the retail and customer service industries. Using a series of soft switches, Windward Software ERP software adapts to the way you do business. Unlike many of our competitors, we don’t believe that a company should have to change its existing business practices to suit a software package.

Windward Software has been in the business since 1984, and our client base includes businesses throughout the world. Our clients are based in Canada, United States, Australia, Barbados, Cayman Islands, Jamaica, Bermuda, Philippines, Malaysia, Brunei and many others.

h/t @pearnick

I only flipped through a few statutory reports, but didn't see much disclosure regarding P&L performance of acquisitions. Have you attempted to break out organic vs acquired growth?

Liberty

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 11366
  • twitter.com/libertyRPF
    • twitter.com/libertyRPF
Re: CSU - Constellation Software
« Reply #623 on: July 12, 2019, 05:32:40 PM »
Volaris acquisition:

https://www.enlightenmentmag.com/news/windward-software-owners-retire-sell-business-to-volaris-group

https://www.windwardsoftware.com/company/about-us.html

Quote
We are specialists in inventory control, point of sale, invoicing and accounting software systems for the retail and customer service industries. Using a series of soft switches, Windward Software ERP software adapts to the way you do business. Unlike many of our competitors, we don’t believe that a company should have to change its existing business practices to suit a software package.

Windward Software has been in the business since 1984, and our client base includes businesses throughout the world. Our clients are based in Canada, United States, Australia, Barbados, Cayman Islands, Jamaica, Bermuda, Philippines, Malaysia, Brunei and many others.

h/t @pearnick

I only flipped through a few statutory reports, but didn't see much disclosure regarding P&L performance of acquisitions. Have you attempted to break out organic vs acquired growth?

The company breaks organic out in pretty good detail. I'm on my phone so don't have it in front of me, but it's in the fillings, and also was in the letters.
"Most haystacks don't even have a needle." |  I'm on Twitter  | This podcast episode is a must-listen

jschembs

  • Sr. Member
  • ****
  • Posts: 353
Re: CSU - Constellation Software
« Reply #624 on: July 13, 2019, 05:31:32 AM »
Volaris acquisition:

https://www.enlightenmentmag.com/news/windward-software-owners-retire-sell-business-to-volaris-group

https://www.windwardsoftware.com/company/about-us.html

Quote
We are specialists in inventory control, point of sale, invoicing and accounting software systems for the retail and customer service industries. Using a series of soft switches, Windward Software ERP software adapts to the way you do business. Unlike many of our competitors, we don’t believe that a company should have to change its existing business practices to suit a software package.

Windward Software has been in the business since 1984, and our client base includes businesses throughout the world. Our clients are based in Canada, United States, Australia, Barbados, Cayman Islands, Jamaica, Bermuda, Philippines, Malaysia, Brunei and many others.

h/t @pearnick

I only flipped through a few statutory reports, but didn't see much disclosure regarding P&L performance of acquisitions. Have you attempted to break out organic vs acquired growth?

The company breaks organic out in pretty good detail. I'm on my phone so don't have it in front of me, but it's in the fillings, and also was in the letters.

Found it, thanks. Didn't see the 2019 letter on the list, but assume that's floating around somewhere. Certainly refreshing to see frank discussion of performance:

The return on our shareholders’ Average Invested Capital (“ROIC”) dropped to 29% in 2017. The
decrease was a function of a slew of new investments with lower ROIC’s and of our increasing cash
balance. I expect this metric to continue to drop.

Constellation's Organic Net Revenue growth has averaged only 2% during the last decade. This has been
disappointing for me and the Operating Group managers. Some of our businesses serve shrinking
verticals or those that are otherwise troubled, so we don’t necessarily expect strong organic growth from
them. We do expect each business unit (“BU”) to provide constantly evolving software and systems that
help their clients refine and strengthen their businesses, even in the face of industry headwinds. In 2017
our Organic Net Revenue growth was 4%.


Liberty

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 11366
  • twitter.com/libertyRPF
    • twitter.com/libertyRPF
Re: CSU - Constellation Software
« Reply #625 on: July 13, 2019, 08:40:52 AM »
They break out the organic growth in the MD&A:



Note that most of the value comes from the maintenance and recurring line, which is the sticky, high-margin revenue. They will often reduce or cut less profitable professional services and hardware sales at acquired companies if they don't feel it creates enough value, so it can be a headwind to the aggregate number without affecting much how much economic value is being created.
"Most haystacks don't even have a needle." |  I'm on Twitter  | This podcast episode is a must-listen

jschembs

  • Sr. Member
  • ****
  • Posts: 353
Re: CSU - Constellation Software
« Reply #626 on: July 14, 2019, 07:59:03 AM »
They break out the organic growth in the MD&A:



Note that most of the value comes from the maintenance and recurring line, which is the sticky, high-margin revenue. They will often reduce or cut less profitable professional services and hardware sales at acquired companies if they don't feel it creates enough value, so it can be a headwind to the aggregate number without affecting much how much economic value is being created.

I'm sure you're the most knowledgeable CSU follower on COBF, so I'm curious how you model this business over the longer term? Even the sticky organic revenue only grows at 3-4% annually. Also, if the sticky, high-margin revenue represents an increasingly large proportion of legacy revenue, why do EBIT margins hover around 15% (which also seems quite low for a collection of slow-growth software businesses)?

Do you add back the acquisition-related intangibles in thinking about FCF? Seems for a core business growing 0-3% annually, that is heavily reliant on acquisitions to deliver the growth that the multiple is predicated upon, those are real expenses. I remember folks arguing VRX intangibles should be added back because they weren't ongoing expenses, which is true, but not consistent with the economics of a serial acquirer. I'm not implying this is VRX, just curious your view on the intangible expenses.

Liberty

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 11366
  • twitter.com/libertyRPF
    • twitter.com/libertyRPF
Re: CSU - Constellation Software
« Reply #627 on: July 14, 2019, 10:36:48 AM »
I think this has been discussed earlier in this thread. Probably not a good use of time to go over it de novo. There's also a shareholder letter where Mark goes over amortization.
"Most haystacks don't even have a needle." |  I'm on Twitter  | This podcast episode is a must-listen

Liberty

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 11366
  • twitter.com/libertyRPF
    • twitter.com/libertyRPF
Re: CSU - Constellation Software
« Reply #628 on: July 17, 2019, 04:01:20 PM »
"Most haystacks don't even have a needle." |  I'm on Twitter  | This podcast episode is a must-listen

jschembs

  • Sr. Member
  • ****
  • Posts: 353
Re: CSU - Constellation Software
« Reply #629 on: July 17, 2019, 09:58:50 PM »
I think this has been discussed earlier in this thread. Probably not a good use of time to go over it de novo. There's also a shareholder letter where Mark goes over amortization.

Great, thanks!