smartone Posted April 19, 2017 Share Posted April 19, 2017 Thanks for the info. If I show up with a copy of my brokerage statement is that enough to get in? I purchased after the March record date. Link to comment Share on other sites More sharing options...
Astrea Posted April 19, 2017 Share Posted April 19, 2017 Yes - I asked about this and that's fine. Link to comment Share on other sites More sharing options...
Liberty Posted April 21, 2017 Author Share Posted April 21, 2017 http://www.reuters.com/article/brief-volaris-group-enters-into-agreemen-idUSASA09JMV New acquisition by Volaris. Strangely, they don't even provide the name of the acquired company. They did that at least once before, giving the name and more details when the transaction closed. Volaris group enters into agreement to acquire asset management software provider Their disclosure threshold was $10m last I asked them. Link to comment Share on other sites More sharing options...
Liberty Posted April 26, 2017 Author Share Posted April 26, 2017 President's letter is out: http://www.csisoftware.com/wp-content/uploads/2017/04/2017-Presidents-Letter.pdf Link to comment Share on other sites More sharing options...
abyli Posted April 26, 2017 Share Posted April 26, 2017 President's letter is out: http://www.csisoftware.com/wp-content/uploads/2017/04/2017-Presidents-Letter.pdf The problem with investing in CSU is: we have no clue how well the underlying businesses are working. The only way is to trust the management. Link to comment Share on other sites More sharing options...
Liberty Posted April 26, 2017 Author Share Posted April 26, 2017 President's letter is out: http://www.csisoftware.com/wp-content/uploads/2017/04/2017-Presidents-Letter.pdf The problem with investing in CSU is: we have no clue how well the underlying businesses are working. The only way is to trust the management. What do you mean "no clue"? You have the aggregate numbers, that's how they're doing. That's different from knowing the operating details of each business unit, but there's over 200 and most aren't material by themselves, so not exactly realistic to break them out... What do you suggest? Imagine a company with lots of small profit centers doing their things, dealing with their customers, running their programs... Like at a big bank. They can't break out how each branch, each trading desk, each broker group and asset manager and derivative trader and research-publishing desk and bond trader desk and insurance group is doing this year or quarter. You get aggregate numbers that lump dozens or hundreds of things together, maybe in large divisions, and it feels natural because "it's the same business". But in a way that's not less arbitrary. CSU also breaks things up in a few operating groups and divisions, but all this stuff is the same company, I'm not sure what else they're supposed to do. More disclosure is usually better, but I feel they're pretty excellent compared to many of the other similar businesses I've looked at. Maybe I misunderstand your issue with the situation. Link to comment Share on other sites More sharing options...
xtreeq Posted April 26, 2017 Share Posted April 26, 2017 President's letter is out: http://www.csisoftware.com/wp-content/uploads/2017/04/2017-Presidents-Letter.pdf Thanks! Link to comment Share on other sites More sharing options...
KCLarkin Posted April 26, 2017 Share Posted April 26, 2017 The problem with investing in CSU is: we have no clue how well the underlying businesses are working. The only way is to trust the management. If you don't trust management, don't invest. Fortunately, Leonard has proven himself trustworthy, so I don't think it is a hard decision. Others, like Grant's, disagree. Link to comment Share on other sites More sharing options...
Phaceliacapital Posted April 26, 2017 Share Posted April 26, 2017 What are you guys thinking at this valuation? No stock issuance, limited use of debt so proven to be extremely disciplined in capital allocation but size is threatening the "old juicy returns"? I took a quick glance at financials and we're at +/- 4% FCF yield with 5-10% expected growth? BTW anyone has a compilation of his letters? Or do I go the long route and download them separately? Link to comment Share on other sites More sharing options...
Liberty Posted April 26, 2017 Author Share Posted April 26, 2017 What are you guys thinking at this valuation? No stock issuance, limited use of debt so proven to be extremely disciplined in capital allocation but size is threatening the "old juicy returns"? I took a quick glance at financials and we're at +/- 4% FCF yield with 5-10% expected growth? BTW anyone has a compilation of his letters? Or do I go the long route and download them separately? What makes you think they can't grow faster than 5-10%? How much capital do you think they could deploy in a downturn and/or if their PE competitors didn't have access to so much cheap debt giving them the ability to put 7 turns on everything? I think one of the cool things about this business is that it's kind of counter-cyclical in value creation (you might almost say antifragile, but I don't deadlift enough to use that term). As for the letters, you should probably download them manually, they're all easy to find on the site. Note that in the early years he also wrote a short quarterly letter. Link to comment Share on other sites More sharing options...
maybe4less Posted April 26, 2017 Share Posted April 26, 2017 What are you guys thinking at this valuation? No stock issuance, limited use of debt so proven to be extremely disciplined in capital allocation but size is threatening the "old juicy returns"? I took a quick glance at financials and we're at +/- 4% FCF yield with 5-10% expected growth? BTW anyone has a compilation of his letters? Or do I go the long route and download them separately? What makes you think they can't grow faster than 5-10%? How much capital do you think they could deploy in a downturn and/or if their PE competitors didn't have access to so much cheap debt giving them the ability to put 7 turns on everything? I think one of the cool things about this business is that it's kind of counter-cyclical in value creation (you might almost say antifragile, but I don't deadlift enough to use that term). As for the letters, you should probably download them manually, they're all easy to find on the site. Note that in the early years he also wrote a short quarterly letter. I mean, I love the company and think they are some of the best and most thoughtful managers in business, but Leonard just wrote that he doesn't think they can do better than 10-12% growth in intrinsic value going forward. I know he has been conservative (at least about the stock price) in the past, but if he feels like they are not going to be able to make enough acquisitions in the current environment to grow faster than that, then who are we to argue? In a downturn, I agree with you that they will have an advantage. Presumably, their stock price will also be down and that will be a buying opportunity. But at 25x FCF, I'm not sure they aren't overvalued. Link to comment Share on other sites More sharing options...
Liberty Posted April 26, 2017 Author Share Posted April 26, 2017 I mean, I love the company and think they are some of the best and most thoughtful managers in business, but Leonard just wrote that he doesn't think they can do better than 10-12% growth in intrinsic value going forward. I know he has been conservative (at least about the stock price) in the past, but if he feels like they are not going to be able to make enough acquisitions in the current environment to grow faster than that, then who are we to argue? In a downturn, I agree with you that they will have an advantage. Presumably, their stock price will also be down and that will be a buying opportunity. But at 25x FCF, I'm not sure they aren't overvalued. Yes, Leonard said 10-12%. Phaceliacapital said 5-10%. That's a pretty big difference. And Leonard didn't say over what period; it's different if he's thinking offer the next 10 or 20 years than if he's looking at the next 2-3 (but he tends to be a long-term guy). I think Leonard is one of the rare remaining practitioners of the art of under-promising and over-delivering, like how Buffett was writing back in the early 80s, when Berkshire was single-billions, that its scale meant we couldn't expect too much going forward. He was right that past history wasn't repeatable, but the results were still quite satisfactory. I seem to remember Leonard writing similar things a few years ago and the results since have been solid (especially if you take out FX headwinds that aren't under their control, -6% last year). Personally, I think CSU can probably do 15%+ for a while with very low risk, and that's fine for me. Some years it might do less than that, and others we might wake up to them having bought another TSS or something even bigger, or them deploying their whole pile of cash in a downturn (and more with more debentures now that they've found a kind of long-term debt that they're comfortable with? It didn't help them in the past that they were competing with levered PE when they eschewed debt). Link to comment Share on other sites More sharing options...
gurpaul88 Posted April 26, 2017 Share Posted April 26, 2017 Doesn't the lack of organic growth bother anyone in this name? Link to comment Share on other sites More sharing options...
Liberty Posted April 26, 2017 Author Share Posted April 26, 2017 Doesn't the lack of organic growth bother anyone in this name? Not after I looked at the components of that organic growth. Link to comment Share on other sites More sharing options...
maybe4less Posted April 26, 2017 Share Posted April 26, 2017 Doesn't the lack of organic growth bother anyone in this name? Not after I looked at the components of that organic growth. Kind of the whole point of Constellation is that they buy companies that have sticky revenues and high returns on capital, but with limited growth prospects, and then reinvest the cash flows into similar acquisitions. No one should ever expect much organic growth here. Link to comment Share on other sites More sharing options...
no_free_lunch Posted April 26, 2017 Share Posted April 26, 2017 The csu business model makes sense when they were buying smaller private companies as there was a valuation discrepancy there compared to public multiples. They are getting to a size where there are much fewer private opportunities. What is their edge now that their scale is so large? Link to comment Share on other sites More sharing options...
Liberty Posted April 26, 2017 Author Share Posted April 26, 2017 Doesn't the lack of organic growth bother anyone in this name? Not after I looked at the components of that organic growth. Kind of the whole point of Constellation is that they buy companies that have sticky revenues and high returns on capital, but with limited growth prospects, and then reinvest the cash flows into similar acquisitions. No one should ever expect much organic growth here. They're also often dropping lots of low-margin revenue from new acquisitions (services revenues, or trading off license revenue for maintenance revenue) to focus on the high-margin, sticky stuff. So at first it can seem like growth is slowing, but they're just dropping the low-ROIC stuff. They've also said that recently they bought some large businesses in real estate and healthcare that are shrinking. They still do these deals if they meet their hurdles, so they get good IRRs, but it impacts organic growth. Also, FX has been a headwind recently, reducing growth by 6% last year, making things look worse than they seem. It's useful to look at maintenance revenue organic growth too, not just overall organic, since they optimize for maintenance revenue since that's the valuable stuff (high-margin, sticky) and aren't shy about dropping some of the other revenue if it doesn't meet their ROIC targets. Link to comment Share on other sites More sharing options...
Liberty Posted April 26, 2017 Author Share Posted April 26, 2017 If some of you CSU ppl want to say "hi" tomorrow or at the AGM, I posted some details here: http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/i'll-be-in-toronto-tomorrow-night-(april-27)/ Link to comment Share on other sites More sharing options...
Liberty Posted April 28, 2017 Author Share Posted April 28, 2017 Q1 results: http://www.csisoftware.com/wp-content/uploads/2017/04/SR_Q1_2017.pdf Q1 2017 Headlines: Revenue grew 14% (1% organic growth, 3% after adjusting for changes in foreign exchange rates) to $555 million compared to $487 million in Q1 2016. Adjusted EBITA increased $23 million or 21% to $131 million as compared to $108 million in Q1 2016. Adjusted Net Income increased 51% to $95 million ($4.46 on a diluted per share basis) from $63 million ($2.95 on a diluted per share basis) in Q1 2016. The Company recorded an unrealized foreign exchange loss of $2 million ($0.07 on a diluted per share basis) in Q1 2017 compared to an unrealized foreign exchange loss of $19 million ($0.91 on a diluted per share basis) in Q1 2016 Net income increased to $1.91 on a diluted per share basis compared to $0.88 on a diluted per share basis in Q1 2016. Twelve acquisitions were completed for aggregate cash consideration of $62 million (which includes acquired cash). Deferred payments associated with these acquisitions have an estimated value of $20 million. Cash flows from operations were $182 million, an increase of 24%, or $36 million, compared to $146 million for the comparable period in 2016. Subsequent to March 31, 2017, the Company entered into agreements to acquire six entities for aggregate cash consideration of $38 million on closing plus cash holdbacks of $5 million for total consideration of $43 million. Link to comment Share on other sites More sharing options...
Liberty Posted May 2, 2017 Author Share Posted May 2, 2017 New $10m+ acquisition by Volaris in Germany: http://www.marketwired.com/press-release/volaris-group-expands-footprint-people-transportation-vertical-with-acquisition-systemtechnik-2213511.htm Volaris Group today announced that it has acquired Systemtechnik GmbH, a provider of fare management and ticketing solutions. […] The company's solutions are in operation in more than 200 transport companies across Germany, including several private rail operators. Every day over 150,000 transactions are processed using Systemtechnik's solutions. Link to comment Share on other sites More sharing options...
CanadianMunger Posted May 7, 2017 Share Posted May 7, 2017 Liberty, After reading all of Leonard's letters to shareholders last year I took a decent position. I had to kinda force myself to override my valuation concerns at the time as I tend to look to look at things from a classic value investor perspective (similar to what the fellow from Greenlea Lane talked about in the link you posted previously). I'm curious. What are your thoughts on the AGM? Any particular insights from Mark Leonard? Thanks, -CM Link to comment Share on other sites More sharing options...
Liberty Posted May 8, 2017 Author Share Posted May 8, 2017 Liberty, After reading all of Leonard's letters to shareholders last year I took a decent position. I had to kinda force myself to override my valuation concerns at the time as I tend to look to look at things from a classic value investor perspective (similar to what the fellow from Greenlea Lane talked about in the link you posted previously). I'm curious. What are your thoughts on the AGM? Any particular insights from Mark Leonard? Thanks, -CM Hi CM, Leonard is very consistent in his thinking - like Buffett and Munger - so if you've been following them for a while, there are fewer surprises. That's not a bad thing. So it was a bit like that for me, I can't say he revealed anything totally out of left field at the AGM. The best part was just hearing all of the managers below him speak about their challenges and how they're dealing with them, and realizing that they are also of very high caliber and are totally on-board with the approach. One interesting discussion was on capital allocation, and on his dislike of buybacks (which he wrote about in the past), which means that if the cash is piling up too much and they can't deploy it, we can probably expect special dividends. But he still seems to think that option #1 is deploying the cash, and the changes they've made to their M&A organization seem to be starting to kick in, so we'll see if they can ramp up and meet that challenge. Sorry, that's probably not a very good answer to your question. Send me a private message and I might have something for you ;) Link to comment Share on other sites More sharing options...
Liberty Posted May 12, 2017 Author Share Posted May 12, 2017 They press release a new contract, which you almost never see. MBB on Twitter asked and the CFO said their threshold for PR on contracts is $10m (like acquisitions), so it should be at least for that: http://www.marketwired.com/press-release/maryland-transit-administration-awards-contract-trapeze-group-business-unit-constellation-tsx-csu-2216000.htm Constellation Software Inc. (TSX:CSU) today announced that the Maryland Transit Administration has awarded a significant contract to Trapeze Group, a business unit of Volaris Group Inc., for the provision of an intelligent transportation system (ITS). The Maryland Transit Administration (MTA) provides subway, light rail, and bus service in the greater Baltimore region and is one of the largest multi-modal transit systems in the United States. Link to comment Share on other sites More sharing options...
Liberty Posted June 1, 2017 Author Share Posted June 1, 2017 New $10m or more acquisition: http://www.csisoftware.com/2017/05/volaris-group-a-constellation-software-company-completes-acquisition-of-asset-management-software-provider/ Link to comment Share on other sites More sharing options...
Liberty Posted June 21, 2017 Author Share Posted June 21, 2017 Another one: CSU: "Volaris acquires the assets of Onshore Development Inc., doing business as WebCheckout" http://www.marketwired.com/press-release/volaris-group-welcomes-webcheckout-to-asset-management-vertical-2222907.htm Link to comment Share on other sites More sharing options...
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