Constellation Software Inc. Strengths, Domain Expertise, and Key Differentiators
The book of the Toronto-based ERP apps vendor Constellation Software Inc. (CSI) tells a simple story – it makes good money as shown in its latest results of 2017 by ending the year with a 17% rise in total revenues to nearly $2,479 billion. CSI used to be a little known on-premise software vendor with a knack of juicing up its returns by acquiring hundreds of small and niche vertical players since 2003, 31 alone in 2015. The strategy has worked so well that CSI now fetches a market cap of $8 billion.
Even though CSI’s listing on the Toronto Stock Exchange has eased 14% to about C$515 from a high of almost C$600 since July 2015, the annualized return for its shareholders has exceeded 40% after it went public in 2006. By comparison, the annualized return on Cloud pioneer Salesforce stock grew less than 26% during the same period.
Constellation Software Inc. Recent Developments
In March 2019, The board of directors of Constellation Software Inc. appointed of Lawrence Cunningham as Vice-Chairman of the board. The role of Vice-Chairman, a new position at Constellation, will be to assist Mark Leonard in his role as Chairman of the board of directors.
The low-cost operating model buttresses its acquisition strategy now zeroing on the healthcare vertical.
Constellation Software Inc. Mergers and Acquisitions (M&A) Activities
In May 2020 Constellation Software entered into a binding agreement with IJssel B.V. (the “Seller”) to purchase 100% of the shares of Topicus.com B.V. (“Topicus”), a Netherlands-based diversified vertical market software provider. Once the transaction is completed, Total Specific Solutions and Topicus will operate together under the operating group name “Topicus.com”. Under the guidance of Constellation, Topicus.com intends to explore opportunities for a future public listing of its shares. Pursuant to such listing, it is anticipated that Constellation would remain a significant shareholder of Topicus.com, and that the current Constellation shareholders would be entitled to receive, pro-rata and via a dividend, common shares in Topicus.com.
The purchase of Topicus will be financed with TSS’ cash on hand and its existing revolving line of credit and requires no funding from Constellation. Consideration will be in the form of a cash payment plus the issuance to the Seller of approximately 9% of the shares of the new operating group Topicus.com (the merged TSS and Topicus economic entity). Annual gross revenues of Topicus for 2019 were approximately €101M and total tangible assets on December 31, 2019, were approximately €7M. Topicus employs approximately 1,000 employees (870 full-time equivalents). The transaction is currently expected to close in 2020, subject to the satisfaction of certain standard closing conditions including clearance from the Dutch Competition Authority.
In November 2017, Vela Operating Group and its subsidiary Aquila Software, a wholly-owned division of CSI acquired Financial Aid Management for Education, a business providing Financial Aid Solutions and Student Information Systems to Higher Education clients. FAME, headquartered in Fort Lauderdale, FL, provides solutions to help Higher Education clients provide outstanding service to their students
Constellation Software Inc. Customers in ARTW Customer Database
Leveraging a rigorous data-centric research methodology, APPS RUN THE WORLD asks the simple question: Who’s buying Constellation Software Inc. applications and why? And we provide the answers – supported by decades of research – to our clients around the world. Our Customer database has over 100 data fields that detail company usage of Constellation Software Inc. and other enterprise apps by function, customer size, industry, location, implementation status, partner involvement, Line of Business Key Stakeholders and IT decision makers contact details. List of Verified Friedman ERP for hosting, customers.
Constellation Software Inc. Overview
Ownership: - CSU : TSE
Number of Employees: 19000
Functional Markets: Analytics and BI, Collaboration, Content Management, Customer Relationship Management, eCommerce, ERP Financial Management, ERP Services and Operations Management, Human Capital Management, Procurement,
Key Verticals: Aerospace and Defense, Automotive, Banking and Financial Services, Communication, Construction, Real Estate, Consumer Packaged Goods, Distribution, K12, Higher Education, Federal Government, State and Local Government, Public Safety, Healthcare, Life Insurance, P&C Insurance, Specialty Insurance, Leisure and Recreation, Hospitality, Life Sciences, Manufacturing, Media, Faith Based Nonprofit, Youth and Elderly Care Nonprofit, Special Cause Nonprofit, Oil and Gas, Professional Services, Retail, Transportation, Utilities,
Constellation Software Inc. Key Enterprise and Cloud Applications
Friedman ERP for hosting,
Constellation Software Inc. Revenues, $M:
| Type/Year | 2018 | 2019 | YoY Growth, % |
|---|---|---|---|
| Total Revenues, $M | Subscribe | Subscribe | Subscribe |
| Enterprise Applications Revenues, $M | Subscribe | Subscribe | Subscribe |
| Cloud Applications Revenues, $M | Subscribe | Subscribe | Subscribe |
* Enterprise Applications Revenues = License + Support & Maintenance + SaaS
** All revenue figures are estimates based on public records, Cloud and Non-Cloud business models in Apps Run The World's vendor database, and annual survey results including vendor feedback.
Constellation Software Inc. Revenue Breakdown By Type, $M:
| Type | License | Services | Hardware | Support & Maintenance | SaaS |
|---|---|---|---|---|---|
| % of Total Revenues | Subscribe | Subscribe | Subscribe | Subscribe | Subscribe |
| Revenues, $M | Subscribe | Subscribe | Subscribe | Subscribe | Subscribe |
Constellation Software Inc. Enterprise Applications Revenues By Functional Markets, $M:
Constellation Software Inc. Enterprise Applications Revenues By Verticals, $M:
Constellation Software Inc. Revenues By Region, $M
| Region | % of Total Revenues | 2019 Total Revenues, $M | 2019 Enterprise Applications Revenues, $M | 2019 Cloud Applications Revenues, $M |
|---|---|---|---|---|
| Americas | Subscribe | Subscribe | Subscribe | Subscribe |
| EMEA | Subscribe | Subscribe | Subscribe | Subscribe |
| APAC | Subscribe | Subscribe | Subscribe | Subscribe |
| Total | Subscribe | Subscribe | Subscribe | Subscribe |
Constellation Software Inc. Direct vs Indirect sales
| Region | Direct Sales | Indirect Sales | Total |
|---|---|---|---|
| Type % | Subscribe | Subscribe | Subscribe |
| Revenues, $M | Subscribe | Subscribe | Subscribe |
Constellation Software Inc. Customers - Breakdown by Geo, Size, Vertical and Product
List of Verified Constellation Software Inc. Customers
No. of Constellation Software Inc. Customers: 125000
No. of Constellation Software Inc. Enterprise Applications Customers: 125000
No. of Constellation Software Inc. Cloud Customers: x
No. of Constellation Software Inc. Cloud Subscribers: x
One of the reasons behind its relatively meager sales and marketing spend has to do with the nature of its customer base. It sells into about 125000 organizations across scores of verticals like local government agencies and sub-verticals like cabinet manufacturing.
Many of its customers have been running these applications for decades and there is little need for CSI to boost sales and marketing spend just to get a few dollars extra from them on new modules or enhancements.
Instead, CSI invests in maintenance in hopes of extending the recurring revenue stream for a long time. Last year, for every dollar CSI put into maintenance, it yielded nearly $7. At Oracle, the enterprise software giant pocketed $16 for every dollar it spends on maintenance. Maintenance represents about 64% of CSI’s revenues, while maintenance and Cloud revenues make up about 61% of Oracle’s revenues.
Constellation Software Inc. Market Opportunities, M&A and Geo Expansions
In September 2020 Volaris Group a subsidiary of Constellation Software, acquired Infoview, leading expense management and industry benchmarking provider.
Infoview is a technology expense management and industry benchmarking provider that enables clients to better interpret expense data for cost-savings and make strategic business decisions. Founded in Australia in 1998, the business has grown by enabling clients to dive deeper into their data to simplify and control expenses. In line with Volaris’ philosophy of acquiring, strengthening, and growing mission-critical software companies, Infoview maintains its independence and autonomy, while Volaris provides support, coaching, and new best practices. Sue Colclough continues to lead the business as Chief Executive Officer.
The increase for both the three and twelve-month periods ended December 2017, is primarily attributable to growth from acquisitions as the Company experienced organic growth of 8% and 3% respectively, 5% and 3% respectively after adjusting for the impact of changes in the valuation of the US dollar against most major currencies in which the Company transacts business.
Recent Constellation Software's acquisitions are: In January 2018, Vela Operating Group, a wholly-owned division of Constellation Software, acquired the ProArc unit of Tieto Oyj, a leading software provider of technical document management software to the engineering & construction industry. By joining Vela, ProArc will gain access to Vela’s and Constellation’s operating expertise across 200+ software businesses, their financial strength, and their global infrastructure.
The same period 2018, Total Specific Solutions, a wholly-owned division of Constellation Software, acquired all shares in the capital of Forsikringens Datacenter A/S, a leading software provider of property & casualty, life & pension, and health sector solutions for the insurance and pension industries in Denmark and other Scandinavian countries.
Jonas operating group, a wholly-owned division of Constellation Software, acquired Bookassist Holdings Limited, a leading provider of booking, digital marketing, web design, and distribution management technology solutions for the hospitality industry.
Constellation Software Inc. Risks and Challenges
Similar to other Cloud vendors, CSI faces the same challenge of higher than normal churn rates among its SaaS customers, while racking up bigger expenses in acquiring or retaining them. Another challenge facing CSI is its foray into the healthcare vertical, a notoriously difficult market for many ERP vendors.
Sage, for instance, sold its healthcare apps business for a loss of $108 million to Vista Equity Partners in 2011 after years of failing to turn the former Emdeon division around. It’s possible that CSI has seen some sluggishness among its TSS healthcare customers with its professional services revenues(a prerequisite and substantial part of most healthcare apps implementations) dropping 16% in 2015, having contributed heavily to its top line in 2014 after the completion of the TSS purchase in December 2013.
Constellation Software Inc. Ecosystem, Partners, Resellers and SI
With its headquarters in Toronto, Canada, and offices in North America, Europe, and Australia, Constellation has over 19000 employees.
Constellation relies on its direct sales force and its ecosystem is made up of technology partners such as IBM and Microsoft as well as a host of hardware and add-on components that complement its core systems. Together with Total Specific Solutions, Constellation Software will further strengthen its Benelux and European position.
Constellation Software Inc. Cloud Infrastructure Insights
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Research Methodology
Data used in research reports are derived from publicly available documents, continuous surveys of applications vendors, customers, resellers, Independent Software Vendors, systems integrators and other verifiable sources.
Vendor shares and market forecast results are based on a combination of existing databases as well as demand side and supply side research conducted throughout the year with validation from vendors, customers, channel partners and documentations such as earnings releases and 10Q and 10K filings, vertical industry studies, regional and country-level statistics from public and private institutions(i.e. colleges, universities, government agencies and trade associations).
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